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UNITED ONLINE INC
FORM 10-K
(Annual Report)
Filed 02/23/10 for the Period Ending 12/31/09
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 2010, 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
    ... Ending 12/31/09 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 http://www.edgar-online.com © Copyright 2010, EDGAR...

  • Page 2
    ... 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) (818) 287-3000...

  • Page 3
    ... 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 $531,095,194 (calculated by excluding shares directly or indirectly held by directors and officers). At February 12, 2010, there...

  • Page 4
    ... Independence Principal Accounting Fees and Services 86 86 86 86 86 PART IV. Item 15. Exhibits, Financial Statement Schedules Signatures In this document, "United Online," "UOL," the "Company," "we," "us" and "our" refer to United Online, Inc. and its subsidiaries. 87 93 This Annual Report on...

  • Page 5
    ... 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 services Internet access, email, Internet security, and Web hosting services Our...

  • Page 6
    ... and deliver the marketers' floral product orders, including retail florists and direct ship merchants. The nationwide floral marketers' share of retail floral purchases has expanded due to shifting consumer preferences towards purchasing floral products online and the emergence of prominent brands...

  • Page 7
    ...of a 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 and services, credit card processing services, ecommerce Web site services, and...

  • Page 8
    ... and response rates to email campaigns, providing rapid feedback for advertisers that can be used to identify potential customers and create new targeted offers. In addition, an online loyalty marketing program that has attracted a large, responsive and loyal member base helps to maximize returns on...

  • Page 9
    ... fulfilled and shipped by third parties direct to the consumer in an elegant gift box, principally offering next-day delivery. Consumer orders are backed by a seven day satisfaction guarantee. Consumers typically pay for floral and specialty gift orders before FTD pays its floral network members or...

  • Page 10
    ... network members include: access to the FTD and Interflora brands and the Mercury Man logo, supported by various marketing and advertising campaigns; access to the floral network; credit card processing services; e-commerce Web site services; online advertising tools; and telephone answering, order...

  • Page 11
    ...advertising fees. We had approximately 4.9 million social networking pay accounts at December 31, 2009. During the quarter ended December 31, 2009, our average monthly revenue per social networking pay account was $2.53 per month. Basic Membership. Basic membership on our Classmates Web site is free...

  • Page 12
    ... features accessible on our Classmates Web site. • • • We continue to develop a number of new features on our Classmates Web site that we believe will enhance the member experience while providing an additional incentive for our free members to upgrade to a pay account. We expect the...

  • Page 13
    ... a free service for consumers who need only provide their name, zip 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 companies...

  • Page 14
    ... and online advertising. Services Revenues FTD FTD services revenues consist of fees charged to floral network members for access to the FTD and Interflora brands and the Mercury Man logo, access to the floral network, credit card processing services, e-commerce Web site services, online advertising...

  • Page 15
    ...www.ftd.com , www.interflora.co.uk and www.interflora.ie Web sites. Classmates Media Our social networking services have historically generated advertising revenues primarily from providing third-party offers to Classmates paying members after they have completed the pay account registration process...

  • Page 16
    ... trade shows; and offline media campaigns. In addition, many of our marketing efforts for our consumer business are also designed to enhance the businesses of our floral network members. By enhancing the FTD and Interflora brands, we increase the possibility that a consumer will place an order...

  • Page 17
    ... and Interflora brands and the Mercury Man logo, access to the floral network, credit card processing services, e-commerce Web site services, online advertising tools, and telephone answering, order-taking, transmission and clearing-house services. The consumer market for flowers and specialty gifts...

  • Page 18
    ... may be able to locate individuals from their past, free of charge in certain cases, without having to use a niche Web site or other online search service. As a result of the growth of the social networking market and minimal barriers to entry, a number of companies have entered or are attempting to...

  • Page 19
    ... pay accounts for our Classmates Media and Communications segments pay us in advance with a credit card. Other payment options for some of our pay services include automated clearing-house ("ACH"), personal check or money order, or via a customer's local telephone bill. Internet access pay accounts...

  • Page 20
    ... our floral network members and third-party suppliers. We also have developed software to enhance the functionality of certain components of our services, including connectivity, Web services, billing, email, customer support, customer loyalty applications, and targeted advertising. We maintain data...

  • Page 21
    ... employees to be good. Executive Officers See Part III, Item 10 "Directors, Executive Officers and Corporate Governance" of this Annual Report on Form 10-K for information about executive officers of the Registrant. Available Information Our corporate Web site is www.unitedonline.com . On this Web...

  • Page 22
    ... of our businesses in a number of ways including reduced demand, more aggressive pricing for similar products and services by our competitors, decreased spending by advertisers, increased credit risks, increased credit card failures, a loss of customers, and increased use of discounted pricing plans...

