Classmates.com 2003 Annual Report Download - page 24

Net cash provided by operating activities increased by $18.4 million, or 62%, to $47.9 million for the six months ended December 31,
2003, compared to $29.5 million for the six months ended
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December 31, 2002. Significant factors that have impacted the variability in our cash provided by operating activities in these periods include,
but are not limited to, the following factors:
• increased operating income before depreciation and amortization during the six months ended December 31, 2003 compared to
the six months ended December 31, 2002 as a result of overall improvements in our business;
• the utilization of net operating loss and tax credit carryforwards and income tax deductions resulting from the exercise of stock
options and the related sale of common stock by employees, which reduced payments for income taxes. We currently anticipate
that our net operating loss and tax credit carryforwards available for use in 2004, when combined with anticipated exercises of
employee stock options, will significantly reduce any cash paid for income taxes in 2004;
• decreases in restricted cash balances as a result of more favorable payment terms obtained from certain vendors and the release
of cash collateral required for letters of credit obtained in connection with a leased facility;
• increases in accounts receivable as a result of increases in billable services and advertising and commerce revenues;
• increases in other assets primarily as a result of the prepayments of certain short-term marketing commitments associated with
increased marketing expenditures;
• increases in accounts payable as a result of better payment terms obtained from certain vendors and increased marketing and
telecommunications expenditures as a result of the growth in the business; and
• increases in deferred revenue due to an increase in the number of pay subscribers to our services, which was partially offset by a
decrease in the average prepaid balance of pay subscribers on prepaid multi-month plans and a reduction in prepayments
received from certain advertising customers.
Based on our current plans, we expect to generate positive cash flow from operations for the year ending December 31, 2004, and we
anticipate that our future cash flows from operations and existing cash, cash equivalent and short-term investment balances will be sufficient to
fund our operations over the next year. We intend to use our cash to repurchase shares of our common stock if we believe market conditions to
be favorable; to acquire complimentary services, businesses or technologies; and to fund future capital expenditures.
Net cash used for investing activities increased by $25.2 million to $33.1 million for the six months ended December 31, 2003, compared
to $7.9 million for the six months ended December 31, 2002. Significant factors that have impacted the variability in our cash used for
investing activities in these periods include, but are not limited to the following factors:
• an increase in net purchases of short-term investments as a result of the execution of our cash management strategy, which is to
maintain a minimum amount of cash in our commercial bank accounts and to invest excess cash in short-
term commercial paper,
U.S. Government and U.S. Government Agency obligations and money market funds;
• the purchase of the Internet access assets of BlueLight in the December 2002 quarter; and
• an increase in purchases of capital equipment associated with the ongoing operation of our business.
In prior years, we have invested significantly in our network infrastructure, software licenses, leasehold improvements, and computer
equipment and we may need to make further significant investments in the future. We anticipate that our capital expenditures will be in the
range of
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$13 million to $15 million for the year ending December 31, 2004. Included in our anticipated capital expenditures for 2004 are approximately
$4.5 million to $5.5 million of capital expenditures associated with the anticipated relocation of our Westlake Village headquarters to
accommodate increased headcount. However, the actual amount of future capital expenditures may fluctuate due to a number of factors
including, without limitation, new business initiatives which are difficult to predict and could change significantly over time. Additionally,
significant technological advances may require us to make capital expenditures to develop or acquire new equipment or technology in order to
replace aging or technologically obsolete equipment.