Support.com 2009 Annual Report Download - page 34

Table of Contents
Provision for income taxes. Income tax amounts represent state income taxes and the benefit of federal refundable research and development credits. The
income tax benefit in 2009 was primarily comprised of the utilization of continuing operations tax attributes arising from and offset by the tax on the gain on sale
from discontinued operations. The income tax benefit in 2008 was related to the federal refundable research and development tax credit. Generally, the amount of
tax expense or benefit allocated to continuing operations is determined without regard to the tax effects of other categories of income or loss, such as income
from discontinued operations. However, an exception is provided in ASC 740 when there is a pre-tax loss from continuing operations and pre-tax income from
other categories in the current year. As a result, the Company recorded a tax expense of $4.9 million in discontinued operations related to the gain on sale of the
Enterprise business, and recorded an off-setting tax benefit of $4.9 million in continuing operations.
As a result of the sale of our Enterprise business (see Note 2 to the Consolidated Financial Statements), we are reporting all historical financial activity for
that segment—including revenues, direct expenses, gain on sale of discontinued operations, and the tax impact of the gain on the sale and the related tax impact
of discontinued operations—as discontinued operations. For details on the tax impact on our discontinued operations, please see Note 2. For details on the tax
impact on our continuing operations, please see Note 9.
Liquidity and Capital Resources
Total cash, cash equivalents, investments and the ARS put option at December 31, 2009 and 2008 were $84.8 million and $95.0 million, respectively. In
2009, our main sources of liquidity were cash from customers as well as the sale of our Enterprise business. The decrease in cash, cash equivalents and
investments in fiscal year 2009 was primarily due to $24.0 million of cash used in operating activities, acquisition of business of $7.9 million and purchases of
investments of $44.9 million offset with $20.5 million from sale of discontinued operations and investment sales and maturities of $15.7 million.
Operating Activities
Net cash used in operating activities was $24.0 million for the year ended December 31, 2009, $12.3 million for the year ended December 31, 2008, and
$10.4 million for the year ended December 31, 2007. Amounts included in net loss, which do not require the use of cash, primarily include stock-based
compensation expense, realized gain/loss on our ARS and corresponding gain/loss on the ARS put option. The sum of these items totaled $5.2 million,
$6.2 million, and $7.8 million in 2009, 2008 and 2007, respectively. Net cash used in operating activities during 2009 was the result of the net loss of $14.6
million, a reduction in other accrued liabilities of $10.0 million, a reduction in deferred revenue for discontinued operations of $1.1 million and a gain on the sale
of Enterprise business of $4.2 million, partially offset by non-cash items of $5.2 million. Net cash used in operating activities during 2008 was primarily the
result of the net loss of $19.1 million, an increase in accounts receivable of $252,000, a gain on the ARS put option of $7.1 million primarily offset by a
corresponding loss on our ARS of $7.2 million and a decrease in deferred revenue of $454,000. Net cash used in operating activities during 2007 was primarily
the result of the net loss of $21.4 million and a decrease in deferred revenue of $3.1 million, offset by a decrease in accounts receivable of $5.1 million.
Investing Activities
Net cash provided by (used in) investing activities was $(17.3) million for the year ended December 31, 2009, $63.4 million for the year ended
December 31, 2008, and $3.2 million for the year ended December 31, 2007. The amount of net cash used in investing activities for the year ended December 31,
2009 resulted primarily from the net proceeds we received from the sale of the Enterprise business of $20.5 million and sales and maturities of $15.7 million in
marketable securities offset by the purchase of $44.9 million in marketable securities, and $7.9 million used for the acquisition of substantially all of the assets of
Xeriton, Inc. and expenditures of $584,000 for property and equipment and developed technology. Net cash provided by investing activities in 2008 was
primarily due to sales and maturities of $109.4 million of marketable securities largely offset by the purchase of $41.3 million of marketable securities, the
purchase of $1.4 million of technology, $2.8 million used for the acquisition of YTO and expenditures of $566,000 for property and equipment. Net cash
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Source: Support.com, Inc., 10-K, March 12, 2010 Powered by Morningstar® Document Research℠