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UNITED ONLINE INC
FORM 10-K
(Annual Report)
Filed 02/27/09 for the Period Ending 12/31/08
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 2009, 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
    ...FORM 10-K (Annual Report) Filed 02/27/09 for the Period Ending 12/31/08 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 21301 BURBANK BOULEVARD WOODLAND HILLS, CA 91367 8182873000 0001142701 UNTD 7370 - Computer Programming, Data Processing, And Computer Services Technology 12/31...

  • Page 2
    ... or organization) 21301 Burbank Boulevard Woodland Hills, California (Address of principal executive office) 77-0575839 (I.R.S. Employer Identification No.) 91367 (Zip Code) (818) 287-3000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of...

  • Page 3
    ... 30, 2008, 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 date reported by The Nasdaq Global Select Market, was $677,644,954 (calculated by excluding shares directly or indirectly...

  • Page 4
    ... and marketing efficiencies; revenues; cash flows and uses of cash; dividends; capital expenditures; depreciation and amortization; tax payments; impairment charges; stock-based compensation; restructuring charges; foreign currency exchange rates; our ability to repay indebtedness, pay dividends...

  • Page 5
    ... accompany their related forward-looking statements in this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as the date hereof...

  • Page 6
    ... Products and Services BUSINESS FTD Classmates Media Communications Floral and related products and services for consumers, retail florists and other retail locations Online social networking and online loyalty marketing Internet access, email, Internet security, and Web hosting Revenue growth...

  • Page 7
    ... gift items. Nationwide floral marketers, such as FTD and Interflora, attract floral orders from consumers via the Internet and telephone. Nationwide floral marketers typically partner with third-parties to fulfill and deliver their floral product orders, including retail florists and direct ship...

  • Page 8
    ... 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 technology systems, branding and advertising services, credit card processing services, e-commerce Web...

  • Page 9
    ... often have the ability to, among other things, segment members based on personal interests, purchasing behavior and demographic profiles in order to create highly targeted advertising campaigns, thereby optimizing value to the advertiser. Online loyalty marketing programs use points as an incentive...

  • Page 10
    ... the www.interflora.co.uk Web site and a toll-free telephone number. While floral arrangements and plants are FTD's primary offerings, FTD also markets and sells other specialty gift items including: gourmet food, holiday gifts, bath and beauty products, jewelry, wine and gift baskets, dried flowers...

  • Page 11
    ... Interflora brands and the Mercury Man logo, supported by various advertising campaigns; access to the FTD florist network; credit card processing services; e-commerce Web sites; online advertising tools; and telephone answering and order-taking services. FTD also provides point-of-sale and related...

  • Page 12
    ... pay account was $2.98 per month. Basic Membership. Basic membership on our Classmates Web site is free and provides members with access to a number of interactive features. Visitors to our Classmates Web site can become free members by completing the registration process and providing their name...

  • Page 13
    ... accessible on our Classmates Web site. Reunions. Paying members can create events and track RSVPs to reunions, build surveys, exchange party ideas on private message boards, and share pictures in photo albums devoted to the reunion event. • • • • We continue to develop a number of new...

  • Page 14
    ... of Contents code, gender, date of birth, and an email address to register. Members register to receive direct email marketing and other online loyalty promotions, and earn points for responding to email offers, taking market research surveys, shopping online, and engaging in other online activities...

  • Page 15
    ... merchandise revenue and related shipping and service fees for consumer orders, as well as revenues generated from the sale of containers, software and hardware systems, cut flowers, packaging and promotional products and a wide variety of other floral-related supplies to florist members. We do not...

  • Page 16
    ...FTD FTD services revenues consist of fees charged to florist members for access to the FTD and Interflora brands and the Mercury Man logo, access to the florist network, credit card processing services, e-commerce Web sites, online advertising tools, and telephone answering and order-taking services...

  • Page 17
    ... the FTD and Interflora brands, we increase the possibility that a consumer will place an order directly with one of our florist members who are able to market themselves as part of the FTD and Interflora florist networks. FTD also employs a dedicated sales force to market our products and services...

  • Page 18
    ...Web sites and toll-free telephone numbers. In the floral services market, retail florists are our customers for memberships and subscriptions to our various floral network services, including access to the FTD and Interflora brands and the Mercury Man logo, access to the florist network, credit card...

  • Page 19
    ... of social networking Web sites, including broad social networking Web sites such as Facebook and MySpace; a number of specialty Web sites, including LinkedIn and Reunion.com, that offer online social networking services based on school or work communities; and schools, employers and associations...

  • Page 20
    ... placed through FTD's consumer Web sites or toll free telephone numbers typically are paid for using a credit card or a debit card; therefore, consumers generally pay for floral and specialty gift orders before FTD pays florists and specialty gift providers to deliver them. FTD's florist members...

  • Page 21
    ... our florist members and third-party suppliers. We maintain data centers in multiple locations around the country with, in many cases, redundant systems to provide high levels of service availability and connectivity. FTD's data center is maintained at its headquarters in Downers Grove, Illinois. We...

  • Page 22
    ... the U.K. provide floral and related products and services to consumers and retail florists in the U.K. and The Republic of Ireland. Our operations in India primarily handle email customer support, product development and quality assurance for our Classmates Media and Communications businesses. Our...

  • Page 23
    ... Web site, 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 code of ethics, and other documents filed with, or furnished to, the Securities and Exchange...

  • Page 24
    ...or decreases the related U.S. Dollar reported revenues and expenses depending on the trend in currency. Certain of our key business metrics, such as the FTD segment's average order value, are similarly affected by such currency fluctuations. Changes in global economic conditions, market factors, and...

  • Page 25
    ... and processing including the system for transmitting orders through florist members; customer support; telecommunications network management; advertisement serving and management systems; and internal financial systems. Some of these systems, such as customer support and FTD's Web site, are...

  • Page 26
    ... be successful. Acquiring a business, service or technology involves many operational and financial risks, including risks relating to disruption of our ongoing business and significant diversion of resources and management time from day-to-day responsibilities; acquisition financings that involve...

  • Page 27
    ...in part, on the security of the network infrastructures of our thirdparty vendors. Unauthorized or inappropriate access to, or use of, our networks, computer systems or services could potentially jeopardize the security of confidential information, including credit card information, of our customers...

  • Page 28
    ...financing to fund future working capital, capital expenditures, additional acquisitions, and other general corporate requirements could be limited; the credit agreements impose operating and financial covenants and restrictions on us, including limitations on our ability to use FTD cash flow for the...

