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As filed with the Securities and Exchange Commission on August 29, 2013

File No. 001-35901

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



AMENDMENT NO. 3 TO

FORM 10



GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934



FTD Companies, Inc.
(Exact name of registrant as specified in its charter)



Delaware
(State or other jurisdiction of
incorporation or organization)
  32-0255852
(I.R.S. Employer
Identification No.)

3113 Woodcreek Drive
Downers Grove, Illinois

(Address of principal executive offices)

 

60515
(Zip Code)

Registrant's telephone number, including area code:
(630) 719-7800

Securities to be registered pursuant to Section 12(b) of the Act:

Title of each class to be so registered   Name of each exchange on which
each class is to be registered
Common Stock, par value $0.0001 per
share
  The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

Securities to be registered pursuant to Section 12(g) of the Act:
None



        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o

   



FTD Companies, Inc.
Cross-Reference Sheet Between Information Statement and Items of Form 10

        The information required by the following Form 10 registration statement items is contained in the information statement sections that are identified below, each of which is incorporated herein by reference.

Item 1.    Business.

        The information required by this item is contained under the sections "Summary," "Risk Factors," "Cautionary Statement Concerning Forward-Looking Statements," "The Separation," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," "Certain Relationships and Related-Party Transactions," and "Where You Can Find More Information."

Item 1A.    Risk Factors.

        The information required by this item is contained under the sections "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements."

Item 2.    Financial Information.

        The information required by this item is contained under the sections "Selected Historical Consolidated Financial Data," "Unaudited Pro Forma Condensed Consolidated Financial Statements," and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Item 3.    Properties.

        The information required by this item is contained under the section "Business—Properties."

Item 4.    Security Ownership of Certain Beneficial Owners and Management.

        The information required by this item is contained under the section "Security Ownership of Management, Directors and Principal Stockholders."

Item 5.    Directors and Executive Officers.

        The information required by this item is contained under the section "Management."

Item 6.    Executive Compensation.

        The information required by this item is contained under the sections "Management" and "Executive Compensation."

Item 7.    Certain Relationships and Related Transactions, and Director Independence.

        The information required by this item is contained under the sections "Certain Relationships and Related-Party Transactions" and "Management."

Item 8.    Legal Proceedings.

        The information required by this item is contained under the section "Business—Legal Proceedings."

2



Item 9.    Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters.

        The information required by this item is contained under the sections "Summary," "Risk Factors," "The Separation," "Executive Compensation," "Description of Capital Stock," and "Description of Certain Indebtedness."

Item 10.    Recent Sales of Unregistered Securities.

        Not applicable.

Item 11.    Description of Registrant's Securities to Be Registered.

        The information required by this item is contained under the sections "Summary," "The Separation," and "Description of Capital Stock."

Item 12.    Indemnification of Directors and Officers.

        The information required by this item is contained under the section "Description of Capital Stock—Indemnification of Directors and Officers; Limitation of Liability of Directors."

Item 13.    Financial Statements and Supplementary Data.

        The information required by this item is contained under the sections "Unaudited Pro Forma Condensed Consolidated Financial Statements," "Index to Consolidated Financial Statements," and the financial statements referenced therein.

Item 14.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

        Not applicable.

Item 15.    Financial Statements and Exhibits.

(a)
Financial Statements

        The information required by this item is contained under the sections "Unaudited Pro Forma Condensed Consolidated Financial Statements," "Index to Consolidated Financial Statements," and the financial statements referenced therein.

(b)
Exhibits

        The information required by this item is contained in the Exhibit Index following the signature page to this registration statement on Form 10.

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SIGNATURE

        Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

    FTD COMPANIES, INC.

 

 

By:

 

/s/ ROBERT S. APATOFF

        Name:   Robert S. Apatoff
        Title:   President

Dated: August 29, 2013

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EXHIBIT INDEX

Exhibit No.   Exhibit Description
  2.1   Form of Separation and Distribution Agreement by and between United Online, Inc. and FTD Companies, Inc.**

 

3.1

 

Form of Amended and Restated Certificate of Incorporation of FTD Companies, Inc.**

 

3.2

 

Form of Second Amended and Restated Bylaws of FTD Companies, Inc.**

 

10.1

 

Form of Transition Services Agreement by and between United Online, Inc. and FTD Companies, Inc.**

 

10.2

 

Form of Employee Matters Agreement by and between United Online, Inc. and FTD Companies, Inc.**

 

10.3

 

Form of Tax Sharing Agreement by and between United Online, Inc. and FTD Companies, Inc.**

 

10.4

 

Credit Agreement, dated as of July 17, 2013, by and among FTD Companies, Inc., Interflora British Unit, the material wholly-owned domestic subsidiaries of FTD Companies, Inc. party thereto as guarantors, the financial institutions party thereto from time to time, Bank of America Merrill Lynch and Wells Fargo Securities, LLC, as joint lead arrangers and book managers, and Bank of America, N.A., as administrative agent for the lenders.**

 

10.5

 

Form of FTD Companies, Inc. 2013 Incentive Compensation Plan**

 

21.1

 

List of subsidiaries of FTD Companies, Inc.**

 

99.1

 

Preliminary Information Statement of FTD Companies, Inc., subject to completion, dated August 29, 2013*

*
Filed herewith.

**
Previously filed.

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FTD Companies, Inc. Cross-Reference Sheet Between Information Statement and Items of Form 10
SIGNATURE
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TABLE OF CONTENTS
FTD COMPANIES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PRELIMINARY AND SUBJECT TO COMPLETION, DATED AUGUST 29, 2013

Exhibit 99.1

LOGO

                    , 2013

Dear United Online, Inc. Stockholder:

        We are pleased to inform you that United Online, Inc.'s ("United Online") Board of Directors has approved the distribution of all of the shares of common stock of FTD Companies, Inc., a wholly-owned subsidiary of United Online ("FTD"), to the stockholders of United Online.

        As a result of the distribution, United Online will be separated into two independent, publicly-traded companies, and United Online stockholders will own all of the outstanding shares of FTD and will continue to own all of the outstanding shares of United Online. United Online will continue to operate its Communications and Content & Media businesses, and its common stock will continue to be listed on the Nasdaq Global Select Market under the symbol "UNTD." FTD will own and operate its floral and gift products and services businesses. FTD has applied to list its common stock on the Nasdaq Global Select Market under the symbol "FTD."

        The distribution of FTD common stock will occur on                    , 2013, by way of a pro rata dividend to United Online stockholders. This means that each United Online stockholder will receive one share of FTD common stock for every            shares of United Online common stock held of record as of the close of business on                    , 2013, the record date for the distribution. Shares of FTD common stock will be issued in book-entry form only, which means that no physical stock certificates will be issued. A book-entry account statement reflecting your ownership of shares of FTD common stock will be mailed to you, or your brokerage account will be credited for the shares.

        Stockholder approval of the distribution is not required. You do not need to take any action to receive your shares of FTD common stock. You do not need to pay any consideration for your shares of FTD common stock or surrender or exchange your shares of United Online common stock.

        If you sell your shares of United Online common stock after the record date and prior to or on the distribution date, you may also be selling your right to receive shares of FTD common stock. You are encouraged to consult with your financial advisor regarding specific implications of selling your United Online common stock after the record date and prior to or on the distribution date. United Online intends for the distribution of FTD common stock to be tax-free for stockholders. Accordingly, the distribution is subject to certain customary conditions including, among other things, the receipt of a ruling from the Internal Revenue Service and an opinion of tax counsel confirming that the distribution generally will be tax-free for U.S. federal income tax purposes. However, any cash that you receive in lieu of fractional shares generally will be taxable to you. You should consult your own tax advisor as to the particular consequences of the distribution to you, including the applicability and effect of any U.S. federal, state and local, and foreign tax laws, which may result in the distribution being taxable to you.

        The enclosed information statement, which is being mailed to all United Online stockholders, describes the distribution in detail and contains important information about FTD, including its historical consolidated financial statements. We urge you to read the information statement carefully and in its entirety.

        We want to thank you, at this historic and exciting time, for your continued support for United Online, and we look forward to your support of FTD in the future.

    Sincerely,

 

 

Mark R. Goldston
Chairman, President and Chief Executive Officer
United Online, Inc.

PRELIMINARY AND SUBJECT TO COMPLETION, DATED AUGUST 29, 2013

LOGO

, 2013

Dear Future FTD Companies, Inc. Stockholder:

        We are very pleased that you will soon be a stockholder of FTD Companies, Inc. ("FTD"). As a result of the separation of our company from United Online, Inc., we will once again become an independent, publicly-traded company, with a storied history dating back 103 years.

        FTD will continue to be a premier provider of floral, gift and related products and services to consumers and retail florists, as well as to other retail locations offering floral and gift products primarily in the U.S., Canada, the U.K., and the Republic of Ireland. Our business uses the highly-recognized FTD® and Interflora® brands, both supported by the iconic Mercury Man logo that is displayed in tens of thousands of floral shops worldwide. Our portfolio of brands also includes Flying Flowers, Flowers Direct, and Drake Algar in the U.K.

        As an independent, publicly-traded company, we believe we can more effectively focus on our key strategic objectives and maximize long-term value to you as a stockholder.

        In connection with our separation from United Online, Inc., we have applied to list our common stock on the Nasdaq Global Select Market under the symbol "FTD."

        We invite you to learn more about FTD and its subsidiaries by reviewing the enclosed information statement. We are excited by our future prospects, and look forward to your support as a holder of our common stock.

  Sincerely,

 

Robert S. Apatoff

  President

  FTD Companies, Inc.

Information contained herein is subject to completion or amendment. A registration statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

PRELIMINARY AND SUBJECT TO COMPLETION, DATED AUGUST 29, 2013

INFORMATION STATEMENT

FTD COMPANIES, INC.

Common Stock
(Par Value $0.0001 Per Share)



        We are sending this Information Statement to you in connection with the separation of our company, FTD Companies, Inc. ("FTD"), from United Online, Inc. ("United Online"). The separation will be effected by a distribution by United Online of all of the issued and outstanding shares of FTD common stock, on a pro rata basis, to United Online stockholders. As a result of the distribution, each United Online stockholder will receive one share of FTD common stock for every            shares of United Online common stock held of record as of the close of business on                  , 2013, the record date for the distribution. The separation, distribution and other corporate transactions required to effect the separation of FTD from United Online and the distribution of FTD common stock to United Online stockholders are collectively referred to in this Information Statement as the "Separation."

        Stockholder approval of the Separation is not required. You do not need to take any action to receive your shares of FTD common stock. You do not need to pay any consideration for your shares of FTD common stock or surrender or exchange your shares of United Online common stock. Shares of FTD common stock will be issued in book-entry form only, which means that no physical stock certificates will be issued. A book-entry account statement reflecting your ownership of shares of FTD common stock will be mailed to you, or your brokerage account will be credited for the shares.

        The Separation is subject to certain customary conditions, including, among other things, the receipt of a ruling from the Internal Revenue Service and an opinion of tax counsel confirming that the distribution will generally be tax-free for U.S. federal income tax purposes. You will receive cash instead of any fractional shares of our common stock, which will generally be taxable to you.

        United Online currently owns all of the outstanding shares of FTD common stock. Accordingly, there is no current trading market for FTD common stock. However, we expect that a limited market for FTD common stock, commonly known as a "when-issued" trading market, will begin on or shortly before the record date, and we expect that "regular-way" trading of FTD common stock will begin on the first trading day following the distribution date. Upon consummation of the Separation, United Online common stock will continue to be listed on the Nasdaq Global Select Market ("NASDAQ") under the symbol "UNTD," and we expect that FTD common stock will be listed on NASDAQ under the symbol "FTD."

        As discussed in this Information Statement, if you sell your shares of United Online common stock in the "regular-way" market after the record date and on or prior to the distribution date, you will also be selling your right to receive shares of FTD common stock in the distribution. You are encouraged to consult with your financial advisor regarding the specific implications of selling your shares of United Online common stock after the record date and on or prior to the distribution date.

        We are an "emerging growth company" as defined under the federal securities laws. For implications of our status as an "emerging growth company," please see "Summary—Emerging Growth Company Status" beginning on page 3, "Risk Factors" beginning on page 19, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 61.

        In reviewing this Information Statement, you should carefully consider the matters described in the section entitled "Risk Factors" beginning on page 19.



        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this Information Statement is truthful or complete. Any representation to the contrary is a criminal offense.



This Information Statement is not an offer to sell, or a solicitation of an offer to buy, any securities.

This Information Statement was first mailed to United Online stockholders on or about                , 2013.

   

The date of this Information Statement is                , 2013



TABLE OF CONTENTS

SUMMARY

    1  

RISK FACTORS

   
19
 

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

   
43
 

THE SEPARATION

   
44
 

CAPITALIZATION

   
54
 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

   
55
 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

   
56
 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   
62
 

BUSINESS

   
91
 

CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

   
101
 

MANAGEMENT

   
106
 

EXECUTIVE COMPENSATION

   
113
 

SECURITY OWNERSHIP OF MANAGEMENT, DIRECTORS AND PRINCIPAL STOCKHOLDERS

   
131
 

DESCRIPTION OF CAPITAL STOCK

   
134
 

DESCRIPTION OF CERTAIN INDEBTEDNESS

   
139
 

WHERE YOU CAN FIND MORE INFORMATION

   
140
 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

   
F-1
 

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SUMMARY

        This summary highlights selected information contained elsewhere in this Information Statement and provides an overview of our company, our separation from United Online and the distribution of our common stock by United Online to its stockholders. For a more complete understanding of our business and the Separation, you should read this entire Information Statement carefully, particularly the discussions set forth under "Risk Factors," "Cautionary Statement Concerning Forward-Looking Statements," and our historical consolidated financial statements, our unaudited pro forma condensed consolidated financial statements and the respective notes to those financial statements appearing elsewhere in this Information Statement. Except as otherwise indicated or unless the context otherwise requires, (1) references in this Information Statement to "FTD," "FTD Entities," our "company," "we," "our," or "us" refer to FTD Companies, Inc., a Delaware corporation, and its consolidated subsidiaries after giving effect to the Separation, and (2) references in this Information Statement to "United Online," "UOL" or "UOL Entities" refer to United Online, Inc., a Delaware corporation, its predecessors and its consolidated subsidiaries, other than, for all periods following the Separation, FTD Companies, Inc. and its consolidated subsidiaries.


Our Company

        We are a premier floral and gift products and services company. We provide floral, gift and related products and services to consumers and retail florists, as well as to other retail locations offering floral and gift products primarily in the U.S., Canada, the U.K., and the Republic of Ireland. Our business uses the highly-recognized FTD® and Interflora® brands, both supported by the iconic Mercury Man logo that is displayed in tens of thousands of floral shops worldwide. Our portfolio of brands also includes Flying Flowers, Flowers Direct, and Drake Algar in the U.K.


Our Competitive Strengths

        We believe that our company possesses a number of competitive advantages that distinguishes us from our competitors, including:

    Strong brand recognition:  Our FTD and Interflora brands, both supported by the iconic Mercury Man logo that is displayed in tens of thousands of floral shops worldwide, are highly recognizable. Our Flowers Direct, Flying Flowers, and Drake Algar brands are also well known in the U.K. market.

    Comprehensive and innovative products and services:  We believe that our product innovation distinguishes us from our competitors. We offer exclusive FTD and Interflora branded products and other exclusive products designed with our strategic partners, which provide our customers with a wide selection of products for gift-giving and self-purchase occasions. Further, for our floral network members, we provide a comprehensive suite of products and services that promote their revenue growth and enhance their operating efficiencies, including services that enable such members to send, receive, and deliver floral orders.

    Complementary consumer and floral network businesses:  The majority of floral orders generated by our consumer business are hand-designed and hand-delivered by the members of our floral networks.

    Strong cash flow:  Orders placed on our consumer websites or through our telephone numbers typically are paid for using a credit, debit or payment card, or PayPal; therefore, consumers generally pay for floral and gift orders before we pay our floral network members and third-party providers to fulfill and deliver them. Further, we do not maintain significant physical inventory because our floral network members and third-party suppliers maintain substantially all floral and gift physical inventory and facilities. We anticipate that our business will continue to generate stable cash flow going forward, which will allow us to continue to make interest payments on or pay down our debt and to invest in our business.

 

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    Experienced management team:  Our management team has a strong track record of performance and execution.


Our Business Strategy

        Our vision is to be the leading and most trusted floral and gifting company in the world. Our mission is to inspire, support, and delight our customers when expressing life's most important sentiments.

    Product Selection:  Our extensive range of fresh cut flowers and floral arrangements, plants and gifts provides our customers with choice in expressing life's most important sentiments. We offer exclusive FTD and Interflora branded products and other exclusive products designed with our strategic partners. Our premium and branded floral and gift products include The FTD College Rose Collection, FTD Floral Jewels™ Birthstone Collection, FTD Color Your Day™ Collection, Better Homes and Gardens Collection, FTD Luxury Collection™, USO Collection, Jane Seymour Silk Botanicals, Vera Wang Bridal and Everyday Collections, along with Baccarat, Nambe, Orrefors, Rogaska, Waterford, Wedgewood, and Godiva, among others. We believe we can further inspire, support, and delight our customers with floral and gift categories such as gift baskets, chocolate and sweets, and jewelry. The aforementioned trademarks are the registered and unregistered trademarks of their respective owners.

    Delivery Services:  Our products can be purchased through numerous websites using a computer or mobile device, by telephone or in retail shops. We offer a variety of delivery options, including same-day delivery (subject to certain limitations) to the U.S., Canada, the U.K., and the Republic of Ireland; and next-day and future-day delivery service throughout the world. Our fulfillment model includes independent retail florists and third-party vendors who ship directly to our customers. Further, we are part of an international network of floral retailers, which enables consumers to purchase products for delivery in more than 150 countries.

    Quality of Products and Services:  We offer our customers a satisfaction guarantee under which we guarantee fresh, beautiful floral arrangements and plants that will generally last at least seven days. We strive to deliver high caliber customer service to our consumer customers, floral network members, and other customers. We operate a customer service center in our headquarters in Downers Grove, Illinois, and in other locations in the U.S., the U.K., and in outsourced locations. High quality products and excellent customer service are critical to the brand strength and brand loyalty that we have built over the past 103 years.

        We are seeking to expand our business by, among other things, marketing to our current and potential consumer and floral network customers. Our marketing efforts are primarily focused on generating orders from new and existing customers; marketing our services to our floral network members; attracting new members to our floral networks; and marketing our services to alternative channels such as supermarkets and mass merchants. We also engage in a variety of activities to build and enhance the FTD, Interflora, and associated brands.

        For our consumer business, we engage in multi-channel, integrated marketing efforts, which include online advertising and marketing, including search engine marketing and optimization; social media and group-buying programs; co-marketing and affiliate partnerships and loyalty programs such as airlines, credit card companies and hotel chains; database marketing to existing consumer customers featuring email promotions; direct mail and other forms of print advertising; an email-based reminder service that provides consumers with personalized reminders of occasions such as birthdays, anniversaries, and key gift-giving holidays; and radio and television advertising. As consumer shopping continues to migrate from computers to mobile devices, we are committed to providing the best shopping experience, regardless of device type.

 

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        For our floral network business, our marketing efforts include member appreciation and training events; sponsoring and participating in floral and retail industry trade shows; and offline media campaigns. In addition, many of our marketing efforts for our consumer business are also designed to integrate with and enhance the businesses of our floral network members. By enhancing the FTD and Interflora brands, we increase the possibility that a consumer will place an order directly with one of our floral network members since floral retailers frequently highlight their association with our floral networks in their own marketing efforts. We also employ dedicated sales forces to market our products and services to our floral network members and to encourage other floral retailers to become members of our floral networks.

        As part of our business strategy, we intend to expand the breadth of our brand through organic growth and, where appropriate, through the acquisition of complementary businesses.

        We generate revenues primarily from the sale of products and services.

    Products Revenues:  Products revenues are derived primarily from selling floral, gift and related products to consumers. Products revenues also include revenues generated from sales of branded and non-branded hard goods, software and hardware systems, cut flowers, packaging and promotional products, and a wide variety of other floral-related supplies to our floral network members.

    Services Revenues:  Services revenues are derived primarily from orders sent to floral network members and fees for floral network services.


Corporate Information

        Our company, FTD Companies, Inc., formerly known as UNOL Intermediate, Inc., is a Delaware corporation that was formed in April 2008 in connection with United Online's acquisition of FTD Group, Inc., a Delaware corporation ("FTD Group"). FTD Group is a Delaware corporation that was formed in 2003 solely for the purpose of acquiring majority ownership of FTD, Inc. FTD, Inc. is a Delaware corporation that commenced operations in 1994 and includes the operations of its principal operating subsidiaries, Florists' Transworld Delivery, Inc., FTD.COM Inc. ("FTD.COM") and Interflora British Unit ("Interflora").


"Emerging Growth Company" Status

        As a company with less than $1 billion in revenues during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act (the "JOBS Act"). For as long as a company is deemed to be an "emerging growth company," it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. These provisions include:

    an exemption from the auditor attestation requirement in the assessment of the "emerging growth company's" internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act");

    an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;

    an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board (the "PCAOB") requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer;

    reduced disclosure about the "emerging growth company's" executive compensation arrangements; and

 

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    an exemption from the requirements of holding a nonbinding advisory vote on executive compensation and the requirement to obtain stockholder approval of any golden parachutes not previously approved.

        Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act"), for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

        We would cease to be an "emerging growth company" upon the earliest of:

    the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement filed under the Securities Act;

    the last day of the fiscal year in which our total annual gross revenues exceed $1 billion;

    the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or

    the date on which we become a "large accelerated filer," as defined in Rule 12b-2 under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), which would occur if the market value of our common stock held by non-affiliates exceeds $700 million as of the last day of our most recently completed second fiscal quarter.


The Separation

Overview

        On                        , 2013, United Online's Board of Directors approved the Separation. On the distribution date, holders of United Online common stock will receive one share of FTD common stock for every            shares of United Online common stock held at the close of business on the record date. Stockholders who are entitled to receive shares of FTD common stock in the distribution will not be required to pay any cash or deliver any other consideration, including any shares of United Online common stock, to receive shares of FTD common stock in the distribution.

        Prior to the Separation, we will have entered into a separation and distribution agreement (the "Separation and Distribution Agreement") and several other ancillary agreements with United Online for the purpose of allocating various assets, liabilities, and obligations between our company and United Online. These agreements will govern our relationship with United Online following the Separation and will provide arrangements for employee matters, tax matters, technology and intellectual property matters, legal and regulatory matters, and certain other liabilities and obligations. These agreements will also include arrangements for the provision of certain transition services generally for a period of up to 12 months (subject to an option, at FTD's election, to extend certain services for up to an additional 12 months). The Separation and Distribution Agreement will provide that we will indemnify United Online against any and all losses relating to liabilities arising out of the FTD business, and that United Online will indemnify us against any and all losses relating to liabilities arising out of the UOL businesses. See "Certain Relationships and Related-Party Transactions—Agreements with United Online."

        The distribution of FTD common stock as described in this Information Statement is subject to the satisfaction or waiver of certain conditions. Even if all of the conditions have been satisfied, United Online's Board of Directors may, in its sole and absolute discretion, terminate and abandon the Separation at any time prior to the distribution date if United Online's Board of Directors determines,

 

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in its sole discretion, that the Separation is not in the best interests of United Online or its stockholders, or that it is not advisable to separate FTD from United Online. See "The Separation—Conditions to the Separation."

Questions and Answers About the Separation

        The following provides only a summary of the terms of the Separation. For a more detailed description of the matters described below, see "The Separation."

Q:
What is the Separation?

A:
The Separation is a transaction by which FTD will separate from United Online through the distribution of FTD common stock to the stockholders of United Online. Following the Separation, (1) FTD will be a public company and will own and operate its consumer business and floral network business (collectively, the "FTD business"), and (2) United Online will continue as a public company and will own and operate its Communications and Content & Media businesses (collectively, the "UOL businesses").

Q:
What are the reasons for and benefits of separating FTD from United Online?

A:
United Online's Board of Directors regularly reviews the businesses that comprise United Online to ensure that United Online's resources are being put to use in a manner that is in the long-term interests of United Online and its stockholders. United Online has reviewed various strategic alternatives and determined that the formation of two "pure-play" businesses offers the best potential for long-term stockholder and corporate value. Additionally, United Online's Board of Directors believes that, as a "pure-play" company that is separate and independent from United Online following the Separation, FTD will be well positioned to deliver stockholder and corporate value for the following reasons:

FTD is expected to have more strategic flexibility, including more opportunities for strategic partnerships or acquisitions, including potential acquisitions using its equity as consideration;

FTD is expected to be in a better position to optimize its capital structure than a larger conglomerate business;

FTD's operating structure is expected to be streamlined, with decision making improved by reducing management layers; and

FTD is expected to create more effective equity compensation in the form of FTD common stock, the performance of which will be more closely aligned with the performance of its senior management.

In determining whether to effect the Separation, United Online's Board of Directors also has considered the costs and risks associated with the Separation. Notwithstanding these costs and risks, United Online's Board of Directors has determined that, for the reasons outlined above, the Separation provides each of United Online and FTD with certain opportunities and benefits that it expects will enhance stockholder and corporate value. For a more detailed discussion of the reasons for the Separation, see "The Separation—Reasons for the Separation."

Q:
What will I receive in the distribution?

A:
You will receive one share of FTD common stock for every            shares of United Online common stock you own as of the close of business on the record date.

 

5


 

Q:
What will I retain after the distribution?

A:
The number of shares of United Online common stock that you own will not change as a result of the Separation. However, as described in the definitive proxy statement filed by United Online on July 23, 2013, United Online will hold a special meeting of stockholders on September 5, 2013 to seek approval to effect a reverse stock split of United Online's issued and outstanding shares of common stock in a ratio of one-for-three, one-for-four, one-for-five, one-for-six or one-for-seven shares to be determined by United Online's Board of Directors (the "Reverse Stock Split"). If approved by United Online's stockholders, the Reverse Stock Split is expected to be implemented immediately prior to the distribution. Immediately following the completion of the Reverse Stock Split, the number of shares of United Online common stock issued and outstanding will be reduced proportionately based on the reverse stock split ratio determined by United Online's Board of Directors. After the distribution, you will also own shares of our common stock.

Q:
Why is the Separation being structured as a distribution?

A:
The distribution generally will be tax-free for U.S. federal income tax purposes. United Online believes that such a tax-free distribution of FTD shares is the most efficient way to accomplish the Separation and will enhance long-term value for United Online stockholders.

Q:
How many shares of FTD common stock will be distributed in total?

A:
Approximately       million shares of FTD common stock will be distributed in the Separation, based on the total number of shares of United Online common stock expected to be outstanding as of the record date. The actual number of shares of FTD common stock to be distributed will be calculated on the record date.

Q:
Will United Online retain any interest in FTD following the Separation?

A:
No. United Online will distribute all of the issued and outstanding shares of FTD common stock to its stockholders. Following the distribution, FTD will be a separate company from United Online, and United Online will not retain any ownership interest in FTD.

Q:
What is the record date for the distribution?

A:
The record date for the distribution will be the close of business on                        , 2013.

Q:
When will the distribution occur?

A:
The distribution will occur on or around                        , 2013.

Q:
What do I have to do to participate in the Separation?

A:
No stockholder approval of the distribution is required or sought, although you are urged to read this entire document carefully and in its entirety. You are not being asked for a proxy, and we request that you not send a proxy. No action is required on your part to receive your shares of FTD common stock. You will neither be required to pay any consideration for the new shares nor to surrender any shares of United Online common stock to participate in the Separation.

Q:
How will United Online distribute shares of FTD common stock?

A:
All shares of FTD common stock will be distributed as uncertificated shares registered in book-entry form through the direct registration system. No physical stock certificates will be distributed. Following the distribution, United Online will cause the transfer agent to deliver an account statement to each holder of FTD common stock reflecting the number of shares of FTD

 

6


 

    common stock held by such holder. If you own your United Online shares beneficially through a bank, broker or other nominee, your bank, broker or other nominee will credit your account with the number of FTD shares you receive in the distribution. For a more detailed description, see "The Separation—When and How You Will Receive Our Shares."

Q:
How will fractional shares be treated in the distribution?

A:
Fractional shares of our common stock will not be issued. If you would be entitled to receive a fractional share of our common stock in the distribution, you will instead receive a cash payment with respect to the fractional share.

Q:
What are the U.S. federal income tax consequences of the distribution?

A:
The distribution is conditioned on the receipt by United Online of a ruling (the "IRS Ruling") from the Internal Revenue Service (the "IRS") and an opinion from United Online's tax counsel, in form and substance acceptable to United Online and FTD (the "Tax Opinion"), substantially to the effect that the distribution of shares of FTD common stock will qualify as a tax-free transaction under Section 355 of the Internal Revenue Code of 1986, as amended (the "Code"), and that, for U.S. federal income tax purposes, (1) no gain or loss will be recognized by United Online upon the distribution of FTD common stock in the Separation, and (2) no gain or loss generally will be recognized by, and no amount generally will be included in the income of, holders of United Online common stock upon the receipt of shares of FTD common stock. Such conditions are waivable by United Online's Board of Directors in its sole and absolute discretion. United Online has requested and expects to receive the IRS Ruling from the IRS prior to the mailing date of this Information Statement. However, any cash payments made instead of fractional shares will generally be taxable to you. For a more detailed description, see "The Separation—Material U.S. Federal Income Tax Consequences of the Separation."

Q:
How will the distribution affect my tax basis in my shares of United Online common stock?

A:
Assuming that the distribution is tax-free to United Online stockholders, your tax basis in United Online common stock held by you immediately prior to the distribution will be allocated between your United Online common stock and FTD common stock that you receive in the distribution in proportion to the relative fair market values of each immediately following the distribution. United Online will provide its stockholders with information to enable them to compute their tax basis in both United Online and FTD shares. This information will be posted on United Online's website, www.unitedonline.com, promptly following the distribution date. You should consult your tax advisor about how this allocation will work in your situation, including a situation where you have purchased United Online shares at different times or for different amounts, and regarding any particular consequences of the distribution to you. For a more detailed description, see "The Separation—Material U.S. Federal Income Tax Consequences of the Separation."

Q:
Will FTD's common stock be listed on a stock exchange?

