Classmates.com 2004 Annual Report Download - page 40

our proposed VoIP telephony service, which are difficult to predict and could change significantly over time. Additionally, 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.
Net cash provided by financing activities increased by $61.4 million for the year ended December 31, 2004 compared to the year ended
December 31, 2003. Significant factors that have impacted the variability in our financing activities in these periods are as follows:
• the borrowing of $100 million in December 2004 through a four-year term loan facility, which is discussed more fully below
under Financial Commitments. The term loan was set up in connection with a modified Dutch auction tender offer to repurchase
up to 14.3 million shares of our common stock. The tender offer was completed on December 13, 2004, and we repurchased
37,754 shares for approximately $0.4 million, excluding fees and expenses. Under our Board-approved program, we can
repurchase up to an additional $75 million of our common stock through May 31, 2005. Going forward, the proceeds from the
term loan may be used for, subject to certain limitations, repurchases of common stock, acquisitions and general corporate
purposes. (See Financial Commitments for repayment obligations under the term loan facility);
•
repurchases of common stock; and
•
cash received from employee stock option exercises and employee stock purchase plan proceeds. Future proceeds from employee
stock option exercises are difficult to predict as such amounts are a function of our stock price, the number of vested and in-the-
money options outstanding and the timing of employee exercises.
We previously had access to a $25 million unsecured revolving line of credit with Silicon Valley Bank, which was canceled in
December 2004 in connection with our $100 million term loan, which is discussed in more detail under Financial Commitments below.
Based on our current projections, we expect to continue to generate positive cash flows from operations, at least in the near term. We intend
to use our existing cash balances and future cash generated from operations to acquire complementary services, businesses or technologies; to
repurchase shares of our common stock if we believe market conditions to be favorable; to make payments on our term loan; and to fund future
capital expenditures. We currently 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, and in the near term we do not anticipate the need for additional
financing to fund our operations. However, we may raise additional debt or equity capital for a variety of reasons including, without limitation,
developing new or enhancing existing services or products, repurchasing our common stock, acquiring complementary services, businesses or
technologies, refinancing our term loan or funding significant capital expenditures. If we need to raise additional capital through public or
private debt or equity financings, strategic relationships or other arrangements, it might not be available to us in a timely manner, on acceptable
terms, or at all. Our failure to raise sufficient capital when needed could have a material adverse effect on our business, financial position, results
of operations and cash flows. If additional funds were raised through the issuance of equity securities, the percentage of stock owned by the then-
current stockholders would be reduced. Furthermore, such equity securities might have rights, preferences or privileges senior to holders of our
common stock.
38