UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-16611

 

GSI COMMERCE, INC.

(Exact name of registrant as specified in its charter)

DELAWARE (State or other jurisdiction of incorporation or organization)		04-2958132 (I.R.S. employer identification no.)
935 FIRST AVENUE, KING OF PRUSSIA, PA (Address of principal executive offices)		19406 (Zip Code)

Registrant’s telephone number, including area code (610) 491-7000

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company 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 þ

There were 55,122,920 shares of the registrant’s Common Stock outstanding as of the close of business on November 5, 2009.

 

 

GSI COMMERCE, INC.
FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED OCTOBER 3, 2009

INDEX

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of January 3, 2009 and October 3, 2009			3
Condensed Consolidated Statements of Operations for the three- and nine-month periods ended September 27, 2008 (corrected) and October 3, 2009			4
Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 27, 2008 (corrected) and October 3, 2009			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3. Quantitative and Qualitative Disclosures About Market Risk			32
Item 4. Controls and Procedures			32
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			52
Item 3. Defaults Upon Senior Securities			52
Item 4. Submission of Matters to a Vote of Security Holders			52
Item 5. Other Information			52
Item 6. Exhibits			53
SIGNATURES			54
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

The Company’s fiscal year ends on the Saturday nearest the last day of December. The Company’s fiscal year ends are as follows:

References To		Refer to the Years Ended/Ending
Fiscal 2005		December 31, 2005
Fiscal 2006		December 30, 2006
Fiscal 2007		December 29, 2007
Fiscal 2008		January 3, 2009
Fiscal 2009		January 2, 2010
Fiscal 2010		January 1, 2011
Fiscal 2011		December 31, 2011
Fiscal 2012		December 29, 2012
Fiscal 2013		December 28, 2013

PART I

ITEM 1: FINANCIAL STATEMENTS

GSI COMMERCE, INC. AND SUBSIDIARIES

		January 3,				October 3,
		2009				2009
ASSETS
Current assets:
Cash and cash equivalents		$	130,315			$	135,273
Accounts receivable, less allowance for doubtful accounts of $2,747 and $2,981			78,544				66,065
Inventory			42,856				43,943
Deferred tax assets			18,125				18,184
Prepaid expenses and other current assets			11,229				13,263
Total current assets			281,069				276,728
Property and equipment, net			164,833				155,870
Goodwill			194,996				199,653
Intangible assets, net of accumulated amortization of $18,340 and $25,884			46,663				42,939
Long-term deferred tax assets			11,296				27,544
Other assets, net of accumulated amortization of $16,384 and $18,197			17,168				13,017
Total assets		$	716,025			$	715,751
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	98,100			$	58,237
Accrued expenses			116,747				76,573
Deferred revenue			20,397				19,089
Convertible notes			—				54,280
Current portion of long-term debt			4,887				5,019
Total current liabilities			240,131				213,198
Convertible notes			161,951				115,436
Long-term debt			32,609				29,239
Deferred revenue and other long-term liabilities			6,838				9,116
Total liabilities			441,529				366,989
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized; 0 shares issued and outstanding as of January 3, 2009 and October 3, 2009			—				—
Common stock, $0.01 par value, 90,000,000 shares authorized; 47,630,824 and 55,077,864 shares issued as of January 3, 2009 and October 3, 2009, respectively; 47,630,621 and 55,077,661 shares outstanding as of January 3, 2009 and October 3, 2009, respectively			476				551
Additional paid in capital			430,933				538,818
Accumulated other comprehensive loss			(2,327	)			(1,392	)
Accumulated deficit			(154,586	)			(189,215	)
Total stockholders’ equity			274,496				348,762
Total liabilities and stockholders’ equity		$	716,025			$	715,751

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

GSI COMMERCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)
(unaudited)

		Three Months Ended								Nine Months Ended
		September 27,				October 3,				September 27,				October 3,
		2008 (1)				2009				2008 (1)				2009
Revenues:
Net revenues from product sales		$	102,139			$	90,767			$	332,314			$	288,150
Service fee revenues			84,655				99,544				243,232				285,817
Net revenues			186,794				190,311				575,546				573,967
Costs and expenses:
Cost of revenues from product sales			73,089				67,548				236,950				217,345
Marketing			11,412				9,087				40,141				27,002
Account management and operations, inclusive of $1,374, $2,033, $4,205 and $6,684 of stock-based compensation			58,733				60,173				175,726				176,969
Product development, inclusive of $705, $1,207, $2,003 and $3,843 of stock-based compensation			25,736				28,396				73,571				84,871
General and administrative, inclusive of $2,475, $2,436, $7,338 and $8,195 of stock-based compensation			17,489				19,365				52,437				58,169
Depreciation and amortization			16,868				15,655				49,503				46,335
Total costs and expenses			203,327				200,224				628,328				610,691
Loss from operations			(16,533	)			(9,913	)			(52,782	)			(36,724	)
Other (income) expense:
Interest expense			4,909				4,897				13,818				14,452
Interest income			(190	)			(99	)			(1,397	)			(304	)
Other (income) expense			480				(32	)			833				(197	)
Total other expense			5,199				4,766				13,254				13,951
Loss before income taxes			(21,732	)			(14,679	)			(66,036	)			(50,675	)
Benefit for income taxes			(7,537	)			(5,273	)			(19,996	)			(16,046	)
Net loss		$	(14,195	)		$	(9,406	)		$	(46,040	)		$	(34,629	)
Basic and diluted loss per share		$	(0.30	)		$	(0.18	)		$	(0.97	)		$	(0.70	)
Weighted average shares outstanding — basic and diluted			47,488				51,910				47,259				49,506
(1)     As retrospectively adjusted and corrected, see Note 14.

