NetZero 2008 Annual Report Download

Download and view the complete annual report

Please find the complete 2008 NetZero annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 226

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191
  • 192
  • 193
  • 194
  • 195
  • 196
  • 197
  • 198
  • 199
  • 200
  • 201
  • 202
  • 203
  • 204
  • 205
  • 206
  • 207
  • 208
  • 209
  • 210
  • 211
  • 212
  • 213
  • 214
  • 215
  • 216
  • 217
  • 218
  • 219
  • 220
  • 221
  • 222
  • 223
  • 224
  • 225
  • 226

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
    ... ONLINE INC 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...

  • Page 2
    ...'s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of Each Class Name of Exchange on Which Registered Common Stock, par value $0.0001 per share Preferred Stock Purchase Rights...

  • Page 3
    ... 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 held by directors and officers...

  • 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
    ...looking statements are made include, among others, the factors disclosed in the section entitled "Risk Factors" and additional factors that 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...

  • 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
    .... Services provided typically include clearinghouse, marketing and other services in support of the floral network. The growth of nationwide floral marketers and the Internet channel has led traditional retail florists to increasingly rely on floral networks to augment their order volumes. Access to...

  • Page 8
    ..., 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 sites, and telephone answering and order-taking services...

  • Page 9
    ... highly targeted advertising campaigns, thereby optimizing value to the advertiser. Online loyalty marketing programs use points as an incentive for members to update their personal interest profiles, helping advertisers target consumers interested in purchasing their products and services. Online...

  • Page 10
    ... to Internet access and email, a number of complementary features, while value-priced services incorporate a more limited set of features. The maturity of the dial-up Internet access market has led the largest service providers in the U.S. market, including AOL, EarthLink and United Online, to...

  • Page 11
    ... 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 technology systems that enable its florist members to transmit and receive orders and manage several back office...

  • Page 12
    ... social networking pay accounts at December 31, 2008. During the quarter ended December 31, 2008, our average monthly revenue per social networking 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...

  • Page 13
    ...our social networking Web sites by marketing our pay account services to our free members; increase our advertising revenues; and evaluate further opportunities to expand internationally or through the acquisition of complementary services. Online Loyalty Marketing MyPoints connects advertisers with...

  • Page 14
    ... or the purchase of an advertiser's products or services, or increasing customer traffic on an advertiser's Web site. All of our loyalty marketing service revenues are classified as advertising revenues. Advertisers primarily pay us when our emails are transmitted to members, when members respond to...

  • Page 15
    ... and Juno brands. We also offer broadband services, Internet security services, Web hosting services and premium email. In total, we had 1.7 million Communications pay accounts at December 31, 2008, of which 1.3 million were dial-up Internet access accounts. Most of our Communications revenues are...

  • Page 16
    ... 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. Classmates Media and Communications Classmates Media services revenues consist of amounts charged to pay accounts for social...

  • Page 17
    ... our pay services to the free member. We have also increased the number of social networking members that have signed up for our free services organically (without incurring online advertising expenditures to attract them) in recent years, primarily through enhancements to our Web sites to improve...

  • Page 18
    ... 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. The consumer market for flowers and specialty gifts is highly competitive, and consumers can purchase the products we...

  • Page 19
    ... their service offerings to compete with our services. As we evolve our services and provide more opportunities for our members to meet new people with similar interests or affiliations, we may compete with the increasing number of social networking Web sites for special niches and areas of...

  • Page 20
    ... 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 are 18

  • Page 21
    ... net order activity on a monthly basis. The vast majority of our pay accounts pay us in advance with a credit card. Other payment options for some of our pay services include automated clearinghouse ("ACH"), personal check or money order, or via a customer's local telephone bill. Pay Internet access...

  • Page 22
    ... of our dial-up Internet access accelerator services. These licenses generally have terms ranging from several years to perpetual. Government Regulations We are subject to a number of international, federal, state and local laws and regulations, including, without limitation, those relating to...

  • Page 23
    ... executive officers of the Registrant. Available Information Our corporate Web site is www.unitedonline.com . On this 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...

  • Page 24
    ... in our business models, changes in the online advertising market, changes in our advertising inventory, and changes in usage. Posttransaction sales are also dependent on the number of consumers purchasing our products and services. We expect our advertising revenues in our Communications segment to...

  • Page 25
    ... as credit card processors. Key systems include, without limitation, billing; Web site and database management; order acceptance, fulfillment and processing including the system for transmitting orders through florist members; customer support; telecommunications network management; advertisement...

  • Page 26
    ...integration attempts will 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...

  • Page 27
    ... 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 and of third-parties. We cannot assure...

