Classmates.com 2008 Annual Report Download - page 67

Table of Contents
Cost of Revenues. Consolidated cost of revenues decreased by $2.8 million, or 2%, to $117.2 million for the year ended December 31,
2007, compared to $120.0 million for the year ended December 31, 2006. The decrease was primarily due to decreased costs associated with our
Communications segment and a $1.1 million decrease in depreciation, partially offset by increased costs associated with our Classmates Media
segment. Cost of revenues related to our Classmates Media segment and our Communications segment constituted 36.3% and 63.7%,
respectively, of our total segment cost of revenues for the year ended December 31, 2007, compared to 24.4% and 75.6%, respectively, for the
year ended December 31, 2006.
Sales and Marketing Expenses. Consolidated sales and marketing expenses decreased by $13.6 million, or 8%, to $163.4 million, or
31.8% of consolidated revenues, for the year ended December 31, 2007, compared to $177.0 million, or 33.9% of consolidated revenues, for the
year ended December 31, 2006. The decrease was primarily attributable to a reduction in marketing expenses related to our Communications
segment, partially offset by an increase in marketing expenses related to our Classmates Media segment. Sales and marketing expenses related to
our Classmates Media segment and our Communications segment constituted 48.4% and 51.6%, respectively, of total segment sales and
marketing expenses for the year ended December 31, 2007 versus 34.4% and 65.6%, respectively, for the year ended December 31, 2006.
Technology and Development Expenses. Consolidated technology and development expenses decreased by $1.6 million, or 3%, to
$51.0 million, or 9.9% of consolidated revenues, for the year ended December 31, 2007, compared to $52.6 million, or 10.1% of consolidated
revenues, for the year ended December 31, 2006. The decrease was attributable to a decrease in expenses in the Communications segment,
partially offset by an increase in expenses in the Classmates Media segment and a $0.7 million increase in depreciation. Product development
expenses related to our Classmates Media segment and our Communications segment constituted 35.1% and 64.9%, respectively, of total
segment product development expenses for the year ended December 31, 2007, compared to 21.9% and 78.1%, respectively, for the year ended
December 31, 2006.
General and Administrative Expenses. Consolidated general and administrative expenses increased by $5.8 million, or 9%, to
$73.3 million, or 14.3% of consolidated revenues, for the year ended December 31, 2007, compared to $67.5 million, or 12.9% of consolidated
revenues, for the year ended December 31, 2006. The increase was due to an increase in expenses associated with our Classmates Media
segment, partially offset by a decrease in expenses associated with our Communications segment and a $0.9 million decrease in depreciation.
General and administrative expenses related to our Classmates Media segment and our Communications segment constituted 45.6% and 54.4%,
respectively, of total segment general and administrative expenses for the year ended December 31, 2007, compared to 35.1% and 64.9%,
respectively, for the year ended December 31, 2006.
Amortization of Intangible Assets. 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.
65