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UNITED ONLINE INC
FORM 10-K
(Annual Report)
Filed 02/28/12 for the Period Ending 12/31/11
Address 21301 BURBANK BOULEVARD
WOODLAND HILLS, CA 91367
Telephone 8182873000
CIK 0001142701
Symbol UNTD
SIC Code 7370 - Computer Programming, Data Processing, And
Industry Computer Services
Sector Technology
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2012, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ..., CA 91367 8182873000 0001142701 UNTD 7370 - Computer Programming, Data Processing, And Computer Services Technology 12/31 http://www.edgar-online.com © Copyright 2012, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

  • Page 2
    ... period from to Commission file number 000-33367 UNITED ONLINE, INC. (Exact name of Registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 21301 Burbank Boulevard Woodland Hills, California (Address of principal executive office) 77-0575839...

  • Page 3
    ...No 3 Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2) of the Act). Yes 1 At June 30, 2011, the aggregate market value of voting stock held by non-affiliates of the Registrant, based on the last reported sales price of the Registrant's common stock on such...

  • Page 4
    ... About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information PART III. Item 10. Directors, Executive Officers and Corporate Governance...

  • Page 5
    ... rates; hedging arrangements; our ability to repay indebtedness, pay dividends and invest in initiatives; our products and services; pricing;... Reported results should not be considered an indication of future performance. Except as required by law, we undertake no obligation to publicly release...

  • Page 6
    ... access revenues began to decline and we began diversifying our business to include other consumer Internet offerings in an effort to provide new growth opportunities for the Company. In November 2004, we acquired Classmates Online, Inc. (whose name was changed to Memory Lane, Inc. in February 2011...

  • Page 7
    ... network members include independent traditional retail florists and other retailers. Services revenues in our Content & Media and Communications segments are derived from selling subscriptions to consumers who are typically billed in advance for the entire subscription term. Advertising revenues...

  • Page 8
    ... to assist members in finding friends and acquaintances primarily from high school. Consumers can register for free accounts or pay for premium accounts that give them access to more information. As the Internet has matured, a number of other websites and services, such as Facebook and Google...

  • Page 9
    ... products and services from participating vendors. Some online loyalty marketing programs use points as an incentive for members to opt in to receiving certain email offers or to update their personal interest profiles, which provide useful information that helps advertisers target consumer segments...

  • Page 10
    ...Information" of the Notes to the Consolidated Financial Statements, which appears in Part II, Item 8 of this Annual Report on Form 10-K. Consumer Business. FTD is a leading marketer of flowers and gift items to consumers. FTD operates in the U.S. and Canada, primarily through the www.ftd.com and www...

  • Page 11
    ... point-of-sale and related technology services and systems that enable its 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...

  • Page 12
    ... codes, of the members in the All-Access Pass holder's high school or other community affiliation. • • International. In addition to our Classmates website, we operate five international websites that offer nostalgia services, primarily as a social networking platform to reconnect friends and...

  • Page 13
    ... email, Internet security and web hosting services. Most of our Communications revenues are derived from dial-up Internet access pay accounts. For additional information regarding our Communications segment, see Note 2-"Segment Information" of the Notes to the Consolidated Financial Statements...

  • Page 14
    .... In general, we charge our pay accounts in advance of providing a service, which results in the deferral of services revenues to the period in which the services are provided. We have offered, and may offer in the future, a variety of price points, subscription periods, discounts, and promotions...

  • Page 15
    .... Communications Our Communications services generate advertising revenues from search placements, display advertisements and online market research associated with our Internet access and email services. We host and customize the initial website displayed to our users. This website, or "start page...

  • Page 16
    ...; advertising on the Internet; and direct marketing campaigns. These activities are designed to drive prospective members to call our toll-free telephone numbers to purchase our services or to visit our websites and download our software. In most distribution arrangements, we pay a fee for each new...

  • Page 17
    ... gifts. In the consumer market, consumers are our customers for direct sales of floral products and gifts through our websites and telephone numbers. In the floral network services market, retail florists and supermarkets are our principal customers for memberships and subscriptions to our various...

  • Page 18
    ... market for online loyalty marketing services is highly competitive, and we expect competition to significantly increase in the future as online loyalty marketing programs continue to grow in popularity. Our MyPoints online loyalty marketing business faces competition for members from other online...

  • Page 19
    ... we offer traditional email support and certain of our services provide live telephone support as well. Our customer relationship management and support infrastructure includes employees at our facilities in Woodland Hills, California; Hyderabad, India; Fort Lee, New Jersey; Seattle, Washington; San...