  • Page 28
    ... in planning for, changes to our business and adverse economic and industry conditions; we could be placed at a competitive disadvantage relative to other companies with less indebtedness; our ability to apply excess cash flows or proceeds from certain types of securities offerings, asset sales and...

  • Page 29
    ... privacy of consumers' nonpublic personal information. Our failure to comply with existing laws, including those of foreign countries in which we operate, the adoption of new laws or regulations or changes in enforcement policies and procedures could increase the costs of operating our business. To...

  • Page 30
    ... to pay dividends. Commencing with the third quarter of 2008, we have decreased our quarterly cash dividend from $0.20 per share of common stock to $0.10 per share of common stock. Changes in our business needs, including working capital and funding for acquisitions, or a change in tax laws relating...

  • Page 31
    ... 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. The consumer market for flowers and specialty gifts is highly competitive, and consumers can purchase the products we...

  • Page 32
    ...remaining retail florists and their business will intensify. Increased competition in the consumer market or the floral network services market may result in lower revenues, reduced gross margins, loss of market share, and increased marketing expenditures. We cannot provide assurance that we will be...

  • Page 33
    ... in the operation of our online and telephonic sales channels could result in the imposition of additional sales and use tax obligations. Moreover, a number of states have been considering or instituting policy initiatives, including those regarding nexus by Internet marketers with the states aimed...

  • Page 34
    ... our services and provide more opportunities for our members to meet new people with similar interests or affiliations, we may compete with the increasing number of social networking Web sites for special niches and areas of interest. The market for loyalty marketing services is highly competitive...

  • 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
    ...the availability of telecommunications services. 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...

  • Page 38
    .... The case against NetZero was coordinated with approximately 300 other suits filed against more than 300 issuers that conducted their initial public offerings between 1998 and 2000, their underwriters and an unspecified number of their individual corporate officers and directors. On October 13...

  • Page 39
    ... to that, NetZero common stock had been quoted on the NASDAQ under the symbol "NZRO" since September 23, 1999. The following table sets forth, for the quarters indicated, the high and low sales prices per share of our common stock as reported on the NASDAQ. 2007 High Low High 2008 Low First Quarter...

  • Page 40
    ... taxes in cash. Common stock repurchases through December 31, 2008 were as follows (in thousands, except per share amounts): Total Number of Shares Purchased as Period Total Number of Shares Purchased Average Price Paid per Share Part of a Publicly Announced Program Maximum Approximate Dollar Value...

  • 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
    ... not included in this Annual Report on Form 10-K. The following amounts are in thousands, except per share data: Year Ended December 31, 2007(3) 2006(2) 2005 2008(4) 2004(1) Consolidated Statements of Operations Data: Revenues Operating income (loss) Net income (loss) Net income (loss) per share...

  • Page 43
    ... of consumer products and services over the Internet through a number of brands including FTD, Interflora, Classmates, MyPoints, NetZero, and Juno. Our FTD segment provides floral and related products and services to consumers and retail florists, as well as to other retail locations offering floral...

  • Page 44
    ... 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 of key business metrics...

  • Page 45
    ... a pay account has purchased more than one of our services unless the account uses the same member identifier. As a result, total active accounts may not represent total unique users. At any point in time, our pay account base includes a number of accounts receiving a free period of service as...

  • Page 46
    ...) Average order value(a) Currency exchange rate: GBP to USD Classmates Media: Segment revenues (in thousands) % of Total revenues Pay accounts (in thousands) Segment churn ARPU Segment active accounts (in millions) Communications: Segment revenues (in thousands) % of Total revenues Pay accounts (in...

  • Page 47
    ... . Services revenues for our social networking services and Communications services are recognized in the period in which fees are fixed or determinable and the related services are provided to the customer. Our pay accounts generally pay in advance for their service by credit card, and revenue is...

  • Page 48
    ... by personal check or money order, or through a local telephone company. In circumstances where payment is not received in advance, revenue is only recognized if collectibility is reasonably assured. Advertising revenues from our social networking services and Communications services consist...

  • Page 49
    ...on available historical and market information. Goodwill and Indefinite-Lived Intangible Assets Goodwill represents the excess of the purchase price of an acquired entity over the fair value of the net tangible and intangible assets acquired. Indefinite-lived intangible assets acquired in a business...

  • Page 50
    ... 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 to our acquired businesses...

  • Page 51
    ... 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 52
    ... market value of the assets. Definite-lived intangible assets are amortized on either a straight-line basis or an accelerated basis over their estimated useful lives, ranging from two to ten years. Our identifiable intangible assets were acquired primarily in connection with business combinations...

