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UNITED ONLINE INC
FORM 10-K
(Annual Report)
Filed 02/27/09 for the Period Ending 12/31/08
Address 21301 BURBANK BOULEVARD
WOODLAND HILLS, CA 91367
Telephone 8182873000
CIK 0001142701
Symbol UNTD
SIC Code 7370 - Computer Programming, Data Processing, And
Industry Computer Services
Sector Technology
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2009, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    UNITED 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 ...

  • Page 2
    ...ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2008 Or 1 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-33367 UNITED...

  • Page 3
    ...Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2) of the Act). Yes 1 At June 30, 2008, the aggregate market value of voting stock held by non-affiliates of the Registrant, based on the last reported sales price of the Registrant's common stock on such date...

  • Page 4
    ...; operating 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...

  • Page 5
    .... Reported results should not be considered an indication of future performance. Except as required by law, we undertake no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof...

  • Page 6
    ...corporation, headquartered in Woodland Hills, California, that commenced operations in 2001 following the merger of Internet access providers NetZero, Inc. ("NetZero") and Juno Online Services, Inc. ("Juno"). Historically, our operations were focused on providing value-priced dial-up Internet access...

  • Page 7
    ... retail florists on floral network services to provide incoming order volume to offset business lost to the Internet, supermarket and mass merchant channels; and The expansion of product offerings by traditional retail florists and nationwide floral marketers to include specialty gift items...

  • Page 8
    ... 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. Certain providers of floral network services...

  • Page 9
    Table of Contents Many advertisers view social networking Web sites as an attractive marketing medium for their products and services. Most social networking Web sites are free to the user and rely on online advertising to generate revenues. Some social networking Web sites, including our Classmates...

  • 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
    ... by various advertising campaigns; access to the FTD florist network; credit card processing services; e-commerce Web sites; online advertising tools; and telephone answering and order-taking services. FTD also provides point-of-sale and related technology systems that enable its florist members to...

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

  • Page 14
    ... include generating sales leads, soliciting information, registrations 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...

  • Page 15
    ... 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, although we also offer an enhanced email service as a stand-alone pay...

  • 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
    ... advertising revenues are generated from our Internet access services. We host and customize the initial Web site displayed to users of our Internet access services. This Web site, or "start page," displays sponsored links to a variety of content, products and services, including Internet...

  • Page 18
    ... floral network services, including access to the FTD and Interflora brands and the Mercury Man logo, access to the florist network, credit card processing services, e-commerce Web sites, online advertising tools, and telephone answering and order-taking services. The consumer market for flowers...

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

  • Page 20
    ... successfully develop certain of these areas serve as effective barriers to entry. Internet Access Services We compete with numerous other dial-up Internet access providers as well as providers of broadband services. Our key dial-up Internet access competitors include established online service and...

  • Page 21
    ...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 facilities in Hyderabad, India; Woodland Hills, California; Fort Lee, New...

  • Page 22
    Table of Contents 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 services. ...

  • 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
    .... 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 continue to decline as a result of the decrease in our dial-up Internet access accounts. Decreases in advertising revenues...

  • 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
    ...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...those set forth above, including risks associated with foreign currency exchange rates,...

  • Page 27
    ...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 you that the security measures we take will be effective in...

  • Page 28
    ...record a significant charge to earnings if we are required to expense certain costs or impair our assets. We have capitalized goodwill and identifiable intangible assets in connection with our acquisitions. We perform an impairment test of our goodwill and indefinite-lived intangible assets annually...

  • Page 29
    ... impact our products and services, our costs, or the manner in which we conduct business, all of which could adversely impact our results of operations and cause our business to suffer. The FTC and certain state agencies have investigated Internet companies, including us, in connection with consumer...

  • Page 30
    ... 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 31
    ... network services including, among other things, access to the FTD and Interflora brands and the Mercury Man logo, access to the florist network, credit card processing services, e-commerce Web sites, online advertising tools, and telephone answering and order-taking services. The consumer market...