  • Page 29
    ... which would negatively impact our financial condition and results of operations. We have experienced impairment charges in the past, and in the fourth quarter of 2008, we recorded material impairment charges related to our FTD segment's goodwill and indefinite-lived intangible assets. Given the...

  • Page 30
    ... its review of our financial condition, results of operations and cash flows and such other factors as are deemed relevant by our Board of Directors. The terms of our indebtedness impose limitations on our ability to pay dividends. Commencing with the third quarter of 2008, we have decreased our...

  • Page 31
    ... gifts through our Web sites and toll-free telephone numbers. In the floral services market, retail florists are our customers for memberships and subscriptions to our various floral network services including, among other things, access to the FTD and Interflora brands and the Mercury Man logo...

  • Page 32
    ...our brands depends on our ability to provide our customers high quality products and a high level of customer service. Our business depends, in part, on the ability of our network of independent florist members and third-party suppliers who fulfill our orders to do so at high quality levels. We work...

  • Page 33
    ...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...

  • Page 34
    ... user bases, significantly greater financial, technical, sales, and marketing resources, and engage in more extensive research and development than we do. Some of our competitors also have lower customer acquisition costs than we do, offer a wider variety of services, have more compelling Web sites...

  • Page 35
    ... our Web sites and utilize our services. An increase in the number of members who opt-out of receiving our emails could adversely affect our business and results of operations. Each month, a significant number of email addresses for our social networking and loyalty marketing members become invalid...

  • Page 36
    ...monthly revenue per pay account, we expect that our Communications services revenues, advertising revenues, and the profitability of this segment will continue to decline over time. The number of dial-up Internet access pay accounts has been adversely impacted by both a decrease in the number of new...

  • Page 37
    ... COMMENTS Our corporate headquarters is located in Woodland Hills, California and consists of leased space of approximately 0.1 million square feet. We also lease office space in New York, New York; Fort Lee, New Jersey; and Hyderabad, India, which is generally used by our Communications segment...

  • Page 38
    ... 2008, we had not established allowances for losses relating to any of the matters described above, with the exception of the Rasnake v. NetZero matter. We are subject to various legal proceedings, claims and litigation that arise in the ordinary course of business. Based on information at this time...

  • Page 39
    ... of Directors authorized a common stock repurchase program (the "program") that allows us to repurchase shares of our common stock through open market or privately negotiated transactions based on prevailing market conditions and other factors. From time to time, our Board of Directors has increased...

  • Page 40
    ... units and restricted stock awards that vest and 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. We then pay the applicable withholding taxes in cash. Common stock repurchases through December 31, 2008...

  • Page 41
    ... filing of United Online under the Securities Act of 1933, as amended, or the Exchange Act. The following graph compares, for the five-year period ended December 31, 2008, the cumulative total stockholder return for the Company's common stock, The Nasdaq Global Select Market (U.S. companies) Index...

  • Page 42
    ... ITEM 6. SELECTED FINANCIAL DATA The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual...

  • Page 43
    ... florists, as well as to other retail locations offering floral and related products and services. Our Classmates Media segment services are online social networking and online loyalty marketing. Our primary Communications segment services are Internet access and email. On a combined basis, our Web...

  • Page 44
    ... Services FTD Classmates Media Communications Key Business Metrics Floral and related products and services for consumers, retail florists and other retail locations Online social networking and online loyalty marketing Internet access, email, Internet security, and Web hosting We review a number...

  • Page 45
    ... the reporting period of all loyalty marketing members who have earned or redeemed points during such period. Communications segment active accounts include all segment pay accounts as of the date presented and the number of free Internet access and email accounts that logged on to our services at...

  • Page 46
    ... such period. The pre-acquisition results of FTD should be read in conjunction with the historical consolidated financial statements of FTD Group, Inc. and the related notes to those financial statements. Historical public filings of FTD Group, Inc. are available at the SEC's Web site at www.sec.gov...

  • Page 47
    ...recognized when delivery, installation and customer acceptance have all occurred. Services revenues based on enabling the delivery of orders by FTD florist members are recognized in the period in which the orders are delivered. Monthly, recurring fees and other florist network service-based fees are...

  • Page 48
    ... available, to third-party or customer-provided performance data. Advertising revenues for our loyalty marketing service consist primarily of fees generated when emails are transmitted to members, when members respond to emails and when members complete online transactions. Each of these activities...

  • Page 49
    ... at least annually at the reporting unit level. 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...

  • Page 50
    ... Indefinite-Lived Intangible Assets We acquired the FTD and Interflora trademarks and trade names in the FTD acquisition. These were recorded at their estimated fair value of $229.8 million as of August 26, 2008 (the "Closing Date"). Due to the proximity of the Closing Date to the annual impairment...

  • Page 51
    ... reporting units. We used a 14.1% and 16.0% discount rate for the FTD and Interflora reporting units, respectively, to calculate the fair values of these reporting units. The sum of the fair values of the reporting units was reconciled to our current market capitalization (based upon our stock price...

  • Page 52
    ... of 100 basis points in the discount rate or the terminal growth rate for the Interflora, Classmates, MyPoints and Communications reporting units would not have resulted in any goodwill impairment. An increase of 100 basis points in the discount rate for the FTD reporting unit would have resulted...

  • Page 53
    ... to direct marketing offers delivered by MyPoints, purchase goods or services from advertisers, engage in certain promotional campaigns of advertisers, or engage in other specified activities. The member redemption liability is estimated based upon the weighted-average cost and number of points that...

  • Page 54
    ... Classmates Media segment for the year ended December 31, 2008 were negatively impacted. Financial Statement Presentation Revenues Products Revenues Products revenues consist of merchandise revenue and related shipping and service fees for FTD consumer orders as well as revenues generated from sales...

  • Page 55
    ... of other floral-related supplies to florist members. Services Revenues FTD Services revenues consist of fees charged to florist members for access to the FTD and Interflora brands and the Mercury Man logo, access to the florist network, credit card processing services, e-commerce Web sites, online...

  • Page 56
    ... of network computers and equipment; license fees; costs related to providing customer support; customer billing for our florist members; fees associated with the storage and processing of customer credit cards and associated bank fees; and domain name registration fees. Classmates Media Classmates...

  • Page 57
    ...customer support personnel. In addition, general and administrative expenses include, among other costs, professional fees for legal, accounting and financial services; office relocation costs; non-income taxes; insurance; occupancy and other overhead-related costs; and expenses incurred and credits...

