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UNITED ONLINE INC
FORM 10-K
(Annual Report)
Filed 02/23/10 for the Period Ending 12/31/09
Address 21301 BURBANK BOULEVARD
WOODLAND HILLS, CA 91367
Telephone 8182873000
CIK 0001142701
Symbol UNTD
SIC Code 7370 - Computer Programming, Data Processing, And
Industry Computer Services
Sector Technology
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2010, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    UNITED ONLINE INC FORM 10-K (Annual Report) Filed 02/23/10 for the Period Ending 12/31/09 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 21301 BURBANK BOULEVARD WOODLAND HILLS, CA 91367 8182873000 0001142701 UNTD 7370 - Computer Programming, Data Processing, And Computer ...

  • 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, 2009 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, 2009, 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
    ... "project," "projections," "business outlook," "estimate," or similar expressions constitute forward-looking statements. These forward-looking statements include, but are not limited to, statements about future financial performance; advertising revenues; segment metrics; operating expenses; market...

  • Page 5
    ... three reportable operating segments: Segment Products and Services BUSINESS FTD Classmates Media Communications Floral and related products and services for consumers, retail florists and other retail locations Online social networking and online loyalty marketing services Internet access, email...

  • Page 6
    ... 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 nationwide floral marketers have expanded their product offerings to include a larger selection of...

  • Page 7
    ... include: point-of-sale technology systems and services, credit card processing services, ecommerce Web site services, and telephone answering, order-taking, transmission and clearing-house services. Certain providers of floral network services have recently broadened their focus and developed new...

  • Page 8
    ... products and services. Most social networking Web sites are free to the user and primarily generate revenues from a wide variety of sources that include online advertising and transactions related to Web site content such as online games, applications or virtual goods. Some social networking Web...

  • Page 9
    ... their broadband connection should fail for any reason. The maturity of the dial-up Internet access market has led the largest service providers in the U.S., including AOL, EarthLink, NetZero, and Juno, to reduce marketing and investment spending and operate their dial-up Internet access businesses...

  • Page 10
    ...supported by various marketing and advertising campaigns; access to the floral network; credit card processing services; e-commerce Web site services; online advertising tools; and telephone answering, order-taking, transmission and clearing-house services. FTD also provides pointof-sale and related...

  • Page 11
    ... account was $2.53 per month. Basic Membership. Basic membership on our Classmates Web site is free and provides members with access to a number of interactive features. Visitors to our Classmates Web site can become free members by completing the registration process and providing their name, year...

  • Page 12
    ... plans are offered to certain free members at various times on a promotional basis. Discounted promotions often feature an introductory 12-month subscription for $9.95 that, if not cancelled by the customer, will renew at the then-current full price after the introductory 12-month period. We expect...

  • Page 13
    ...dial-up Internet access, offered under the NetZero and Juno brands. We also offer broadband services, email, Internet security services, and Web hosting services. In total, we had 1.4 million Communications pay accounts at December 31, 2009, of which 1.0 million were dial-up Internet access accounts...

  • Page 14
    ... that feature discounted fees for a limited number of months and revert to a standard rate at the end of the discount period. Pricing also varies due to connection speed and geographic region. Our primary strategy for the Communications segment is to manage our dial-up Internet access business for...

  • Page 15
    ... 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 search...

  • Page 16
    ... and personal computer manufacturers; advertising on the Internet and television; and direct marketing campaigns. These activities are designed to drive prospective accounts to call our toll-free telephone numbers to purchase our services, or to visit our Web sites and download our software. In...

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

  • Page 18
    ... a number of specialty niche Web sites, including LinkedIn and MyLife.com, that offer online social networking services focused on particular affiliations such as school or work communities; and schools, employers and associations that maintain their own Internetbased alumni information services. We...

  • Page 19
    ... pay us in advance with a credit card. Other payment options for some of our pay services include automated clearing-house ("ACH"), personal check or money order, or via a customer's local telephone bill. Internet access pay accounts that elect to pay with a personal check or money order are not...