  • Page 32
    ..., results of operations, and cash flows. Many factors, such as weather conditions, agricultural limitations and restrictions relating to the management of pests and disease, affect the supply of flowers and the price of our floral products. If the supply of flowers available for sale is limited, the...

  • Page 33
    ... currently offered by us. A large portion of our supply of flowers is sourced from countries such as Colombia, Ecuador and Holland. The availability and price of our products could be affected by a number of other factors affecting suppliers, including severe weather; import duties and quotas; time...

  • Page 34
    ... networking Web sites such as Facebook and MySpace; a number of specialty Web sites, including LinkedIn and Reunion.com, that offer online social networking services based on school or work communities; and schools, employers and associations that maintain their own Internet-based alumni information...

  • Page 35
    ...registered or active free social networking members, or a decline in the activity of those members, could result in decreased pay accounts, decreased content on our Web sites and decreased advertising revenues. A decline in the number of registered or active loyalty marketing members could result in...

  • Page 36
    ... 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 pay accounts signing...

  • Page 37
    ... 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 currently require...

  • Page 38
    ... lawsuit in the Superior Court of the State of California, County of Los Angeles, against NetZero claiming that NetZero continues to charge consumers fees after they cancel their Internet access account. On July 27, 2006, plaintiff Donald E. Ewart filed a purported consumer class action lawsuit in...

  • 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
    ... units and restricted stock awards that vest and the stock awards that are issued, the portion of those shares with a fair market value equal to the amount of the employee withholding taxes due. We then pay the applicable withholding taxes in cash. Common stock repurchases through December 31, 2008...

  • Page 41
    ..., 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 (the "Nasdaq Composite") and the Morgan Stanley Internet Index ("MS...

  • Page 42
    ... the year ended December 31, 2007. In August 2008, we acquired FTD. The results of FTD are included in our consolidated statements of operations from the date of acquisition. During the quarter ended December 31, 2008, we recorded an impairment of goodwill, intangible assets and long-lived assets of...

  • Page 43
    ... offering floral and related products and services. Our Classmates Media segment services are online social networking and online loyalty marketing. Our primary Communications segment services are Internet access and email. On a combined basis, our Web properties attract a significant number...

  • Page 44
    ...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 to help us monitor our performance and trends affecting...

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

  • Page 46
    ... FTD. The combined and pre-acquisition quarterly results of FTD set forth in the table above have been included with this Annual Report on Form 10-K for informational purposes only and do not purport to be indicative of the results of future operations of the FTD segment or of the results that would...

  • Page 47
    ... related services are provided to the customer. Our pay accounts generally pay in advance for their service by credit card, and revenue is then recognized ratably over the service period. Advance payments from pay accounts are recorded on the consolidated balance sheets as deferred revenue. We offer...

  • Page 48
    ... is specified in the sales agreement for each advertising customer. As the earning activities take place, activity measurement data (examples include the number of emails delivered and the number of responses received) is accumulated and the related revenue is recorded. Probability of collection is...

  • Page 49
    ... assessment we performed in the quarter ended December 31, 2008, given the volatility of the capital markets around the valuation date, a study of market transactions and their transaction multiples was not utilized. The estimated fair value of each of our reporting units is determined using...

  • 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
    ... include, but are not limited to, significant decreases in the market value of an asset, significant underperformance relative to expected historical or projected future operating results, a change in the extent or manner in which an asset is used, shifts in technology, loss of key management...

  • Page 53
    ... Volume-Based Sales Incentive Offers, and Offers for Free Products and Services to be Delivered in the Future . MyPoints' historical analysis takes into consideration the total points in members' accounts that have been inactive for six months or longer, less an estimated reactivation rate, plus an...

  • Page 54
    ... 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, software and...

  • 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. Sales and Marketing Sales and marketing expenses include...

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

  • Page 58
    ... 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 administrative Restructuring charges Impairment of goodwill, intangible assets and long-lived assets...

