Classmates.com 2010 Annual Report Download - page 77

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attributable to a $15.1 million decline in advertising, promotion and distribution costs related to our dial-up Internet access services and, to a
lesser extent, a $6.1 million decrease in personnel- and overhead-related expenses as a result of reduced headcount. The decrease was partially
offset by a one-time, out-of-period adjustment of $1.4 million related to marketing expenses.
Communications Technology and Development Expenses. Communications technology and development expenses decreased by
$5.6 million, or 23%, to $18.5 million for the year ended December 31, 2009, compared to $24.0 million for the year ended December 31, 2008.
Communications technology and development expenses as a percentage of Communications revenues decreased to 8.7% for the year ended
December 31, 2009, compared to 9.3% for the prior-year period. The decrease in expenses was primarily the result of a $6.9 million decrease in
personnel-related expenses as a result of reduced headcount, partially offset by a $1.2 million increase in overhead-related expenses.
Communications General and Administrative Expenses.
Communications general and administrative expenses decreased by $2.0 million,
or 6%, to $33.0 million for the year ended December 31, 2009, compared to $34.9 million for the year ended December 31, 2008.
Communications general and administrative expenses as a percentage of Communications revenues increased to 15.6% for the year ended
December 31, 2009, compared to 13.6% for the prior-year period. The decrease of $2.0 million was primarily due to a $2.2 million decrease in
personnel-related costs as a result of reduced headcount and a $1.3 million decrease in professional services and consulting fees, partially offset
by a $0.9 million increase in bad debt expense. The increase as a percentage of revenues was largely attributable to continued declines in
revenues as a result of continuing declines in the number of dial-up Internet access pay accounts.
Communications Restructuring Charges. Communications restructuring charges decreased by $0.3 million, or 17%, to $1.4 million for
the year ended December 31, 2009, compared to $1.7 million for the year ended December 31, 2008. Restructuring charges for the year ended
December 31, 2009 were primarily associated with a reduction in headcount in the fourth quarter of 2009. Restructuring charges for the year
ended December 31, 2008 were primarily associated with the closure of our Orem, Utah facility and a reduction in headcount.
Liquidity and Capital Resources
On August 26, 2008, we completed the acquisition of 100% of the capital stock of FTD Group, Inc. We paid a combination of (i) $10.15 in
cash and (ii) 0.4087 of a share of United Online, Inc. common stock for each outstanding share of FTD Group, Inc. common stock. The total
merger consideration was approximately $307 million in cash and approximately 12.3 million shares of United Online, Inc. common stock,
subject to the payment of cash in lieu of fractional shares of United Online, Inc. common stock.
The FTD acquisition was funded, in part, with the net proceeds from (i) a $60 million senior secured credit agreement with Silicon Valley
Bank (the "UOL Credit Agreement") and (ii) $375 million of term loan borrowings under senior secured credit facilities with Wells Fargo Bank,
National Association, as Administrative Agent (the "FTD Credit Agreement"). In connection with the FTD Credit Agreement, FTD Group, Inc.
received a $50 million revolving line of credit. In April 2010, we paid $14.7 million to retire our credit facility with Silicon Valley Bank.
The FTD Credit Agreement consists of (i) a term loan A facility of up to $75 million, (ii) a term loan B facility of up to $300 million, and
(iii) a revolving credit facility of up to $50 million. The interest rate set forth in the FTD Credit Agreement for loans made under the revolving
credit facility and term loan A facility is either the prime rate plus 2.50% per annum, or LIBOR plus 3.50% per annum (with a LIBOR floor of
3.00%), in each case, with step-downs in the interest rate depending on FTD's leverage ratio. The interest rate set forth in the FTD Credit
Agreement for loans made under
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