Classmates.com 2003 Annual Report Download - page 69

Download and view the complete annual report

Please find page 69 of the 2003 Classmates.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 91

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91

On May 17, 2001, plaintiff Ann Louise Truschel filed an action in the Supreme Court of the State of New York for the County of New
York against Juno on behalf of herself and all others similarly situated. Plaintiff alleges unjust enrichment, unfair and deceptive business
practices and breach of contract. Specifically, plaintiff alleges that Juno was unjustly enriched and deceived consumers by: (a) advertising
"free" Internet access services and limiting the usage of heavier users of the service, and (b) advertising a free trial month for its premium
service and not disclosing that the free month begins when the software is requested, rather than when it is first used, resulting in users
receiving less than one month of free use. Plaintiff is seeking damages, injunctive relief and attorneys' fees. The court has entered an order
granting preliminary approval of a settlement agreement.
F-34
On December 19, 2002, plaintiff William Kleen filed a lawsuit in the Supreme Court of the State of New York for the County of New
York against Juno on behalf of himself and all others similarly situated. Plaintiff alleges unjust enrichment, unfair and deceptive business
practices and breach of contract. Specifically, plaintiff alleges that Juno was unjustly enriched and deceived consumers by: (a) advertising
"free" Internet access services and limiting the usage of heavier users of the service, and (b) advertising a free trial month for its premium
service and not disclosing that the free month begins when the software is requested, rather than when it is first used, resulting in users
receiving less than one month of free use. Plaintiff is seeking damages, injunctive relief and attorneys' fees. The court has entered an order
granting preliminary approval of a settlement agreement.
On August 21, 2001, Juno commenced an adversary proceeding in U.S. Bankruptcy Court in the Southern District of New York against
Smart World Technologies, LLC, dba "Freewwweb," (the "Debtor"), a provider of free Internet access that had elected to cease operations and
had sought the protection of Chapter 11 of the Bankruptcy Code. The adversary proceeding arose out of a subscriber referral agreement
between Juno and Freewwweb. In response to the commencement of the adversary proceeding, Freewwweb and its principals filed a pleading
with the Bankruptcy Court asserting that Juno is obligated to pay compensation in an amount in excess of $80 million as a result of Juno's
conduct in connection with the subscriber referral agreement. In addition, a dispute arose between Juno and UUNET Technologies, Inc., an
affiliate of MCI WorldCom Network Services, Inc., regarding the value of services provided by UUNET, with UUNET claiming in excess of
$1,000,000 and Juno claiming less than $300,000. On April 25, 2003, Juno, the Committee of Unsecured Creditors, WorldCom and UUNET
(allegedly the largest secured creditor) entered into a Stipulation of Settlement. The Stipulation of Settlement provides for the payment by Juno
of $5.5 million in final settlement of all claims against Juno. The Stipulation of Settlement has been approved by the court and the Debtor has
filed a notice of appeal of the decision. At December 31, 2003, the Company had liabilities recorded of approximately $5.5 million.
The pending lawsuits involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of
other resources to defend. Although the Company does not believe the outcome of the above outstanding legal proceedings, claims and
litigation will have a material adverse effect on its business, financial position, results of operations or cash flows, the results of litigation are
inherently uncertain and the Company can provide no assurance that it will not be materially and adversely impacted by the results of such
proceedings. The Company has established reserves for certain of the matters discussed above and such reserves are reflected in the
consolidated financial statements.
The Company is subject to various other legal proceedings and claims that arise in the ordinary course of business. Management believes
the amount, and ultimate liability, if any, with respect to these actions will not materially affect the Company's business financial position,
results of operations or cash flows. There can be no assurance, however, that such actions will not be material or adversely affect the
Company's business, financial position, results of operations or cash flows.
F-35
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter Ended
June 30,
March 31,
December 31,
September 30,
(in thousands)
Six months ended December 31, 2003:
Net revenues
$
96,948
$
88,790
Operating income
$
18,861
$
13,778
Net income
$
24,425
$
8,902
Net income per share
—
basic
$
0.38
$
0.14
Net income per share
—
diluted
$
0.35
$
0.13
Year ended June 30, 2003:
Net revenues
$
79,608
$
73,819
$
65,800
$
58,068