NetZero 2011 Annual Report Download

Download and view the complete annual report

Please find the complete 2011 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 172

  • 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

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

Table of contents

  • Page 1
    UNITED ONLINE INC FORM 10-K (Annual Report) Filed 02/28/12 for the Period Ending 12/31/11 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 ...

  • 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...

  • Page 3
    ...Yes 1 At June 30, 2011, the aggregate market value of voting stock held by non-affiliates of the Registrant, based on the last reported sales price of the Registrant's common stock on such date reported by The Nasdaq Global Select Market, was $511,771,575 (calculated by excluding shares directly or...

  • Page 4
    ... Accounting Fees and Services PART IV. Item 15. Exhibits, Financial Statement Schedules Signatures 41 44 45 84 85 85 85 86 87 87 87 87 87 88 93 In this document, "United Online," "UOL," the "Company," "we," "us" and "our" refer to United Online, Inc. and its subsidiaries. This Annual Report...

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

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

  • Page 7
    ...florists have become increasingly dependent on floral network services to provide incoming order volume to offset business lost to the Internet, supermarket and mass merchant channels; and Traditional retail florists and floral mass marketers have expanded their product offerings to include a larger...

  • Page 8
    ... and services offered by providers of floral network services include point-of-sale and related technology systems and services, credit card processing services, e-commerce website services, online advertising tools, clearing-house services, order transmission, and after-hours telephone answering...

  • Page 9
    ...access to broadband in non-rural areas. Many broadband providers, including cable companies such as Comcast and local exchange carriers such as AT&T, market broadband Internet access offerings that are "bundled" with telephone, entertainment or other services, which generally results in lower prices...

  • Page 10
    ... than new pay accounts. In 2012, we intend to begin selling 4G mobile broadband under the NetZero brand as part of a wholesale agreement with Clearwire, a leading provider of 4G mobile broadband in the U.S. The dynamics and drivers of this market are substantially different from the dial-up Internet...

  • Page 11
    ... also provides point-of-sale and related technology services and systems that enable its floral network members to transmit and receive orders and manage several back office functions of a floral retailer's business, including accounting, customer relationship management, direct marketing campaigns...

  • Page 12
    ... All-Access Pass, which is generally available for terms ranging from three months to two years. Revenues from our Classmates website are derived primarily from the sale of these subscriptions and, to a lesser extent, from advertising fees and other transactions on our website, including the sale of...

  • Page 13
    ..., broadband services. Our dial-up Internet access services are provided on both a free and pay basis, with the free services subject to hourly and other limitations. Basic pay dial-up Internet access services include Internet access and an email account. In addition, we offer accelerated dial-up...

  • Page 14
    ... FTD FTD services revenues consist of fees charged to its floral network members for access to the FTD and Interflora brands and the Mercury Man logo, access to the floral networks, credit card processing services, e-commerce website services, online advertising tools, clearing-house services, order...

  • Page 15
    ... integrations in order to provide effective solutions for advertisers. Communications Our Communications services generate advertising revenues from search placements, display advertisements and online market research associated with our Internet access and email services. We host and customize the...

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

  • Page 17
    ... supermarkets may choose from a variety of providers that offer similar products and services. We believe the primary competitive factors in this market are price, order volume, customer service, services offered, strength of brand, number of members in the network, and fulfillment capabilities. In...

  • Page 18
    ...-up Internet access providers. Our principal competitors for broadband services include, among others, local exchange carriers such as AT&T and Verizon, wireless and satellite service providers, and cable service providers. Our principal dial-up Internet access competitors include established online...

  • Page 19
    ... to assist our members and customers in verifying and updating their account information. In addition, we offer traditional email support and certain of our services provide live telephone support as well. Our customer relationship management and support infrastructure includes employees at our...

  • Page 20
    ... and managed modem services. We license from third parties a number of our software applications and components, including applications for our billing, customer support, advertising, and database systems, our client and server applications, and portions of our dial-up Internet access accelerator...

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

  • Page 22
    ... aspects 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...

  • Page 23
    ...Internet advertising networks, co-registration partners, retailers, distributors, and direct marketers, to promote or distribute our products and services. In addition, in connection with the launch of new products or services, such as those related to the planned NetZero 4G mobile broadband service...