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

GSI COMMERCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)
(unaudited)

		Nine Months Ended
		September 27,				October 3,
		2008 (1)				2009
Cash Flows from Operating Activities:
Net loss		$	(46,040	)		$	(34,629	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			39,805				38,856
Amortization			9,698				7,479
Amortization of discount on convertible notes			7,041				7,765
Stock-based compensation			13,546				18,722
Foreign currency transaction losses (gains)			841				(184	)
Gain on disposal of equipment			(359	)			(10	)
Deferred income taxes			(18,026	)			(16,046	)
Changes in operating assets and liabilities:
Accounts receivable, net			5,623				14,602
Inventory			(6,614	)			(1,087	)
Prepaid expenses and other current assets			510				(1,900	)
Other assets, net			583				1,938
Accounts payable and accrued expenses			(54,937	)			(81,434	)
Deferred revenue			6,064				(2,224	)
Net cash used in operating activities			(42,265	)			(48,152	)
Cash Flows from Investing Activities:
Payments for acquisitions of businesses, net of cash acquired			(145,001	)			(5,601	)
Cash paid for property and equipment, including internal use software			(46,007	)			(29,585	)
Proceeds from disposition of assets			1,500				—
Release from restricted cash escrow funds			—				1,052
Net cash used in investing activities			(189,508	)			(34,134	)
Cash Flows from Financing Activities:
Borrowings on revolving credit loan			60,000				—
Repayments on revolving credit loan			(20,000	)			—
Proceeds from sale of common stock			—				92,596
Equity issuance costs paid			—				(4,179	)
Proceeds from lease financing obligations			7,901				—
Debt issuance costs paid			(561	)			(83	)
Repayments of capital lease obligations			(2,142	)			(3,359	)
Repayments of mortgage note			(152	)			(136	)
Proceeds from exercise of common stock options			1,342				2,065
Net cash provided by financing activities			46,388				86,904
Effect of exchange rate changes on cash and cash equivalents			(1,073	)			340
Net increase (decrease) in cash and cash equivalents			(186,458	)			4,958
Cash and cash equivalents, beginning of period			231,511				130,315
Cash and cash equivalents, end of period		$	45,053			$	135,273
Supplemental Cash Flow Information
Cash paid during the period for interest		$	5,614			$	4,672
Cash paid during the period for income taxes			628				2,620
Noncash Investing and Financing Activities:
Accrual for purchases of property and equipment			2,047				3,196
Equipment financed under capital lease			2,497				257
(1)     As retrospectively adjusted and corrected, see Note 14.

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

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)
(unaudited)

NOTE 1—BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of GSI Commerce, Inc. and Subsidiaries (“the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements.

The accompanying financial information is unaudited; however, in the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the financial position, results of operations and cash flows for the periods reported have been included. The results of operations for the periods reported are not necessarily indicative of those that may be expected for a full year.

The financial statements presented include the accounts of the Company and all wholly-owned subsidiaries. All inter-company balances and transactions among consolidated entities have been eliminated.

This quarterly report should be read in conjunction with the financial statements and notes thereto included in the Company’s audited financial statements for the fiscal year ended January 3, 2009, presented in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on August 4, 2009.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.

Client Revenue Share: Client revenue share charges are payments made to the Company’s clients in exchange for the use of their brand names, logos, the promotion of its clients’ URLs, Web stores and toll-free telephone numbers in clients’ marketing and communications materials, the implementation of programs to provide incentives to consumers to shop through the e-commerce businesses that the Company operates for its clients and other programs and services provided to the consumers of the e-commerce businesses that the Company operates for its clients, net of amounts reimbursed to the Company by its clients. Client revenue share is calculated as either a percentage of product sales or a guaranteed annual amount. Client revenue share charges were $5,613 and $17,900 for the three- and nine-month periods ended October 3, 2009, and $6,651 and $23,203 for the three- and nine-month periods ended September 27, 2008 and are included in marketing expenses in the Condensed Consolidated Statements of Operations.

Shipping and Handling Costs: The Company defines shipping and handling costs as only those costs incurred for a third-party shipper to transport products to consumers and these costs are included in cost of revenues from product sales to the extent the costs are less than or equal to shipping revenue. In some instances, shipping and handling costs exceed shipping charges to the consumer and are subsidized by the Company. Additionally, the Company selectively offers promotional free shipping whereby it ships merchandise to consumers free of all shipping and handling charges. The cost of promotional, free, and subsidized shipping and handling was $0 for the three- and nine-month periods ended October 3, 2009, and $595 and $3,824 for the three- and nine-month periods ended September 27, 2008, and is included in marketing expenses in the Condensed Consolidated Statements of Operations.