  • 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 Republic of Ireland. Our operations in India primarily handle email customer support, product development and quality assurance. Our operations in Germany provide online social networking services in Sweden, Germany, France, Austria, and Switzerland. We do not generate revenues directly from our...

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

  • Page 23
    ... that have engaged in such practices, including us. Although we expect to continue to offer our members and customers complementary services or products at the end of our registration or sale processes, including third-party offers as well as our own offers, there are no assurances that we will...

  • Page 24
    ... credit card processors. Key systems include, without limitation, billing; Web site and database management; order transmission, fulfillment and processing including the system for transmitting orders through the floral network; customer support; telecommunications network management; advertisement...

  • Page 25
    ...integration attempts will be successful. Acquiring a business, service or technology involves many operational and financial risks, including risks relating to disruption of our ongoing business and significant diversion of resources and management time from day-to-day responsibilities; acquisition...

  • Page 26
    ... in the associated costs could adversely affect our business and results of operations. Our emails generate the majority of the traffic on our social networking Web sites and are the most important driver of member activity for our online loyalty marketing service. A significant number of members of...

  • Page 27
    ...parties include our marketing offers in the emails they send. An increase in the number of members or customers who elect to not receive, or are unable to receive, our emails could adversely affect our business and results of operations. From time to time, Internet service providers block bulk email...

  • Page 28
    ... the benefits associated with our assets and may be required to 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...

  • Page 29
    ...and use taxes, value-added taxes or other taxes on our business activities and Internet-based transactions, including our past sales, which could decrease our ability to compete, reduce our sales, or have a material adverse effect on our business, financial condition, results of operations, and cash...

  • Page 30
    ... operations involves risks and uncertainties, including adverse fluctuations in currency exchange rates; potentially adverse tax consequences, including the complexities of foreign value-added taxes and restrictions on the repatriation of earnings; increased financial accounting, tax and reporting...

  • Page 31
    ...rights plan, which is an anti-takeover measure that will cause substantial dilution to a third party who attempts to acquire our Company on terms not approved by our Board of Directors. Our stock price has been highly volatile and may continue to be volatile. The market price of our common stock has...

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

  • Page 33
    ... products and a high level of customer service. Our business depends, in part, on the ability of our independent floral network members and third-party suppliers who fulfill our orders to do so at high-quality levels. We work with our floral network members and third-party suppliers to develop...

  • Page 34
    ... operation of our online and telephonic sales channels could result in the imposition of additional sales and use tax or other tax obligations. Additionally, in accordance with current industry practice by international floral and specialty gift direct marketers and our interpretation of applicable...

  • Page 35
    ... a number of specialty niche Web sites, including LinkedIn and MyLife.com, that offer online social networking services focused on particular affiliations such as school or work communities; and schools, employers and associations that maintain their own Internetbased alumni information services. We...

  • Page 36
    ... 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 online loyalty marketing service members could...

  • Page 37
    ... providers, including cable companies and local exchange carriers, bundle their offerings with telephone, entertainment or other services, which may result in lower prices than standalone services. In addition to competition from broadband providers, competition among dial-up Internet access service...

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

  • Page 39
    ... 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 40
    ... to that, NetZero common stock had been quoted on 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. 2008 High Low High 2009 Low First Quarter...

  • Page 41
    ...stock units or issuance of stock awards, we currently do not collect the applicable employee withholding taxes from employees. Instead, we automatically withhold, from the restricted stock units that vest and from the stock awards that are issued, the portion of those shares with a fair market value...

  • Page 42
    ... of the Company, the Nasdaq Composite and the MS Internet Index and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance. Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 United Online, Inc. Nasdaq...

  • Page 43
    ... statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report on Form 10-K. The following table presents the consolidated statements of operations data for the years ended December 31, 2009, 2008 and...

