Classmates.com 2008 Annual Report Download - page 118

Table of Contents
UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING
PRONOUNCEMENTS (Continued)
awards that contain rights to nonforfeitable dividends (such as restricted stock units) are considered participating securities. Because the awards
are considered participating securities, the issuing entity is required to apply the two-class method of computing basic and diluted earnings per
share. The provisions of FSP EITF 03-6-1 were effective for the Company beginning January 1, 2009, and in 2009, will be applied retroactively
to all prior-period earnings per share computations. The Company is currently evaluating the impact of the adoption of FSP EITF 03-6-1 on its
earnings per share amounts.
2. ACQUISITIONS
FTD Group, Inc.
On August 26, 2008 (the "Closing Date"), the Company completed the acquisition of FTD, a leading provider of floral and related products
and services to consumers and retail florists, as well as for other retail locations offering floral products and services, in the U.S., Canada, the
U.K., and The Republic of Ireland. The acquisition was accounted for under the purchase method in accordance with SFAS No. 141. The
primary reasons for the acquisition were as follows:
•
Significant Increase in Scale,
resulting in significantly higher consolidated and diversified revenues and consolidated operating
income and expanded business opportunities.
•
Diversification of Revenue and Cash Flow Streams
, resulting in the Company's mature Communications segment representing
a smaller percentage of consolidated revenues and cash flows. FTD will provide additional revenue and cash flow streams in
addition to the existing Communications and Classmates Media businesses.
•
Expansion into an Attractive Market Segment and FTD's Market Position
, enabling the Company to participate in a large
domestic and international floral market that is experiencing growth in the Internet sector.
•
Expanded Marketing Opportunities and Efficiencies,
resulting from the Company's marketing expertise to attract consumers
to FTD's Web sites and thousands of florist members while cross-selling FTD products and services to the Company's existing
member base of over 50 million registered consumer accounts that have similar demographic characteristics as FTD's customer
base.
The Company believed that certain of these primary factors supported the amount of goodwill recorded as a result of the purchase price
paid for FTD, in relation to other acquired tangible and intangible assets. In the fourth quarter of 2008, the Company determined that significant
adverse changes in the business climate had occurred and subsequently determined that an impairment charge was necessary (see Note 5).
Each share of common stock of FTD Group, Inc., par value $0.01 per share, issued and outstanding immediately prior to the effective time
of the FTD acquisition was canceled and converted into the right to receive $10.15 in cash and 0.4087 of a share of United Online common
stock, subject to the payment of cash in lieu of fractional shares of United Online common stock. The total merger consideration was
approximately $307 million in cash and approximately 12.3 million shares of United Online common stock.
F-23