Company Quick10K Filing
Quick10K
Shutterfly
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$44.79 34 $1,530
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-06-09 Enter Agreement, Amend Bylaw, Other Events, Exhibits
8-K 2019-06-01 Officers, Other Events, Exhibits
8-K 2019-05-15 Shareholder Vote
8-K 2019-04-25 Earnings, Exhibits
8-K 2019-03-29 Officers, Exhibits
8-K 2019-03-29 Officers, Exhibits
8-K 2019-02-05 Earnings, Exhibits
8-K 2019-02-05 Regulation FD, Exhibits
8-K 2019-02-04 Officers, Exhibits
8-K 2018-11-20 Other Events, Exhibits
8-K 2018-11-07 Other Events
8-K 2018-10-30 Earnings, Exhibits
8-K 2018-08-13 Officers
8-K 2018-08-07 Earnings, Exhibits
8-K 2018-05-23 Shareholder Vote, Exhibits
8-K 2018-05-01 Earnings, Exhibits
8-K 2018-04-02 Enter Agreement, M&A, Off-BS Arrangement, Exhibits
8-K 2018-02-28 Other Events
8-K 2018-02-13 Regulation FD, Exhibits
8-K 2018-01-30 Enter Agreement, Exhibits
EBAY eBay 32,790
BEN Franklin Resources 17,120
XRX Xerox 7,230
MGNX Macrogenics 851
BRID Bridgford Foods 261
MOTS Motus Gi Holdings 84
DCAR Dropcar 6
PRKA Parks America 0
IMDZ Immune Design 0
FUSZ nFusz 0
SFLY 2019-03-31
Part I - Financial Information
Item 1. Financial Statements
Note 1 - The Company and Summary of Significant Accounting Policies
Note 2 - Revenue
Note 3 - Acquisition
Note 4 - Stock-Based Compensation
Note 5 - Net Loss per Share
Note 6 - Investments
Note 7 - Fair Value Measurement
Note 8 - Balance Sheet Components
Note 9 - Debt
Note 10 - Segment Reporting
Note 11 - Leases
Note 12 - Commitments and Contingencies
Note 13 - Share Repurchase Program
Note 14 - Restructuring
Note 15 - Derivative Financial Instruments
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.01 ex3101q1-19.htm
EX-31.02 ex3102q1-19.htm
EX-32.01 ex3201q1-19.htm
EX-32.02 ex3202q1-19.htm

Shutterfly Earnings 2019-03-31

SFLY 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019 
 
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to
Commission file number 001-33031

SHUTTERFLY, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
94-3330068
(State or Other Jurisdiction of Incorporation or Organization)
(IRS Employer Identification No.)

2800 Bridge Parkway
Redwood City, California
94065
(Address of Principal Executive Offices)
(Zip Code)

Registrant’s Telephone Number, Including Area Code
(650) 610-5200

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $0.0001 Par Value Per Share
SFLY
The Nasdaq Global Select Market

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. Yes   ý       No   o

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).  
Yes ý      No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated Filer   x
Accelerated Filer   o
Non-accelerated Filer   o
Smaller reporting company o
Emerging growth company o

1




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. o 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   o      No   ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Outstanding as of May 1, 2019 
Common stock, $0.0001 par value per share
34,199,981 



2




TABLE OF CONTENTS

Page
Number
Part I - Financial Information
7 
Part II - Other Information


3


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report, including the following Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based upon our current expectations. These forward-looking statements include statements related to gaining access to Lifetouch customers after our acquisition; the benefit Lifetouch customers stand to gain from Shutterfly Photos; the expectation to realize revenue from Lifetouch customers; the expectations of realizing acquisition synergies; the plan to have our Texas facility serve all of our business segments; the closing of four legacy Lifetouch facilities and related employee considerations; the plan to acquire customers through multiple marketing channels; the plan to attract, retain and grow our leadership team; the anticipated departure of our CEO; our expected secured gross leverage ratio; any effect we would experience from a change in interest rates; the anticipation that our current cash balance and cash generated from operations will be sufficient to meet our strategic and other financial requirements; our intent to continue to expand our use of cloud services; our intent to pursue patent coverage in other countries; our plan to reinstate our stock repurchase program in the fourth quarter of 2019; as well as other statements regarding our future operations, financial condition and prospects and business strategies. In some cases, you can identify forward-looking statements by terminology such as “guidance,” “believe,” “anticipate,” “expect,” “estimate,” “intend,” “seek,” “continue,” “should,” “would,” “could,” “will,” or “may,” or the negative of these terms or other comparable terminology. Forward-looking statements involve risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in our forward-looking statements as a result of many factors, including but not limited to, decreased consumer discretionary spending as a result of general economic conditions; our ability to expand our customer base and increase sales to existing customers; failure to realize the anticipated benefits of the Lifetouch acquisition; the exploration of strategic alternatives; recent and ongoing restructuring activities (including but not limited to those relating to manufacturing consolidation, Lifetouch field operations and our single platform migration); our ability to meet production requirements; our ability to attract and retain management and other personnel; our ability to retain and hire necessary employees, including seasonal personnel, and appropriately staff our operations; the impact of seasonality on our business; our ability to develop innovative, new products and services on a timely and cost-effective basis; the exploration of strategic alternatives may not result in any transaction being consummated; consumer acceptance of our products and services; our ability to develop additional adjacent lines of business; unforeseen changes in expense levels; a deterioration in the relationship with any of our business partners; refining our promotional strategies; competition and the pricing strategies of our competitors, which could lead to pricing pressure; failure to implement new technology systems; a decline in participation rate in the Lifetouch business; the retention of Lifetouch employees and our ability to successfully integrate the Lifetouch businesses; risks inherent in the achievement of anticipated synergies and the timing thereof; general economic conditions and changes in laws and regulations and the other risks set forth below under “Risk Factors” in Part II, Item 1A of this report. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We assume no obligation to update any of the forward-looking statements after the date of this report or to compare these forward-looking statements to actual results.
4