  • Page 58
    ..., 2008 (date of acquisition) to December 31, 2008 Classmates Media Year Ended December 31, 2008 2007 2006 Communications Year Ended December 31, 2008 2007 2006 Revenues: Products Services Advertising Total revenues Operating expenses: Cost of revenues Sales and marketing Technology and development...

  • Page 59
    ... related to our FTD, Classmates Media and Communications segments constituted 52.0%, 19.9% and 28.1%, respectively, of our total segment cost of revenues for the year ended December 31, 2008, compared to 0%, 36.3% and 63.7%, respectively, for the year ended December 31, 2007. Sales and Marketing...

  • Page 60
    ... of fiscal 2008; and the effect of restricted stock units awarded in 2007 to members of senior management in connection with the execution or renewal of employment agreements. Also, the resignation of an executive officer in 2007 resulted in the reversal in 2007 of certain stock-based compensation...

  • Page 61
    ...align the Communications segment's cost structure within a mature business for dial-up Internet access services. In addition, we recognized $0.4 million in restructuring charges in the year ended December 31, 2007 for termination benefits paid to certain employees associated with our Web hosting and...

  • Page 62
    ... related to acquiring new social networking and loyalty marketing members, partially offset by a $0.3 million decrease in personnel- and overhead-related expenses. The decrease as a percentage of Classmates Media revenues was mainly due to lower customer acquisition cost. Classmates Media Technology...

  • Page 63
    ... of a $3.5 million decrease in customer supportand billing-related costs in the year ended December 31, 2008, compared to the year ended December 31, 2007, as a result of a decrease in the number of dial-up Internet access pay accounts and a decrease in the hourly rate charged by our third-party...

  • Page 64
    ...'s cost structure within a mature business for dial-up Internet access services. In addition, we recognized $0.4 million in restructuring charges in the year ended December 31, 2007 for termination benefits paid to certain employees associated with our Web hosting and photo sharing businesses. FTD...

  • Page 65
    ... site at www.sec.gov . Year Ended December 31, 2008 2007 Combined Pre-Acquisition (in thousands, except Average Order Value) % Change FTD segment revenues: Products Services Advertising Total FTD segment revenues Operating expenses: Cost of revenues Sales and marketing Technology and development...

  • Page 66
    ... exchange rates, sales and marketing costs decreased by $3.5 million. The decrease was due to reduced costs in certain programs, including online marketing and reduced florist member incentives, partially offset by increased direct marketing costs. FTD Technology and Development Expenses. FTD...

  • Page 67
    ...'s cost structure within a mature business for dial-up Internet access services. In addition, we recognized $0.4 million in restructuring charges in the year ended December 31, 2007 for termination benefits paid to certain employees associated with our Web hosting and photo sharing businesses. 65

  • Page 68
    ... compensation, including stock-based compensation, that is limited under Section 162(m) of the Code; (3) foreign losses, the benefit of which is not currently recognizable due to uncertainty regarding realization; (4) the re-measurement of certain deferred tax assets in New York; (5) employee stock...

  • Page 69
    ... networking services. The higher cost of revenues associated with our loyalty marketing service is largely due to the benefits provided to our loyalty marketing members when they redeem points earned in connection with our loyalty marketing service. Classmates Media Sales and Marketing Expenses...

  • Page 70
    ... marketing costs related to acquiring new free social networking members, a $2.6 million increase in personnel- and overhead-related expenses associated with our social networking services as a result of growth in our business and a $0.4 million increase in stock-based compensation. Classmates Media...

  • Page 71
    ... as lower average hourly telecommunications costs. In addition, customer support and billing-related costs decreased by $5.4 million in 2007 versus 2006 as a result of a decrease in the number of dial-up Internet access pay accounts and a decrease in the hourly rate charged by our third-party vendor...

  • Page 72
    ... 12.3 million shares of United Online common stock, subject to the payment of cash in lieu of fractional shares of United Online common stock. The FTD acquisition was financed, in part, with the net proceeds from (i) a $60 million senior secured credit agreement with Silicon Valley Bank (the "UOL...

  • Page 73
    ... 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...

  • Page 74
    ... will vary based on our stock price and the number of restricted stock units vesting and stock awards being issued during the quarter. Based on our current projections, we expect to continue to generate positive cash flows from operations, at least in the next twelve months. We intend to use our...

  • Page 75
    ...stock units and stock awards and pay the employee withholding taxes due on vested restricted stock units and stock awards issued; and to fund future capital expenditures. Under the terms of the UOL Credit Agreement and the FTD Credit Agreement, there are significant limitations on our ability to use...

  • Page 76
    ... at declining levels through the terms of the related leases. In addition, standby letters of credit are maintained by FTD to secure credit card processing activity. Other Commitments In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors...

  • Page 77
    ...of inprocess research and development. SFAS No. 141(R) is effective for financial statements issued for fiscal years beginning after December 15, 2008 and early adoption is prohibited. SFAS No. 141(R) requires prospective application for all acquisitions after the date of adoption. We expect SFAS No...

  • Page 78
    ... 1, 2009. We do not expect the adoption of FSP FAS 142-3 to have a material impact on our consolidated financial statements. Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities In June 2008, the FASB issued FSP EITF Issue No. 03-6-1, Determining...

  • Page 79
    ... in market value of the interest rate cap will be recorded in earnings. If interest rates were to increase 100 basis points, the result would be an annual increase in our interest expense related to our debt of approximately $4.2 million. We also have interest rate risk related to our short-term...

  • Page 80
    ...date, we may in the future use hedging programs, including currency forward contracts, currency options and/or other derivative financial instruments commonly utilized if it is determined that such hedging activities are appropriate to reduce risk. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...

  • Page 81
    ... appears herein. Changes in Internal Control Over Financial Reporting On August 26, 2008, the Company completed the acquisition of FTD. The Company is in the process of integrating FTD and will be conducting an evaluation of internal control over financial reporting pursuant to the Sarbanes-Oxley...

  • Page 82
    ...PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by Item 10 is hereby incorporated by reference to our definitive proxy statement relating to our 2009 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal...

  • Page 83
    ... actual state of affairs as of the date they were made or at any other time. 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 Web site at www.sec.gov. 81

  • Page 84
    ... Incorporated by Reference to Form File No. Date Filed 2.1 Stock Purchase Agreement, dated as of April 9, 2006, by and between United Online, Inc. and UAL Corporation 2.2 Agreement and Plan of Merger, dated April 30, 2008, among United Online, Inc., UNOLA Corp. and FTD Group, Inc. 2.3 Amendment No...

