e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2006
or
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o |
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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: 001-32425
FTD Group, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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87-0719190 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
3113 Woodcreek Drive
Downers Grove, IL 60515
(Address of principal executive offices)
(630) 719-7800
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one):
Large accelerated filer o Accelerated filer þ Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Securities Exchange Act of 1934). YES o NO þ
As
of February 6, 2007, there were 28,334,856 outstanding shares of the issuers Common Stock,
par value $0.01 per share.
FTD GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FTD GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
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December 31, 2006 |
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June 30, 2006 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
30,760 |
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$ |
10,954 |
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Accounts receivable, less allowance for doubtful accounts
of $5,084 at December 31, 2006 and $4,437 at June 30, 2006 |
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54,846 |
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26,044 |
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Inventories, net |
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5,191 |
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3,542 |
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Other current assets |
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9,375 |
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5,985 |
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Total current assets |
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100,172 |
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46,525 |
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Property and equipment: |
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Property and equipment, at cost |
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33,687 |
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25,265 |
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Less accumulated depreciation |
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8,400 |
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6,051 |
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Property and equipment, net |
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25,287 |
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19,214 |
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Other assets: |
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Computer software, net |
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14,331 |
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10,577 |
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Other noncurrent assets |
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22,642 |
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21,405 |
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Intangible assets, less accumulated amortization of
$7,544 at December 31, 2006 and $5,993 at June 30, 2006 |
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15,027 |
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14,780 |
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Trademark |
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186,451 |
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121,577 |
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Goodwill |
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416,518 |
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336,659 |
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Total other assets |
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654,969 |
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504,998 |
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Total assets |
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$ |
780,428 |
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$ |
570,737 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
82,145 |
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$ |
45,273 |
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Notes payable |
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22,684 |
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Other accrued liabilities |
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28,237 |
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24,083 |
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Current maturities of long-term debt |
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1,500 |
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1,125 |
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Total current liabilities |
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134,566 |
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70,481 |
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Senior secured credit facility |
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148,125 |
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48,875 |
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Senior subordinated notes |
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170,117 |
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170,117 |
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Post-retirement benefits, accrued pension obligations and other liabilities |
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5,119 |
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2,368 |
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Deferred income taxes |
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81,590 |
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61,160 |
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Stockholders equity: |
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Common stock: $0.01 par value, 75,000,000 shares authorized; 29,482,182
shares issued as of December 31, 2006 and June 30, 2006 |
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295 |
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295 |
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Additional paid-in capital |
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234,844 |
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233,362 |
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Retained earnings (accumulated deficit) |
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9,996 |
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(1,554 |
) |
Accumulated other comprehensive income |
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6,587 |
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200 |
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Treasury stock, at cost, 1,147,326 shares as of December 31, 2006
and 1,504,480 shares as of June 30, 2006 |
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(10,811 |
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(14,567 |
) |
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Total stockholders equity |
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240,911 |
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217,736 |
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Total liabilities and stockholders equity |
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$ |
780,428 |
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$ |
570,737 |
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SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
FTD GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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December 31, |
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December 31, |
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2006 |
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2005 |
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2006 |
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2005 |
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Revenues: |
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Products |
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$ |
115,828 |
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$ |
81,359 |
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$ |
189,701 |
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$ |
137,189 |
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Services |
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35,712 |
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27,826 |
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70,610 |
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57,865 |
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Total revenues |
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151,540 |
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109,185 |
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260,311 |
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195,054 |
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Costs of products sold and services provided: |
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Products |
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84,392 |
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56,346 |
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140,546 |
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97,655 |
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Services |
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4,926 |
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4,776 |
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9,195 |
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9,325 |
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Total costs of products sold and services provided |
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89,318 |
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61,122 |
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149,741 |
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106,980 |
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Gross profit: |
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Products |
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31,436 |
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25,013 |
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49,155 |
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39,534 |
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Services |
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30,786 |
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23,050 |
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61,415 |
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48,540 |
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Total gross profit |
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62,222 |
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48,063 |
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110,570 |
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88,074 |
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Operating expenses: |
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Advertising and selling |
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24,855 |
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21,890 |
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41,419 |
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39,541 |
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General and administrative |
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20,354 |
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11,467 |
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36,764 |
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23,396 |
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Total operating expenses |
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45,209 |
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33,357 |
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78,183 |
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62,937 |
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Income from operations |
