UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
b
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices)
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Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class |
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Trading Symbol |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of April 28, 2022, the registrant had
Table of Contents
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PART I. |
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Item 1. |
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3 |
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4 |
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5 |
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6 |
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Notes to the Consolidated Financial Statements (Unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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26 |
1
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
Cars.com Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
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March 31, 2022 |
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December 31, 2021 |
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(unaudited) |
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Assets: |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Intangible assets, net |
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Investments and other assets, net |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity: |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued compensation |
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Current portion of long-term debt, net |
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Other accrued liabilities |
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Total current liabilities |
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Noncurrent liabilities: |
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Long-term debt, net |
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Other noncurrent liabilities |
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Total noncurrent liabilities |
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Total liabilities |
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Stockholders' equity: |
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Preferred Stock at par, $ |
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Common Stock at par, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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Accumulated other comprehensive loss |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of the Consolidated Financial Statements.
2
Cars.com Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Revenue: |
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Dealer |
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$ |
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$ |
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OEM and National |
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Other |
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Total revenue |
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Operating expenses: |
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Cost of revenue and operations |
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Product and technology |
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Marketing and sales |
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General and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Operating income |
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Nonoperating expense: |
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Interest expense, net |
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( |
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Other income, net |
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Total nonoperating expense, net |
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( |
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Income before income taxes |
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Income tax (benefit) expense |
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( |
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Net income |
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$ |
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$ |
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Weighted-average common shares outstanding: |
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Basic |
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Diluted |
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Earnings per share: |
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Basic |
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$ |
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$ |
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Diluted |
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The accompanying notes are an integral part of the Consolidated Financial Statements.
3
Cars.com Inc.
Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Net income |
$ |
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$ |
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Other comprehensive income, net of tax: |
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Reclassification of accumulated other comprehensive loss on interest rate swap into |
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Total other comprehensive income |
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Comprehensive income |
$ |
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$ |
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The accompanying notes are an integral part of the Consolidated Financial Statements.
4
Cars.com Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
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Preferred Stock |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at December 31, 2021 |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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— |
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— |
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Repurchases of common stock |
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— |
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— |
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( |
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( |
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( |
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— |
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— |
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( |
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Shares issued in connection with |
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( |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2022 |
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— |
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— |
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Preferred Stock |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at December 31, 2020 |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued in connection with |
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— |
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— |
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( |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2021 |
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— |
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— |
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( |
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( |
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The accompanying notes are an integral part of the Consolidated Financial Statements.
5
Cars.com Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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Three Months Ended |
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile Net income to Net cash provided by operating activities: |
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Depreciation |
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Amortization of intangible assets |
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Amortization of accumulated other comprehensive loss on interest rate swap |
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Stock-based compensation |
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Deferred income taxes |
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( |
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Provision for doubtful accounts |
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Amortization of debt issuance costs |
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Amortization of deferred revenue related to Accu-Trade Acquisition |
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( |
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Other, net |
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( |
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Changes in operating assets and liabilities, net of acquisitions: |
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Accounts receivable |
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Prepaid expenses and other assets |
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( |
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Accounts payable |
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Accrued compensation |
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( |
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( |
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Other liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Payments for acquisitions, net of cash acquired |
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( |
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Purchase of property and equipment |
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( |
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( |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Proceeds from revolving loan borrowings |
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Payments of long-term debt |
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( |
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( |
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Payments for stock-based compensation plans, net |
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( |
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( |
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Repurchases of common stock |
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( |
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Payments of debt issuance costs and other fees |
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( |
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Net cash provided by (used in) financing activities |
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( |
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Net decrease in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash paid (received) for income taxes |
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$ |
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$ |
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Cash paid for interest and swap |
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The accompanying notes are an integral part of the Consolidated Financial Statements.
6
Cars.com Inc.
Notes to the Consolidated Financial Statements
(Unaudited)
NOTE 1. Description of Business and Summary of Significant Accounting Policies
Description of Business. Cars.com Inc. (the “Company” or “CARS”) is a leading automotive marketplace platform that provides a robust set of industry specific digital solutions. Through the marketplace, dealer websites and other digital products, the Company showcases dealer inventory, elevates and amplifies dealers’ and automotive manufacturers’ (“OEMs”) brands, connects sellers with the Company’s ready-to-buy audience and empowers shoppers with the resources and information needed to make confident car buying decisions. The Company’s digital solutions strategy builds on the rich data and audience of its digital marketplace to offer media and solutions that drive growth and efficiency for the automotive industry. The Company's portfolio of brands now includes Cars.com, Dealer Inspire®, DealerRater®, FUEL, Auto.com, PickupTrucks.com, CreditIQ, Accu-Trade and NewCars.com®.