  • Page 20
    ..., billing, email, customer support, logistics and fulfillment for floral products, data analysis, customer loyalty applications, and targeted advertising. We maintain data centers in multiple locations in the U.S. and Europe. In most cases, we have redundant systems to provide high levels of service...

  • Page 21
    ... the Registrant. Available Information Our corporate website is www.unitedonline.com . On this website, we make available, free of charge, our annual, quarterly and current reports (including all amendments to such reports), changes in the stock ownership of our directors and executive officers, our...

  • Page 22
    ... and financial results. We have expended, and may continue to expend, significant resources in developing and implementing new business initiatives, products, services, features, and functionality, such as those related to the planned NetZero 4G mobile broadband service and our high school yearbook...

  • Page 23
    ... cause, our advertising revenues and profits to significantly decline in the future. Changes 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...

  • Page 24
    ..., financial condition, results of operations, and cash flows. Various governmental agencies have in the past, and may in the future, assert claims, institute legal actions, inquiries or investigations, or impose obligations relating to our business practices, such as our marketing, billing, customer...

  • Page 25
    .... To the extent that our services and business practices change as a result of claims or actions by governmental agencies or private parties, or we are required to pay significant sums, including damages, fines, penalties, or assessments, our business, financial condition, results of operations, and...

  • Page 26
    ... bill their payment card accounts (credit or debit) directly for all amounts charged by us. These members and customers provide payment card information and other personally identifiable information which, depending on the particular payment plan, may be maintained to facilitate future payment card...

  • Page 27
    ...our business, financial condition, results of operations, and cash flows. Our emails have historically generated the majority of the traffic on our online nostalgia websites and are the most important driver of member activity for our online loyalty marketing service. A significant number of members...

  • Page 28
    ... Our ability to obtain additional financing to fund future working capital needs, capital expenditures, additional acquisitions, and other general corporate requirements could be limited. The Credit Agreement imposes operating and financial covenants and restrictions on FTD, including limitations on...

  • Page 29
    ... for, changes to our businesses and adverse economic and industry conditions. We could be placed at a competitive disadvantage relative to other companies with less indebtedness. Our ability to apply excess FTD cash flow or proceeds from certain types of securities offerings, asset sales and other...

  • Page 30
    ...financial condition and results of operations. 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, particularly Mark R. Goldston...

  • Page 31
    ...key business metrics, and our financial results. We may reduce or stop paying quarterly cash dividends on our common stock. The payment of future dividends is discretionary and is subject to determination by our Board of Directors each quarter following its review of our financial condition, results...

  • Page 32
    ... gifts. In the consumer market, consumers are our customers for direct sales of floral products and gifts through our websites and telephone numbers. In the floral network services market, retail florists and supermarkets are our principal customers for memberships and subscriptions to our various...

  • Page 33
    ... a high level of customer service. Our business depends, in part, on the ability of our independent 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...

  • Page 34
    ... 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...

  • Page 35
    ... the underlying order, in which case, a state may seek to impose taxes on the receipts generated by our FTD 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...

  • Page 36
    ...and for new member acquisitions, such as our Facebook high school fan pages. If our competitors provide services similar to our online nostalgia services for free, we may not be able to charge for our online nostalgia services. Competition has adversely affected our subscription revenues from online...

  • Page 37
    ... revenues is highly dependent on our ability to attract visitors to our websites, register them as free members, encourage them to return to our websites, and convince them to become pay accounts in order to access the pay features of our websites. A number of our pay account subscriptions...

  • Page 38
    ... percentage of discounted pricing plans on a promotional basis. In general, these discounted pricing plans offer a subscription term at a significant discount compared to the standard pricing for such subscription term. Any increases in the percentage of pay accounts under a discounted pricing plan...

  • Page 39
    ... the number of new pay accounts signing up for our services as well as the impact of subscribers canceling their accounts, which we refer to as "churn." Churn has increased from time to time and may increase in the future. We expect our dial-up Internet access pay accounts to continue to decline. As...

  • Page 40
    ...Our Content & Media Segment leases office space in Seattle, Washington; San Francisco, California; Schaumburg, Illinois; Erlangen, Germany; and Berlin, Germany and our Communications segment leases office space in Fort Lee, New Jersey. We also lease office space in Hyderabad, India, which is used by...

  • Page 41
    ... result, the settlement among the parties is final. In October 2008, Anthony Michaels filed a purported class action complaint against Classmates Online, Inc., now known as Memory Lane, Inc., Classmates Media Corporation and United Online, Inc. in Superior Court of the State of California, County of...

  • Page 42
    ...post-transaction sales practices in which we previously engaged with a certain third-party vendor. In July 2011, Classmates Online, Inc. received a civil investigative demand from the Attorney General for the State of Washington regarding its marketing, refund, cancelation, and renewal practices. In...