Fulfillment Costs: The Company defines fulfillment costs as personnel, occupancy and other costs associated with its fulfillment centers, personnel and other costs associated with its logistical support and vendor operations departments and third-party warehouse and fulfillment services costs. Fulfillment costs were $19,541 and $59,351 for the three- and nine-month periods ended October 3, 2009, and $22,126 and $68,452 for the three- and nine-month periods ended September 27, 2008, and are included in account management and operations expenses in the Condensed Consolidated Statements of Operations.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

Recent Accounting Pronouncements:

The following is a summary of recent accounting standards issued by the Financial Accounting Standards Board (“FASB”):

								Effective Date for
Subject		Date Issued		Summary		Effect of Adoption		The Company
Effective Date of Fair Value Measurements		February 2008		Delayed the effective date of previously issued accounting standards for “Fair Value Measurements” of nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis, at least annually, until fiscal years beginning after November 15, 2008, and interim periods within those fiscal years.		No material impact.		January 4, 2009
Business Combinations		December 2007		Establishes principles and requirements for an acquirer in a business combination for recognizing and measuring the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the entity acquired in its financial statements. Provides guidance on the recognition and measurement of goodwill acquired in the business combination or a gain from a bargain purchase as well as what information to disclose to enable users of the financial statements to evaluate the nature and financial impact of the business combination. Also, requires recognition of assets and liabilities of noncontrolling interests acquired, fair value measurement of consideration and contingent consideration, expense recognition for transaction costs and certain integration costs, recognition of the fair value of contingencies, and adjustments to income tax expense for changes in an acquirer’s existing valuation allowances or uncertain tax positions that result from the business combination.		No material impact.		January 4, 2009
Noncontrolling Interests in Consolidating Financial Statements		December 2007		Establishes principles and requirements of treatment for the portion of equity in a subsidiary that is not attributable directly or indirectly to a parent. This is commonly known as a minority interest. The objective is to improve relevance, comparability, and transparency concerning ownership interests in subsidiaries held by parties other than the parent by providing disclosures that clearly identify between interests of the parent and interest of the noncontrolling owners and the related impacts on the consolidated statement of income and the consolidated statement of financial position. Also provides guidance on disclosures related to changes in the parent’s ownership interest and deconsolidation of a subsidiary.		No material impact.		January 4, 2009
Disclosures about Derivative Instruments and Hedging Activities		March 2008		Requires companies with derivative instruments to disclose how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under accounting standards for “Accounting for Derivative Instruments and Hedging Activities,” and how derivative instruments and related hedged items affect a company’s financial statements.		No material impact.		January 4, 2009

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

								Effective Date for
Subject		Date Issued		Summary		Effect of Adoption		The Company
Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)		May 2008		Changes the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. Requires the issuer of convertible debt instruments with cash settlement features to separately account for the liability and equity components of the instrument. The Company’s $207,500 principal amount of subordinated convertible notes are subject to the provisions of these standards because under the notes the Company has the ability to elect cash settlement of the conversion value of the notes. The provisions require retrospective application.		See Note 14, Financial Statement Correction of a Misstatement and Retrospective Application of Accounting Standard, for the impact of these standards on the Company’s previously reported financial statements.		January 4, 2009
Determining whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock		June 2008		Provides a two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the scope exception under accounting standards of “Accounting for Derivative Instruments and Hedging Activities.”		No material impact.		January 4, 2009
Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities		June 2008		Requires that unvested stock-based compensation awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) should be classified as participating securities and should be included in the computation of earnings per share pursuant to the two-class method as described in accounting standards for “Earnings Per Share.”		No material impact.		January 4, 2009
Interim Disclosures about Fair Value of Financial Instruments		April 2009		Requires companies to disclose in interim financial statements the fair value of financial instruments within the scope of accounting standards for “Disclosures About Fair Value of Financial Instruments.” Also requires that companies disclose the method or methods and significant assumptions used to estimate the fair value of financial instruments.		No material impact.		July 4, 2009
Subsequent Events		May 2009		Sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.		No material impact.		July 4, 2009
The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles		June 2009		Identifies the FASB Accounting Standards Codification as the authoritative source of generally accepted accounting principles in the United States. Rules and interpretive releases of the Securities and Exchange Commission under federal securities laws are also sources of authoritative GAAP for SEC registrants.		No material impact.		July 5, 2009
Multiple Deliverable Element Arrangements		October 2009		Removes the objective-and-reliable-evidence-of-fair-value criterion from the separation criteria used to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. Replaces references to “fair value” with “selling price” to distinguish from the fair value measurements required under accounting standards for “Fair Value Measurements.” Provides a hierarchy that entities must use to estimate the selling price, eliminates the use of the residual method for allocation, and expands the ongoing disclosure requirements.		The Company is currently evaluating the impact, if any, that the adoption of this statement will have on its consolidated financial statements.		January 2, 2011, with early adoption permitted.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

NOTE 3—FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis are as follows (in thousands):

Fair Value Measurements on January 3, 2009

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

Identical Assets

Observable Inputs

Inputs

Recurring Fair Value Measures

(Level 1)

(Level 2)

(Level 3)

Assets

Cash and cash equivalents(1)

Money market mutual funds

$

97,849

$

—

$

—

Fair Value Measurements on October 3, 2009

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

Identical Assets

Observable Inputs

Inputs

Recurring Fair Value Measures

(Level 1)

(Level 2)

(Level 3)

Assets

Cash and cash equivalents(1)

Money market mutual funds

$

11,759

$

—

$

—

The Company’s financial assets and liabilities subject to fair value measurements on a nonrecurring basis are as follows (in thousands):

Fair Value Measurements on January 3, 2009

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

Identical Assets

Observable Inputs

Inputs

Nonrecurring Fair Value Measures

(Level 1)

(Level 2)

(Level 3)

Assets

Other assets

Equity investments

$

—

$

—

$

1,418

For fiscal 2008, the Company recognized an other than temporary impairment loss of $1,665 which reduced the carrying value of one of its equity investments from $3,083 to its estimated fair value of $1,418.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

The Company did not have any nonrecurring fair value measurements as of October 3, 2009.