  • Page 59
    ... year ended December 31, 2008, compared to 31.8% for the prior year period. The increase of $9.6 million was primarily related to $30.6 million of sales and marketing expenses associated with our FTD segment, which are included in consolidated sales and marketing expenses from August 26, 2008 (date...

  • Page 60
    ..., including bonuses for certain members of senior management for the year ended December 31, 2008 (the "2008 Bonuses") that were paid in shares of our common stock whereas such bonuses were historically paid primarily in cash; the effect of shares of common stock and restricted stock units awarded...

  • Page 61
    ... the acquired member redemption liability of our loyalty marketing service recorded in the year ended December 31, 2007. These decreases were offset by an increase in foreign currency exchange rate losses and an increase in losses on disposal of assets. Provision for Income Taxes. For the year ended...

  • Page 62
    ...decreased to 35.6% for the year ended December 31, 2008, compared to 40.8% for the prior year period. The increase of $2.9 million was the result of a $3.3 million increase in marketing costs related to acquiring new social networking and loyalty marketing members, partially offset by a $0.3 million...

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

  • Page 64
    ... 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 decrease in promotion costs related to our broadband services, and...

  • Page 65
    ... 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 Technology and...

  • Page 66
    ... year ended December 31, 2008, compared to 16.7% for the prior 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...

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

  • Page 68
    ...certain deferred tax assets in New York; (5) employee stock purchase plan compensation, the benefit of which is not currently recognized under SFAS No. 123R but which is recognized upon a disqualified disposition; and (6) the benefit of federal tax exempt interest income. For the year ended December...

  • Page 69
    ..., generated from our social networking services. The 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...

  • Page 70
    ... to develop new product features related to our social networking services. In addition, a portion of the increase was related to expenses associated with our loyalty marketing service, which we acquired in April 2006 and which was included in our results of operations for the full year ended...

  • Page 71
    ..., customer support and billing-related costs decreased by $5.4 million in 2007 versus 2006 as a result of a decrease in the number of dial-up Internet access pay accounts and a decrease in the hourly rate charged by our third-party vendor, and by $2.1 million due to a decrease in costs associated...

  • Page 72
    ... and limitations on, among other things, capital expenditures, investments, dividends, asset sales, and the incurrence of additional debt and liens. On the date of the FTD acquisition, term loan A and term loan B under the FTD Credit Agreement were funded. In connection with the closing of...

  • Page 73
    ...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-based compensation, impairment of goodwill, intangible assets and long-lived assets, deferred taxes...

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

  • Page 75
    ... year ended December 31, 2006. Cash provided by operating activities was driven by our net income adjusted for non-cash items, including, but not limited to, depreciation and amortization, stock-based compensation, impairment of goodwill, intangible assets and long-lived assets, deferred taxes, tax...

  • Page 76
    ... shares with a fair market value equal to the amount of the employee withholding taxes due. We then paid the applicable withholding taxes in cash. The net effect of such withholding adversely impacted our cash flows from financing activities. The amounts remitted in the years ended December 31, 2007...

  • Page 77
    ...by SFAS No. 141(R), prospectively. After the effective date of SFAS No. 141(R), changes in the valuation allowance for acquired deferred tax assets and dispositions of uncertain income tax positions must be recognized as an adjustment to income tax expense rather than through goodwill. The impact of...

  • Page 78
    ...of the adoption of FSP EITF 03-6-1 on our earnings per share amounts. Inflation Inflation did not have a material impact on our consolidated results of operations during the years ended December 31, 2008, 2007 and 2006, and we do not currently anticipate that inflation will have a material impact on...

  • Page 79
    ..., and will no longer qualify for hedge accounting. Therefore, fluctuations in market value of the interest rate cap will be recorded in earnings. If interest rates were to increase 100 basis points, the result would be an annual increase in our interest expense related to our debt of approximately...

  • Page 80
    ... in the value of the U.S. Dollar compared to the British Pound had an adverse effect on our FTD segment's operating results for the year ended December 31, 2008. While we have not engaged in foreign currency hedging to date, we may in the future use hedging programs, including currency forward...