  • Page 43
    ... the General Corporation Law of the State of Delaware. For information regarding restrictions on the payment of dividends, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." Common Stock Repurchases United Online, Inc.'s Board of Directors authorized...

  • Page 44
    ..., from the restricted stock units that vest and from the stock awards that are issued, the portion of those shares with a fair market value equal to the amount of the employee withholding taxes due, which is accounted for as a repurchase of common stock. We then pay the applicable required employee...

  • Page 45
    ... of United Online, Inc. under the Securities Act of 1933, as amended, or the Exchange Act. The following graph compares, for the five-year period ended December 31, 2011, the cumulative total stockholder return for the Company's common stock, The Nasdaq Global Select Market (U.S. companies) Index...

  • Page 46
    ... audited consolidated financial statements that are not included in this Annual Report on Form 10-K. The following amounts are in thousands, except per share data: Year Ended December 31, 2009 2008(1) 2011 2010 2007 Consolidated Statements of Operations Data: Revenues Cost of revenues Operating...

  • Page 47
    ...services. Our primary Communications segment service is Internet access. On a combined basis, our web properties attract a significant number of Internet users, and we offer a broad range of Internet marketing services for advertisers. Segment Definitions We report our businesses in three reportable...

  • Page 48
    ... and service fees; levels of refunds issued; and discounts, among other factors. Content & Media and Communications Segment Metrics Pay Accounts. We generate a significant portion of our revenues from our pay accounts and they represent one of the most important drivers of our business model. A pay...

  • Page 49
    ... online loyalty marketing members who have earned or redeemed points during such period. Communications segment active accounts include all Communications segment pay accounts as of the date presented combined with the number of free Internet access and email accounts that logged on to our services...

  • Page 50
    ... discounted pricing is offered in prior and current periods, the percentage of pay accounts being represented by international pay accounts which, on average, have lower-priced subscription plans compared to U.S. pay accounts, and the churn rate. Quarter Ended September 30, June 30, March 31, 2011...

  • Page 51

  • Page 52
    ... of revenues. Service revenues for our online nostalgia services and for our Communications services are recognized in the period in which fees are fixed or determinable and the related services are provided to the customer. Our pay accounts generally pay in advance for their services by credit card...

  • Page 53
    ... on the consolidated balance sheets as deferred revenue. We offer alternative payment methods to credit cards for certain pay service plans. These alternative payment methods currently include use of ACH, payment by personal check or money order, or payment through a local telephone company. In...

  • Page 54
    ... 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...

  • Page 55
    ... a number of factors, including projections of the amounts and timing of future revenues and cash flows, assumed discount rates and other assumptions. Under the market approach, using the guideline company method, a reporting unit's fair value is estimated based on multiples of the cash-free market...

  • Page 56
    ...email response; survey completion; profile update; or any point-earning or point-redeeming transaction. The canceling or disabling of inactive MyPoints accounts would have no impact on our consolidated financial statements, as we fully consider inactive MyPoints accounts when establishing the member...

  • Page 57
    ... and service fees, less discounts and refunds, for FTD consumer orders as well as 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...

  • Page 58
    ... segment. Services Revenues FTD FTD services revenues consist of fees charged to its floral network members for access to the FTD and Interflora brands and the Mercury Man logo; access to the floral networks; credit card processing services; e-commerce website services; online advertising tools...

  • Page 59
    ...and billing support for our pay accounts; fees associated with the storage and processing of customer credit cards and associated bank fees; domain name registration fees; and costs associated with the sale of yearbook copies and related shipping costs. Communications Communications cost of revenues...

  • Page 60
    ... audit, investor relations, internal customer support personnel and personnel associated with operating our corporate network systems. In addition, general and administrative expenses include, among other costs, professional fees for legal, accounting and financial services; insurance; occupancy and...

  • Page 61
    ... thereto included elsewhere in this Annual Report on Form 10-K. Consolidated information was as follows (in thousands): Year Ended December 31, 2010 2009 2011 Revenues Operating expenses: Cost of revenues Sales and marketing Technology and development General and administrative Amortization of...

  • Page 62
    ... that consolidated revenues will continue to decline due to the anticipated continuing declines in pay accounts and revenues from our Communications and Content & Media segments. Cost of Revenues Year Ended December 31, Change 2011 2010 $ (in thousands, except percentages) % Cost of revenues Cost...

  • Page 63
    ....3% 26.5% The decrease in consolidated technology and development expenses was primarily related to a $4.3 million decrease in technology and development expenses associated with our Communications segment. General and Administrative Year Ended Change December 31, 2011 2010 $ (in thousands, except...