NOTE 4—PROPERTY AND EQUIPMENT

The major classes of property and equipment, at cost, as of January 3, 2009 and October 3, 2009 are as follows:

		January 3,				October 3,
		2009				2009
Computer hardware and software		$	190,957			$	215,024
Building and building improvements			44,721				44,791
Furniture, warehouse and office equipment, and other			40,423				43,945
Land			7,889				7,889
Leasehold improvements			4,592				5,386
Capitalized leases			28,141				28,398
Construction in progress			1,497				1,931
			318,220				347,364
Less: Accumulated depreciation			(153,387	)			(191,494	)
Property and equipment, net		$	164,833			$	155,870

The Company’s net book value in capital leases, which consist of warehouse equipment and computer hardware, was $19,039 as of October 3, 2009 and $22,595 as of January 3, 2009. Amortization of capital leases is included within depreciation and amortization expense on the Condensed Consolidated Statements of Operations. Interest expense recorded on capital leases was $357 and $1,126 for the three- and nine-month periods ended October 3, 2009 and $425 and $954 for the three- and nine-month periods ended September 27, 2008.

NOTE 5—GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the changes in the carrying amount of goodwill for each of the Company’s reportable segments:

						Interactive
		E-Commerce				Marketing
		Services				Services				Consolidated
January 3, 2009		$	82,758			$	112,238			$	194,996
Acquisitions(1)(2)			—				4,263				4,263
Foreign currency translation			394				—				394
October 3, 2009		$	83,152			$	116,501			$	199,653

These acquisitions, on an aggregate basis, did not have a material impact on the Company’s condensed consolidated financial statements.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

The Company’s intangible assets are as follows:

										Weighted-
		January 3,				October 3,				Average
		2009				2009				Life
										(in years)
Gross carrying value of intangible assets subject to amortization:
Customer contracts		$	38,773			$	41,191				2.5
Non-compete agreements			3,838				3,838				3.0
Purchased technology			4,493				4,805				4.0
Trade names			470				840				1.5
Foreign currency translation			(691	)			(511	)
			46,883				50,163				2.6
Accumulated amortization:
Customer contracts			(15,302	)			(20,850	)
Non-compete agreements			(1,599	)			(2,559	)
Purchased technology			(1,152	)			(2,092	)
Trade names			(470	)			(470	)
Foreign currency translation			183				87
			(18,340	)			(25,884	)
Net carrying value:
Customer contracts			23,471				20,341
Non-compete agreements			2,239				1,279
Purchased technology			3,341				2,713
Trade names			—				370
Foreign currency translation			(508	)			(424	)
Total intangible assets subject to amortization, net			28,543				24,279
Indefinite life intangible assets:
Trade names			18,120				18,660
Total intangible assets		$	46,663			$	42,939

Amortization expense of intangible assets was $2,582 and $7,544 for the three- and nine-month periods ended October 3, 2009 and $3,880 and $9,665 for the three- and nine-month periods ended September 27, 2008. Estimated future amortization expense related to intangible assets as of October 3, 2009, is as follows:

Fiscal 2009		$	2,772
Fiscal 2010			8,930
Fiscal 2011			6,463
Fiscal 2012			2,845
Fiscal 2013			1,786
Thereafter			1,483
		$	24,279

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

NOTE 6—LONG-TERM DEBT AND CREDIT FACILITY

The following table summarizes the Company’s long-term debt as of:

		January 3,				October 3,
		2009				2009
Convertible notes		$	161,951			$	169,716
Notes payable (1)			12,663				12,527
Capital lease obligations			24,833				21,731
Credit facility (2)			—				—
Total debt			199,447				203,974
Less: Current portion of convertible notes			—				(54,280	)
Less: Current portion of notes payable			(184	)			(193	)
Less: Current portion of capital lease obligations			(4,703	)			(4,826	)
Total long-term debt		$	194,560			$	144,675

In May 2008, the FASB issued accounting standards which require the issuer of convertible debt instruments with cash settlement features to separately account for the liability and equity components of the instrument. The Company’s $207,500 principal amounts of subordinated convertible notes are subject to the provisions of these standards because the Company has the ability to elect cash settlement of the conversion value of the notes. The liability component of the notes is determined based on the present value of the notes using the Company’s nonconvertible debt borrowing rate on the issuance date. In order to determine the fair value of the debt portion and equity portion of the Company’s convertible notes, the Company used a market approach to determine the market rate for comparable transactions had the Company issued nonconvertible debt with similar embedded features other than the conversion feature by using prices and other relevant information generated by market transactions at or near the issuance date of its convertible notes. The equity component is the difference between the proceeds from the issuance of the note and the fair value of the liability component. The resulting debt discount, equal to the excess of the principal amount of the liability over its carrying amount, will be amortized to interest expense using the effective interest method over the expected life of the debt. The Company adopted these standards on January 4, 2009 and applied it retrospectively to all prior periods presented. See Note 14, Financial Statement Correction of Misstatement and Retrospective Application of Accounting Standard, for the impact to prior periods.

