Classmates.com 2008 Annual Report Download - page 80

Table of Contents
carried at fair value, with unrealized gains and losses, net of tax, reported as a separate component of stockholders' equity. At December 31,
2008, we had no short-term investments.
Foreign Currency Risk
We transact business in foreign currencies and may be exposed to risk resulting from fluctuations in foreign currency exchange rates,
particularly the British Pound (GBP), the Indian Rupee (INR), the Euro (EUR), and the Canadian Dollar (CAD), which may result in gains or
losses reported in our earnings. The volatilities in GBP, INR, EUR, and CAD (and all other applicable foreign currencies) are monitored by us
throughout the year. We face two risks related to foreign currency exchange rates: translation risk and transaction risk. Amounts invested in our
foreign operations are translated into U.S. Dollars using period-end exchange rates. The resulting translation adjustments are recorded as a
component of accumulated other comprehensive income (loss) in stockholders' equity. When the functional currencies of our foreign operations
are denominated in the local currency of our subsidiaries, the foreign currency translation adjustments are reflected as a component of
stockholders' equity and do not impact our operating results. Revenues and expenses in foreign currencies translate into higher or lower revenues
and expenses in U.S. Dollars as the U.S. Dollar weakens or strengthens against other currencies. Substantially all of the revenues of our foreign
subsidiaries are received, and substantially all expenses are incurred, in currencies other than the U.S. Dollar, which increases or decreases the
related U.S. Dollar reported revenues and expenses depending on the trend in currency. Therefore, changes in foreign currency exchange rates
may negatively affect our consolidated revenues and expenses. We do not currently hedge foreign currency translation risk. A hypothetical 10%
adverse change in overall foreign currency exchange rates over an entire year would result in a reduction of reported revenue of approximately
$6.8 million and a reduction of reported loss before income taxes of approximately $1.2 million. Excluding the impact of impairment charges, a
hypothetical 10% adverse change in foreign currency exchange rates would result in a reduction of income before income taxes of $0.6 million.
These estimates assume an adverse shift in all foreign currency exchange rates, which do not always move in the same direction, and actual
results may differ materially. Net foreign currency transaction gains or losses arising from transactions in our foreign operations denominated in
currencies other than the local functional currency are included in other income (expense), net in the consolidated statements of operations. The
recent decline in the value of the U.S. Dollar compared to the British Pound had an adverse effect on our FTD segment's operating results for the
year ended December 31, 2008. While we have not engaged in foreign currency hedging to date, we may in the future use hedging programs,
including currency forward contracts, currency options and/or other derivative financial instruments commonly utilized if it is determined that
such hedging activities are appropriate to reduce risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For our Consolidated Financial Statements and Schedule II, see the Index to Consolidated Financial Statements on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Acting Chief Financial Officer, has evaluated the effectiveness
of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-
15(e) under the Exchange Act as of the
end of the period
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