Classmates.com 2007 Annual Report Download - page 56

our loyalty marketing service increased by $3.6 million in the year ended December 31, 2007 when compared to the year ended December 31,
2006, primarily due to the fact that no such general and administrative expenses were included in our consolidated financial statements in the
first three months and nine days of 2006 (the period prior to our acquisition of MyPoints). In addition, the increase was due to a $2.5 million
increase in fees largely related to audit and executive search fees incurred as a result of our CMC subsidiary IPO process, a $1.4 million increase
in personnel-related costs due to increased headcount, specifically certain members of senior management hired in connection with our CMC
subsidiary IPO process, a $1.2 million increase in stock-
based compensation primarily related to guaranteed equity awards to be issued to certain
members of senior management, and a $0.7 million increase in overhead-related costs.
Communications General and Administrative Expenses.
Communications general and administrative expenses decreased by $2.7 million,
or 7%, to $36.7 million, or 11.5% of Communications revenues, for the year ended December 31, 2007, compared to $39.4 million, or 10.3% of
Communications revenues, for the year ended December 31, 2006. The decrease was due to a $2.0 million decrease in professional fees, a
$1.1 million decrease in overhead-related expenses, a $1.0 million decrease in stock-based compensation primarily related to the resignation of a
former executive, a $0.8 million decrease in recruiting and relocation costs, and a $0.5 million decrease in facilities costs. These decreases were
partially offset by a $2.4 million increase in bad debt expense related to a technology partner combined with a litigation-related allowance
recorded in the September 2007 quarter.
Amortization of Intangible Assets
Amortization of intangible assets principally includes amortization of acquired pay accounts and free accounts, acquired trademarks and
trade names, purchased software and technologies, and other identifiable intangible assets. In accordance with the provisions set forth in SFAS
No. 142, goodwill is not being amortized but is tested for impairment at a reporting unit level on an annual basis and between annual tests if an
event occurs or circumstances change that would indicate the fair value of a reporting unit is below its carrying value.
Consolidated amortization of intangible assets decreased by $4.8 million, or 27%, to $12.8 million for the year ended December 31, 2007,
compared to $17.6 million for the year ended December 31, 2006. The decrease was primarily attributable to the accelerated amortization of
intangible assets in earlier years associated with our Classmates acquisition in November 2004, partially offset by increased amortization related
to intangible assets acquired in connection with our acquisition of The Names Database in March 2006 and our acquisition of MyPoints in April
2006.
Restructuring Charges
In the year ended December 31, 2007, we recorded restructuring charges totaling $3.4 million. In October 2007, we eliminated 69 positions
and recorded restructuring charges totaling $3.0 million within our Communications segment to better align the segment's cost structure within a
mature business for dial-up Internet access services.
In addition, we recognized $0.4 million in restructuring charges in the year ended December 31, 2007 for termination benefits paid to
certain employees associated with our Web hosting and photo sharing businesses.
In the year ended December 31, 2006, we recorded restructuring charges totaling $0.6 million primarily for lease termination costs and
termination benefits paid to certain employees.
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