NetZero 2011 Annual Report Download - page 34

Table of Contents
costs, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
The success of our business is dependent on our floral network members and on the financial performance of the retail floral industry.
A significant portion of our profitability is dependent on our floral network members. We have lost, and may continue to lose, floral
network members as a result of both declines in the number of local retail florists as a result of economic factors and competition as well as our
members choosing not to do business with us. If we lose a significant 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, and types of products and services sold, may adversely affect our financial results.
The cost of revenues associated with our products revenues is generally higher than that associated with our services revenues. In addition,
the cost of revenues associated with certain products and services may be higher than that associated with other products and services. As a
result, changes in the proportion of FTD segment revenues that is represented by products revenues versus services revenues, and certain types
of products and services versus others, may adversely affect our revenues, cost of revenues, cost of revenues as a percentage of revenues, and
segment income from operations.
Shifts in the mix of products and services sold at standard pricing as compared to discounted pricing or the failure to maintain our standard
pricing for products and services could have adverse effects on our financial results.
Due to economic conditions and for competitive and other reasons, we have been offering broader and greater discounts to the consumer,
both on a promotional basis to consumers generally as well as through strategic arrangements with third parties that have a fixed, and in certain
cases greater, discount or other associated costs. We also offer discounts on our floral network service fees from time to time on a promotional
basis. Shifts in the mix of products and services sold that have resulted in increases in the proportion of products and services sold at a discount,
and at times at greater discounts, including through such strategic arrangements, have resulted, and may in the future result, in reduced revenues,
an increase in cost of revenues as a percentage of revenues, and a decrease in segment income from operations. We currently intend to continue
selling a portion of our products and services at a discount, including through such strategic arrangements, and there are no assurances that the
portion of products and services sold at a discount will not continue to increase. The continued use of discounts, including through such strategic
arrangements, for our products and services may result in our becoming more reliant upon offering discounts in order to sell our products and
services, which could result in our having to reduce our standard pricing, and may adversely impact our financial results.
If the supply of flowers becomes limited, the price of these products could rise or these products may become unavailable, which could result
in our not being able to meet consumer demand and could have a material effect on our business, financial condition, results of operations,
and cash flows.
Many factors, such as weather conditions, agricultural limitations, restrictions relating to the management of pests and disease, and fair
trade and other social or environmental issues, affect the supply of flowers and the price of our floral products. If the supply of flowers available
for sale is limited, the wholesale prices of flowers could rise, which would cause us to increase our prices or reduce our profits. An increase in
our prices could result in a decline in customer demand for our floral products, which would decrease our revenues.
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