A:
There is currently no public market for FTD common stock. A condition to the Separation is the listing of FTD common stock on NASDAQ. We are in the process of applying to list FTD common stock on NASDAQ and expect to list under the ticker symbol "FTD." It is anticipated that trading of FTD common stock will commence on a "when-issued" basis on or shortly before the record date under the symbol "FTDDV." "When-issued" trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. "When-issued" trades generally settle within four trading days after the distribution date. On the first trading day following the distribution date, any "when-issued" trading with respect to FTD common stock will end, and "regular-way" trading will begin. "Regular-way" trading refers to trading after a security

 

7


 

    has been issued and typically involves a transaction that settles on the third full trading day following the date of the transaction. For a more detailed description, see "The Separation—Market for Our Common Stock."

Q:
Will my shares of United Online common stock continue to trade?

A:
Yes. United Online common stock will continue to be listed and traded on NASDAQ under the symbol "UNTD."

Q:
If, on or before the distribution date, I sell shares of United Online common stock that I held on the record date, am I still entitled to receive shares of FTD common stock distributable with respect to the shares of United Online common stock I sold?

A:
Beginning on or shortly before the record date and continuing up to and including the distribution date, United Online expects that its common stock will trade in two markets on NASDAQ: a "regular-way" market and an "ex-distribution" market. If you are a holder of record of shares of United Online common stock as of the record date and choose to sell those shares in the "regular-way" market after the close of business on the record date and up to and including the distribution date, you will also be selling the right to receive shares of FTD common stock in the distribution. However, if you are a holder of record of shares of United Online common stock as of the record date and choose to sell those shares in the "ex-distribution" market after the close of business on the record date and up to and including the distribution date, you will still receive the shares of FTD common stock that you would be entitled to receive in the distribution pursuant to your ownership of the shares of United Online common stock. You are encouraged to consult with your financial advisor regarding the specific implications of selling shares of United Online common stock prior to or on the distribution date.

Q:
Will the Separation affect the trading price of my United Online common stock?

A:
Yes. As a result of the Separation, the trading price of shares of United Online common stock immediately following the Separation is expected to change from the trading price immediately prior to the Separation because the trading price will no longer reflect the value of the FTD business. Furthermore, until the market has fully analyzed the value of United Online after the Separation of FTD, United Online may experience more stock price volatility than usual. There can be no assurance that, following the Separation, the combined value of the common stock of United Online and the common stock of FTD will equal or exceed what the value of United Online common stock would have been in the absence of the Separation. It is possible that after the Separation, the combined value of the equity of United Online and FTD will be less than the value of the equity of United Online before the distribution. In addition, if approved by stockholders, the Reverse Stock Split is expected to be implemented immediately prior to the distribution and will impact the trading price of shares of United Online common stock.

Q:
What will the relationship be between United Online and FTD after the Separation?

A:
Following the Separation, we will be an independent, publicly-traded company, and United Online will have no continuing ownership interest in us. We will have entered into the Separation and Distribution Agreement and several other ancillary agreements with United Online for the purpose of allocating various assets, liabilities, and obligations between our company and United Online. These agreements will govern our relationship with United Online following the Separation and will provide arrangements for employee matters, tax matters, technology and intellectual property matters, legal and regulatory matters, and certain other liabilities and obligations. These agreements will also include arrangements for the provision of certain transition services generally for a period of up to 12 months (subject to an option, at FTD's election, to extend certain services

 

8


 

    for up to an additional 12 months). The Separation and Distribution Agreement will provide that we will indemnify United Online against any and all losses relating to liabilities arising out of the FTD business, and that United Online will indemnify us against any and all losses relating to liabilities arising out of the UOL businesses.

Q:
Will FTD retain any debt in connection with the Separation?

A:
Yes. On July 17, 2013, FTD Companies, Inc. entered into a new credit agreement (the "Credit Agreement") by and among FTD Companies, Inc., Interflora, the material wholly-owned domestic subsidiaries of FTD party thereto as guarantors, the financial institutions party thereto from time to time, Bank of America Merrill Lynch and Wells Fargo Securities, LLC, as joint lead arrangers and book managers, and Bank of America, N.A., as administrative agent for the lenders, to refinance the senior secured credit facilities of FTD Group under that certain credit agreement, dated June 10, 2011, by and among FTD Group, the financial institutions party thereto from time to time as lenders, Wells Fargo Securities, LLC, as sole lead arranger and sole book runner, and Wells Fargo Bank, National Association, as administrative agent for the lenders (the "2011 Credit Agreement"). On July 17, 2013, FTD Companies, Inc. drew $220 million of the new $350 million revolving credit facility and used approximately $19 million of its existing cash balance to repay its previously outstanding credit facilities in full and pay fees and expenses related to the Credit Agreement.

Q:
What will happen to United Online equity awards in connection with the Separation?

A:
Outstanding United Online equity awards at the time of the Separation will be treated as follows:

Stock Options.    Options to purchase shares of United Online common stock ("United Online Options") that are outstanding on the distribution date and held by any individual who is employed by FTD prior to the Separation (each, an "FTD Employee") will be converted into options to purchase shares of our common stock ("FTD Options"), without any changes to the original terms of the United Online Options, other than appropriate adjustments to increase the number of shares of our common stock subject to each FTD Option and reduce the exercise price payable per share, so as to preserve the value that existed with respect to the United Online Options immediately prior to the Separation. No changes will be made with respect to United Online Options held by any individual who is employed by United Online immediately prior to the Separation (each, a "Remaining Employee") or former or retired employees other than similar adjustments with respect to the number of shares of United Online common stock subject to each United Online Option and the exercise price payable per share so as to preserve the value that existed with respect to such United Online Option immediately prior to the Separation.

United Online Options held by directors of United Online (including Mark R. Goldston, Chairman, President and Chief Executive Officer of United Online) on the distribution date will be converted into FTD Options and United Online Options, in each case, with appropriate adjustments as described above so as to preserve the aggregate value of such options.

Restricted Stock Units.    United Online restricted stock units that are held by FTD Employees on the distribution date will be converted into our restricted stock units covering an increased number of shares of our common stock, so as to preserve the value that existed with respect to each such United Online restricted stock unit immediately prior to the Separation, and other than such adjustments, the original terms of such restricted stock units, including the vesting and issuance schedules, will remain unchanged. United Online restricted stock units held by Remaining Employees on the distribution date will be adjusted to increase the number of shares of United Online common stock subject to each such award so as to preserve the value that existed with respect to such award immediately prior to the Separation and, other than such adjustment, the

 

9


 

    original terms of the United Online restricted stock unit, including the vesting and issuance schedules, will remain unchanged.

    United Online restricted stock units held by directors of United Online (including Mr. Goldston) on the distribution date will vest as of the distribution date and be settled in FTD shares and United Online shares, in each case, with the appropriate adjustments as described above so as to preserve the aggregate value of such restricted stock units.

    Continued Vesting.    The service-vesting requirements in effect for each United Online award will remain unchanged in connection with the Separation and will be measured in terms of both service prior to the Separation and continued service with the entity employing the holder immediately after the Separation.

    Employee Stock Purchase Plan.    The then-current purchase period under the United Online 2010 Employee Stock Purchase Plan will end as of the Separation and all then-outstanding purchase rights will be automatically exercised in accordance with the provisions of the plan.

Q:
What will FTD's dividend policy be after the Separation?

A:
We presently intend to retain future earnings, if any, to reinvest in the growth of our businesses and to make interest payments on or pay down our debt and fund potential acquisitions. As a result, we do not currently expect to pay any cash dividends.

Q:
What are the risks associated with the Separation?

A:
There are a number of risks associated with the Separation and with ownership of FTD common stock, including:

The risk of being unable to achieve the benefits expected from the Separation;

The loss of economies of scope and scale from operating as one company;

The risk of limitations on FTD's ability to engage in desirable strategic transactions and equity issuances following the Separation because of certain restrictions relating to requirements for tax-free distributions;

The risk of FTD being unable to make, on a timely basis, the changes necessary to operate as an independent, publicly-traded company; and

The potential tax liabilities that could arise if the Separation were to fail to qualify as a tax-free transaction for U.S. federal income tax purposes.

United Online's Board of Directors considered such risks and concluded that the potential benefits of the Separation outweighed its potential costs. For a more detailed discussion of the risk factors associated with the Separation, see "Risk Factors."

Q:
What are the conditions to the Separation?

A:
The Separation is subject to a number of conditions set forth in the Separation and Distribution Agreement, including, among others, (1) declaration of the distribution by United Online's Board of Directors, (2) the Securities and Exchange Commission (the "SEC") declaring effective the registration statement on Form 10 of which this Information Statement forms a part, (3) receipt of the IRS Ruling and the Tax Opinion, and (4) NASDAQ approving FTD common stock for listing, subject to official notice of issuance. For a more detailed description, see "The Separation—Conditions to the Separation."

 

10


 

Q:
Can United Online decide to cancel the Separation even if all the conditions have been satisfied?

A:
Yes. United Online's Board of Directors may, in its sole discretion and at any time prior to the distribution date, terminate and abandon the Separation, even if all of the conditions to the Separation have been satisfied. For a more detailed description, see "The Separation—Conditions to the Separation."

Q:
Will I have dissenters' rights in connection with the Separation?

A:
No. United Online stockholders will not be entitled to assert dissenters' rights in connection with the Separation.

Q:
Where can I get more information?

A:
Before the Separation, if you have any questions relating to the Separation, you should contact United Online at:

Investor Relations
United Online, Inc.
21301 Burbank Boulevard
Woodland Hills, California 91367
Phone: (818) 287-3560

After the Separation, if you have any questions relating to the Separation or to FTD, you should contact FTD at:

Investor Relations
FTD Companies, Inc.
3113 Woodcreek Drive
Downers Grove, Illinois 60515
Phone: (630) 719-7800

 

11


      


Summary of the Separation

        The following provides a summary of the material terms of the Separation. For a more detailed description, see "The Separation."

Distributing Company

  United Online, Inc., a Delaware corporation. After the Separation, United Online will not own any shares of FTD common stock.


Distributed Company


 


FTD Companies, Inc., a Delaware corporation and a wholly-owned subsidiary of United Online. After the Separation, FTD will be an independent, publicly-traded company.


Distributed Securities


 


United Online will distribute all of the shares of FTD common stock owned by United Online, which will be 100% of FTD common stock issued and outstanding immediately prior to the distribution. Based on the approximately        million shares of United Online common stock outstanding on                    , 2013, and applying the distribution ratio of one share of FTD common stock for every        shares of United Online common stock, approximately        million shares of FTD common stock will be distributed to United Online stockholders who hold United Online common stock as of the record date.


Record Date


 


The record date for the distribution is the close of business on                    , 2013.


Distribution Date


 


The distribution date is                    , 2013.


Transfer Agent


 

 


Distribution Ratio


 


Each holder of United Online common stock will receive one share of FTD common stock for every        shares of United Online common stock held at the close of business on the record date. If you sell your shares of United Online common stock on or before the distribution date, the buyer of those shares may, in certain circumstances, be entitled to receive the shares of FTD common stock distributed on the distribution date. For a more detailed description, see "The Separation—Trading of United Online Common Stock After the Record Date and On or Prior to the Distribution."

 

12


 

Distribution Procedures

 

Prior to the commencement of trading on NASDAQ on the distribution date, United Online will release the shares of FTD common stock to the transfer agent for distribution to United Online stockholders. The transfer agent will distribute the shares of FTD common stock by crediting those shares to book-entry accounts established by the transfer agent for persons who were stockholders of United Online as of the record date. Shares of FTD common stock will be issued as uncertificated shares registered in book-entry form through the direct registration system. No physical stock certificates will be issued. You will not be required to make any payment or surrender or exchange your shares of United Online common stock or take any other action to receive your shares of FTD common stock. However, as discussed below, if you sell shares of United Online common stock in the "regular-way" market after the record date and on or before the distribution date, you will be selling your right to receive the associated shares of FTD common stock in the distribution. Registered stockholders will receive additional information from the transfer agent shortly after the distribution date. If you hold your United Online shares in "street name" through a broker, bank or other nominee, you will receive additional information from your broker, bank or other nominee.


Trading Prior to or On the Distribution Date


 


Beginning on or shortly before the record date and continuing up to and including the distribution date, United Online expects that its common stock will trade in two markets on NASDAQ: a "regular-way" market and an "ex-distribution" market. Any holder of record of shares of United Online common stock as of the record date who chooses to sell those shares in the "regular-way" market after the close of business on the record date and up to and including the distribution date will also be selling the right to receive shares of FTD common stock in the distribution. However, any holder of record of shares of United Online common stock as of the record date who chooses to sell those shares in the "ex-distribution" market after the close of business on the record date and up to and including the distribution date will still receive the shares of FTD common stock that he/she would be entitled to receive in the distribution pursuant to his/her ownership of the shares of United Online common stock.



 


You are encouraged to consult with your financial advisor regarding the specific implications of selling shares of United Online common stock prior to or on the distribution date. For a more detailed description, see "The Separation—Trading of United Online Common Stock After the Record Date and On or Prior to the Distribution."

 

13


 

Trading Market and Symbol

 

Subject to completion of the distribution, FTD common stock will be listed on NASDAQ under the symbol "FTD." We cannot predict the trading prices for FTD common stock when such trading begins. We anticipate that trading in shares of FTD common stock will begin on a "when-issued" basis on or shortly before the record date under the symbol "FTDDV" and will continue up to and including the distribution date. On the first trading day following the distribution date, any "when-issued" trading in respect of FTD common stock will end and "regular-way" trading in shares of FTD common stock will begin. If trading begins on a "when-issued" basis, you may purchase or sell FTD common stock up to and including the distribution date, but your transaction will not settle until after the distribution date. For more information regarding "regular-way" trading and "when-issued" trading, see the section entitled "The Separation—Trading of United Online Common Stock After the Record Date and On or Prior to the Distribution."


Assets and Liabilities


 


We will enter into the Separation and Distribution Agreement with United Online, which will contain the key provisions relating to the Separation of the FTD business from the UOL businesses and the distribution of FTD common stock. Among other things, the Separation and Distribution Agreement will allocate the assets and liabilities of United Online and its subsidiaries between us and United Online and describe when and how any required transfers and assumptions of assets and liabilities will occur between us and United Online. For a more detailed description, see "Certain Relationships and Related-Party Transactions—Agreements with United Online—Separation and Distribution Agreement."


Indebtedness and Other Financing Arrangements


 


On July 17, 2013, FTD Companies, Inc. entered into the Credit Agreement to refinance the senior secured credit facilities of FTD Group under the 2011 Credit Agreement. On July 17, 2013, FTD Companies, Inc. drew $220 million of the new $350 million revolving credit facility and used approximately $19 million of its existing cash balance to repay its previously outstanding credit facilities in full and pay fees and expenses related to the Credit Agreement.

 

14


 

Relationship with United Online after the Distribution

 

After the distribution, United Online will not own any shares of FTD common stock and, as a result, each of United Online and FTD will be independent, publicly-traded companies with their own separate management and boards of directors. In addition to the Separation and Distribution Agreement, FTD will enter into other ancillary agreements with United Online to define various continuing relationships between United Online and FTD after the distribution, including a transition services agreement (the "Transition Services Agreement"), a tax sharing agreement (the "Tax Sharing Agreement"), and an employee matters agreement (the "Employee Matters Agreement"). For a more detailed description, see "Certain Relationships and Related-Party Transactions—Agreements with United Online."


Indemnification


 


The Separation and Distribution Agreement will provide that we (and our subsidiaries) will indemnify United Online (and its remaining subsidiaries) against any and all losses relating to liabilities arising out of the FTD business, and that United Online (and its remaining subsidiaries) will indemnify us (and our subsidiaries) against any and all losses relating to liabilities arising out of UOL businesses. In addition, under the terms of the Tax Sharing Agreement that we will enter into with United Online, we also will be generally responsible for any taxes imposed on United Online that arise from the failure of the distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code, to the extent such failure to qualify is attributable to actions, events or transactions relating to our stock, assets or business, or a breach of the relevant representations or covenants made by us in the Tax Sharing Agreement. For a more detailed description, see "Certain Relationships and Related-Party Transactions—Agreements with United Online—Tax Sharing Agreement."


U.S. Federal Income Tax Consequences


 


The Separation is conditioned on the receipt by United Online of the IRS Ruling and the Tax Opinion substantially to the effect that the distribution of shares of FTD common stock will qualify as a tax-free transaction under Section 355 of the Code, and that, for U.S. federal income tax purposes, (1) no gain or loss will be recognized by United Online upon the distribution of FTD common stock in the Separation, and (2) no gain or loss generally will be recognized by, and no amount generally will be included in the income of, holders of United Online common stock upon receipt of shares of FTD common stock. However, any cash payments made instead of fractional shares will generally be taxable to you. United Online has requested and expects to receive the IRS Ruling from the IRS prior to the mailing date of this Information Statement. You should consult your own tax advisor as to the particular tax consequences to you. For a more detailed description, see "The Separation—Material U.S. Federal Income Tax Consequences of the Separation."

 

15


 

Conditions to the Separation

 

We expect that the Separation will be effective as of 12:01 a.m., New York time, on the distribution date, provided that the following conditions have been satisfied or waived by United Online's Board of Directors, in its sole and absolute discretion:

 

United Online's Board of Directors has, in its sole and absolute discretion, declared the distribution;

 

the SEC has declared effective our registration statement on Form 10, of which this Information Statement forms a part, with no stop order in effect with respect thereto, and with no proceedings for such purpose pending or threatened by the SEC;

 

we have mailed this Information Statement (and such information concerning our company, businesses, operations and management, the distribution and such other matters as we and United Online shall determine and as may otherwise be required by law) to the holders of record of United Online common stock;

 

all other actions and filings necessary or appropriate under applicable federal or state securities laws and state blue sky laws in connection with the distribution shall have been taken;

 

we have received the IRS Ruling from the IRS and the IRS Ruling remains in full force and effect and has not been modified or amended in any respect adversely affecting the intended tax-free treatment of the distribution;

 

United Online has received the Tax Opinion, dated the distribution date, in form and substance satisfactory to United Online and us, substantially to the effect that the distribution of shares of FTD common stock will qualify as a tax-free transaction under Section 355 of the Code;

 

NASDAQ has approved FTD common stock for listing, subject to official notice of issuance;

 

the ancillary agreements to the Separation and Distribution Agreement have been executed and delivered by each of the parties thereto and no party to any of the ancillary agreements is in material breach of any such agreement;

 

any material governmental approvals and consents necessary to consummate the Separation or any portion thereof have been obtained and are in full force and effect;

 

no preliminary or permanent injunction or other order, decree, or ruling issued by a governmental authority, and no statute (as interpreted through the orders or rules of any governmental authority duly authorized to effectuate the statute), rule, regulation or executive order promulgated or enacted by any governmental authority is in effect preventing the consummation of, or materially limiting the benefits of, the Separation; and

 

16


 

 

no other event or development has occurred or failed to occur that, in the judgment of United Online's Board of Directors, in its sole discretion, prevents the consummation of the Separation or any portion thereof or makes the consummation of the Separation inadvisable.



 


However, even if all of the foregoing conditions have been satisfied, United Online may terminate and abandon the Separation at any time prior to the distribution date if United Online's Board of Directors determines, in its sole discretion, that the Separation is not in the best interests of United Online or its stockholders, or that it is not advisable for our company to separate from United Online.


Reasons for the Separation


 


United Online's Board of Directors believes that creating two public companies will achieve a number of benefits, including:

 

Enhanced Operational Flexibility and Ability to Allocate Resources More Efficiently.    The Separation is expected to allow each of United Online and our company to prioritize independently our various investment opportunities going forward. In addition, United Online's Board of Directors believes that each of our management teams will be better positioned to pursue organic growth and/or acquisitions and fund those growth investments via direct access to the debt or equity markets, as appropriate, taking into account only those considerations relating to each company's business strategies and business models. Increased operational agility is expected to enhance each company's ability to more effectively operate and compete and hence create value for our respective stockholders.

 

Enhanced Ability to Use Stock More Efficiently as an Acquisition Currency.    We intend to grow our business after the Separation both organically and through acquisitions if we identify attractive acquisition opportunities that satisfy our investment criteria and expect to offer FTD common stock as consideration, either in whole or in part, in connection with future acquisitions. It is expected that the market will likely place a higher valuation multiple on our company, when analyzed on a fully-distributed basis, than it would place on us as a subsidiary of United Online, all other things being equal, on the basis that FTD's closest publicly-traded competitor operating in primarily the same industry was trading at a higher valuation multiple than that of United Online prior to the announcement of the Separation. However, there is no assurance that such higher valuation multiple will be achieved. The resulting anticipated increase in valuation multiple for our company will cause our equity to represent an attractive acquisition currency that will permit us to effect acquisitions in a manner that preserves capital with significantly less dilution of the existing stockholders' interests. In addition, United Online's Board of Directors believes that having our own publicly-traded common stock will provide a more efficient and attractive acquisition currency for us than the





 

 

 

17


 

 

existing common stock of United Online, which is of a type that is generally viewed as less desirable acquisition currency due, in part, to market perceptions about conglomerates of unrelated businesses. Therefore, we believe the distribution may allow us and United Online to pursue strategic opportunities that are not otherwise available within United Online's pre-separation corporate structure.

 

Fit and Focus and Flexibility to Pursue Independent Business Purposes.    The Separation will allow United Online and our management teams to focus on their respective strategic priorities, the different challenges and opportunities in their businesses, and their different financial profiles and capital needs. By eliminating the necessary time and resources required to resolve conflicting business priorities and strategic needs, our two separate companies will be able to better serve our respective customers and markets, and compete in our respective industries through quicker decision making, more efficient deployment of resources, and enhanced responsiveness to customers and markets.

 

Increased Flexibility with respect to Management Compensation.    We and United Online will have our own separate stock, which will allow for equity-based incentive awards that more directly link and closely align the interests of each of our companies and our employees, making equity-based incentive awards an even more effective management tool to attract, motivate and retain key employees.


Dividend Policy


 


We presently intend to retain future earnings, if any, to reinvest in the growth of our businesses and to make interest payments on or pay down our debt and fund potential acquisitions. As a result, we do not currently expect to pay any cash dividends.


Risk Factors


 


Our business is subject to both general and specific business risks relating to our operations. Our business is also subject to risks relating to the Separation, and, following the Separation, we will be subject to risks relating to being an independent, publicly-traded company. Accordingly, you should read carefully the section entitled "Risk Factors" beginning on page 19.

 

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RISK FACTORS

        Our business, the Separation, and our common stock are subject to a number of risks and uncertainties. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Information Statement. Based on information currently known, we believe that the following information identifies the most significant risk factors affecting our business, the Separation, and our common stock. However, the risks and uncertainties faced by us are not limited to those described below, nor are they listed in order of significance.

        If any of the following events occur, our business, financial condition, results of operations, and cash flows could be materially adversely affected, and the trading price of our common stock could materially decline.

Risks Relating to Our Business

        We face the following risks in connection with the general conditions and trends of the industries in which we operate:

         Current or future economic conditions may have a material and adverse impact on our business, financial condition, results of operations, and cash flows.

        Economic conditions in the U.S. and the European Union have been depressed and may remain challenging for the foreseeable future. Our products and services are discretionary and dependent upon levels of consumer spending. Consumer spending patterns are difficult to predict and are sensitive to, among other factors, the general economic climate, the consumers' levels of disposable income, consumer debt, and overall consumer confidence. The challenging economic conditions have adversely impacted certain aspects of our businesses in a number of ways, including reduced demand, more aggressive pricing for similar products and services by our competitors, increased credit risks, increased credit card failures, a loss of customers, and increased use of discounted pricing for certain of our products and services. It is likely that these and other factors will continue to adversely impact our businesses, at least in the near term. The challenging economic conditions may adversely impact our key vendors and customers. Such economic conditions and decreased consumer spending have, in certain cases, resulted in, and may in the future result in, a variety of negative effects such as a reduction in revenues, increased costs, lower gross margin and operating margin percentages, increased allowances for doubtful accounts and write-offs of accounts receivable, increased provisions for excess and obsolete inventories, and recognition of impairments of assets, including goodwill and other intangible and long-lived assets. Any of the above factors could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

         Competition could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        The consumer market for flowers and gifts is highly competitive and fragmented as consumers can purchase the products we offer from numerous sources, including traditional local retail florists, supermarkets, mass merchants, gift retailers, and floral and gift mass marketers. We believe the primary competitive factors in the consumer market are price, quality of products, selection, customer service, ordering convenience, and strength of brand. The floral network services market is highly competitive as well, and retail florists and supermarkets may choose from a variety of providers that offer similar products and services. In the U.S., our key competitors in the consumer market include online, catalog and floral and gift retailers and mass market retailers with floral departments, including such companies as 1-800-FLOWERS.COM, Inc., Proflowers.com, and Teleflora. Our key competitors in the U.S. floral network services market include providers of online or e-commerce services, retailers and wholesalers of floral-related products, and other floral network services, such as Teleflora and BloomNet Wire Service, a subsidiary of 1-800-FLOWERS.COM, Inc. International key competitors in the consumer market include mass market retailers, such as Asda, Marks & Spencer, Next, and

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Waitrose/John Lewis, as well as online, catalog and specialty gift retailers such as eFlorist, Serenata Flowers, and Arena.

        We face intense competition in the consumer market. We expect that the sales volumes at supermarkets and mass merchants will continue to increase, and that other online floral mass marketers will continue to increase their competition with us. In particular, the nature of the Internet as a marketplace facilitates competitive entry and comparative shopping, and we have experienced increased competition. Some of our competitors may have significant competitive advantages over us, may engage in more significant discounting, may devote significantly greater resources to marketing campaigns or other aspects of their business or may respond more quickly and effectively than we can to new or changing opportunities or customer requirements.

        We face intense competition in the market for floral network services. In addition, the number of retail florists has been declining over a number of years. As the number of retail florists decreases, competition for the business of the remaining retail florists will intensify.

        Increased competition in the consumer market or the floral network services market may result in lower revenues, reduced gross margins, loss of market share, and increased marketing expenditures. We cannot provide assurance that we will be able to compete successfully or that competitive pressures will not have a material adverse effect on our business, financial condition, results of operations, and cash flows.

         Our revenues and operating results fluctuate on a seasonal basis and may suffer if revenues during peak seasons do not meet our expectations.

        Our business is seasonal, and our quarterly revenues and operating results typically exhibit seasonality. For example, revenues and operating results tend to be lower for the quarter ending September 30 because none of the most popular floral and gift holidays, which include Valentine's Day, Easter, Mother's Day, Thanksgiving, and Christmas, fall within that quarter. In addition, depending on the year, Easter and the U.K. Mother's Day sometimes fall within the quarter ending March 31 and sometimes fall within the quarter ending June 30.

        Our operating results may suffer if revenues during our peak seasons do not meet expectations, as we may not generate sufficient revenues to offset increased costs incurred in preparation for peak seasons. Our working capital and cash flows also fluctuate during the year as a result of the factors set forth above. Moreover, the operational risks described elsewhere in these risk factors may be significantly exacerbated if those risks were to occur during a peak season.

         We are dependent on our strategic relationships to help promote our consumer websites; failure to establish, maintain or enhance these relationships could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        We believe that our strategic relationships with leading online retailers and direct marketers are critical to attract customers, facilitate broad market acceptance of our products and brands and enhance our sales and marketing capabilities. A failure to maintain existing strategic relationships or to establish additional relationships that generate a significant amount of traffic from other websites could limit the growth of our business. Establishing and maintaining relationships with leading online retailers and direct marketers is competitive and expensive. We may not successfully enter into additional strategic relationships. In addition, we may not be able to renew existing strategic relationships beyond their current terms or may be required to pay significant fees to maintain and expand these strategic relationships. Further, many online retailers and direct marketers that we may approach to establish an advertising presence or with whom we already have an existing relationship may also provide advertising services for our competitors. As a result, these companies may be reluctant to enter into, maintain or expand a strategic relationship with us. Our business, financial condition, results of operations, and cash flows may suffer if we fail to enter into new strategic relationships, or maintain or

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expand existing strategic relationships, or if these strategic relationships do not result in traffic on our websites sufficient to justify their costs.

        In addition, we are subject to many risks beyond our control that influence the success or failure of our strategic relationships. For example, if any of the online retailers or direct marketers with which we have strategic relationships experience financial or operational difficulties that materially and adversely affect their ability to satisfy their obligations under their agreements with us, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.

         Our marketing efforts may not be successful or may become more expensive, either of which could increase our costs and adversely impact our key metrics and financial results.

        We spend significant resources marketing our brands, products, and services. We rely on relationships with a wide variety of third parties, including Internet search providers such as Google, Internet advertising networks, retailers, distributors, and direct marketers, to source new customers and to promote or distribute our products and services. In addition, from time to time, we may spend a significant amount on marketing, including through television advertising. With any of our brands, products, and services, if our marketing activities are inefficient or unsuccessful, if important third-party relationships or marketing strategies, such as Internet search engine marketing and search engine optimization, become more expensive or unavailable, or are suspended or terminated, for any reason, if there is an increase in the proportion of consumers visiting our websites or purchasing our products and services by way of marketing channels with higher marketing costs as compared to channels that have lower or no associated marketing costs, or if our marketing efforts do not result in our products and services being prominently ranked in Internet search listings, our key metrics and financial results could be materially and adversely impacted.

         Our consumer business relies heavily on email campaigns, and any disruptions or restrictions on the sending of emails or increase in the associated costs could adversely affect our business, financial condition, results of operations, and cash flows.

        We generate a significant portion of our consumer orders from the emails we send to customers who have previously ordered products from us. We also engage in a number of third-party email marketing campaigns in which such third parties include our marketing offers in the emails they send.

        An increase in the number of customers to whom we are not able to send emails, or who elect to not receive or are unable to receive our emails could adversely affect our business, financial condition, results of operations, and cash flows. From time to time, Internet service providers block bulk email transmissions or otherwise experience technical difficulties that result in our inability to successfully deliver emails to our customers. Third parties may also block, impose restrictions on, or start to charge for, the delivery of emails through their email systems. Due to the importance of email to our businesses, any disruption or restriction on the distribution of emails or increase in the associated costs could materially and adversely affect our revenues and profitability.

