Go Daddy 2015 Annual Report Download - page 74

Table of Contents
Tax Receivable Agreements
We are a party to five TRAs. Under four of these agreements, we are generally required to pay to each Reorganization Party approximately 85% of the
amount of savings, if any, in U.S. federal, state and local income tax we are deemed to realize (using the actual U.S. federal income tax rate and an assumed
combined state and local income tax rate) as a result of (1) any existing tax attributes associated with LLC Units acquired in the applicable Investor Corp Merger,
the benefit of which is allocable to us as a result of such Investor Corp Merger (including the allocable share of Desert Newco’s existing tax basis in its assets),
(2) NOLs available as a result of the applicable Investor Corp Merger and (3) tax benefits related to imputed interest.
During 2015 , we recorded $151.6 million as a liability due to the Reorganization Parties under the TRAs, which is the amount we currently deem is probable
and estimable, all of which is classified as long-term as of December 31, 2015 . We may record additional liabilities under the TRAs when LLC Units are
exchanged in the future and as our estimates of the utilization of the tax attributes, NOLs and other tax benefits change in the future. We expect to make payments
under the TRAs, to the extent they are required, within 150 days after our federal income tax return is filed for each fiscal year. Interest on such payments will
begin to accrue from the due date (without extensions) of such tax return at a rate equal to the one year LIBOR plus 100 basis points. Under the TRAs, to avoid
interest charges, we have the right, but not the obligation, to make TRA payments in advance of the date the payments are otherwise due. We do not expect to
make any payments related to the existing liability under the TRAs until at least 2017. See "Contractual Obligations" for additional information regarding tax
payments.
Because we are a holding company with no operations, we rely on Desert Newco to provide us with funds necessary to meet any financial obligations. If we
do not have sufficient funds to pay TRA, tax or other liabilities or to fund our operations (as a result of Desert Newco’s inability to make distributions to us due to
various limitations and restrictions or as a result of the acceleration of our obligations under the TRAs), we may have to borrow funds and thus our liquidity and
financial condition could be materially and adversely affected. To the extent we are unable to make payments under the TRAs for any reason, such payments will
be deferred and will accrue interest at a rate equal to one year LIBOR plus 500 basis points until paid (although a rate equal to one year LIBOR plus 100 basis
points will apply if the inability to make payments under the TRAs is due to limitations imposed on us or any of our subsidiaries by a debt agreement in effect at
the date of our IPO).
Tax Distributions to Desert Newco's Owners
Tax distributions are required under the terms of the New LLC Agreement. Any required payments are calculated each quarter based on a number of
variables, including Desert Newco's taxable income or loss, allocations of taxable income among Desert Newco's owners based on principles detailed within the
Treasury Regulations, tax deductions for stock option exercises and vested RSUs and changing ownership percentages among Desert Newco's owners. As of
December 31, 2015 , we have accrued $5.3 million for tax distributions related to estimated taxable income allocations to Desert Newco's owners for 2015 , which
will be paid in March 2016. This accrued amount will be paid based on ownership as of the payment date and is estimated as follows: $2.1 million to Holdings,
$1.1 million to KKR, $1.1 million to SLP, $0.6 million to TCV and $0.4 million to other Desert Newco owners. See "Contractual Obligations" for additional
information regarding tax payments.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
2015
2014
2013
Net cash provided by operating activities $ 259.4
$ 180.6
$ 153.3
Net cash used in investing activities (145.9)
(107.3)
(208.5)
Net cash provided by (used in) financing activities 95.7
(29.7)
91.1
Effect of exchange rate changes on cash and cash equivalents (0.2)
—
—
Net increase in cash and cash equivalents $ 209.0
$ 43.6
$ 35.9
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