PART IFINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS
SHUTTERFLY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
(Unaudited)
 
March 31, 2019December 31, 2018
ASSETS
Current assets: 
Cash and cash equivalents $156,337 $521,567 
Short-term investments 24,439 34,011 
Accounts receivable, net 56,735 87,023 
Inventories 20,932 18,015 
Prepaid expenses and other current assets 102,869 66,961 
Total current assets 361,312 727,577 
Long-term investments 6,082 10,808 
Property and equipment, net 342,073 381,018 
Intangible assets, net 303,526 316,154 
Goodwill 843,628 843,607 
Other assets 89,293 23,045 
Total assets $1,945,914 $2,302,209 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities: 
Current portion of long-term debt $5,348 $14,203 
Accounts payable 41,569 105,407 
Accrued liabilities 137,000 226,445 
Operating lease liabilities, current portion21,564 — 
Deferred revenue, current portion 96,341 57,319 
Total current liabilities 301,822 403,374 
Long-term debt 900,145 1,090,442 
Operating lease liabilities60,701 — 
Other liabilities 84,619 134,027 
Total liabilities 1,347,287 1,627,843 
Commitments and contingencies (Note 12) 
Stockholders’ equity: 
Common stock, $0.0001 par value; 100,000 shares authorized; 34,181 and 33,673 shares issued and outstanding on March 31, 2019 and December 31, 2018, respectively
3 3 
Additional paid-in capital 1,077,922 1,065,531 
Accumulated other comprehensive income 1,053 1,592 
Accumulated deficit (480,351)(392,760)
Total stockholders' equity 598,627 674,366 
Total liabilities and stockholders' equity $1,945,914 $2,302,209 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


SHUTTERFLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended 
March 31, 
20192018
Net revenue $324,681 $199,725 
Cost of net revenue210,399 126,046 
Gross profit 114,282 73,679 
Operating expenses: 
Technology and development 48,332 38,504 
Sales and marketing 119,370 37,720 
General and administrative 48,388 31,565 
Restructuring 3,973  
Total operating expenses 220,063 107,789 
Loss from operations (105,781)(34,110)
Interest expense (18,253)(9,633)
Interest and other income, net 1,178 1,749 
Loss before income taxes (122,856)(41,994)
Benefit from income taxes 39,237 14,829 
Net loss $(83,619)$(27,165)
Net loss per share - basic and diluted $(2.47)$(0.83)
Weighted-average shares outstanding - basic and diluted 33,918 32,702 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


SHUTTERFLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)

Three Months Ended
March 31,
20192018
Common stock (par value)
Balance, beginning of year$3 $3 
Issuance of common stock upon exercise of options and vesting of restricted stock units  
Balance, end of period3 3 
Additional paid-in capital
Balance, beginning of year1,065,531 996,301 
Issuance of common stock upon exercise of options and vesting of restricted stock units60 13,775 
Stock based compensation, net of forfeitures12,331 12,015 
Balance, end of period1,077,922 1,022,091 
Accumulated other comprehensive income
Balance, beginning of year1,592 1,778 
Foreign currency translation gains382 — 
Unrealized gain (loss) on investments, net of tax74 (23)
Unrealized (loss) gain on cash flow hedges, net of tax(1,371)2,071 
Impact of adoption of new accounting standard376 — 
Balance, end of period1,053 3,826 
Accumulated deficit
Balance, beginning of year(392,760)(447,358)
Impact of adoption of new accounting standards(3,972)4,201 
Net loss(83,619)(27,165)
Balance, end of period(480,351)(470,322)
Total stockholders' equity$598,627 $555,598 
Number of shares
Common stock
Balance, beginning of year33,673 32,297 
Issuance of common stock upon exercise of options and vesting of restricted stock units508 825 
Balance, end of period34,181 33,122 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7


SHUTTERFLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)

Three Months Ended 
March 31, 
20192018
Net loss $(83,619)$(27,165)
Other comprehensive (loss) income, net of reclassification adjustments: 
Foreign currency translation gains382  
Unrealized net gains (losses) on investments 100 (30)
Tax (expense) benefit on unrealized net gains (losses) on investments (26)7 
Unrealized (losses) gains on cash flow hedges (1,844)2,770 
Tax benefit (expense) on unrealized gains on cash flow hedges 473 (699)
Impact of adoption of new accounting standard376  
Other comprehensive (loss) income, net of tax (539)2,048 
Comprehensive loss $(84,158)$(25,117)

The accompanying notes are an integral part of these condensed consolidated financial statements.
 