  • Page 64
    ... Restructuring and Other Exit Costs Year Ended Change December 31, 2011 2010 $ % (in thousands, except percentages) Restructuring and other exit costs $ 5,677 $ 2,815 $ 2,862 102% Consolidated restructuring and other exit costs for the year ended December 31, 2011 primarily consisted of employee...

  • Page 65
    ... to lower non-deductible stock-based compensation. FTD Segment Results FTD Revenues Year Ended Change December 31, 2011 2010 $ (in thousands, except percentages and average order value) % Products Services Advertising Total FTD Revenues Consumer orders Average order value $ 471,885 $ 434,035...

  • Page 66
    ... and Marketing Year Ended Change December 31, 2011 2010 $ % (in thousands, except percentages) FTD sales and marketing FTD sales and marketing expenses as a percentage of FTD revenues $ 97,512 $ 93,782 $ 3,730 16.6% 16.9% 4% Excluding the unfavorable impact of foreign currency exchange rates of...

  • Page 67
    ... by our online loyalty marketing service due to a number of factors, including the loss of a major customer. These decreases were partially offset by $0.9 million in products revenues generated in the year ended December 31, 2011. We anticipate that Content & Media pay accounts and revenues will...

  • Page 68
    ... costs and a $1.7 million decrease in marketing costs to acquire new online loyalty marketing members. These decreases were partially offset by $5.5 million in marketing costs in the year ended December 31, 2011 primarily related to television advertising supporting the launch of the Memory Lane...

  • Page 69
    ... subscription plans or services. The decrease in Communications advertising revenues was primarily due to the decrease in pay accounts. We anticipate that Communications pay accounts, revenues and ARPU will continue to decline. Communications Cost of Revenues Year Ended December 31, Change 2011...

  • Page 70
    ... of Communications revenues $ 10,009 $ 20,521 $ (10,512) 7.9% 12.3% (51)% The decrease in Communications sales and marketing expenses was attributable to a $5.4 million decrease in advertising, promotion and distribution costs primarily related to our dial-up Internet access services and...

  • Page 71
    ... and other exit costs recorded during the year ended December 31, 2011 primarily related to the departure of United Online's former chief financial officer. Year Ended December 31, 2010 compared to Year Ended December 31, 2009 Consolidated Results Revenues Year Ended December 31, Change 2010 2009...

  • Page 72
    ... million decrease in cost of revenues associated with our Communications segment. Sales and Marketing Year Ended December 31, Change 2010 2009 $ (in thousands, except percentages) % Sales and marketing Sales and marketing expenses as a percentage of total segment sales and marketing expenses: FTD...

  • Page 73
    ... in consolidated amortization of intangible assets was primarily due to certain intangible assets related to our acquisition of Classmates Online, Inc. and its subsidiaries in 2004 becoming fully amortized in 2009 and 2010. Restructuring and Other Exit Costs Year Ended December 31, Change 2010...

  • Page 74
    ...refund and a favorable legal settlement. Provision for Income Taxes Year Ended December 31, 2010 2009 (in thousands, except percentages) Provision for income taxes Effective income tax rate $ 36,228 40.3% $ 48,144 40.7% The year-over-year effective income tax rate declined primarily due to the...

  • Page 75
    ... volume and level of discounts on products sold to consumers, increased shipping costs, a shift in the mix of products and services sold, and a decrease in post-transaction sales, which have minimal cost of revenues. FTD Sales and Marketing Year Ended December 31, Change 2010 2009 $ % (in thousands...

  • Page 76
    ...FTD revenues $ 33,844 $ 33,273 $ 571 6.1% 6.1% 2% The increase in FTD general and administrative expenses was attributable to higher personnel-related costs and a $0.4 million charge, net of an insurance reimbursement, related to the resolution of the investigation of the Attorney General for New...

  • Page 77
    ... in ARPU was primarily attributable to a greater percentage of total pay accounts being represented by domestic discounted pricing plans and lowerpriced international subscription plans. In addition, Content & Media advertising revenues decreased by $16.5 million for the year ended December 31...

  • Page 78
    ... a reduction in headcount. Communications Segment Results Communications Revenues Year Ended December 31, Change 2010 2009 $ (in thousands, except percentages and ARPU) % Services Advertising Total Communications Revenues ARPU Average number of dial-up Internet access pay accounts $ 135,342 $ 175...

  • Page 79
    ... the number of dial-up Internet access pay accounts and a decrease in hourly usage per pay account and a $3.1 million decrease in customer support and billing-related costs due to a decrease in the number of dial-up Internet access pay accounts. In addition, Communications cost of revenues decreased...

