Shutterfly 2013 Annual Report Download - page 91

Download and view the complete annual report

Please find page 91 of the 2013 Shutterfly 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 124

  • 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

giving effect to the merger as if it occurred on January 1, 2011 and 2010, respectively (in thousands, except
per share data):
Year Ended
December 31, 2011
Pro forma net revenues .............................................. $ 499,048
Pro forma net income ............................................... 11,089
Pro forma diluted net income per share .................................. $ 0.32
Included in net revenues for the year ended December 31, 2011 is $93.0 million of net revenues from
sales of Tiny Prints products from the acquisition date of April 25, 2011 through December 31, 2011.
Purchased Intangible Assets
Eastman Kodak Gallery Assets
On March 1, 2012, the Company entered into an agreement with Kodak for the proposed sale of
certain assets of its Kodak Gallery online photo services business for $23.8 million through a court-
supervised auction process. On April 30, 2012, the transaction was approved by the bankruptcy court and
on May 2, 2012 the transaction closed. The Company paid $19.0 million at close and the remaining
$4.8 million at the end of the transition period, which was during 2012. This acquisition was accounted for
as an asset acquisition and as such the Company has capitalized transaction costs of approximately
$0.6 million, for a total purchase price of $24.4 million. The purchase price was allocated to a single asset,
customer list, which will be amortized over its estimated useful life of four years.
Note 5 — Commitments and Contingencies
Leases
The Company leases office and production space under various non-cancelable operating leases that
expire no later than January 2023. Rent expense was $5.8 million, $4.8 million and $4.2 million, for the
years ended December 31, 2013, 2012 and 2011, respectively. In 2010, the Company renewed the lease for
its corporate office. The lease renewal provided for a $2.1 million tenant improvement reimbursement
allowance which the Company utilized during 2011. Reimbursements under this provision were recorded
as a deferred lease incentive and will reduce rent expense over the remaining lease term.
Rent expense is recorded on a straight-line basis over the lease term. When a lease provides for fixed
escalations of the minimum rental payments, the difference between the straight-line rent charged to
expense, and the amount payable under the lease is recognized as deferred rent.
The Company also has non-cancelable operating leases for certain production equipment with terms
ranging from four to five years. As of December 31, 2013, the total outstanding obligation under all
equipment operating leases was $34.6 million.
89