  • Page 85
    ... to Form File No. Date Filed 10.9 Form of Restricted Stock Unit Issuance Agreement for 2001 Stock Incentive Plan, 2001 Supplemental Stock Incentive Plan and FTD Group, Inc. 2005 Equity Incentive Award Plan, Amended and Restated as of October 29, 2008 10.10 Form of Restricted Stock Unit Issuance...

  • Page 86
    ... Amendment to Employment Agreement between FTD Group, Inc. and Robert S. Apatoff 10.37 Restricted Stock Unit Issuance Agreement(s) Amendment Agreement between United Online, Inc. and Mark R. Goldston 10.38 Restricted Stock Unit Issuance Agreement Amendment Agreement between United Online, Inc. and...

  • Page 87
    ...Voting and Support Agreement, dated as of April 30, 2008, by and among Green Equity Investors IV L.P., FTD Co-Investment, LLC and United Online, Inc. 10.50 Credit Agreement, dated as of August 4, 2008, among UNOLA Corp., the financial institutions party thereto from time to time and Wells Fargo Bank...

  • Page 88
    ... by Reference to Form File No. Date Filed 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Exhibits X 000-33367 2/27/2009 The exhibits filed as part of this report are listed in Item 15(a)(3) of this Annual Report on Form 10...

  • Page 89
    .... Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated below. Signature Title Date /s/ MARK R. GOLDSTON Mark R. Goldston /s/ NEIL P. EDWARDS Neil...

  • Page 90
    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 88 February 27, 2009 February 27, 2009 February 27, 2009

  • Page 91
    ...this Annual Report on Form 10-K and in the Company's other public filings, which are available without charge through the SEC's Web site at www.sec.gov. No. Exhibit Description Filed with this Form 10-K Incorporated by Reference to Form File No. Date Filed 2.1 Stock Purchase Agreement, dated as...

  • Page 92
    ... Reference to Form File No. Date Filed 4.2 Amendment No. 1 to Rights Agreement, dated as of April 29, 2003, between the Registrant and U.S. Stock Transfer Corporation 10.1 Form of Indemnification Agreement 10.2 2001 Amended and Restated Employee Stock Purchase Plan 10.3 2001 Stock Incentive Plan 10...

  • Page 93
    Table of Contents No. Exhibit Description Filed with this Form 10-K Incorporated by Reference to Form File No. Date Filed 10.19 Amended and Restated Employment Agreement between Classmates Media Corporation and Mark R. Goldston 10.20 Employment Agreement between the Registrant and Jeremy E. ...

  • Page 94
    ...Voting and Support Agreement, dated as of April 30, 2008, by and among Green Equity Investors IV L.P., FTD Co-Investment, LLC and United Online, Inc. 10.50 Credit Agreement, dated as of August 4, 2008, among UNOLA Corp., the financial institutions party thereto from time to time and Wells Fargo Bank...

  • Page 95
    ... 11, 2008, among United Online, Inc., the lenders party thereto from time to time and Silicon Valley Bank, as administrative agent 21.1 List of Subsidiaries 23.1 Consent of Independent Registered Public Accounting Firm 24.1 Power of Attorney (see signature page of this Annual Report on Form 10K) 31...

  • Page 96
    Table of Contents UNITED ONLINE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting ... Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Schedule II-Valuation and Qualifying Accounts F-1 F-2 F-4 F-5 F-6 F-7...

  • Page 97
    ... (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not...

  • Page 98
    ... was acquired by the Company in a purchase business combination during 2008. We have also excluded FTD from our audit of internal control over financial reporting. FTD is a wholly-owned subsidiary whose total assets and total revenues represent 12% and 27%, respectively, of the related consolidated...

  • Page 99
    ... revenue Long-term debt, net of discounts Deferred tax liabilities, net Other liabilities Total liabilities Commitments and contingencies (see Note 15) Stockholders' equity: Preferred stock, $0.0001 par value; 5,000 shares authorized; no shares issued or outstanding at December 31, 2008 and 2007...

  • Page 100
    ...2008 2007 2006 Revenues $669,403 $513,503 $522,654 Operating expenses: Cost of revenues (including stock-based compensation, see Note 10) 214,885 117,203 119,990 Sales and marketing (including stock-based compensation, see Note 10) 173,042 163,424 176,980 Technology and development (including stock...

  • Page 101
    ...of Contents UNITED ONLINE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Year Ended December 31, 2008 2007 2006 Net income (loss) Change in unrealized gain (loss) on short-term investments, net of tax of $(102), $184 and $120 for the years ended December 31, 2008, 2007...

  • Page 102
    ... of common stock in connection with acquisition Dividends paid on shares outstanding and restricted stock units Dividends payable on restricted stock units Stock-based compensation Change in unrealized loss on short-term investments, net of tax Change in unrealized loss on interest rate cap, net...

  • Page 103
    ... by operating activities: Depreciation and amortization Stock-based compensation Provision for (benefit from) doubtful accounts receivable Impairment of goodwill, intangible assets and long-lived assets Accretion of discounts and amortization of debt issue costs Deferred taxes, net Tax benefits from...

  • Page 104
    ... of online loyalty marketing services. In August 2008, the Company acquired FTD Group, Inc., a leading provider of floral and related products and services. The Company's corporate headquarters is located in Woodland Hills, California, and the Company also maintains offices in New York, New York...

  • Page 105
    ... Standards ("SFAS") No. 131, Disclosures about Segments of an Enterprise and Related Information . In August 2008, the Company completed the acquisition of FTD. FTD's operating results are now reported as the FTD segment, which is aligned with how management measures and reviews segment performance...

  • Page 106
    ... FTD florist 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 Company maintains an allowance for doubtful accounts receivable based upon the expected...

  • Page 107
    ... fixtures, are amortized using the straight-line method over the shorter of the lease term or up to ten years. Upon the sale or retirement of property or equipment, the cost and related accumulated depreciation or amortization is removed from the Company's consolidated financial statements with the...

  • Page 108
    ... at the reporting unit level. The Company tests the goodwill of its reporting units and indefinite-lived intangible assets for impairment annually during the fourth quarter of its fiscal year and whenever events occur or circumstances change that would more likely than not indicate that the goodwill...

  • Page 109
    ... significant changes in the manner of the Company's use of the acquired assets or the strategy for the acquired business or the Company's overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of...

  • Page 110
    ... to direct marketing offers delivered by MyPoints, purchase goods or services from advertisers, engage in certain promotional campaigns of advertisers, or engage in other specified activities. The member redemption liability is estimated based upon the weighted-average cost and number of points that...