  • Page 80
    ... of reduced headcount. Communications General and Administrative Year Ended December 31, Change 2010 2009 $ (in thousands, except percentages) % Communications general and administrative Communications general and administrative expenses as a percentage of Communications revenues $ 16,351 $ 19...

  • Page 81
    ...with the FTD acquisition in August 2008, United Online, Inc. entered into a $60 million senior secured credit agreement with Silicon Valley Bank (the "UOL Credit Agreement") and borrowed $60 million thereunder. The net proceeds of the term loan under the UOL Credit Agreement were used to finance, in...

  • Page 82
    ... was due to a $19.5 million increase in working capital requirements primarily related to a decline in deferred revenue primarily as a result of a decline in Content & Media pay accounts and, to a lesser extent, the timing of payments to vendors and changes in tax liabilities, as well as a $13...

  • Page 83
    ... balance under the Credit Agreement; dividend payments, if declared by United Online, Inc.'s Board of Directors; the development and/or acquisition of other services, businesses or technologies; the repurchase of our common stock underlying restricted stock units and stock awards to pay the required...

  • Page 84
    ... constrain or prevent us from, among other factors, developing new or enhancing existing services or products, repurchasing our common stock, acquiring other services, businesses or technologies or funding significant capital expenditures and/or purchases of intangible assets, including rights...

  • Page 85
    ...offset by a $2.4 million increase in the change in working capital for the year ended December 31, ... acquiring new content for our domestic online nostalgia services business and ...payments of $15.3 million, an increase in proceeds from the exercise of stock options and proceeds from the employee stock...

  • Page 86
    ... current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources. Recent Accounting Pronouncements Comprehensive Income -In June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards...

  • Page 87
    ... per annum (with a LIBOR floor of 1.25% in the case of the Term Loan). 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 $0.6 million. While we do not currently...

  • Page 88
    ... regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America. The Company's internal control over financial reporting includes policies and...

  • Page 89
    ... LLP, an independent registered public accounting firm, as stated in their report which appears herein. Changes in Internal Control Over Financial Reporting There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules...

  • Page 90
    ... Transactions". ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by Item 14 is included under the caption "Proposal Two: Ratification of Independent Registered Public Accounting Firm" in our definitive proxy statement relating to our 2012 annual meeting of stockholders to be...

  • Page 91
    ... to make the statements in this Annual Report on Form 10-K not misleading. Additional information about the Company may be found elsewhere in this Annual Report on Form 10-K and in the Company's other public filings, which are available without charge through the SEC's website at www.sec.gov. 88

  • Page 92
    ... Option Agreement for 2001 Stock Incentive Plan 10.10 Form of Restricted Stock Unit Issuance Agreement for 2010 Incentive Compensation Plan (nonemployee directors-initial grant) 10.11 Form of Restricted Stock Unit Issuance Agreement for 2010 Incentive Compensation Plan (nonemployee directors-annual...

  • Page 93
    89

  • Page 94
    ... between Memory Lane, Inc. (f/k/a Classmates Online, Inc.) and Harold A. Zeitz 10.24 Employment Agreement between the Registrant and Neil P. Edwards 10.25 Restricted Stock Unit Issuance Agreement(s) Amendment Agreement between United Online, Inc. and Mark R. Goldston 10.26 Restricted Stock Unit...

  • Page 95
    Agreement(s) Amendment Agreement between United Online, Inc. and Frederic A. Randall, Jr. 90

  • Page 96
    ... of Independent Registered Public Accounting Firm 24.1 Power of Attorney (see signature page of this Annual Report on Form 10-K) 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to...

  • Page 97

  • Page 98
    ... (b) Exhibits The exhibits filed as part of this report are listed in Item 15(a)(3) of this Annual Report on Form 10-K. (c) Financial Statement Schedules The financial statement schedules required by Regulation S-X and Item 8 of this Annual Report on Form 10-K are listed in Item 15(a)(2) of...

  • Page 99
    ... Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 28, 2012. UNITED ONLINE, INC. By: /s/ MARK R. GOLDSTON Mark R. Goldston Chairman, President and Chief Executive Officer POWER OF ATTORNEY...

  • Page 100
    Table of Contents Signature Title Date /s/ DENNIS HOLT Director Dennis Holt /s/ HOWARD G. PHANSTIEL Director Howard G. Phanstiel /s/ CAROL A. SCOTT Director Carol A. Scott 94 February 28, 2012 February 28, 2012 February 28, 2012

  • Page 101
    ... securities laws...Annual Report on Form 10-K not misleading. Additional information about the Company may be found elsewhere in this Annual Report on Form 10-K and in the Company's other public filings, which are available without charge through the SEC's website at www...2008, among United Online, Inc.,...