3% Convertible Notes due 2025

In fiscal 2005, the Company completed a public offering of $57,500 aggregate principal amount of 3% subordinated convertible notes due June 1, 2025. The notes bear interest at 3%, payable semi-annually on June 1 and December 1.

Holders may convert the notes into shares of the Company’s common stock (or cash or a combination of the Company’s common stock and cash, if the Company so elects) at a conversion rate of 56.1545 shares per $1,000 principal amount of notes (representing a conversion price of approximately $17.81 per share). Based on the Company’s closing stock price of $18.96 on October 2, 2009, the if-converted value of the notes exceeds the aggregate principal amount of the notes by $3,713.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

The following table provides additional information about the Company’s 3% convertible notes:

		As of				As of
		January 3, 2009				October 3, 2009
Carrying amount of the equity component		$	18,187			$	18,187
Principal amount of the liability component		$	57,500			$	57,500
Unamortized discount of liability component		$	6,574			$	3,220
Net carrying amount of liability component		$	50,926			$	54,280
Remaining amortization period of discount						8 months
Effective interest rate on liability component							12.00	%

The Company recognized interest expense from the 3% convertible notes of $1,693 and $4,940 for the three- and nine-months ended October 3, 2009, which was comprised of $1,161 and $3,354 respectively, for the amortization of the discount on the liability component, $431 and $1,294 respectively, for the contractual interest coupon, and $101 and $292 respectively, for the amortization of the liability component of the issue costs. The Company recognized interest expense of $1,557 and $4,548 for the three- and nine-months ended September 27, 2008 which was comprised of $1,034 and $2,986 respectively, for the amortization of the discount on the liability component, $431 and $1,294 respectively, for the contractual interest coupon and $92 and $268 respectively, for the amortization of the liability component of the issue costs.

The estimated fair market value of the 3% subordinated convertible notes was $66,326 as of October 3, 2009 and $40,825 as of January 3, 2009 based on quoted market prices.

2.5% Convertible Notes due 2027

In fiscal 2007, the Company completed a private placement of $150,000 of aggregate principal amount of 2.5% subordinated convertible notes due June 1, 2027, raising net proceeds of approximately $145,000, after deducting initial purchaser’s discount and issuance costs. The notes bear interest at 2.5%, payable semi-annually on June 1 and December 1.

Holders may convert the notes into shares of the Company’s common stock (or cash or a combination of the Company’s common stock and cash, if the Company so elects) at a conversion rate of 33.3333 shares per $1,000 principal amount of notes (representing a conversion price of approximately $30.00 per share). Based on the Company’s closing stock price of $18.96 on October 2, 2009, the if-converted value of the notes does not exceed the aggregate principal amount of the notes.

The following table provides additional information about the Company’s 2.5% convertible notes:

		As of				As of
		January 3, 2009				October 3, 2009
Carrying amount of the equity component		$	26,783			$	26,783
Principal amount of the liability component		$	150,000			$	150,000
Unamortized discount of liability component		$	38,975			$	34,564
Net carrying amount of liability component		$	111,025			$	115,436
Remaining amortization period of discount						56 months
Effective interest rate on liability component							8.60	%

The Company recognized interest expense on the 2.5% convertible notes of $2,565 and $7,565 for the three- and nine-months ended October 3, 2009 which was comprised of $1,512 and $4,411 respectively, for the amortization of the discount on the liability component, $937 and $2,812 respectively, for the contractual interest coupon, and $116 and $342 respectively, for the amortization of the liability component of the issue costs. The Company recognized interest expense of $2,437 and $7,192 for the three- and nine-months ended September 27, 2008 which was comprised of $1,390 and $4,055 respectively, for the amortization of the discount on the liability component, $937 and $2,812 respectively, for the contractual interest coupon and $110 and $325 respectively, for the amortization of the liability component of the issue costs.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

The estimated fair market value of the 2.5% subordinated convertible notes was $132,255 as of October 3, 2009 and $68,748 as of January 3, 2009 based on quoted market prices.

NOTE 7—COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is involved in various litigation incidental to its business, including alleged contractual claims, claims relating to infringement of intellectual property rights of third parties, claims relating to the manner in which goods are sold through its integrated platform and claims relating to the Company’s collection of sales taxes in certain states. The Company collects sales taxes for goods owned and sold by it and shipped into certain states. As a result, the Company is subject from time to time to claims from other states alleging that the Company failed to collect and remit sales taxes for sales and shipments of products to customers in states.

Based on the merits of the cases and/or the amounts claimed, the Company does not believe that any claims are likely to have a material adverse effect on its business, financial position or results of operations. The Company may, however incur substantial expenses and devote substantial time to defend these claims whether or not such claims are meritorious. In addition, litigation is inherently unpredictable. In the event of a determination adverse to the Company, the Company may incur substantial monetary liability and may be required to implement expensive changes in its business practices, enter into costly royalty or licensing agreements, or begin to collect sales taxes in states in which it previously did not. An adverse determination could have a material adverse effect on the Company’s business, financial position or results of operations. Expenditures for legal costs are expensed as incurred.