8


SHUTTERFLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended 
March 31, 
20192018
Cash flows from operating activities: 
Net loss $(83,619)$(27,165)
Adjustments to reconcile net loss to net cash used in operating activities: 
Depreciation and amortization 29,333 22,564 
Amortization of intangible assets 12,825 2,334 
Amortization of debt discount and issuance costs 4,660 4,122 
Amortization of operating lease assets 5,504  
Stock-based compensation12,039 11,692 
(Gain) loss on disposal of property and equipment (465)225 
Deferred income taxes 2,420 4,264 
Restructuring 1,347  
Other (37) 
Changes in operating assets and liabilities: 
Accounts receivable 30,294 28,174 
Inventories (2,959)869 
Prepaid expenses and other assets (36,673)(15,642)
Accounts payable (65,277)(73,773)
Accrued and other liabilities (53,507)(81,996)
Net cash used in operating activities (144,115)(124,332)
Cash flows from investing activities: 
Purchases of property and equipment (13,726)(8,075)
Capitalization of software and website development costs (13,927)(8,584)
Purchases of investments  (9,523)
Proceeds from maturities of investments 14,444 72,068 
Proceeds from sales of property and equipment 956 649 
Net cash (used in) provided by investing activities (12,253)46,535 
Cash flows from financing activities: 
Proceeds from issuance of common stock upon exercise of stock options 60 13,775 
Principal payments of borrowings (203,891)(750)
Payment of debt issuance costs (1,108)
Principal payments of finance lease liabilities (5,312)(4,643)
Net cash (used in) provided by financing activities (209,143)7,274 
Effect of exchange rate changes on cash and cash equivalents 281  
Net decrease in cash and cash equivalents (365,230)(70,523)
Cash and cash equivalents, beginning of period 521,567 489,894 
Cash and cash equivalents, end of period $156,337 $419,371 
Supplemental schedule of non-cash investing / financing activities: 
Net decrease in accrued purchases of property and equipment $(1,420)$(3,780)
Net increase in accrued capitalized software and website development costs 1,920 357 
Stock-based compensation capitalized with software and website development costs 292 323 
Leased assets obtained in exchange for finance lease liabilities  2,969 

The accompanying notes are an integral part of these condensed consolidated financial statements.


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Table of Contents
SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — The Company and Summary of Significant Accounting Policies

Shutterfly, Inc., (the “Company” or "Shutterfly") is the leading retailer and manufacturing platform for personalized products and communications. Founded and incorporated in the state of Delaware in 1999, Shutterfly has three segments: Shutterfly Consumer, Lifetouch, and Shutterfly Business Solutions ("SBS"). Shutterfly Consumer and Lifetouch help consumers capture, preserve, and share life’s important moments through professional and personal photography, and personalized products. The Shutterfly brand brings photos to life in photo books, gifts, home décor, and cards and stationery. Lifetouch is the national leader in school photography, built on the enduring tradition of “Picture Day,” and also serves families through portrait studios and other partnerships. SBS delivers digital printing services that enable efficient and effective customer engagement through personalized communications. The Company is headquartered in Redwood City, California.

On April 2, 2018, the Company completed its acquisition of Lifetouch Inc. ("Lifetouch").  

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and, accordingly, do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements include the accounts of Shutterfly, Inc. and its wholly owned subsidiaries including the financial results of Lifetouch which are included prospectively from the acquisition date of April 2, 2018. In the opinion of management, all adjustments, consisting primarily of normal recurring accruals, considered necessary for a fair statement of the Company’s results of operations for the interim periods reported and of its financial condition as of the date of the interim balance sheet have been included. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019, or for any other period.

The December 31, 2018 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K.

The Company has evaluated subsequent events through the date that the financial statements were issued.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2018. There have been no material changes to the significant accounting policies during the three months ended March 31, 2019 other than those noted below.

Lease Accounting

The Company determines if an arrangement is or contains a lease at inception. Lease right-of-use ("ROU") assets and lease liabilities for operating and finance leases are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Operating leases are included in other assets, current operating lease liabilities and operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included in property and equipment, accrued liabilities and other liabilities in the condensed consolidated balance sheets.

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. ROU assets also include any lease payments made and initial direct costs, and exclude lease incentives. Variable lease payments are excluded from the ROU assets and lease liabilities and recognized in the period in which the obligation for those payments is incurred.

Most leases include one or more options to renew. The exercise of lease renewal options is at the Company’s sole discretion. Certain leases also include options to terminate or purchase the leased asset. The Company’s lease agreements do not
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Table of Contents
SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
contain any material residual value guarantee or material restrictive covenants. Lease expense is recognized on a straight-line basis over the lease term.

