Chegg 2014 Annual Report Download - page 85

Table of Contents
47
Provision for Income Taxes
The following table sets forth our provision for income taxes for the periods shown (dollars in thousands):
Year Ended December 31, Change in 2014 Change in 2013
2014 2013 2012 $ % $ %
Provision from income taxes . . . . . . . . . . . . . . . . . $ 186 $ 642 $ 29 $ (456) (71)% 613 n/m
_______________________
n/m – Not meaningful
We recorded an income tax provision of approximately $0.2 million in the year ended December 31, 2014 primarily the
result of the release of a valuation allowance resulting from our acquisition of InstaEDU, offset by foreign and state income
taxes. We recognized income tax expense of $0.6 million, in 2013 that was comprised of state and foreign income tax expense.
We recognized income tax expense of $29,000 in 2012, which was comprised of state and foreign income tax expense, partially
offset by the release of certain income tax benefits. Our tax rate is affected by recurring items, such as tax rates in foreign
jurisdictions and the relative amounts of income we earn in those jurisdictions which we expect to be fairly consistent in the
near term.
Liquidity and Capital Resources
As of December 31, 2014 our principal sources of liquidity were cash, cash equivalents and investments totaling $90.9
million, which were held for working capital purposes. Our cash equivalents and investments are composed primarily of
commercial paper, corporate securities, U.S. government treasuries and money market funds. We have $40.0 million available
for draw down under our Revolving Credit Facility with an accordion feature subject to certain financial criteria that would
allow us to draw down to $75.0 million in total, which expires in August 2016. As of December 31, 2014, we were in
compliance with all financial covenants.
Our print textbook business is highly capital intensive, and we typically use cash for our investing activities while we
generate positive cash flows from operations. We capitalize the investment in our print textbook library and depreciate the
value of our textbooks over their useful life as cost of revenues. During the year ended December 31, 2014, 2013 and 2012, our
investment in print textbooks, net of proceeds from textbook liquidations, was $54.7 million, $84.3 million and $70.4 million,
respectively. As a result of our proposed expanded strategic partnership with Ingram, we would continue to buy used books on
Ingram’s behalf including books through our buyback program, and invoice Ingram at cost. We would also provide Ingram with
extended payment terms in 2015 and 2016 for the purchase of textbooks, before moving to normal payment terms in 2017.
As of December 31, 2014, we have incurred cumulative losses of $269.9 million from our operations, and we expect to
incur additional losses in the future. Our operations have been financed primarily by net proceeds from the sales of shares of
our convertible preferred stock, through various debt financing activities and our IPO.
We believe that our existing sources of liquidity will be sufficient to fund our operations, debt service and repayment
obligations for at least the next 12 months. To the extent that existing cash and cash equivalents, investments and cash from
operations are insufficient to fund our future activities, we may need to raise additional funds through public or private equity
or debt financing. Additional funds may not be available on terms favorable to us or at all. If adequate funds are not available
on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on
our business, operating cash flows and financial condition.
Most of our cash is held in the United States. We do not have a significant amount of cash held in foreign jurisdictions
by foreign subsidiaries. We currently do not intend or foresee a need to repatriate these funds.