  • Page 24
    ... of customer support functions in the event that this vendor unexpectedly becomes unable or unwilling to provide these services to us. Legal actions or investigations could subject us to substantial liability, require us to change our business practices, and adversely affect our business, financial...

  • Page 25
    ... of revenue. The success of our business depends on the security of our networks and, in part, on the security of the network infrastructures of our thirdparty vendors. In connection with conducting our business in the ordinary course, we store and transmit customer and member information, including...

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

  • Page 27
    .... An increase in the number of members or customers to whom we are not able to send emails, or who elect to not receive, or are unable to receive, our emails could adversely affect our business, financial condition, results of operations, and cash flows. From time to time, Internet service providers...

  • Page 28
    ...impairment of relationships with users, customers or vendors as a result of changes in management of the acquired business or other factors; large write-offs either at the time of the acquisition or in the future, the incurrence of restructuring and other exit costs, the amortization of identifiable...

  • Page 29
    ...securities offerings, asset sales and other transactions to purposes other than the repayment of debt, as well as servicing of the debt, could be limited. The interest rates under the Credit Agreement will fluctuate and, accordingly, interest expense may increase. The U.S. government's credit rating...

  • Page 30
    ...could result in the imposition of additional sales and use taxes, or the payment of state income or other taxes, on certain transactions conducted over the Internet. In addition, advertisers and other third parties may choose to not do business with us in order to avoid nexus with certain states. If...

  • Page 31
    ... adverse tax consequences, including the complexities of foreign value 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...

  • Page 32
    ...previous stockholder rights plan expired in February 2011, there are no assurances that our Board of Directors will not implement a new stockholder rights plan in the future. Our stock price has been highly volatile and may continue to be volatile. The market price of our common stock has fluctuated...

  • Page 33
    ... 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 able to compete successfully or that competitive pressures will not have a material adverse effect on our business, financial...

  • Page 34
    ... number of floral network members, or if we are not able to maintain or increase revenues from our floral network members, our business, financial condition, results of operations, and cash flows could be materially and adversely affected. Shifts in the mix of products versus services sold...

  • Page 35
    ... nexus, we could incur substantial tax liabilities for past sales and lose future sales as a result of the increased tax cost that would be borne by the customer. Also, states may seek to reclassify the status of Internet order gatherers, such as our FTD consumer business, as persons that are deemed...

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

  • Page 37
    ... or active free online nostalgia members, or a decline in the activity of those members, could result in decreased pay accounts, decreased content on our websites and decreased advertising revenues. A decline in the number of registered or active online loyalty marketing service members could also...

  • Page 38
    ... its PeoplePC subsidiary. Dial-up Internet access services do not compete favorably with broadband services with respect to connection speed and do not have a significant, if any, price advantage over certain broadband services. Many broadband providers, including cable companies and local exchange...

  • Page 39
    ... access pay accounts and revenues have been declining and are expected to continue to decline due to the continued maturation of the market for dial-up Internet access. Consumers continue to migrate to broadband access, primarily due to the faster connection and download speeds provided by broadband...

  • Page 40
    ... and security of our telecommunications networks. Only a limited number of telecommunications providers offer the network and data services we currently require, and we purchase most of our telecommunications services from a few providers. In addition, our planned NetZero 4G mobile broadband service...

  • Page 41
    ... 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. The parties in the approximately 300 coordinated class actions, including NetZero, the underwriter defendants in the...

  • Page 42
    ... General for the District of Columbia regarding the subsidiary's marketing, billing, and renewal practices, including, without limitation, its former post-transaction sales practices. In July 2011, United Online, Inc. received a civil investigative demand from the Federal Trade Commission regarding...

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

  • Page 44
    ...We then pay the applicable required employee withholding taxes. Common stock repurchases during the quarter ended December 31, 2011 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 that...

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

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

  • Page 47
    ... number of Internet users, and we offer a broad range of Internet marketing services for advertisers. Segment Definitions We report our businesses in three reportable segments: Segment Products and Services FTD Content & Media Communications Floral, gift and related products and services...

  • Page 48
    ...business model. A pay account is defined as a member who has paid for a subscription to a Content & Media or Communications service, and whose subscription has not terminated or expired. A subscription provides the member with access to our service for a specific term (for example, a month or a year...

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

  • Page 50
    ... international pay accounts which, on average, have lower-priced subscription plans compared to U.S. pay accounts, and the churn rate. Quarter Ended September 30, June 30, March 31, 2011 2011 2011 Year Ended December 31, December 31, 2010 2011 2010 2009 December 31, 2011 Consolidated: Revenues (in...

