Classmates.com 2008 Annual Report Download - page 61

Table of Contents
expenses for the year ended December 31, 2008, compared to 0%, 45.6% and 54.4%, respectively, for the year ended December 31, 2007.
Amortization of Intangible Assets. Consolidated amortization of intangible assets increased by $5.6 million, or 43.9%, to $18.4 million
for the year ended December 31, 2008, compared to $12.8 million for the year ended December 31, 2007. The increase was associated with
increased amortization related to definite- lived intangible assets acquired in connection with our FTD acquisition, partially offset by a decrease
in amortization of intangible assets attributable to the accelerated amortization of intangible assets in earlier years associated with our Classmates
acquisition in November 2004 and, to a lesser extent, a decrease in amortization in the year ended December 31, 2008 compared to the year
ended December 31, 2007 as a result of certain assets from the acquisition of Web hosting assets in April 2004 becoming fully amortized in
March 2007.
Restructuring Charges. Consolidated restructuring charges totaled $0.7 million for the year ended December 31, 2008, compared to
$3.4 million for the year ended December 31, 2007. The restructuring charges for the year ended December 31, 2008 were primarily associated
with the closure of our Orem, Utah facility. In 2007, we eliminated 69 positions and recorded restructuring charges totaling $3.0 million to better
align the Communications 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.
Impairment of Goodwill, Intangible Assets and Long-Lived Assets. Consolidated impairment charges totaled $176.2 million for the year
ended December 31, 2008, compared to $0 for the year ended December 31, 2007. Impairment charges for the year ended December 31, 2008
were primarily due to a reduction in the fair value of the FTD reporting unit compared to its carrying value and lower fair values in the FTD and
Interflora trademarks and trade names compared to their carrying values.
Interest Income.
Interest income decreased by $2.6 million, or 36.6%, to $4.5 million for the year ended December 31, 2008, compared to
$7.1 million for the year ended December 31, 2007. The decrease in interest income is consistent with the decrease in the investment portfolio
during the year ended December 31, 2008 as a result of the liquidation of investments to fund the FTD acquisition and the reduction in interest
rates as a result of the macroeconomic environment.
Interest Expense. Interest expense was $13.2 million for the year ended December 31, 2008, compared to $3,000 for the year ended
December 31, 2007. The increase in interest expense was a result of the indebtedness incurred in connection with the FTD acquisition, which
closed on August 26, 2008.
Other Income (Expense), net. Other expense, net was $48,000 for the year ended December 31, 2008, compared to $0.7 million for the
year ended December 31, 2007. The decrease in other expense, net, was primarily due to interest earned on a non
-income tax dispute settlement,
a $0.3 million net realized gain on sales of our short-term investments recognized in the year ended December 31, 2008 in connection with the
liquidation of our short-term investments portfolio during the year ended December 31, 2008 and $0.3 million of imputed interest on the
acquired member redemption liability of our loyalty marketing service recorded in the year ended December 31, 2007. These decreases were
offset by an increase in foreign currency exchange rate losses and an increase in losses on disposal of assets.
Provision for Income Taxes. For the year ended December 31, 2008, we recorded a tax provision of $23.3 million on a pre-tax loss of
$71.4 million. The tax provision reflects the impact of non-deductible goodwill and impairment charges of $176.2 million. Excluding these
charges, the effective income tax rate for the year ended December 31, 2008 would have been 43.5%. For the year
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