  • 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...

  • Page 54
    ... 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 of containers...

  • Page 55
    ... 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. Classmates Media and Communications Classmates Media services revenues consist of amounts charged to pay accounts for social...

  • Page 56
    ... fees; costs related to providing customer support; customer billing and 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. Communications Communications cost of revenues includes...

  • Page 57
    ...our credit facilities, including accretion of discounts and amortization of debt issue costs, and interest expense relating to capital leases. Other Income (Expense), Net Other income (expense), net, generally consists of realized gains and losses recognized in connection with the sale of short-term...

  • Page 58
    ... 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 General and...

  • Page 59
    ...Consolidated cost of revenues increased to 32.1% of consolidated revenues for the year ended December 31, 2008, compared to 22.8% for the prior year period. The increase of $97.7 million was primarily related to $107.1 million of cost of revenues associated with our FTD segment, which is included in...

  • Page 60
    ... shares of common stock and restricted stock units awarded in the first quarter 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...

  • Page 61
    ...earned on a non-income tax dispute settlement, a $0.3 million net realized gain on sales of our short-term investments recognized in the year ended December 31, 2008 in connection with the liquidation of our short-term investments portfolio during the year ended December 31, 2008 and $0.3 million of...

  • Page 62
    ... increase in customer support, overhead and personnel-related costs associated with our social networking services as a result of growth in the business and an increase in headcount, partially offset by decreased costs associated with our loyalty marketing service. The decrease in cost of revenues...

  • Page 63
    ...costs. In addition, Communications costs of revenues decreased as a result 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...

  • Page 64
    ... year period. The decrease in expenses was a result of continued declines in dial-up Internet access revenues. The decrease of $23.9 million was attributable to a $21.6 million decline in advertising, promotion and distribution costs related to our dial-up Internet access services, a $1.3 million...

  • Page 65
    ... available at the SEC's Web 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...

  • Page 66
    ...year period. Excluding the impact of foreign currency 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...

  • 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
    ... in imputed interest on the acquired member redemption liability of our loyalty marketing service. Net realized gains on sales of our short-term investments were not significant for the years ended December 31, 2007 and 2006. Provision for Income Taxes. For the year ended December 31, 2007, we...

  • Page 69
    ...increase in advertising revenues generated from our social networking services was primarily related to increased revenues from post-transaction sales resulting from pay account growth in the year ended December 31, 2007. Classmates Media Cost of Revenues. Classmates Media cost of revenues increased...

  • Page 70
    ... of a $5.8 million increase in 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...

  • Page 71
    ... in telecommunications costs associated with our dial-up Internet access business due to a decrease in the number of pay accounts, a decrease in hourly usage per pay account as well as lower average hourly telecommunications costs. In addition, customer support and billing-related costs decreased by...

  • Page 72
    ... 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 Credit Agreement") and (ii) $425 million of term loan borrowings...

  • Page 73
    ... activities increased by $36.8 million, or 28.9%, for the year ended December 31, 2008 compared to the year ended December 31, 2007. Net cash provided by operating activities is driven by our net income adjusted for non-cash items, including, but not limited to, depreciation and amortization, stock...

  • Page 74
    ...options and proceeds from our employee stock purchase plan; a $3.2 million increase in repurchases of common stock in connection with shares withheld upon vesting of restricted stock awards and restricted stock units to pay applicable employee withholding taxes; and a $2.9 million decrease in excess...

  • Page 75
    ... million increase in the payment of dividends and a $2.9 million increase in repurchases of common stock in connection with shares withheld upon vesting of restricted stock units to pay applicable employee withholding taxes. In 2007 and 2006, we paid quarterly cash dividends of $0.20 per share of...

  • Page 76
    ... 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 other parties with respect to certain matters, including, but not limited to, losses...

  • Page 77
    ... by reason of their status or service as directors, officers or employees. We have also agreed to indemnify certain former officers, directors and employees of acquired companies in connection with the acquisition of such companies. We maintain director and officer insurance, which may cover certain...

  • Page 78
    ...Other Intangible Assets , and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141(R) when the underlying arrangement includes renewal or extension of terms that would require substantial costs or result in a material modification to the asset upon renewal...

  • Page 79
    ..., our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal by selling securities which have declined in market value due to changes in interest rates. During the year ended December 31, 2008, in connection with our acquisition...

  • Page 80
    Table of Contents carried at fair value, with unrealized gains and losses, net of tax, reported as a separate component of stockholders' equity. At December 31, 2008, we had no short-term investments. Foreign Currency Risk We transact business in foreign currencies and may be exposed to risk ...