  • Page 51

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

  • Page 53
    ... and, when available, to third-party or customer-provided performance data. Advertising revenues for our online loyalty marketing service consist primarily of fees generated when emails are transmitted to members, when members respond to emails and when members complete online transactions. Each...

  • Page 54
    ... 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 is specific to each reporting unit and the goodwill...

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

  • Page 56
    ... 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 57
    ...loss. As additional information becomes available, we continually assess the potential liability related to such pending matter. Financial Statement Presentation Revenues Products Revenues FTD Products revenues consist of merchandise revenues and related shipping and service fees, less discounts and...

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

  • Page 59
    ... to providing customer support; costs related to 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. Sales and Marketing Sales and marketing expenses include...

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

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

  • Page 62
    ... depreciation expense. We anticipate that consolidated cost of revenues will continue to increase in 2012 compared to 2011. Sales and Marketing Year Ended Change December 31, 2011 2010 $ (in thousands, except percentages) % Sales and marketing Sales and marketing expenses as a percentage of total...

  • Page 63
    ... depreciation expense. These decreases were partially offset by a $3.7 million increase in sales and marketing expenses associated with our FTD segment. Technology and Development Year Ended Change December 31, 2011 2010 $ (in thousands, except percentages) % Technology and development Technology...

  • Page 64
    ... 31, 2011, related to such refinancing. Other Income, Net Year Ended Change December 31, 2011 2010 $ % (in thousands, except percentages) Other income, net $ 2,643 $ 452 $ 2,191 485% The increase in consolidated other income, net, was primarily due to a $1.1 million non-income tax refund at...

  • Page 65
    ...-year discrete income tax benefits and reduced expense related to lower non-deductible stock-based compensation. FTD Segment Results FTD Revenues Year Ended Change December 31, 2011 2010 $ (in thousands, except percentages and average order value) % Products Services Advertising Total FTD Revenues...

  • Page 66
    ..., as well as an increase in marketing expenses related to television advertising in the U.K., partially offset by decreased marketing expenditures related to television advertising in the U.S. FTD Technology and Development Year Ended Change December 31, 2011 2010 $ % (in thousands, except...

  • Page 67
    ... to a decrease in segment active accounts and a decrease in available inventory on the Classmates website as well as a decrease in advertising revenues generated by our online loyalty marketing service due to a number of factors, including the loss of a major customer. These decreases were partially...

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

  • Page 69
    ..., customer support and billingrelated costs due to the decrease in the number of dial-up Internet access accounts, a $1.0 million decrease in costs associated with our broadband Internet access services and a $1.6 million decrease in costs associated with our email, Internet security and...

  • Page 70
    ...dial-up Internet access services and a $5.2 million decrease in personnel- and overhead-related expenses primarily as a result of reduced headcount. We anticipate that Communications sales and marketing expenses will increase in 2012 as compared to 2011 due to the planned promotion of the NetZero 4G...

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

  • Page 72
    ...increases were partially offset by a $9.1 million decrease in cost of revenues associated with our Communications segment. Sales and Marketing Year Ended December 31, Change 2010 2009 $ (in thousands, except percentages) % Sales and marketing Sales and marketing...expenses was primarily related to a ...

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

  • Page 74
    ...on our credit facilities. Other Income, Net Year Ended December 31, 2009 (in thousands, except percentages) Change $ % 2010 Other income, net $ 452 $ 4,215 $ (3,763) (89)% Other income, net, for the year ended December 31, 2009 included non-operating income related to a non-income tax refund...

  • Page 75
    ... FTD revenues $ 93,782 $ 89,720 $ 4,062 16.9% 16.4% 5% The increase in FTD sales and marketing expenses was primarily due to higher marketing expenditures related to television advertising for the Valentine's Day and U.S. Mother's Day holidays in 2010 and higher customer service costs, partially...

  • Page 76
    ... included lease termination costs and employee termination benefits. Content & Media Segment Results Content & Media Revenues Year Ended Change December 31, 2010 2009 $ (in thousands, except percentages and ARPU) % Services Advertising Total Content & Media Revenues ARPU Average pay accounts...