  • Page 102
    ... Form of Stock Option Agreement for 2010 Incentive Compensation Plan (officers version II) 10.16 Amended and Restated United Online, Inc. Severance Benefit Plan 10.17 Employment Agreement between the Registrant and Mark R. Goldston 10.18 Employment Agreement between the Registrant and Paul E. Jordan...

  • Page 103
    the Registrant and Frederic A. Randall, Jr. 96

  • Page 104
    ... between Memory Lane, Inc. (f/k/a Classmates Online, Inc.) and Harold A. Zeitz 10.24 Employment Agreement between the Registrant and Neil P. Edwards 10.25 Restricted Stock Unit Issuance Agreement(s) Amendment Agreement between United Online, Inc. and Mark R. Goldston 10.26 Restricted Stock Unit...

  • Page 105
    31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 000-33367 97

  • Page 106
    ... to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document...

  • Page 107
    Table of Contents UNITED ONLINE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income Consolidated Statements of Stockholders' ...

  • Page 108
    ... of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was...

  • Page 109
    ... Deferred revenue Long-term debt, net of discounts Deferred tax liabilities, net Other liabilities Total liabilities Commitments and contingencies (see Note 13) Stockholders' equity: Preferred stock, $0.0001 par value; 5,000 shares authorized; no shares issued or outstanding at December 31, 2011 and...

  • Page 110
    ... of Contents UNITED ONLINE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Year Ended December 31, 2010 2009 2011 Revenues: Products Services Total revenues Operating expenses: Cost of revenues-products Cost of revenues-services Sales and marketing Technology...

  • Page 111
    ... of Contents UNITED ONLINE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year Ended December 31, 2011 2010 2009 Net income Change in gains on derivatives designated as net investment hedging instruments, net of tax of $79 for the year ended December 31, 2011 Change in losses...

  • Page 112
    ... UNITED ONLINE, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands) Accumulated Other Comprehensive Loss Retained Earnings (Accumulated Deficit) Common Stock Shares Amount Additional Paid-In Capital Total Stockholders' Equity Balance at January 1, 2009 Exercises of stock options...

  • Page 113
    ... stock options Issuance of common stock through employee stock purchase plans Vesting of restricted stock units Repurchases of common stock Dividends and dividend equivalents paid on shares outstanding and restricted stock units Change in dividend equivalents payable on restricted stock units Stock...

  • Page 114
    ...: Proceeds from term loans Payments on term loans Payments for debt issue costs Proceeds from exercises of stock options Proceeds from employee stock purchase plans Repurchases of common stock Dividends and dividend equivalents paid on outstanding shares and restricted stock units Excess tax...

  • Page 115
    F-7

  • Page 116
    ... Lee, New Jersey; and Hyderabad, India. Basis of Presentation The Company's consolidated financial statements for the years ended December 31, 2011, 2010 and 2009 have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). All significant...

  • Page 117
    ... receivable are derived primarily from revenues earned from advertising customers and floral network members located in the U.S. and the U.K., and pay accounts. The Company extends credit based upon an evaluation of the customer's financial condition and, generally, collateral is not required. The...

  • 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) considered to be impaired when the Company determines that it is probable that it ...

  • Page 119
    ... for model-based valuation techniques are not available, the Company will be required to make judgments about assumptions market participants would use in estimating the fair value of the financial instrument. Fair values of cash and cash equivalents, short-term accounts receivable, accounts payable...

  • Page 120
    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) include, but are not limited to, a significant adverse change in legal factors or in ...

  • Page 121
    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) Company's operating model or strategy, and competitive forces. In determining if an ...

  • Page 122
    ... deferred revenue. The Company offers alternative payment methods to credit cards for certain Communications pay service plans. These alternative payment methods currently include use of automated clearing-house, payment by personal check or money order, or payment through a local telephone company...

  • Page 123
    ... the Company's pay accounts and 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 the Company's networks and data centers. Sales...

  • Page 124
    ... software costs. General and Administrative -General and administrative expenses, which include unallocated corporate expenses, consist of personnelrelated expenses for executive, finance, legal, human resources, facilities, internal audit, investor relations, internal customer support personnel...

  • Page 125
    ... our corporate network systems. In addition, general and administrative expenses include, among other costs, professional fees for legal, accounting and financial services; insurance; occupancy and other overhead-related costs; office relocation costs; non-income taxes; gains and losses on sales of...