  • Page 81
    ... that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and are...

  • Page 82
    ...filed with the SEC within 120 days after the end of our fiscal year. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by Item 14 is hereby incorporated by reference to our definitive proxy statement relating to our 2009 annual meeting of stockholders to be filed with the SEC...

  • Page 83
    ... information required to be set forth therein is not applicable, not required or is shown in the consolidated financial statements 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...

  • Page 84
    Table of Contents No. Exhibit Description Filed with this Form 10-K Incorporated by Reference to Form File No. Date Filed 2.1 Stock Purchase Agreement, dated as 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...

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

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

  • Page 87
    ... and administrative agent 10.51 Credit Agreement, dated as of August 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...

  • Page 88
    Table of Contents No. Exhibit Description Filed with this Form 10-K Incorporated by Reference to Form File No. Date Filed 32.2 ...27/2009 The exhibits filed as part of this report are listed in Item 15(a)(3) of this Annual Report on Form 10-K. (c) Financial Statement Schedules The financial...

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

  • Page 90
    Table of Contents Signature Title Date /s/ DENNIS HOLT Director Dennis Holt /s/ HOWARD G. PHANSTIEL Director Howard G. Phanstiel /s/ CAROL A. SCOTT Director Carol A. Scott 88 February 27, 2009 February 27, 2009 February 27, 2009

  • Page 91
    ... actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Annual Report on Form 10-K and in the Company's other public filings, which are available without charge through the SEC's Web site at www.sec.gov. No...

  • Page 92
    ... Agreement, dated as of April 29, 2003, between the Registrant and U.S. Stock Transfer Corporation 10.1 Form of Indemnification Agreement 10.2 2001 Amended and Restated Employee Stock Purchase Plan 10.3 2001 Stock Incentive Plan 10.4 2001 Supplemental Stock Incentive Plan 10.5 Classmates Online, Inc...

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

  • Page 94
    ... Association, to United Online, Inc. 10.48 Commitment Letter, dated July 2, 2008, from Silicon Valley Bank to United Online, Inc. 10.49 Voting and Support Agreement, dated as of April 30, 2008, by and among Green Equity Investors IV L.P., FTD Co-Investment, LLC and United Online, Inc. 10.50 Credit...

  • 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
    ... opinions. As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for uncertain tax positions in 2007. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability...

  • Page 98
    Table of Contents As described in Management's Report on Internal Control Over Financial Reporting, management has excluded FTD from its assessment of internal control over financial reporting as of December 31, 2008 because it was acquired by the Company in a purchase business combination during ...

  • Page 99
    ...long-term debt Capital leases Total current liabilities Member redemption liability Deferred revenue Long-term debt, net of discounts Deferred tax liabilities, net Other liabilities Total liabilities Commitments and contingencies (see Note 15) Stockholders' equity: Preferred stock, $0.0001 par value...

  • Page 100
    ... 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 and marketing...

  • Page 101
    Table 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...

  • Page 102
    ...loss on short-term investments, net of tax Change in unrealized loss on interest rate cap, net of tax Foreign currency translation Tax benefits from equity awards Net loss Balance at December 31, 2008 Deferred Paid-In Stock-Based Capital Compensation Income (Loss) Deficit Equity $ 471,704 $ (15,558...

  • Page 103
    ... assets and long-lived assets Accretion of discounts and amortization of debt issue costs Deferred taxes, net Tax benefits from equity awards Excess tax benefits from equity awards Cumulative effect of accounting change, net of tax Other Changes in operating assets and liabilities (net of effects...

  • Page 104
    ... Company offers a broad array of Internet 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...

  • Page 105
    ..., by policy, the Company limits the amount of credit exposure to any one issuer. The Company's investments, at times in both fixedrate and variable-rate interest-earning instruments, carried a degree of interest rate risk. Fixed-rate securities may have their fair market value adversely impacted due...

  • Page 106
    ... 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 the consolidated...