The Company elected a short-term lease exception policy, permitting the Company not to apply the recognition requirements of Accounting Standard Codification 842, Leases, ("ASC 842") to short-term leases (i.e., leases with terms of 12 months or less). For all leases, the Company accounts for the lease and non-lease components as a single lease component.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), (“ASC 842”) which requires the recognition of ROU assets and corresponding lease liabilities on the balance sheet, measured at present value of the future lease payments. The most significant impact relates to the recognition of lease assets and liabilities for operating leases, while the accounting for finance leases remained unchanged except for recognition of lease assets and liabilities for fixed non-lease components. Accounting for leases by lessors is substantially unchanged from prior practice as lessors will continue to recognize lease revenue as earned.

The Company adopted ASC 842 as of January 1, 2019 (the effective date), using the alternative modified retrospective transition method provided in ASU 2018-11, Leases (Topic 842): Targeted Improvements. Under this method, the Company recorded a cumulative-effect adjustment as of the effective date and prior comparative periods were not retrospectively presented in the consolidated financial statements. This adoption approach results in a balance sheet presentation that is not comparable to the prior year period in the first year of adoption. In addition, the Company elected the package of practical expedients permitted under the transition guidance, which among other things allows companies to carry forward their historical lease classification. The Company did not elect the hindsight practical expedient, which permits the use of hindsight when determining the lease term and impairment of ROU assets.

Adoption of ASC 842 resulted in the recording of additional net lease assets and lease liabilities of approximately $37.6 million and $42.4 million, respectively, as of January 1, 2019, for finance lease and operating leases including the impact of the reclassification of the Company's financing obligations related to build-to-suit arrangements to operating leases. The difference between the additional net lease assets and lease liabilities, net of deferred tax impact, was recorded as an adjustment to the opening balance of accumulated deficit. As of December 31, 2018, building assets of $48.4 million and financing obligations of $54.0 million related to build-to-suit arrangements. As of January 1, 2019, these balances were derecognized and these arrangements were accounted for as operating leases. The adoption of ASC 842 did not materially impact the Company’s consolidated net loss and had no impact on the consolidated statement of cash flows.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement, Reporting Comprehensive Income (Topic 220): Reclassification of Certain Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”), which allows a reclassification of stranded tax effects from accumulated other comprehensive income to retained earnings, as a result of the Tax Cuts and Jobs Act. The Company adopted ASU 2018-02 as of January 1, 2019 using the prospective transition method, which resulted in an immaterial reclassification from accumulated other comprehensive income to the opening balance of accumulated deficit.

The Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) as of January 1, 2018 using the modified retrospective transition method. Under the modified retrospective method, ASC 606 is only applied to contracts that were not complete as of the adoption date. The cumulative impact of the adoption of ASC 606 resulted in a decrease to the opening balance of accumulated deficit of $4.2 million as of January 1, 2018, which consisted of a decrease in total liabilities of $5.1 million primarily related to deferred revenue and a decrease in total assets of $0.9 million primarily related to deferred costs. Refer to Note 3 in the Company's Form 10-K for the year ended December 31, 2018 for further details.

Recent Accounting Pronouncements Pending Adoption

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"), which clarifies the accounting for implementation costs in cloud computing arrangements. ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, and earlier adoption is permitted including adoption in any interim period. The Company is evaluating the impact of adopting this new accounting guidance on the consolidated financial statements.

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SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). The updated guidance simplifies the measurement of goodwill impairment by removing step two of the goodwill impairment test, which requires the determination of the fair value of individual assets and liabilities of a reporting unit. The new guidance requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying value exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments should be applied on a prospective basis. The new standard is effective for annual or any interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is evaluating the impact this new accounting guidance will have on the consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted beginning January 1, 2019. The Company is evaluating the impact of adopting this new accounting guidance on the consolidated financial statements.

Note 2 — Revenue

Net Revenue by Brand

The following table disaggregates the Company’s net revenue by brand for the three months ended March 31, 2019 and 2018:

Three Months Ended 
March 31, 
20192018
(in thousands)
Shutterfly Consumer net revenue: 
Shutterfly Brand Core $105,076 $111,668 
Shutterfly Brand Personalized Gifts and Home Décor
34,585 30,965 
Tiny Prints Boutique1,695 2,134 
Other 7,491 7,292 
Shutterfly Consumer net revenue 148,847 152,059 
Lifetouch net revenue(1)
129,307  
Shutterfly Business Solutions net revenue 46,527 47,666 
Net revenue $324,681 $199,725 

(1) The Company acquired Lifetouch on April 2, 2018.

Deferred Revenue

The Company records deferred revenue when cash payments are received in advance of the Company's performance and primarily relate to flash deal promotions, gift cards, and yearbooks as well as up-front fees received from SBS or Lifetouch customers. The amount of net revenue recognized during the three months ended March 31, 2019 that was included in the opening deferred revenue balances as of December 31, 2018 was approximately $13.0 million. 