Operating and Capital Commitments

The following summarizes the Company’s principal operating and capital commitments as of October 3, 2009:

		Payments due by fiscal year
		2009				2010				2011				2012				2013				Thereafter				Total
Operating lease obligations(1)		$	4,645			$	17,688			$	14,491			$	13,612			$	9,464			$	19,175			$	79,075
Purchase obligations and marketing commitments(1)			89,258				11,589				13,866				13,866				5,338				49,960				183,877
Client revenue share payments(1)			3,795				20,768				21,400				14,658				4,368				28,760				93,749
Debt interest(1)			3,499				5,241				4,509				4,498				4,481				11,061				33,289
Debt obligations			48				57,695				209				563				237				161,275				220,027
Capital lease obligations, including interest(2)			1,672				6,040				5,989				5,768				3,672				1,789				24,930
Deferred acquisition payments			—				1,250				1,050				750				1,000				—				4,050
Total		$	102,917			$	120,271			$	61,514			$	53,715			$	28,560			$	272,020			$	638,997

Approximately $1,924 of unrecognized tax benefits have been recorded as liabilities as of October 3, 2009, in accordance with FASB’s issued accounting standards relating to accounting for uncertainty in income taxes, and the Company is uncertain as to if or when such amounts may be settled; as a result, these obligations are not included in the table above. Changes to these tax contingencies that are reasonably possible in the next 12 months are not expected to be material.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

NOTE 8—STOCKHOLDERS’ EQUITY

Common Stock

In August 2009, the Company completed a registered public offering of 5,439 common shares at $17.00 per share. Net proceeds from the sale of the common shares after deducting underwriting discounts and commissions and offering expenses were approximately $88,000.

NOTE 9—STOCK AWARDS

The Company currently maintains the 2005 Equity Incentive Plan (“the Plan”) which provides for the grant of equity to certain employees, directors and other persons. As of October 3, 2009, 1,465 shares of common stock were available for future grants under the Plan. The equity awards granted under the Plan generally vest at various times over periods ranging up to five years and have terms of up to ten years after the date of grant, unless the optionee’s service to the Company is interrupted or terminated.

Stock Options and Warrants

The following table summarizes the stock option and warrant activity for the nine-month period ended October 3, 2009:

										Weighted
						Weighted				Average
		Number of				Average				Remaining				Aggregate
		Shares				Exercise				Contractual				Intrinsic
		(in thousands)				Price				Life (in years)				Value
Outstanding at January 3, 2009			4,244			$	9.50
Granted			—				—
Exercised			(500	)		$	4.41
Forfeited/Cancelled			(179	)		$	13.70
Outstanding at October 3, 2009			3,565			$	9.99				3.11			$	32,079
Vested and expected to vest at October 3, 2009			3,565			$	9.99				3.11			$	32,079
Exercisable at October 3, 2009			3,565			$	9.99				3.11			$	32,079

The Company recognized no stock-based compensation expense for stock options for the three- and nine-month periods ended October 3, 2009, as all options were fully vested. The total stock-based compensation expense recognized for the three-month period ended September 27, 2008 was $16 and for the nine-month period ended September 27, 2008, the Company recognized a stock-based compensation benefit of $37 due to forfeited shares in excess of the Company’s estimated forfeiture rate.

Restricted Stock Units and Awards

The Company also has issued restricted stock units and restricted stock awards to certain employees. The grant-date fair value of restricted stock is based on the market price of the stock, and compensation cost is amortized to expense on a straight-line basis over the vesting period during which employees perform services.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

The following table summarizes the restricted stock unit and restricted stock award activity for the nine-month period ended October 3, 2009:

						Weighted
		Number of				Average
		Shares				Grant Date
		(in thousands)				Fair Value
Nonvested shares at January 3, 2009			3,793			$	18.86
Granted			1,776			$	10.96
Vested			(942	)		$	15.77
Forfeited/Cancelled			(248	)		$	13.90
Nonvested shares at October 3, 2009			4,379			$	16.60

The Company recognized $5,423 and $17,961 of stock-based compensation expense for the three-and nine-month periods ended October 3, 2009, and $4,284 and $12,821 of stock-based compensation expense for the three- and nine-month periods ended September 27, 2008.

NOTE 10—INCOME TAXES

At the end of each interim period, the Company estimates its annual effective tax rate and applies that rate to its ordinary year-to-date earnings. FASB’s accounting standards of “Accounting for Income Taxes in Interim Periods,” provides that if in a separate jurisdiction, the Company anticipates an ordinary loss for the year in which a tax benefit cannot be recognized in accordance with the FASB’s standards of “Accounting for Income Taxes,” then the Company excludes the ordinary loss in that jurisdiction and the related tax benefit from the computation of its estimated annual effective tax rate. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs, however, the related benefit or expense is excluded from the annual effective tax rate. The tax expense or benefit related to significant, unusual, or extraordinary items are individually computed and recognized as a discrete item in the interim period in which the item occurs.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in foreign jurisdictions, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the tax environment changes. The Company has a historical seasonal pattern of reporting a net loss before income taxes in the first three quarters of its fiscal year offset by income before income taxes in its fiscal fourth quarter. The Company recognizes a tax benefit and increases its deferred tax assets in its interim periods as realization of the tax benefit at the end of the fiscal year is more likely than not.

