Juno 2012 Annual Report Download - page 94

Table of Contents
repurchasing our common stock, acquiring other services, businesses or technologies or funding significant capital expenditures and/or purchases of
intangible assets, including rights, content and intellectual property, and have a material adverse effect on our business, financial position, results of
operations, and cash flows, as well as impair our ability to pay future dividends and our ability to service our debt obligations. If additional funds were
raised through the issuance of equity or convertible debt securities, the percentage of stock owned by the then-current stockholders could be reduced.
Furthermore, such equity or any debt securities that we issue might have rights, preferences or privileges senior to holders of our common stock. In
addition, trends in the securities and credit markets may restrict our ability to raise any such additional funds, at least in the near term.
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Net cash provided by operating activities decreased by $32.7 million, or 23%, for the year ended December 31, 2011, compared to the year ended
December 31, 2010. Net cash provided by operating activities is driven by our net income adjusted for non-cash items and changes in working capital
including, but not limited to, depreciation and amortization, stock-based compensation, loss on extinguishment of debt, deferred taxes, and tax benefits
(shortfalls) from equity awards. The decrease in net cash provided by operating activities was due to a $19.5 million increase in working capital
requirements primarily related to a decline in deferred revenue primarily as a result of a decline in Content & Media pay accounts and, to a lesser extent,
the timing of payments to vendors and changes in tax liabilities, as well as a $13.2 million decrease in net income, adjusted for non-cash items. Changes
in working capital can cause variation in our cash flows provided by operating activities due to seasonality, timing and other factors.
Net cash used for investing activities decreased by $4.5 million, or 14%, for the year ended December 31, 2011, compared to the year ended
December 31, 2010. The decrease was primarily due to a $2.7 million decrease in cash paid for purchases of property and equipment and a $1.4 million
decrease in cash paid for purchases of rights, content and intellectual property related to our online nostalgia services business.
Net cash used for financing activities decreased by $79.0 million, or 63%, for the year ended December 31, 2011, compared to the year ended
December 31, 2010. In the year ended December 31, 2011, we refinanced the 2008 Credit Agreement and, in connection with the refinancing, we
received net proceeds of $261.3 million, which, along with FTD's available cash, were used to repay the outstanding balance on the 2008 Credit
Agreement of $264.6 million. In the year ended December 31, 2010, we repaid $50.0 million on the outstanding balance of the 2008 Credit Agreement
and $24.8 million on the UOL Credit Agreement. Additionally, repurchases of common stock for the year ended December 31, 2011 decreased by
$12.8 million, compared to the year ended December 31, 2010.
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We measure our contingent consideration liability at fair value on a recurring basis using significant unobservable inputs classified within Level 3
of the fair value hierarchy. At December 31, 2012, the fair value of the contingent consideration related to the schoolFeed acquisition was estimated at
$8.6 million, which is approximately 97% of total liabilities measured at fair value on a recurring basis. The fair value of the contingent consideration
was estimated using a Monte-Carlo simulation based on estimated probabilities of U.S. and other target market daily registrations; mean growth rates
(59)% to 51% for U.S. registrations and (60)% to 51% for other target market registrations, each with a standard deviation of 50%, during the three
annual earnout periods ending June 30, 2013, 2014 and 2015; an estimated rate of conversion of new subscribers to pay accounts; and a discount rate of
18.2%. We recognized a gain of $0.8 million in the year ended December 31, 2012 related to changes in the estimated fair value of the contingent
consideration. Changes to one or multiple inputs to the Monte-Carlo simulation, including the discount rate, growth rates, volatility rates, the estimated
number of
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