  • Page 23
    ..., we expect that our advertising revenues will decrease as compared to 2009. We anticipate advertising revenues generated by our Communications segment to continue to decline primarily as a result of the decrease in our dial-up Internet access pay accounts. In addition, our Communications segment...

  • Page 24
    ...limitation, billing; Web site and database management; order transmission, fulfillment and processing including the system for transmitting orders through the floral network; customer support; telecommunications network management; advertisement serving and management systems; and internal financial...

  • Page 25
    ...risks of entering markets in which we have little or no direct prior experience; unforeseen obligations or liabilities; difficulty assimilating the acquired customer bases, technologies and operations; difficulty assimilating and retaining management and employees of the acquired business; potential...

  • Page 26
    ... online loyalty marketing services elect to opt-out of receiving certain types of emails. Without the ability to email these members, we have very limited means of inducing members to return to our Web sites and utilize our services. In addition, each month, a significant number of email addresses...

  • Page 27
    ... a key reason why members use our online social networking services. Our FTD segment generates a significant portion of its consumer orders from the emails we send to customers who have previously ordered products from us. We also engage in a number of third-party email marketing campaigns in which...

  • Page 28
    ...other key employees. Our business is largely dependent on the efforts and abilities of our senior management, particularly Mark R. Goldston, our chairman, president and chief executive officer, and other key personnel. Any of our officers or employees can terminate his or her employment relationship...

  • Page 29
    ... life insurance on any of our employees. Foreign, state and local governments may attempt to impose additional income taxes, sales and use taxes, value-added taxes or other taxes on our business activities and Internet-based transactions, including our past sales, which could decrease our ability...

  • Page 30
    ...-added taxes and restrictions on the repatriation of earnings; increased financial accounting, tax and reporting burdens and complexities; disruption of our ongoing business and significant diversion of management attention from day-to-day responsibilities; localization of our services, including...

  • Page 31
    ...to acquire our Company on terms not approved by our Board of Directors. Our stock price has been highly volatile and may continue to be volatile. The market price of our common stock has fluctuated significantly and it may continue to be volatile with extreme trading volume fluctuations. In addition...

  • Page 32
    ...and Interflora brands and the Mercury Man logo, access to the floral network, credit card processing services, ecommerce Web sites, online advertising tools, and telephone answering, order-taking, transmission and clearing-house services. The consumer market for flowers and specialty gifts is highly...

  • Page 33
    ... and 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...

  • Page 34
    ... sales and use tax or other tax obligations. Additionally, in accordance with current industry practice by international floral and specialty gift direct marketers and our interpretation of applicable law, we collect and remit value-added taxes on certain consumer orders placed through Interflora...

  • Page 35
    ... may be able to locate individuals from their past, free of charge in certain cases, without having to use a niche Web site or other online search service. As a result of the growth of the social networking market and minimal barriers to entry, a number of companies have entered or are attempting to...

  • Page 36
    ... the number of pay accounts, which could reduce our revenues and adversely affect our financial results. Failure to increase or maintain the number of members for our online social networking and online loyalty marketing services or the activity level of these members could cause our business and...

  • Page 37
    ...-up Internet access pay accounts and, potentially, the average 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...

  • Page 38
    ... systems and products. Our Internet access business substantially depends on the availability, capacity, affordability, reliability, and security of our telecommunications networks. Only a limited number of telecommunications providers offer the network and data services we currently require, and...

  • Page 39
    ... 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 additional NetZero shares in the aftermarket at pre-determined prices...

  • Page 40
    ...the State of Delaware. Common Stock Repurchases United Online, Inc.'s Board 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...

  • Page 41
    ... common stock. We then pay the applicable withholding taxes in cash. Common stock repurchases during the quarter ended December 31, 2009 were as follows (in thousands, except per share amounts): Total Number of Shares Purchased as Part of a Publicly Announced Program Maximum Approximate Dollar Value...

  • Page 42
    ... 31, 2009, the cumulative total stockholder return for the Company's common stock, The Nasdaq Global Select Market (U.S. companies) Index (the "Nasdaq Composite") and the Morgan Stanley Internet Index ("MS Internet Index"). Measurement points are the last trading day of each of the Company's fiscal...

  • Page 43
    ... Financial Statements, which appears in Part II, Item 8 of this Annual Report on Form 10-K. During the quarter ended December 31, 2008, we recorded an impairment of goodwill, intangible assets and long-lived assets of $176.2 million ($153.9 million, net of tax) primarily related to our FTD...

  • Page 44
    ...We report our businesses in three reportable segments: Segment Products and Services 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 services Internet access...

  • Page 45
    ...and service fees; levels of certain refunds issued; and discounts, among other factors. Classmates 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...

