Classmates.com 2010 Annual Report Download - page 33

Table of Contents
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.
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. We have lost, and may continue to lose, floral
network members as a result of both our members choosing not to do business with us as well as declines in the number of local retail florists as
a result of economic factors and competition. If we lose a significant number of floral network members, or if we are not able to maintain or
increase revenues from our floral network members, our business, financial condition, results of operations, and cash flows could be materially
and adversely affected.
Shifts in the mix 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. As a result,
changes in the proportion of FTD segment revenues that is represented by products revenues versus services revenues may adversely affect our
revenues, cost of revenues, cost of revenues as a percentage of revenues, and segment income from operations.
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. Increases in the portion of products and services sold at a discount, including through such strategic arrangements, has 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 segment income from
operations. 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, including through such strategic
arrangements, will not continue to increase. The continued use of discounts for our products and services may result in our becoming more
reliant upon offering discounts, including through such strategic arrangements, in order to sell our products and services, which could result in
our having to reduce our standard pricing, which 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 cause an adverse effect on our business, financial condition, results of operations,
and cash flows.
Many factors, such as weather conditions, agricultural limitations and restrictions relating to the management of pests and disease, 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.
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