Basis of Presentation. These accompanying unaudited interim Consolidated Financial Statements (“Consolidated Financial Statements”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2021, which are included in the Company's Annual Report on Form 10-K dated February 25, 2022 (the “December 31, 2021 Financial Statements”).
The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in the December 31, 2021 Financial Statements. In the opinion of management, the Consolidated Financial Statements contain all adjustments (consisting of a normal, recurring nature) necessary to present fairly the Company's financial position, results of operations, cash flows and changes in stockholders' equity as of the dates and for the periods indicated. The unaudited results of operations for the three months ended March 31, 2022 are not necessarily indicative of results that may be expected for the year ending December 31, 2022.
Use of Estimates. The preparation of the accompanying Consolidated Financial Statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates.
Correction of Certain Amounts Relating to Previously Issued Financial Statements. During the three months ended March 31, 2022, the Company identified a $
7
Cars.com Inc.
Notes to the Consolidated Financial Statements (continued)
(Unaudited)
Consolidated Balance Sheet |
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As of December 31, 2021 |
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Financial statement line item |
As reported |
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Adjustment |
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As adjusted |
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Deferred tax liability |
$ |
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$ |
( |
) |
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$ |
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Total noncurrent liabilities |
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( |
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Total liabilities |
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( |
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Consolidated Balance Sheet and Statement of Stockholders' Equity |
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As of December 31, 2021 |
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Financial statement line item |
As reported |
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Adjustment |
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As adjusted |
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Accumulated deficit |
$ |
( |
) |
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$ |
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$ |
( |
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Total stockholders' equity |
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Consolidated Statement of Stockholders' Equity |
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Three Months Ended March 31, 2021 |
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Financial statement line item |
As reported |
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Adjustment |
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As adjusted |
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Accumulated deficit balance at December 31, 2020 |
$ |
( |
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$ |
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$ |
( |
) |
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Total stockholders' equity balance at December 31, 2020 |
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Accumulated deficit balance at March 31, 2021 |
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( |
) |
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( |
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Total stockholders' equity balance at March 31, 2021 |
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These adjustments had no impact to Net cash provided by operating activities, Net cash used in investing activities or Net cash provided by (used in) financing activities on the Consolidated Statements of Cash Flows. In addition, these adjustments had no impact to the Consolidated Statements of Income and Earnings per share for the three months ended March 31, 2021.
NOTE 2. Revenue
Revenue Summary. In the table below (in thousands), revenue is disaggregated by major products and services. The Company only has
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Three Months Ended March 31, |
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Major products and services |
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2022 |
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2021 |
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Subscription advertising and digital solutions |
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$ |
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$ |
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Display advertising |
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Pay per lead |
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Other |
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Total revenue |
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$ |
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$ |
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NOTE 3. Goodwill, Indefinite-lived Intangible Asset and Business Combination
The changes in the carrying amount of goodwill and indefinite-lived intangible asset are as follows (in thousands):
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December 31, 2021 |
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Additions |
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Impairment |
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March 31, 2022 |
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Goodwill |
$ |
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$ |
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$ |
— |
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$ |
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Indefinite-lived intangible asset |
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— |
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— |
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Business Combinations. The below transactions were accounted for as business combinations.
Accu-Trade Acquisition. On March 1, 2022, the Company acquired certain of the assets and assumed certain liabilities of Accu-Trade, LLC; Accu-Trade Canada, LLC; Galves Market Data; and Headstart Logistics, LLC d/b/a/ MADE Logistics (collectively, “Accu-Trade”), which provides dealers with vehicle VIN-specific valuation and appraisal data, instant guaranteed offer capabilities and logistics technology (the “Accu-Trade Acquisition”).
The Company expensed as incurred total acquisition costs of $
8
Cars.com Inc.
Notes to the Consolidated Financial Statements (continued)
(Unaudited)
Preliminary Purchase Price Allocation. The preliminary fair values assigned to the tangible and intangible assets acquired and liabilities assumed were determined based on management’s estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques, such as the multi-period excess earnings and the relief of royalty methods. These preliminary fair values are subject to change within the one-year measurement period.
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Preliminary |
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Cash consideration |
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$ |
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Other consideration (1) |
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Contingent consideration (2) |
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Total purchase consideration |
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$ |
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Assets acquired (3) |
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$ |
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Identified intangible assets (4) |
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Total assets acquired |
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Total liabilities assumed (5) |
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( |
) |
Net identifiable assets |
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Goodwill |
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Total purchase consideration |
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$ |
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