  • Page 46
    ... 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 47
    ... critical accounting policies in the preparation of our consolidated financial statements: Revenue Recognition FTD Segment Revenue Recognition -Products revenues and related cost of revenues are generally recognized when products are delivered to the customers. Shipping and service fees charged to...

  • Page 48

  • Page 49
    ... floral network service-based fees are recognized in the period in which the service has been provided. Classmates Media Segment and Communications Segment Revenue Recognition -Revenues are comprised of services revenues, which are derived primarily from fees charged to pay accounts, and advertising...

  • Page 50
    ...for each advertising customer. As the earning activities take place, activity measurement data (examples include the number of emails delivered and the number of responses received) is accumulated and the related revenue is recorded. Probability of collection is assessed based on a number of factors...

  • Page 51
    ...- FTD, Interflora, Classmates Online, MyPoints, and Communications-for purposes of evaluating goodwill. These reporting units each constitute a business or group of businesses for which discrete financial information is available and is regularly reviewed by segment management. The goodwill related...

  • Page 52
    ... 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 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
    ... Revenues 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 Web sites services, online advertising...

  • Page 55
    ...www.ftd.com , www.interflora.co.uk and www.interflora.ie Web sites. Classmates Media Our online social networking services have historically generated advertising revenues primarily from providing third-party offers to Classmates members after they have completed the pay account registration process...

  • Page 56
    ... billing support for our pay accounts; fees associated with the storage and processing of customer credit cards and associated bank fees; and domain name registration fees. Sales and Marketing Sales and marketing expenses include expenses associated with promoting our brands, products and services...

  • Page 57
    ... amortization of: acquired pay accounts and free accounts; certain acquired trademarks and trade names; purchased software and technology; acquired customer and advertising contracts and related relationships; acquired patents and domain names; and other acquired identifiable intangible assets...

  • Page 58
    ... Media Communications Year Ended December 31, 2009 2008 2007 Year Ended December 31, 2009 2008 2007 Revenues: Services $ Products Advertising Total revenues Operating expenses: Cost of revenues Sales and marketing Technology and development General and administrative Restructuring charges...

  • Page 59
    assets Total operating expenses Segment income (loss) from operations - 175,867 - - - - 283 - 468,917 331,370 177,229 182,926 165,242 141,288 178,248 223,010 $ 76,928 $ (149,405) $ 58,793 $ 47,309 $ 28,177 56 69,945 $ 79,190 $ 97,074

  • Page 60
    ... was as follows for each period presented (in thousands): Year Ended December 31, 2008 2007 2009 Segment revenues: FTD Classmates Media Communications Intersegment eliminations Consolidated revenues $ 545,845 $ 181,965 $ - 236,022 230,235 193,419 211,233 257,438 320,084 (2,968) (235) - $ 990...

  • Page 61
    ... Year Ended December 31, 2009 2008 Revenues Operating expenses: Cost of revenues Sales and marketing Technology and development General and administrative Amortization of intangible assets Restructuring charges Impairment of goodwill, intangible assets and long-lived assets Total operating expenses...

  • Page 62
    ... for the year ended December 31, 2009 since our FTD segment has lower technology and development expenses as a percentage of its revenues compared to the other segments. Technology and development expenses related to our FTD, Classmates Media and Communications segments constituted 20.8%, 44.9% and...

  • Page 63
    ... ended December 31, 2008. Impairment charges for the year ended December 31, 2008 were primarily due to a reduction in the fair value of the FTD reporting unit compared to its carrying value and lower fair values in the FTD and Interflora trademarks and trade names compared to their carrying values...

  • Page 64
    ... of FTD Group, Inc. are available at the SEC's Web site at www.sec.gov . Year Ended December 31, 2008 (Combined) 2009 % Change (in thousands, except average order value and average currency exchange rates) Revenues Operating expenses: Cost of revenues Sales and marketing Technology and development...

  • Page 65
    ... consumer order volume and a decrease in sales of products and services to our floral network members. In the fourth quarter of 2009, the FTD segment achieved a year-over-year increase in revenues for the first time since the acquisition and, despite the expected decrease in advertising revenues due...

  • Page 66
    ... Assets and Long-Lived Assets. FTD recorded impairment charges of $175.9 million for the year ended December 31, 2008 due to a reduction in the fair value of the FTD reporting unit compared to its carrying value and lower fair values in the FTD and Interflora trademarks and trade names compared to...

  • Page 67
    ...largely due to an increase in our offerings of discounted pricing plans, with a significant number of the new pay accounts generated during the period under this promotional pricing, resulting in a decrease in the churn rate. The increase in Classmates Media services revenues was partially offset by...