         We are dependent on third parties who fulfill orders and deliver goods and services to our customers and their failure to provide our customers with high-quality products within the required timeframe and a high level of customer service may harm our brands and could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        We believe that our success in promoting and enhancing our brands depends on our ability to provide our customers high-quality products within the required timeframe and a high level of customer service. Our business depends, in part, on the ability of our floral network members and third-party suppliers who fulfill our orders to do so at high-quality levels. We work with our floral network members and third-party suppliers to develop best practices for quality assurance; however, we generally do not directly control or continuously monitor any floral network member or third-party supplier. A failure to maintain our relationship with key floral network members or third-party

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suppliers or the failure of our floral network members or third-party suppliers to fulfill orders to our customers' satisfaction, at an acceptable level of quality and within the required timeframe, could adversely impact our brands and cause us to lose customers, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        Additionally, because we depend upon third parties for the delivery of our products to customers, strikes or other service interruptions affecting these shippers could have an adverse effect on our ability to deliver our products on a timely basis. If any of our shippers are unable or unwilling to deliver our products, we would have to engage alternative shippers, which could increase our costs. A disruption in any of our shippers' delivery of our products could cause us to lose customers or could increase our costs, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

         We face risks relating to operating and doing business internationally that could adversely affect our businesses and results of operations.

        Our businesses operate in a number of countries outside the U.S. Conducting international operations involves risks and uncertainties, including:

        The occurrence of any one of these risks could negatively affect our international operations, our key business metrics, and our financial results.

         The success of our business is dependent on our floral network members and on the financial performance of the retail floral industry.

        A significant portion of our profitability is dependent on our floral network members. The amount of revenues and profits we generate from individual floral network members can vary significantly. We have lost, and may continue to lose, floral network members as a result of both declines in the number of local retail florists as a result of economic factors and competition, as well as our members choosing not to do business with us. There can be no assurance that the decline in the number of floral network members will not increase in the future, or that we will not lose floral network members that generate significant revenues for our business, either of which could materially and adversely affect our business, financial condition, results of operations, or cash flows.

        In addition, the operating and financial success of our business has been, and is expected to continue to be, dependent on the financial performance of the retail floral industry. There can be no assurance that the retail floral industry will not decline, that consumer preferences for, and purchases of, floral products will not decline, or that retail florist revenues or inter-city floral delivery transactions will not decline in absolute terms. A sustained decline in the sales volume of the retail floral industry

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could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

         Shifts in the mix of products versus services sold, and types of products and services sold, may adversely affect our financial results.

        The cost of revenues associated with our products revenues is generally higher than that associated with our services revenues. In addition, the cost of revenues associated with certain products and services may be higher than that associated with other products and services. As a result, changes in the proportion of revenues that is represented by products revenues versus services revenues, and certain types of products and services versus others, may adversely affect our revenues, cost of revenues, cost of revenues as a percentage of revenues, and income from operations.

         Shifts in the mix of products and services sold at standard pricing as compared to discounted pricing or the failure to maintain our standard pricing for products and services could have adverse effects on our financial results.

        Due to economic conditions and for competitive and other reasons, we have been offering broader and greater discounts to the consumer, both on a promotional basis to consumers generally, as well as through strategic arrangements with third parties that have a fixed, and in certain cases greater, discount or other associated costs. We also offer discounts on our floral network service fees from time to time on a promotional basis. Shifts in the mix of products and services sold that have resulted in increases in the proportion of products and services sold at a discount, and at times at greater discounts, including through such strategic arrangements, have resulted, and may in the future result, in reduced revenues, an increase in cost of revenues as a percentage of revenues, and a decrease in operating income. We currently intend to continue selling a portion of our products and services at a discount, including through such strategic arrangements, and there are no assurances that the portion of products and services sold at a discount will not continue to increase. The continued use of discounts, including through such strategic arrangements, for our products and services may result in our becoming more reliant upon offering discounts in order to sell our products and services, which could result in our having to reduce our standard pricing, and may adversely impact our financial results.

         If the supply of flowers becomes limited, the price of these products could rise or these products may become unavailable, which could result in our not being able to meet consumer demand and could have a material effect on our business, financial condition, results of operations, and cash flows.

        Many factors, such as weather conditions, agricultural limitations, restrictions relating to the management of pests and disease, and fair trade and other social or environmental issues, affect the supply of flowers and the price of our floral products. If the supply of flowers available for sale is limited, the wholesale prices of flowers could rise, which would cause us to increase our prices or reduce our profits. An increase in our prices could result in a decline in customer demand for our floral products, which would decrease our revenues. Alternatively, we may not be able to obtain high-quality flowers in an amount sufficient to meet customer demand. Even if available, flowers from alternative sources may be of lesser quality or more expensive than those currently offered by us. A large portion of our supply of flowers is sourced from Colombia, Ecuador, Holland, and Kenya.

        The availability and price of our products could be affected by a number of other factors affecting suppliers, including:

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         Our business could be shut down or severely impacted by a catastrophic event.

        Our business could be materially and adversely affected by a catastrophic event. A disaster such as a fire, earthquake, flood, power loss, terrorism, or other similar event, affecting any of our facilities, data centers or computer systems, or those of our third-party vendors, or a system interruption or delay that slows down the Internet or makes the Internet or our websites temporarily unavailable, could result in a significant and extended disruption of our operations and services. Any prolonged disruption of our services due to these or other events would severely impact our businesses. We do not carry flood insurance for our facilities, and the property, business interruption and other insurance we do carry may not be sufficient to cover, if at all, losses that may occur as a result of any events which cause interruptions in our services.

         Our success is dependent on the intellectual property that we use.

        We regard the "FTD" and "Interflora" trademarks, the "Mercury Man" logo, the "FTD.COM" and the "Interflora.co.uk" Internet domain names and the other service marks, trademarks, and other intellectual property that we use in our business as being critical to our success. Our company and our subsidiaries have applied for the registration of, and have been issued, trademark registrations for trademarks and service marks used in our business in the U.S. and various foreign countries; however, in some other countries, there are certain pre-existing and potentially conflicting trademark registrations held by third parties. We rely on a combination of copyright, trademark, and trade secret laws, confidentiality procedures, contractual provisions, and license and other agreements with employees, customers and others to protect our intellectual property rights. In addition, we may also rely on the third-party owners of the intellectual property rights we license to protect those rights. We license some of our intellectual property rights, including the Mercury Man logo, to third parties. The steps taken by us and those third parties to protect our intellectual property rights may not be adequate, and other third parties may infringe or misappropriate our intellectual property rights. This could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Furthermore, the validity, enforceability, and scope of protection of intellectual property in Internet-related industries are uncertain and still evolving.

        We are also subject to the risk of claims alleging that our business practices infringe on the intellectual property rights of others. These claims could result in lengthy and costly litigation. Moreover, resolution of any such claim against us may require our company or one of our subsidiaries to obtain a license to use the intellectual property rights at issue or possibly to cease using those rights

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altogether. Any of those events could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

         Significant problems with our key systems or those of our third-party vendors could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        The systems underlying the operations of our business are complex and diverse and must efficiently integrate with third-party systems, such as credit card processors. Key systems include, without limitation, order transmission, fulfillment and processing, including the systems for transmitting orders through our floral networks; billing; website and database management; customer support; telecommunications network management; and internal financial systems. Some of these systems are outsourced to third parties, and other systems, such as Interflora's order transmission, fulfillment and billing system and our customer service telephone system, are not redundant. All information technology and communication systems are subject to reliability issues, denial of service attacks, integration and compatibility concerns, and security threatening intrusions. The continued and uninterrupted performance of our key systems is critical to our success. Unanticipated problems affecting these systems could cause interruptions in our services. In addition, if our third-party vendors face financial or other difficulties, our business could be adversely impacted. Any significant errors, damage, failures, interruptions, delays, or other problems with our systems or our third-party vendors or their systems could adversely impact our ability to satisfy our customers and could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

         We may be unable to increase capacity or introduce enhancements to our consumer websites or our toll-free telephone numbers in a timely manner or without service interruptions.

        A key element of our business strategy is to generate a high volume of traffic on our consumer websites and through our toll-free telephone numbers. However, we may not be able to accommodate all of the growth in user demand on our consumer websites or through our toll-free telephone numbers. Our inability to add additional hardware and software to upgrade our existing technology or network infrastructure to accommodate, in a timely manner, increased traffic to our consumer websites or increased volume through our toll-free telephone numbers, may cause decreased levels of customer service and satisfaction. Failure to implement new systems effectively or within a reasonable period of time could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        We also regularly introduce additional or enhanced features and services to retain current customers and attract new customers to our consumer websites. If we introduce a feature or a service that is not favorably received, our current customers may not use our consumer websites as frequently, or we may not be successful in attracting new customers. We may also experience difficulties that could delay or prevent us from introducing new services and features. Furthermore, these new services or features may contain errors that are discovered only after they are introduced. We may need to significantly modify the design of these services or features to correct errors. If customers encounter difficulty with or do not accept new services or features, this could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

         Our business could suffer as a result of significant credit card or debit card fraud.

        Orders placed on our consumer websites or through our toll-free telephone numbers typically are paid for using a credit card or debit card. Our revenues and gross margins could decrease if we experience significant credit card or debit card fraud. Failure to adequately detect and avoid fraudulent credit card or debit card transactions could cause us to lose our ability to accept credit cards or debit cards as forms of payment and result in charge-backs of the fraudulently charged amounts. Furthermore, widespread credit card or debit card fraud may lessen our customers' willingness to purchase products on our consumer websites or through our toll-free telephone numbers. As a result,

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such failure could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

         We are exposed to the credit risk of our floral network members.

        When an FTD or Interflora floral network member fulfills an order from an originating member, we become liable to the fulfilling member for payment on the order, even if we do not receive payment from the originating member. Accordingly, we are exposed to the credit risk of our floral network members. Although we reserve for this exposure, we cannot be sure that the exposure will not be greater than we anticipate. An increase in this exposure, coupled with material instances of default, in the aggregate, could have an adverse effect on our business, financial condition, results of operations, and cash flows.

         Fluctuations in foreign currency exchange rates could adversely affect comparisons of our operating results.

        We transact business in different foreign currencies and may be exposed to financial market risk resulting from fluctuations in foreign currency exchange rates, including the British Pound, the Euro, and the Canadian Dollar. 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 such other currencies. Substantially all of the revenues of our international businesses 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 fluctuations in foreign currency exchange rates. Certain of our key business metrics, such as average order value, are similarly affected by such foreign currency exchange rate fluctuations. Changes in global economic conditions, market factors, and governmental actions, among other factors, can affect the value of these currencies in relation to the U.S. Dollar. A strengthening of the U.S. Dollar compared to these currencies and, in particular, to the British Pound and the Euro, has had, and in future periods could have, an adverse effect on the comparisons of our revenues and operating income against prior periods. We cannot accurately predict the impact of future foreign currency exchange rate fluctuations on our operating results, and such fluctuations could negatively impact the comparisons of such results against prior periods.

         Changes in laws and regulations and new laws and regulations may adversely affect our business, financial condition, results of operations, and cash flows.

        We are subject to a variety of international, federal, state, and local laws and regulations, including, without limitation, those relating to taxation, bulk email or "spam," advertising, including, without limitation, targeted or behavioral advertising, user privacy and data protection, consumer protection, antitrust, and unclaimed property. Compliance with the various laws and regulations, which in many instances are unclear or unsettled, is complex. New laws and regulations, such as those being considered or recently enacted by certain states or the federal government related to automatic-renewal practices, user privacy, targeted or behavioral advertising, floral-related fees and advertising, and taxation, could impact our revenues or certain of our business practices or those of our advertisers. Any changes in the laws and regulations applicable to us, the enactment of any additional laws or regulations, or the failure to comply with, or increased enforcement activity of, such laws and regulations, could significantly impact our products and services, our costs, or the manner in which we or our advertisers conduct business, all of which could adversely impact our results of operations and cause our business to suffer.

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         Foreign, state, and local governments may attempt to impose additional sales and use taxes, value added taxes or other taxes on our business activities, including our past sales, which could decrease our ability to compete, reduce our sales, and have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        In accordance with current industry practice by domestic floral and gift order gatherers and our interpretation of applicable law, our consumer business collects and remits sales and use taxes on orders that are delivered in a limited number of states where it has a physical presence or other form of jurisdictional nexus. If states successfully challenge this practice and impose sales and use taxes on orders delivered in states where we do not have physical presence or another form of jurisdictional nexus, we could incur substantial tax liabilities for past sales and lose future sales as a result of the increased tax cost that would be borne by the customer. Also, states may seek to reclassify the status of Internet order gatherers, such as our consumer business, as persons that are deemed to fulfill the underlying order, in which case, a state may seek to impose taxes on the receipts generated by our consumer business for orders fulfilled and delivered by florists outside such state. In addition, future changes in the operation of our online and telephonic sales channels could result in the imposition of additional sales and use tax or other tax obligations.

        Additionally, in accordance with current industry practice by international floral and gift direct marketers and our interpretation of applicable law, we collect and remit value added taxes on certain consumer orders placed through Interflora. Future changes in the operation of our business could result in the imposition of additional tax obligations. Moreover, if a foreign taxing authority successfully challenges our current practice or implements new legislative initiatives, we could incur substantial tax liabilities for past sales and lose future sales as a result of the increased tax costs that would be borne by the customer. The imposition of additional tax liabilities for past or future sales could decrease our ability to compete with traditional retailers and reduce our sales, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        We are subject to income and various other taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating our consolidated provision for income taxes. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain. We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income and other taxes against us. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions, and our historical recognition of other tax matters. The results of an audit or litigation could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        In connection with our Internet-based transactions, a number of states have been considering or adopting legislation or instituting policy initiatives, including those that would facilitate a finding of nexus to exist between Internet companies with the states, aimed at expanding the reach of sales and use taxes or imposing state income or other taxes on various innovative theories, including agency attribution from independent third-party service providers. Such legislation or initiatives could result in the imposition of additional sales and use taxes, or the payment of state income or other taxes, on certain transactions conducted over the Internet. In addition, advertisers and other third parties may choose to not do business with us in order to avoid nexus with certain states. If such legislation is enacted, or such initiatives are instituted, and unless overturned by the courts, the legislation or initiatives could subject us to substantially increased tax liabilities for past and future sales or state income or other taxes, require us to collect additional sales and use taxes, cause our future sales to decrease, or otherwise negatively impact our businesses, and thus have a material adverse effect on us.

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         Legal actions or investigations could subject us to substantial liability, require us to change our business practices, and adversely affect our business, financial condition, results of operations, and cash flows.

        We are currently, and have been in the past, party to various legal actions and investigations. These actions may include, without limitation, claims by private parties in connection with consumer protection and other laws, claims that we infringe third-party patents, trademarks, copyrights or other intellectual property or proprietary rights, securities laws claims, claims involving marketing practices or unfair competition, claims in connection with employment practices, breach of contract claims, and other business-related claims. The nature of our business could subject us to additional claims for similar matters, as well as a wide variety of other claims, including, without limitation, for privacy and security matters. The failure to successfully defend against these and other types of claims, including claims relating to our business practices, could result in our incurring significant liabilities related to judgments or settlements or require us to change our business practices. Infringement claims may also result in our being required to obtain licenses from third parties, which licenses may not be available on acceptable terms, if at all. Both the cost of defending claims, as well as the effect of settlements and judgments, could cause our results of operations to fluctuate significantly from period to period and could materially and adversely affect our business, financial condition, results of operations, and cash flows. In addition, we also file actions against third parties from time to time for various reasons, including, without limitation, to protect our intellectual property rights, to enforce our contractual rights, or to make other business-related claims. The legal fees, costs and expenses associated with these actions may be significant, and if we were to lose these actions, we may be required to pay the other party's legal fees, costs and expenses, which also may be significant and could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        Various governmental agencies have in the past asserted claims, instituted legal actions, inquiries or investigations, or imposed obligations relating to our business practices, such as our marketing, billing, customer retention, renewal, cancellation, refund, or disclosure practices, and they may continue to do so in the future. We and United Online have received civil investigative demands and subpoenas, as applicable, from the Federal Trade Commission ("FTC") and the Attorneys General of various states, primarily regarding their respective investigations into certain former post-transaction sales practices and certain of our and United Online's marketing, billing, renewal and privacy practices and disclosures. We and United Online have been cooperating with these investigations. However, the outcome of these or any other governmental investigations or their potential implications for our business are uncertain. We and United Online may not prevail in existing or future claims and any judgment against us or settlement or resolution of such claims may involve the payment of significant sums, including damages, fines, penalties, or assessments, or changes to our business practices. For example, in 2010, FTD, Inc. paid $640,000 to resolve an investigation of the Attorney General for the State of New York related to FTD, Inc.'s former post-transaction sales practices. Defending against lawsuits, inquiries, and investigations also involves significant expense and diversion of management's attention and resources from other matters. In addition, following the Separation, United Online will have the right to control the litigation and settlement of certain litigation matters that relate to a member of each of the UOL Entities and the FTD Entities and which were asserted before the Separation, as well as specified litigation matters which are asserted after the Separation, and the allocation of liabilities and expenses to us relating to such litigation matters. See "Certain Relationships and Related-Party Transactions—Agreements with United Online—Separation and Distribution Agreement."

        There are no assurances that additional governmental investigations or other legal actions will not be instituted in connection with our former post-transaction sales practices or other current or former business practices. Enforcement actions or changes in enforcement policies and procedures could result in changes to our business practices, as well as significant damages, fines, penalties or assessments, which could decrease our revenues or increase the costs of operating our business. To the extent that our services and business practices change as a result of claims or actions by governmental agencies or

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private parties, or we are required to pay significant sums, including damages, fines, penalties, or assessments, our business, financial condition, results of operations, and cash flows could be materially and adversely affected. For more information, see the section entitled "Business—Legal Proceedings."

         Governmental regulation of the collection and use of personal information or our failure to comply with these regulations could harm our businesses.

        The FTC has regulations regarding the collection and use of personal information obtained from individuals when accessing websites, with particular emphasis on access by minors. In addition, other governmental authorities have regulations to govern the collection and use of personal information that may be obtained from customers or visitors to websites. These regulations include requirements that procedures be established to disclose and notify users of our websites of our privacy and security policies, obtain consent from users for collection and use of personal information and provide users with the ability to access, correct or delete personal information stored by us. In addition, the FTC and other governmental authorities have made inquiries and investigations of companies' practices with respect to their users' personal information collection and dissemination practices to confirm these are consistent with stated privacy policies and to determine whether precautions are taken to secure consumers' personal information. The FTC and certain state agencies also have made inquiries, and in a number of situations, brought actions against companies to enforce the privacy policies of these companies, including policies relating to security of consumers' personal information.

        As discussed in the preceding risk factor, we have been cooperating with the Attorneys General of various states in connection with their inquiries and investigations of, among other things, the privacy policy of our FTD.COM business. Becoming subject to the regulatory and enforcement efforts of the FTC, a state agency or other governmental authority could have a material adverse effect on our ability to collect demographic and personal information from users, which, in turn, could have a material adverse effect on our marketing efforts, business, financial condition, results of operations, and cash flows. In addition, the adverse publicity regarding the existence or results of an investigation could have an adverse impact on customers' willingness to use our websites and services and thus could adversely impact our future revenues.

        Certain of our international businesses, such as our international consumer and floral network businesses, must also comply with data protection and privacy laws in the U.K., including the Data Protection Act 1998. If we or any of the third-party services on which we rely fail to transmit customer information and payment details in a secure manner, or if they otherwise fail to protect customer privacy in online transactions or if they transfer personal information outside the European Economic Area without complying with certain required conditions, then we risk being exposed to civil and criminal liability in the U.K., usually in the form of fines, as well as claims from individuals alleging damages as a result of the alleged non-compliance. We may also be required to alter our data collection and use practices. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

         We may be unsuccessful at acquiring additional businesses, services or technologies. Even if we make acquisitions, it may not improve our results of operations and may also adversely impact our business, financial condition, and cash flows.

        Acquisitions of businesses, services or technologies may provide us with an opportunity to diversify the products and services we offer, leverage our assets and core competencies, complement our existing businesses, or expand our geographic reach. We may evaluate a wide variety of potential strategic transactions that we believe may complement our existing businesses. However, we may not realize the anticipated benefits and synergies of an acquisition, and our attempts at integrating an acquired

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business may not be successful. Acquiring a business, service or technology involves many operational and financial risks, including risks relating to:

        In addition, an acquisition of a foreign business involves risks in addition to those set forth above, including risks associated with foreign currency exchange rates, potentially unfamiliar economic, political, and regulatory environments, and integration difficulties due to language, cultural, and geographic differences. Any of these risks could harm our business, financial condition, results of operations, and cash flows.

         Our ability to operate our business could be seriously harmed if we lose members of our senior management team or other key employees.

        Our business is largely dependent on the efforts and abilities of our senior management and other key personnel. Any of our officers or employees can terminate his or her employment relationship at any time. The loss of any of these key employees or our inability to attract or retain other qualified employees could seriously harm our business and prospects. We do not expect to carry key-person life insurance on any of our employees.

         We utilize outsourced staff and temporary employees, who may not be as well trained or committed to our customers as our permanent employees, and their failure to provide our customers with high-quality customer service may cause our customers not to return, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        We utilize and rely on a significant number of outsourced staff and temporary employees, in addition to our permanent employees, to take orders and respond to customer inquiries. These outsourced staff and temporary employees may not have the same level of commitment to our customers or be as well trained as our permanent employees. In addition, we may not hire enough outsourced staff or temporary employees to adequately handle the increased volume of telephone calls we receive during peak periods. We maintain only a limited number of permanent customer support

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employees and rely on one third-party vendor for our outsourced customer support. Our permanent employees may not be able to provide the necessary range or level of customer support services in the event that our third-party vendor unexpectedly becomes unable or unwilling to provide some or all of these services to us. If our customers are dissatisfied with the quality of the customer service they receive, they may not place orders with us again, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

         Following the Separation, we will continue to have a substantial amount of indebtedness which could adversely affect our ability to raise additional capital to fund operations, our flexibility in operating our business, and our ability to react to changes in the economy or our industry.

        At July 17, 2013, we had $220.0 million of indebtedness outstanding. Following the Separation, we will have a substantial amount of indebtedness which could have significant consequences for our business and financial condition. For example:

        Under the terms of the Credit Agreement, we are permitted to incur additional indebtedness subject to certain conditions, and the risks described above may be increased if we incur additional indebtedness.

        The Credit Agreement includes guarantees on a joint and several basis by certain of FTD Companies, Inc.'s existing and future, direct and indirect, material wholly-owned domestic subsidiaries and is secured by first priority security interests in, and mortgages on, substantially all of the tangible

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and intangible assets of FTD Companies, Inc. and certain of FTD Companies, Inc.'s direct and indirect domestic, wholly-owned subsidiaries and first priority pledges of all the equity interests owned by FTD Companies, Inc. in certain of its existing and future direct and indirect subsidiaries (except with respect to foreign subsidiaries and certain domestic subsidiaries whose assets consist primarily of foreign subsidiary equity interests, in which case such pledges are limited to 66% of the outstanding capital stock). The occurrence of an event of default under the Credit Agreement could permit the lenders to cause all amounts outstanding under the Credit Agreement to become immediately due and payable, terminate the commitments of such lenders to make further extensions of credit under the Credit Agreement, to call and enforce the guarantees, and to foreclose on the collateral securing such debt.

         We may increase our debt level or raise additional capital in the future, which could affect our financial health and may decrease our profitability.

        To execute our business strategy, we may require additional capital. If we incur additional debt or raise equity through the issuance of preferred stock, the terms of the debt or preferred stock issued may give the holders rights, preferences, and privileges senior to those of holders of our common stock, particularly in the event of liquidation. The terms of any new debt may also impose additional and more stringent restrictions on our operations than currently in place. If we issue additional common equity, either through public or private offerings or rights offerings, your percentage ownership in our company would decline if you do not participate on a ratable basis. If we are unable to raise additional capital when required, it could affect our liquidity, business, financial condition, results of operations, and cash flows.

         An increase in interest rates may increase our overall interest expense.

        A rapid increase in interest rates could have an immediate adverse impact on us due to our outstanding variable-rate debt. Although we attempt to mitigate interest rate risk by utilizing interest rate hedges, there is no assurance that our efforts will be fully successful. In addition, in the event of an increase in interest rates, we may be unable to refinance maturing debt with new debt at equal or better interest rates.

         Our business is subject to online security risks, and a security breach or inappropriate access to, or use of, our networks, computer systems or services or those of third-party vendors could expose us to liability, claims, and a loss of revenue.

        The success of our business depends on the security of our networks and, in part, on the security of the network infrastructures of our third-party vendors. In connection with conducting our business in the ordinary course, we store and transmit customer and member information, including personally identifiable information. Unauthorized or inappropriate access to, or use of, our networks, computer systems or services, whether intentional, unintentional or as a result of criminal activity, could potentially jeopardize the security of confidential information, including credit card information, of our customers and of third parties. A number of other websites have publicly disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks on portions of their sites. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the perception of the effectiveness of our security measures could be harmed and we could lose members, customers or vendors. A party that is able to circumvent our security measures could misappropriate our proprietary information or the information of our members or customers, cause interruption in our operations, or damage our computers or those of our members or customers.

        A significant number of our members and customers authorize us to bill their payment card accounts (credit or debit) directly for all amounts charged by us. These members and customers

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provide payment card information and other personally identifiable information which, depending on the particular payment plan, may be maintained to facilitate future payment card transactions. We rely on third-party and internally-developed encryption and authentication technology to provide the security and authentication to effectively secure transmission of confidential information, including payment card numbers. Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in the technology used by us to protect transaction data being breached or compromised. Non-technical means, for example, actions by an employee, can also result in a data breach. Under payment card rules and our contracts with our card processors, if there is a breach of payment card information that we store, we could be liable to the banks that issue the payment cards for their related expenses and penalties. In addition, if we fail to follow payment card industry security standards, even if there is no compromise of customer information, we could incur significant fines or lose our ability to give our members and customers the option of using payment cards. If we were unable to accept payment cards, our businesses would be seriously harmed.

        We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. Security breaches, including any breach related to us or the parties with which we have commercial relationships, could damage our reputation and expose us to a risk of loss, litigation, and possible liability. We cannot assure you that the security measures we take will be effective in preventing these types of activities. We also cannot assure you that the security measures of our third-party vendors, including network providers, providers of customer and billing support services, and other vendors, will be adequate. In addition to potential legal liability, these activities may adversely impact our reputation or our revenues and may interfere with our ability to provide our products and services, all of which could adversely impact our business. In addition, the coverage and limits of our insurance policies may not be adequate to reimburse us for losses caused by security breaches.

Risks Relating to the Separation

        We face the following risks in connection with the Separation:

         If the distribution were to fail to qualify as a tax-free transaction for U.S. federal income tax purposes, then the distribution could result in significant tax liabilities.

        United Online has requested a private letter ruling from the IRS, substantially to the effect that, for U.S. federal income tax purposes, the distribution will qualify as a tax-free transaction for U.S. federal income tax purposes under Section 355 of the Code. United Online has requested and expects to receive the IRS Ruling from the IRS prior to the mailing date of this Information Statement. In addition, United Online expects to receive the Tax Opinion, substantially to the effect that the distribution so qualifies. The IRS Ruling and the Tax Opinion will rely on certain facts, assumptions, and undertakings, and certain representations from United Online and us, regarding the past and future conduct of both respective businesses and other matters, and the Tax Opinion will rely on the IRS Ruling. Notwithstanding the IRS Ruling and the Tax Opinion, the IRS could determine that the distribution should be treated as a taxable transaction if it determines that any of these facts, assumptions, representations, or undertakings is not correct, or that the distribution should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the Tax Opinion that are not covered by the IRS Ruling.

        If the distribution ultimately is determined to be taxable, then a stockholder of United Online that received shares of our common stock in the distribution would be treated as having received a distribution of property in an amount equal to the fair market value of such shares on the distribution date and could incur significant income tax liabilities. Such distribution would be taxable to such stockholder as a dividend to the extent of United Online's current and accumulated earnings and profits. Any amount that exceeded United Online's earnings and profits would be treated first as a non-taxable return of capital to the extent of such stockholder's tax basis in its shares of United Online

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stock with any remaining amount being taxed as a capital gain. In addition, United Online would recognize a taxable gain in an amount equal to the excess, if any, of the fair market value of the shares of common stock of our company held by United Online on the distribution date over United Online's tax basis in such shares.

        In addition, under the terms of the Tax Sharing Agreement that we will enter into with United Online, we also generally will be responsible for any taxes imposed on United Online that arise from the failure of the distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code, to the extent such failure to qualify is attributable to actions, events or transactions relating to our stock, assets or business, or a breach of the relevant representations or any covenants made by us in the Tax Sharing Agreement, the materials submitted to the IRS in connection with the request for the IRS Ruling or the representation letter provided to counsel in connection with the Tax Opinion. The amounts of such taxes could be significant.

         Our success will depend in part on our ongoing relationship with United Online after the Separation.

        In connection with the Separation, we will enter into a number of agreements with United Online that will govern the ongoing relationships between the UOL Entities and us after the Separation. These relationships include providing critical technology and operational services to the FTD Entities for a specified period of time after the Separation. Our success will depend, in part, on the maintenance of these ongoing relationships with the UOL Entities and their performance of their obligations under these agreements.

         We will be subject to continuing contingent liabilities of United Online following the Separation.

        After the Separation, there will be several significant areas where the liabilities of United Online may become our obligations. For example, under the Code and the related rules and regulations, each corporation that was a member of the United Online consolidated tax reporting group during any taxable period or portion of any taxable period ending on or before the effective time of the distribution is jointly and severally liable for the U.S. federal income tax liability of the entire United Online consolidated tax reporting group for such taxable period. In connection with the Separation, we will enter into a Tax Sharing Agreement with United Online that will allocate the responsibility for prior period taxes of the United Online consolidated tax reporting group between our company and United Online. For a more detailed description, see "Certain Relationships and Related-Party Transactions—Agreements with United Online—Tax Sharing Agreement." If United Online were unable to pay any prior period taxes for which it is responsible, however, we could be required to pay the entire amount of such taxes, and such amounts could be significant. Other provisions of federal, state, local, or foreign law may establish similar liability for other matters, including laws governing tax-qualified pension plans, as well as other contingent liabilities.

         We might not be able to engage in desirable strategic transactions and equity issuances following the distribution because of certain restrictions relating to requirements for tax-free distributions.

        Our ability to engage in significant equity transactions could be limited or restricted after the distribution in order to preserve, for U.S. federal income tax purposes, the tax-free nature of the distribution by United Online. Even if the distribution otherwise qualifies for tax-free treatment under Section 355 of the Code, the distribution may result in corporate-level taxable gain to United Online under Section 355(e) of the Code if 50% or more, by vote or value, of shares of our stock or United Online's stock are acquired or issued as part of a plan or series of related transactions that includes the Separation. The process for determining whether an acquisition or issuance triggering these provisions has occurred is complex, inherently factual and subject to interpretation of the facts and circumstances of a particular case. Any acquisitions or issuances of our stock or United Online's stock within a two-year period after the distribution generally are presumed to be part of such a plan, although our company or United Online, as applicable, may be able to rebut that presumption.