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SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3 — Acquisition
On January 30, 2018, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Lifetouch and Lifetouch Inc. Employee Stock Ownership Trust (collectively, the “Seller”). On April 2, 2018, pursuant to the Purchase Agreement, the Company completed the acquisition of 100% of the issued and outstanding shares of common stock of Lifetouch from the Seller. Under the terms of the Purchase Agreement, the consideration for the acquisition consisted of an all-cash purchase price of $825.0 million subject to certain adjustments based on a determination of Closing Net Working Capital, Transaction Expenses, Cash and Investments, and Closing Indebtedness, as defined in the Purchase Agreement. The Company financed the all-cash purchase price with an incremental $825.0 million term loan issuance under its existing credit agreement, which closed simultaneous with the acquisition (refer to Note 9 - Debt for further details).
Lifetouch provides the Company with a highly complementary business. Lifetouch will be able to offer Shutterfly’s broader product range to Lifetouch customers, as well as to accelerate the development of Lifetouch’s online order-taking platform. The Company expects to gain access to many Lifetouch customers as Shutterfly customers, where they will benefit from Shutterfly’s leading cloud-based photo management service, product creation capabilities, mobile apps, and broad product range.
The Company elected to treat the acquisition of Lifetouch as an asset acquisition under section 338(h)(10) of the U.S. Internal Revenue Service tax code. As such, the goodwill that the Company recognized as part of the Lifetouch acquisition will be deductible for U.S. income tax purposes. The goodwill recognized represents the assembled workforce of Lifetouch and the value of growth in revenue from future customers of Lifetouch.
During the year ended December 31, 2018, the Company recorded approximately $15.5 million of direct and incremental costs associated with acquisition-related activities. These costs were incurred primarily for banking, legal, professional fees and personnel-related costs for transitional employees associated with the Lifetouch acquisition. These costs were recorded in general and administrative expenses in the consolidated statement of operations.
During the three months ended March 31, 2019, Lifetouch contributed $129.3 million to net revenue and $48.6 million to gross profit.

Under the terms of the Purchase Agreement, the amount of consideration that the Company paid consisted of an all-cash purchase price of $825.0 million subject to certain adjustments based on a determination of Closing Net Working Capital, Transaction Expenses, Cash and Investments, and Indebtedness, as defined by the Purchase Agreement. The total purchase consideration paid by the Company during the second quarter of 2018 was $982.0 million. The following table shows the calculation of how the purchase consideration paid by the Company was determined in accordance with the Purchase Agreement:
 (in thousands)
Cash consideration at closing $825,000 
Less: Closing indebtedness(1)
(27,742)
Less: Closing net working capital adjustment(1)
(10,559)
Less: Transaction expenses(1)(2)
(17,614)
Add: Closing cash and investments(1)
212,872 
Purchase price adjustments 156,957 
Total purchase consideration $981,957 
(1) As defined in the Purchase Agreement.
(2) Transaction expenses incurred by Lifetouch in connection with the transaction as defined by the Purchase Agreement.

In accordance with ASC 805, Business Combinations, the Company has recorded the acquired assets (including identifiable intangible assets) and liabilities assumed at the acquisition date fair values. The purchase price allocation for the Lifetouch acquisition includes adjustments for additional information that existed as of the acquisition date but at that time was unknown and became known during the measurement period of 12 months from the acquisition date. As of March 31, 2019, the Company has completed the purchase price allocation of the Lifetouch acquisition.

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Table of Contents
SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table shows the allocation of the total purchase price to the net assets acquired based on their estimated fair values as of April 2, 2018:

 (in thousands)
Cash and cash equivalents$91,753 
Investments100,574 
Accounts receivable7,680 
Inventories19,857 
Property and equipment 134,973 
Intangible assets 326,300 
Goodwill434,862 
Prepaid expenses and other assets37,037 
Accounts payable(9,388)
Deferred revenue, current portion(31,334)
Notes payable(9,102)
Accrued and other liabilities(121,255)
Total $981,957 

The following table shows the valuation of the intangible assets acquired from Lifetouch along with their estimated useful lives:
Approximate Fair Value
(in thousands)
Weighted Average Life
(in years)
Customer contracts and related relationships
$200,400 10
Developed technology
68,000 5
Trade names / trademarks / domain name
57,600 5
Favorable/unfavorable leases300 7
Total intangible assets
$326,300 