  • Page 68
    ... December 31, 2009, compared to $257.4 million for the year ended December 31, 2008. The decrease in Communications revenues was primarily due to a $43.2 million decrease in services revenues as a result of a 24% decrease in our average number of dial-up Internet access pay accounts from 1.6 million...

  • Page 69
    .... In addition, Communications cost of revenues decreased as a result of a $2.8 million decrease in customer support- and billing-related costs due to a decrease in the number of dial-up Internet access pay accounts, a $0.7 million decrease in costs associated with our Web hosting business primarily...

  • Page 70
    ...increase in cost of revenues as a percentage of revenues was primarily due to the addition of FTD which has higher cost of revenues as a percentage of its revenues, compared to the other segments. Cost of revenues related to our FTD, Classmates Media and Communications segments constituted 52.0%, 19...

  • Page 71
    ... as a percentage of revenues was due to the addition of FTD, which has lower technology and development expenses as a percentage of its revenues, compared to the other segments. Technology and development expenses related to our FTD, Classmates Media and Communications segments constituted 7.4%, 44...

  • Page 72
    ...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 73
    ... online social networking pay accounts. The increase in Classmates Media revenues was also due to a $3.9 million increase in advertising revenues as a result of increased advertising revenues associated with our online loyalty marketing and international online social networking services, partially...

  • Page 74
    ... social networking and online 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 and Development...

  • Page 75
    ...-up Internet access services due to a decrease in the number of pay accounts, a decrease in hourly usage per pay account, and lower average hourly telecommunications costs. In addition, Communications costs of revenues decreased as a result of a $3.5 million decrease in customer supportand billing...

  • Page 76
    ...-related expenses and, a $1.2 million increase in consulting fees. The increase as a percentage of revenues was largely attributable to continued declines in revenues as a result of continuing declines in the number of dial-up Internet access pay accounts. Communications Restructuring Charges...

  • Page 77
    ... of FTD Group, Inc. are available at the SEC's Web site at www.sec.gov . Year Ended December 31, 2008 2007 % Change (in thousands, except average order value and average currency exchange rates) Revenues Operating expenses: Cost of revenues Sales and marketing Technology and development General...

  • Page 78
    ... ended December 31, 2007. Impairment charges for the year ended December 31, 2008 were due to a reduction in the fair value of the FTD reporting unit compared to its carrying value and lower fair values in the FTD and Interflora trademarks and trade names compared to their carrying values. Liquidity...

  • Page 79
    ...-month consolidated adjusted EBITDA. The obligations under the UOL Credit Agreement are guaranteed by our domestic wholly-owned subsidiaries, other than UNOL Intermediate, Inc. (a wholly-owned subsidiary of United Online and the direct parent of FTD Group, Inc.) and its subsidiaries. In addition...

  • Page 80
    ... in working capital, primarily related to a decrease in deferred revenue in 2009, compared to the prior-year period, resulting from an increase in the number of pay accounts with discounted promotional pricing plans in our Classmates Media segment as well as a reduction in the number of pay accounts...

  • Page 81
    ..., not be available to United Online, Inc. or segments other than the FTD segment. In addition, the UOL Credit Agreement imposes certain limitations on our ability to pay dividends or use cash flows from operations generated by our Communications and Classmates Media segments for the benefit of...

  • Page 82
    Table of Contents 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 employee withholding taxes due on vested restricted stock units and stock awards issued; the repurchase of...

  • Page 83
    ... stock awards and restricted stock units to pay applicable employee withholding taxes; and a $2.9 million decrease in excess tax benefits from equity awards. In 2008, prior to the closing of the FTD acquisition, we paid quarterly cash dividends of $0.20 per share of common stock for a total...

  • Page 84
    ...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, lessors, business partners, and...

  • Page 85
    ...This update addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. The amendments in this update will be effective prospectively for revenue arrangements entered into or materially...

  • Page 86
    ...flow hedge against expected future cash flows attributable to future LIBOR interest payments on the outstanding borrowings under the FTD Credit Agreement. However, in January 2009, as economic and capital market conditions continued to deteriorate, we determined that prime rate-based borrowings were...

  • Page 87
    ... ITEM 9A. CONTROLS AND PROCEDURES CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company...

  • Page 88
    ... accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management's Report on Internal Control Over Financial Reporting The Company's management is...

  • Page 89
    ... statement relating to our 2010 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year and is incorporated herein by reference: "Board Committees and Meetings" and "Related-Party Transactions". ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The...

  • Page 90
    ... are required to make the statements in this 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 Web site at www.sec.gov. 87

  • Page 91
    ... 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,...the Company and U.S. Stock Transfer Corporation, which includes the form of Certificate of Designation for the Series A junior participating ...