  • Page 81
    ... 31, 2008 the internal control over financial reporting of FTD Group, Inc. and its subsidiaries because FTD was acquired by the Company in a purchase business combination on August 26, 2008. FTD's total assets and total revenues represent 12% and 27%, respectively, of the related consolidated...

  • Page 82
    ... the end of our fiscal year. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by Item 12 is hereby incorporated by reference to our definitive proxy statement relating to our 2009 annual meeting of stockholders to be...

  • Page 83
    ... or notes related thereto. 3. Exhibits: In reviewing the agreements included as exhibits to this Annual Report on Form 10-K, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the...

  • 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
    ... 2008 10.11 Form of Restricted Stock Unit Issuance Agreement for 2001 Stock Incentive Plan 10.12 Form of Option Agreement for 2001 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...

  • Page 86
    ..., Inc. and Frederic A. Randall, Jr. 10.41 Restricted Stock Unit Issuance Agreement(s) Amendment Agreement between United Online, Inc. and Matthew J. Wisk 10.42 Restricted Stock Unit Issuance Agreement(s) Amendment Agreement between United Online, Inc. and Jeremy E. Helfand 84 10-Q 8-K 10-Q 8-K 10...

  • Page 87
    .... and Paul E. Jordan 10.44 Restricted Stock Unit Issuance Agreement(s) Amendment Agreement between United Online, Inc. and Robert J. Taragan 10.45 United Online, Inc. 2008 Management Bonus Plan 10.46 Office Lease between LNR Warner Center, LLC and NetZero, Inc. 10.47 Commitment Letter, dated April...

  • Page 88
    ... 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...27/2009 The exhibits filed as part of this report are listed in Item 15(a)(3) of this Annual Report on Form 10-K. (c) Financial Statement Schedules The...

  • Page 89
    ... Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 27, 2009. UNITED ONLINE, INC. By: /s/ MARK R. GOLDSTON Mark R. Goldston Chairman, President and Chief Executive Officer KNOW ALL PERSONS...

  • 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
    ... 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. No. Exhibit Description Filed...

  • Page 92
    ... Purchase Plan 10.3 2001 Stock Incentive Plan 10.4 2001 Supplemental Stock Incentive Plan 10.5 Classmates Online, Inc. Amended and Restated 1999 Stock Plan 10.6 Classmates Online, Inc. 2004 Stock Plan 10.7 FTD Group, Inc. 2005 Equity Incentive Award Plan, Amended and Restated as of October 29, 2008...

  • Page 93
    ...McArthur 10.25 First Amendment to Amended and Restated Employment Agreement between Classmates Online, Inc. and Steven B. McArthur 10.26 Employment Agreement between the ... 12/30/2008 10/30/2007 2/27/2009 10/30/2007 2/27/2009 11/10/2008 2/27/2009 10/30/2007 12/30/2008 10/30/2007 12/30/2008 10/30/2007...

  • Page 94
    .... and Paul E. Jordan 10.44 Restricted Stock Unit Issuance Agreement(s) Amendment Agreement between United Online, Inc. and Robert J. Taragan 10.45 United Online, Inc. 2008 Management Bonus Plan 10.46 Office Lease between LNR Warner Center, LLC and NetZero, Inc. 10.47 Commitment Letter, dated April...

  • 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 Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income (Loss) Consolidated Statements of ...

  • Page 97
    ... Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of United Online, Inc.: In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of United Online...

  • 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
    ...Contents UNITED ONLINE, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) December 31, 2008 2007 Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net of allowance for doubtful accounts of $4,327 and $2,378 at December 31, 2008 and...

  • Page 100
    ... UNITED ONLINE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Year Ended December 31, 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...

  • 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
    ... unrealized gain on short-term investments, net of tax Foreign currency translation Tax benefits from equity awards Net income Balance at December 31, 2007 Exercises of stock options Issuance of common stock through employee stock purchase plan Vesting of restricted stock units Repurchases of common...

  • Page 103
    ... Payments on term loan and revolver Payments on capital leases Payments for debt issue 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...

  • Page 104
    ... marketing services for advertisers. United Online is a Delaware corporation that commenced operations in 2001 following the merger of Internet access providers NetZero, Inc. and Juno Online Services, Inc. In April 2004, the Company acquired the Web hosting and domain name registration business...

  • Page 105
    ... from the date of purchase. Consistent with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, the Company classified these securities, all of which had readily determinable fair values and which were highly liquid, as short-term. In connection with the FTD acquisition...

  • Page 106
    ...by selling securities which have declined in market value due to changes in interest rates. The Company classified all of its short-term investments as available-for-sale. Available-for-sale securities were carried at fair value, with changes in unrealized gains and losses, net of taxes, reported in...