Identifiable Intangible Assets
Customer contracts and related relationships. These assets primarily relate to the existing relationships that Lifetouch has developed with a number of schools and preschools. These relationships provide economic value to the Company and therefore were valued separately from goodwill. The Company valued these assets utilizing a form of the income approach known as the "Multi-Period Excess Earnings Method" ("MPEEM") since these customer assets were identified as the primary asset. Under the MPEEM, the value of these assets was estimated based on the expected future economic earnings attributable to the assets. The key assumptions used in the valuation of these assets include future revenue from existing customers and estimated expenses forecast, contributory asset charges (such as cash-free debt-free working capital, fixed assets, brand assets and assembled workforce), the discount rate, expected tax rate(s) and tax amortization benefit.
Developed technology. Lifetouch has a number of developed technology platforms that are internally-used (e.g., field operations management and production management systems) and customer-facing (e.g., order management and yearbook design systems). These technologies will continue to be used by the Company. Given that the technologies are specific to Lifetouch and have minimal possibility of being licensed out to third parties, the "Cost to Recreate Method" under the cost approach was used to value these assets. The key assumptions used in the valuation of these assets include direct and indirect developer costs, developer's profit, and opportunity cost.
Trade names / trademarks / domain name. Lifetouch is the leading provider of school photography services in the U.S. and has a number of registered trade names, trademarks and domain names that are recognized and well known in the marketplace. These brand names are expected to continue to be used, providing economic value to the Company, and therefore were valued separately from goodwill. The "Relief from Royalty Method" of the income approach was used in the valuation of trade names, trademarks and domain names.
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Table of Contents
SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Unaudited Pro Forma Financial Information
The following table summarizes the pro forma consolidated information for the Company assuming the acquisition of Lifetouch had occurred as of January 1, 2017. The unaudited pro forma information for the three months ended March 31, 2018 includes the business combination accounting effects resulting from the acquisition, including amortization for intangible assets acquired, depreciation expense for tangible assets acquired, interest expense for the additional indebtedness incurred to complete the acquisition, acquisition-related charges and the impact of adopting ASC 606. The impact of applying ASC 606 to Lifetouch’s historical results as presented below was not material. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2017.

Three Months Ended
March 31,
 (in thousands, except per share data)
2018
Total net revenue
$334,059 
Net loss
$(84,385)
Net loss per share - basic and diluted $(2.58)

Note 4 — Stock-Based Compensation

Stock-based Compensation Expense

The Company's stock-based compensation expense is allocated as follows in its condensed consolidated statements of operations:


Three Months Ended
March 31,
20192018
(in thousands)
Cost of net revenue$892 $999 
Technology and development2,298 2,429 
Sales and marketing3,466 3,504 
General and administrative5,383 4,760 
Total stock-based compensation$12,039 $11,692 


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SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stock Option Activity

A summary of the Company’s stock option activity for the three months ended March 31, 2019 is as follows:

Number of
Options
Outstanding (in thousands)
Weighted
Average
Exercise
Price
Weighted
Average Remaining
Contractual
Term (years)
Aggregate
Intrinsic
Value
(in thousands)
Balance as of December 31, 20181,405 $53.44 
Granted  $ 
Exercised (2)$25.50 
Forfeited, cancelled or expired  $ 
Balance as of March 31, 2019 1,403 $53.49 3.1$185 
Options vested and expected to vest as of March 31, 2019 1,271 $53.10 3.1$185 
Options vested as of March 31, 2019 587 $50.49 2.2$185 
 
The total intrinsic value of options exercised during the three months ended March 31, 2019 was immaterial, and $7.9 million for the three months ended March 31, 2018. Net cash proceeds from the exercise of stock options for the three months ended March 31, 2019 and 2018 were $0.1 million and $13.8 million, respectively.

Valuation of Stock Options

The Company estimates the fair value of each option award on the date of grant using the Black-Scholes option-pricing model. The Company calculates volatility using an average of its historical and implied volatilities as it has sufficient public trading history to cover the entire expected term. The expected term of options gives consideration to historical exercises, post-vest cancellations and the options' contractual term. The risk-free rate for the expected term of the option is based on the U.S. Treasury Constant Maturity at the time of grant. The assumptions used to value options granted during the three months ended March 31, 2018 are as follows (there were no option awards granted during the three months ended March 31, 2019):

Three Months Ended
March 31,
2018
Dividend yield
 
Annual risk-free rate of return
2.6 %
Expected volatility
33.7 %
Expected term (years)
4.1

Restricted Stock Unit Activity

The Company grants restricted stock units (“RSUs”), performance-based restricted stock units ("PBRSUs"), and market-based restricted stock units ("MSUs") to its employees under the provisions of the 2015 Equity Incentive Plan and inducement awards to certain new employees upon hire in accordance with Nasdaq Listing Rule 5635(c)(4). The cost of RSUs and PBRSUs is determined using the fair value of the Company’s common stock on the date of grant. The cost of MSUs is determined using a Monte Carlo simulation model on the date of grant. RSUs typically vest and are settled annually, based on a four-year total vesting term. Compensation cost associated with RSUs is amortized on a straight-line basis over the requisite service period.

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SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A summary of the Company’s RSU activity, including service-based awards, performance-based awards, and market-based awards for the three months ended March 31, 2019, is as follows:
Number of
Units
Outstanding (in thousands)
Weighted
Average
Grant Date
Fair Value
Awarded and unvested as of December 31, 20181,941 $56.91 
Granted 991 $44.49 
Vested (506)$51.57 
Forfeited (48)$54.42 
Awarded and unvested as of March 31, 2019 2,378 $52.91 
RSUs expected to vest as of March 31, 2019 1,818 

Included in the RSU grants for the three months ended March 31, 2019, are approximately 116,000 RSUs that have both performance criteria tied to the Company’s 2019 financial performance and a three-year service criteria. Compensation expense associated with these PBRSUs is recognized based on the estimated number of shares the Company ultimately expects will vest and amortized on an accelerated basis over the requisite service period as these PBRSUs consist of three tranches. If in the future, situations indicate that the performance criteria is not probable, then no further compensation expense will be recorded and any previous expenses will be reversed.