  • Page 107
    ... Company uses an interest rate cap to manage risks associated with interest rate fluctuations on certain of its credit facilities which, if effective, is accounted for as a cash flow hedge, as defined by SFAS No. 133. Any ineffective portion of the gain or loss on the interest rate cap is reported...

  • Page 108
    ... fair value of acquired intangible assets, there are two approaches primarily used: the discounted cash flow and market comparison approaches. Some of the more significant estimates and assumptions inherent in the two approaches include: projected future cash flows (including timing); discount rate...

  • Page 109
    ... include, but are not limited to, significant decreases in the market value of an asset, significant underperformance relative to expected historical or projected future operating results, a change in the extent or manner in which an asset is used, shifts in technology, loss of key management...

  • Page 110
    ... Volume-Based Sales Incentive Offers, and Offers for Free Products and Services to be Delivered in the Future . MyPoints' historical analysis takes into consideration the total points in members' accounts that have been inactive for six months or longer, less an estimated reactivation rate, plus an...

  • Page 111
    ...payments from pay accounts are recorded on the consolidated balance sheets as deferred 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...

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

  • Page 113
    ... No. 86. At December 31, 2008, the net book value of capitalized computer software costs related to the internal development and production of computer software to be sold, leased or otherwise marketed was $14.0 million. During the year ended December 31, 2008, $0.9 million was charged to expense...

  • Page 114
    ...customer support personnel. In addition, general and administrative expenses include, among other costs, professional fees for legal, accounting and financial services; office relocation costs; non-income taxes; insurance; occupancy and other overhead-related costs; and expenses incurred and credits...

  • Page 115
    ... value of the U.S. Dollar compared to the British Pound has had an adverse effect on the FTD segment's operating results for the period from August 26, 2008 (date of acquisition) through December 31, 2008. Income Taxes -The Company accounts for income taxes under SFAS No. 109, Accounting for Income...

  • Page 116
    ... by SFAS No. 141(R), prospectively. After the effective date of SFAS No. 141(R), changes in the valuation allowance for acquired deferred tax assets and dispositions of uncertain income tax positions must be recognized as an adjustment to income tax expense, rather than through goodwill. The impact...

  • Page 117
    ... 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 or extension. Companies estimating...

  • Page 118
    ... Company is currently evaluating the impact of the adoption of FSP EITF 03-6-1 on its earnings per share amounts. 2. ACQUISITIONS FTD Group, Inc. On August 26, 2008 (the "Closing Date"), the Company completed the acquisition of FTD, a leading provider of floral and related products and services to...

  • 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
    ...of FTD's operations have been included in the Company's consolidated financial statements since the Closing Date. The following unaudited pro forma information assumes the FTD acquisition occurred at January 1, 2008 and 2007 (in thousands, except per share amounts): Year Ended December 31, 2008 2007...

  • Page 121
    ...,463 16,171 26,634 In April 2006, the Company acquired MyPoints.com, Inc. for approximately $56.6 million in cash, including acquisition costs. MyPoints is a leading provider of online loyalty marketing services. The acquisition was accounted for under the purchase method in accordance with SFAS No...

  • Page 122
    ...goodwill 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...

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

  • 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
    ... 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 other Total...

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

  • 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
    ... statements of operations. Impairment of Long-Lived Assets During the quarter ended December 31, 2008, the Company decided not to pursue the marketing of broadband satellite service to its customers and recorded an impairment charge against the capitalized software costs relating to such service of...

  • Page 131
    ... 283 Total impairment of goodwill, intangible assets and long-lived assets $176,150 6. CREDIT AGREEMENTS UOL Credit Agreement $ - 5,738 5,738 - 3,044 3,044 4,503 4,503 $13,285 In connection with the FTD acquisition, in August 2008, United Online entered into a $60 million senior secured...

  • Page 132
    ... ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. CREDIT AGREEMENTS (Continued) such pledge is limited to 66% of the outstanding capital stock), excluding the capital stock of UNOL Intermediate, Inc. FTD Credit Agreement In connection with the FTD acquisition, in August 2008...