  • Page 44
    ... are Internet access and email. On a combined basis, our Web properties attract a significant 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...

  • Page 45
    ... the number of pay accounts at the beginning and end of a period. ARPU may fluctuate from period to period as a result of a variety of factors, including, but not limited to, changes in the mix of pay services and the related pricing plans; the use of promotional or retention pricing to attract new...

  • Page 46
    ... online loyalty marketing members who have earned or redeemed points during such period. Communications segment active accounts include all Communications segment pay accounts as of the date presented combined with the number of free Internet access and email accounts that logged on to our services...

  • Page 47
    Table of Contents represented by international social networking pay accounts which, on average, have lower-priced subscription plans compared to U.S. social networking pay accounts, and the churn rate. Quarter Ended June 30, 2009 December 31, 2009 September 30, 2009 March 31, 2009 December 31,...

  • Page 48

  • Page 49
    ... utilizing partner Internet search services, amounts generated from the display of third-party offers at the end of Classmates' pay account registration process, amounts generated from other display advertisements, and amounts generated from referring members to third-party Web sites or services. We...

  • Page 50
    Table of Contents 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...

  • Page 51
    ... include, but are not limited to, future operating performance and cash flows, cost of capital, terminal values, and remaining economic lives of assets. Goodwill We operate in three reportable segments, in accordance with ASC 280, Segment Reporting , and we have identified five reporting units...

  • Page 52
    ... a number of factors, including projections of the amounts and timing of future revenues and cash flows, assumed discount rates and other assumptions. Under the market approach, using the guideline company method, a reporting unit's fair value is estimated based on multiples of the cash-free market...

  • Page 53
    ...estimates include, but are not limited to, future operating performance and cash flows, cost of capital, terminal values, and remaining economic lives of assets. Member Redemption Liability Member redemption liability for online loyalty marketing points represents the estimated costs associated with...

  • Page 54
    ... of fees charged to its floral network members for access to the FTD and Interflora brands and the Mercury Man logo, access to the floral networks, credit card processing services, e-commerce Web sites services, online advertising tools, and telephone answering, order-taking, transmission, and...

  • Page 55
    ...of our Communications advertising revenues are generated from our Internet access services. Cost of Revenues FTD FTD cost of revenues includes product costs; shipping and delivery costs; costs associated with taking orders; printing and postage costs; costs related to FTD's product quality guarantee...

  • Page 56
    ... 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 57
    ...Annual Report on Form 10-K. As a result of the FTD acquisition, the results of operations of FTD have been included in the consolidated statements of operations and cash flows from August 26, 2008, the date of acquisition. Combined information for FTD for the full-year ended December 31, 2008 is set...

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

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

  • Page 60
    ... each period presented (in thousands): Year Ended December 31, 2008 2007 2009 Segment income (loss) from operations: FTD Classmates Media Communications Total segment income (loss) from operations Depreciation Amortization of intangible assets Consolidated operating income (loss) $ 76,928 $ (149...

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

  • Page 62
    ...$59.1 million increase in sales and marketing expenses associated with our FTD segment as a result of including FTD sales and marketing expenses for the entire period for the year ended December 31, 2009 whereas such expenses were included only from August 26, 2008 (date of acquisition) in the prior...

  • Page 63
    ...closed on August 26, 2008. Interest expense was primarily related to interest on our credit facilities, including accretion of discounts and amortization of debt issue costs. Other Income (Expense), net. Other income, net increased by $4.3 million to $4.2 million for the year ended December 31, 2009...

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

  • Page 65
    ... 31, 2009 and 2008. Year Ended December 31, 2008 2009 (Combined) Revenues Operating expenses: Cost of revenues Sales and marketing Technology and development General and administrative Impairment of goodwill, intangible assets and long-lived assets Total operating expenses Segment income (loss...