The Company’s tax provision for the nine months ended October 3, 2009 was determined using an estimate of its annual effective tax rate which is 39.2% for fiscal 2009 plus any discrete items that affect taxes that occur during the quarter. The effective tax rate is higher than the 35% federal statutory tax rate primarily due to state taxes partially offset by permanent items. Estimated annual losses from international operations yield no tax benefit and were removed from the calculation of the annual effective tax rate. The Company does not provide for U.S. taxes on its undistributed earnings of foreign subsidiaries since it intends to invest such undistributed earnings indefinitely outside of the U.S.

The Company’s reported effective tax rate for the nine months ended October 3, 2009 was 31.7%. The annual effective tax rate of 39.2% was different from the actual tax rate of 31.7% primarily due to losses in foreign operations that generate no tax benefit and therefore are not included in the pre-tax book income calculation for the annual effective tax rate partially offset by the benefit from certain discrete items.

The reported effective tax rate for the nine months ended September 27, 2008 was 30.3%. The annual effective tax rate of 31.2% was different from the actual tax rate of 30.3% primarily due to the change in estimate of losses in jurisdictions in which little or no tax benefit is recognized under the standards for “Accounting for Income Taxes.”

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

The total amount of liabilities, interest and penalties related to uncertain tax positions and recognized in the Condensed Consolidated Balance Sheets were $1,924 as of October 3, 2009, and $1,708 as of January 3, 2009. The Company recorded an increase in liabilities, including interest and penalties for uncertain tax positions that were recorded as income tax expense of $45 and $216 for the three- and nine-month periods ended October 3, 2009 and $109 and $277 for the three- and nine-month periods ended September 27, 2008.

NOTE 11—LOSS PER SHARE

Basic and diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the fiscal year.

The following is a summary of the securities outstanding during the respective periods that have been excluded from the calculations because the effect on net loss per share would have been anti-dilutive for the three- and nine-month periods ended:

		September 27,				October 3,
		2008				2009
Stock units and awards			3,881				4,379
Stock options and warrants			4,256				3,565
Convertible notes			8,229				8,229
			16,366				16,173

The potential number of common shares and dilution from the Company’s Series A Junior Participating Preferred Stock from its Stockholders Right Plan cannot be determined because these shares are not exercisable unless certain future contingent events occur.

NOTE 12 — COMPREHENSIVE LOSS

Comprehensive loss is computed as net loss plus certain other items that are recorded directly to shareholders’ equity in accordance with standards of accounting for “Reporting Comprehensive Income.” Comprehensive loss is calculated as follows:

		Three Months Ended								Nine Months Ended
		September 27,				October 3,				September 27,				October 3,
		2008				2009				2008				2009
Net loss		$	(14,195	)		$	(9,406	)		$	(46,040	)		$	(34,629	)
Other comprehensive income (loss):
Cumulative translation adjustment			(6	)			153				50				935
Comprehensive loss		$	(14,201	)		$	(9,253	)		$	(45,990	)		$	(33,694	)

NOTE 13—SEGMENT INFORMATION

The Company operates two reportable segments: e-commerce services and interactive marketing services. For e-commerce services, the Company delivers customized solutions to its clients through an integrated platform which is comprised of three components: technology, fulfillment and customer care. The Company offers each of the platform’s components on a modular basis, or as part of an integrated, end-to-end solution. For interactive marketing services, the Company offers online marketing and advertising, user experience and design, studio and e-mail marketing services.

The Company manages its segments based on an internal management reporting process that provides segment revenue and segment operating income before depreciation, amortization and stock-based compensation expense for determining financial decisions and allocating resources. The Company believes that segment operating income before depreciation, amortization and stock-based compensation expense is an appropriate measure of evaluating the operational performance of the Company’s segments. The Company uses this financial measure for financial and operational decision making and as a means to evaluate segment performance. It is also used for planning, forecasting and analyzing future periods. However, this measure should be considered in addition to, not as a substitute for, or superior to, income from operations or other measures of financial performance prepared in accordance with GAAP.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

The Company manages its working capital on a consolidated basis and does not allocate long-lived assets to segments. In addition, segment assets are not reported to, or used by, the Company and therefore, pursuant to the standards for “Disclosures about Segments of an Enterprise and Related Information,” total segment assets have not been disclosed.

The following table’s present summarized information by segment:

		Three Months Ended September 27, 2008
		E-Commerce				Interactive				Intersegment
		Services				Marketing Services				Eliminations				Consolidated
Net revenues		$	168,097			$	23,132			$	(4,435	)		$	186,794
Costs and expenses before depreciation, amortization and stock-based compensation expense			166,082				20,258				(4,435	)			181,905
Operating income before depreciation, amortization and stock-based compensation expense			2,015				2,874				—				4,889
Depreciation and amortization															16,868
Stock-based compensation expense															4,554
Loss from operations															(16,533	)
Interest expense															4,909
Interest income															(190	)
Other expense, net															480
Loss before income taxes														$	(21,732	)