  • Page 133
    ... Company's debt balances for the year ended December 31, 2008 were as follows (in thousands): Drawn Downs of Debt Debt Discounts Repayments of Debt Accretion of Discounts Balance at December 31, 2008 UOL Credit Agreement FTD Credit Agreement, term loan A FTD Credit Agreement, term loan B FTD Credit...

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

  • Page 135
    ... at $0.0007 per right at any time until 10 days after a public announcement that a 15% position in the Company's common stock has been acquired or that a tender or exchange offer which would result in a person or group owning 15% or more of the Company's common stock has commenced. The rights expire...

  • Page 136
    ... 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 $8.8 million...

  • Page 137
    ... to non-employee directors generally vest 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...

  • Page 138
    ... rate assumed 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...

  • Page 139
    ... 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 (in years) Dividend yield Volatility The following table summarizes...

  • Page 140
    ...taxes of $1.5 million were paid. The following table summarizes activity for restricted stock units during the years ended December 31, 2006, 2007 and 2008: Restricted Stock Units Outstanding (in thousands) WeightedAverage Grant Date Fair Value Outstanding at January 1, 2006 Granted Vested Canceled...

  • Page 141
    ... equity awards has been recorded in the Company's consolidated financial statements from the execution dates of these agreements. During the year ended December 31, 2008, certain of the employment agreements with guaranteed values totaling $6.5 million in restricted stock units in CMC were canceled...

  • Page 142
    ... effect at the time of grant for the expected term. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the closing market price of United Online common stock at the date of grant. For the years ended December 31, 2008, 2007 and 2006, the Company...

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

  • Page 144
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. INCOME TAXES (Continued) The following is a reconciliation of the statutory federal income tax rate to the Company's effective income tax rate (in thousands): Year Ended December 31, 2008 2007 2006 ...

  • Page 145
    ...U.S., foreign, state or local examination for years prior to fiscal 2004. In accordance with APB Opinion No. 23, Accounting for Income Taxes-Special Areas , the Company has not provided for U.S. deferred income taxes on the cumulative undistributed earnings of certain of its non-U.S. affiliates that...

  • Page 146
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. INCOME TAXES (Continued) For the years ended December 31, 2008, 2007 and 2006, income tax benefits attributable to equity-based compensation that were allocated to stockholders' equity amounted to $0.4 ...

  • 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
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15. COMMITMENTS AND CONTINGENCIES (Continued) expense for operating leases for the years ended December 31, 2008, 2007 and 2006 was $8.6 million, $7.4 million and $6.6 million, respectively. Standby ...

  • 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
    ... affect the Company's business, financial position, results of operations or cash flows. 16. QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands, except per share data) Quarter Ended September 30, June 30, December 31, March 31, Year ended December 31, 2008: Revenues Operating income (loss...

  • 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
    ..., subject to the Corporation's collection of all applicable Withholding Taxes, on the applicable vesting date specified for those Shares in such Normal Vesting Schedule or as soon thereafter as administratively practicable, but in no event later than the close of the calendar year in which such...

  • Page 154
    ... the outstanding Common Stock, subject to the Corporation's collection of all applicable federal, state and local income and employment withholding taxes. For any other dividend or distribution, a special book account shall be established for the (ii) Participant and credited with a phantom dividend...

  • Page 155
    ... of Service shall be issued to the Participant, subject to the Corporation's collection of all applicable Withholding Taxes, on the date of such Involuntary Termination or as soon thereafter as administratively practicable, but in no event later than the close of the calendar year in which the date...

  • 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...

  • Page 157
    ... subject to compliance by the Corporation and Participant with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or the Nasdaq National Market, if applicable) on which the Common Stock may be listed for trading at the time of such issuance...

  • Page 158
    ... of Participant's Separation from Service or, if earlier, the first day of the month immediately following the date the Corporation receives proof of Participant's death. IN WITNESS WHEREOF , the parties have executed this Agreement on the day and year first indicated above. UNITED ONLINE, INC. By...