  • Page 66
    ... for the years ended December 31, 2009 and 2008. Year Ended December 31, 2009 2008 Revenues Operating expenses: Cost of revenues Sales and marketing Technology and development General and administrative Restructuring charges Total operating expenses Segment income from operations 100.0% 100...

  • Page 67
    ... online social networking pay accounts. Although we experienced a net increase in Classmates Media pay accounts in the year ended December 31, 2009, this increase was largely due to an increase in our offerings of discounted pricing plans, with a significant number of the new pay accounts generated...

  • Page 68
    ... 31, 2009 and 2008. Year Ended December 31, 2009 2008 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 Total operating expenses Segment income...

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

  • Page 70
    ... 31, 2008 and 2007. Year Ended December 31, 2008 2007 Revenues Operating expenses: Cost of revenues Sales and marketing Technology and development General and administrative Amortization of intangible assets Restructuring charges Impairment of goodwill, intangible assets and long-lived assets Total...

  • Page 71
    ... 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 72
    ... dial-up Internet access services. In addition, we recognized $0.4 million in restructuring charges in the year ended December 31, 2007 for termination benefits paid to certain employees associated with our Web hosting and photo sharing businesses. Impairment of Goodwill, Intangible Assets and Long...

  • Page 73
    ... for the years ended December 31, 2008 and 2007. Year Ended December 31, 2008 2007 Revenues Operating expenses: Cost of revenues Sales and marketing Technology and development General and administrative Restructuring charges Total operating expenses Segment income from operations 100.0% 100...

  • Page 74
    ... ended December 31, 2008, compared to 20.4% for the prior-year period. The increase of $1.6 million was primarily related to a $2.6 million increase in customer support, overhead and personnel-related costs associated with our online social networking services as a result of growth in the business...

  • Page 75
    ...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 vendor and a $2.5 million decrease in costs associated...

  • Page 76
    ... 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 77
    ... Year Ended December 31, 2008 2007 % Change (in thousands, except average order value and average currency exchange rates) Revenues Operating expenses: Cost of revenues Sales and marketing Technology and development General and administrative Impairment of goodwill, intangible assets and long-lived...

  • Page 78
    ... at 16.6% for the year ended December 31, 2008 and the prior-year period. Excluding the impact of foreign currency exchange rates of $1.7 million, sales and marketing costs decreased by $0.1 million. FTD Technology and Development Expenses. FTD technology and development expenses decreased by...

  • Page 79
    ...-owned subsidiary of United Online and the direct parent of FTD Group, Inc.) and its subsidiaries. In addition, the obligations under the UOL Credit Agreement are secured by a lien on substantially all of the assets of the guarantors, including a pledge of all of the outstanding capital stock of the...

  • Page 80
    ... to a number of factors including, without limitation, potential future acquisitions and new business initiatives, which are difficult to predict and which could change significantly over time. Additionally, technological advances may require us to make capital expenditures to develop or acquire new...

  • Page 81
    ... 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. We may use our existing...

  • Page 82
    ... factors, developing new or enhancing existing services or products, repurchasing our common stock, acquiring other services, businesses or technologies or funding significant capital expenditures, and have a material adverse effect on our business, financial position, results of operations, and...

  • Page 83
    ..., from the restricted stock units that vested and the stock awards that were issued, the portion of those 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...

  • Page 84
    ... FTD to secure credit card processing activity. Other Commitments In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses...

  • Page 85
    ... likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources. Recent Accounting Pronouncements Revenue Recognition -In October 2009, the FASB issued Accounting Standards Update ("ASU") No...

  • Page 86
    ... in the market value of the interest rate cap are recorded in earnings. For the year ended December 31, 2009, we recorded a $10,000 gain as a result of such fluctuations. A 100 basis point increase in interest rates would result in an annual increase in our interest expense related to our...

  • Page 87
    ...rates may negatively affect our consolidated revenues and expenses. A 10% adverse change in overall foreign currency exchange rates over an entire year would result in a reduction of reported annual revenues of approximately $17.1 million and a reduction of reported annual income before income taxes...