  • Page 107
    ... are not available, the Company will be required to make judgments about assumptions market participants would use in estimating the fair value of the financial instrument. Fair values of cash and cash equivalents, short-term accounts receivable, accounts payable, accrued liabilities, and short-term...

  • Page 108
    ..., Business Combinations . Under the purchase method of accounting, the costs, including transaction costs, are allocated to the underlying net assets acquired, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired...

  • Page 109
    ... , 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 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...

  • Page 111
    ... revenue. The Company offers alternative payment methods to credit cards for certain pay service plans. These alternative payment methods currently include automated clearinghouse ("ACH"), payment by personal check or money order, or through a local telephone company. In circumstances where payment...

  • Page 112
    ... of network computers and equipment; email support and license fees; 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...

  • Page 113
    ... is established. The Company amortizes these costs using the greater of the straight-line method over a period of three to five years or the revenue method prescribed by SFAS No. 86. At December 31, 2008, the net book value of capitalized computer software costs related to the internal development...

  • 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...

  • Page 115
    ...before income taxes and net income for the year ended December 31, 2006 were $7.0 million and $5.1 million lower, respectively, than if the Company had continued to account for stock-based compensation under APB Opinion No. 25. Basic net income per share and diluted net income per share for the year...

  • Page 116
    ... or warrants, restricted stock, restricted stock units, and convertible securities, if any. Diluted net income (loss) per share is computed using the weighted-average number of common stock and common stock equivalent shares outstanding (including the effect of restricted stock) during the period...

  • Page 117
    .... The 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...

  • Page 118
    ... of FTD Group, Inc., par value $0.01 per share, issued and outstanding immediately prior to the effective time of the FTD acquisition was canceled and converted into the right to receive $10.15 in cash and 0.4087 of a share of United Online common stock, subject to the payment of cash in lieu of...

  • Page 119
    ... in connection with the transaction. The following table summarizes the components of the purchase price (in thousands): Cash consideration $306,557 Stock consideration (12.3 million shares of United Online common stock valued at $10.29) 126,151 Transaction costs 12,087 Total $444,795 The Company...

  • Page 120
    ... 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): Year Ended December 31, 2008 2007 Revenues Net income (loss) Basic net income...

  • Page 121
    ... 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. The acquisition was accounted for under the purchase method in accordance with SFAS No. 141, Business Combinations...

  • Page 122
    ... acquired is tax deductible. The following summarized unaudited pro forma information assumes that the acquisition of MyPoints had occurred on January 1, 2006 (in thousands, except per share amounts): Year Ended December 31, 2006 Revenues Income before cumulative effect of accounting change Net...

  • 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
    ... $ 68,800 Gross unrealized gains and losses are presented net of tax in accumulated other comprehensive income (loss) on the consolidated balance sheets. The Company had no material realized gains or losses from the sale of short-term investments in the years ended December 31, 2007 and 2006. The...

  • 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
    ... related expenses Income taxes payable Non-income taxes payable Customer deposits Other Total 5. GOODWILL, INTANGIBLE ASSETS AND OTHER LONG-LIVED ASSETS Goodwill $23,683 1,690 4,930 3,472 9,373 $43,148 $25,902 767 1,886 - 2,031 $30,586 The changes in goodwill by reportable segments for the years...

  • Page 127
    ... of the following (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...

  • Page 128
    ...-term growth past fiscal year 2010. In addition, the Company used a 4% royalty rate based on an assessment of other similar royalty arrangements. Lastly, the Company used a 14.6% and 16.9% discount rate for the FTD and Interflora trademarks and trade names, respectively, to determine the fair values...

  • Page 129
    ... 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 130
    ..., and long-term growth past fiscal year 2010. In addition, the Company applied margin and other cost assumptions consistent with the reporting unit's historical trends at various revenue levels and used a 3% growth factor to calculate the terminal value of its reporting units. The Company used a 14...

  • Page 131
    ...4,503 $13,285 In connection with 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...

  • Page 132
    ...such subsidiaries, including a pledge of all of the outstanding capital stock owned by FTD and such guarantors (provided that no more than 66% of the capital stock of any foreign subsidiary is pledged or otherwise secures the FTD Credit Agreement). On the date of the FTD acquisition, term loan A and...

  • Page 133
    ... Company's outstanding and scheduled debt payments per the credit agreements were as follows at December 31, 2008 (in thousands): Year Ending December 31, 2010 2011 2012 Total 2009 2013 Thereafter UOL Credit Agreement $ 56,250 FTD Credit Agreement, term loan A 74,062 FTD Credit Agreement, term...

