Bankrate, Inc. - 10-Q filing on 2012-08-13

Condensed Consolidating Financial Statement Information

6 Months Ended

Jun. 30, 2012

Condensed Consolidating Financial Statement Information [Abstract]

CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION

NOTE 14 – CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION

On July 13, 2010, the Company completed its offering of the Original Notes. The Original Notes were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act or to Non-US buyers in accordance with regulation S under the Securities Act. In connection with the sale of the Original Notes, the Company entered into a Registration Rights Agreement with the initial purchasers of the Original Notes party thereto, pursuant to which the Company and its Subsidiary Guarantors (as defined below) agreed to file a registration statement with respect to an offer to exchange the Original Notes for the Exchange Notes. On June 30, 2011, the Company's Form S-4 registration statement for the Exchange Notes filed with the Securities and Exchange Commission become effective, and all of the original notes were exchanged for Exchange Notes on August 1, 2011. The Senior Secured Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by the Company and certain of its wholly owned domestic subsidiaries (the “Subsidiary Guarantors”).

The following consolidating financial information, which has been prepared in accordance with the requirements for presentation of Rule 3-10(f) of Regulation S-X promulgated under the Securities Act, presents the consolidating financial information separately for:

i.	Bankrate, Inc., as the issuer of the Senior Secured Notes;

ii.	The Subsidiary Guarantors, on a combined basis, which are 100% owned by Bankrate, Inc., and which are guarantors of the Senior Secured Notes;

iii.	The Subsidiary Guarantors, on a combined basis, which are 100% owned by Bankrate, Inc., and which are guarantors of the Senior Secured Notes;

iv.	Consolidating entries and eliminations representing adjustments to:

Eliminate intercompany transactions between or among the Company, the Subsidiary Guarantors and those subsidiaries of the Company that are not Subsidiary Guarantors and

Eliminate the investments in the Company’s subsidiaries;

v.	The Company and its subsidiaries on a consolidated basis.

As the Subsidiary Guarantors have guaranteed the Senior Secured Notes and have pledged their assets as collateral, the Company has “pushed down” the recording of the Senior Secured Notes and related interest expense to the Subsidiary Guarantors balance sheet and statement of comprehensive income as a non-cash transaction.

Condensed Consolidating Balance Sheet

As of June 30, 2012

(In thousands)


	Bankrate			Guarantor Subsidiary			Non-Guarantor Subsidiary			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	72,437		$	3,963		$	1,603		$	—		$	78,003

Accounts receivable, net of allowance for doubtful accounts		33,641			30,603			2,109			—			66,353
Deferred income taxes		18,696			6,422			13			—			25,131
Prepaid expenses and other current assets		1,053			849			84			—			1,986

Total current assets		125,827			41,837			3,809			—			171,473

Furniture, fixtures and equipment, net of accumulated depreciation		5,091			4,043			488			—			9,622
Intangible assets, net of accumulated amortization		256,514			123,370			4,182			—			384,066
Goodwill		383,596			214,585			—			—			598,181
Other assets		2,313			9,399			—			—			11,712
Intercompany		(179,149	)		188,117			(8,968	)		—			—
Investments in subsidiary		351,363			(2,078	)		—			(349,285	)		—

Total assets	$	945,555		$	579,273		$	(489	)	$	(349,285	)	$	1,175,054

Liabilities and Stockholders’ Equity
Liabilities
Accounts payable	$	6,146		$	3,895		$	361		$	—		$	10,402
Accrued expenses		25,931			3,120			410			—			29,461
Deferred revenue and customer deposits		2,638			782			79			—			3,499
Accrued interest		—			10,588			—			—			10,588
Other current liabilities		6,237			—			11			—			6,248

Total current liabilities		40,952			18,385			861			—			60,198

Deferred income taxes, net		66,221			15,176			1,273			—			82,670
Senior secured notes, net of unamortized discount		—			193,773			—			—			193,773
Other liabilities		18,927			31			—			—			18,958