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        Under the Tax Sharing Agreement that we will enter into with United Online, we also generally will be responsible for any taxes imposed on United Online that arise from the failure of the distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code, to the extent such failure to qualify is attributable to actions, events or transactions relating to our stock, assets or business, or a breach of the relevant representations or any covenants made by us in the Tax Sharing Agreement, the materials submitted to the IRS in connection with the request for the IRS Ruling or the representation letter provided to counsel in connection with the Tax Opinion. For a more detailed description, see "Certain Relationships and Related-Party Transactions—Agreements with United Online—Tax Sharing Agreement."

         We may be unable to achieve some or all of the benefits that we expect to achieve as an independent, publicly-traded company.

        As an independent, publicly-traded company, we believe that our businesses will benefit from, among other things: (1) enhanced strategic and management focus; (2) the ability to independently establish strategic priorities, growth strategies, and financial objectives; (3) more efficient capital allocation and direct access to capital; (4) the ability to implement a tailored approach to recruiting and retaining employees, including the ability to design effective incentives for the management team and employees that are more closely tied to business performance; (5) improved investor understanding of our business strategy and operating results; and (6) the ability to allow investors to choose between investing in United Online and/or FTD. However, by separating from United Online, we may be more susceptible to securities market fluctuations and other adverse events than we would have been if we were still a subsidiary of United Online. In addition, we may not be able to achieve some or all of the benefits that we expect to achieve as an independent company in the time in which we expect to do so, if at all. For example, the process of operating as a newly independent public company may distract our management team from focusing on our business and strategic priorities. If we do not realize the anticipated benefits from the Separation for any reason, our business may be adversely affected.

         We are an "emerging growth company" and cannot be certain if the reduced disclosure requirements applicable to "emerging growth companies" will make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the JOBS Act. For as long as we continue to be an "emerging growth company," we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies. Among other things, we will not be required to (1) provide an auditor's attestation report on management's assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (2) comply with any new rules that may be adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (3) comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the SEC determines otherwise, (4) comply with any new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies under Section 102(b)(1) of the JOBS Act, (5) provide certain disclosure regarding executive compensation required of larger public companies, or (6) hold a nonbinding advisory vote on executive compensation and obtain stockholder approval of any golden parachute payments not previously approved. Accordingly, the information that we provide stockholders in this Information Statement and in our other filings with the SEC may be different than what is available with respect to other public companies. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile and adversely affected.

        Additionally, as an "emerging growth company," we have elected to take advantage of the extended transition period for complying with new or revised accounting standards applicable to public

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companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates for such new or revised standards. The election to comply with these public company effective dates is irrevocable pursuant to Section 107(b) of the JOBS Act.

        We will remain an "emerging growth company" until the earliest of (1) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (2) the date on which we are deemed to be a "large accelerated filer," as defined in Rule 12b-2 under the Exchange Act or any successor statute, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period, and (4) the end of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement filed under the Securities Act.

         We may be unable to make, on a timely basis, the changes necessary to operate as an independent, publicly-traded company.

        Our financial results previously were included within the consolidated results of United Online. As a result of the Separation, we will be directly subject to the reporting and other obligations under the Exchange Act immediately after the distribution date. In addition, as a public entity, we will be subject to the requirements of the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly, and current reports about our business and financial condition. Under the Sarbanes-Oxley Act, we must maintain effective disclosure controls and procedures and internal control over financial reporting, which requires significant resources and management oversight. As an "emerging growth company," we are excluded from Section 404(b) of the Sarbanes-Oxley Act, which otherwise would have required our auditors to formally attest to and report on the effectiveness of our internal control over financial reporting. If we cannot maintain effective disclosure controls and procedures or favorably assess the effectiveness of our internal control over financial reporting, or once we are no longer an "emerging growth company," our independent registered public accounting firm cannot provide an unqualified attestation report on the effectiveness of our internal control over financial reporting, investor confidence and, in turn, the market price of our common stock could decline.

         Our historical and unaudited pro forma condensed consolidated financial statements are not necessarily representative of the results we would have achieved as an independent, publicly-traded company and may not be a reliable indicator of future results.

        The historical and unaudited pro forma condensed consolidated financial statements included in this Information Statement do not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as an independent, publicly-traded company during the periods presented or those that we will achieve in the future. This is primarily a result of the following factors:

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        For these reasons, our cost structure may be higher and our future financial costs and performance may be worse than the performance implied by the historical and unaudited pro forma condensed consolidated financial information presented in this Information Statement.

        For additional information about the past financial performance of our business and the basis of the presentation of the historical and unaudited pro forma condensed consolidated financial statements, see "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Condensed Consolidated Financial Statements," and the historical consolidated financial statements and the accompanying notes included elsewhere in this Information Statement.

         There can be no assurance that we will have access to the capital markets on acceptable terms.

        From time to time, we may need to access the long-term and short-term capital markets to obtain financing. Although we believe that the sources of capital in place at the time of the Separation will permit us to finance our operations for the foreseeable future on acceptable terms, our access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including, but not limited to: (1) our financial performance, (2) our credit ratings or absence of a credit rating, (3) the liquidity of the overall capital markets, and (4) the state of the economy. There can be no assurance that we will have access to the capital markets on acceptable terms and conditions.

         We may incur greater costs as an independent, publicly-traded company than we did when we were part of United Online, which could decrease our profitability.

        We share economies of scope and scale with United Online in costs and vendor relationships, and take advantage of United Online's size and purchasing power in procuring certain products and services, such as insurance and healthcare benefits, and technology, such as computer software licenses. After the Separation, as a separate, independent entity, we may be unable to obtain these products, services and technologies at prices or on terms as favorable to us as those we obtained prior to the Separation. We also rely on United Online to provide various information technology, payroll, legal, and other services. While we expect to enter into the Transition Services Agreement, which will govern certain relationships between us and United Online after the Separation and pursuant to which United Online will continue to provide certain of these services on a short-term transitional basis after the Separation, this arrangement may not capture all the benefits our business has enjoyed as a result of being integrated with the other businesses of United Online. In addition, we will be required to establish the necessary infrastructure and systems to supply these services on an ongoing basis. We may not be able to replace the services provided by United Online in a timely manner or on terms and conditions as favorable as those we receive from United Online. If functions previously performed by United Online cost us more than the amounts reflected in our historical financial statements, our profitability could decrease.

         We might have been able to receive better terms from unaffiliated third parties than the terms we receive in our agreements with United Online.

        The agreements related to the Separation, including the Separation and Distribution Agreement, the Tax Sharing Agreement, the Transition Services Agreement, the Employee Matters Agreement, and any other agreements, will be negotiated in the context of our separation from United Online while we are still part of United Online. Although these agreements are intended to be on an arm's-length basis, they may not reflect terms that would have resulted from arm's-length negotiations among unaffiliated third parties. Conversely, certain agreements related to the Separation may include terms that are more favorable than those that would have resulted from arm's-length negotiations among unaffiliated third

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parties. Following expiration of these agreements, we will have to enter into new agreements with unaffiliated third parties, and such agreements may include terms that are less favorable to us. The terms of the agreements being negotiated in the context of our separation concern, among other things, allocations of assets, liabilities, rights, indemnifications, and other obligations between United Online and us. For a more detailed description, see "Certain Relationships and Related-Party Transactions—Agreements with United Online."

         Certain of the contracts to be transferred or assigned from United Online or its affiliates to us or one of our affiliates in connection with the Separation require the consent of a third party to such transfer or assignment. If such consent is not obtained, we may not be entitled to the benefit of such contracts in the future.

        In connection with the Separation, a number of contracts with service providers and other third parties are to be assigned by United Online or its affiliates to us or one of our affiliates. However, some of these contracts require the contractual counterparty's consent to such an assignment. Similarly, in some circumstances, we are a joint beneficiary of contracts, and we will need to enter into a new agreement with the third party to replicate the contract or assign the portion of the contract related to our business. It is possible that some parties may use the requirement of a consent to seek more favorable contractual terms from us or seek to terminate the contract. If (1) we are unable to obtain such consents on commercially reasonable and satisfactory terms, (2) we enter into new agreements on significantly less favorable terms, or (3) if any contract is terminated, we may be unable to obtain the benefits, assets, and contractual commitments that are intended to be allocated to us as part of the Separation. The failure to timely complete the assignment of existing contracts, or the negotiation of new arrangements, with any of our key suppliers, including those that are a single source or limited source suppliers, or a termination of any of those arrangements, could negatively impact our business, financial condition, results of operations, and cash flows.

         A court could require that we assume responsibility for obligations allocated to United Online under the Separation and Distribution Agreement.

        Under the Separation and Distribution Agreement, from and after the Separation, we and United Online will be responsible for the debts, liabilities, and other obligations related to the businesses which each company owns and operates following the consummation of the Separation. Although we do not expect to be liable for any obligations that are not allocated to us under the Separation and Distribution Agreement, a court could disregard the allocation agreed to between the parties, and require that we assume responsibility for obligations allocated to United Online, particularly if United Online were to refuse or were unable to pay or perform the allocated obligations. For a more detailed description, see "Certain Relationships and Related-Party Transactions—Agreements with United Online—Separation and Distribution Agreement."

         Potential indemnification liabilities to United Online pursuant to the Separation and Distribution Agreement could materially and adversely affect our company.

        Among other things, the Separation and Distribution Agreement provides for indemnification obligations designed to make our company financially responsible for substantially all liabilities that may exist relating to our business activities, whether incurred prior to or after the Separation. If we are required to indemnify United Online under the circumstances set forth in the Separation and Distribution Agreement, we may be subject to substantial liabilities.

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         In connection with the Separation, United Online will indemnify us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that United Online's ability to satisfy its indemnification obligation will not be impaired in the future.

        Pursuant to the Separation and Distribution Agreement, United Online will indemnify us for substantially all liabilities that may exist relating to United Online's business activities, whether incurred prior to or after the Separation. However, third parties could seek to hold us responsible for any of the liabilities that United Online agrees to retain, and there can be no assurance that the indemnity from United Online will be sufficient to protect us against the full amount of such liabilities, or that United Online will be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from United Online any amounts for which we are held liable, we may be temporarily required to bear these losses.

         The Separation may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws and legal dividend requirements.

        The Separation is subject to review under various state and federal fraudulent conveyance laws. Fraudulent conveyance laws generally provide that an entity engages in a constructive fraudulent conveyance when (1) the entity transfers assets and does not receive fair consideration or reasonably equivalent value in return, and (2) the entity (a) is insolvent at the time of the transfer or is rendered insolvent by the transfer, (b) has unreasonably small capital with which to carry on its business, or (c) intends to incur or believes it will incur debts beyond its ability to repay its debts as they mature. An unpaid creditor or an entity acting on behalf of a creditor, including, without limitation, a trustee or debtor-in-possession in a bankruptcy by us or United Online or any of our respective subsidiaries, may bring a lawsuit alleging that the Separation or any of the related transactions constituted a constructive fraudulent conveyance. If a court accepts these allegations, it could impose a number of remedies, including, without limitation, voiding our claims against United Online, requiring our stockholders to return to United Online some or all of the shares of our common stock distributed in the distribution, or providing United Online with a claim for money damages against us in an amount equal to the difference between the consideration received by United Online and the fair market value of FTD at the time of the Separation.

        The measure of insolvency for purposes of the fraudulent conveyance laws will vary depending on which jurisdiction's law is applied. Generally, an entity would be considered insolvent if (1) the sum of its debts is greater than all of its property, at a fair valuation; (2) the present fair saleable value of its assets is less than its probable liabilities on its debts as such debts become absolute and matured; (3) it cannot pay its debts and other liabilities, including contingent liabilities and other commitments as they mature; or (4) it has unreasonably small capital for the business in which it is engaged. We cannot assure you what standard a court would apply to determine insolvency or that a court would determine that we, any of our respective subsidiaries or United Online were solvent at the time of or after giving effect to the Separation.

        The distribution of our common stock by United Online is also subject to review under state corporate distribution statutes. Under the General Corporation Law of the State of Delaware (the "DGCL"), a corporation may only pay dividends to its stockholders either (1) out of its surplus (net assets minus capital) or (2) if there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Although United Online intends to make the distribution of our common stock entirely from surplus, we cannot assure you that a court will not later determine that some or all of the distribution to United Online stockholders was unlawful.

        Prior to the Separation, United Online's Board of Directors expects to obtain an opinion that we and United Online each will be solvent at the time of the Separation, including immediately after the payment of the dividend and the Separation, will be able to repay our respective debts as they mature

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following the Separation and will have sufficient capital to carry on our respective businesses, and that the distribution will be made entirely out of surplus in accordance with Section 170 of the DGCL. We cannot assure you, however, that a court would reach the same conclusions set forth in such opinion in determining whether United Online or we were insolvent at the time of, or after giving effect to, the Separation, or whether lawful funds were available for the distribution to United Online's stockholders.

         The Separation may not occur, and until the distribution occurs, United Online has the sole discretion to change the terms of the distribution in ways that may be unfavorable to us.

        The Separation may not occur, and United Online's Board of Directors may, in its absolute and sole discretion, decide at any time prior to the distribution not to proceed with the Separation. Until the consummation of the distribution, United Online's Board of Directors will have the sole and absolute discretion to determine and change the terms of the distribution, including the establishment of the record date and distribution date. These changes could be unfavorable to us.

Risks Relating to Our Common Stock

        You will face the following risks in connection with ownership of our common stock:

         There is no existing market for our common stock, and a trading market that will provide you with adequate liquidity may not develop. In addition, once our common stock begins trading, the market price of our common stock may fluctuate significantly.

        There is currently no public market for our common stock. It is anticipated that on or shortly before the record date for the distribution, trading of shares of our common stock will begin on a "when-issued" basis and will continue up to and including the distribution date. However, there can be no assurance that an active trading market for our common stock will develop as a result of the distribution or be sustained in the future. The lack of an active trading market may make it more difficult for you to sell our shares and could lead to our share price being depressed or more volatile.

        We cannot predict the prices at which our common stock may trade after the distribution. The market price of our common stock may fluctuate significantly, depending upon many factors, some of which may be beyond our control, including, but not limited to:

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        Stock markets in general have also experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could negatively affect the trading price of our common stock.

         The combined post-distribution value of United Online and our shares may not equal or exceed the pre-distribution value of United Online shares.

        We cannot assure you that the combined trading prices of United Online common stock and our common stock after the distribution will be equal to or greater than the trading price of United Online common stock prior to the distribution. Until the market has fully evaluated the business of United Online without our business, the price at which United Online common stock trades may fluctuate more significantly than might otherwise be typical. Similarly, until the market has fully evaluated the stand-alone business of our company, the price at which shares of our common stock trades may fluctuate more significantly than might otherwise be typical, including volatility caused by general market conditions.

         Substantial sales of our common stock may occur in connection with the distribution, which could cause the market price of our common stock to decline.

        The shares of our common stock that United Online distributes to its stockholders generally may be sold immediately in the public market. Although we have no actual knowledge of any plan or intention on the part of any holder of five percent or more of the outstanding shares of United Online to sell our common stock on or after the record date, it is possible that some United Online stockholders will sell our common stock received in the distribution for reasons such as our business profile or market capitalization as an independent company not fitting their investment objectives or because our common stock is not included in certain indices after the distribution. The sales of significant amounts of our common stock or the perception in the market that this will occur may result in the lowering of the market price of our common stock.

         Your percentage ownership in our company may be diluted in the future.

        Your percentage ownership in our company may be diluted in the future because of equity awards that we expect to grant to our directors, officers, and employees and because of adjustments being made to outstanding United Online equity awards in connection with the Separation. We intend to establish equity incentive plans that will provide for the grant of common stock-based equity awards to our directors, officers, and employees. In addition, we may issue equity as all or part of the consideration paid for acquisitions and strategic investments we may make in the future.

         We may issue preferred stock with terms that could dilute the voting power or reduce the value of our common stock.

        While we have no specific plan to issue preferred stock, our certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designation, powers, privileges, preferences, including preferences over our common stock respecting dividends and distributions, terms of redemption and relative participation, optional, or other rights, if any, of the shares of each such series of preferred stock and any qualifications, limitations or restrictions thereof, as our Board of Directors may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. For example, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock. For a more detailed description, see "Description of Capital Stock—Preferred Stock."

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         Provisions in our charter documents and the DGCL could discourage potential acquisition proposals, could delay, deter or prevent a change in control, and could limit the price certain investors might be willing to pay for our common stock.

        Certain provisions of the DGCL and our certificate of incorporation and bylaws may inhibit a change of control not approved by our Board of Directors or changes in the composition of our Board of Directors, which could result in the entrenchment of current management. These provisions include:

        We believe these provisions protect our stockholders from coercive or harmful takeover tactics by requiring potential acquirers to negotiate with our Board of Directors and by providing our Board of Directors with adequate time to assess any acquisition proposal, and are not intended to make our company immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board of Directors determines is not in the best interests of our company and our stockholders. For a more detailed description, see "Description of Capital Stock—Anti-Takeover Provisions."

         We currently do not expect to pay any cash dividends.

        We presently intend to retain future earnings, if any, to reinvest in the growth of our businesses and to make interest payments on or pay down our debt and fund potential acquisitions. As a result, we do not currently expect to pay any cash dividends. If we do not pay dividends, the price of our common stock that you receive in the distribution must appreciate for you to recognize a gain on your investment upon sale. This appreciation may not occur.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

        We have made forward-looking statements in this Information Statement, including in the sections entitled "Questions and Answers About the Separation," "Summary," "Risk Factors," "The Separation," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business," that are based on our management's beliefs and assumptions and on information currently available to our management. Forward-looking statements include, but are not limited to, statements about the Separation, expectations regarding the potential benefits of such transaction, the expected tax-free nature of the transaction, future financial performance, revenues, operating expenses, operating income, capital expenditures, depreciation and amortization, stock-based compensation, business strategies, financing plans, competitive position, potential growth opportunities, the effects of competition, and the effects of future legislation or regulations.

        Forward-looking statements can be identified by the use of forward-looking terminology such as the words "believe," "expect," "plan," "intend," "anticipate," "estimate," "predict," "potential," "continue," "may," "might," "should," "could," or the negative of these terms or similar expressions.

        Forward-looking statements involve risks, uncertainties, and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements in this Information Statement. We do not have any intention or obligation to update forward-looking statements after we distribute this Information Statement.

        The risk factors discussed in "Risk Factors" could cause our results to differ materially from those expressed in forward-looking statements.

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THE SEPARATION

Background

        On                    , 2013, United Online's Board of Directors approved the Separation. Prior to the commencement of trading on NASDAQ on the distribution date, holders of United Online common stock will receive one share of our common stock for every            shares of United Online common stock held at the close of business on the record date. Stockholders who are entitled to receive shares of our common stock in the distribution will not be required to pay any cash or deliver any other consideration, including any shares of United Online common stock, to receive shares of our common stock in the distribution.

        Prior to the Separation, we will have entered into the Separation and Distribution Agreement and several other ancillary agreements with United Online for the purpose of allocating various assets, liabilities, and obligations between our company and United Online. These agreements will govern our relationship with United Online following the Separation and will provide arrangements for employee matters, tax matters, technology and intellectual property matters, legal and regulatory matters, and certain other liabilities and obligations. These agreements will also include arrangements for the provision of certain transition services generally for a period of up to 12 months (subject to an option, at FTD's election, to extend certain services for up to an additional 12 months). The Separation and Distribution Agreement will provide that we will indemnify United Online against any and all losses relating to liabilities arising out of the FTD business, and that United Online will indemnify us against any and all losses relating to liabilities arising out of the UOL businesses. See "Certain Relationships and Related-Party Transactions—Agreements with United Online."

        The distribution of our common stock as described in this Information Statement is subject to the satisfaction or waiver of certain conditions. Even if all of the conditions have been satisfied, United Online's Board of Directors may, in its sole and absolute discretion, terminate and abandon the Separation at any time prior to the distribution date if United Online's Board of Directors determines, in its sole discretion, that the Separation is not in the best interests of United Online or its stockholders, or that it is not advisable for our company to separate from United Online. See "The Separation—Conditions to the Separation."

Reasons for the Separation

        United Online's Board of Directors regularly reviews the businesses that comprise United Online to ensure that United Online's resources are being put to use in a manner that is in the long-term interests of United Online and its stockholders. United Online's Board of Directors believes that the separation of United Online's and FTD's businesses will maximize the value of the respective businesses and will benefit each of United Online and our company in the following ways:

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        In determining whether to effect the Separation, United Online's Board of Directors has also considered the costs and risks associated with the Separation. Notwithstanding these costs and risks, United Online's Board of Directors has determined that, for the reasons outlined above, the Separation provides each of United Online and us with certain opportunities and benefits that it expects will enhance stockholder and corporate value.

When and How You Will Receive Our Shares

        On the distribution date, United Online will distribute, on a pro rata basis, all of the issued and outstanding shares of our common stock to holders of United Online common stock as of the record date.                    will serve as transfer agent and registrar for our common stock in connection with the distribution. If you are entitled to receive shares of our common stock in the distribution, the common stock will be distributed to your account as follows:

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        Holders of United Online common stock are not being asked to take any action in connection with the Separation. No stockholder approval of the Separation is required or is being sought. You are not being asked for a proxy, and we request that you not send a proxy. You are also not being asked to surrender or exchange any of your shares of United Online common stock, pay any consideration or take any other action for shares of our common stock. The number of outstanding shares of United Online common stock will not change as a result of the distribution.

Number of Shares You Will Receive

        On the distribution date, United Online will distribute one share of our common stock for every            shares of United Online common stock outstanding as of the close of business on the record date.

Transferability of Shares You Receive

        The shares of our common stock distributed to United Online stockholders will be freely transferable, except for shares received by persons who may be deemed to be FTD's "affiliates" under the Securities Act. Persons who may be deemed to be "affiliates" of our company after the Separation generally include individuals or entities that control, are controlled by, or are under common control with our company and may include directors and certain officers or principal stockholders of us. Our "affiliates" will be permitted to sell their shares of our common stock only pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, such as the exemptions afforded by Rule 144 promulgated under the Securities Act. Of the        shares of our common stock we expect to distribute in connection with the Separation,        will be held by our affiliates and may be resold subject to Rule 144.

Material U.S. Federal Income Tax Consequences of the Separation

        The following is a summary of the material U.S. federal income tax consequences to United Online and to the holders of shares of United Online common stock in connection with the Separation. This summary is based on the Code, the Treasury Regulations promulgated thereunder, and judicial and administrative interpretations thereof, all as in effect as of the date of this Information Statement and all of which are subject to differing interpretations and may change at any time, possibly with retroactive effect. Any such change could affect the tax consequences described below. This summary assumes that the Separation will be consummated in accordance with the Separation and Distribution Agreement and as described in this Information Statement.

        Except as specifically described below, this summary is limited to holders of shares of United Online common stock that are U.S. Holders, as defined immediately below. For purposes of this summary, a U.S. Holder is a beneficial owner of United Online common stock that is, for U.S. federal income tax purposes:

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        This summary also does not discuss all tax considerations that may be relevant to stockholders in light of their particular circumstances, nor does it address the consequences to stockholders subject to special treatment under the U.S. federal income tax laws, such as:

        This summary does not address the U.S. federal income tax consequences to United Online stockholders who do not hold shares of United Online common stock as a capital asset. Moreover, this summary does not address any state, local, or foreign tax consequences or any estate, gift or other non-income tax consequences.

        If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds shares of United Online common stock, the tax treatment of a partner in that partnership generally will depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its own tax advisor as to the tax consequences of the distribution.

        YOU SHOULD CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC U.S. FEDERAL, STATE AND LOCAL, AND NON-U.S. TAX CONSEQUENCES OF THE SEPARATION IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES AND THE EFFECT OF POSSIBLE CHANGES IN LAW THAT MIGHT AFFECT THE TAX CONSEQUENCES DESCRIBED IN THIS INFORMATION STATEMENT.

Treatment of the Distribution

        United Online has requested and expects to receive an IRS Ruling prior to the mailing date of this Information Statement, substantially to the effect that, on the basis of certain facts presented, and representations and assumptions set forth in the request submitted to the IRS for such IRS Ruling, the distribution of our common stock will qualify as tax-free under Section 355 of the Code. In addition to

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obtaining the IRS Ruling, United Online expects to receive the Tax Opinion on certain aspects of the tax treatment of the distribution not addressed by the IRS in the IRS Ruling.

        Assuming the distribution qualifies under Section 355 of the Code, for U.S. federal income tax purposes:

        Although the IRS Ruling generally will be binding on the IRS, the IRS Ruling will be based on certain facts and assumptions, and certain representations and undertakings, from United Online and us that certain necessary conditions to obtain tax-free treatment under the Code have been satisfied. Furthermore, as a result of the IRS's general ruling policy with respect to distributions under Section 355 of the Code, the IRS will not rule on whether a distribution satisfies certain critical requirements necessary to obtain tax-free treatment under the Code. Specifically, the IRS will not rule that a distribution was effected for a valid business purpose, that a distribution does not constitute a device for the distribution of earnings and profits, or that a distribution is not part of a plan described in Section 355(e) of the Code (as discussed below). Instead, the IRS Ruling will be based on representations made to the IRS by United Online that these requirements have been established. In connection with obtaining the ruling, United Online expects to obtain the Tax Opinion, which is expected to include a conclusion that the distribution is being effected for a valid business purpose, that the distribution does not constitute a device for the distribution of earnings and profits, and that the distribution is not part of a plan described in Section 355(e) of the Code (as discussed below). The Tax Opinion will be expressed as of the date of the distribution and will not cover subsequent periods, and the Tax Opinion will rely on the IRS Ruling. As a result, the Tax Opinion is not expected to be issued until after the date of this Information Statement. An opinion of counsel represents counsel's best legal judgment based on current law and is not binding on the IRS or any court. We cannot assure you that the IRS will agree with the conclusions expected to be set forth in the Tax Opinion, and it is possible that the IRS or another tax authority could adopt a position contrary to one or all of those conclusions and that a court could sustain that contrary position. If any of the facts, representations, assumptions, or undertakings described or made in connection with the IRS Ruling or the Tax Opinion are not correct, are incomplete or have been violated, the IRS Ruling could be revoked retroactively or modified by the IRS, and our ability to rely on the Tax Opinion could be jeopardized. We are not aware of any facts or circumstances, however, that would cause these facts, representations, or assumptions to be untrue or incomplete, or that would cause any of these undertakings to fail to be complied with, in any material respect.

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        If, notwithstanding the conclusions that we expect to be included in the IRS Ruling and the Tax Opinion, it is ultimately determined that the distribution does not qualify as tax-free under Section 355 of the Code for U.S. federal income tax purposes, then United Online would recognize gain in an amount equal to the excess, if any, of the fair market value of our common stock distributed to United Online stockholders on the distribution date over United Online's tax basis in such shares. In addition, each United Online stockholder that receives shares of our common stock in the distribution could be treated as receiving a distribution in an amount equal to the fair market value of our common stock that was distributed to the stockholder, which generally would be taxed as a dividend to the extent of the stockholder's pro rata share of United Online's current and accumulated earnings and profits, including United Online's taxable gain, if any, on the distribution, then treated as a non-taxable return of capital to the extent of the stockholder's basis in the United Online stock and thereafter treated as capital gain from the sale or exchange of United Online stock.

        Even if the distribution otherwise qualifies for tax-free treatment under Section 355 of the Code, the distribution may result in corporate level taxable gain to United Online under Section 355(e) of the Code if 50% or more, by vote or value, of our stock or United Online stock is treated as acquired or issued as part of a plan or series of related transactions that includes the distribution. If an acquisition or issuance of our stock or United Online stock triggers the application of Section 355(e) of the Code, United Online would recognize taxable gain as described above, but the distribution would be tax-free to each United Online stockholder.

        A U.S. Holder that receives cash instead of fractional shares of our common stock should be treated as though the U.S. Holder first received a distribution of a fractional share of our common stock, and then sold it for the amount of cash. Such U.S. Holder should recognize capital gain or loss, provided that the fractional share is considered to be held as a capital asset, measured by the difference between the cash received for such fractional share and the U.S. Holder's basis in the fractional share, as determined above. Such capital gain or loss should generally be a long-term capital gain or loss if the U.S. Holder's holding period for such U.S. Holder's United Online common stock exceeds one year on the date of the distribution.

        U.S. Treasury regulations require certain stockholders that receive stock in a distribution to attach a detailed statement setting forth certain information relating to the distribution to their respective U.S. federal income tax returns for the year in which the distribution occurs. Within a reasonable period after the distribution, United Online will provide stockholders who receive our common stock in the distribution with the information necessary to comply with such requirement. In addition, all stockholders are required to retain permanent records relating to the amount, basis, and fair market value of our common stock received in the distribution and to make those records available to the IRS upon request of the IRS.

Market for Our Common Stock

        There is currently no public market for our common stock. A condition to the Separation is the listing of our common stock on NASDAQ. We are in the process of applying to list our common stock on NASDAQ and expect to list under the ticker symbol "FTD."

        Beginning on or shortly before the record date and continuing up to and including the distribution date, we expect that there will be a "when-issued" market for our common stock under the symbol "FTDDV." "When-issued" trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The "when-issued" trading market will be a market for shares of our common stock that will be distributed to United Online stockholders on the distribution date. If you own shares of United Online common stock as of the record date, you will be entitled to shares of our common stock distributed pursuant to the distribution. You may trade this entitlement to shares of our common stock, without trading the shares of United Online common stock you own, on the "when-issued" market. On the first trading day following the distribution date, "when-issued" trading

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with respect to our common stock will end and "regular-way" trading will begin. "Regular-way" trading refers to trading after a security has been issued and typically involves a transaction that settles on the third full business day following the date of the transaction.

