Classmates.com 2005 Annual Report Download - page 49

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General and Administrative
General and administrative expenses increased by $10.8 million, or 37%, to $39.9 million for the year ended December 31, 2004, compared
to $29.1 million for the year ended December 31, 2003. The increase was the result of $3.3 million in lease termination fees and accelerated
depreciation expenses in connection with the relocation of our corporate offices; a $3.2 million increase in professional and consulting fees
primarily related to our Sarbanes-Oxley Section 404 compliance efforts, the due diligence process associated with a potential acquisition that
was terminated and increased legal fees; a $2.3 million increase in stock-based compensation primarily related to restricted stock issued to
certain of our executive officers in January 2004; a $2.3 million increase in overhead-related costs and a $1.4 million increase in personnel-
related expenses as a result of higher compensation costs, including increased costs associated with our acquisitions of our Web-hosting and
community-based networking businesses. These increases were partially offset by a $1.7 million decrease in legal settlement costs.
Amortization of Intangible Assets
At December 31, 2004, we had approximately $70.6 million in net identifiable intangible assets resulting primarily from the acquisition of
Classmates, the acquisition of the Internet access assets of BlueLight and the acquisition of the Web-hosting assets of About, Inc. At
December 31, 2004, we had approximately $76.5 million in goodwill resulting from the acquisition of Classmates and the acquisition of the
Web-hosting assets of About, Inc.
Amortization of intangible assets increased by $4.5 million, or 29%, to $20.4 million for the year ended December 31, 2004, compared to
$15.9 million for the year ended December 31, 2003. The increase was due to the amortization of identifiable intangible assets from the
acquisition of the Web-
hosting assets of About, Inc. in April 2004 and the acquisition of Classmates in November 2004. We recorded a reduction
in intangible assets of approximately $11.2 million during the December 2004 quarter in connection with the release of the deferred tax valuation
allowance.
Restructuring Charges
We had no restructuring charges or benefits during the year ended December 31, 2004 as compared to a $0.2 million benefit to restructuring
charges during the year ended December 31, 2003 as a result of contract termination fees expensed in earlier periods in excess of final negotiated
settlements.
Interest and Other Income, Net
Interest and other income, net decreased by $0.5 million, or 9%, to $5.1 million for the year ended December 31, 2004, compared to
$5.6 million for the year ended December 31, 2003. The decrease was the result of lower average returns due to a shift toward tax-exempt
holdings. Other income associated with net realized gains on our short-
term investments was $0.1 million for the year ended December 31, 2004.
Interest Expense
Interest expense increased by $0.2 million, or 20%, to $1.2 million for the year ended December 31, 2004, compared to $1.0 million for the
year ended December 31, 2003. Interest expense increased as a result of the outstanding balance on the term loan in the December 2004 quarter.
Provision for Income Taxes
For the year ended December 31, 2004, we recorded a tax benefit of $34.1 million on pre-tax income of $83.4 million. The effective tax
rate differs from the statutory rate primarily due to the release of
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