Total liabilities		126,100			227,365			2,134			—			355,599
Total stockholders’ equity		819,455			351,908			(2,623	)		(349,285	)		819,455

Total liabilities and stockholders’ equity	$	945,555		$	579,273		$	(489	)	$	(349,285	)	$	1,175,054

Condensed Consolidating Balance Sheet

As of December 31, 2011

(In thousands)


	Bankrate			Guarantor Subsidiary			Non-Guarantor Subsidiary			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	44,476		$	10,066		$	1,671		$	—		$	56,213

Accounts receivable, net of allowance for doubtful accounts		32,705			26,809			1,578			(549	)		60,543
Deferred income taxes		18,251			6,422			17			—			24,690
Prepaid expenses and other current assets		1,718			750			67			—			2,535

Total current assets		97,150			44,047			3,333			(549	)		143,981

Furniture, fixtures and equipment, net of accumulated depreciation		5,320			3,307			438			—			9,065
Intangible assets, net of accumulated amortization		242,336			131,525			4,379			—			378,240
Goodwill		380,937			214,585			—			—			595,522
Other assets		2,045			8,559			—			—			10,604
Intercompany		(168,537	)		176,718			(8,181	)		—			—
Investments in subsidiary		349,401			(1,524	)		—			(347,877	)		—

Total assets	$	908,652		$	577,217		$	(31	)	$	(348,426	)	$	1,137,412


Liabilities and Stockholders’ Equity

Liabilities
Accounts payable	$	6,916		$	3,144		$	53		$	(549	)	$	9,564
Accrued expenses		22,169			3,872			247			—			26,288
Deferred revenue and customer deposits		4,601			1,133			157			—			5,891
Accrued interest		—			10,588			—			—			10,588
Other current liabilities		3,946			—			23			—			3,969

Total current liabilities		37,632			18,737			480			(549	)		56,300

Deferred income taxes, net		66,230			15,176			1,264			—			82,670
Senior secured notes, net of unamortized discount		—			193,613			—			—			193,613
Other liabilities		16,328			39			—			—			16,367

Total liabilities		120,190			227,565			1,744			(549	)		348,950
Total stockholders’ equity		788,462			349,652			(1,775	)		(347,877	)		788,462

Total liabilities and stockholders’ equity	$	908,652		$	577,217		$	(31	)	$	(348,426	)	$	1,137,412

Condensed Consolidating Statement of Comprehensive Income

For the six months ended June 30, 2012

(In thousands)


	Bankrate			Guarantor Subsidiary			Non-Guarantor Subsidiary			Eliminations			Consolidated
Revenue	$	178,433		$	111,846		$	3,742		$	(46,876	)	$	247,145
Cost of revenue (excludes depreciation and amortization)		73,616			51,136			11			(46,876	)		77,887

Gross margin		104,817			60,710			3,731			—			169,258


Operating expenses:
Sales		4,374			3,573			7			—			7,954
Marketing		39,410			20,124			3,267			—			62,801
Product development		4,574			3,990			6			—			8,570
General and administrative		13,220			5,279			668			—			19,167
Legal settlements		65			—			—			—			65
Acquisition, offering and related expenses and related party fees		879			—			—			—			879
Depreciation and amortization		14,670			9,314			372			—			24,356

		77,192			42,280			4,320			—			123,792

Income (loss) from operations		27,625			18,430			(589	)		—			45,466
Interest income (expense), net		(666	)		(12,311	)		(333	)		—			(13,310	)
Earnings (loss) on equity investments, net of tax		1,745			(554	)		—			(1,191	)		—


Income (loss) before income taxes		28,704			5,565			(922	)		(1,191	)		32,156
Income tax expense		2,277			3,343			109			—			5,729

Net income (loss)	$	26,427		$	2,222		$	(1,031	)	$	(1,191	)	$	26,427


Comprehensive income (loss)	$	26,610		$	2,256		$	(848	)	$	(1,408	)	$	26,610

Condensed Consolidating Statement of Comprehensive Income

For the six months ended June 30, 2011

(In thousands)