Trading of United Online Common Stock After the Record Date and On or Prior to the Distribution

        Beginning on or shortly before the record date and continuing up to and including the distribution date, United Online expects that its common stock will trade in two markets on NASDAQ: a "regular-way" market and an "ex-distribution" market. Shares of United Online common stock that trade on the "regular-way" market will trade with an entitlement to receive shares of our common stock distributed pursuant to the distribution. Shares that trade on the "ex-distribution" market will trade without an entitlement to receive shares of our common stock distributed pursuant to the distribution. Therefore, if you sell shares of United Online common stock in the "regular-way" market after the close of business on the record date and up to and including the distribution date, you will be selling your right to receive shares of our common stock in the distribution. If you sell shares of United Online common stock in the "ex-distribution" market after the close of business on the record date and up to and including the distribution date, you will still receive the shares of our common stock that you would be entitled to receive in the distribution pursuant to your ownership of the shares of United Online common stock.

Treatment of Equity-Based Compensation

        The following discussion describes the expected treatment of United Online equity awards in connection with the Separation and is subject to approval of United Online's compensation committee (the "Compensation Committee"). The different types of awards discussed below are described in further detail under "Executive Compensation." The post-separation treatment of awards held by an employee will depend on the type of award and whether the person is an employee of United Online or our company immediately prior to the Separation. For purposes of this discussion, an "FTD Employee" refers to an individual who is employed by us immediately prior to the Separation and a "Remaining Employee" refers to an individual who is employed by United Online immediately prior to the Separation. The treatment described below will become effective as of the distribution date.

Stock Options

        United Online Options that are outstanding on the distribution date and held by any FTD Employee will be converted into FTD Options, without any changes to the original terms of the United Online Options, other than appropriate adjustments to increase the number of shares of our common stock subject to each FTD Option and reduce the exercise price payable per share, so as to preserve the value that existed with respect to the United Online Options immediately prior to the Separation. No changes will be made with respect to United Online Options held by Remaining Employees or former or retired employees, other than similar adjustments with respect to the number of shares of United Online common stock subject to each United Online Option and the exercise price payable per share so as to preserve the value that existed with respect to such United Online Options immediately prior to the Separation.

        United Online Options held by directors of United Online (including Mr. Goldston) on the distribution date will be converted into FTD Options and United Online Options, in each case, with appropriate adjustments as described above so as to preserve the aggregate value of such options.

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Restricted Stock Units

        United Online restricted stock units that are held by FTD Employees on the distribution date will be converted via the issuance of a dividend into our restricted stock units covering an increased number of shares of our common stock (such converted restricted stock units, the "FTD RSUs"), so as to preserve the value that existed with respect to each such United Online restricted stock unit immediately prior to the Separation, and other than such adjustments, the original terms of such restricted stock units, including the vesting and issuance schedules, will remain unchanged. United Online restricted stock units held by Remaining Employees on the distribution date will be adjusted to increase the number of shares of United Online common stock subject to each such award so as to preserve the value that existed with respect to such award immediately prior to the Separation and, other than such adjustment, the original terms of the United Online restricted stock unit, including the vesting and issuance schedules, will remain unchanged.

        United Online restricted stock units held by directors of United Online (including Mr. Goldston) on the distribution date will vest as of the distribution date and be settled in FTD shares and United Online shares, in each case, with appropriate adjustments as described above so as to preserve the aggregate value of such restricted stock units.

Continued Vesting

        The service-vesting requirements in effect for each United Online award will remain unchanged in connection with the Separation and will be measured in terms of both service prior to the Separation and continued service with the entity employing the holder immediately after the Separation.

Employee Stock Purchase Plan

        The then-current purchase period under the United Online 2010 Employee Stock Purchase Plan will end as of the Separation and all then-outstanding purchase rights will be automatically exercised in accordance with the provisions of the plan.

Results of the Separation

        After the Separation, we will be an independent, publicly-traded company. Immediately following the distribution, we expect to have approximately            stockholders of record, based on the number of registered stockholders of United Online common stock on            , 2013, and approximately              million shares of our common stock outstanding. The actual number of shares to be distributed will be determined on the record date and will reflect any exercise of United Online Options and the vesting of United Online restricted stock units at any time prior to the record date. The distribution will not affect the number of outstanding shares of United Online common stock or any rights of holders of United Online common stock.

        We will enter into a Separation and Distribution Agreement and several other agreements with United Online to effect the Separation and to provide a framework for our relationship with United Online after the Separation. We cannot assure you that these agreements are or will be on terms as favorable to us or to United Online as agreements with unaffiliated third parties. For a more detailed description, see "Certain Relationships and Related-Party Transactions—Agreements with United Online."

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Conditions to the Separation

        We expect that the Separation will be effective as of 12:01 a.m., New York time, on the distribution date, provided that the following conditions have been satisfied or waived by United Online's Board of Directors, at its sole and absolute discretion:

        The fulfillment of the foregoing conditions will not create any obligation on the part of United Online to effect the distribution, and United Online's Board of Directors may terminate the Separation and Distribution Agreement and abandon the Separation at any time prior to the distribution if United Online determines, in its sole discretion, that the Separation is not in the best interests of United Online or its stockholders, or that it is not advisable for our company to separate from United Online.

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Dividends

        We presently intend to retain future earnings, if any, to reinvest in the growth of our businesses and to make interest payments on or pay down our debt and fund potential acquisitions. As a result, we do not currently expect to pay any cash dividends.

Solvency Opinion

        Prior to the Separation, United Online's Board of Directors expects to obtain an opinion from an independent financial advisory firm that we and United Online each will be solvent at the time of the Separation, including immediately after the distribution and the Separation, will be able to repay our respective debts as they mature following the Separation and will have sufficient capital to carry on our respective businesses, and that the distribution will be made entirely out of surplus in accordance with Section 170 of the DGCL.

Reasons for Furnishing this Information Statement

        This Information Statement is being furnished solely to provide information to United Online stockholders who are entitled to receive shares of our common stock in the distribution. This Information Statement is not, and is not to be construed as, an inducement or encouragement to buy, hold, or sell any of our securities. We believe that the information in this Information Statement is accurate as of the date indicated on the cover page. Changes may occur after that date, and neither United Online nor our company undertakes any obligation to update such information except pursuant to our respective obligations under the securities laws.

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CAPITALIZATION

        The following table sets forth our capitalization as of June 30, 2013, on a historical basis and on a pro forma basis to give effect to the pro forma adjustments included in our unaudited pro forma condensed consolidated financial statements (see "Unaudited Pro Forma Condensed Consolidated Financial Statements"). The pro forma adjustments include:

        The pro forma adjustments are based on available information and assumptions that management believes are reasonable; however, such adjustments are subject to change based on the final terms of the distribution and the agreements that define our relationship with United Online after the distribution. In addition, such adjustments are estimates and may not prove to be accurate. Accordingly, the pro forma information below is not necessarily indicative of what our cash and cash equivalents and capitalization would have been had the Separation and distribution been completed as of June 30, 2013.

        The information in the following table should be read in conjunction with "Selected Historical Consolidated Financial Data," "Unaudited Pro Forma Condensed Consolidated Financial Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our audited consolidated financial statements and accompanying notes included elsewhere in this Information Statement.

 
  June 30, 2013  
 
  Historical   Pro Forma  
 
  (in thousands)
 

Cash and cash equivalents

  $ 48,757   $               
           

Capitalization:

             

Indebtedness:

             

2011 revolving credit facility

                      

Long-term debt, including current portion, net of discounts

    233,410                   
           

Total indebtedness

    233,410                   
           

Equity:

             

Common stock, $0.0001 par value

                      

Additional paid-in capital

                      

Parent company investment

    303,040                   

Accumulated other comprehensive loss

    (29,496 )   (             )
           

Total equity

    273,544                   
           

Total capitalization

  $ 506,954   $               
           

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

        The following tables present our selected historical consolidated financial data. The selected historical consolidated financial data as of June 30, 2013 and for the six months ended June 30, 2013 and 2012 was derived from our unaudited condensed consolidated financial statements included elsewhere in this Information Statement. The selected historical consolidated financial data as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010 was derived from our audited consolidated financial statements included elsewhere in this Information Statement.

        Our historical consolidated financial statements include allocations of certain expenses from United Online, including expenses related to senior management, legal, human resources, finance, information technology, and centrally managed employee benefit arrangements. We consider the allocations of expenses from United Online to be reasonable. These costs may not be representative of the future costs we will incur as an independent, public company, and do not include certain additional costs we may incur as an independent public company.

        The financial statements included in this Information Statement may not necessarily reflect our financial position, results of operations, and cash flows as if we had operated as a stand-alone public company during all periods presented. Accordingly, our historical results should not be relied upon as an indicator of our future performance.

        The following selected historical consolidated financial and operating data should be read in conjunction with "Capitalization," "Unaudited Pro Forma Condensed Consolidated Financial Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Certain Relationships and Related-Party Transactions," and our consolidated financial statements and related notes included elsewhere in this Information Statement.

 
  Six Months Ended
June 30,
  Year Ended December 31,  
 
  2013   2012   2012   2011   2010  

Consolidated Statements of Operations Data (in thousands):

                               

Revenues

  $ 354,562   $ 343,974   $ 613,514   $ 587,249   $ 554,576  

Operating income

  $ 29,158   $ 27,789   $ 44,189   $ 41,217   $ 32,113  

Net income

  $ 14,775   $ 14,116   $ 21,174   $ 15,721   $ 6,607  

 

 
   
  December 31,  
 
  June 30,
2013
 
 
  2012   2011  

Consolidated Balance Sheet Data (in thousands):

                   

Total assets

  $ 641,777   $ 684,629   $ 677,459  

Long-term debt, net of discounts

  $ 233,410   $ 233,144   $ 258,474  

Cash dividends paid to parent company

  $ 18,066   $ 19,299   $ 15,000  

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

        The unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2013 and unaudited pro forma condensed consolidated balance sheet as of June 30, 2013 were derived from our unaudited condensed consolidated financial statements included elsewhere in this Information Statement. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2012 was derived from our audited consolidated financial statements included elsewhere in this Information Statement.

        The unaudited pro forma condensed consolidated financial statements reflect adjustments to our historical financial results in connection with the Separation. The unaudited pro forma condensed consolidated statement of operations gives effect to these events as if they occurred on January 1, 2012, the beginning of our last fiscal year. The unaudited pro forma condensed consolidated balance sheet gives effect to these events as if they occurred as of June 30, 2013, our latest balance sheet date. The pro forma adjustments are described in the accompanying notes and include the following:

        The pro forma adjustments are based on available information and assumptions that management believes are reasonable; however, such adjustments are subject to change based on the final terms of the distribution and the agreements that define our relationship with United Online after the distribution. In addition, such adjustments are estimates and may not prove to be accurate. Accordingly, the pro forma information below is not necessarily indicative of what our financial position and results of operations would have been had the Separation and distribution been completed on the dates indicated.

        The unaudited pro forma financial information is for illustrative and informational purposes only and is not intended to represent, or be indicative of, what our financial position or results of operations would have been had the Separation and related transactions occurred on the dates indicated. The unaudited pro forma financial information also should not be considered representative of our financial position, and you should not rely on the financial information presented below as a representation of our future performance.

        Included in our consolidated statement of operations for the quarter and six months ended June 30, 2013 are non-recurring transaction and separation costs totaling $1.4 million related to the Separation and transition from United Online, which have been incurred by or allocated to us by United Online. We expect to recognize additional transaction and separation costs, which are currently estimated to range from $10 million to $14 million. These costs, which have not been included in the unaudited pro forma condensed consolidated financial statements, are expected to include, among other things, investment banking, legal, accounting, and other advisory fees and other costs to separate and transition from United Online.

        We also expect to experience changes in our ongoing cost structure when we become an independent, publicly-traded company. For example, our historical consolidated financial statements include allocations of certain expenses from United Online, including expenses related to senior management, legal, human resources, finance, information technology, and centrally managed employee benefit arrangements. These costs may not be representative of the future costs we will incur as an independent, publicly-traded company. We also expect to incur certain incremental costs as an independent, publicly-traded company as compared to the costs historically allocated to us by United Online. These incremental costs, which are estimated to range from $2 million to $5 million on an annual pre-tax basis, have not been reflected in our unaudited pro forma condensed consolidated

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statement of operations. For a description of the allocation of expenses to us by United Online, see Note 5, "Transactions with Related Parties—Transactions with United Online," to our audited consolidated financial statements as of December 31, 2012 and 2011 and for each of the three years in the period ended December 31, 2012 included elsewhere in this Information Statement.

        The following unaudited pro forma condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010 and accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Information Statement.

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FTD COMPANIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2013

(in thousands, except per share amounts)

 
  As Reported   Pro Forma
Adjustments
  Pro Forma  

Revenues:

                   

Products

  $ 282,347   $            $           

Services

    72,215              
               

Total revenues

    354,562              

Operating expenses:

                   

Cost of revenues—products

    215,760              

Cost of revenues—services

    9,717              

Sales and marketing

    58,010              

General and administrative

    29,114              

Amortization of intangible assets

    12,803              

Restructuring and other exit costs

                 
               

Total operating expenses

    325,404              
               

Operating income

    29,158              

Interest income

    343              

Interest expense

    (6,383 )            

Other income (expense), net

    240              
               

Income before income taxes

    23,358              

Provision for income taxes

    8,583       (a)      
               

Net income

  $ 14,775   $     $    
               

Pro forma earnings per common share:

                   

Basic

                   
                   

Diluted

                   
                   

Pro forma weighted-average common shares outstanding:

                   

Basic

            (b)      
                   

Diluted

            (c)      
                   

   

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

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FTD COMPANIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2012

(in thousands, except per share amounts)

 
  As Reported   Pro Forma
Adjustments
  Pro Forma  

Revenues:

                   

Products

  $ 477,579   $            $           

Services

    135,935              
               

Total revenues

    613,514              

Operating expenses:

                   

Cost of revenues—products

    366,935              

Cost of revenues—services

    19,811              

Sales and marketing

    104,913              

General and administrative

    52,123              

Amortization of intangible assets

    25,543              

Restructuring and other exit costs

                 
               

Total operating expenses

    569,325              
               

Operating income

    44,189              

Interest income

    750              

Interest expense

    (13,562 )            

Other income (expense), net

    627              
               

Income before income taxes

    32,004              

Provision for income taxes

    10,830              (a)      
               

Net income

  $ 21,174   $     $    
               

Pro forma earnings per common share:

                   

Basic

                   
                   

Diluted

                   
                   

Pro forma weighted-average common shares outstanding:

                   

Basic

                   (b)      
                   

Diluted

                   (c)      
                   

   

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

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FTD COMPANIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

JUNE 30, 2013

(in thousands)

 
  As Reported   Pro Forma
Adjustments
  Pro Forma  

ASSETS

                   

Current assets:

                   

Cash and cash equivalents

  $ 48,757   $            $           

Accounts receivable, net of allowances

    22,123              

Inventories, net

    6,043              

Deferred tax assets, net

    5,796              

Prepaid expenses

    5,410              
               

Total current assets

    88,129              

Property and equipment, net

    29,745              

Intangible assets, net

    178,071              

Goodwill

    332,980              

Other assets

    12,852              
               

Total assets

  $ 641,777   $     $    
               

LIABILITIES AND EQUITY

                   

Current liabilities:

                   

Accounts payable

  $ 33,822   $     $    

Accrued liabilities

    13,279              

Accrued compensation

    7,721              

Deferred revenue

    6,325              

Income taxes payable

    8,394              

Current portion of long-term debt

                 

Intercompany payable to United Online, Inc. 

    3,867              
               

Total current liabilities

    73,408              

Long-term debt, net of discounts

    233,410              

Deferred tax liabilities, net

    58,472              (a)      

Other liabilities

    2,943              
               

Total liabilities

    368,233              
               

Equity:

                   

Common stock, $0.0001 par value

                 (d)      

Additional paid-in capital

                 (d)      

Parent company investment

    303,040              

Accumulated other comprehensive loss

    (29,496 )            
               

Total equity

    273,544              
               

Total liabilities and equity

  $ 641,777   $     $    
               

   

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

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FTD COMPANIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(a)
Reflects the tax effects of the pro forma adjustments at the applicable statutory income tax rates.

(b)
The number of FTD shares used to compute basic earnings per share is based on the number of shares of FTD common stock assumed to be outstanding on the distribution date, based on the number of United Online common shares outstanding during the six months ended June 30, 2013 or the year ended December 31, 2012, as applicable, assuming a distribution ratio of one share of FTD common stock for every            shares of United Online common stock outstanding.

(c)
The number of FTD shares used to compute diluted earnings per share is based on the number of basic shares of FTD common stock as described in Note (b) above, plus incremental shares assuming exercise of dilutive outstanding options and restricted stock awards.

(d)
Adjustment reflects the pro forma recapitalization of our equity. As of the distribution date, Parent's net investment in our company will be distributed to Parent's stockholders through the distribution of all common stock of FTD Companies, Inc.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

        This Information Statement and the documents incorporated herein by reference contain certain forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on our current expectations, estimates and projections about our operations, industry, financial condition, performance, results of operations, and liquidity. Statements containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "projections," "business outlook," "estimate," or similar expressions constitute forward-looking statements. These forward-looking statements include, but are not limited to, our strategies; future financial performance; revenues; segment metrics; operating expenses; market trends, including those in the markets in which we compete; liquidity; cash flows and uses of cash; dividends; capital expenditures; depreciation and amortization; tax payments; foreign currency exchange rates; hedging arrangements; our ability to repay indebtedness and invest in initiatives; our products and services; pricing; marketing plans; competition; settlement of legal matters; and the impact of accounting pronouncements. Potential factors that could affect the matters about which the forward-looking statements are made include, among others, the factors disclosed in the section entitled "Risk Factors" in this Information Statement and additional factors that accompany the related forward-looking statements in this Information Statement. Readers are cautioned not to place undue reliance on these forward- looking statements, which reflect management's analysis only as of the date hereof. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that may cause actual performance and results to differ materially from those predicted. Reported results should not be considered an indication of future performance. Except as required by law, we undertake no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes thereto which appear under "Index to Consolidated Financial Statements." This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on management's expectations, estimates, assumptions and projections about our industry, business and future financial results, based on information available at the time of the statement. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in the sections of this Information Statement entitled "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements." We undertake no obligation to, and expressly disclaim any such obligation to, update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events or changes to future results over time or otherwise, except as required by law.

Overview

        We are a premier floral and gift products and services company. We provide floral, gift and related products and services to consumers and retail florists, as well as to other retail locations offering floral and gift products primarily in the U.S., Canada, the U.K., and the Republic of Ireland. Our business uses the highly-recognized FTD and Interflora brands, both supported by the iconic Mercury Man logo that is displayed in tens of thousands of floral shops worldwide. Our portfolio of brands also includes Flying Flowers, Flowers Direct, and Drake Algar in the U.K.

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        Our vision is to be the leading and most trusted floral and gifting company in the world. Our mission is to inspire, support and delight our customers when expressing life's most important sentiments.

        We are seeking to expand our business by, among other things, marketing to our current and potential consumer and floral network customers. Our marketing efforts are primarily focused on generating orders from new and existing customers; marketing our services to our floral network members; attracting new members to our floral networks; and marketing our services to alternative channels such as supermarkets and mass merchants. We also engage in a variety of activities to build and enhance the FTD, Interflora and associated brands. As part of our business strategy, we intend to expand the breadth of our brand through organic growth and, where appropriate, through the acquisition of complementary businesses.

Industry Background

        Floral mass marketers, such as our company, generate floral orders from consumers via the Internet and telephone. The floral mass marketers' share of retail floral purchases has expanded due to shifting consumer preferences towards purchasing floral products online and the emergence of prominent brands with national or international exposure.

        Providers of floral network services typically offer a broad range of services that are designed to promote revenue growth and facilitate the efficient operation of a retail florist's business, including the ability to send, receive and deliver floral orders. The total number of retail florists has declined over the past decade, primarily due to floral products becoming increasingly available for purchase on the Internet and in other retail channels, as well as recent economic challenges, among other factors. Supermarkets, mass merchants, and other retailers have established or increased their presence in the floral products retail market by adding a variety of floral and related products to their merchandise assortments. The emergence of supermarkets and mass merchants as increasingly important distribution channels within the floral products retail market has led many traditional retail florists to expand their merchandise offerings to include giftware, outdoor nursery stock, and seasonal decorations, among other items.

        The following sets forth some of the key market trends:

Planned Separation

        On August 1, 2012, United Online announced that its Board of Directors had approved a preliminary plan to separate United Online into two independent, publicly-traded companies: FTD and United Online, which will continue to include the businesses of United Online's Content & Media and

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Communications segments. The Separation is expected to take the form of a tax-free pro rata distribution to stockholders of United Online and is subject to a number of conditions, including final approval of transaction specifics by United Online's Board of Directors, receipt of a favorable private letter ruling from the IRS and an opinion of counsel, the filing and effectiveness of a registration statement with the SEC, and other related matters. United Online anticipates that the IRS Ruling will confirm that the distribution of shares of FTD common stock will not result in the recognition, for U.S. federal income tax purposes, of income, gain, or loss by United Online, Inc. or its stockholders. The Separation will not require stockholder approval. While United Online expects that the Separation will be completed by the end of the third quarter of 2013, there can be no assurance that it will be completed on the anticipated schedule or that its terms will not change. In connection with the Separation, we will incur certain transaction-related costs. These costs relate primarily to investment bankers, legal, accounting, tax, and other professional costs. In addition, we will incur certain ongoing public company costs, including board of directors fees, corporate overhead costs, legal, accounting, insurance, and investor relations, as a stand-alone public company.

Key Business Metrics

        We review a number of key business metrics to help us monitor our performance and trends affecting our businesses, and to develop forecasts and budgets. These key measures include the following:

        Consumer Orders.    We monitor the number of consumer orders for floral, gift and related products during a given period. Consumer orders are orders delivered during the period that originated in the U.S. and Canada, primarily from the www.ftd.com website and the 1-800-SEND-FTD telephone number, and in the U.K. and the Republic of Ireland, primarily from the www.interflora.co.uk website and various telephone numbers. The number of consumer orders is not adjusted for non-delivered orders that are refunded on or after the scheduled delivery date. Orders originating with a florist or other retail location for delivery to consumers are not included. The number of consumer orders received may fluctuate significantly from quarter to quarter due to seasonality resulting from the timing of key holidays; general economic conditions; fluctuations in marketing expenditures on initiatives designed to attract new and retain existing customers; changes in pricing for our floral, plant, and gift products or competitive offerings; new or terminated partnerships; and changing consumer preferences, among other factors.

        Average Order Value.    We monitor the average value for consumer orders delivered in a given period, which we refer to as the average order value. Average order value represents the average U.S. Dollar amount received for consumer orders delivered during a period. For orders placed outside the U.S. (principally in the U.K. and the Republic of Ireland), this average U.S. Dollar amount is determined after translating the local currency amounts received into U.S. Dollars. Average order value includes merchandise revenues and shipping and service fees paid by the consumer, less discounts and refunds (net of refund-related fees charged to floral network members). Average order values may fluctuate from period to period based on the average foreign currency exchange rates; product mix; changes in merchandise pricing, shipping and service fees; levels of refunds issued; and discounts, among other factors.

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        The table below sets forth, for the periods presented, as applicable, our consolidated revenues, consumer orders, average order value, and average currency exchange rates.

 
  Quarter Ended
June 30,
  Six Months
Ended June 30,
  Year Ended
December 31,
 
 
  2013   2012   2013   2012   2012   2011   2010  

Revenues (in thousands)

  $ 164,279   $ 167,527   $ 354,562   $ 343,974   $ 613,514   $ 587,249   $ 554,576  

Consumer orders (in thousands)

    1,921     1,997     4,125     3,994     7,020     6,628     6,361  

Average order value

  $ 61.27   $ 60.75   $ 61.14   $ 61.83   $ 61.26   $ 62.15   $ 59.72  

Average currency exchange rate: GBP to USD

    1.54     1.58     1.54     1.58     1.59     1.61     1.54  

Critical Accounting Policies, Estimates and Assumptions

General

        Our discussion and analysis of our financial condition and results of operations is based upon our audited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates and assumptions. Management believes that the following accounting policies, estimates, and assumptions made by management thereunder are the most critical to aid in fully understanding and evaluating our reported financial results. These estimates and assumptions require management's most difficult, subjective or complex judgment and may be based on matters the effects of which are inherently uncertain.

Revenue Recognition

        We apply the provisions of Accounting Standards Codification ("ASC") 605, Revenue Recognition, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements. ASC 605 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed or determinable, no significant company obligations remain, and collectibility is reasonably assured. Revenues exclude sales taxes.

        Products revenues, less discounts and refunds, and the related cost of revenues are recognized when products are delivered to the customers. Shipping and service fees charged to customers are recognized at the time the related products revenues are recognized and are included in products revenues. Shipping and delivery costs are included in cost of revenues. Our consumer business generally recognizes revenues on a gross basis because we bear the risks and rewards associated with the revenue-generating activities by (1) acting as a principal in the transaction; (2) establishing prices; (3) being responsible for fulfillment of the order by the floral network members and third-party suppliers; (4) taking the risk of loss for collection, delivery and returns; and (5) marketing the products and services.

        We also sell point-of-sale systems and related technology services to our floral network members and recognize revenue in accordance with ASC 605 and ASC 985, Software. We recognize revenue on hardware which is sold without software at the time of delivery. For hardware sales that include software, revenue is recognized when delivery, installation, and customer acceptance have all occurred.

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        Services revenues related to orders sent through the floral network are variable based on either the number of orders or on the value of orders and are recognized in the period in which the orders are delivered. Membership and other subscription-based fees are recognized monthly as earned, on a month-to-month basis.

        Probability of collection is assessed based on a number of factors, including past transaction history with the customer and the creditworthiness of the customer. If it is determined that collectibility is not reasonably assured, revenues are not recognized until collectibility becomes reasonably assured, which is generally upon receipt of cash.

Goodwill and Indefinite-Lived Intangible Assets

        Goodwill represents the excess of the purchase price of an acquired entity over the fair value of the net tangible and intangible assets acquired. Indefinite-lived intangible assets acquired in a business combination are initially recorded at management's estimate of their fair values. We account for goodwill and indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other, which among other things, addresses financial accounting and reporting requirements for acquired goodwill and indefinite-lived intangible assets. ASC 350 prohibits the amortization of goodwill and indefinite-lived intangible assets and requires us to test goodwill, at the reporting unit level, and indefinite-lived intangible assets for impairment at least annually.

        We test the goodwill of our reporting units and indefinite-lived intangible assets for impairment annually during the fourth quarter of our fiscal year and whenever events occur or circumstances change that would more likely than not indicate that the goodwill and/or indefinite-lived intangible assets might be impaired. Events or circumstances which could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key management or other personnel, significant changes in the manner of our use of the acquired assets or the strategy for the acquired business or our overall business, significant and sustained decline in market capitalization, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations.

        The determination of whether or not goodwill and/or indefinite-lived intangible assets are impaired involves a significant level of judgment in the assumptions underlying the approaches used to determine the estimated fair values of our reporting units. The determination of the fair values of our reporting units generally includes a study of market comparables, including the selection of appropriate valuation multiples and discounted cash flow models based on our internal forecasts and projections. The estimated fair value of each of our reporting units is determined using a combination of the income approach and the market approach.

Goodwill

        We operate in one operating and reportable segment, in accordance with ASC 280, Segment Reporting, and we have identified two reporting units—the FTD reporting unit (the domestic business) and the Interflora reporting unit—for purposes of evaluating goodwill. These reporting units each constitute a business or group of businesses for which discrete financial information is available and is regularly reviewed by management. The goodwill related to our acquired businesses is specific to each reporting unit and the goodwill amounts are assigned as such.

        Testing goodwill for impairment involves a two-step quantitative process. However, prior to performing the two-step quantitative goodwill impairment test, we have the option to first assess qualitative factors to determine whether or not it is necessary to perform the two-step quantitative goodwill impairment test for selected reporting units. If we choose that option, we are not required to perform the two-step quantitative goodwill impairment test unless we have determined, based on the

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qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the two-step quantitative impairment test is required or chosen, the first step of the impairment test involves comparing the estimated fair value of a reporting unit with its respective carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, including goodwill, goodwill is considered not to be impaired and no additional steps are necessary. If, however, the estimated fair value of a reporting unit is less than its carrying amount, including goodwill, then the carrying amount of the goodwill is compared with its implied fair value. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess.

Goodwill Impairment Assessment

        During the quarter ended June 30, 2012, due to the sustained decline in United Online's market capitalization, we performed an interim quantitative goodwill impairment assessment for our reporting units. Step one of the goodwill impairment test resulted in our determination that the fair value of each of the reporting units exceeded its respective carrying amount, including goodwill. Accordingly, step two was not required.

        We performed the annual goodwill impairment assessment for our reporting units during the fourth quarter of 2012. We did not perform a qualitative assessment to determine whether it was more likely than not that goodwill was impaired. Step one of the quantitative goodwill impairment test resulted in the determination that the fair values of the FTD reporting unit and the Interflora reporting unit exceeded their carrying amounts, including goodwill. Accordingly, step two was not required.

        The determination of whether or not goodwill is impaired involves a significant level of judgment in the assumptions underlying the approaches used to determine the estimated fair value of our reporting units. We believe our analysis included sufficient tolerance for sensitivity in key assumptions. The determination of the fair value of our reporting units included a study of market comparables, including the selection of appropriate valuation multiples and discounted cash flow models based on our internal forecasts and projections. We believe the assumptions and rates used in our impairment assessment are reasonable, but they are judgmental, and variations in any assumptions could result in materially different calculations of fair value and, if applicable, the impairment amount.

        The key assumptions used in the discounted cash flow valuation model for the goodwill impairment test include discount rates, growth rates, cash flow projections, and terminal growth rates. The discount rate utilized is indicative of the return an investor would expect to receive for investing in a similar business. Discount rates are determined by using the Capital Asset Pricing Model ("CAPM") to develop our weighted average cost of capital ("WACC"). The CAPM considers market and industry data, as well as company-specific risk factors for each reporting unit in determining the appropriate WACC to be used. Management, while considering industry and company-specific historical and projected data, develops growth rates and cash flow projections for each reporting unit. The terminal value is determined by following a common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and terminal growth rates. In determining the terminal growth rates, we consider GDP growth, consumer price inflation and the long-term growth prospects of each reporting unit.