  • Page 111
    ...recognized when delivery, installation and customer acceptance have all occurred. Services revenues based on enabling the delivery of orders by FTD florist members are recognized in the period in which the orders are delivered. Monthly, recurring fees and other florist network service-based fees are...

  • Page 112
    ...; costs related to providing telephone support; customer billing and billing support for the Company's pay accounts and florist members; fees associated with the storage and processing of customer credit cards and associated bank fees; and domain name registration fees. Sales and Marketing -Sales...

  • Page 113
    ...) including branding and customer acquisition campaigns consisting of television, Internet, sponsorships, radio, print, and outdoor advertising, and on retail and other performance-based distribution relationships. Marketing and advertising costs to promote the Company's products and services are...

  • Page 114
    ...services; office relocation costs; non-income taxes; insurance; occupancy and other overhead-related costs; and expenses incurred and credits received as a result of certain legal settlements. Stock-Based Compensation -On January 1, 2006, the Company adopted SFAS No. 123R (revised 2004), Share-Based...

  • Page 115
    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) employee share-based compensation, and to determine the subsequent impact on the ...

  • Page 116
    ... inprocess research and development. SFAS No. 141(R) is effective for financial statements issued for fiscal years beginning after December 15, 2008 and early adoption is prohibited. SFAS No. 141(R) requires prospective application for all acquisitions after the date of adoption. The Company expects...

  • Page 117
    ... calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company does not expect the adoption of SFAS No...

  • Page 118
    ... 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...

  • Page 119
    ... million shares of United Online common stock valued at $10.29) 126,151 Transaction costs 12,087 Total $444,795 The Company's common stock was valued at $10.29 for purposes of determining the total purchase price, based on the average of the Company's closing stock price for the period from two days...

  • Page 120
    ... price allocation. The results of FTD's operations have been included in the Company's consolidated financial statements since the Closing Date. The following unaudited pro forma information assumes the FTD acquisition occurred at January 1, 2008 and 2007 (in thousands, except per share amounts...

  • Page 121
    ... of FTD's existing debt Transaction-related expenses Total MyPoints.com, Inc. $ $ 10,463 16,171 26,634 In April 2006, the Company acquired MyPoints.com, Inc. for approximately $56.6 million in cash, including acquisition costs. MyPoints is a leading provider of online loyalty marketing services...

  • Page 122
    ...of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. ACQUISITIONS (Continued) table summarizes the net liabilities assumed and the intangible assets and goodwill acquired in connection with the acquisition (in thousands): Estimated Amortizable Life Description...

  • Page 123
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. SEGMENT INFORMATION Revenues and segment income (loss) from operations by segment are as follows (in thousands): Year Ended December 31, 2008 Classmates Media Communications FTD Total Products Services Advertising...

  • Page 124
    ...): December 31, 2007 2008 2006 United States Europe Total long-lived assets $669,947 193,025 $862,972 $277,048 1,231 $278,279 $282,178 1,122 $283,300 The Company manages its working capital on a consolidated basis. In addition, segment assets are not reported to, or used by, the chief...

  • Page 125
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. BALANCE SHEET COMPONENTS (Continued) Other Current Assets Other current assets consisted of the following (in thousands): December 31, 2008 2007 Prepaid expenses Income taxes receivable Gift cards related to member...

  • Page 126
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. BALANCE SHEET COMPONENTS (Continued) Accrued Liabilities Accrued liabilities consisted of the following (in thousands): December 31, 2008 2007 Employee compensation and related expenses Income taxes ...

  • Page 127
    ... (in thousands): December 31, 2008 Accumulated Amortization Net Cost or Fair Value Pay accounts and free accounts Customer contracts and relationships Trademarks and trade names Advertising contracts and related relationships Software and technology Patents, domain names and other Total $ 100,785...

  • Page 128
    ...-Lived Intangible Assets 2008 Impairment Charge As discussed in Note 2, the Company acquired the FTD and Interflora trademarks and trade names in the FTD acquisition. These were recorded at their estimated fair value of $229.8 million as of the Closing Date. Due to the proximity of the Closing Date...

  • Page 129
    ... in the Closing Date valuation and determined that there was no impairment of the FTD and Interflora reporting units as of October 1, 2008. During the latter half of the December 2008 quarter, there was deterioration in the general business environment, weakening consumer spending, a significant...

  • Page 130
    ... used a 14.1% and 16.0% discount rate for the FTD and Interflora reporting units, respectively, to calculate the fair values of these reporting units. The sum of the fair values of the reporting units was reconciled to the Company's current market capitalization (based upon the Company's stock price...

  • Page 131
    ...the FTD acquisition, in August 2008, United Online entered into a $60 million senior secured credit agreement (the "UOL Credit Agreement") and borrowed $60 million thereunder. The net proceeds of the term loans under the UOL Credit Agreement were used to finance, in part, the acquisition of FTD. The...

  • Page 132
    ... Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. CREDIT AGREEMENTS (Continued) such pledge is limited to 66% of the outstanding capital stock), excluding the capital stock of UNOL Intermediate, Inc. FTD Credit Agreement In connection with the FTD acquisition...

  • Page 133
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. CREDIT AGREEMENTS (Continued) Summary of Indebtedness FTD debt assumed in connection with the acquisition amounting to $302.3 million was fully repaid upon completion of the acquisition. The repayment ...

  • Page 134
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. DERIVATIVE INSTRUMENT In November 2008, the Company entered into a three-year interest rate cap instrument to manage risks associated with interest rate fluctuations on a $150 million notional amount of the FTD Credit...

  • Page 135
    ... record at the close of business on that date. Each right entitles the registered holder to purchase from the Company one unit consisting of one one-thousandth of a share of its Series A junior participating preferred stock at a price of $25 per unit. On April 29, 2003, the Board of Directors voted...

  • Page 136
    ... were paid. Common Stock Repurchases The Company's Board of Directors authorized a common stock repurchase program (the "program") that allows the Company to repurchase shares of its common stock through open market or privately negotiated transactions based on prevailing market conditions and other...

  • Page 137
    ... of employment. Restricted stock units granted to non-employee directors generally vest annually over a one-year period. Upon the exercise of a stock option award, the vesting of a restricted stock unit or the award of common stock or restricted stock, shares of common stock are issued from...

  • Page 138
    ... options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the closing market price of United Online common stock at the date of grant...

  • Page 139
    ...-pricing model. The assumptions represent the weighted average of the applicable assumption used to value stock options at their grant date. The Company did not grant any stock options in the years ended December 31, 2008 and 2007. Year Ended December 31, 2006 Risk-free interest rate Expected term...