	Bankrate			Guarantor Subsidiary			Non-Guarantor Subsidiary			Eliminations			Consolidated
Revenue	$	121,150		$	93,894		$	4,169		$	(21,686	)	$	197,527
Cost of revenue (excludes depreciation and amortization)		57,574			37,347			40			(21,686	)		73,275

Gross margin		63,576			56,547			4,129			—			124,252


Operating expenses:
Sales		3,120			2,824			14			—			5,958
Marketing		15,930			16,204			3,568			—			35,702
Product development		3,170			3,941			11			—			7,122
General and administrative		8,244			6,043			701			—			14,988
Acquisition, offering and related expenses and related party fees		39,695			—			—			—			39,695
Restructuring charges		—			238			—			—			238
Depreciation and amortization		12,080			9,587			(1	)		—			21,666

		82,239			38,837			4,293			—			125,369

(Loss) income from operations		(18,663	)		17,710			(164	)		—			(1,117	)
Interest expense, net		(3	)		(18,580	)		(337	)		—			(18,920	)
Loss on early extinguishment of senior secured notes		—			(16,629	)		—			—			(16,629	)
(Loss) earnings on equity investments, net of tax		(11,154	)		(55	)		—			11,209			—

(Loss) income before income taxes		(29,820	)		(17,554	)		(501	)		11,209			(36,666	)
Income tax expense (benefit)		4,779			(6,846	)		—			—			(2,067	)

Net (loss) income	$	(34,599	)	$	(10,708	)	$	(501	)	$	11,209		$	(34,599	)


Comprehensive (loss) income	$	(34,599	)	$	(10,708	)	$	(501	)	$	11,398		$	(34,410	)

Condensed Consolidating Statement of Comprehensive Income

For the three months ended June 30, 2012

(In thousands)


	Bankrate			Guarantor Subsidiary			Non-Guarantor Subsidiary			Eliminations			Consolidated
Revenue	$	89,109		$	54,377		$	1,915		$	(23,276	)	$	122,125
Cost of revenue (excludes depreciation and amortization)		35,878			25,003			4			(23,276	)		37,609

Gross margin		53,231			29,374			1,911			—			84,516


Operating expenses:
Sales		2,151			1,857			7			—			4,015
Marketing		20,014			9,807			1,730			—			31,551
Product development		2,217			1,926			3			—			4,146
General and administrative		6,273			2,581			331			—			9,185
Legal settlements		3			—			—			—			3
Acquisition, offering and related expenses and related party fees		682			—			—			—			682
Depreciation and amortization		7,727			4,674			186			—			12,587

		39,067			20,845			2,257			—			62,169

Income (loss) from operations		14,164			8,529			(346	)		—			22,347

Interest income (expense), net		(671	)		(5,992	)		(167	)		—			(6,830	)
Earnings (loss) on equity investments, net of tax		40			(280	)		—			240			—


Income (loss) before income taxes		13,533			2,257			(513	)		240			15,517
Income tax (benefit) expense		(2,743	)		1,984			—			—			(759	)

Net income (loss)	$	16,276		$	273		$	(513	)	$	240		$	16,276


Comprehensive income (loss)	$	16,307		$	(16	)	$	(482	)	$	498		$	16,307

Condensed Consolidating Statement of Comprehensive Income

For the three months ended June 30, 2011

(In thousands)


	Bankrate			Guarantor Subsidiary			Non-Guarantor Subsidiary			Eliminations			Consolidated
Revenue	$	62,075		$	46,308		$	1,961		$	(11,895	)	$	98,449
Cost of revenue (excludes depreciation and amortization)		29,399			17,793			13			(11,895	)		35,310

Gross margin		32,676			28,515			1,948			—			63,139


Operating expenses:
Sales		1,518			1,486			14			—			3,018
Marketing		9,173			8,767			1,664			—			19,604
Product development		1,643			2,006			3			—			3,652
General and administrative		4,253			2,677			329			—			7,259
Acquisition, offering and related expenses and related party fees		38,222			—			—			—			38,222
Restructuring charges		—			238			—			—			238
Depreciation and amortization		6,036			4,587			197			—			10,820