  • Page 77
    ... the cost of points earned by members of our online loyalty marketing service and a $0.7 million increase in overhead-related costs, partially offset by a $1.3 million decrease in credit card processing fees and a $0.4 million decrease in personnel-related costs. The increase in cost of revenues as...

  • Page 78
    ... in headcount. Communications Segment Results Communications Revenues Year Ended December 31, Change 2010 2009 $ (in thousands, except percentages and ARPU) % Services Advertising Total Communications Revenues ARPU Average number of dial-up Internet access pay accounts $ 135,342 $ 175,207 $ (39...

  • Page 79
    ... costs due to a decrease in the number of dial-up Internet access pay accounts. In addition, Communications cost of revenues decreased due to a $0.9 million decrease in personnel-related costs as a result of reduced headcount, a $0.9 million decrease in costs associated with our broadband services...

  • Page 80
    ...unallocated corporate expenses, excluding depreciation and amortization expenses, was due to a $3.1 million decrease in personnel- and overhead-related costs and a $1.0 million decrease in professional fees. These items were partially offset by $2.0 million of expenses recorded during the year ended...

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

  • Page 82
    ... increase in working capital requirements primarily related to a decline in deferred revenue primarily as a result of a decline in Content & Media pay accounts and, to a lesser extent, the timing of payments to vendors and changes in tax liabilities, as well as a $13.2 million decrease in net income...

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

  • Page 84
    ...as well as the terms at which such capital might be offered to us. We currently expect to have sufficient liquidity to fulfill our debt service obligations, at least in the next twelve months. FTD Group, Inc. was in compliance with all covenants under the Credit Agreement at December 31, 2011. If we...

  • Page 85
    ... rights, content and intellectual property related to acquiring new content for our domestic online nostalgia services business and a $1.1 million increase in capital expenditures. Net cash used for financing activities decreased by $2.9 million, or 2%, for the year ended December 31, 2010, compared...

  • Page 86
    ... to secure credit card processing activity and additional letters of credit are maintained related to inventory purchases. Other Commitments In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, sureties and insurance companies...

  • Page 87
    ... may negatively affect our consolidated revenues and net income. A 1% adverse change in overall foreign currency exchange rates over an entire year would not have a material impact on estimated annual revenues and estimated annual income before income taxes. These estimates assume an adverse shift...

  • Page 88
    ...Company's internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United...

  • Page 89
    ..., management has determined that, at December 31, 2011, the Company's internal control over financial reporting was effective. The Company's internal control over financial reporting at December 31, 2011 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm...

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

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

  • Page 92
    ...for 2001 Stock Incentive Plan 10.10 Form of Restricted Stock Unit Issuance Agreement for 2010 Incentive Compensation Plan (nonemployee directors-initial grant) 10.11 Form of Restricted Stock Unit Issuance Agreement for 2010 Incentive Compensation Plan (nonemployee directors-annual grant) S-4/A 333...

  • Page 93
    89

  • Page 94
    ... R. Goldston 10.26 Restricted Stock Unit Issuance Agreement Amendment Agreement between United Online, Inc. and Mark R. Goldston 10.27 Restricted Stock Unit Issuance 10-K 000-33367 2/28/2011 10-K 000-33367 2/28/2011 10-K 000-33367 2/28/2011 10-K 000-33367 2/28/2011 10-K 10-K 000-33367...

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

  • Page 96
    ... Amendment Agreement between United Online, Inc. and Robert J. Taragan 10.30 2011 Management Bonus Plan 10.31 2011 Special Bonus Plan 10.32 Office Lease between LNR Warner Center, LLC and NetZero, Inc. 21.1 List of Subsidiaries 23.1 Consent of Independent Registered Public Accounting Firm 24.1 Power...

  • Page 97

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

  • Page 99
    ...substitution, for him or her in any and all capacities, to sign any amendment to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said...

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

  • Page 101
    ...provisions are required to make the statements in this Annual Report on Form 10-K not misleading. Additional information about the Company may be found elsewhere in this Annual Report on Form 10-K and in the Company's other public filings, which are available without charge through the SEC's website...

  • Page 102
    ...) 10.11 Form of Restricted Stock Unit Issuance Agreement for 2010 Incentive Compensation Plan (nonemployee directors-annual grant) 10.12 Form of Restricted Stock Unit Issuance Agreement for 2010 Incentive Compensation Plan (officers) 10.13 Form of Restricted Stock Unit Issuance Agreement for 2010...