  • Page 92
    ... Stock Incentive Plan 10.13 Form of Option Agreement for 2001 Supplemental Stock Incentive Plan 10.14 Form of Option Agreement for Classmates Online, Inc. 2004 Stock Plan 10.15 Amended and Restated United Online, Inc. Severance Benefit Plan 10.16 Employment Agreement between the Registrant and Mark...

  • Page 93
    ... S. Apatoff 10.37 First Amendment to Employment Agreement between FTD Group, Inc. and Robert S. Apatoff 10.38 Employment Agreement between the Registrant and Charles B. Ammann 10.39 Restricted Stock Unit Issuance Agreement(s) Amendment Agreement between United Online, Inc. and Mark R. Goldston 10.40...

  • Page 94
    ... 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 10-K) 31...

  • Page 95
    ...of the Chief Financial Officer pursuant to Section 906 of the SarbanesOxley Act of 2002 (b) Exhibits X X X 000-33367 000-33367 000-33367 2/23/2010 2/23/2010 2/23/2010 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...

  • Page 96
    ...Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 23, 2010. UNITED ONLINE, INC. By: /s/ MARK R. GOLDSTON Mark R. Goldston Chairman, President and Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENT, that...

  • Page 97
    Table of Contents Signature Title Date /s/ KENNETH L. COLEMAN Director Kenneth L. Coleman /s/ DENNIS HOLT Director Dennis Holt /s/ HOWARD G. PHANSTIEL Director Howard G. Phanstiel /s/ CAROL A. SCOTT Director Carol A. Scott 94 February 23, 2010 February 23, 2010 February 23, 2010 February 23, 2010

  • Page 98
    ... statements in this 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 Web site at www.sec.gov. No. Exhibit Description Filed...

  • Page 99
    ... for 2001 Stock Incentive Plan Form of Option Agreement for 2001 Supplemental Stock Incentive Plan Form of Option Agreement for Classmates Online, Inc. 2004 Stock Plan Amended and Restated United Online, Inc. Severance Benefit Plan Employment Agreement between the Registrant and Mark R. Goldston...

  • Page 100
    ... Description Filed with this Form 10-K Incorporated by Reference to Form File No. Date Filed 10.20 Amended and Restated Employment Agreement between Classmates Media Corporation and Mark R. Goldston 10.21 Employment Agreement between the Registrant and Jeremy E. Helfand 10.22 First Amendment to...

  • Page 101
    ... Investors IV L.P., FTD Co-Investment, LLC and United Online, Inc. 10.52 Credit Agreement, dated as of August 4, 2008, among UNOLA Corp., the financial institutions party thereto from time to time and Wells Fargo Bank, National Association, as sole lead arranger, sole book manager and administrative...

  • Page 102
    ... 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 10-K) 31...

  • Page 103
    ...Contents UNITED ONLINE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting ...Flows Notes to Consolidated Financial Statements Schedule I-Condensed Financial Information of Registrant Schedule II-Valuation and Qualifying Accounts F-1 F-2 F-4 F-5...

  • Page 104
    ... statements, on the financial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require...

  • Page 105
    Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become ...

  • Page 106
    ...and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Member redemption liability Deferred revenue Long-term debt Total current liabilities Member redemption liability Deferred revenue Long-term debt, net of discounts Deferred tax liabilities, net Other liabilities Total...

  • Page 107
    ... Contents UNITED ONLINE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Year Ended December 31, 2008 2007 2009 Revenues: Services Products Total revenues Operating expenses: Cost of revenues-services Cost of revenues-products Sales and marketing Technology and...

  • Page 108
    ... of Contents UNITED ONLINE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Year Ended December 31, 2008 2007 2009 Net income (loss) Change in unrealized gain (loss) on short-term investments, net of tax of $0, $(102) and $184 for the years ended December 31, 2009, 2008...

  • Page 109
    ...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 of tax Foreign currency...

  • Page 110
    Net income Balance at December 31, 2009 - 84,958 $ - 8 $ - 518,580 $ - (26,963 ) $ 70,085 (58,974) $ 70,085 432,651 The accompanying notes are an integral part of these consolidated financial statements. F-7

  • Page 111
    ... costs Proceeds from exercises of stock options Proceeds from employee stock purchase plan Repurchases of common stock Payments for dividends Excess tax benefits from equity awards Net cash provided by (used for) financing activities Effect of foreign currency exchange rate changes on cash and cash...

  • Page 112
    ... Company acquired MyPoints.com, Inc. ("MyPoints"), a leading provider of online loyalty marketing services. In August 2008, the Company acquired FTD, a leading provider of floral and related products and services under the FTD and Interflora brands. The Company's corporate headquarters are located...

  • Page 113
    ...short-term investments and accounts receivable. The Company's accounts receivable are derived primarily from revenue earned from advertising customers and floral network members located in the United States and the United Kingdom, and pay accounts. The Company extends credit based upon an evaluation...