  • Page 88
    Table of Contents Exchange Act and are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief...

  • Page 89
    ... and "Related-Party 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 2010 annual meeting of...

  • Page 90
    ... Accounts F-48 F-52 All other schedules have been omitted because the 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: The agreements included as exhibits to this Annual Report...

  • Page 91
    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 92
    ....13 Form of Option Agreement for 2001 Supplemental Stock Incentive Plan 10.14 Form of Option Agreement for Classmates Online, Inc. 2004 Stock Plan 10.15 Amended and Restated United Online, Inc. Severance Benefit Plan 10.16 Employment Agreement between the Registrant and Mark R. Goldston 10.17 First...

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

  • Page 94
    ... book manager and administrative agent 10.53 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...

  • Page 95
    Table of Contents No. Exhibit Description Filed with this Form 10-K Incorporated by Reference to Form File No. Date Filed ...2010 2/23/2010 The exhibits filed as part of this report are listed in Item 15(a)(3) of this Annual Report on Form 10-K. (c) Financial Statement Schedules The financial ...

  • Page 96
    ... hereof. 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/ SCOTT H. RAY Scott...

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

  • Page 98
    ...this Annual Report on Form 10-K and in the Company's other public filings, which are available without charge through the SEC's Web site at www.sec.gov. No. Exhibit Description Filed with this Form 10-K Incorporated by Reference to Form File No. Date Filed 2.1 Stock Purchase Agreement, dated as...

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

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

  • Page 101
    ... Agreement between United Online, Inc. and Robert J. Taragan 10.47 United Online, Inc. 2009 Management Bonus Plan 10.48 Office Lease between LNR Warner Center, LLC and NetZero, Inc. 10.49 Commitment Letter, dated April 30, 2008, from Wells Fargo Bank, National Association, to United Online, Inc. 10...

  • Page 102
    ... 11, 2008, among United Online, Inc., the lenders party thereto from time to time and Silicon Valley Bank, as administrative agent 21.1 List of Subsidiaries 23.1 Consent of Independent Registered Public Accounting Firm 24.1 Power of Attorney (see signature page of this Annual Report on Form 10-K) 31...

  • Page 103
    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 104
    ... 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 105
    Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in ...

  • Page 106
    ...revenue Long-term debt Total current liabilities Member redemption liability Deferred revenue Long-term debt, net of discounts Deferred tax liabilities, net Other liabilities Total liabilities Commitments and contingencies (see Note 15) Stockholders' equity: Preferred stock, $0.0001 par value; 5,000...

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

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

  • Page 109
    ... currency translation Tax benefits from equity awards Net income Balance at December 31, 2007 Exercises of stock options Issuance of common stock through employee stock purchase plan Vesting of restricted stock units Repurchases of common stock Issuance of common stock in connection with acquisition...

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

  • Page 111
    ... income to net cash provided by operating activities: Depreciation and amortization Stock-based compensation Provision for doubtful accounts receivable Impairment of goodwill, intangible assets and long-lived assets Accretion of discounts and amortization of debt issue costs Deferred taxes, net Tax...

  • Page 112
    ... offers a broad array of Internet marketing services for advertisers. United Online, Inc. 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 113
    ...other long-lived assets, member redemption liability, income taxes, and legal contingencies. The accounting policies for these areas are discussed elsewhere in these consolidated financial statements. Reclassifications -Certain prior-year amounts have been reclassified to conform to the current year...

  • Page 114
    ...interest rate cap associated with interest rate fluctuations on certain of its credit facilities, however, the interest rate cap does not currently qualify for hedge accounting treatment. In addition, the Company periodically uses foreign exchange contracts to partially offset the economic effect of...

  • Page 115
    ... 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 116
    ... process of estimating the fair value of indefinite-lived intangible assets is subjective and requires the Company to make estimates that may significantly impact the outcome of the analyses. Such estimates include, but are not limited to, future operating performance and cash flows, cost of capital...