		60,845			19,761			2,207			—			82,813

(Loss) income from operations		(28,169	)		8,754			(259	)		—			(19,674	)
Interest expense, net		(36	)		(9,316	)		(172	)		—			(9,524	)
Loss on early extinguishment of senior secured notes		—			(16,629	)		—			—			(16,629	)
(Loss) earnings on equity investments, net of tax		(10,907	)		(245	)		—			11,152			—

(Loss) income before income taxes		(39,112	)		(17,436	)		(431	)		11,152			(45,827	)
Income tax expense (benefit)		549			(6,715	)		—			—			(6,166	)

Net income (loss)	$	(39,661	)	$	(10,721	)	$	(431	)	$	11,152		$	(39,661	)


Comprehensive (loss) income	$	(39,661	)	$	(10,721	)	$	(431	)	$	11,134		$	(39,679	)

Condensed Consolidating Statement of Cash Flows

For the six months ended June 30, 2012

(In thousands)


	Bankrate			Guarantor Subsidiary			Non-Guarantor Subsidiary			Consolidated
Cash flows from operating activities
Net cash provided by (used in) operating activities	$	48,125		$	(4,205	)	$	(71	)	$	43,849

Cash flows from investing activities
Purchases of furniture, fixtures and equipment and capitalized Website development costs		(4,263	)		(1,898	)		(155	)		(6,316	)
Cash used in business acquisitions, net		(13,378	)		—			—			(13,378	)
Restricted cash		(309	)		—			—			(309	)

Net cash used in investing activities		(17,950	)		(1,898	)		(155	)		(20,003	)

Cash flows from financing activities
Cash paid for acquisition earnouts and contingent liabilities		(2,000	)		—			—			(2,000	)
Purchase of Company common stock		(589	)		—			—			(589	)
Proceeds from issuance of common stock, net of costs		375			—			—			375

Net cash used in financing activities		(2,214	)		—			—			(2,214	)

Effect of exchange rate on cash and cash equivalents		—			—			158			158

Net increase (decrease) in cash		27,961			(6,103	)		(68	)		21,790
Cash - beginning of period		44,476			10,066			1,671			56,213

Cash - end of period	$	72,437		$	3,963		$	1,603		$	78,003

Condensed Consolidating Statement of Cash Flows

For the six months ended June 30, 2011

(In thousands)


	Bankrate			Guarantor Subsidiary			Non-Guarantor Subsidiary			Consolidated
Cash flows from operating activities
Net cash (used in) provided by operating activities	$	(19,809	)	$	580		$	325		$	(18,904	)

Cash flows from investing activities
Purchases of furniture, fixtures and equipment and capitalized Website development costs		(1,664	)		(1,322	)		(137	)		(3,123	)
Cash used in business acquisitions, net		(20,440	)		—			—			(20,440	)
Restricted cash		2			—			—			2

Net cash used in investing activities		(22,102	)		(1,322	)		(137	)		(23,561	)

Cash flows from financing activities
Cash paid for acquisition earnouts and contingent liabilities		(576	)		—			—			(576	)
Debt issuance cost		(2,950	)		—			—			(2,950	)
Repurchase of senior secured notes		(117,337	)		—			—			(117,337	)
Proceeds from issuance of preferred and common stock, net of costs		170,319			—			—			170,319
Payments to dissenting stockholders		(61,253	)		—			—			(61,253	)

Net cash used in financing activities		(11,797	)		—			—			(11,797	)

Effect of exchange rate on cash and cash equivalents		—			—			(83	)		(83	)

Net (decrease) increase in cash		(53,708	)		(742	)		105			(54,345	)
Cash - beginning of period		109,323			5,014			1,293			115,630

Cash - end of period	$	55,615		$	4,272		$	1,398		$	61,285