Chegg 2013 Annual Report Download - page 134

Download and view the complete annual report

Please find page 134 of the 2013 Chegg annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 152

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152

CHEGG, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
the end of each quarter, based on the ratio of the consolidated outstanding debt balance to consolidated EBITDA
for the period of the four fiscal quarters most recently ended. As of December 31, 2013, we were in compliance
with these financial covenants. On August 12, 2013, we drew down $21.0 million in proceeds and with these
proceeds we paid our $20.0 million Term Loan in full. On October 18, 2013, we drew down an additional
$10.0 million in proceeds. On November 18, 2013 we repaid the $31.0 million outstanding balance in full.
Note 10. Stock Warrants
In connection with our IPO in November 2013, our previously outstanding convertible preferred stock
warrants were converted into 1,118,282 common stock warrants at a weighted average exercise price of $5.16 per
share.
At the time of conversion, the common stock warrants were valued using the Black-Scholes Merton option-
pricing valuation model using the following weighted average key assumptions:
Expected term .................................... 5.9years
Expected volatility ................................ 55.5%
Dividend yield .................................... 0.00%
Risk-free interest rate .............................. 1.61%
Weighted-average fair value per share ................. $ 6.35
The conversion of the preferred stock warrants into common stock warrants resulted in a gain of $3.3
million and is included in other income (expense), net in our consolidated statements of operations.
Note 11. Commitments and Contingencies
We lease our office and warehouse facilities under operating leases, which expire at various dates through
2019. Our primary operating lease commitments at December 31, 2013, related to our headquarters in Santa
Clara, California, and our warehouse in Shepardsville, Kentucky. We recognize rent expense on a straight-line
basis over the lease period. Where leases contain escalation clauses, rent abatements, or concessions, such as rent
holidays and landlord or tenant incentives or allowances, we apply them in the determination of straight-line rent
expense over the lease term. Rental expense, net of sublease income was approximately $2.9 million,
$3.9 million and $2.8 million, in 2013, 2012 and 2011, respectively.
The aggregate future minimum lease payments as of December 31, 2013, are as follows (in thousands):
2014 ............................................. $ 3,694
2015 ............................................. 2,978
2016 ............................................. 2,896
2017 ............................................. 794
2018 ............................................. 821
Thereafter ......................................... 140
$11,323
We expect to receive sublease income of $0.2 million during the year ended December 2014.
From time to time, third parties may assert patent infringement claims against us in the form of letters,
litigation, or other forms of communication. In addition, from time to time, we may be subject to other legal
proceedings and claims in the ordinary course of business, including claims of alleged infringement of
trademarks, copyrights, and other intellectual property rights; employment claims; and general contract or other
88