  • Page 140
    .... The fair value of restricted stock units that vested during the year ended December 31, 2008 was approximately $20.5 million. Total unrecognized compensation cost related to unvested restricted stock and restricted stock units at December 31, 2008, net of expected forfeitures was approximately $57...

  • Page 141
    ...guaranteed such employees an aggregate $13.0 million of value in restricted stock units in CMC. Because the IPO was not effective by April 30, 2008, certain of these employment agreements were modified and the related equity awards were issued as restricted stock units in the Company based on prices...

  • Page 142
    ... the expected annual dividend by the closing market price of United Online common stock at the date of grant. For the years ended December 31, 2008, 2007 and 2006, the Company recognized $1.1 million, $1.7 million and $1.9, respectively, of stock-based compensation related to the employee stock...

  • Page 143
    ... of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. STOCK-BASED COMPENSATION PLANS (Continued) plan. Total unrecognized compensation cost related to the employee stock purchase plan at December 31, 2008 was approximately $2.1 million and was expected to be...

  • Page 144
    ..., 2008 and 2007, respectively, to reduce deferred tax assets to an amount that is more likely than not to be realized in future periods. Based on an assessment of all available evidence, the Company concluded that, with the exception of certain stock-based compensation that is expected to be limited...

  • Page 145
    ... 31, 2007 Additions due to FTD acquisition Additions related to current year positions Lapse of statute of limitations Additions related to prior year positions Balance at December 31, 2008 $ 6,795 1,915 1,591 10,301 1,508 72 (1,142) 1,068 $11,807 The Company is currently under audit by certain...

  • Page 146
    ...In October 2007, the Company eliminated 69 positions and recorded restructuring charges totaling $3.0 million for employee termination benefits within its Communications segment to better align the segment's cost structure within a mature business for dial-up Internet access services. All costs F-51

  • Page 147
    ...for lease termination costs and termination benefits paid to certain employees. 14. POTENTIAL SUBSIDIARY INITIAL PUBLIC OFFERING OF CLASSMATES MEDIA CORPORATION CMC was formed in August 2007 for the purposes of consolidating the Company's Classmates, The Names Database and MyPoints business units in...

  • Page 148
    ... that may arise by reason of their status or service as directors, officers or employees. The Company has also agreed to indemnify certain former officers, directors and employees of acquired companies in connection with the acquisition of such companies. The Company maintains director and...

  • Page 149
    ...of the restricted number of NetZero shares issued in connection with the offering; and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate NetZero shares to those customers in the offering in exchange for which the customers agreed to purchase...

  • Page 150
    ..., however, that such actions will not materially and adversely affect the Company's business, financial position, results of operations or cash flows. 16. QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands, except per share data) Quarter Ended September 30, June 30, December 31, March 31, Year...

  • Page 151
    ...allowance due to executive compensation that is limited under Section 162(m) of the Code and foreign losses, the benefit of which is not currently recognizable due to uncertainty regarding realization, partially offset by a $0.4 million reduction for the release of valuation allowance related to net...

  • Page 152

  • Page 153
    ... of this Agreement. The number of shares of Common Stock subject to the awarded Restricted Stock Units, the applicable vesting schedule for those shares, the dates on which those vested shares shall become issuable to Participant and the remaining terms and conditions governing the award (the...

  • Page 154
    ... within five (5) business day following the payment of the actual cash dividend on the outstanding Common Stock, subject to the Corporation's collection of all applicable federal, state and local income and employment withholding taxes. For any other dividend or distribution, a special book account...

  • Page 155
    ... number of Shares which vest on such an accelerated basis exceed the number of Shares unvested immediately prior to the date of the Participant's Involuntary Termination. The Shares that vest upon such Involuntary Termination of Service shall be issued to the Participant, subject to the Corporation...

  • Page 156
    ... use of the proceeds from a next-day sale of the Shares issued to the Participant, provided and only if • (i) such a sale is permissible under the Corporation's trading policies governing the sale of Common Stock, (ii) the Participant makes an irrevocable commitment, on or before the vesting date...

  • Page 157
    ... Stock may be listed for trading at the time of such issuance. 9. Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices, and directed to the attention of Stock...

  • Page 158
    ... first day of the month immediately following the date the Corporation receives proof of Participant's death. IN WITNESS WHEREOF , the parties have executed this Agreement on the day and year first indicated above. UNITED ONLINE, INC. By: Mark R. Goldston Title: Chairman, Chief Executive Officer...

  • Page 159
    ... and shall be the date indicated in Paragraph 1 of the Agreement. D. Board shall mean the Corporation's Board of Directors. Agreement shall mean this Restricted Stock Unit Issuance Agreement. Award shall mean the award of restricted stock units made to the Participant pursuant to the terms of this...

  • Page 160
    ...the closing selling price on the last preceding date for which such quotation exists. (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined...

  • Page 161
    ...-six (36) months (or such shorter period of time in which the Participant has been in Employee status). Any such determination, however, shall be made in accordance with the applicable standards of the Treasury Regulations issued under Internal Revenue Code Section 409A. S. Service shall mean the...

  • Page 162
    of absence, no Service credit shall be given for vesting purposes for any period the Participant is on a leave of absence. T. Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain...

  • Page 163
    ... of this Agreement. The number of shares of Common Stock subject to the awarded Restricted Stock Units, the applicable vesting schedule for those shares, the dates on which those vested shares shall become issuable to Participant and the remaining terms and conditions governing the award (the...

  • Page 164
    ..., are to be issued. The terms and provisions of the Employment Agreement (including any conditions, restrictions or limitations governing the accelerated vesting or the issuance of the Shares, including (without limitation) the execution and delivery of an effective general release), as they apply...

  • Page 165
    ... accelerated basis in accordance with those provisions shall be issued or distributed on the applicable date or dates determined for those Restricted Stock Units pursuant to terms of the Employment Agreement. Accordingly, the terms and provisions of the Employment Agreement (including any conditions...

  • Page 166
    ..., including (without limitation) the execution and delivery of an effective general release) shall apply to any Restricted Stock Units which are assumed or otherwise continued in effect in connection with a Change in Control or replaced with a cash incentive program under Paragraph 5(a) and are...

  • Page 167
    ... Stock may be listed for trading at the time of such issuance. 9. Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices, and directed to the attention of Stock...

  • Page 168
    ...first day of the month immediately following the date the Corporation receives proof of Participant's death. IN WITNESS WHEREOF , the parties have executed this Agreement on the day and year first indicated above. UNITED ONLINE, INC. By: Mark R. Goldston Title: Chairman, Chief Executive Officer and...