        The fair value of the Interflora reporting unit exceeded its carrying amount by approximately 6%. The amount of goodwill assigned to the Interflora reporting unit at October 1, 2012 was $95.8 million. The inputs for the fair value calculation of the reporting unit included a 4.0% growth rate to calculate the terminal value and a discount rate of 12.3%. In addition, we assumed revenue growth and applied margin and other cost assumptions consistent with the reporting unit's historical trends. Factors that have the potential to create variances in the estimated fair value of the Interflora reporting unit include, but are not limited to, fluctuations in (1) forecasted order volumes and average order values,

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which can be driven by multiple external factors affecting demand, including macroeconomic factors, competitive dynamics, and changes in consumer preferences; (2) marketing costs to generate orders; (3) product costs; and (4) equity valuations of peer companies. An increase of 100 basis points in the discount rate for the Interflora reporting unit would have resulted in a decrease in the income approach valuation of the reporting unit of $11.5 million. A decrease of 100 basis points in the terminal growth rate would have resulted in a decrease in the income approach valuation of the Interflora reporting unit of $9.1 million. Given the weighting of 75% to the income approach for the Interflora reporting unit, a 100 basis point increase in the discount rate would have caused the Interflora reporting unit to fail the first step of the goodwill impairment test. In addition, a 100 basis point decrease in the terminal growth rate would have caused the Interflora reporting unit to fail the first step of the goodwill impairment test.

        The fair value of the FTD reporting unit exceeded its carrying amount by approximately 10%. The amount of goodwill assigned to the FTD reporting unit at October 1, 2012 was $242.9 million. The inputs for the fair value calculation of the reporting unit at October 1, 2012 included a 2.0% growth rate to calculate terminal value and a discount rate of 12.0%. In addition, we assumed revenue growth and applied margin and other cost assumptions consistent with the reporting unit's historical trends. Factors that have the potential to create variances in the estimated fair value of the FTD reporting unit include, but are not limited to, fluctuations in (1) forecasted order volumes and average order values, which can be driven by multiple external factors affecting demand, including macroeconomic factors, competitive dynamics, and changes in consumer preferences; (2) marketing costs to generate orders; (3) product costs; and (4) equity valuations of peer companies. An increase of 100 basis points in the discount rate for the FTD reporting unit would have resulted in a decrease in the income approach valuation of the reporting unit of $35.1 million. A decrease of 100 basis points in the terminal growth rate would have resulted in a decrease in the income approach valuation of the FTD reporting unit of $24.5 million. Given the weighting of 75% to the income approach for the FTD reporting unit, a 100 basis point increase in the discount rate would have caused the FTD reporting unit to fail the first step of the goodwill impairment test. However, a 100 basis point decrease in the terminal growth rate would not have caused the FTD reporting unit to fail the first step of the goodwill impairment test.

Indefinite-Lived Intangible Assets

        We test indefinite-lived intangible assets for impairment on an annual basis, or more frequently, if events occur or circumstances change that indicate they may be impaired. Testing indefinite-lived intangible assets, other than goodwill, for impairment involves a one-step quantitative process under ASC 350. However, prior to performing the one-step quantitative impairment test, we have the option to first assess qualitative factors to determine whether or not it is necessary to perform the one-step quantitative impairment test. If we choose that option, we are not required to perform the one-step quantitative impairment test unless we have determined, based on the qualitative assessment, that it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If the one-step quantitative impairment test is required or chosen, the fair values of indefinite-lived intangible assets are compared to their respective carrying amounts and, if the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized equal to the excess.

        The process of estimating the fair value of indefinite-lived intangible assets is subjective and requires us to make estimates that may significantly impact the outcome of the analyses. Such estimates include, but are not limited to, future operating performance and cash flows, royalty rate, terminal growth rate, and discount rate. We did not record any impairment charges related to our indefinite-lived intangible assets in the year ended December 31, 2012.

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Finite-Lived Intangible Assets and Other Long-Lived Assets

        We account for finite-lived intangible assets and other long-lived assets in accordance with ASC 360, Property, Plant and Equipment, which addresses financial accounting and reporting for the impairment and disposition of identifiable intangible assets and other long-lived assets. Intangible assets acquired in a business combination are initially recorded at management's estimate of their fair values. We evaluate the recoverability of identifiable intangible assets and other long-lived assets, other than indefinite-lived intangible assets, for impairment when events occur or circumstances change that would indicate that the carrying amount of an asset may not be recoverable. Events or circumstances that may indicate that an asset is impaired include, but are not limited to, significant decreases in the market value of an asset, significant underperformance relative to expected historical or projected future operating results, a change in the extent or manner in which an asset is used, shifts in technology, loss of key management or other personnel, significant negative industry or economic trends, changes in our operating model or strategy, and competitive forces. In determining if an impairment exists, we estimate the undiscounted cash flows to be generated from the use and ultimate disposition of these assets. If an impairment is indicated based on a comparison of the assets' carrying amounts and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amounts of the assets exceed the respective fair values of the assets. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from two to ten years. Our identifiable intangible assets were acquired primarily in connection with business combinations.

        The process of evaluating the potential impairment of long-lived intangible assets is subjective and requires significant judgment on matters such as, but not limited to, the asset group to be tested for recoverability. We are also required to make estimates that may significantly impact the outcome of the analyses. Such estimates include, but are not limited to, future operating performance and cash flows, cost of capital, terminal values, and remaining economic lives of assets.

Income Taxes

        We are included in the consolidated federal income tax return of United Online, as well as certain state tax returns where United Online files on a combined basis. We apply the provisions of ASC 740, Income Taxes, and compute the provision for income taxes on a separate return basis. Under ASC 740, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including our operating results, ongoing tax planning, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. In accordance with ASC 740, we recognize, in our consolidated financial statements, the impact of our tax positions that are more likely than not to be sustained upon examination based on the technical merits of the positions. We recognize interest and penalties for uncertain tax positions in income tax expense.

Legal Contingencies

        We are currently involved in certain legal proceedings and investigations. We record liabilities related to pending matters when an unfavorable outcome is deemed probable and management can reasonably estimate the amount or range of loss. As additional information becomes available, we continually assess the potential liability related to such pending matters.

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Financial Statement Presentation

Revenues

Products Revenues

        Products revenues are derived primarily from selling floral, gift and related products to consumers. Products revenues also include revenues generated from sales of branded and non-branded hard goods, software and hardware systems, cut flowers, packaging and promotional products, and a wide variety of other floral-related supplies to floral network members.

Services Revenues

        Services revenues related to orders sent through the floral network are variable based on either the number of orders or on the value of orders and are recognized in the period in which the orders are delivered. Membership and other subscription-based fees are recognized monthly as earned, on a month-to-month basis.

Cost of Revenues

        Cost of revenues primarily includes product costs; shipping and delivery costs; costs associated with taking orders; printing and postage costs; systems installation, training and support costs; telecommunications and data center costs; depreciation of network computers and equipment; license fees; costs related to customer billing and billing support for floral network members; fees associated with the storage and processing of customer credit cards and associated bank fees; domain name registration fees; and personnel and overhead-related costs associated with operating our networks.

Sales and Marketing

        Sales and marketing expenses include expenses associated with promoting our brands, products and services. Expenses associated with promoting our brands, products and services include advertising and promotion expenses; fees paid to online and other corporate partners and to floral network members related to order volume sent through our floral network; and personnel and overhead-related expenses for marketing, merchandising, customer service, and sales personnel. We have expended significant amounts on sales and marketing, including branding and customer acquisition campaigns consisting of television, Internet, public relations, sponsorships, print, and outdoor advertising, and on retail and other performance-based distribution relationships. Marketing and advertising costs to promote our brands, products and services are expensed in the period incurred. Advertising and promotion expenses include media, agency, and promotion expenses. Media production costs are expensed the first time the advertisement is run. Media and agency costs are expensed over the period the advertising runs.

General and Administrative

        General and administrative expenses consist of personnel-related expenses for executive, finance, legal, human resources, technology, facilities, and internal audit. In addition, general and administrative expenses include, among other costs, maintenance of existing software, technology, and websites; development of new or improved software technology; professional fees for legal, accounting, and financial services; insurance; occupancy and other overhead-related costs; non-income taxes; gains and losses on the sale of assets; bad debt expense; and reserves or expenses incurred related to litigation, investigations, or similar matters. These include direct expenses incurred by FTD, as well as general corporate costs which have been allocated to FTD by United Online. General and administrative expenses also include expenses resulting from actual or potential transactions such as acquisitions, spin offs, financing transactions, and other strategic transactions.

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Amortization of Intangible Assets

        Amortization of intangible assets includes amortization of certain acquired trademarks and trade names; acquired software and technology; acquired customers; and other acquired identifiable intangible assets. In accordance with the provisions set forth in ASC 350, goodwill and indefinite-lived intangible assets are not being amortized but are tested for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would indicate the fair value may be below the carrying amount.

Restructuring and Other Exit Costs

        Restructuring and other exit costs consist of costs associated with the realignment and reorganization of our operations and other employee termination events. Restructuring and other exit costs include employee termination costs, facility closure and relocation costs, and contract termination costs. The timing of associated cash payments is dependent upon the type of exit cost and can extend over a 12-month period. We record restructuring and other exit cost liabilities in accrued liabilities in the consolidated balance sheets.

Interest Income

        Interest income consists primarily of earnings on our cash and cash equivalents and interest on long-term receivables, including those from our technology system sales.

Interest Expense

        Interest expense consists of interest expense on our credit facilities, including accretion of discounts and amortization of debt issue costs, loss on extinguishment of debt, and our interest rate caps.

Other Income (Expense), Net

        Other income (expense), net, consists of gains and losses on foreign currency exchange rate transactions; realized and unrealized gains and losses on certain forward foreign currency exchange contracts; equity earnings on investments in subsidiaries; and other non-operating income and expenses.

Results of Operations

Quarter and Six Months Ended June 30, 2013 compared to
Quarter and Six Months Ended June 30, 2012

        The following table sets forth, for the periods presented, selected historical consolidated statements of operations. The information contained in the table below should be read in conjunction with Critical Accounting Policies, Estimates and Assumptions, Liquidity and Capital Resources, Contractual Obligations, Other Commitments, and Quantitative and Qualitative Disclosures About Market Risk included in "Management's Discussion and Analysis of Financial Condition and Results of Operations,"

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as well as the consolidated financial statements and notes thereto included elsewhere in this Information Statement.

 
  Quarter Ended
June 30,
  Six Months
Ended June 30,
 
 
  2013   2012   2013   2012  
 
  (in thousands)
 

Revenues

  $ 164,279   $ 167,527   $ 354,562   $ 343,974  

Operating expenses:

                         

Cost of revenues

    103,227     106,387     225,477     219,642  

Sales and marketing

    27,723     28,668     58,010     57,407  

General and administrative

    14,999     12,936     29,114     26,475  

Amortization of intangible assets

    6,396     6,383     12,803     12,661  

Restructuring and other exit costs

                 
                   

Total operating expenses

    152,345     154,374     325,404     316,185  
                   

Operating income

    11,934     13,153     29,158     27,789  

Interest income

    174     176     343     382  

Interest expense

    (3,191 )   (3,582 )   (6,383 )   (7,041 )

Other income, net

    82     22     240     343  
                   

Income before income taxes

    8,999     9,769     23,358     21,473  

Provision for income taxes

    3,530     3,507     8,583     7,357  
                   

Net income

  $ 5,469   $ 6,262   $ 14,775     14,116  
                   

Revenues

 
  Quarter Ended
June 30,
  Change   Six Months Ended
June 30,
  Change  
 
  2013   2012   $   %   2013   2012   $   %  
 
  (in thousands, except percentages and average order value)
 

Products

  $ 129,145   $ 131,996   $ (2,851 )   (2 )% $ 282,347   $ 273,398   $ 8,949     3 %

Services

    35,134     35,531     (397 )   (1 )%   72,215     70,576     1,639     2 %
                                       

Total revenues

  $ 164,279   $ 167,527   $ (3,248 )   (2 )% $ 354,562   $ 343,974   $ 10,588     3 %
                                       

Consumer orders

    1,921     1,997     (76 )   (4 )%   4,125     3,994     131     3 %

Average order value

  $ 61.27   $ 60.75   $ 0.52     1 % $ 61.14   $ 61.83   $ (0.69 )   (1 )%

        The $3.2 million decrease in total revenues for the quarter was primarily due to a decrease in revenues generated by our consumer business. The overall decrease in revenues generated by our consumer business was partially offset by a $0.6 million increase in revenues generated by the Flying Flowers, Flowers Direct and Drake Algar businesses, which were acquired on April 30, 2012. The $2.9 million decrease in products revenues for the quarter was driven by a 4% decrease in consumer order volume primarily due to the timing of the Easter holiday, which occurred in the first quarter of 2013 but occurred in the second quarter of 2012. Also contributing to the decrease was a modest decline in order volume for the U.S. Mother's Day holiday period. The decrease in order volume was partially offset by a 1% increase in average order value primarily due to higher merchandise values in both the U.S. and the U.K. The $0.4 million decrease in services revenues for the quarter was primarily related to a decrease in membership and subscription-based revenues. Unfavorable foreign currency exchange rates had a $0.9 million negative impact on total revenues for the quarter due to a weaker British Pound versus the U.S. Dollar.

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        The $10.6 million increase in total revenues for the six months ended June 30, 2013 was primarily due to an increase in revenues generated by our consumer business, including a $3.7 million increase in revenues generated by the Flying Flowers, Flowers Direct and Drake Algar businesses. The $8.9 million increase in products revenues for the six months ended June 30, 2013 was driven by a 3% increase in consumer order volume, substantially all of which was due to the contribution of orders from the Flying Flowers and Flowers Direct businesses. Partially offsetting this increase in order volume was a 1% decrease in average order value primarily due to consumer orders generated by the Flying Flowers and Flowers Direct businesses, which have lower average order values compared to the rest of our consumer business. Excluding the Flying Flowers and Flowers Direct businesses and the unfavorable impact of foreign currency exchange rates, average order value increased by 1%. Also contributing to the increase in products revenues was $2.2 million of additional container sales to our members. The $1.6 million increase in services revenues was primarily related to an increase in order-related revenues driven by an increase in order volume in our floral network business. Unfavorable foreign currency exchange rates had a $2.3 million negative impact on total revenues for the six months ended June 30, 2013 due to a weaker British Pound versus the U.S. Dollar.

Cost of Revenues

 
  Quarter Ended
June 30,
  Change   Six Months Ended
June 30,
  Change  
 
  2013   2012   $   %   2013   2012   $   %  
 
  (in thousands, except percentages)
 

Products

  $ 98,484   $ 101,372   $ (2,888 )   (3 )% $ 215,760   $ 209,532   $ 6,228     3 %

Services

    4,743     5,015     (272 )   (5 )%   9,717     10,110     (393 )   (4 )%
                                       

Total cost of revenues

  $ 103,227   $ 106,387   $ (3,160 )   (3 )% $ 225,477   $ 219,642   $ 5,835     3 %
                                       

Cost of products revenues as a percentage of products revenues

    76.3 %   76.8 %               76.4 %   76.6 %            

Cost of services revenues as a percentage of services revenues

    13.5 %   14.1 %               13.5 %   14.3 %            

Total cost of revenues as a percentage of total revenues

    62.8 %   63.5 %               63.6 %   63.9 %            

        The $3.2 million decrease in cost of revenues for the quarter was primarily due to the decrease in products revenues, which was driven by a decrease in consumer order volume. Favorable foreign currency exchange rates had a $0.6 million impact on cost of revenues for the quarter.

        The $5.8 million increase in cost of revenues for the six months ended June 30, 2013 was primarily due to the increase in products revenues. Favorable foreign currency exchange rates had a $1.6 million impact on cost of revenues for the six months ended June 30, 2013. Cost of revenues as a percentage of revenues was relatively flat for the six months ended June 30, 2013 as compared to the six months ended June 30, 2012.

Sales and Marketing

 
  Quarter Ended
June 30,
  Change   Six Months Ended
June 30,
  Change  
 
  2013   2012   $   %   2013   2012   $   %  
 
  (in thousands, except percentages)
 

Sales and marketing

  $ 27,723   $ 28,668   $ (945 )   (3 )% $ 58,010   $ 57,407   $ 603     1 %

Sales and marketing expenses as a percentage of revenues

    16.9 %   17.1 %               16.4 %   16.7 %            

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        The $0.9 million decrease in sales and marketing expenses for the quarter was related to an $0.8 million decrease in variable costs associated with a decrease in consumer order volume and an $0.8 million decrease in higher cost marketing programs, partially offset by a $0.5 million increase in marketing costs related to the Flying Flowers, Flowers Direct and Drake Algar businesses.

        The $0.6 million increase in sales and marketing expenses for the six months ended June 30, 2013 was primarily related to a $1.5 million increase in marketing costs related to the Flying Flowers, Flowers Direct and Drake Algar businesses, a $0.9 million increase in marketing expenditures related to an increase in floral network order volume and a $0.3 million increase in variable costs associated with an increase in consumer order volume. These increases were partially offset by a $2.0 million decrease in higher cost marketing programs. Favorable foreign currency exchange rates had an impact of $0.3 million on sales and marketing expenses for the six months ended June 30, 2013.

General and Administrative

 
  Quarter Ended
June 30,
  Change   Six Months Ended
June 30,
  Change  
 
  2013   2012   $   %   2013   2012   $   %  
 
  (in thousands, except percentages)
 

General and administrative

  $ 14,999   $ 12,936   $ 2,063     16 % $ 29,114   $ 26,475   $ 2,639     10 %

General and administrative expenses a percentage of revenues

    9.1 %   7.7 %               8.2 %   7.7 %            

        The $2.1 million increase in general and administrative expenses for the quarter was primarily due to a $1.6 million increase in legal fees and dispute settlement costs, $1.4 million in costs recorded in the quarter ended June 30, 2013 associated with the Separation, and a $1.0 million increase in personnel-related costs. These increases were partially offset by an interim award of $1.7 million as reimbursement of legal fees in the Marks and Spencer litigation.

        The $2.6 million increase in general and administrative expenses for the six months ended June 30, 2013 was primarily due to a $2.2 million increase in legal fees and dispute settlement costs, $1.4 million in costs recorded in the six months ended June 30, 2013 associated with the Separation, compared to $0.5 million of transaction-related costs recorded in the six months ended June 30, 2012 associated with the acquisition of the Gifts Division of Flying Brands Limited, and a $1.3 million increase in personnel-related costs. These increases were partially offset by an interim award of $1.7 million as reimbursement of legal fees in the Marks and Spencer litigation.

Amortization of Intangible Assets

 
  Quarter Ended
June 30,
  Change   Six Months Ended
June 30,
  Change  
 
  2013   2012   $   %   2013   2012   $   %  
 
  (in thousands, except percentages)
 

Amortization of intangible assets

  $ 6,396   $ 6,383   $ 13     % $ 12,803   $ 12,661   $ 142     1 %

        Amortization of intangible assets for the quarter and six months ended June 30, 2013, remained relatively flat compared to the quarter and six months ended June 30, 2012.

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Interest Income

 
  Quarter Ended
June 30,
  Change   Six Months Ended
June 30,
  Change  
 
  2013   2012   $   %   2013   2012   $   %  
 
  (in thousands, except percentages)
 

Interest income

  $ 174   $ 176   $ (2 )   (1 )% $ 343   $ 382   $ (39 )   (10 )%

        Interest income remained relatively flat for the quarter and six months ended June 30, 2013, compared to the quarter and six months ended June 30, 2012.

Interest Expense

 
  Quarter Ended
June 30,
  Change   Six Months Ended
June 30,
  Change  
 
  2013   2012   $   %   2013   2012   $   %  
 
  (in thousands, except percentages)
 

Interest expense

  $ 3,191   $ 3,582   $ (391 )   (11 )% $ 6,383   $ 7,041   $ (658 )   (9 )%

        The decrease in interest expense for the quarter and six months ended June 30, 2013, compared to the quarter and six months ended June 30, 2012, was primarily due to lower amounts outstanding under the 2011 Credit Agreement as a result of principal repayments.

Other Income, Net

 
  Quarter Ended
June 30,
  Change   Six Months Ended
June 30,
  Change  
 
  2013   2012   $   %   2013   2012   $   %  
 
  (in thousands, except percentages)
 

Other income, net

  $ 82   $ 22   $ 60     273 % $ 240   $ 343   $ (103 )   (30 )%

        The increase in other income, net, for the quarter ended June 30, 2013, compared to the quarter ended June 30, 2012, was primarily due to an increase in gains associated with foreign currency exchange transactions.

        The decrease in other income, net, for the six months ended June 30, 2013, compared to the six months ended June 30, 2012, was primarily due to an increase in losses associated with foreign currency exchange transactions.

Provision for Income Taxes

 
  Quarter Ended
June 30,
  Six Months Ended
June 30,
 
 
  2013   2012   2013   2012  
 
  (in thousands, except percentages)
 

Provision for income taxes

  $ 3,530   $ 3,507   $ 8,583   $ 7,357  

Effective income tax rate

    39.2 %   35.9 %   36.7 %   34.3 %

        For each of the quarters ended June 30, 2013 and 2012, we recorded a tax provision of $3.5 million on pretax income of $9.0 million and $9.8 million, respectively. The increase in our effective income tax rate for the quarter ended June 30, 2013, compared to the quarter ended June 30, 2012, was primarily due to the treatment of costs related to the Separation as a permanent difference in the quarter ended June 30, 2013 as well as a higher proportion of pre-tax income in the U.S., for which the tax rate is higher than the tax rate on foreign earnings as the statutory rate in the U.K. is lower than that in the U.S.

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        For the six months ended June 30, 2013 and 2012, we recorded a tax provision of $8.6 million and $7.4 million, respectively, on pretax income of $23.4 million and $21.5 million, respectively. The increase in our effective income tax rate for the six months ended June 30, 2013, compared to the six months ended June 30, 2012, was primarily due to the treatment of costs related to the Separation as a permanent difference in the six months ended June 30, 2013 as well as a higher proportion of pre-tax income in the U.S., for which the tax rate is higher than the tax rate on foreign earnings as the statutory rate in the U.K. is lower than that in the U.S.


Year Ended December 31, 2012 compared to Year Ended December 31, 2011

        The following table sets forth, for the periods presented, selected historical consolidated statements of operations. The information contained in the table below should be read in conjunction with Critical Accounting Policies, Estimates and Assumptions, Liquidity and Capital Resources, Contractual Obligations, Other Commitments, and Quantitative and Qualitative Disclosures About Market Risk included in "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as the consolidated financial statements and notes thereto included elsewhere in this Information Statement.

 
  Year Ended
December 31,
 
 
  2012   2011  
 
  (in thousands)
 

Revenues

  $ 613,514   $ 587,249  

Operating expenses:

             

Cost of revenues

    386,746     371,717  

Sales and marketing

    104,913     97,605  

General and administrative

    52,123     50,646  

Amortization of intangible assets

    25,543     25,188  

Restructuring and other exit costs

        876  
           

Total operating expenses

    569,325     546,032  
           

Operating income

    44,189     41,217  

Interest income

    750     1,253  

Interest expense

    (13,562 )   (22,897 )

Other income, net

    627     1,740  
           

Income before income taxes

    32,004     21,313  

Provision for income taxes

    10,830     5,592  
           

Net income

  $ 21,174   $ 15,721  
           

Revenues

 
  Year Ended
December 31,
  Change  
 
  2012   2011   $   %  
 
  (in thousands, except percentages and
average order value)

 

Products

  $ 477,579   $ 454,206   $ 23,373     5 %

Services

    135,935     133,043     2,892     2 %
                     

Total revenues

  $ 613,514   $ 587,249   $ 26,265     4 %
                     

Consumer orders

    7,020     6,628     392     6 %

Average order value

  $ 61.26   $ 62.15   $ (0.89 )   (1 )%

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        Excluding the unfavorable impact of foreign currency exchange rates of $1.6 million due to a weaker British Pound versus the U.S. Dollar, revenues increased by $27.9 million, or 5%. The Flying Flowers, Flowers Direct and Drake Algar businesses contributed an incremental $6.6 million to revenues during the year ended December 31, 2012 and the existing consumer and florist businesses contributed the remaining $21.3 million of growth, primarily in products revenue.

        Products revenues increased 5%, driven by a 6% increase in consumer order volume due to the additional volume from the Flying Flowers and Flowers Direct businesses. Partially offsetting this increase was a decrease in average order value primarily due to the incremental consumer order volume generated by the Flying Flowers and Flowers Direct businesses, which have lower average order values than the existing consumer business. Excluding order volume from the Flying Flowers and Flowers Direct businesses, consumer order volume grew 3%. Excluding the impact of Flying Flowers and Flowers Direct and the unfavorable impact of foreign currency exchange rates, average order value increased 1%.

        The increase in services revenues was primarily related to an increase in order-related revenues in our floral network.

Cost of Revenues

 
  Year Ended
December 31,
  Change  
 
  2012   2011   $   %  
 
  (in thousands, except percentages)
 

Products

  $ 366,935   $ 351,898   $ 15,037     4 %

Services

    19,811     19,819     (8 )   %
                     

Total cost of revenues

  $ 386,746   $ 371,717   $ 15,029     4 %
                     

Cost of products revenues as a percentage of products revenues

    76.8 %   77.5 %            

Cost of services revenues as a percentage of services revenues

    14.6 %   14.9 %            

Total cost of revenues as a percentage of total revenues

    63.0 %   63.3 %            

        Excluding the favorable impact of foreign currency exchange rates of $1.1 million, cost of revenues increased by $16.1 million, or 4%, primarily due to an increase in cost of products revenues related to an increase in consumer order volume. Cost of revenues as a percentage of revenues was relatively flat in both periods.

Sales and Marketing

 
  Year Ended
December 31,
  Change  
 
  2012   2011   $   %  
 
  (in thousands, except percentages)
 

Sales and marketing

  $ 104,913   $ 97,605   $ 7,308     7 %

Sales and marketing expenses as a percentage of revenues

    17.1 %   16.6 %            

        The increase in sales and marketing expenses was primarily due to a $4.7 million increase in marketing costs in the consumer business and a $1.8 million increase in marketing expenditures related to an increase in floral network order volume. Marketing costs in the consumer business increased $1.8 million due to an increase in variable costs associated with an increase in consumer order volume,

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$1.0 million due to an increase in higher cost marketing programs, and $1.9 million as a result of the addition of marketing expenditures of the Flying Flowers, Flowers Direct and Drake Algar businesses.

General and Administrative

 
  Year Ended
December 31,
  Change  
 
  2012   2011   $   %  
 
  (in thousands, except percentages)
 

General and administrative

  $ 52,123   $ 50,646   $ 1,477     3 %

General and administrative expenses as a percentage of revenues

    8.5 %   8.6 %            

        The increase in general and administrative expenses was primarily due to a $0.9 million increase in legal costs primarily related to the Marks and Spencer plc proceeding, a $0.5 million increase in depreciation, and $0.5 million of transaction-related costs incurred in connection with the acquisition of the Gifts Division of Flying Brands Limited, partially offset by a decrease in stock-based compensation of $0.4 million primarily due to a decline in United Online's stock price in recent years.

Amortization of Intangible Assets

 
  Year Ended
December 31,
  Change  
 
  2012   2011   $   %  
 
  (in thousands, except percentages)
 

Amortization of intangible assets

  $ 25,543   $ 25,188   $ 355     1 %

        The increase in amortization of intangible assets was due to the addition of amortizable intangible assets related to the acquisition of the Gifts Division of Flying Brands Limited in the second quarter of 2012.

Restructuring and Other Exit Costs

 
  Year Ended
December 31,
  Change  
 
  2012   2011   $   %  
 
  (in thousands, except
percentages)

 

Restructuring and other exit costs

  $   $ 876   $ (876 )   (100 )%

        Restructuring and other exit costs for the year ended December 31, 2011 consisted of employee termination costs related to reductions in headcount.

Interest Income

 
  Year Ended
December 31,
  Change  
 
  2012   2011   $   %  
 
  (in thousands, except
percentages)

 

Interest income

  $ 750   $ 1,253   $ (503 )   (40 )%

        The decrease in interest income was primarily due to a decrease in interest income on long-term receivables from our technology system sales.

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Interest Expense

 
  Year Ended
December 31,
  Change  
 
  2012   2011   $   %  
 
  (in thousands, except percentages)
 

Interest expense

  $ 13,562   $ 22,897   $ (9,335 )   (41 )%

        The decrease in interest expense was primarily due to a $6.1 million loss on extinguishment of debt, which was recorded in the year ended December 31, 2011 and, to a lesser extent, lower interest rates, as a result of the June 2011 refinancing of our credit facility and lower amounts outstanding under the 2011 Credit Agreement as a result of repayments.

Other Income, Net

 
  Year Ended
December 31,
  Change  
 
  2012   2011   $   %  
 
  (in thousands, except percentages)
 

Other income, net

  $ 627   $ 1,740   $ (1,113 )   (64 )%

        The decrease in other income, net, was primarily due to a non-income tax refund during the year ended December 31, 2011.

Provision for Income Taxes

 
  Year Ended
December 31,
 
 
  2012   2011  
 
  (in thousands, except
percentages)

 

Provision for income taxes

  $ 10,830   $ 5,592  

Effective income tax rate

    33.8 %   26.2 %

        The increase in the effective income tax rate was primarily due to a higher proportion of pre-tax income in the U.S., for which the tax rate is higher than the tax rate on foreign earnings and a reduction in state income taxes in the U.S. in the year ended December 31, 2011.

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Year Ended December 31, 2011 compared to Year Ended December 31, 2010

        The following table sets forth, for the periods presented, selected historical consolidated statements of operations. The information contained in the table below should be read in conjunction with Critical Accounting Policies, Estimates and Assumptions, Liquidity and Capital Resources, Contractual Obligations, Other Commitments, and Quantitative and Qualitative Disclosures About Market Risk included in "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as the consolidated financial statements and notes thereto included elsewhere in this Information Statement.

