Classmates.com 2005 Annual Report Download - page 56

Cash flows from financing activities may also be negatively impacted by the RSUs by withholding shares we award to employees. Upon
vesting, we currently anticipate that we will collect the applicable withholding taxes for RSUs. As such, we will automatically withhold, from
the RSUs that vest, the portion of those shares with a fair market value equal to the amount of the withholding taxes due. We will then pay the
applicable withholding taxes in cash. The net effect of such withholding will adversely impact our cash flows. The amount remitted in February
2006, which was our first vesting of RSUs, was $1.6 million. The amount we pay in future quarters will vary based on our stock price and the
number of RSUs vesting during the quarter.
Based on our current projections, we expect to continue to generate positive cash flows from operations, at least in the near term. Cash
flows from operations in the March 2006 quarter will be reduced by the payment of approximately $12.4 million for annual employee bonuses
for 2005 and by approximately $10.0 million for income taxes. We intend to use our existing cash balances and future cash generated from
operations to fund dividend payments; to develop and acquire complementary services, businesses or technologies; to repurchase shares of our
common stock if we believe market conditions to be favorable; pay the withholding taxes due on vested RSUs; and to fund future capital
expenditures. As noted above, in January 2006, we retired the remaining balance of $54.2 million of our term loan. 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 technologiesor 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, and could impair our ability to pay
dividends. 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.
Financial Commitments
Our financial commitments are as follows at December 31, 2005 (in thousands):
(1)
Our variable-rate term loan accrued interest at rates generally equal to the London inter-bank offered rate (LIBOR) for dollar deposits plus
a margin of 3.0%. The table reflects only principal amounts. In January 2006, we paid in full the outstanding balance of the term loan of
approximately $54.2 million. See Note 3 to the condensed consolidated financial statements.
(2)
Includes $33,000 of imputed interest.
55
Year Ending December 31,
Contractual Obligations:
Total
2006
2007
2008
2009
2010
Thereafter
Term loan(1)
$
54,208
$
16,498
$
16,498
$
21,212
$
—
$
—
$
—
Capital leases(2)
731
399
332
—
—
—
—
Operating leases
46,638
6,979
7,155
7,162
6,078
4,464
14,800
Telecommunications purchases
19,388
10,892
8,496
—
—
—
—
Media purchases
8,398
8,398
—
—
—
—
—
Total
$
129,363
$
43,166
$
32,481
$
28,374
$
6,078
$
4,464
$
14,800