Enom 2014 Annual Report Download - page 54

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file with the SEC that is effective through October 2015 which we may use to offer and sell debt or equity securities with an aggregate
offering price not to exceed $100.0 million.
In November 2014, we repaid all amounts outstanding under our Credit Agreement, dated August 29, 2013, with Silicon Valley
Bank, as administrative agent, and the lenders and other agents party thereto (the “Credit Agreement”) and terminated the Credit
Agreement and the related Guarantee and Collateral Agreement. The Credit Agreement had provided for a $100.0 million senior
secured term loan facility and a $125.0 million senior secured revolving loan facility, each of which was scheduled to mature on
August 29, 2018. Under the Credit Agreement, loans bore interest at an annual rate based on LIBOR or a base rate, and we were
required to pay a commitment fee between 0.20% and 0.40% per annum on the undrawn portion available under the revolving loan
facility. The Credit Agreement contained customary events of default and affirmative and negative covenants, including certain
financial maintenance covenants. At the time of termination, there was approximately $73.8 million outstanding under the term loan
facility, no principal balance outstanding under the revolving loan facility and an outstanding standby letter of credit with a face
amount of approximately $1.4 million. We used cash on hand to pay all outstanding principal, interest and other amounts owing under
the Credit Agreement as of the termination date and to cash collateralize the outstanding standby letter of credit. In connection with
the termination of the Credit Agreement, during the quarter ended December 31, 2014, we recorded a non-cash expense of $1.7
million from the acceleration of unamortized debt issuance costs. We do not currently have a line of credit available.
On August 1, 2014, we completed the Separation of our business into two independent, publicly traded companies. In
connection with the completion of the Separation, we capitalized Rightside Group, Ltd. with approximately $25 million in cash.
Following the Separation, we are a smaller, less diversified company focused on our Content & Media and Marketplaces businesses.
This narrower business focus may leave us more vulnerable to changing market conditions. The diminished diversification of revenue,
costs, and cash flows could also cause our results of operation, cash flows, working capital and financing requirements to be subject to
increased volatility.
Since our inception, we have used significant cash to make strategic acquisitions to grow our business, including the
acquisitions of Society6 in June 2013 and Saatchi Art in August 2014. We acquired Saatchi Art for total consideration, after giving
effect to working capital adjustments as of the closing date, of approximately $4.8 million in cash and 1,049,959 shares of our
common stock, in addition to certain liabilities that we assumed in the merger. In July 2014, we sold our Creativebug business for
$10.0 million in cash, of which $1.0 million is being held in escrow until the first anniversary of the Creativebug closing, and our
CoveritLive business for $4.5 million in cash and a promissory note with a principal amount of $5.6 million. In addition, in February
2015 we sold our Pluck social media business for $3.8 million in cash after working capital adjustments. We may make further
acquisitions and dispositions in the future.
Subsequent to the filing of our Form 10-Q for the third quarter of 2014, we determined that certain gTLD transactions were
misclassified in the Consolidated Statement of Cash Flows for the nine-months ended September 30, 2014. The misclassification
primarily related to deposits made for certain gTLD auctions just prior to the spin-off of Rightside. These cash flows were improperly
recorded as a change in Accounts Receivable within Operating activities whereas the transactions should have been classified as
Payments for gTLD applications within Investing activities. The classification error understated our third quarter net cash provided by
operating activities by $3.4 million, and understated net cash used in investing activities by the same amount. This classification error
relates entirely to activities of our discontinued operations, the spun-off Rightside business. We assessed the materiality of the error on
its previously issued quarterly financial statements in accordance with SEC Staff Accounting Bulletin No. 99, and concluded that the
error was not material to the consolidated financial statements taken as a whole. As such, we have corrected this error in preparing the
Consolidated Statement of Cash Flows for the year ended December 31, 2014. Further, the Company will revise the Consolidated
Statement of Cash Flows for the nine months ended September 30, 2014 when that statement is included in its 2015 third quarter Form
10-Q filing.
Our cash flows from operating activities are significantly affected by our cash-based investments in operations, including
working capital, and corporate infrastructure to support our ability to generate revenue and conduct operations. Cash used in investing
activities has historically been, and is expected to be, impacted by our ongoing investments in our platforms, company infrastructure
and equipment. The following table sets forth our major sources and (uses) of cash for each period as set forth below (in thousands):
Year ended December 31,
2014
2013 2012
N
et cash provided by operating activities .................................................... 34,661 76,163 90,983
N
et cash used in investing activities ............................................................ (14,921) (114,535) (67,482)
N
et cash p
r
ovided by (used in) financing activities ..................................... (125,418) 89,030 (6,566)