Classmates.com 2008 Annual Report Download - page 33

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would cause us to increase our prices or reduce our profits and gross margins. 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 countries such as Colombia, Ecuador and Holland.
The availability and price of our products could be affected by a number of other factors affecting suppliers, including:
•
severe weather;
• import duties and quotas;
• time-consuming import regulations or controls at airports;
•
changes in trading status;
•
economic uncertainties and currency fluctuations, including as a result of the recent volatility and disruptions in the credit markets
and general economy;
• foreign government regulations and political unrest;
•
governmental bans or quarantines; and
• trade restrictions, including U.S. retaliation against foreign trade practices.
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 with traditional retailers, 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 specialty gift order gatherers and our interpretation of applicable law,
our FTD business collects and remits sales and use taxes on orders that are delivered in states where FTD has a physical presence or other form
of jurisdictional nexus, which is a limited number of states. If states successfully challenge this practice and impose sales and use taxes on orders
delivered in states where we do not have physical presence, 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. 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 obligations. Moreover, a number of states have been considering or
instituting policy initiatives, including those regarding nexus by Internet marketers with the states aimed at expanding the reach of existing sales
and use tax legislation, that could result in the imposition of additional sales and use taxes on sales over the Internet. If enacted and legally
supported by the courts, such initiatives could require us to collect additional sales and use taxes.
Additionally, in accordance with current industry practice by international floral and specialty 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 Interflora business could result in the imposition of additional tax obligations. Moreover, if a foreign taxing authority challenges our current
practice or implements new legislative initiatives, additional taxes on consumer sales could be due by us. The imposition of additional tax
liability for past or future sales could decrease our ability to compete with traditional retailers, which could have a material adverse effect on our
business, financial conditions, results of operations, and cash flow.
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