		Three Months Ended October 3, 2009
		E-Commerce				Interactive				Intersegment
		Services				Marketing Services				Eliminations				Consolidated
Net revenues		$	166,641			$	31,038			$	(7,368	)		$	190,311
Costs and expenses before depreciation, amortization and stock-based compensation expense			161,708				24,553				(7,368	)			178,893
Operating income before depreciation, amortization and stock-based compensation expense			4,933				6,485				—				11,418
Depreciation and amortization															15,655
Stock-based compensation expense															5,676
Loss from operations															(9,913	)
Interest expense															4,897
Interest income															(99	)
Other income, net															(32	)
Loss before income taxes														$	(14,679	)

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

		Nine Months Ended September 27, 2008
		E-Commerce				Interactive				Intersegment
		Services				Marketing Services				Eliminations				Consolidated
Net revenues		$	531,632			$	56,746			$	(12,832	)		$	575,546
Costs and expenses before depreciation, amortization and stock-based compensation expense			528,834				49,277				(12,832	)			565,279
Operating income before depreciation, amortization and stock-based compensation expense			2,798				7,469				—				10,267
Depreciation and amortization															49,503
Stock-based compensation expense															13,546
Loss from operations															(52,782	)
Interest expense															13,818
Interest income															(1,397	)
Other expense, net															833
Loss before income taxes														$	(66,036	)

		Nine Months Ended October 3, 2009
		E-Commerce				Interactive				Intersegment
		Services				Marketing Services				Eliminations				Consolidated
Net revenues		$	508,921			$	84,646			$	(19,600	)		$	573,967
Costs and expenses before depreciation, amortization and stock-based compensation expense			497,885				67,349				(19,600	)			545,634
Operating income before depreciation, amortization and stock-based compensation expense			11,036				17,297				—				28,333
Depreciation and amortization															46,335
Stock-based compensation expense															18,722
Loss from operations															(36,724	)
Interest expense															14,452
Interest income															(304	)
Other income, net															(197	)
Loss before income taxes														$	(50,675	)

The Company’s operations are substantially within the United States.

NOTE 14—FINANCIAL STATEMENT CORRECTION OF MISSTATEMENT AND RETROSPECTIVE APPLICATION OF ACCOUNTING STANDARD

The Company adopted accounting standards for “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” on January 4, 2009 and retrospectively applied its provisions for all periods presented. See Recent Accounting Pronouncements in Note 2, Summary of Significant Accounting Policies, and Note 6, Long-Term Debt and Credit Facility, for more information regarding the Company’s adoption of this standard.

The Company recognizes stock-based compensation expense for all stock-based awards over the requisite service period, net of estimated forfeitures, in accordance with accounting standards for “Share-Based Payment.” The amount of stock-based compensation expense recognized at any date must at least equal the portion of grant date value of the award that is vested at that date. In the second quarter of fiscal 2009, the Company discovered a computational error in the software used by the Company to calculate the stock-based compensation expense whereby the expense recognized for each vested portion of the award was less than the grant date fair value of that vested portion of the award. The error resulted in an understatement of stock-based compensation expense in fiscal 2006, 2007, 2008 and the first quarter of fiscal 2009.

GSI COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)

In accordance with Staff Accounting Bulletin’s accounting standards for materiality and for considering the effects of prior year misstatements when quantifying misstatements in current year financial statements, the Company evaluated the materiality of the error from qualitative and quantitative perspectives, and concluded that the error was immaterial to any prior year financial statements.

The following tables reflect the impact of the retrospective application of accounting for convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement and the correction on the Company’s (i) Condensed Consolidated Statement of Operations for the three and nine months ended September 27, 2008, and (ii) Condensed Consolidated Statement of Cash Flows for the nine months ended September 27, 2008:

						Effect of								As Retrospectively
		As Originally				Retrospective				Effect of				Adjusted and
Condensed Consolidated Statement of Operations		Reported				Application				Correction				Corrected
		Three Months Ended September 27, 2008
Account management and operations		$	58,732			$	—			$	1			$	58,733
General and administrative			17,487				—				2				17,489
Total costs and expenses			203,324				—				3				203,327
Loss from operations			(16,530	)			—				(3	)			(16,533	)
Interest expense			2,594				2,315				—				4,909
Total other expense			2,884				2,315				—				5,199
Loss before income taxes			(19,414	)			(2,315	)			(3	)			(21,732	)
Benefit for income taxes			(6,575	)			(961	)			(1	)			(7,537	)
Net loss			(12,839	)			(1,354	)			(2	)			(14,195	)
Basic and diluted loss per share			(0.27	)			(0.03	)			—				(0.30	)
		Nine Months Ended September 27, 2008
Account management and operations		$	175,339			$	—			$	387			$	175,726
Product development			73,356				—				215				73,571
General and administrative			51,820				—				617				52,437
Total costs and expenses			627,109				—				1,219				628,328
Loss from operations			(51,563	)			—				(1,219	)			(52,782	)
Interest expense			7,118				6,700				—				13,818
Total other expense			6,554				6,700				—				13,254
Loss before income taxes			(58,117	)			(6,700	)			(1,219	)			(66,036	)
Benefit for income taxes			(16,753	)			(2,780	)			(463	)			(19,996	)
Net loss			(41,364	)			(3,920	)			(756	)			(46,040	)
Basic and diluted loss per share			(0.88	)			(0.08	)			(0.01	)			(0.97	)