  • Page 134
    ...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 Agreement which is accounted for as a cash flow hedge at December 31, 2008. At December 31, 2008, the cap had a fair value...

  • Page 135
    ... $25 per unit. On April 29, 2003, the Board of Directors voted to amend the purchase price per unit from $25 to $140. The rights generally will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company's common stock or announces a tender or exchange offer...

  • Page 136
    ... portion of those shares with a fair market value equal to the amount of the employee withholding taxes due, which is accounted for as a repurchase of common stock. The Company then pays the applicable withholding taxes in cash. The amounts remitted in the years ended December 31, 2008 and 2007 were...

  • Page 137
    ...over a nine-month to three-year period, either monthly or annually. Stock option grants expire after ten years unless canceled earlier due to termination of employment or Board of Directors service. Certain stock option grants are immediately exercisable for unvested shares of common stock, with the...

  • Page 138
    ... in valuing the 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...

  • 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
    ... stock units was approximately $42.0 million. 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...

  • Page 141
    ...of Directors of United Online, Inc. (the "Compensation Committee") approved grants of 0.9 million restricted stock units with a grant-date fair value equal to $4.9 million to certain members of the Company's senior management. Each restricted stock unit entitles the recipient to receive one share of...

  • Page 142
    ...-month offering period. The risk-free interest rate assumed in valuing the employee stock purchase plan shares is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term. The Company determines the expected dividend yield percentage by dividing the expected annual...

  • Page 143
    ... 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 recognized over a weighted-average period of 0.7 years. 11. INCOME TAXES Income before income taxes was...

  • Page 144
    ...federal income tax rate to the Company's effective income tax rate (in thousands): Year Ended December 31, 2008 2007 2006 Federal taxes at statutory rate of 35% State taxes, net Change in uncertain tax positions Goodwill impairment Re-measurement of deferred tax assets Other differences Increase in...

  • Page 145
    ... accrued for interest and penalties relating to uncertain tax positions at December 31, 2008 and 2007, respectively, all of which is included in income taxes payable. At December 31, 2008, the Company had federal net operating loss and federal foreign tax credit carryforwards of $150 million and...

  • Page 146
    ... table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share amounts): Year Ended December 31, 2008 2007 2006 Numerator: Income (loss) before cumulative effect of accounting change Cumulative effect of accounting change, net of tax Net income...

  • Page 147
    ... with its Web hosting and photo sharing businesses. In the year ended December 31, 2006, the Company recorded restructuring charges totaling $0.6 million primarily for lease termination costs and termination benefits paid to certain employees. 14. POTENTIAL SUBSIDIARY INITIAL PUBLIC OFFERING OF...

  • Page 148
    ... course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company's breach of such agreements, services to be...

  • Page 149
    ... in May 2001, lawsuits were filed in the United States District Court for the Southern District of New York against NetZero, Inc. ("NetZero"), certain officers and directors of NetZero and the underwriters of NetZero's initial public offering, Goldman Sachs Group, Inc., BancBoston Robertson Stephens...

  • Page 150
    ... 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 ended December 31, 2008: Revenues Operating income (loss) Net income...

  • Page 151
    ..., partially offset by a $0.4 million reduction for the release of valuation allowance related to net operating losses in connection with the acquisition of Classmates Online. Includes primarily the increase in valuation allowance acquired in connection with the FTD acquisition. F-56 (d) (e) (f)

  • Page 152

  • Page 153
    ...Restricted Stock Units under the Plan. Each Restricted Stock Unit represents the right to receive one share of Common Stock on the date that unit vests in accordance with the express provisions of this Agreement. The number of shares of Common Stock subject to the awarded Restricted Stock Units, the...

  • Page 154
    ... Service . Except as otherwise provided in Paragraph 5 below, should the Participant cease Service for any reason prior to vesting in one or more Shares subject to this Award, then the Award will be immediately cancelled with respect to those unvested Shares, and the number of Restricted Stock Units...

  • Page 155
    ... parent entity) may, in connection with the assumption or continuation of the Restricted Stock Units subject to the Award at that time, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in the Change in...

  • Page 156
    ... withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to supplemental taxable income. Participant shall be notified in writing in the event such Share Withholding Method is no longer available. (b) Should any Shares vest under the Award at time the Share...

  • Page 157
    ..., however, shall any fractional shares be issued. Accordingly, the total number of shares of Common Stock to be issued at the time the Award vests shall, to the extent necessary, be rounded down to the next whole share in order to avoid the issuance of a fractional share. 8. Compliance with Laws and...

  • Page 158
    ... 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 President...

