Classmates.com 2008 Annual Report Download - page 75

Table of Contents
stock units and stock awards and pay the employee withholding taxes due on vested restricted stock units and stock awards issued; and to fund
future capital expenditures. Under the terms of the UOL Credit Agreement and the FTD Credit Agreement, there are significant limitations on
our ability to use cash flows from operations generated by our Communications and Classmates Media segments for the benefit of the FTD
segment and, conversely, there are significant limitations on our ability to use cash flows from operations generated by the FTD segment for the
benefit of United Online, Inc. or the Communications and Classmates Media segments. The degree to which our assets are leveraged and the
terms of our debt could materially and adversely affect our ability to obtain additional capital as well as the terms at which such capital might be
offered to us. We currently expect to have sufficient liquidity to fulfill our short-term and long-term debt service obligations.
If we need to raise additional capital through public or private debt or equity financings, strategic relationships or other arrangements, this
capital might not be available to us in a timely manner, on acceptable terms, or at all. Our failure to raise sufficient capital when needed could
severely constrain or prevent us from, among other factors, developing new or enhancing existing services or products, repurchasing our
common stock, acquiring other services, businesses or technologies or funding significant capital expenditures, and have a material adverse
effect on our business, financial position, results of operations, and cash flows as well as impair our ability to pay future dividends. If additional
funds were raised through the issuance of equity or convertible debt securities, the percentage of stock owned by the then-current stockholders
could be reduced. Furthermore, such equity or debt securities that we issue might have rights, preferences or privileges senior to holders of our
common stock. In addition, the extreme volatility and disruption in the securities and credit markets may restrict our ability to raise any such
additional funds, at least in the near term.
Year Ended December 31, 2007 compared to Year Ended December 31, 2006
Net cash provided by operating activities increased by $25.8 million, or 25%, for the year ended December 31, 2007 compared to the year
ended December 31, 2006. Cash provided by operating activities was driven by our net income adjusted for non-cash items, including, but not
limited to, depreciation and amortization, stock-based compensation, impairment of goodwill, intangible assets and long-lived assets, deferred
taxes, tax benefits from equity awards and changes in operating assets and liabilities. The increase from 2006 was primarily due to favorable net
operating assets and liabilities changes of $18.4 million and a $15.5 million increase in net income, partially offset by a $7.1 million decrease in
non-cash items.
Net cash provided by investing activities was $48.5 million for the year ended December 31, 2007, compared to net cash used for investing
activities of $89.8 million for the year ended December 31, 2006. The increase was primarily the result of the following:
•
a $73.1 million increase in net proceeds from sales and maturities of short
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term investments; and
• a $61.2 million decrease in cash paid for acquisitions. We acquired MyPoints in April 2006 for $49.5 million, net of cash
acquired; we acquired The Names Database in March 2006 for $9.5 million, net of cash acquired; and we paid the remaining
$1.5 million due in connection with the acquisition of our photo sharing business in March 2006.
Net cash used for financing activities decreased by $47.2 million, or 51%, for the year ended December 31, 2007 compared to the year
ended December 31, 2006. In January 2006, we paid, in full, the outstanding balance on our term loan of $54.2 million. The decrease in net cash
used for financing activities was partially offset by a $3.6 million increase in the payment of dividends and a $2.9 million increase in repurchases
of common stock in connection with shares withheld upon vesting of restricted stock units to pay applicable employee withholding taxes. In
2007 and 2006, we paid quarterly cash dividends of $0.20 per share of common stock for a total of $57.1 million and $53.1 million, respectively.
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