  • Page 126
    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) Foreign Currency Translation -The Company accounts for foreign currency translation ...

  • Page 127
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued) Recent Accounting Pronouncements Comprehensive Income -In June 2011, the FASB issued Accounting...

  • Page 128
    ...Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. SEGMENT INFORMATION Segment revenues and segment income from operations were as follows (in thousands): Year Ended December 31, 2011 Content & Media Communications FTD Total Products Services Advertising Total...

  • Page 129
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. SEGMENT INFORMATION (Continued) A reconciliation of segment operating expenses (which excludes depreciation and amortization of intangible assets) to consolidated operating expenses was as follows for ...

  • Page 130
    ... Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. SEGMENT INFORMATION (Continued) Geographic information for long-lived assets, which consist of property and equipment and other assets, was as follows (in thousands): December 31, 2010 2011 2009 United States...

  • Page 131
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. BALANCE SHEET COMPONENTS (Continued) Other Current Assets Other current assets consisted of the following (in thousands): December 31, 2011 2010 Prepaid expenses Income taxes receivable Floral-related ...

  • Page 132
    ... consisted of the following (in thousands): December 31, 2011 2010 Employee compensation and related expenses Non-income taxes payable Reserves for pending legal settlements Income taxes payable Accrued restructuring and other exit costs Customer deposits Other Total $ 26,621 $ 23,411 4,932...

  • Page 133
    ...TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. GOODWILL, INTANGIBLE ASSETS AND OTHER LONG-LIVED ASSETS (Continued) Intangible Assets Intangible assets consisted of the following (in thousands): December 31, 2011 Accumulated Amortization Gross Value Net Pay accounts and free accounts Customer...

  • Page 134
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. LONG-TERM DEBT (Continued) "UOL Credit Agreement") and borrowed $60 million thereunder. The net proceeds of the term loan under the UOL Credit Agreement were used to finance, in part, the acquisition of ...

  • Page 135
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. LONG-TERM DEBT (Continued) The refinancing of the Credit Facilities was accounted for in accordance with ASC 470, Debt . A significant portion of the debt under the 2008 Credit Agreement was considered ...

  • Page 136
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. DERIVATIVE INSTRUMENTS The fair and notional values of outstanding derivative instruments were as follows (in thousands): Fair Value of Derivative Instruments Balance Sheet Location December 31, 2011 2010 Notional Value...

  • Page 137
    ...UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. DERIVATIVE INSTRUMENTS (Continued) Derivatives Designated as Cash Flow Hedging Instruments Location Losses Recognized in Earnings on Derivatives (Amount Excluded from Effectiveness Testing) Year Ended December 31, 2011...

  • Page 138
    ... fair value of its long-term debt using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration and risk profile. In determining the market interest yield curve, the Company considered, among other factors, its estimate of its credit rating. The...

  • Page 139
    ... from the restricted stock units that vest, and from the stock awards that are issued, the portion of those shares with a fair market value equal to the amount of the required employee withholding taxes due, which is accounted for as a repurchase of common stock. The Company then pays the applicable...

  • Page 140
    ... stock. The record date for the dividend is February 14, 2012 and the dividend will be paid on February 29, 2012. The payment of future dividends is discretionary and is subject to determination by United Online, Inc.'s Board of Directors each quarter following its review of the Company's financial...

  • Page 141
    ... thousands): Year Ended December 31, 2011 2010 2009 Operating expenses: Cost of revenues-products Cost of revenues-services Sales and marketing Technology and development General and administrative Total stock-based compensation Tax benefit recognized Restricted Stock Units $ 46 $ 41 $ 43 354 502...

  • Page 142
    ... of the total number of units awarded annually over a three-year period beginning February 15, 2012. On February 27, 2012, the Secondary Compensation Committee of the Board of Directors of United Online, Inc. approved restricted stock unit grants to certain non-executive officer employees totaling...

  • Page 143
    ...model with the following weighted-average assumptions: Risk-free interest rate Expected term (in years) Dividend yield Volatility Recent Awards On February 23, 2012, the Compensation Committee of the Board of Directors of United Online, Inc. approved stock option grants to certain executive officers...

  • Page 144
    ...-free interest rate assumed in valuing the employee stock purchase plan shares is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the closing market...

  • Page 145
    ... as follows (in thousands): Year Ended December 31, 2011 2010 2009 Federal taxes at statutory rate of 35% State taxes, net Nondeductible executive compensation Effects of foreign income Foreign distribution Foreign tax credit Changes in uncertain tax positions Other differences, net Provision for...

  • Page 146
    .... The Company is generally not able to reliably estimate the ultimate settlement amounts until the close of the audit. While the Company does not expect material changes, it is possible that the amount of unrecognized benefit with respect to its uncertain tax positions could significantly increase...