  • Page 114
    ... of Financial Instruments -In accordance with ASC 820, Fair Value Measurements and Disclosures , the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when developing fair value measurements. When available, the Company uses quoted market prices to measure...

  • Page 115
    ...in a business combination are initially recorded at management's estimate of their fair values. The Company accounts for goodwill and indefinite-lived intangible assets in accordance with ASC 350, Intangibles-Goodwill and Other , which among other things, addresses financial accounting and reporting...

  • Page 116
    ... , which addresses financial accounting and reporting for the impairment and disposition of identifiable intangible assets and other long-lived assets. Intangible assets acquired in a business combination are initially recorded at management's estimate of their fair values. The Company evaluates the...

  • Page 117
    ... 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 118
    ... orders are delivered. Monthly, recurring fees and other floral network service-based fees are recognized in the period in which the service has been provided. Classmates Media Segment and Communications Segment Revenue Recognition -The Company's online social networking revenues and Communications...

  • Page 119
    ... related to providing telephone support; customer billing and billing support for the Company's pay accounts and floral network 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 120
    ...The Company capitalizes costs associated with customized internal-use software systems that have reached the application development stage. Such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related expenses for employees...

  • Page 121
    ... and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce...

  • Page 122
    ... 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) per share is an earnings allocation formula that determines earnings per share for common...

  • Page 123
    ... on its consolidated financials statements. 2. SEGMENT INFORMATION Segment revenues and segment income (loss) from operations were as follows (in thousands): Year Ended December 31, 2009 Classmates Media Communications FTD Total Services Products Advertising Total segment revenues Segment income...

  • Page 124
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. SEGMENT INFORMATION (Continued) A reconciliation of segment revenues to consolidated revenues was as follows for each period presented (in thousands): Year Ended December 31, 2008 2007 2009 Segment revenues: FTD...

  • Page 125
    ... 31, 2008 2009 2007 United States Europe Total long-lived assets $ 71,280 $ 76,436 $ 47,054 9,204 6,952 399 $ 80,484 $ 83,388 $ 47,453 The Company manages its working capital on a consolidated basis. In addition, segment assets are not reported to, or used by, the Company's chief operating...

  • Page 126
    ..., respectively. Accrued Liabilities Accrued liabilities consisted of the following (in thousands): December 31, 2009 2008 Employee compensation and related expenses Income taxes payable Non-income taxes payable Customer deposits Other Total $ 22,475 $ 23,683 8,565 1,690 5,325 4,930 3,636 4,269...

  • Page 127
    ... LONG-LIVED ASSETS (Continued) Intangible Assets Intangible assets consisted of the following (in thousands): December 31, 2009 Accumulated Amortization Gross Value Net Pay accounts and free accounts Customer contracts and relationships Trademarks and trade names Software and technology Patents...

  • Page 128
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. CREDIT AGREEMENTS (Continued) 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 FTD. The term loan under...

  • Page 129
    ... of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. CREDIT AGREEMENTS (Continued) dividends, asset sales, and the incurrence of additional debt and liens. Impairment charges recorded by the Company do not impact covenants contained in the FTD Credit Agreement...

  • Page 130
    F-26

  • Page 131
    .... In addition, in 2009, the Company made voluntary prepayments on the FTD Credit Agreement totaling $57.0 million, eliminating all required payments in 2010. Under the terms of the FTD Credit Agreement, FTD is significantly restricted from making dividend payments, loans or advances to United Online...

  • Page 132
    ... 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 to...

  • Page 133
    ..., 2009 and 2008, the Company had no preferred shares issued or outstanding. Common Stock Repurchases United Online, Inc.'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...

  • Page 134
    ... determination by United Online, Inc.'s Board of Directors each quarter following its review of the Company's financial performance and other factors. Dividends are declared and paid out of the Company's surplus, as defined and computed in accordance with the General Corporation Law of the State of...

  • Page 135
    ...presented (in thousands): Year Ended December 31, 2009 2008 2007 Operating expenses: Cost of revenues-services Cost of revenues-products Sales and marketing Technology and development General and administrative Total stock-based compensation Tax benefit recognized $ 943 $ 1,049 $ 43 - 5,472 7,250...

  • Page 136
    ... of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. STOCK-BASED COMPENSATION PLANS (Continued) Restricted Stock Units The following table summarizes activity for restricted stock units during the years ended December 31, 2007, 2008 and 2009: Restricted Stock...

  • Page 137
    ...Board of Directors of United Online, Inc. approved grants of 1.2 million restricted stock units with a grant-date fair value equal to $7.7 million to certain of the Company's non-executive officer employees. The restricted stock units will vest as to twenty-five percent of the total number of shares...

