Classmates.com 2003 Annual Report Download - page 23

General and administrative expenses increased by $1.9 million, or 7%, to $30.7 million for the year ended June 30, 2002, compared to
$28.8 million for the year ended June 30, 2001 due to a $2.2 million increase in personnel-related expenses, a $2.4 million increase in rent and
other occupancy-related expenses, a $1.0 million increase in insurance expenses, a $0.9 million increase in professional fees and a $0.6 million
increase in other administrative and overhead-related costs. These increases were primarily a result of the Merger. These increases were
partially offset by a $3.3 million decrease in stock-based charges, a $1.0 million decrease in bad debt expense and a $0.9 million decrease in
expenses directly related to our former RocketCash subsidiary. Stock-based charges decreased as a result of the cancellation or forfeiture of
issued securities that were previously being amortized over their vesting period, which were partially offset by increased stock-based charges
incurred as a result of the accelerated vesting of certain previously granted stock options and restricted stock awards that occurred in
October 2001 and March 2002.
Amortization of Goodwill and Intangible Assets
Amortization of goodwill and intangible assets decreased by $2.7 million, or 16%, to $14.2 million for the year ended June 30, 2002,
compared to $16.8 million for the year ended June 30, 2001 as a result of the write down of goodwill and intangible assets totaling
$48.6 million that was recorded during the March 2001 quarter, which reflected the amount by which the carrying amounts of the intangible
assets exceeded their respective fair values. The write down consisted of $33.5 million of goodwill and $15.1 million of other identifiable
intangible assets and other assets. The decrease was partially offset by an increase in amortization of intangible assets resulting from the
Merger. In connection with the Merger, we recorded $59.8 million of identifiable intangible assets and $10.9 million of goodwill. The
intangible assets are being amortized over periods ranging from one to
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seven years. Since the Merger was completed after June 30, 2001, we are not amortizing the goodwill acquired as a result of the Merger in
accordance with SFAS No. 142. Under SFAS No. 142, goodwill is no longer amortized but is reviewed annually (or more frequently if
impairment indicators arise) for impairment.
Restructuring Charges
During the year ended June 30, 2002, we recorded $4.2 million of restructuring charges, which consisted of $0.8 million in employee
termination benefits, $0.5 million for early contractual termination fees and $2.9 million in lease exit-related costs, which included a charge of
approximately $1.4 million to write off leasehold improvements associated with our former offices in New York and Rhode Island.
In an effort to streamline our operations in response to changing market conditions, we reduced our workforce by 101 employees during
the year ended June 30, 2002. Of the 101 employees terminated, 43 were in sales and marketing, 26 were in general and administrative, 23
were in product development, 6 employees were at our former RocketCash subsidiary, and 3 were in network operations. In addition, we closed
our offices in San Francisco, California and Providence, Rhode Island and combined our New York offices into one facility. At June 30, 2002,
accrued liabilities associated with restructuring costs were $0.6 million. We did not record any restructuring costs in the year ended June 30,
2001.
Interest Income, Net
Interest income, net decreased by $4.2 million, or 45%, to $5.1 million for the year ended June 30, 2002, compared to $9.3 million for the
year ended June 30, 2001. The decrease in interest income, net was a result of lower average cash balances and lower interest rates, partially
offset by reduced interest expense as a result of decreases in capital lease and notes payable balances.
Other Income (Expense), Net
Other income (expense), net for the year ended June 30, 2002 was $1.1 million. During the quarter ended September 30, 2001, we sold
substantially all of the assets of our RocketCash subsidiary and recognized a gain of approximately $1.0 million.
Income Taxes
As a result of operating losses and our inability to recognize a benefit from our deferred tax assets, we did not record a benefit for income
taxes for the years ended June 30, 2002 and 2001.
Liquidity and Capital Resources
From inception through June 30, 2002, our business was financed primarily through the sale of equity securities. However, during the year
ended June 30, 2003 and the six months ended December 31, 2003, our business generated positive cash flows from operations. Our total cash,
cash equivalent and short-
term investment balances increased by approximately $43.9 million, or 28%, to $203.7 million at December 31, 2003
compared to $159.8 million at December 31, 2002.