  • Page 159
    ... shall be in effect under the Agreement: A. B. Agreement. C. Award Date shall mean the date the restricted stock units are awarded to Participant pursuant to the Agreement and shall be the date indicated in Paragraph 1 of the Agreement. D. Board shall mean the Corporation's Board of Directors...

  • Page 160
    ... is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted...

  • Page 161
    ..., as amended from time to time. Participant shall mean the person to whom the Award is made pursuant to the Agreement. Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending O. with the Corporation, provided each corporation in the unbroken chain...

  • Page 162
    ... American Stock Exchange or the New York Stock Exchange. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations U. beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of...

  • Page 163
    ... soon thereafter as administratively practicable, but in no event later than the close of the calendar year in which such vesting date occurs or (if later) the fifteenth day of the third calendar month following such vesting date. The applicable Withholding Taxes are to be collected pursuant to the...

  • Page 164
    ... the Corporation, including this Award, may vest [in whole or] in part on an accelerated basis in connection with his cessation of Service under various specified circumstances. The Employment Agreement also sets forth the date or dates on which the shares of Common Stock subject to the awards that...

  • Page 165
    ... continued in full force and effect or may be replaced with a cash incentive program of the successor entity which preserves the Fair Market Value of the unvested shares of Common Stock subject to the Award at the time of the Change in Control and provides for the subsequent vesting and payout...

  • 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...

  • Page 167
    ... issued to the Participant, provided and only if (i) such a sale is permissible under the Corporation's trading policies governing the sale of Common Stock, (ii) the Participant makes an irrevocable commitment, on or before the vesting date for those Shares, to effect such sale of the Shares and...

  • Page 168
    ... limitations of Code Section 409A applicable ...Service or, if earlier, the first day of the month immediately following the date the Corporation receives proof of Participant's death. IN WITNESS WHEREOF , the parties have executed this Agreement on the day and year first indicated above. UNITED ONLINE...

  • Page 169
    ... shall be in effect under the Agreement: A. B. Agreement. C. Award Date shall mean the date the restricted stock units are awarded to Participant pursuant to the Agreement and shall be the date indicated in Paragraph 1 of the Agreement. D. Board shall mean the Corporation's Board of Directors...

  • Page 170
    ... is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted...

  • Page 171
    ... by the Plan Administrator or by the Corporation's written policy on leaves of absence, no Service credit shall be given for vesting purposes for any period the Participant is on a leave of absence. S. Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange. Subsidiary...

  • Page 172
    ...the Original Agreement, as follows: "Your annual bonus award shall in no event be paid later than the 15th day of the third month following the end of your taxable year or, if later, the end of the Company's taxable year in which such bonus award is earned." 3. A new sentence is hereby added to the...

  • Page 173
    ...becomes effective and enforceable after the expiration of any applicable revocation period under federal or state law, then the Company will pay you a separation payment (the " Separation Payment ") equal to the sum of (i) twelve (12) months of your then current monthly base salary, (ii) your Annual...

  • Page 174
    ... 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 employment with...

  • Page 175
    ... purposes of this subparagraph (ii), the 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...

  • Page 176
    ... 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 in full force...

  • 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
    ...the Original Agreement, as follows: "Your annual bonus award shall in no event be paid later than the 15th day of the third month following the end of your taxable year or, if later, the end of the Company's taxable year in which such bonus award is earned." 3. A new sentence is hereby added to the...

  • Page 179
    ...becomes effective and enforceable after the expiration of any applicable revocation period under federal or state law, then the Company will pay you a separation payment (the " Separation Payment ") equal to the sum of (i) twelve (12) months of your then current monthly base salary, (ii) your Annual...

  • Page 180
    ... 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 employment with...

  • Page 181
    ... purposes of this subparagraph (ii), the 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...

  • 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
    ...taxes, on the vesting date or as soon thereafter as administratively practicable, but in no event later than the close of the calendar year in which such vesting date occurs or (if later) the fifteenth day of the third calendar month following such vesting date. 2. The general release of the Company...