 
  Year Ended
December 31,
 
 
  2011   2010  
 
  (in thousands)
 

Revenues

  $ 587,249   $ 554,576  

Operating expenses:

             

Cost of revenues

    371,717     347,565  

Sales and marketing

    97,605     94,230  

General and administrative

    50,646     53,086  

Amortization of intangible assets

    25,188     26,008  

Restructuring and other exit costs

    876     1,574  
           

Total operating expenses

    546,032     522,463  
           

Operating income

    41,217     32,113  

Interest income

    1,253     1,426  

Interest expense

    (22,897 )   (23,962 )

Other income, net

    1,740     426  
           

Income before income taxes

    21,313     10,003  

Provision for income taxes

    5,592     3,396  
           

Net income

  $ 15,721   $ 6,607  
           

Revenues

 
  Year Ended
December 31,
  Change  
 
  2011   2010   $   %  
 
  (in thousands, except percentages and
average order value)

 

Products

  $ 454,206   $ 420,470   $ 33,736     8 %

Services

    133,043     134,106     (1,063 )   (1 )%
                     

Total revenues

  $ 587,249   $ 554,576   $ 32,673     6 %
                     

Consumer orders

    6,628     6,361     267     4 %

Average order value

  $ 62.15   $ 59.72   $ 2.43     4 %

        Excluding the favorable impact of foreign currency exchange rates of $5.6 million due to a stronger British Pound versus the U.S. Dollar, revenues increased by $27.1 million, or 5%, compared to the prior-year period. The increase in products revenues was primarily due to a 4% increase in average order value (a 3% increase excluding the impact of foreign currency exchange rates) for the year ended December 31, 2011, compared to the year ended December 31, 2010 and a 4% increase in consumer order volume. The increase in average order value was driven primarily by increased merchandise values, partially offset by higher discounts, primarily related to group-buying initiatives. The decrease in

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services revenues was primarily related to a decrease in membership and subscription-based services revenues.

Cost of Revenues

 
  Year Ended
December 31,
  Change  
 
  2011   2010   $   %  
 
  (in thousands, except percentages)
 

Products

  $ 351,898   $ 327,691   $ 24,207     7 %

Services

    19,819     19,874     (55 )   %
                     

Total cost of revenues

  $ 371,717   $ 347,565   $ 24,152     7 %
                     

Cost of products revenues as a percentage of products revenues

    77.5 %   77.9 %            

Cost of services revenues as a percentage of services revenues

    14.9 %   14.8 %            

Total cost of revenues as a percentage of total revenues

    63.3 %   62.7 %            

        Excluding the unfavorable impact of foreign currency exchange rates of $3.9 million, cost of revenues increased by $20.3 million, or 6%, compared to the prior-year period primarily due to higher consumer order volume. Cost of revenues as a percentage of revenues was negatively impacted by higher discounts, as discussed above.

Sales and Marketing

 
  Year Ended
December 31,
  Change  
 
  2011   2010   $   %  
 
  (in thousands, except percentages)
 

Sales and marketing

  $ 97,605   $ 94,230   $ 3,375     4 %

Sales and marketing expenses as a percentage of revenues

    16.6 %   17.0 %            

        Excluding the unfavorable impact of foreign currency exchange rates of $0.7 million, sales and marketing expenses increased by $2.7 million, or 3%, compared to the prior-year period. The increase was driven by an increase in variable costs associated with an increase in consumer order volume.

General and Administrative

 
  Year Ended
December 31,
  Change  
 
  2011   2010   $   %  
 
  (in thousands, except percentages)
 

General and administrative

  $ 50,646   $ 53,086   $ (2,440 )   (5 )%

General and administrative expenses as a percentage of revenues

    8.6 %   9.6 %            

        The decrease in general and administrative expenses was primarily attributable to a $2.1 million decrease in bad debt expense and a $1.2 million decrease in stock-based compensation primarily due to a decline in United Online's stock price in recent years, partially offset by a $0.5 million increase in depreciation expense.

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Amortization of Intangible Assets

 
  Year Ended
December 31,
  Change  
 
  2011   2010   $   %  
 
  (in thousands, except percentages)
 

Amortization of intangible assets

  $ 25,188   $ 26,008   $ (820 )   (3 )%

        The decrease in amortization of intangible assets was due to certain customer lists becoming fully amortized in the year ended December 31, 2010.

Restructuring and Other Exit Costs

 
  Year Ended
December 31,
  Change  
 
  2011   2010   $   %  
 
  (in thousands, except percentages)
 

Restructuring and other exit costs

  $ 876   $ 1,574   $ (698 )   (44 )%

        Restructuring and other exit costs for the year ended December 31, 2011 consisted of employee termination costs related to reductions in headcount. Restructuring and other exit costs for the year ended December 31, 2010 primarily related to the closure of certain call center facilities in the U.S. and the U.K.

Interest Income

 
  Year Ended
December 31,
  Change  
 
  2011   2010   $   %  
 
  (in thousands, except percentages)
 

Interest income

  $ 1,253   $ 1,426   $ (173 )   (12 )%

        The decrease in interest income was primarily due to lower interest income on long-term receivables from our technology sales.

Interest Expense

 
  Year Ended
December 31,
  Change  
 
  2011   2010   $   %  
 
  (in thousands, except percentages)
 

Interest expense

  $ 22,897   $ 23,962   $ (1,065 )   (4 )%

        The decrease in interest expense was primarily due to a lower effective interest rate, including accretion of discounts, as a result of the June 2011 refinancing of our credit facility, as well as reduced interest expense as a result of lower average debt balances, partially offset by a $6.1 million loss on extinguishment of debt, which was recorded in the year ended December 31, 2011, related to such refinancing.

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Other Income, Net

 
  Year Ended
December 31,
  Change  
 
  2011   2010   $   %  
 
  (in thousands, except percentages)
 

Other income, net

  $ 1,740   $ 426   $ 1,314     308 %

        The increase in other income, net, was primarily due to a $1.1 million non-income tax refund during the year ended December 31, 2011.

Provision for Income Taxes

 
  Year Ended
December 31,
 
 
  2011   2010  
 
  (in thousands,
except percentages)

 

Provision for income taxes

  $ 5,592   $ 3,396  

Effective income tax rate

    26.2 %   33.9 %

        The decrease in the effective income tax rate was primarily due to a lower proportion of non-deductible expenses on pre-tax income in the year ended December 31, 2011, as compared to the year ended December 31, 2010, and a reduction in state income taxes in the U.S. in the year ended December 31, 2011, partially offset by a higher proportion of pre-tax income in the U.S., for which the tax rate is higher than the rate on foreign earnings.

Liquidity and Capital Resources

        In connection with our acquisition by United Online in August 2008, UNOLA Corp., which was then an indirect wholly-owned subsidiary of United Online, and which subsequently merged into FTD Group, entered into a $425 million senior secured credit agreement with Wells Fargo Bank, National Association, as Administrative Agent (the "2008 Credit Agreement"), consisting of (1) a term loan A facility of $75 million, (2) a term loan B facility of $300 million, and (3) a revolving credit facility of up to $50 million. On June 10, 2011, FTD Group entered into the 2011 Credit Agreement with Wells Fargo Bank, National Association, as Administrative Agent for the lenders, to refinance the 2008 Credit Agreement. The 2011 Credit Agreement provided FTD Group with a $315 million senior secured credit facility consisting of (1) a $265 million seven-year term loan (the "2011 Term Loan"), and (2) a $50 million five-year revolving credit facility (the "2011 Revolving Credit Facility" and together with the 2011 Term Loan, the "2011 Credit Facilities"), and certain other financial accommodations, including letters of credit.

        On June 10, 2011, FTD Group repaid in full all outstanding indebtedness under the 2008 Credit Agreement. No penalties were paid in connection with such repayment. The repayment of obligations under the 2008 Credit Agreement was financed with the proceeds of the 2011 Term Loan borrowings and FTD Group's available cash. No funds were borrowed under the 2011 Revolving Credit Facility at closing or through June 30, 2013.

        Under the terms of the 2011 Credit Agreement, we were generally restricted from transferring funds and other assets to United Online, with certain exceptions, including an annual basket of $15 million (subject to adjustment based on excess cash flow calculations) which was permitted to be used to make cash dividends, loans, and advances to United Online, provided certain terms and conditions specified in the 2011 Credit Agreement were satisfied. These restrictions resulted in restricted net assets (as defined in Rule 4-08(e)(3) of Regulation S-X) totaling $277.3 million, including cash of $67.3 million, at December 31, 2012. In May 2012, we made a voluntary debt prepayment of

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$17.0 million on the outstanding borrowings under the 2011 Credit Agreement, which had eliminated all future scheduled mandatory principal payments. The 2011 Credit Agreement also included provisions which required us to make debt prepayments in the event that we generated consolidated excess cash flow and the net leverage ratio was higher than a threshold level, as defined in the 2011 Credit Agreement, on an annual basis commencing in April 2013 for fiscal year 2012. Such excess cash flow payment, which was paid in April 2013, totaled $10.9 million. 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 interest payment obligations, at least in the next twelve months. We were in compliance with all covenants under the 2011 Credit Agreement at June 30, 2013.

        On July 17, 2013, FTD Companies, Inc. entered into the Credit Agreement to refinance the senior secured credit facilities of FTD Group under the 2011 Credit Agreement. On July 17, 2013, FTD Companies, Inc. drew $220 million of the new $350 million revolving credit facility and used approximately $19 million of its existing cash balance to repay its previously outstanding credit facilities in full and pay fees and expenses related to the Credit Agreement.

        The obligations under the Credit Agreement are guaranteed by FTD Companies, Inc.'s material wholly-owned domestic subsidiaries (collectively, with FTD Companies, Inc., the "U.S. Loan Parties"). In addition, the obligations under the Credit Agreement are secured by a lien on substantially all of the assets of the U.S. Loan Parties, including a pledge of all of the outstanding capital stock of certain direct subsidiaries of the U.S. Loan Parties (except with respect to foreign subsidiaries and certain domestic subsidiaries whose assets consist primarily of foreign subsidiary equity interests, in which case such pledge shall be limited to 66% of the outstanding capital stock).

        The interest rates set forth in the Credit Agreement are either a base rate plus a margin ranging from 0.50% per annum to 1.25% per annum, or LIBOR plus a margin ranging from 1.50% per annum to 2.25% per annum, calculated according to FTD Companies, Inc.'s net leverage ratio. The initial base rate margin is 0.75% per annum and the initial LIBOR margin is 1.75% per annum. In addition, FTD Companies, Inc. will pay a commitment fee ranging from 0.20% per annum to 0.35% per annum on the unused portion of the revolving credit facility. The Credit Agreement contains customary representations and warranties, events of default, affirmative covenants and negative covenants, that, among other things, require FTD Companies, Inc. and its subsidiaries to maintain compliance with a maximum net leverage ratio and a minimum interest coverage ratio, and impose restrictions and limitations on, among other things, investments, dividends, and asset sales, and our ability to incur additional debt and additional liens.


Six Months Ended June 30, 2013 compared to Six Months Ended June 30, 2012

        Our total cash and cash equivalents balance decreased by $18.6 million to $48.8 million at June 30, 2013, compared to $67.3 million at December 31, 2012. Our summary cash flows for the periods presented were as follows (in thousands):

 
  Six Months Ended
June 30,
 
 
  2013   2012  

Net cash provided by operating activities

  $ 15,036   $ 24,648  

Net cash used for investing activities

  $ (4,067 ) $ (6,383 )

Net cash used for financing activities

  $ (28,864 ) $ (20,838 )

        Net cash provided by operating activities decreased by $9.6 million, or 39%. Net cash provided by operating activities is driven by our net income adjusted for non-cash items and changes in working capital, including, but not limited to, depreciation and amortization, stock-based compensation, and deferred taxes. The decrease in net cash provided by operating activities was primarily due to an

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$8.4 million unfavorable change in working capital and a $1.9 million decrease in non-cash items, partially offset by a $0.7 million increase in net income. The change in working capital was primarily related to a decrease in accounts payable of $5.8 million related to the timing of payments and a $4.3 million decrease in taxes payable related to timing of tax payments. Changes in working capital can cause variation in our cash flows provided by operating activities due to seasonality, timing and other factors.

        Net cash used for investing activities decreased by $2.3 million. The decrease was primarily due to $3.9 million of cash paid for the acquisition of the Gifts Division of Flying Brands Limited during the six months ended June 30, 2012. This decrease was partially offset by a $1.8 million increase in purchases of property and equipment.

        Capital expenditures for the six months ended June 30, 2013 totaled $4.2 million. At June 30, 2013 and December 31, 2012, we had $0.4 million and $1.2 million, respectively, of property and equipment that was not yet paid for and was included in accounts payable and other liabilities in the consolidated balance sheets. We currently anticipate that our total capital expenditures for 2013 will be in the range of $10 million to $15 million, which includes the aforementioned $1.2 million of purchases on account at December 31, 2012, as well as capital expenditures related to the Separation. The actual amount of future capital expenditures may fluctuate due to a number of factors, including, without limitation, potential future acquisitions and new business initiatives, which are difficult to predict and which could change significantly over time. Additionally, technological advances may require us to make capital expenditures to develop or acquire new equipment or technology in order to replace aging or technologically obsolete equipment.

        Net cash used for financing activities increased by $8.0 million. In the six months ended June 30, 2013, we paid dividends of $18.1 million to United Online compared to $3.2 million in the six months ended June 30, 2012. Also, in the six months ended June 30, 2013, we repaid $10.9 million on the outstanding balance under the 2011 Credit Agreement, compared to payments totaling $17.7 million in the six months ended June 30, 2012.

        Based on our current projections, we expect to continue to generate positive cash flows from operations at least for the next twelve months. We may use our existing cash balances and future cash generated from operations to fund, among other things, optional prepayments on the outstanding balance under the Credit Agreement; the development and/or acquisition of other services, businesses, or technologies; and future capital expenditures.

        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, 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 service our debt obligations. 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 any debt securities that we issue might have rights, preferences, or privileges senior to holders of our common stock. In addition, trends in the securities and credit markets may restrict our ability to raise any such additional funds, at least in the near term.

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Year Ended December 31, 2012 compared to Year Ended December 31, 2011

        Our total cash and cash equivalents balance increased by $20.2 million to $67.3 million at December 31, 2012, compared to $47.1 million at December 31, 2011. Our summary cash flows for the periods presented were as follows (in thousands):

 
  Year Ended December 31,  
 
  2012   2011  

Net cash provided by operating activities

  $ 66,955   $ 43,688  

Net cash used for investing activities

  $ (10,509 ) $ (7,897 )

Net cash used for financing activities

  $ (36,958 ) $ (20,358 )

        Net cash provided by operating activities increased by $23.3 million, or 53%, for the year ended December 31, 2012, compared to the year ended December 31, 2011. Net cash provided by operating activities is driven by our net income adjusted for non-cash items and changes in working capital, including, but not limited to, depreciation and amortization, stock-based compensation, loss on extinguishment of debt, and deferred taxes. The increase in net cash provided by operating activities was due to a $25.4 million favorable change in working capital primarily due to timing of payments to United Online and other vendors and the timing and amounts of income tax payments, as well as a $5.5 million increase in net income. These increases were partially offset by a $7.6 million decrease in non-cash items, which consisted primarily of a $6.1 million loss on extinguishment of debt related to the refinancing of the 2008 Credit Agreement in June 2011 and a $2.5 million decrease in deferred taxes. Changes in working capital can cause variation in our cash flows provided by operating activities due to timing and other factors.

        Net cash used for investing activities increased by $2.6 million for the year ended December 31, 2012, compared to the year ended December 31, 2011. The increase was primarily due to $3.9 million of cash paid for the acquisition of the Gifts Division of Flying Brands Limited during the year ended December 31, 2012. This increase was partially offset by a $1.6 million decrease in cash paid for purchases of property and equipment.

        Capital expenditures for the year ended December 31, 2012 totaled $7.7 million, including $1.2 million of property and equipment that was not yet paid for and was included in accounts payable and other liabilities in the consolidated balance sheets. We currently anticipate that our total capital expenditures for 2013 will be in the range of $10 million to $15 million, which includes the aforementioned $1.2 million of purchases on account at December 31, 2012, as well as capital expenditures related to the Separation. The actual amount of future capital expenditures may fluctuate due to a number of factors, including, without limitation, potential future acquisitions and new business initiatives, which are difficult to predict and which could change significantly over time. Additionally, technological advances may require us to make capital expenditures to develop or acquire new equipment or technology in order to replace aging or technologically obsolete equipment.

        Net cash used for financing activities increased by $16.6 million for the year ended December 31, 2012, compared to the year ended December 31, 2011. In June 2011, we refinanced the 2008 Credit Agreement and, in connection with the refinancing, we received net proceeds of $261.3 million, which along with our available cash, were used to repay the outstanding balance on the 2008 Credit Agreement of $264.6 million. In the year ended December 31, 2012, we repaid $17.7 million on the outstanding balance under the 2011 Credit Agreement. In addition, dividends paid to United Online for the year ended December 31, 2012 increased by $4.3 million, compared to the year ended December 31, 2011.

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Year Ended December 31, 2011 compared to Year Ended December 31, 2010

        Our summary cash flows for the periods presented were as follows (in thousands):

 
  Year Ended December 31,  
 
  2011   2010  

Net cash provided by operating activities

  $ 43,688   $ 56,220  

Net cash used for investing activities

  $ (7,897 ) $ (9,588 )

Net cash used for financing activities

  $ (20,358 ) $ (49,985 )

        Net cash provided by operating activities decreased by $12.5 million, or 22%, for the year ended December 31, 2011, compared to the year ended December 31, 2010. Net cash provided by operating activities is driven by our net income adjusted for non-cash items and changes in working capital, including, but not limited to, depreciation and amortization, stock-based compensation, loss on extinguishment of debt and deferred taxes. The decrease in net cash provided by operating activities was due to a $24.1 million unfavorable change in working capital requirements primarily related to the timing of payments to United Online, partially offset by an $11.6 million increase in net income, adjusted for non-cash items. Changes in working capital can cause variation in our cash flows provided by operating activities due to timing and other factors.

        Net cash used for investing activities decreased by $1.7 million for the year ended December 31, 2011, compared to the year ended December 31, 2010. The decrease was primarily due to a $1.5 million decrease in cash paid for purchases of property and equipment.

        Net cash used for financing activities decreased by $29.6 million for the year ended December 31, 2011, compared to the year ended December 31, 2010. In the year ended December 31, 2011, we refinanced the 2008 Credit Agreement and, in connection with the refinancing, we received net proceeds of $261.3 million, which, along with our available cash, were used to repay the outstanding balance on the 2008 Credit Agreement of $264.6 million. In the year ended December 31, 2010, we repaid $50.0 million on the outstanding balance of the 2008 Credit Agreement. Additionally, dividends paid to United Online were $15.0 million in the year ended December 31, 2011. There were no dividends paid in the year ended December 31, 2010.

Contractual Obligations

        Contractual obligations at December 31, 2012 were as follows (in thousands):

 
  Total   Less than
1 Year
  1 Year to
Less than
3 Years
  3 Years to
Less than
5 Years
  More than
5 Years
 

Debt, including interest

  $ 310,606   $ 22,516   $ 22,793   $ 24,394   $ 240,903  

Noncancelable operating leases

    2,953     1,666     1,122     165      

Purchase obligations

    12,489     10,667     1,822          

Other liabilities

    2,811     1,273     830     200     508  
                       

Total

  $ 328,859   $ 36,122   $ 26,567   $ 24,759   $ 241,411  
                       

        Interest obligations were estimated using implied forward interest rates for 3-month LIBOR based on quoted market rates from the U.S. dollar-denominated interest-rate swap curve. At December 31, 2012, we had liabilities for uncertain tax positions totaling $0.7 million, $0.4 million of which was included in other liabilities in the contractual obligations table above and, at December 31, 2012, was expected to be due in less than one year. We are not able to reasonably estimate when or if cash payments for long-term liabilities related to uncertain tax positions will occur.

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        Commitments under letters of credit at December 31, 2012 were scheduled to expire as follows (in thousands):

 
  Total   Less than
1 Year
 

Letters of credit

  $ 1,473   $ 1,473  

        Standby letters of credit are maintained to secure credit card processing activity and additional letters of credit are maintained related to inventory purchases.

Other Commitments

        In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, sureties and insurance companies, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. In addition, we expect to enter into indemnification agreements with our directors and certain of our officers and employees that will require FTD, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. We have also agreed to indemnify certain former officers, directors, and employees of acquired companies in connection with the acquisition of such companies. We expect to maintain director and officer insurance, which may cover certain liabilities, including those arising from our obligation to indemnify our directors and certain of our officers and employees, and former officers, directors, and employees of acquired companies, in certain circumstances.

        It is not possible to determine the maximum potential amount of exposure under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements may not be subject to maximum loss clauses.

Off-Balance Sheet Arrangements

        At December 31, 2012, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.

Recent Accounting Pronouncements

        Testing Indefinite-Lived Intangible Assets for Impairment—In July 2012, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, as codified in ASC 350. The amendments in this update allow an entity to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired, thus necessitating that it perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired. An entity choosing to perform the qualitative assessment would need to identify and consider those events and circumstances that, individually or in the aggregate, most significantly affect an indefinite-lived intangible asset's fair value. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. The amendments in this update are effective for annual and interim impairment tests of indefinite-lived intangible assets performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued. We perform our

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annual impairment assessment in the fourth quarter and adopted this update in the quarter ended December 31, 2012. The adoption of this update did not have a material impact on our consolidated financial statements.

        Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income—In February 2013, the FASB issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, as codified in ASC 220. The amendments in this update require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. For the Company, the amendments in this update are effective prospectively for reporting periods beginning after December 15, 2013. We do not expect this update to have a material impact on our consolidated financial statements.

        Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists—In July 2013, FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, as codified in ASC 740, Income Taxes. The amendments in this update state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. However, to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This ASU applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The amendments in this ASU will be effective for us for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. We are currently assessing the impact of this update on our consolidated financial statements.

Inflation

        Inflation did not have a material impact on our consolidated revenues and results of operations during the years ended December 31, 2012, 2011, and 2010, and we do not currently anticipate that inflation will have a material impact on our consolidated revenues and results of operations for the year ending December 31, 2013.

Quantitative and Qualitative Disclosures About Market Risk

        We are exposed to certain market risks arising from transactions in the normal course of business, principally risk associated with interest rate and foreign currency exchange rate fluctuations.

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Interest Rate Risk

        We are exposed to interest rate risk on our cash and cash equivalents and the outstanding balance of the Credit Agreement. The interest rate set forth in the Credit Agreement is either a base rate plus a margin ranging from 0.50% per annum to 1.25% per annum, or LIBOR plus a margin ranging from 1.50% per annum to 2.25% per annum, calculated according to FTD's net leverage ratio. In March 2012, the Company entered into forward starting interest rate cap instruments based on 3-month LIBOR that are effective from January 2015 to June 2018 and have aggregated notional values totaling $130 million. The interest rate cap instruments are designated as cash flow hedges against expected future cash flows attributable to future 3-month LIBOR interest payments on outstanding borrowings. The gains or losses on the instruments are reported in other comprehensive income to the extent that they are effective and will be reclassified into earnings when the expected future cash flows, beginning in January 2015 through June 2018 and attributable to future 3-month LIBOR interest payments, are recognized in earnings. A 100 basis point increase in LIBOR rates would result in an estimated annual increase in our interest expense related to the outstanding debt under the Credit Agreement of approximately $2.2 million.

        While we do not currently maintain any short-term investments, we still maintain deposits, which are classified as cash equivalents. Therefore, our interest income is sensitive to changes in the general level of U.S. and certain foreign interest rates.

Foreign Currency Exchange Risk

        We transact business in foreign currencies, and we are exposed to risk resulting from fluctuations in foreign currency exchange rates, particularly the British Pound ("GBP"), the Euro ("EUR"), and the Canadian Dollar ("CAD"), which may result in gains or losses reported in our results of operations. The volatilities in GBP, 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 loss in the consolidated balance sheets. 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 exchange rate trend in currencies. Therefore, changes in foreign currency exchange rates may negatively affect our consolidated revenues and net income. A 10% adverse change in overall foreign currency exchange rates over an entire year would not have a material impact on estimated annual revenues or estimated annual income before income taxes. These estimates assume an adverse shift in all foreign currency exchange rates against the U.S. Dollar, which do not always move in the same direction or in the same degrees, and actual results may differ materially. Net foreign currency transaction gains or losses arising from transactions denominated in currencies other than the local functional currency are included in other income, net, in the consolidated statements of operations.

        At times, we utilize forward foreign currency exchange contracts to protect the value of our net investments in certain foreign subsidiaries denominated in currencies other than the U.S. Dollar. These contracts are designated as hedges of net investments in foreign entities. At June 30, 2013, we had no forward foreign currency exchange contracts outstanding. At December 31, 2012, the notional value of open forward foreign currency exchange contracts accounted for as net investment hedges totaled $0.9 million and $1.9 million, respectively.

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BUSINESS

Our Business

        We are a premier floral and gift products and services company. We provide floral, gift and related products and services to consumers and retail florists, as well as to other retail locations offering floral and gift products primarily in the U.S., Canada, the U.K., and the Republic of Ireland. Our business uses the highly-recognized FTD and Interflora brands, both supported by the iconic Mercury Man logo that is displayed in tens of thousands of floral shops worldwide. Our portfolio of brands also includes Flying Flowers, Flowers Direct, and Drake Algar in the U.K. We are a leading provider of floral and gift items to consumers, which we refer to as our consumer business, and a provider of floral network products and services, which we refer to as our floral network business. These businesses are complementary as the majority of floral orders generated by the consumer business are fulfilled and hand-delivered by members of our floral networks, with the remaining orders delivered via direct shipment from third-party suppliers. We do not currently own or operate retail locations except for one retail shop and six concession stands in the U.K. We do not maintain significant physical inventory because our floral network members and third-party suppliers maintain substantially all floral and gift physical inventory and facilities. We generally receive payment from consumers before paying our floral network members and third parties for fulfillment and delivery of products.

        Consumer Business.    We operate in the U.S. and Canada, primarily through the www.ftd.com website and the 1-800-SEND-FTD telephone number, and in the U.K. and the Republic of Ireland, primarily through the www.interflora.co.uk website and various telephone numbers. We also operate mobile websites for these same markets that are optimized for mobile devices with Internet connections. While floral arrangements and plants are our primary offerings, we also market and sell gift items, including jewelry, sweets, gift baskets, wine, fruit, and spa products.

        Consumers place orders on our websites and, to a much lesser extent, over the telephone. Orders are transmitted to floral network members or third-party suppliers for processing and delivery. The majority of consumer orders are hand-delivered by our floral network members, who provide same-day and future-day delivery services. The other consumer orders are fulfilled and shipped directly to the consumer in an elegant gift box by third parties, who provide next-day and future-day delivery services.

        Floral Network Business.    We provide a comprehensive suite of products and services to members of our floral networks, including services that enable such members to send, receive, and deliver floral orders. Floral network members include traditional retail florists, as well as other retail locations offering floral and related products, that are located primarily in the U.S., Canada, the U.K., and the Republic of Ireland. The large networks of floral network members provide an order fulfillment vehicle for our consumer business and allow us to offer same-day delivery capability (subject to certain limitations) to populations throughout the U.S., Canada, the U.K., and the Republic of Ireland.

        Our products and services available to floral network members include access to the FTD and Interflora brands and the Mercury Man logo, supported by various marketing campaigns; access to the floral networks; credit card processing services; e-commerce website services; online advertising tools; clearinghouse services; order transmission services; and system support services, as well as floral-related products, such as fresh flowers and containers. We provide point-of-sale systems and related technology services that enable our floral network members to transmit and receive orders and manage several back office functions of a floral retailer's business, including accounting, customer relationship management, direct marketing campaigns, delivery route management, event planning, and mobile applications. We also act as a national wholesaler to our floral network members, providing branded and non-branded hard goods and cut flowers, as well as packaging, promotional products and a wide variety of other floral-related supplies. Wholesaling branded vases and other hard goods to floral network members helps to ensure consistency between the consumer orders fulfilled by our floral network members and the product imagery displayed on our websites.

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Our Competitive Strengths

        We believe that our company possesses a number of competitive advantages that distinguishes us from our competitors, including:

Our Business Strategy

        Our vision is to be the leading and most trusted floral and gifting company in the world. Our mission is to inspire, support, and delight our customers when expressing life's most important sentiments.

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        We are seeking to expand our business by, among other things, marketing to our current and potential consumer and floral network customers. Our marketing efforts are primarily focused on generating orders from new and existing customers; marketing our services to our floral network members; attracting new members to our floral networks; and marketing our services to alternative channels such as supermarkets and mass merchants. We also engage in a variety of activities to build and enhance the FTD, Interflora, and associated brands.

        For our consumer business, we engage in multi-channel, integrated marketing efforts, which include online advertising and marketing, including search engine marketing and optimization; social media and group-buying programs; co-marketing and affiliate partnerships and loyalty programs such as airlines, credit card companies and hotel chains; database marketing to existing consumer customers featuring email promotions; direct mail and other forms of print advertising; an email-based reminder service that provides consumers with personalized reminders of occasions such as birthdays, anniversaries, and key gift-giving holidays; and radio and television advertising. As consumer shopping continues to migrate from computers to mobile devices, we are committed to providing the best shopping experience, regardless of device type.

        For our floral network business, our marketing efforts include member appreciation and training events; sponsoring and participating in floral and retail industry trade shows; and offline media campaigns. In addition, many of our marketing efforts for our consumer business are also designed to integrate with and enhance the businesses of our floral network members. By enhancing the FTD and Interflora brands, we increase the possibility that a consumer will place an order directly with one of our floral network members since floral retailers frequently highlight their association with our floral networks in their own marketing efforts. We also employ dedicated sales forces to market our products and services to our floral network members and to encourage other floral retailers to become members of our floral networks.

        As part of our business strategy, we intend to expand the breadth of our brand through organic growth and, where appropriate, through the acquisition of complementary businesses.

Revenue Sources

        We generate revenues primarily from the sale of products and services.

        Products Revenues:    Products revenues are derived primarily from selling floral, gift and related products to consumers. Products revenues also include revenues generated from sales of branded and non-branded hard goods, software and hardware systems, cut flowers, packaging and promotional products, and a wide variety of other floral-related supplies to our floral network members.

        Services Revenues:    Services revenues are derived primarily from orders sent through the floral network and fees for floral network services.

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Industry Background

Consumers

        Floral industry retail purchases in the U.S., including flowers, potted plants, and seeds were approximately $34.3 billion in 2012, according to the U.S. Department of Commerce. Floral industry retail purchases in the U.K., including fresh cut flowers and indoor plants, were approximately £2.2 billion in 2008, according to Mintel, a market research company. Both the U.S. and the U.K. markets are highly fragmented, with thousands of floral industry participants. The floral retail marketplace has evolved considerably. The following sets forth some of the key market trends:

        Floral mass marketers, such as our company, generate floral orders from consumers via the Internet and telephone. Floral mass marketers typically partner with third parties, including retail florists and direct ship merchants, to fulfill and deliver the marketers' floral product orders. The floral mass marketers' share of retail floral purchases has expanded due to shifting consumer preferences towards purchasing floral products online and the emergence of prominent brands with national or international exposure. Growing consumer interest in floral arrangements shipped directly to the consumer via common carrier has also benefited floral mass marketers in recent years.