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

  • Page 104
    ... Amendment Agreement between United Online, Inc. and Robert J. Taragan 10.30 2011 Management Bonus Plan 10.31 2011 Special Bonus Plan 10.32 Office Lease between LNR Warner Center, LLC and NetZero, Inc. 21.1 List of Subsidiaries 23.1 Consent of Independent Registered Public Accounting Firm 24.1 Power...

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

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

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

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

  • Page 109
    Table of Contents UNITED ONLINE, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) December 31, 2011 2010 Assets Current assets: Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts of $10,521 and $10,431 at December 31, 2011 and 2010, ...

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

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

  • Page 112
    ... stock units Change in dividend equivalents payable on restricted stock units Stock-based compensation Foreign currency translation Tax shortfalls from equity awards Net income Balance at December 31, 2009 Exercises of stock options Issuance of common stock through employee stock purchase plans...

  • Page 113
    ...paid on shares outstanding and restricted stock units Change in dividend equivalents payable on restricted stock units Stock-based compensation Change in gains on derivative instruments, net of tax Foreign currency translation Tax shortfalls from equity awards Net income Balance at December 31, 2011...

  • Page 114
    ... of Contents UNITED ONLINE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2010 2009 2011 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Stock-based...

  • Page 115
    F-7

  • Page 116
    ... basis, the Company's web properties attract a significant number of Internet users and the Company offers a broad array of Internet marketing services for advertisers. The Company's corporate headquarters are located in Woodland Hills, California, and the Company also maintains offices in Downers...

  • Page 117
    ...insurance provided on such deposits. Accounts Receivable, including Financing Receivables -The Company's accounts receivable are derived primarily from revenues earned from advertising customers and floral network members located in the U.S. and the U.K., and pay accounts. The Company extends credit...

  • Page 118
    ... are recognized in other income, net in the consolidated statements of operations. There was no ineffectiveness related to the Company's foreign currency net investment hedges for the years ended December 31, 2011, 2010 and 2009. The Company presents the cash flows of net investment hedges in cash...

  • Page 119
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued) effectiveness. Gains or losses related to the change in time value are immediately ...

  • Page 120
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued) include, but are not limited to, a significant adverse change in legal factors or in ...

  • Page 121
    ... 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 122
    ... in which fees are fixed or determinable and the related services are provided to the customer. The Company's pay accounts generally pay in advance for their services by credit card, and revenues are then recognized ratably over the service period. Advance payments from pay accounts are recorded...

  • Page 123
    ...by members of the Company's online loyalty marketing service; telecommunications and data center costs; depreciation of network computers and equipment; license fees; costs related to providing customer support; costs related to customer billing and billing support for the Company's pay accounts and...

  • Page 124
    ... 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) expenses include media, agency and promotion expenses. Media production costs are expensed...

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

  • Page 126
    ... in income tax expense. Earnings Per Share -The Company computes earnings per share in accordance with ASC 260, Earnings Per Share . ASC 260 provides that unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and shall be included in...

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

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

  • Page 129
    ...Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. SEGMENT INFORMATION ... revenues are generated by the Company's operations in Europe. International revenues totaled $194.6 million, $180.0 million and $171.2 million for the years ended December 31, 2011,...

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

  • Page 131
    ... consisted of the following (in thousands): December 31, 2011 2010 Prepaid expenses Income taxes receivable Floral-related inventories Gift cards related to member redemption liability Prepaid floral catalog expenses Prepaid advertising and promotion expense Prepaid insurance Other Total Property...

  • Page 132
    ... Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. BALANCE SHEET COMPONENTS (Continued) Accrued Liabilities Accrued liabilities consisted of the following (in thousands): December 31, 2011 2010 Employee compensation and related expenses Non-income taxes payable...

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

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

  • Page 135
    ... to United Online, Inc., with certain exceptions including an annual basket of $15 million (subject to adjustment based on excess cash flow calculations) which may be used to make cash dividends, loans and advances to United Online, Inc., provided certain terms and conditions specified in the Credit...

  • Page 136
    ... on accumulated other comprehensive loss, other income, net, and technology and development expenses was as follows (in thousands): Change in Losses Recognized in Accumulated Other Comprehensive Loss on Derivatives Before Tax Year Ended December 31, 2011 2010 2009 Derivatives Designated as Cash...

