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DIGITAL RIVER, INC.
Consolidated Statements of Cash Flows
2006 2005 2004
For the Years Ended December 31
As Restated(1) As Restated(1)
(In thousands)
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,810 $ 56,512 $ 34,507
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of acquisition-related intangibles . . . . . . . . . . . . . . . 12,134 8,730 8,269
Change in accounts receivable allowance, net of acquisitions . . . . 1,215 (598) 709
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,983 8,833 8,203
Stock-based compensation expense related to stock-based
compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,904 293 817
Tax benefit of stock-based compensation . . . . . . . . . . . . . . . . . . . — 45,417 —
Excess tax benefits from stock-based compensation . . . . . . . . . . . (8,980) — —
Deferred income taxes and other . . . . . . . . . . . . . . . . . . . . . . . . . 19,583 (34,789) —
Litigation and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (739) 1,090
Change in operating assets and liabilities (net of acquisitions):
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,678) (10,304) (8,223)
Prepaid and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,293) (2,417) 1,037
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,701 34,822 34,433
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 811 1,395 (230)
Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,126 2,740 143
Accrued payroll and other accrued liabilities. . . . . . . . . . . . . . . 11,190 9,859 4,380
Net cash provided by operating activities . . . . . . . . . . . . . . . 117,506 119,754 85,135
INVESTING ACTIVITIES:
Purchases of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (193,609) (190,713) (199,699)
Sales of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,296 127,771 94,059
Cash paid for acquisitions, net of cash received . . . . . . . . . . . . . . . . (37,800) (54,177) (126,457)
Purchases of equipment and capitalized software . . . . . . . . . . . . . . . (15,907) (8,328) (9,255)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . (68,020) (125,447) (241,352)
FINANCING ACTIVITIES:
Principal amount on line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . — — 45,000
Repayment of principal on line of credit . . . . . . . . . . . . . . . . . . . . . — — (45,000)
Proceeds from convertible senior notes . . . . . . . . . . . . . . . . . . . . . . — — 188,371
Proceeds from sales of common stock . . . . . . . . . . . . . . . . . . . . . . . 172,780 — —
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,118 23,199 19,719
Sales of common stock under employee stock purchase plan . . . . . . 2,109 2,199 904
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (13,145) —
Repurchase of restricted stock to satisfy tax witholding obligation . . (426) — —
Excess tax benefits from stock-based compensation . . . . . . . . . . . . . 8,980 — —
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . 204,561 12,253 208,994
EFFECT OF EXCHANGE RATE CHANGES ON CASH . . . . . . . . . . 4,426 (2,524) 2,072
NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . 258,473 4,036 54,849
CASH AND CASH EQUIVALENTS, beginning of period . . . . . . . . . . 131,770 127,734 72,885
CASH AND CASH EQUIVALENTS, end of period . . . . . . . . . . . . . . $ 390,243 $ 131,770 $ 127,734
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest on Convertible Senior Notes. . . . . . . . . . . . . . $ 2,438 $ 2,641 $ —
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,006 $ 193 $ —
Noncash investing and financing activities:
Common stock issued in acquisitions and earn-outs . . . . . . . . . . . $ 1,172 $ — $ 5,344
(1) See Note 2, “Restatement of Consolidated Financial Statements,” in Notes to Consolidated Financial Statements.
The accompanying notes are an integral part of these consolidated financial statements.
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