Traditional Retail Florists and Other Retailers

        There were approximately 15,300 retail florists in the U.S. in 2011, according to the U.S. Census Bureau. The total number of retail florists has declined over the past decade, primarily due to floral products becoming increasingly available for purchase on the Internet and in other retail channels, as well as recent economic challenges, among other factors. Supermarkets, mass merchants, and other retailers have established or increased their presence in the floral products retail market by adding a variety of floral and related products to their merchandise assortments. The emergence of supermarkets and mass merchants as increasingly important distribution channels within the floral products retail market has led many traditional retail florists to expand their merchandise offerings to include giftware, outdoor nursery stock, and seasonal decorations, among other items.

        Floral wire services, which we also refer to as floral network services, utilize proprietary network communications systems to facilitate the transmission and fulfillment of orders among their floral network members. Services provided by floral wire services typically include order transmission, clearinghouse services, marketing, and other services in support of the floral network. Order clearinghouse services play an important role by ensuring the flow of payment between a floral network member sending an order received from a consumer and the member receiving and fulfilling the order, thereby eliminating counterparty credit risk for the floral network members. The growth of floral mass marketers and the Internet channel has led traditional retail florists to increasingly rely on floral

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networks to augment their order volumes. Access to incremental consumer orders for fulfillment is one of the various benefits a member receives from membership in a floral network.

        Providers of floral network services typically offer a broad range of services that are designed to promote revenue growth and facilitate the efficient operation of a retail florist's business, including the ability to send, receive, and deliver floral orders. Additional products and services offered by providers of floral network services include point-of-sale systems and related technology services, credit card processing services, e-commerce website services, online advertising tools, clearinghouse services, order transmission services, and system support services, as well as floral-related products, such as fresh flowers and containers.

Our History

        On August 18, 1910, fifteen American retail florists agreed to exchange orders for out-of-town deliveries. In telegraphing orders to each other from opposite sides of the country, they hoped to eliminate their reliance on trains to send flowers to far-away recipients. Soon independent florists all over America were telegraphing and telephoning orders to each other using the FTD service. Originally called "Florists' Telegraph Delivery Association," FTD was the world's first flowers-by-wire service. In 1965, FTD expanded to include international transactions. FTD later became a for-profit corporation and was renamed "Florists' Transworld Delivery, Inc." In 2006, FTD acquired Interflora.

        FTD Companies, Inc., formerly known as UNOL Intermediate, Inc., is a Delaware corporation that was formed in April 2008 in connection with United Online's acquisition of FTD Group, Inc., a Delaware corporation. FTD Group, Inc., formerly known as Mercury Man Holdings Corporation, is a Delaware corporation that was formed in 2003 by Green Equity Investors IV, L.P., a private investment fund affiliated with Leonard Green & Partners, L.P., solely for the purpose of acquiring majority ownership of FTD, Inc. FTD, Inc. is a Delaware corporation that commenced operations in 1994 and includes the operations of its principal operating subsidiaries, Florists' Transworld Delivery, Inc., FTD.COM, and Interflora.

Competition

        The consumer market for flowers and gifts is highly competitive and fragmented as consumers can purchase the products we offer from numerous sources, including traditional local retail florists, supermarkets, mass merchants, gift retailers, and floral and gift mass marketers. We believe the primary competitive factors in the consumer market are price, quality of products, selection, customer service, ordering convenience, and strength of brand. The floral network services market is highly competitive as well, and retail florists and supermarkets may choose from a variety of providers that offer similar products and services. We believe the primary competitive factors in this market are price, order volume, customer service, services offered, strength of brand, number of members in the network, and fulfillment capabilities. In the U.S., our key competitors in the consumer market include online, catalog and floral and gift retailers and mass market retailers with floral departments, including such companies as 1-800-FLOWERS.COM, Inc., Proflowers.com, and Teleflora. Our key competitors in the U.S. floral network services market include providers of online or e-commerce services, retailers and wholesalers of floral-related products, and other floral network services, such as Teleflora and BloomNet Wire Service, a subsidiary of 1-800-FLOWERS.COM, Inc. International key competitors, in the consumer market, include mass market retailers, such as Asda, Marks & Spencer, Next, and Waitrose/John Lewis, as well as online, catalog and specialty gift retailers such as eFlorist, Serenata Flowers, and Arena. Although we believe that we compete favorably with respect to many competitive factors, some of our competitors have an advantage over us with respect to certain factors.

        We face intense competition in the consumer market. We expect that the sales volumes at supermarkets and mass merchants will continue to increase, and other online floral mass marketers will

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continue to increase their competition with us. In particular, the nature of the Internet as a marketplace facilitates competitive entry and comparative shopping, and we have experienced increased competition. Some of our competitors may have significant competitive advantages over us, may engage in more significant discounting, may devote significantly greater resources to marketing campaigns or other aspects of their business or may respond more quickly and effectively than we can to new or changing opportunities or customer requirements.

        We face intense competition in the market for floral network services. In addition, the number of retail florists has been declining over a number of years. As the number of retail florists decreases, competition for the business of the remaining retail florists is expected to intensify.

Seasonality and Cyclicality

        Our revenues and operating results typically exhibit seasonality. Revenues and operating results tend to be lower for the quarter ending September 30 because none of the most popular floral and gift-giving holidays, which include Mother's Day in the U.S. and the U.K., Valentine's Day, Christmas, Easter, and Thanksgiving, fall within that quarter. In addition, depending on the year, Easter and the U.K. Mother's Day sometimes fall within the quarter ending March 31 and sometimes fall within the quarter ending June 30. Furthermore, depending on the year, certain of the most popular floral and gift-giving holidays, such as Valentine's Day, may occur on a weekend or government holiday. As a result of these variations, we believe that comparisons of our revenues and operating results for any period with those of the immediately preceding period, or in some instances, the same period of the preceding fiscal year, may be of limited relevance in evaluating our historical performance and predicting our future financial performance. Our working capital, cash and any short-term borrowings may also fluctuate during the year as a result of the factors described above.

International Operations

        We have international operations in the U.K. Our operations in the U.K. provide floral, gift and related products and services to consumers and floral network members in the U.K. and the Republic of Ireland. Our U.S. revenues totaled $456.4 million, $436.3 million, and $413.2 million for the years ended December 31, 2012, 2011, and 2010, respectively. International revenues, primarily generated by Interflora in the U.K. and the Republic of Ireland, totaled $157.1 million, $150.9 million, and $141.4 million for the years ended December 31, 2012, 2011, and 2010, respectively. For information regarding risks associated with our international operations, see "Risk Factors." For information regarding long-lived assets, see Note 2—"Segment Information" of the Notes to the Consolidated Financial Statements which appear elsewhere in this Information Statement.

Technology

        In addition to the proprietary technology described in "Our Competitive Strengths," we license from third parties a number of our software applications and components, including applications for our customer support, as well as our client and server applications. These licenses generally have terms ranging from several years to perpetual.

Proprietary Rights

        Our trade names, trademarks, service marks, patents, copyrights, domain names, trade secrets, and other intellectual property are important to the success of our business. In particular, we view our primary trademarks as critical to our success. We principally rely upon patent, trademark, copyright, trade secret, domain name laws, and contract laws to protect our intellectual property and proprietary rights. We also license some of our intellectual property rights, including the Mercury Man logo, to third parties. We continuously assess whether to seek patent and other intellectual property protections

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for those aspects of our businesses and technologies that we believe constitute innovations providing competitive advantages. We generally enter into confidentiality or license agreements with our employees, consultants, and corporate partners, and generally control access to, and distribution of, our technologies, documentation, and other proprietary information. We consider our trademarks, including our FTD, Interflora, Flying Flowers, Flowers Direct, and Drake Algar trademarks, to be very valuable assets, and most of these trademarks have been registered in the U.S. or, in certain cases, in other countries.

Properties

        We own and occupy real property in Downers Grove, Illinois, and Sleaford, England. The Credit Agreement includes a security interest in substantially all of our assets, including a mortgage on the owned real property at the Downers Grove, Illinois, location. We also lease space for call center facilities in Centerbrook, Connecticut, and Medford, Oregon, warehouse space in a distribution center in Aurora, Illinois, and office space in Quebec, Canada. In addition, we lease a flower shop in London, England, and a number of concession stands located within garden centers throughout England. We consider the offices, warehouses and other properties that we own or lease to be in good condition and generally suitable for the purposes for which they are used.

Employees

        As of June 30, 2013, we had 871 employees, 612 of which were located in North America and 259 of which were located in the U.K. None of these employees are subject to a collective bargaining agreement, and we consider our relationship with our employees to be good.

Executive Officers

        See "Management" for information about our executive officers.

Government Regulations

        We are subject to a number of international, federal, state, and local laws and regulations, including, without limitation, those relating to taxation, bulk email or "spam," advertising, user privacy and data protection, consumer protection, antitrust, and unclaimed property. In addition, proposed laws and regulations relating to some or all of the foregoing, as well as to other areas affecting our businesses, are continuously debated and considered for adoption in the U.S. and other countries, and such laws and regulations could be adopted in the future. For additional information, see "Risk Factors."

Legal Proceedings

        In March 2012, Hope Kelm, Barbara Timmcke, Regina Warfel, Brett Reilly, Juan M. Restrepo, and Jennie H. Pham filed a purported class action complaint (the "Kelm Class Action") in United States District Court, District of Connecticut, against the following defendants: (i) Chase Bank USA, N.A., Bank of America, N.A., Capital One Financial Corporation, Citigroup, Inc., and Citibank, N.A. (collectively, the "Credit Card Company Defendants"); (ii) 1-800-Flowers.com, Inc., United Online, Memory Lane, Inc., Classmates International, Inc., FTD Group, Days Inns Worldwide, Inc., Wyndham Worldwide Corporation, PeopleFindersPro, Inc., Beckett Media LLC, Buy.com, Inc., Rakuten USA, Inc., IAC/InterActiveCorp, and Shoebuy.com, Inc. (collectively, the "E-Merchant Defendants"); and (iii) Trilegiant Corporation, Inc. ("Trilegiant"), Affinion Group, LLC ("Affinion"), and Apollo Global Management, LLC ("Apollo"). The complaint alleges (1) violations of the Racketeer Influenced Corrupt Organizations Act ("RICO") by all defendants, and aiding and abetting violations of such act by the Credit Card Company Defendants; (2) aiding and abetting violations of federal mail fraud, wire

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fraud and bank fraud statutes by the Credit Card Company Defendants; (3) violations of the Electronic Communications Privacy Act ("ECPA") by Trilegiant, Affinion and the E-Merchant Defendants, and aiding and abetting violations of such act by the Credit Card Company Defendants; (4) violations of the Connecticut Unfair Trade Practices Act by Trilegiant, Affinion, Apollo, and the E-Merchant Defendants, and aiding and abetting violations of such act by the Credit Card Company Defendants; (5) violation of California Business and Professions Code section 17602 by Trilegiant, Affinion, Apollo, and the E-Merchant Defendants; and (6) unjust enrichment by all defendants. The plaintiffs seek class certification, restitution and disgorgement of all amounts wrongfully charged to and received from plaintiffs, damages, treble damages, punitive damages, preliminary and permanent injunctive relief, attorneys' fees, costs of suit, and pre- and post-judgment interest on any amounts awarded.

        In March 2012, Debra Miller and William Thompson filed a purported class action complaint (the "Miller Class Action") in United States District Court, District of Connecticut, against the following defendants: (i) Trilegiant, Affinion, Apollo, Vertrue, Inc., Webloyalty.com, Inc., and Adaptive Marketing, LLC (collectively, the "Membership Companies"); (ii) 1-800-Flowers.com, Inc., Beckett Media LLC, Buy.com, Inc., Classmates International, Inc., Days Inn Worldwide, Inc., FTD Group, IAC/Interactivecorp, Inc., Memory Lane, Inc., Peoplefinderspro, Inc., Rakuten USA, Inc., Shoebuy.com, Inc., United Online, Wells Fargo & Company, and Wyndham Worldwide Corporation (collectively, the "Marketing Companies"); and (iii) Bank of America, N.A., Capital One Financial Corporation, Chase Bank USA, N.A., and Citibank, N.A. (collectively, the "Credit Card Companies"). The complaint alleges (1) violations of RICO by all defendants, and aiding and abetting violations of such act by the Credit Card Companies; (2) aiding and abetting violations of federal mail fraud, wire fraud and bank fraud statutes by the Credit Card Companies; (3) violations of the ECPA by the Membership Companies and the Marketing Companies, and aiding and abetting violations of such act by the Credit Card Companies; (4) violations of the Connecticut Unfair Trade Practices Act by the Membership Companies and the Marketing Companies, and aiding and abetting violations of such act by the Credit Card Companies; (5) violation of California Business and Professions Code section 17602 by the Membership Companies and the Marketing Companies; and (6) unjust enrichment by all defendants. The plaintiffs seek class certification, restitution and disgorgement of all amounts wrongfully charged to and received from plaintiffs, damages, treble damages, punitive damages, preliminary and permanent injunctive relief, attorneys' fees, costs of suit, and pre- and post-judgment interest on any amounts awarded.

        In April 2012, the Kelm Class Action and the Miller Class Action were consolidated with a related case under the case caption In re Trilegiant Corporation, Inc. In September 2012, the plaintiffs filed their consolidated amended complaint and named five additional defendants. The defendants have responded to the consolidated amended complaint. No trial date has been set.

        In addition, in December 2012, David Frank filed a purported class action complaint (the "Frank Class Action") in United States District Court, District of Connecticut, against the following defendants: Trilegiant, Affinion, Apollo (collectively, the "Frank Membership Companies"); 1-800-Flowers.com, Inc., Beckett Media LLC, Buy.com, Inc., Classmates International, Inc., Days Inn Worldwide, Inc., FTD Group, Hotwire, Inc., IAC/Interactivecorp, Inc., Memory Lane, Inc., Orbitz Worldwide, LLC, PeopleFindersPro, Inc., Priceline.com, Inc., Shoebuy.com, Inc., TigerDirect, Inc., United Online, and Wyndham Worldwide Corporation (collectively, the "Frank Marketing Companies"); Bank of America, N.A., Capital One Financial Corporation, Chase Bank USA, N.A., Chase Paymentech Solutions, LLC, Citibank, N.A., Citigroup, Inc., and Wells Fargo Bank, N.A. (collectively, the "Frank Credit Card Companies"). The complaint alleges (1) violations of RICO by all defendants; (2) aiding and abetting violations of such act by the Frank Credit Card Companies; (3) aiding and abetting commissions of mail fraud, wire fraud and bank fraud by the Frank Credit Card Companies; (4) violation of the ECPA by the Frank Membership Companies and the Frank Marketing Companies, and aiding and abetting violations of such act by the Frank Credit Card Companies;

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(5) violations of the Connecticut Unfair Trade Practices Act by the Frank Membership Companies and the Frank Marketing Companies, and aiding and abetting violations of such act by the Frank Credit Card Companies; (6) violation of California Business and Professions Code section 17602 by the Frank Membership Companies and the Frank Marketing Companies; and (7) unjust enrichment by all defendants. The plaintiff seeks class certification, restitution and disgorgement of all amounts wrongfully charged to and received from plaintiff, damages, treble damages, punitive damages, preliminary and permanent injunctive relief, attorneys' fees, costs of suit, and pre- and post-judgment interest on any amounts awarded. On January 23, 2013, the plaintiff moved to consolidate the Frank Class Action with the In re Trilegiant Corporation, Inc. action. In response, the court ordered the plaintiff to show cause as to why, among other things, the plaintiff should be afforded named plaintiff status. The plaintiff filed his response to the order to show cause on February 15, 2013. The court has not yet ruled upon the request for consolidation or the order to show cause.

        In December 2008, Interflora, Inc. (in which we have two-thirds ownership interest) and Interflora issued proceedings against Marks and Spencer plc ("Marks and Spencer") seeking injunctive relief, damages, interest and costs in an action claiming infringement of U.K. trademark registration number 1329840 and European Community trademark registration number 909838, both for the word "Interflora". Marks and Spencer did not make a counterclaim. In July 2009, the High Court of Justice of England and Wales (the "High Court"), referred questions to the Court of Justice of European Union ("CJEU") for a preliminary ruling. In September 2011, the CJEU handed down its judgment on the questions referred by the High Court. In February 2012, the High Court scheduled the trial for April 2013. In September 2012, Interflora executed an indemnity agreement by which Interflora agreed to indemnify Interflora, Inc. against all losses and expenses arising out of this action which Interflora, Inc. may incur after July 10, 2012. The trial in this matter concluded in April 2013. In May 2013, the High Court ruled that Marks and Spencer infringed the Interflora trademarks. In June 2013, the High Court issued an injunction prohibiting Marks and Spencer from infringing the Interflora trademarks in specified jurisdictions and ordered Marks and Spencer to provide certain disclosures in order for damages to be quantified. The High Court has granted Marks and Spencer permission to appeal the ruling.

        We have been cooperating with certain governmental authorities in connection with their respective investigations of our former post-transaction sales practices and certain other current or former business practices. In 2010, FTD.COM and Classmates Online, Inc. (a wholly-owned subsidiary of United Online) received subpoenas from the Attorney General for the State of Kansas and the Attorney General for the State of Maryland, respectively. These subpoenas were issued on behalf of a Multistate Work Group that consists of the Attorneys General for the following states: Alabama, Alaska, Delaware, Florida, Idaho, Illinois, Kansas, Maine, Maryland, Michigan, New Mexico, New Jersey, North Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Texas, Vermont, and Washington. The primary focus of the inquiry concerns certain post-transaction sales practices in which these companies previously engaged with certain third-party vendors. In the second quarter of 2012, we received an offer of settlement from the Multistate Work Group consisting of certain injunctive relief and the consideration of two areas of monetary relief: (1) restitution to consumers and (2) a $20 million payment by these companies for the violations alleged by the Multistate Work Group and to reimburse the Multistate Work Group for its investigation costs. We rejected the Multistate Work Group's offer. We have since had ongoing discussions with the Multistate Work Group regarding the non-monetary aspects of a negotiated resolution. We are continuing to cooperate with the Multistate Work Group and are providing requested information. There can be no assurances as to the terms on which we and the Multistate Work Group may agree to settle this matter, or that any settlement of this matter may be reached. We are not able to reasonably estimate the amount of possible loss or range of loss that may arise, if any. In the event that we and the Multistate Work Group agree to settle this matter, or if no settlement is reached and there are adverse judgments against us in connection with litigation filed by the Attorneys General of the Multistate Work Group, there could be a material

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adverse effect on our financial position, results of operations and our cash flows. The Separation and Distribution Agreement will provide United Online with the right to control such litigation and the settlement of such litigation, as well as other specified litigation matters that relate to a member of each of the UOL Entities and the FTD Entities and which were asserted before the Separation, as well as specified litigation matters which are asserted after the Separation. The Separation and Distribution Agreement also will provide for the allocation of liabilities and expenses between United Online and us with respect to these matters. It will also establish procedures with respect to claims subject to indemnification, insurance claims, and related matters. See "Certain Relationships and Related-Party Transactions—Agreements with United Online—Separation and Distribution Agreement."

        We cannot predict the outcome of these or any other governmental investigations or other legal actions or their potential implications for our business. There are no assurances that additional governmental investigations or other legal actions will not be instituted in connection with our former post-transaction sales practices or other current or former business practices.

        We record a liability when we believe that it is both probable that a loss will be incurred, and the amount of loss can be reasonably estimated. We evaluate, at least quarterly, developments in our legal matters that could affect the amount of liability that has been previously accrued, and make adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount. We may be unable to estimate a possible loss or range of possible loss due to various reasons, including, among others: (i) if the damages sought are indeterminate, (ii) if the proceedings are in early stages, (iii) if there is uncertainty as to the outcome of pending appeals, motions or settlements, (iv) if there are significant factual issues to be determined or resolved, and (v) if there are novel or unsettled legal theories presented. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any. At June 30, 2013, we had a reserve totaling $0.4 million for a dispute settlement. With respect to the other legal matters described above, we have determined, based on our current knowledge, that the amount of possible loss or range of loss, including any reasonably possible losses in excess of amounts already accrued, is not reasonably estimable. However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. As such, there can be no assurance that the final outcome of these matters will not materially and adversely affect our business, financial condition, results of operations, or cash flows.

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CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

Related-Party Transactions Policies and Procedures

        We expect that our Board of Directors will adopt a written policy under which FTD's audit committee (the "Audit Committee") must review and approve or disapprove of all related-party transactions that are required to be disclosed under SEC Regulation S-K, Item 404(a). Prior to entering into a transaction with our company, directors and executive officers (and their immediate family members) and stockholders who beneficially own more than 5% of our common stock will be required to make full disclosure of all facts and circumstances to the Audit Committee. The Audit Committee will consider all of the relevant facts available, including (if applicable) but not limited to: the related party's relationship to us; the nature of the party's interest in the transaction; the benefits to us; the availability of other sources of comparable products or services; the terms of the transaction; and the terms available to unrelated third parties or to employees generally. The Audit Committee will approve only those related-party transactions that are in, or are not inconsistent with, the best interests of our company and our stockholders.

        We expect that the Audit Committee will establish written procedures to address situations when approvals need to be sought between meetings. Whenever possible, proposed related-party transactions will be included as an agenda item at the next scheduled Audit Committee meeting for review and approval. However, if it would be impractical or undesirable to wait until the next scheduled Audit Committee meeting, approval will be sought from the chairperson of the Audit Committee between meetings, provided the chairperson or his immediate family member is not the related party. If a related-party transaction is approved in this manner, the action will be reported at the next Audit Committee meeting.

Agreements with United Online

        As part of the Separation, we will enter into a Separation and Distribution Agreement and several other agreements with United Online. These agreements will provide for the allocation between our company and United Online of the assets, liabilities, and obligations of United Online and its subsidiaries, and will govern the relationship between United Online and us after the Separation.

        In addition to the Separation and Distribution Agreement, the other principal agreements to be entered into with United Online include:

        The summaries of these agreements set forth below are qualified in their entirety by reference to the full text of the applicable agreements, which will be included as exhibits to our registration statement on Form 10, of which this Information Statement is a part.

Separation and Distribution Agreement

        The Separation and Distribution Agreement will contain the key provisions relating to the Separation of our businesses from United Online. It will also contain other agreements that govern certain aspects of our relationship with United Online that will continue after the completion of the Separation. For purposes of the Separation and Distribution Agreement: (1) the "FTD Entities" will mean FTD Companies, Inc. and each of FTD Companies, Inc.'s subsidiaries, and (2) the "UOL Entities" will mean United Online and each of United Online's subsidiaries other than the FTD Entities.

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        Transfer of Assets and Assumption of Liabilities.    The Separation and Distribution Agreement will allocate the assets and liabilities of United Online and its subsidiaries between the FTD Entities and the UOL Entities and will describe when and how any required transfers and assumptions of assets and liabilities will occur. Because United Online and FTD have generally had segregated assets and liabilities since United Online's acquisition of FTD in 2008, no material assets and liabilities are currently expected to be transferred to FTD by United Online. In addition, the Separation and Distribution Agreement will provide that on or before September 30, 2014, United Online Software Development (India) Private Limited, a wholly-owned subsidiary of United Online, will transfer certain personnel and immaterial assets and liabilities primarily dedicated to servicing FTD's business to a newly-formed Indian subsidiary of FTD in exchange for a cash payment in an amount equal to the fair market value of such assets and liabilities (not expected to exceed $750,000) at the time of such transfer.

        Termination of Intercompany Agreements.    Effective as of the distribution date, all agreements between any member of the UOL Entities, on the one hand, and any member of the FTD Entities, on the other hand, existing prior to the distribution (excluding the Separation and Distribution Agreement, the Transition Services Agreement and each other ancillary agreement described in this Information Statement) will be terminated.

        Settlement of Intercompany Accounts.    Any receivables, payables, or loans between any member of the UOL Entities, on the one hand, and any member of the FTD Entities, on the other hand, existing prior to the distribution (excluding any receivables, payables, or loans that arise pursuant to the Separation and Distribution Agreement or any ancillary agreement) will be satisfied and/or settled in cash or otherwise cancelled.

        The Distribution.    The Separation and Distribution Agreement will also govern the rights and obligations of the parties regarding the distribution. On the distribution date, United Online will cause its agents to distribute, on a pro rata basis, all of the issued and outstanding shares of our common stock to United Online stockholders who hold United Online shares as of the record date.

        Conditions.    Additionally, the Separation and Distribution Agreement will provide that the distribution is subject to several conditions that must be satisfied or waived by United Online in its sole discretion. For further information regarding these conditions, see "The Separation—Conditions to the Separation." Even if all of the conditions have been satisfied, United Online's Board of Directors may, in its sole and absolute discretion, terminate and abandon the distribution and the related transactions at any time prior to the distribution date.

        No Representations or Warranties.    Except as expressly set forth in any ancillary agreement, neither we nor United Online will provide any representations or warranties in connection with the Separation and Distribution Agreement, and all assets transferred will be transferred "as is, where is."

        Access to Information.    The Separation and Distribution Agreement will provide that the parties will exchange certain information required to comply with requirements imposed on the requesting party by a government authority for use in any proceeding or to satisfy audit, accounting, claims defense, regulatory filings, litigation, tax or similar requirements, for use in compensation, benefit or welfare plan administration or other bona fide business purposes, or to comply with its obligations under the Separation and Distribution Agreement or any ancillary agreement. In addition, the parties will use commercially reasonable efforts to make available to each other directors, officers, other employees, and agents as witnesses in any legal, administrative or other proceeding in which the other party may become involved to the extent reasonably required.

        Releases, Allocation of Liabilities and Indemnification.    The Separation and Distribution Agreement will provide for a full and complete release and discharge of all liabilities existing or arising

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from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed at or before the Separation, between or among any member of the UOL Entities and any member of the FTD Entities, except as expressly set forth in the Separation and Distribution Agreement.

        The Separation and Distribution Agreement will provide that (1) we will indemnify each member of the UOL Entities, each affiliate of such member and each of their respective current and former stockholders, members, directors, officers, managers, agents, and employees against any and all losses relating to (a) liabilities arising out of the FTD business, (b) any breach by any member of the FTD Entities of any provision of the Separation and Distribution Agreement or any ancillary agreement, and (c) with respect to information contained in the registration statement on Form 10 of which this Information Statement is a part (other than information regarding any member of the UOL Entities provided to us by any member of the UOL Entities for inclusion therein), any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (2) that United Online will indemnify each member of the FTD Entities, each affiliate of such member, and each of their respective current and former stockholders, members, directors, officers, managers, agents, and employees against any and all losses relating to (a) liabilities arising out of the UOL businesses, (b) any breach by any member of the UOL Entities of any provision of the Separation and Distribution Agreement or any ancillary agreement, and (c) with respect to information contained in the registration statement on Form 10 of which this Information Statement is a part (solely with respect to information regarding any member of the UOL Entities provided to us by any member of the UOL Entities for inclusion therein), any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

        The Separation and Distribution Agreement will provide United Online with the right to control the litigation and settlement of certain litigation matters that relate to a member of each of the UOL Entities and the FTD Entities and which were asserted before the Separation, as well as specified litigation matters which are asserted after the Separation. The Separation and Distribution Agreement also will provide for the allocation of liabilities and expenses between United Online and us with respect to these matters. It will also establish procedures with respect to claims subject to indemnification, insurance claims and related matters.

        Indemnification with respect to taxes and employee benefits will be governed by the Tax Sharing Agreement and the Employee Matters Agreement, respectively.

        Termination.    The Separation and Distribution Agreement will provide that it may be terminated and the distribution and the Separation may be abandoned at any time prior to the distribution date by United Online, in its sole discretion.

        Expenses.    Except as expressly set forth in the Separation and Distribution Agreement or in any ancillary agreement, each of United Online and our company will bear our own expenses (and the expenses of our subsidiaries) in connection with the Separation.

Tax Sharing Agreement

        Prior to the Separation, our company and United Online will enter into a Tax Sharing Agreement. The Tax Sharing Agreement with United Online generally will govern United Online's and our respective rights, responsibilities, and obligations after the Separation with respect to taxes, including ordinary course of business taxes and taxes, if any, incurred as a result of any failure of the distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code, including as a result of Section 355(e) of the Code. Under the Tax Sharing Agreement, we expect that, with certain exceptions, we generally will be responsible for the payment of all income and

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non-income taxes attributable to our operations, and the operations of our direct and indirect subsidiaries. We expect that, with certain exceptions, United Online generally will be responsible for the payment of all income and non-income taxes, including consolidated U.S. federal income taxes of the United Online tax reporting group for which we are severally liable, to the extent such taxes are not attributable to our operations, or the operations of our direct or indirect subsidiaries, and we expect United Online to agree to indemnify us for these taxes.

        Notwithstanding the foregoing, we expect that, under the Tax Sharing Agreement, we also generally will be responsible for any taxes imposed on United Online that arise from the failure of the distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code, to the extent such failure to qualify is attributable to actions, events, or transactions relating to our stock, assets, or business, or a breach of the relevant representations or any covenants made by us in the Tax Sharing Agreement, the materials submitted to the IRS in connection with the request for the IRS Ruling or the representation letter provided to counsel in connection with the Tax Opinion. In addition, we generally will be responsible for a portion of any taxes that arise from the failure of the distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code, if such failure is for any reason for which neither we nor United Online is responsible. The Tax Sharing Agreement also is expected to set forth the respective obligations among our company and United Online with respect to the preparation and filing of tax returns, the administration of tax audits and disputes and other tax matters.

Transition Services Agreement

        Pursuant to the Transition Services Agreement, United Online will agree to continue to provide various services to us on an interim, transitional basis, generally for a period of up to 12 months (subject to an option, at FTD's election, to extend certain services for up to an additional 12 months).

        Transition Services.    The services United Online will provide to us will include information technology, payroll, legal, and other services.

        Standard of Performance.    We and United Online will perform the transition services in a manner generally consistent with the manner in which such services were provided prior to the distribution date.

        Fees.    In consideration for such services, we and United Online will each pay fees to the other for the services provided, and those fees will generally be in amounts intended to allow the party providing services to recover all of its direct and indirect costs incurred in providing those services.

        Limitation of Liabilities.    In general, neither we nor United Online will be liable to the other in connection with any service provided under the Transition Services Agreement except in the case of gross negligence, willful misconduct, or material breach of the agreement.