  • Page 137
    ... VALUE MEASUREMENTS Other income, net $ 654 $ - $ - The following table presents information about assets at December 31, 2011 that were required to be measured at fair value on a recurring basis (in thousands): Description Total Fair Value Level 1 Fair Value Level 2 Fair Value Money market...

  • Page 138
    ...of Directors voted to accelerate the expiration date of the stockholder rights plan described above to February 28, 2011. Accordingly, on February 28, 2011, such stockholder rights plan expired. Preferred Stock United Online, Inc. has 5.0 million shares of preferred stock authorized with a par value...

  • Page 139
    ... FINANCIAL STATEMENTS (Continued) 8. STOCKHOLDERS' EQUITY (Continued) Common Stock Repurchases United Online, Inc.'s Board of Directors authorized a common stock repurchase program (the "Program") that allows United Online, Inc. to repurchase shares of its common stock through open market...

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

  • Page 141
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. STOCK-BASED COMPENSATION PLANS (Continued) available for grant by 2.5 shares and cancellations of such shares increase the shares available for grant by 2.5 shares. At December 31, 2011, there were 19.7 ...

  • Page 142
    ... of the Company through such date. The restricted stock units will vest as to one-third of the total number of units awarded annually over a three-year period beginning February 15, 2012. On February 27, 2012, the Secondary Compensation Committee of the Board of Directors of United Online, Inc...

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

  • Page 144
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. STOCK-BASED COMPENSATION PLANS (Continued) of time remaining in the 24-month offering period. The risk-free interest rate assumed in valuing the employee stock purchase plan shares is based on the U.S. ...

  • Page 145
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. INCOME TAXES (Continued) The provision for income taxes reconciled to the amount computed by applying the statutory federal rate to income before taxes as follows (in thousands): Year Ended December 31, 2011 2010...

  • Page 146
    ...effective income tax rate related to such positions. The Company had $1.4 million and $3.2 million accrued for interest and penalties relating to uncertain tax positions at December 31, 2011 and 2010, respectively, all of which is included in income taxes payable. The Company recognized net interest...

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

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

  • Page 149
    ... the terms of the related leases. In addition, standby letters of credit are maintained by FTD to secure credit card processing activity. Certificates of deposit totaling $0.3 million and $0.5 million at December 31, 2011 and 2010, respectively, were maintained by the Company in connection with...

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

  • Page 151
    ...'s marketing, billing, and renewal practices, including, without limitation, its former post-transaction sales practices. In July 2011, United Online, Inc. received a civil investigative demand from the Federal Trade Commission regarding certain post-transaction sales practices in which the Company...

  • Page 152
    ...Company's business, financial condition, results of operations, or cash flows. 14. QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands, except per share data) Quarter Ended September 30 June 30 December 31 March 31 Year ended December 31, 2011: Revenues Cost of revenues Operating income Net income...

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

  • Page 154
    Table of Contents UNITED ONLINE, INC. SCHEDULE I-CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY BALANCE SHEETS (in thousands) December 31, 2011 2010 Assets Current assets: Cash and ... 1,256,991 $ 1,188,540 The accompanying notes are an integral part of these financial statements. F-46

  • Page 155
    ... UNITED ONLINE, INC. PARENT COMPANY STATEMENTS OF OPERATIONS (in thousands) Year Ended December 31, 2011 2010 2009 Revenues Operating expenses: General and administrative Total operating expenses Operating loss Interest income Intercompany interest income Interest expense Other expense, net Income...

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

  • Page 157
    ... Company's share of net income of its subsidiaries is included in net income 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 corresponding years. Under the terms of the Credit...

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

  • Page 159

  • Page 160
    ...Inc.) NetZero Wireless, Inc., a Delaware corporation NetZero, Inc., a Delaware corporation (also dba Bluelight Internet Service) Opobox, Inc., a Delaware corporation StayFriends GmbH Trombi Acquisition SARL United Online Advertising Network, Inc., a Delaware corporation (also dba United Online Media...

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

  • Page 162
    QuickLinks Exhibit 21.1 List of Subsidiaries

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

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

  • Page 165
    ..., not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as...

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

  • Page 167
    ..., not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as...

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

  • Page 169
    ... The Annual Report on Form 10-K of United Online, Inc. for the year ended December 31, 2011, as filed with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and The information contained in such report fairly...

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

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

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