  • Page 169
    ... and shall be the date indicated in Paragraph 1 of the Agreement. D. Board shall mean the Corporation's Board of Directors. Agreement shall mean this Restricted Stock Unit Issuance Agreement. Award shall mean the award of restricted stock units made to the Participant pursuant to the terms of this...

  • Page 170
    ...the closing selling price on the last preceding date for which such quotation exists. (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined...

  • Page 171
    ... of absence, no Service credit shall be given for vesting purposes for any period the Participant is on a leave of absence. S. Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken...

  • Page 172
    ... restricted stock units that vest on such an accelerated basis will be issued to you on the first business day, within the sixty (60)-day period following the date of your cessation from service as a result of your termination "without cause" (as defined below) or your resignation for "good reason...

  • Page 173
    ...the Company will pay you an amount equal to the annual bonus that you would have received had you remained employed by, and in good standing with, the Company through the date the annual bonus for that fiscal year is paid in the following fiscal year, with that amount to be paid at the same time and...

  • Page 174
    ... sixty (60) days after the date of such termination." 7. The definition of "good reason" as set forth in Section 7(d) of the Original Agreement is hereby deleted and replaced in its entirety as follows: "' good reason' means: (i) (ii) (iii) (iv) a material reduction in your base salary without your...

  • Page 175
    ...applicable dollar limitation will be equal to two times the lesser of (i) your annualized compensation (based on your annual rate of pay for the calendar year preceding the calendar year of your separation from service, adjusted to reflect any increase during that calendar year which was expected to...

  • Page 176
    ...remaining severance payments and benefits (if any) shall be paid in accordance with the normal payment dates specified for them herein." 8. and effect. Except as modified by this Amendment, all the terms and provisions of the Original Agreement shall continue in full force ( Signature Page Follows )

  • Page 177
    ... WHEREOF, each of the parties hereto has executed this Amendment on the date specified therefor below. UNITED ONLINE, INC. By: /s/ Mark R. Goldston Mark R. Goldston Chairman, President and Chief Executive Officer Dated: December 19, 2008 By: /s/ Jeremy E. Helfand Jeremy E. Helfand Dated: December 22...

  • Page 178
    ... restricted stock units that vest on such an accelerated basis will be issued to you on the first business day, within the sixty (60)-day period following the date of your cessation from service as a result of your termination "without cause" (as defined below) or your resignation for "good reason...

  • Page 179
    ...the Company will pay you an amount equal to the annual bonus that you would have received had you remained employed by, and in good standing with, the Company through the date the annual bonus for that fiscal year is paid in the following fiscal year, with that amount to be paid at the same time and...

  • Page 180
    ... sixty (60) days after the date of such termination." 7. The definition of "good reason" as set forth in Section 7(d) of the Original Agreement is hereby deleted and replaced in its entirety as follows: "' good reason' means: (i) (ii) (iii) (iv) a material reduction in your base salary without your...

  • Page 181
    ...applicable dollar limitation will be equal to two times the lesser of (i) your annualized compensation (based on your annual rate of pay for the calendar year preceding the calendar year of your separation from service, adjusted to reflect any increase during that calendar year which was expected to...

  • Page 182
    10. Except as modified by this Amendment Agreement, all the terms and provisions of the Original Agreement shall continue in full force and effect. ( Signature Page Follows )

  • Page 183
    ... WHEREOF, each of the parties hereto has executed this Amendment on the date specified therefor below. UNITED ONLINE, INC. By: /s/ Mark R. Goldston Mark R. Goldston Chairman, President and Chief Executive Officer Dated: December 19, 2008 By: /s/ Paul E. Jordan Paul E. Jordan Dated: December 22...

  • Page 184
    ...monthly installments, beginning on the first regular payday for the Company's salaried employees, within the 60-day period following the date of your "separation of service" (as defined in the Treasury Regulations issued under Code Section 409A) due to such termination, on which the executed Release...

  • Page 185
    ...applicable dollar limitation will be equal to two times the lesser of (i) your annualized compensation (based on your annual rate of pay for the calendar year preceding the calendar year of your separation from service, adjusted to reflect any increase during that calendar year which was expected to...

  • Page 186
    Please indicate your acceptance of the foregoing terms by signing the acknowledgement below. CLASSMATES ONLINE, INC. By: /s/ Mark R. Goldston Mark R. Goldston Chief Executive Officer Dated: December 19, 2008 Acknowledged and agreed to as of the date set forth below, and effective January 1, 2009: ...

  • Page 187
    ...evidencing a particular restricted stock unit award, the shares of common stock underlying the restricted stock units that vest on such an accelerated basis will be issued to you on the first business day, within the sixty (60)-day period following the date of your cessation from service as a result...

  • Page 188
    ...the Company will pay you an amount equal to the annual bonus that you would have received had you remained employed by, and in good standing with, the Company through the date the annual bonus for that fiscal year is paid in the following fiscal year, with that amount to be paid at the same time and...

  • Page 189
    ... sixty (60) days after the date of such termination." 8. The definition of "good reason" as set forth in Section 7(d) of the Original Agreement is hereby deleted and replaced in its entirety as follows: "' good reason' means: (i) (ii) (iii) (iv) a material reduction in your base salary without your...

  • Page 190
    ...applicable dollar limitation will be equal to two times the lesser of (i) your annualized compensation (based on your annual rate of pay for the calendar year preceding the calendar year of your separation from service, adjusted to reflect any increase during that calendar year which was expected to...

  • Page 191
    compensation limit under Section 401(a)(17) of the Code as in effect in the year of such separation from service. To the extent the ... accordance with the normal payment dates specified for them herein." 8. and effect. Except as modified by this Amendment, all the terms and provisions of the Original ...

  • Page 192
    ... WHEREOF, each of the parties hereto has executed this Amendment on the date specified therefor below. UNITED ONLINE, INC. By: /s/ Mark R. Goldston Mark R. Goldston Chairman, President and Chief Executive Officer Dated: December 19, 2008 By: /s/ Robert J. Taragan Robert J. Taragan Dated: December 22...

  • Page 193
    ...monthly installments, beginning on the first regular payday for the Company's salaried employees, within the 60-day period following the date of your "separation of service" (as defined in the Treasury Regulations issued under Code Section 409A) due to such termination, on which the executed Release...

  • Page 194
    ...applicable dollar limitation will be equal to two times the lesser of (i) your annualized compensation (based on your annual rate of pay for the calendar year preceding the calendar year of your separation from service, adjusted to reflect any increase during that calendar year which was expected to...

