Classmates.com 2006 Annual Report Download - page 71

UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES AND RECENT ACCOUNTING
PRONOUNCEMENTS
Description of Business
United Online, Inc. (“United Online” or the “Company”)
is a leading provider of consumer Internet and media services through a number of
brands, including NetZero, Juno, Classmates and MyPoints. The Company’s primary Communications services include Internet access and
email. The Company’s primary Content & Media services include social networking and online loyalty marketing. On a combined basis, the
Company’s Web properties attract a significant number of Internet users each month and the Company offers marketers a broad array of Internet
advertising products and services as well as online market research and measurement services.
United Online is a Delaware corporation that commenced operations in 2001 following the merger of Internet access providers
NetZero, Inc. and Juno Online Services, Inc. (the
“Merger”). During 2004, the Company completed the acquisitions of Classmates Online, Inc.
(“Classmates”), a leading provider of social-networking services, and the Web-hosting and domain name registration business of About Web
Services, Inc. In March 2005, the Company acquired certain assets related to PhotoSite, the online digital photo-sharing service of Homestead
Technologies, Inc. In March 2006, the Company acquired The Names Database, a global social-
networking service. In April 2006, the Company
acquired MyPoints.com, Inc. (“MyPoints”), a leading provider of online loyalty marketing services. The Company’s corporate headquarters are
located in Woodland Hills, California, and the Company also maintains offices in New York, New York; Fort Lee, New Jersey; Renton,
Washington; San Francisco, California; Schaumburg, Illinois; Orem, Utah; Erlangen, Germany; Berlin, Germany; and Hyderabad, India.
The Company believes that its existing cash, cash equivalents and short-term investments, and cash generated from operations will be
sufficient to fund its working capital requirements, capital expenditures, dividend payments and other obligations through at least the next twelve
months. However, additional capital may be needed in order to fund the Company’s operations, expand marketing activities, develop new or
enhance existing services or products, respond to competitive pressures or acquire complementary services, businesses or technologies.
Basis of Presentation
The accompanying consolidated financial statements for the years ended December 31, 2006, 2005 and 2004, include United Online and its
wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated
financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary
for a fair presentation of the results for the periods shown. The results of operations for such periods are not necessarily indicative of the results
expected for any future periods.
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent liabilities and the reported amounts of revenues and expenses. Actual
results could differ from those estimates.
Accounting Policies
Use of Estimates— The
preparation of financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and
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