Included in the RSU grants for the three months ended March 31, 2019, are approximately 116,000 RSUs that have both market criteria over a three-year period and a three-year service criteria (‘’MSUs’’). The grant date fair value of these MSUs was determined using a Monte Carlo simulation model that incorporates the probability that market conditions may not be achieved. Provided that the requisite service is rendered, the total fair value of the MSUs at the date of grant must be recognized as compensation expense even if the market condition is not achieved; the number of shares that ultimately vest can vary depending on the ultimate achievement of the market criteria. Compensation expense associated with these MSUs is recognized on a straight-line basis over the requisite service period as these MSUs consist of one tranche.

Employee stock-based compensation expense recognized in the three months ended March 31, 2019 and 2018 was calculated based on awards ultimately expected to vest and has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

At March 31, 2019, the Company had $88.8 million of total unrecognized stock-based compensation cost, net of estimated forfeitures, related to stock options, RSUs, PBRSUs, and MSUs that will be recognized over a weighted-average period of approximately 2.6 years.

Note 5 — Net Loss Per Share

Basic net loss per share attributed to common shares is computed by dividing the net loss attributable to common shares for the period by the weighted average number of common shares outstanding during the period.

Diluted net loss per share attributed to common shares is computed by dividing the net loss attributable to common shares for the period by the weighted-average number of common and potential common shares outstanding during the period, if the effect of each class of potential common shares is dilutive. Potential common shares include RSUs and incremental shares of common stock issuable upon the exercise of stock options, convertible senior notes and conversion of warrants.

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SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A summary of the net loss per share for the three months ended March 31, 2019 and 2018 is as follows:

Three Months Ended 
March 31, 
(in thousands, except per share data)20192018
Net loss per share:
Numerator
Net loss
$(83,619)$(27,165)
Denominator for basic and diluted net loss per share
Weighted-average common shares outstanding 33,918 32,702 
Net loss per share - basic and diluted
$(2.47)$(0.83)

The following weighted-average outstanding stock options and RSUs were excluded from the computation of diluted net loss per common share for the periods presented as the Company had a net loss in the period and including them would have had an anti-dilutive effect:

Three Months Ended 
March 31, 
20192018
(in thousands)
Weighted average stock options and RSUs that would have been included in the computation of dilutive common equivalent shares outstanding if net income had been reported in the period1,256 3,422 
Weighted average stock options and RSUs that would have been excluded from the computation of dilutive common equivalent shares outstanding if net income had been reported due to their antidilutive effect1,991 265 
Total3,247 3,687 

With respect to the convertible senior notes issued in 2013 and settled in cash upon their maturity in May 2018, the potential conversion impact of approximately 373,000 shares as of March 31, 2018 were excluded from the computation of diluted net loss per common share because including it would have had an anti-dilutive effect in the three months ended March 31, 2018.


Note 6 — Investments

At March 31, 2019 and December 31, 2018, the estimated fair value of short-term and long-term debt securities investments, all of which are classified as available-for-sale, was as follows:
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SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2019
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value 
(in thousands)
Short-term investments 
Corporate debt securities $17,354 $9 $(7)$17,356 
Agency securities 3,610  (7)3,603 
U.S. government securities 3,484  (4)3,480 
Total short-term investments $24,448 $9 $(18)$24,439 
Long-term investments 
Corporate debt securities $995 $5 $ $1,000 
Agency securities 2,117 1 (1)2,117 
U.S. government securities 2,964 1  2,965 
Total long-term investments $6,076 $7 $(1)$6,082 

December 31, 2018
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value 
(in thousands)
Short-term investments 
Corporate debt securities $24,367 $ $(43)$24,324 
Agency securities 5,728  (19)5,709 
U.S. government securities 3,986  (8)3,978 
Total short-term investments $34,081 $ $(70)$34,011 
Long-term investments 
Corporate debt securities $4,283 $ $(13)$4,270 
Agency securities 2,113  (7)2,106 
U.S. government securities 4,445  (13)4,432 
Total long-term investments $10,841 $ $(33)$10,808 

The Company had no available-for-sale investments with a significant unrealized loss that have been in a continuous unrealized loss position for more than 12 months as of March 31, 2019, and no impairments were recorded during the three months ended March 31, 2019 and 2018. The Company had no material realized gains or losses during the three months ended March 31, 2019 and 2018.

The following table summarizes the contractual maturities of the Company's investments as of March 31, 2019 and December 31, 2018:
March 31, 2019December 31, 2018
(in thousands) 
One year or less $24,439 $34,011 
One year through three years 6,082 10,808 
$30,521 $44,819 

Actual maturities may differ from the contractual maturities because borrowers may have certain prepayment conditions. 

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SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7 — Fair Value Measurement

Cash Equivalents and Investments

The Company measures the fair value of money market funds and investments based on quoted prices in active markets for identical assets or liabilities. All other financial instruments were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. The Company did not hold any cash equivalents or investments categorized as Level 3 as of March 31, 2019 and December 31, 2018.