  • Page 117
    ... estimates include, but are not limited to, future operating performance and cash flows, cost of capital, terminal values, and remaining economic lives of assets. Member Redemption Liability -Member redemption liability for online loyalty marketing points represents the estimated costs associated...

  • Page 118
    ...revenue. The Company offers alternative payment methods to credit cards for certain pay service plans. These alternative payment methods currently include use of automated clearing-house ("ACH"), payment by personal check or money order, or payment through a local telephone company. In circumstances...

  • Page 119
    ...; costs related to providing telephone support; customer billing and billing support for the Company's pay accounts and floral network members; fees associated with the storage and processing of customer credit cards and associated bank fees; and domain name registration fees. Sales and Marketing...

  • Page 120
    ...for product development, maintenance of existing software and technology and the development of new or improved software and technology, including personnel-related expenses for the Company's technology group in various office locations, and the costs associated with operating the Company's facility...

  • Page 121
    ... and directors including restricted stock units, stock awards, stock options, and employee stock purchases. ASC 718 requires companies to estimate the fair value of share-based payment awards on the grant date using an option-pricing model. The Company values its restricted stock units based on...

  • Page 122
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued) per share is an earnings allocation formula that determines earnings per share for common stock...

  • Page 123
    ... statements. 2. SEGMENT INFORMATION Segment revenues and segment income (loss) from operations were as follows (in thousands): Year Ended December 31, 2009 Classmates Media Communications FTD Total Services Products Advertising Total segment revenues Segment income from operations $ 125,430...

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

  • Page 125
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. SEGMENT INFORMATION (Continued) International revenues are generated by the Company's operations in Europe. International revenues totaled $171.2 million, $66.6 million and $7.3 million for the years ended December...

  • Page 126
    ... Income taxes payable Non-income taxes payable Customer deposits Other Total $ 22,475 $ 23,683 8,565 1,690 5,325 4,930 3,636 4,269 10,427 8,576 $ 50,428 $ 43,148 4. GOODWILL, INTANGIBLE ASSETS AND OTHER LONG-LIVED ASSETS Goodwill The changes in goodwill by reportable segment for the years ended...

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

  • Page 128
    ... case 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, UNOLA Corp., then an indirect wholly-owned subsidiary of United Online, Inc., which subsequently...

  • Page 129
    ...) dividends, asset sales, and the incurrence of additional debt and liens. Impairment charges recorded by the Company do not impact covenants contained in the FTD Credit Agreement. The changes in the Company's debt balances, net of discounts, for the years ended December 31, 2009 and 2008 were...

  • Page 130
    F-26

  • Page 131
    ... Group, Inc. entered into a three-year interest rate cap agreement to manage risks associated with interest rate fluctuations on a $150 million notional amount of the FTD Credit Agreement. This instrument was initially accounted for as a cash flow hedge. In January 2009, FTD Group, Inc. changed the...

  • Page 132
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. FAIR VALUE MEASUREMENTS The provisions of ASC 820 related to nonfinancial assets and liabilities became effective for the Company on January 1, 2009, and did not have a material impact on the Company's ...

  • Page 133
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. STOCKHOLDERS' EQUITY (Continued) 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 ...

  • Page 134
    ... stock. The record date was February 14, 2010 and the dividend will be paid on February 26, 2010. 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 performance...

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

  • Page 136
    ... Effective February 15, 2010, the Compensation Committee of the Board of Directors of United Online, Inc. (the "Compensation Committee") approved grants of 1.0 million restricted stock units with a grant-date fair value equal to $6.5 million to certain members of the Company's senior management...

  • Page 137
    .... Effective February 15, 2010, the Compensation Committee approved grants of 0.7 million shares of common stock with a grant-date fair value equal to $3.7 million to the Company's executive officers in connection with awards earned under the 2009 Management Bonus Plan. Stock Option Exchange Program...