  • Page 159
    ... been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination. F. Code shall mean the Internal Revenue Code of 1986, as amended. A-1

  • Page 160
    ...: If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market (i) Value shall be the closing selling price per share of Common Stock, as such price is reported by the National Association of Securities Dealers. If there is no closing selling price for the Common...

  • Page 161
    ... the Treasury Regulations issued under Internal Revenue Code Section 409A. S. Service shall mean the Participant's performance of services for the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent...

  • Page 162
    ... in such chain. V. Withholding Taxes shall mean the federal, state and local income taxes and the employee portion of the federal, state and local employment taxes required to be withheld by the Corporation in connection with the issuance of the shares of Common Stock which vest under the Award and...

  • Page 163
    ...Restricted Stock Units under the Plan. Each Restricted Stock Unit represents the right to receive one share of Common Stock on the date that unit vests in accordance with the express provisions of this Agreement. The number of shares of Common Stock subject to the awarded Restricted Stock Units, the...

  • Page 164
    ... receive any Shares under those cancelled units. (b) The Participant's Employment Agreement sets forth certain terms and conditions under which Participant's equity or equity-based awards from the Corporation, including this Award, may vest [in whole or] in part on an accelerated basis in connection...

  • Page 165
    ... parent entity) may, in connection with the assumption or continuation of the Restricted Stock Units subject to the Award at that time, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in the Change in...

  • Page 166
    ... withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to supplemental taxable income. Participant shall be notified in writing in the event such Share Withholding Method is no longer available. (b) Should any Shares vest under the Award at time the Share...

  • Page 167
    ... as otherwise provided in Paragraph 5 or Paragraph 7(a), the settlement of all Restricted Stock Units which vest under the Award shall be made solely in shares of Common Stock. In no event, however, shall any fractional shares be issued. Accordingly, the total number of shares of Common Stock to be...

  • Page 168
    ...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 President...

  • Page 169
    ... been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination. F. Code shall mean the Internal Revenue Code of 1986, as amended. A-1

  • Page 170
    ...the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock, as such price is reported by the National Association of Securities Dealers. If there is no closing selling price for the Common Stock on the...

  • Page 171
    ... in such chain. U. Withholding Taxes shall mean the federal, state and local income taxes and the employee portion of the federal, state and local employment taxes required to be withheld by the Corporation in connection with the issuance of the shares of Common Stock which vest under of the Award...

  • Page 172
    ... Agreement") by and between United Online, Inc. (the "Company") and Jeremy E. Helfand. Capitalized terms used and not otherwise defined herein shall have the respective meanings set forth in the Original Agreement. RECITALS WHEREAS, Section 409A of the Internal Revenue Code of 1986, as amended...

  • 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
    ... amount of benefits after taking into account any Excise Tax imposed on the payments and benefits provided you hereunder (or on any other payments or benefits to which your may become entitled in connection with any change in control or ownership of the Company or the subsequent termination of 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...

  • Page 176
    ... provisions of Section 7(e), and the 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...

  • 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
    ..."Original Agreement") by and between United Online, Inc. (the "Company") and Paul E. Jordan. Capitalized terms used and not otherwise defined herein shall have the respective meanings set forth in the Original Agreement. RECITALS WHEREAS, Section 409A of the Internal Revenue Code of 1986, as amended...

  • 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
    ... amount of benefits after taking into account any Excise Tax imposed on the payments and benefits provided you hereunder (or on any other payments or benefits to which your may become entitled in connection with any change in control or ownership of the Company or the subsequent termination of 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...

  • 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
    ... "Agreement") dated August 14, 2008, between you and Classmates Online, Inc. (the "Company"), and any defined terms used but not otherwise defined herein will have the meanings ascribed thereto in the Agreement. For the purpose of complying with Section 409A of the Internal Revenue Code of 1986, as...

  • 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...

  • 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
    ... Agreement") by and between United Online, Inc. (the "Company"), and Robert J. Taragan. Capitalized terms used and not otherwise defined herein shall have the respective meanings set forth in the Original Agreement. RECITALS WHEREAS, Section 409A of the Internal Revenue Code of 1986, as amended...

  • 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
    ... amount of benefits after taking into account any Excise Tax imposed on the payments and benefits provided you hereunder (or on any other payments or benefits to which your may become entitled in connection with any change in control or ownership of the Company or the subsequent termination of 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...

  • Page 191
    ... as in effect in the year of such separation from service. To the extent the portion of the severance payments and benefits to which you would otherwise be entitled under this letter agreement during the deferral period under Section 7(e) exceeds the foregoing dollar limitation, such excess shall be...