  • Page 185
    ... purposes of this subparagraph (ii), the 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...

  • 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
    ...the Original Agreement, as follows: "Your annual bonus award shall in no event be paid later than the 15th day of the third month following the end of your taxable year or, if later, the end of the Company's taxable year in which such bonus award is earned." 4. A new sentence is hereby added to the...

  • Page 188
    ...becomes effective and enforceable after the expiration of any applicable revocation period under federal or state law, then the Company will pay you a separation payment (the " Separation Payment ") equal to the sum of (i) twelve (12) months of your then current monthly base salary, (ii) your Annual...

  • Page 189
    ... 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 employment with...

  • Page 190
    ... purposes of this subparagraph (ii), the 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...

  • Page 191
    ... the Code 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...

  • 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
    ... the Company's collection of all applicable withholding taxes, on the vesting date or as soon thereafter as administratively practicable, but in no event later than the close of the calendar year in which such vesting date occurs or (if later) the fifteenth day of the third calendar month following...

  • Page 194
    ... purposes of this subparagraph (ii), the 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...

  • 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
    ...to the Corporation's collection of all applicable Withholding Taxes, on the applicable vesting date specified for those Shares in such Vesting Schedule or as soon thereafter as administratively practicable, but in no event later than the close of the calendar year in which the vesting date occurs or...

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

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

  • Page 199
    ... Agreement shall mean the Employment Agreement between the Participant and the Corporation dated August 15, 2007 and as amended effective January 1, 2009." 7. The definitions of Involuntary Termination and Misconduct set forth in Appendix A of each Restricted Stock Unit Issuance Agreement are each...

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

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

  • Page 202
    ...to the Corporation's collection of all applicable Withholding Taxes, on the applicable vesting date specified for those Shares in such Vesting Schedule or as soon thereafter as administratively practicable, but in no event later than the close of the calendar year in which the vesting date occurs or...

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

  • Page 204
    ... event later than three (3) business days following the effective date of that Change in Control. Such distribution shall be subject to the Corporation's collection of the applicable Withholding Taxes pursuant to the provisions of Paragraph 7." 5. There is hereby added to each Restricted Stock Unit...

  • Page 205
    ... Agreement shall mean the Employment Agreement between the Participant and the Corporation dated August 15, 2007 and as amended effective January 1, 2009." The definitions of Involuntary Termination and Misconduct set forth in Appendix A of each Restricted Stock Unit Issuance 7. Agreement are each...

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

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

  • Page 208
    ... Schedule set forth above shall be issued, subject to the Corporation's collection of all applicable Withholding Taxes, on the applicable vesting date specified for those Shares in such Vesting Schedule or as soon thereafter as administratively practicable, but in no event later than the close of...

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

  • Page 210
    ... equity awards or the distribution of the proceeds of any replacement cash incentive plan, including (without limitation) the execution and delivery of an effective general release) shall apply to any Restricted Stock Units which are assumed or otherwise continued in effect in connection with...

  • Page 211
    ... event later than three (3) business days following the effective date of that Change in Control. Such distribution shall be subject to the Corporation's collection of the applicable Withholding Taxes pursuant to the provisions of Paragraph 8." 8. There is hereby added to each Restricted Stock Unit...

  • Page 212
    ...to include the following definition of Employment Agreement: " Employment Agreement shall mean the Employment Agreement between the Participant and the Corporation dated August 15, 2007 and as amended effective January 1, 2009." 10. The definitions of Involuntary Termination and Misconduct set forth...

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

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

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    ... 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 Online Media Group) United Online Web Services, Inc...

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    QuickLinks Exhibit 21.1 List of Subsidiaries

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    ..., 333-140999, 333-149324 and 333-155261) of United Online, Inc. of our report dated February 26, 2009 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP...

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    QuickLinks Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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    ... of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and...

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

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    ... of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and...

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

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

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

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

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