  • Page 138
    ... closing market price per share of the Company's common stock on the employee's entry date into the two-year offering period in which the purchase date occurs or (ii) the closing market price per share of the Company's common stock on the purchase date. Each offering period has a 24-month duration...

  • Page 139
    ... curve in effect at the time of grant for the expected term. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the closing market price of United Online, Inc. common stock at the date of grant. For the years ended December 31, 2009, 2008 and...

  • Page 140
    ... income tax rate to the Company's effective income tax rate (in thousands): Year Ended December 31, 2008 2007 2009 Federal taxes at statutory rate of 35% State taxes, net Nondeductible executive compensation Goodwill impairment Effects of foreign income Foreign distribution Foreign tax credit...

  • Page 141
    ... an impact on the Company's effective income tax rate. The Company recognizes interest and penalties for uncertain tax positions in income tax expense. The Company had $3.0 million and $3.9 million accrued for interest and penalties relating to uncertain tax positions at December 31, 2009 and 2008...

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

  • Page 143
    ... 2007, the Company eliminated 69 positions and recorded restructuring charges totaling $3.0 million for employee termination benefits within its Communications segment to better align the segment's cost structure within a mature business for dial-up Internet access services. All costs related to the...

  • Page 144
    ... in the Internet sector. Expanded Marketing Opportunities and Efficiencies, resulting from the Company's marketing expertise to attract consumers to FTD's Web sites and thousands of floral network members while cross-selling FTD products and services to the Company's then-existing member base of...

  • Page 145
    ... million, including expenses incurred in connection with the transaction. The following table summarizes the components of the purchase price (in thousands): Cash consideration, net Stock consideration (12.3 million shares of United Online common stock valued at $10.29) Transaction costs Total $ 306...

  • Page 146
    ...Charge As discussed in Note 13, 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 impairment assessment date...

  • Page 147
    ... at its Classmates Online, MyPoints and Communications reporting units was not impaired. Due to the proximity of the Closing Date to the annual impairment assessment date of October 1, 2008, management reviewed the validity of the assumptions included in the Closing Date valuation and determined...

  • Page 148
    ..., intangible assets and long-lived assets 15. COMMITMENTS AND CONTINGENCIES Leases $ 114,000 61,867 283 176,150 $ Future minimum lease payments at December 31, 2009 under noncancelable operating leases, and related sublease income, with initial lease terms in excess of one year were as follows...

  • Page 149
    ...and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company's breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made...

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

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

  • Page 152
    Table of Contents UNITED ONLINE, INC. SCHEDULE I-CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY BALANCE SHEETS (in thousands) December 31, 2009 2008 Assets Current assets: Cash and cash equivalents Other current assets Total current assets Investments in subsidiaries Other assets ...

  • Page 153
    Table of Contents UNITED ONLINE, INC. PARENT COMPANY STATEMENTS OF OPERATIONS (in thousands) Year Ended December 31, 2008 2007 2009 Revenues Operating expenses: General and administrative Total operating expenses Operating loss Interest income Intercompany interest income Interest expense Other ...

  • Page 154
    ... of Contents UNITED ONLINE, INC. PARENT COMPANY STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2008 2007 2009 Net cash provided by operating activities Cash flows from investing activities: Purchases of short-term investments Proceeds from maturities of short-term investments...

  • Page 155
    Table of Contents UNITED ONLINE, INC. NOTES TO PARENT COMPANY FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The financial statements for United Online, Inc. ("Parent Company") summarize the results of operations and cash flows of the Parent Company for the years ended December 31, 2009, 2008 and ...

  • Page 156
    ... Period Tax Valuation Allowance Charged to Income Tax Provision Charged to Other Accounts Tax Valuation Allowance Credited to Income Tax Provision Balance at End of Period Valuation allowance for deferred tax assets: Year ended December 31, 2009 Year ended December 31, 2008 Year ended December...