  • 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
    ... following terms of the Agreement: 1. Any shares of stock required to be issued upon the vesting of an award under the Agreement (whether pursuant to the normal vesting schedule or on an accelerated basis) shall be issued, subject to the Company's collection of all applicable withholding taxes, on...

  • 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...

  • 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
    ... Restricted Stock Unit Issuance Agreement is hereby amended in its 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 Withholding Taxes, on...

  • Page 197
    ... to receive any Shares under those cancelled units. (b) The Participant's Employment Agreement sets forth certain terms and conditions under which Participant's equity or equity-based awards from the Corporation, including this Award, may vest in part on an accelerated basis in connection with...

  • Page 198
    ... shall vest immediately prior to the closing of the Change in Control. The Shares subject to those vested units shall be converted into the right to receive the same consideration per share of Common Stock payable to the other stockholders of the Corporation in consummation of that Change in Control...

  • Page 199
    ... 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." 6. There is hereby added to Appendix A of each Restricted Stock Unit...

  • 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
    ... 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: August 15, 2006 February 15, 2007 August 15, 2007 February 15, 2008 6 130,000 25,000 100,000 50,000...

  • Page 202
    ... Restricted Stock Unit Issuance Agreement is hereby amended in its 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 Withholding Taxes, on...

  • Page 203
    ... to receive any Shares under those cancelled units. (b) The Participant's Employment Agreement sets forth certain terms and conditions under which Participant's equity or equity-based awards from the Corporation, including this Award, may vest in part on an accelerated basis in connection with...

  • Page 204
    ... shall vest immediately prior to the closing of the Change in Control. The Shares subject to those vested units shall be converted into the right to receive the same consideration per share of Common Stock payable to the other stockholders of the Corporation in consummation of that Change in Control...

  • Page 205
    ... 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." 6. There is hereby added to Appendix A of each Restricted Stock Unit...

  • 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
    ... 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: March 25, 2005 March 30, 2006 February 15, 2007 August 15, 2007 February 15, 2008 6 7,500 20,000 40...

  • Page 208
    ... Agreements with the Corporation pursuant to which Participant A. will become entitled to receive shares of Common Stock that vest under the restricted stock units evidenced by those agreements. The Restricted Stock Unit Issuance Agreements covering the grants awarded on March 24, 2005, August 15...

  • Page 209
    ... to receive any Shares under those cancelled units. (b) The Participant's Employment Agreement sets forth certain terms and conditions under which Participant's equity or equity-based awards from the Corporation, including this Award, may vest in part on an accelerated basis in connection with...

  • Page 210
    ... for those Restricted Stock Units pursuant to terms of the Employment Agreement. Accordingly, the terms and provisions of the Employment Agreement (including any conditions, restrictions or limitations governing the accelerated vesting or issuance of the securities subject to the Participant...

  • Page 211
    ... shall vest immediately prior to the closing of the Change in Control. The Shares subject to those vested units shall be converted into the right to receive the same consideration per share of Common Stock payable to the other stockholders of the Corporation in consummation of that Change in Control...

  • Page 212
    ... in their entirety. 11. The definition of Good Reason set forth in Appendix A of the February 2007 Agreement is hereby deleted in its entirety. 12. Except as modified by this Amendment Agreement, all the terms and conditions of each Restricted Stock Unit Issuance Agreement subject to this Amendment...

  • 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, ...

  • Page 214
    ... 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: March 24, 2005 February 15, 2007 August 15, 2007 February 15, 2008 7 50,000 50,000 75,000 50,000 12...

  • Page 215
    ...) Juno Online Services, Inc., a Delaware corporation MyPoints.com, Inc., a Delaware corporation NetZero, Inc., a Delaware corporation (also dba Bluelight Internet Service and PhotoSite) Opobox, Inc., a Delaware corporation United Online Advertising Network, Inc., a Delaware corporation (dba United...

  • Page 216
    QuickLinks Exhibit 21.1 List of Subsidiaries

  • Page 217
    ... INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-70532, 333-88766, 333-106003, 333-114919, 333-121217, 333-123392, 333-140999, 333-149324 and 333-155261) of United Online, Inc. of our report dated...

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

  • Page 219
    ...reviewed this Annual Report on Form 10-K of United Online, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make...ensure that material information relating to the Registrant, including its consolidated ...

  • Page 220
    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 221
    ...reviewed this Annual Report on Form 10-K of United Online, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make...ensure that material information relating to the Registrant, including its consolidated ...

  • Page 222
    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 223
    ...pursuant to 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...

  • Page 224
    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 225
    ...pursuant to 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...

  • Page 226
    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