  • Page 195
    Please indicate your acceptance of the foregoing terms by signing the acknowledgement below. FTD GROUP, INC. By: /s/ Mark R. Goldston Mark R. Goldston Chief Executive Officer Dated: December 19, 2008 Acknowledged and agreed to on the date set forth below, and effective January 1, 2009: /s/ Robert ...

  • Page 196
    ...the applicable vesting date specified for those Shares in such Vesting Schedule or as soon thereafter as administratively practicable, but in no event later than the close of the calendar year in which the vesting date occurs or (if later) the fifteenth day of the third calendar month following such...

  • Page 197
    ... or equity-based awards from the Corporation, including this Award, may vest in part on an accelerated basis in connection with his cessation of Service under various specified circumstances. The Employment Agreement also sets forth the date or dates on which the shares of Common Stock subject to...

  • Page 198
    ...three (3) business days following the effective date of that Change in Control. Such distribution shall be subject to the Corporation's collection of the applicable Withholding Taxes pursuant to the provisions of Paragraph 7." 5. There is hereby added to each Restricted Stock Unit Issuance Agreement...

  • Page 199
    ..., the first day of the month immediately following the date the Corporation receives proof of Participant's death. For purposes of this Agreement, the term Separation from Service shall have the meaning ascribed to such (c) term under Code Section 409A and the Treasury Regulations issued thereunder...

  • Page 200
    IN WITNESS WHEREOF, each of the parties has executed this Amendment Agreement on the date specified for that party below. UNITED ONLINE, INC. By: /s/ Mark R. Goldston Title: Chairman, President & CEO Dated: December 19, 2008 Jeremy Helfand PARTICIPANT Name: Jeremy Helfand Dated: December 22, 2008 5

  • Page 201
    ... Corporation and Participant governing the following Awards are subject to the Amendment Agreement: Number of Restricted Stock Units Originally Subject to Agreement: Number of Restricted Stock Units Currently Outstanding: Number of Restricted Stock Units Subject to Amendment Agreement: Award Date...

  • Page 202
    ...the applicable vesting date specified for those Shares in such Vesting Schedule or as soon thereafter as administratively practicable, but in no event later than the close of the calendar year in which the vesting date occurs or (if later) the fifteenth day of the third calendar month following such...

  • Page 203
    ... or equity-based awards from the Corporation, including this Award, may vest in part on an accelerated basis in connection with his cessation of Service under various specified circumstances. The Employment Agreement also sets forth the date or dates on which the shares of Common Stock subject to...

  • Page 204
    ... Corporation, and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Section 409A(a)(2). The deferred Shares or other distributable amount shall be issued or distributed in a lump sum on the first day of the seventh (7th) month following the date...

  • Page 205
    ..., the first day of the month immediately following the date the Corporation receives proof of Participant's death. (c) For purposes of this Agreement, the term Separation from Service shall have the meaning ascribed to such term under Code Section 409A and the Treasury Regulations issued thereunder...

  • Page 206
    IN WITNESS WHEREOF, each of the parties has executed this Amendment Agreement on the date specified for that party below. UNITED ONLINE, INC. By: /s/ Mark R. Goldston Title: Chairman, President & CEO Dated: December 19, 2008 Paul Jordan PARTICIPANT Name: Paul Jordan Dated: December 22, 2008 5

  • Page 207
    ... Corporation and Participant governing the following Awards are subject to the Amendment Agreement: Number of Restricted Stock Units Originally Subject to Agreement: Number of Restricted Stock Units Currently Outstanding: Number of Restricted Stock Units Subject to Amendment Agreement: Award Date...

  • Page 208
    ... Paragraph 1 of each Restricted Stock Unit Issuance Agreement is hereby amended in its 1. entirety to read as follows: "The Shares in which the Participant vests in accordance with the regular Vesting Schedule set forth above shall be issued, subject to the Corporation's collection of all applicable...

  • Page 209
    ... or equity-based awards from the Corporation, including this Award, may vest in part on an accelerated basis in connection with his cessation of Service under various specified circumstances. The Employment Agreement also sets forth the date or dates on which the shares of Common Stock subject to...

  • Page 210
    ... accelerated basis in accordance with those provisions shall be issued or distributed on the applicable date or dates determined for those Restricted Stock Units pursuant to terms of the Employment Agreement. Accordingly, the terms and provisions of the Employment Agreement (including any conditions...

  • Page 211
    ... Corporation, and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Section 409A(a)(2). The deferred Shares or other distributable amount shall be issued or distributed in a lump sum on the first day of the seventh (7th) month following the date...

  • Page 212
    ..., the first day of the month immediately following the date the Corporation receives proof of Participant's death. (c) For purposes of this Agreement, the term Separation from Service shall have the meaning ascribed to such term under Code Section 409A and the Treasury Regulations issued thereunder...

  • Page 213
    IN WITNESS WHEREOF, each of the parties has executed this Amendment Agreement on the date specified for that party below. UNITED ONLINE, INC. By: /s/ Mark R. Goldston Title: Chairman, President & CEO Dated: December 19, 2008 Robert J. Taragan PARTICIPANT Name: Robert J. Taragan Dated: December 22, ...

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    ... Corporation and Participant governing the following Awards are subject to the Amendment Agreement: Number of Restricted Stock Units Originally Subject to Agreement: Number of Restricted Stock Units Currently Outstanding: Number of Restricted Stock Units Subject to Amendment Agreement: Award Date...

  • Page 215
    ...a Delaware corporation United Online Advertising Network, Inc., a Delaware corporation (dba United Online Media Group) United Online Web Services, Inc., a Delaware corporation (dba 50 Megs, Bizhosting, Freeservers, GlobalServers, and MySite) United Online Software Development (India) Private Limited...

  • Page 216
    QuickLinks Exhibit 21.1 List of Subsidiaries

  • Page 217
    ...) of United Online, Inc. of our report dated February 26, 2009 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP Los Angeles, California February 27...

  • Page 218
    QuickLinks Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  • Page 219
    ... 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 I, Mark R. Goldston, certify that: 1. I have reviewed this Annual Report on Form 10-K of United Online, Inc.; 2. Based on my knowledge, this report...

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    QuickLinks 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

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    ... (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most...

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    QuickLinks 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

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    ... Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (a) The Annual Report on Form 10-K of United Online, Inc. for the year ended December 31, 2008, as filed with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the Securities...

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    QuickLinks 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

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    ... Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (a) The Annual Report on Form 10-K of United Online, Inc. for the year ended December 31, 2008, as filed with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the Securities...

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    QuickLinks 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