  • Page 157

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

  • Page 159
    ..., except such terms as are set forth in a written agreement signed by an authorized officer of the Company or one of its subsidiaries and in effect at the time of the applicable termination of employment. This Plan supplements any such written agreements to provide all terms that are not otherwise...

  • Page 160
    ... A , as such schedule may be revised from time to time, as a participating Employer in the Plan. "Employer Group" means the Company and each member of the group of commonly controlled corporations or other businesses that include the Company, as determined in accordance with Sections 414(b) and...

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

  • Page 162
    ...your employment termination date, you have returned to the Company all items of property received by you for your use during employment with your Employer, including, but not limited to, any laptops, computer equipment, software programs, cell phones, keys and passes, and credit and calling cards. 5

  • Page 163
    ... it to your Employer within ten (10) business days (or such shorter period of time required by your Employer) after the date of your Layoff Termination or Involuntary Termination and (ii) such Required Release must become effective after the expiration of any revocation period applicable by law or...

  • Page 164
    ... made later than the last business day of such sixty (60)-day period on which your Required Release is so effective. B. Severance Benefits Guidelines The Severance Payment Benefit for which you are eligible under the Plan depends on your position, your base pay, your length of service, the type of...

  • Page 165
    ...date of termination or, if during the Transaction Protection Period, the employee's highest title at any time during that period. It shall be solely in the Company's discretion to change employees' titles. 2. Severance Payment... guideline for a person who has been employed for five years with a base ...

  • Page 166
    .... During the limited post-employment exercise period and pursuant to the procedures specified in the applicable stock option agreement(s), you may exercise any outstanding stock options that vested on or prior to the effective date of your Layoff Termination. You will receive information describing...

  • Page 167
    ... a benefit or are entitled to a greater benefit than the benefit you receive under the Plan, you may submit a signed, written application to the Chief Personnel Officer of the Company within ninety (90) days after the effective date of your Layoff Termination or Involuntary Termination. 2. Denial of...

  • Page 168
    ... and plans which were previously offered by the Company to eligible employees of this Plan, except such terms as are set forth in a written agreement signed by an authorized officer of the Company or any subsidiary of the Company. This policy supplements any such written agreements to provide all...

  • Page 169
    ... contravene any applicable restrictions or limitations under Code Section 409A. No Right to Employment . No provision of this Plan is intended to provide you or any other employee with any right to continue G. employment with Company or any other member of the Employer Group or otherwise affect the...

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

  • Page 171
    ...PLAN INFORMATION Plan Sponsor: Plan Name: Employer Identification Number Plan Number: Plan Effective Date: Plan Administrator: United Online, Inc. The United Online, Inc. Severance Benefit Plan 77-0575839 5 01 January 1, 2010 United Online, Inc. 21301 Burbank Blvd. Woodland Hills, CA 91367 Telephone...

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

  • Page 173
    ... SARL United Online Advertising Network, Inc., a Delaware corporation (dba United Online Media Group) United Online Web Services, Inc., a Delaware corporation (dba 50 Megs, Bizhosting, Freeservers, GlobalServers, and MySite) United Online Software Development (India) Private Limited, a corporation...

  • Page 174
    QuickLinks Exhibit 21.1

  • Page 175
    ... REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-70532, 333-88766, 333-106003, 333-114919, 333-121217, 333-123392, 333-140999, 333-149324, 333-155261, and 333-157599) of United Online, Inc. of our report dated...

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

  • Page 177
    ...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 report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who...

  • Page 178
    QuickLinks CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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    ...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 report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who...

  • Page 180
    QuickLinks CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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    ... The Annual Report on Form 10-K of United Online, Inc. for the year ended December 31, 2009, 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 182
    QuickLinks CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

  • Page 183
    ... The Annual Report on Form 10-K of United Online, Inc. for the year ended December 31, 2009, 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 184
    QuickLinks CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002