  • Page 138
    ...of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. STOCK-BASED COMPENSATION PLANS (Continued) Stock Options The following table summarizes stock option activity during the years ended December 31, 2007, 2008 and 2009: WeightedAverage Remaining Contractual Life...

  • Page 139
    ...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 price of United...

  • Page 140
    ...tax rate (in thousands): Year Ended December 31, 2008 2007 2009 Federal taxes at statutory rate of 35% State taxes, net Nondeductible executive compensation Goodwill impairment Effects of foreign income Foreign distribution Foreign tax credit Changes in uncertain tax positions Changes in valuation...

  • Page 141
    .... The valuation allowance as of December 31, 2009 relates primarily to certain stock-based compensation that is expected to be limited under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), foreign net operating losses and foreign tax credits. At December 31, 2009 and...

  • Page 142
    ... of limitations Additions related to prior-year positions Balance at December 31, 2009 $ 6,795 1,915 1,591 10,301 1,508 72 (1,142) 1,068 11,807 (3,354) 1,276 $ 9,729 The Company is currently under audit by certain taxing jurisdictions in the U.S. Some audits may conclude in the next twelve months...

  • Page 143
    ... 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 related to the...

  • Page 144
    ... to FTD's Web sites and thousands of floral network members while cross-selling FTD products and services to the Company's then-existing member base of over 50 million registered domestic consumer accounts having similar demographic characteristics as FTD's customer base. • • The Company...

  • Page 145
    ... assets Accounts payable Accrued liabilities Deferred revenue Debt Deferred tax liabilities, net Other liabilities Total net liabilities assumed Intangible assets acquired: Trademarks and trade names Customer contracts Technology Total intangible assets acquired Goodwill Total purchase price $ 12...

  • Page 146
    ... circumstances change that would indicate the carrying amount of an asset may not be recoverable. Impairment of Indefinite-Lived Intangible Assets 2008 Impairment Charge As discussed in Note 13, the Company acquired the FTD and Interflora trademarks and trade names in the FTD acquisition. These were...

  • Page 147
    ... December 31, 2008 valuation, the Company recorded a $44.0 million and $17.9 million impairment charge for the trademarks and trade names of FTD and Interflora, respectively. These impairment charges were included in impairment of goodwill, intangible assets and long-lived assets in the consolidated...

  • Page 148
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. IMPAIRMENT OF GOODWILL, INTANGIBLE ASSETS AND LONG-LIVED ASSETS (Continued) Summary of Impairment Charges Recognized Impairment charges of goodwill, intangible assets and long-lived assets consisted of ...

  • Page 149
    ... or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers and employees that will require the Company, among other things, to indemnify them against certain liabilities...

  • Page 150
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15. COMMITMENTS AND CONTINGENCIES (Continued) those investors material portions of the restricted number of NetZero shares issued in connection with the offering; and (ii) the underwriters had entered into...

  • Page 151
    ... of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 16. QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands, except per share data) Quarter Ended September 30, June 30, December 31, March 31, Year ended December 31, 2009: Revenues Cost of revenues Operating...

  • Page 152
    Table of Contents UNITED ONLINE, INC. SCHEDULE I-CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY BALANCE SHEETS (in thousands) December 31, 2009 2008 Assets Current assets: ...,766 $ 1,133,848 $ 1,015,663 The accompanying notes are an integral part of these financial statements. F-48

  • Page 153
    Table of Contents UNITED ONLINE, INC. PARENT COMPANY STATEMENTS OF OPERATIONS (in thousands) Year Ended December 31, 2008 2007 2009 Revenues Operating expenses: General and ...) 52,664 $ 70,085 $ (94,657) $ 57,777 The accompanying notes are an integral part of these financial statements. F-49

  • Page 154
    ...of Contents UNITED ONLINE, INC. PARENT COMPANY STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2008 2007 2009 Net cash ... options Proceeds from employee stock purchase plan Repurchases of common stock Payments for dividends Net contributions of capital Net cash provided by (used for...

  • Page 155
    ... them ("date of acquisition"). The Parent Company's share of net income (loss) of its subsidiaries is included in net income (loss) using the equity method. The Parent Company financial statements should be read in conjunction with the consolidated financial statements of United Online, Inc. for the...

  • Page 156
    ...UNITED ONLINE, INC. SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS (in thousands) Charged (Credited) to Other Accounts Balance at Beginning of Period Additions Charged to Expense Charges Utilized (Write-offs) Balance at End of Period Allowance for doubtful accounts: Year ended December 31, 2009...