The following table summarizes, by major security type, the Company's cash equivalents and investments that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:

Total Estimated Fair Value as of
March 31, 2019December 31, 2018
Cash Equivalents
Investments
Cash Equivalents
Investments
(in thousands)
Level 1 Securities:
Money market funds $81,418 $ $116,212 $ 
Level 2 Securities:
Corporate debt securities  18,356  28,594 
Agency securities  5,720  7,815 
U.S. government securities  6,445  8,410 
Total cash equivalents and investments$81,418 $30,521 $116,212 $44,819 

Derivative Assets

As of March 31, 2019 and December 31, 2018, the fair value of the interest-rate swap agreements, which were determined based on an income-based valuation model that takes into account the contract terms as well as multiple observable market inputs such as LIBOR-based yield curves, futures, volatility and basis spreads (Level 2), were as follows:

Total Estimated Fair Value as of
March 31, 2019December 31, 2018
(in thousands) 
Derivative assets $2,360 $4,204 

Borrowings

As of March 31, 2019 and December 31, 2018, the fair value of the Company's Term Loan borrowings (as described in Note 9 - Debt), which was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including the Company's stock price, interest rates and credit spread (Level 2) were as follows:

Total Estimated Fair Value as of
March 31, 2019December 31, 2018
(in thousands) 
Term Loans
$904,508 $1,081,520 

As of March 31, 2019 and December 31, 2018, the carrying value of other financial instruments, including accounts receivable, accounts payable and other payables, approximates fair value due to their short maturities.

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SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 8 — Balance Sheet Components

Prepaid Expenses and Other Current Assets
March 31, 2019December 31, 2018
(in thousands)
Intra-period income tax asset $41,445 $ 
Restricted certificate of deposit18,745 18,745 
Prepaid service contracts – current portion 15,928 13,562 
Other prepaid expenses and current assets 26,751 34,654 
$102,869 $66,961 

Intra-period income tax asset represents the cumulative income tax benefit recorded as of the balance sheet date, which will offset against taxes payable or become a component of deferred taxes on a full year basis.

Property and Equipment, Net
March 31, 2019December 31, 2018
(in thousands)
Computer equipment and software$367,053 $347,032 
Plant and equipment 310,189 297,597 
Land, buildings and building improvements 56,664 113,048 
Leasehold improvements 27,079 27,011 
Furniture, fixtures and other 11,586 11,498 
772,571 796,186 
Less: Accumulated depreciation and amortization (430,498)(415,168)
Property and equipment, net $342,073 $381,018 
 
Included within computer equipment and software is approximately $82.0 million and $75.3 million of capitalized software and website development costs, net of accumulated amortization at March 31, 2019 and December 31, 2018, respectively. Amortization of capitalized costs totaled approximately $9.5 million and $6.6 million for the three months ended March 31, 2019 and 2018, respectively.

Plant and equipment includes manufacturing, photography, and rental equipment. Rental equipment includes camera lenses, camera bodies, video equipment and other camera peripherals which are rented through the BorrowLenses website. Included within plant and equipment is approximately $95.8 million and $92.5 million of ROU assets under finance leases for various pieces of manufacturing facility equipment as of March 31, 2019 and December 31, 2018, respectively. As a result of the adoption of ASC 842, the ROU assets under finance leases as of March 31, 2019 include non-lease components whereas the balance as of December 31, 2018 does not. Accumulated depreciation of ROU assets under finance leases totaled $43.6 million and $44.9 million at March 31, 2019 and December 31, 2018, respectively.

As of December 31, 2018, land, buildings and building improvements included approximately $56.5 million of build-to-suit arrangements which represented the estimated fair value of buildings under build-to-suit arrangements of which the Company was the "deemed owner" for accounting purposes. As of December 31, 2018, accumulated depreciation for these build-to-suit arrangements was $8.1 million. Upon adoption of ASC 842 on January 1, 2019, the Company derecognized its build-to-suit arrangements as these arrangements no longer qualify for build-to-suit accounting and are instead recognized as operating leases under ASC 842 and included in the operating ROU assets and operating lease liabilities recorded as of the adoption date.

Included in property and equipment is approximately $34.8 million and $26.3 million of assets in construction as of March 31, 2019 and December 31, 2018, respectively, the majority of which relates to computer equipment and software.

Depreciation and amortization expense totaled $29.3 million and $22.6 million for the three months ended March 31, 2019 and 2018, respectively.

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SHUTTERFLY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Intangible Assets

Intangible assets are comprised of the following:

Weighted Average
Useful Life
March 31, 2019December 31, 2018
(in thousands)
Customer relationships9 years$275,546 $275,546 
Less: accumulated amortization(96,095)(91,087)
179,451 184,459 
Trade name9 years112,120 112,120 
Less: accumulated amortization(42,051)(38,320)
70,069 73,800 
Purchased technology5 years121,769 121,769 
Less: accumulated amortization(67,763)(64,142)
54,006 57,627