  • Page 147
    ... of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. INCOME TAXES (Continued) undistributed earnings is not practicable. The Company provided for U.S. income taxes on the earnings of its U.K. and German subsidiaries. For the years ended December 31, 2011, 2010...

  • Page 148
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. RESTRUCTURING AND OTHER EXIT COSTS Restructuring and other exit costs were as follows (in thousands): Employee Termination Costs Facility Closure and Relocation Costs Contract Termination Costs Total ...

  • Page 149
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. COMMITMENTS AND CONTINGENCIES Leases Future minimum lease payments at December 31, 2011 under noncancelable operating leases with initial lease terms in excess of one year were as follows (in thousands...

  • Page 150
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. COMMITMENTS AND CONTINGENCIES (Continued) Other Commitments In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, ...

  • Page 151
    ... result, the settlement among the parties is final. In October 2008, Anthony Michaels filed a purported class action complaint against Classmates Online, Inc., now known as Memory Lane, Inc., Classmates Media Corporation and United Online, Inc. in Superior Court of the State of California, County of...

  • Page 152
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. COMMITMENTS AND CONTINGENCIES (Continued) Attorney General for the State of Washington regarding certain post-transaction sales practices in which it had previously engaged with certain third-party vendors. The Company...

  • Page 153
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands, except per share data) (Continued) December 31 Quarter Ended September 30 June 30 March 31 Year ended December 31, 2010: Revenues Cost of revenues Operating...

  • Page 154
    Table of Contents UNITED ONLINE, INC. SCHEDULE I-CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY BALANCE SHEETS (in thousands) December 31, 2011 2010 Assets Current assets: Cash and cash equivalents Total current assets Investments in subsidiaries Other assets Total assets Liabilities...

  • Page 155
    Table of Contents UNITED ONLINE, INC. PARENT COMPANY STATEMENTS OF OPERATIONS (in thousands) Year Ended December 31, 2011 2010 2009 Revenues Operating expenses: General and administrative Total...51,730 $ 53,687 $ 70,085 The accompanying notes are an integral part of these financial statements. F-47

  • Page 156
    ... Contents UNITED ONLINE, INC. PARENT COMPANY STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2010 2009 2011 Net cash provided by operating activities Cash flows from investing activities: Net cash used for investing activities Cash flows from financing activities: Payments on term...

  • Page 157
    ... method. The Parent Company financial statements should be read in conjunction with the consolidated financial statements of United Online, Inc. for the corresponding years. Under the terms of the Credit Agreement, FTD Group, Inc., a subsidiary of United Online, Inc., is generally restricted from...

  • Page 158
    ... UNITED ONLINE, INC. SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS (in thousands) Balance at Beginning of Period Additions Charged to Expense Charged (Credited) to Other Accounts Charges Utilized (Write-offs) Balance at End of Period Allowance for doubtful accounts: Year ended December 31, 2011...

  • Page 159

  • Page 160
    ... Trombi Acquisition SARL United Online Advertising Network, Inc., a Delaware corporation (also dba United Online Media Group) United Online Software Development (India) Private Limited, a corporation organized under the laws of India United Online Web Services, Inc., a Delaware corporation (also dba...

  • Page 161
    UNOL Intermediate, Inc., a Delaware corporation

  • Page 162
    QuickLinks Exhibit 21.1 List of Subsidiaries

  • Page 163
    ...-166114, and 333-168634) of United Online, Inc. of our report dated February 28, 2012 relating to the financial statements, financial statement schedules and the effectiveness of internal control over financial reporting, which appears in this Annual Report on Form 10-K. /s/ PRICEWATERHOUSECOOPERS...

  • Page 164
    QuickLinks Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  • Page 165
    ... information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: February 28, 2012 /s/ MARK R. GOLDSTON Mark R. Goldston Chairman, President and Chief Executive...

  • Page 166
    QuickLinks Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

  • Page 167
    ... and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: February 28, 2012 /s/ NEIL P. EDWARDS Neil P. Edwards Executive Vice President...

  • Page 168
    QuickLinks Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

  • Page 169
    ... the Securities Exchange Act of 1934; and The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company. (b) Date: February 28, 2012 /s/ MARK R. GOLDSTON Mark R. Goldston Chairman, President and Chief Executive...

  • Page 170
    QuickLinks Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

  • Page 171
    ... The Annual Report on Form 10-K of United Online, Inc. for the year ended December 31, 2011, as filed with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and The information contained in such report fairly...

  • Page 172
    QuickLinks Exhibit 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002