  • Page 157

  • Page 158
    Exhibit 10.15 AMENDED AND RESTATED UNITED ONLINE, INC. SEVERANCE BENEFIT PLAN AND SUMMARY PLAN DESCRIPTION Amended and Restated Effective January 1, 2010

  • Page 159
    ... United Online, Inc. (the " Company ") grants severance pay to terminated full-time employees only under limited circumstances. The Company retains the right to amend, modify or terminate its severance pay policy at any time, in whole or part, and to determine employee eligibility for severance pay...

  • Page 160
    ... of United Online, Inc. " Covered Subsidiary " means any subsidiary listed in attached Schedule A , as such schedule may be revised from time to time, as a participating Employer in the Plan. "Employer Group" means the Company and each member of the group of commonly controlled corporations or...

  • Page 161
    ...Control or Corporate Transaction with respect to United Online, Inc. " Misconduct " means the (i) commission of any act of fraud, embezzlement or dishonesty, (ii) any unauthorized use or disclosure of confidential information or trade secrets of the Company (or any other member of the Employer Group...

  • Page 162
    ... that fifteen (15)day period (via check payable to "United Online, Inc.") any amount advanced but not used. On or before your employment termination date, you have met with your manager and: (i) you have transitioned your work 7. and information concerning your work to your manager; and (ii) you...

  • Page 163
    ... the Company (the " Required Release ") and delivered it to your Employer in accordance with following requirements: • if you are under age forty (40), then (i) you must sign the Required Release and deliver it to your Employer within ten (10) business days (or such shorter period of time required...

  • Page 164
    ..., acquires some or all of the assets of, or otherwise carries on the business of the Company or other Employer relating to your employment. For purposes of this provision "comparable employment" means employment within 50 miles of your prior employment site and at least 100% of your prior base pay...

  • Page 165
    ..., an employee with a $40,000 per year base salary who has been employed continuously for four years would be eligible for a severance benefit equal to nine (9) weeks of base pay. (b) The Severance Payment Benefit amount for Presidents and Executive Vice Presidents shall be one year of base pay. The...

  • Page 166
    ...,000 would be one week's base pay. 3. Payment of Benefits. The lump sum payment of the Severance Payment Benefit determined in accordance with the provisions of this Section IV.B. will be subject to legally required tax withholdings and all other applicable payroll deductions. Such withholdings and...

  • Page 167
    ...'s review procedure. This written notice will be given to you within ninety (90) days after the Plan Administrator receives the application, unless special circumstances require an extension of time, in which case, the Plan Administrator has up to an additional ninety (90) days for processing the...

  • Page 168
    ... is denied (or deemed denied), in whole or in part, you (or your authorized representative) may appeal the denial by submitting a request for a review to the Chief Personnel Officer of the Company within sixty (60) days after the application is denied (or deemed denied). The Plan Administrator will...

  • Page 169
    ... the right of the Company or any other member of the Employer Group, which right is hereby expressly reserved, to terminate the employment of any individual at any time for any reason, without cause. VI. STATEMENT OF ERISA RIGHTS As a participant in the United Online, Inc. Severance Benefit Plan...

  • Page 170
    Administration, U.S. Department of Labor, listed in your local telephone directory or contact the Division of Technical Assistance and Inquiries, Pension and Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. 13

  • Page 171
    ... Telephone: (818) 287-3000 Plan Administrator or United Online's Executive Vice President and General Counsel Severance Plan / Employee Welfare Benefit Plan The cost of the plan is paid by United Online, Inc. Direct Inquiries to: Agent for Service of Legal Process: Type of Plan: Plan Costs: IN...

  • Page 172
    SCHEDULE A LIST OF COVERED SUBSIDIARIES PARTICIPATING IN THE PLAN AS OF JANUARY 1, 2010 NetZero, Inc. Juno Internet Services, Inc. United Online Advertising Network, Inc. Classmates Online, Inc. MyPoints.com, Inc. FTD.COM, Inc. Florists' Transworld Delivery, Inc.

  • Page 173
    ... SARL 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, a corporation...

  • Page 174
    QuickLinks Exhibit 21.1

  • Page 175
    ...333-149324, 333-155261, and 333-157599) of United Online, Inc. of our report dated February 23, 2010 relating to the financial statements, financial statement schedules and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP...

  • Page 176
    QuickLinks Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  • Page 177
    ... 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...

  • Page 178
    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

  • Page 179
    ... 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 I, Scott H. Ray, certify that: 1. I have reviewed this Annual Report on Form 10-K of United Online, Inc.; 2. Based on my knowledge...

  • Page 180
    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

  • Page 181
    ... 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 23, 2010 /s/ MARK R. GOLDSTON Mark R. Goldston Chairman, President and Chief Executive Officer

  • Page 182
    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

  • Page 183
    ... 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 23, 2010 /s/ SCOTT H. RAY Scott H. Ray Executive Vice President and Chief Financial Officer

  • Page 184
    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