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F-7 VONAGE ANNUAL REPORT 2012
VONAGE HOLDINGS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31,
(In thousands) 2012 2011 2010
Cash flows from operating activities:
Net income (loss) $36,627 $409,044 $ (83,665)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization and impairment charges 30,949 35,776 51,928
Amortization of intangibles 2,375 1,275 1,145
Loss from abandonment of software assets 25,262 ——
Deferred tax expense (benefit) 19,488 (325,601)—
Change in fair value of embedded features in notes payable and stock warrant — 950 99,338
Loss on extinguishment of notes — 11,806 31,023
Amortization of discount on notes — 914 4,732
Accrued interest paid in-kind ——
13,232
Allowance for doubtful accounts 926 (4) (711)
Allowance for obsolete inventory 527 773 2,213
Amortization of debt related costs 1,235 1,391 1,402
Share-based expense 11,975 14,279 8,255
Changes in operating assets and liabilities:
Accounts receivable (3,461) (2,663)573
Inventory 748 (1,362)(568)
Prepaid expenses and other current assets 1,345 412 21,322
Deferred customer acquisition costs (66)1,891 15,505
Other assets (788)163 9,118
Accounts payable 7,801 29,090 25,606
Accrued expenses (10,719) (21,216) 19,966
Deferred revenue (3,517) (5,167) (19,446)
Other liabilities (864)(4,965)(6,756)
Net cash provided by operating activities 119,843 146,786 194,212
Cash flows from investing activities:
Capital expenditures (13,763) (12,636) (17,674)
Purchase of intangible assets —(3,725)—
Acquisition and development of software assets (12,987) (22,292) (22,712)
Decrease in restricted cash 1,278 1,049 35,700
Net cash used in investing activities (25,472) (37,604) (4,686)
Cash flows from financing activities:
Principal payments on capital lease obligations (2,104) (1,783)(1,500)
Principal payments on notes (28,333) (229,166)(232,514)
Proceeds from issuance of notes payable — 100,000 200,000
Discount on notes payable ——
(6,000)
Extinguishment of notes —(1,054) (99,938)
Debt related costs —(2,697)(5,430)
Common stock repurchases (27,545) — —
Proceeds from exercise of stock options and stock warrant 1,725 4,562 1,620
Net cash used in financing activities (56,257) (130,138)(143,762)
Effect of exchange rate changes on cash 133 885 957
Net change in cash and cash equivalents 38,247 (20,071) 46,721
Cash and cash equivalents, beginning of period 58,863 78,934 32,213
Cash and cash equivalents, end of period $ 97,110 $58,863 $78,934
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Interest $ 4,653 $15,563 $63,814
Income taxes $ 2,329 $2,289 $544
Non-cash financing transactions during the periods for:
Conversion of convertible notes into common stock:
Third lien convertible notes, net of discount and debt related costs $ — $ — $ 4,497
Embedded conversion option within third lien convertible notes $ — $ — $ 32,358
Common stock repurchases $ 644 $—$—
The accompanying notes are an integral part of these financial statements