Classmates.com 2008 Annual Report Download - page 130

Table of Contents
UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. GOODWILL, INTANGIBLE ASSETS AND OTHER LONG-LIVED ASSETS (Continued)
market approach was weighted less heavily as the guideline companies used in those models are not 100% comparable to the Company's
reporting units.
Solely for purposes of establishing inputs for the fair value calculations described above related to interim goodwill impairment testing of
the FTD and Interflora reporting units, the Company made certain assumptions, including that the current economic downturn would continue
through fiscal year 2009, followed by a recovery period in fiscal year 2010, and long-term growth past fiscal year 2010. In addition, the
Company applied margin and other cost assumptions consistent with the reporting unit's historical trends at various revenue levels and used a
3% growth factor to calculate the terminal value of its reporting units. The Company used a 14.1% and 16.0% discount rate for the FTD and
Interflora reporting units, respectively, to calculate the fair values of these reporting units. The sum of the fair values of the reporting units was
reconciled to the Company's current market capitalization (based upon the Company's stock price) plus an estimated control premium.
As a result of the aforementioned factors, the Company recorded an impairment charge of $114.0 million related to goodwill within the
FTD reporting unit. These impairment charges were included in impairment of goodwill, intangible assets and long-lived assets in the
consolidated statements of operations. The Company concluded that goodwill in the Interflora reporting unit was not impaired as of
December 31, 2008.
2006 Impairment Charge
In the quarter ended December 31, 2006, the Company tested goodwill for impairment and recorded a goodwill impairment charge of
$5.7 million related to its photo sharing service within the Communications segment. These impairment charges were included in impairment of
goodwill, intangible assets and long-lived assets in the consolidated statements of operations.
Impairment of Long
-Lived Assets
During the quarter ended December 31, 2008, the Company decided not to pursue the marketing of broadband satellite service to its
customers and recorded an impairment charge against the capitalized software costs relating to such service of $0.3 million within the
Communications segment. This impairment charge was included in impairment of goodwill, intangible assets and long-lived assets in the
consolidated statements of operations.
As a result of slower than expected growth of the VoIP market in the U.S., current period operating losses and projected continuing
operating losses, the Company evaluated the recoverability of certain assets and wrote off $4.3 million of capitalized software and $0.2 million
of prepaid marketing and domain names in the December 2006 quarter. The Company was required to reduce the carrying value of the assets to
fair value and recognized asset impairment charges because the carrying value of the affected assets exceeded the Company's estimate of future
undiscounted cash flows. These impairment charges were included in impairment of goodwill, intangible assets and long-lived assets in the
consolidated statements of operations.
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