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17,013 |
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14,706 |
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32,387 |
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25,137 |
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Other income and expenses: |
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Interest income |
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(339 |
) |
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(129 |
) |
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(637 |
) |
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(295 |
) |
Interest expense |
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7,009 |
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4,986 |
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15,235 |
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9,767 |
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Other expense (income), net |
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249 |
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(44 |
) |
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(1,295 |
) |
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(88 |
) |
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Total other expenses, net |
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6,919 |
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4,813 |
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13,303 |
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9,384 |
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Income before income tax |
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10,094 |
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9,893 |
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19,084 |
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15,753 |
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Income tax expense |
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3,987 |
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3,992 |
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7,534 |
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6,425 |
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Net income |
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$ |
6,107 |
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$ |
5,901 |
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$ |
11,550 |
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$ |
9,328 |
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Other comprehensive income: |
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Foreign currency translation adjustments |
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3,987 |
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29 |
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6,387 |
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130 |
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Comprehensive income |
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$ |
10,094 |
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$ |
5,930 |
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$ |
17,937 |
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$ |
9,458 |
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Net income per Common Share basic |
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$ |
0.22 |
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$ |
0.20 |
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$ |
0.41 |
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$ |
0.32 |
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Net income per Common Share diluted |
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$ |
0.21 |
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$ |
0.19 |
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$ |
0.39 |
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$ |
0.31 |
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Weighted average common shares outstanding: |
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Basic |
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28,335 |
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29,404 |
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28,283 |
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29,429 |
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Diluted |
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29,762 |
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30,417 |
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29,479 |
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30,481 |
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SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
FTD GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Six Months Ended |
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December 31, |
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2006 |
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2005 |
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Cash flows from operating activities: |
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Net income |
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$ |
11,550 |
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$ |
9,328 |
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Adjustments to reconcile net income to net cash
provided by operating activities: |
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Depreciation and amortization |
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7,201 |
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5,116 |
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Gain from sale of business and related transaction |
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(991 |
) |
Stock-based compensation expense |
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959 |
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|
304 |
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Amortization and write off of deferred financing costs |
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2,294 |
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|
776 |
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Provision for doubtful accounts |
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|
1,481 |
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|
1,769 |
|
Deferred income taxes |
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|
753 |
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|
862 |
|
Decrease in cash due to changes in operating assets and liabilities, net of acquisition |
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(5,275 |
) |
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(908 |
) |
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Net cash provided by operating activities |
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18,963 |
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|
16,256 |
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Cash flows from investing activities: |
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Acquisition of business, net of cash acquired |
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(96,717 |
) |
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Capital expenditures |
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(4,849 |
) |
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(5,425 |
) |
Proceeds from sale of business |
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|
3,500 |
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Net cash used in investing activities |
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(101,566 |
) |
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|
(1,925 |
) |
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Cash flows from financing activities: |
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Proceeds from issuance of long-term debt, net of financing costs |
|
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148,536 |
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Repayments of long-term debt |
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(50,375 |
) |
|
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(5,936 |
) |
Excess tax benefit from stock-based compensation |
|
|
654 |
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|
196 |
|
Proceeds from exercise of stock options |
|
|
422 |
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|
184 |
|
Purchase of company stock |
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(3,307 |
) |
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|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
99,237 |
|
|
|
(8,863 |
) |
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|
|
|
|
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|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash and cash equivalents |
|
|
3,172 |
|
|
|
130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
19,806 |
|
|
|
5,598 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
10,954 |
|
|
|
8,890 |
|
|
|
|
|
|
|
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|
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|
|
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Cash and cash equivalents at end of period |
|
$ |
30,760 |
|
|
$ |
14,488 |
|
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|
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|
|
Supplemental disclosures of cash flow information |
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Cash paid for: |
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|
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Interest |
|
$ |
12,386 |
|
|
$ |
8,972 |
|
|
|
|
|
|
|
|
Income taxes, net |
|
$ |
9,676 |
|
|
$ |
2,539 |
|
|
|
|
|
|
|
|
Non-cash disclosure: |
|
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|
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|
|
Issuance of notes payable associated with the purchase of Interflora Holdings Limited |
|
$ |
23,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of treasury stock associated with the purchase of Interflora Holdings Limited |
|
$ |
3,206 |
|
|
|
|
|
|
|
|
|
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|
|
Issuance of notes receivable associated with the sale of Renaissance |
|
|
|
|
|
$ |
1,805 |
|
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|
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
FTD Group, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Description of the Business
Basis of Presentation
These condensed consolidated financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC) and, therefore, do not include all
information and footnote disclosures normally included in audited financial statements. However,
in the opinion of management, all adjustments consisting only of normal recurring adjustments,
unless otherwise noted herein, necessary to present fairly the results of operations, financial
position and cash flows have been made. These condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and notes thereto included in FTD
Group, Inc.s Annual Report on Form 10-K for the year ended June 30, 2006. The results of
operations for any interim period are not necessarily indicative of the results of operations to be
expected for the full year.
As used in this Form 10-Q, the term Company refers to FTD Group, Inc. and its consolidated
subsidiaries, including FTD, Inc. taken as a whole. FTD, Inc. is a Delaware corporation that
commenced operations in 1994 and includes the operations of its principal operating subsidiaries,
Florists Transworld Delivery, Inc. (FTD or the Operating Company),
FTD.COM, INC. (FTD.COM) and Interflora British Unit.
On
July 31, 2006, the Company completed its acquisition of
Interflora Holdings Limited (Interflora), the parent
company of Interflora British Unit, a U.K. based provider
of floral-related products and services to consumers and retail floral locations in the U.K. and
the Republic of Ireland. Refer to Note 2 below. As a result of the Interflora acquisition, the
Company also acquired majority control of Interflora, Inc. Interflora, Inc. is an international
clearinghouse for flowers-by-wire order exchanges between its members. The results of operations
associated with Interflora and Interflora, Inc. are included in a new international segment.
All intercompany accounts and transactions have been eliminated in consolidation.
Certain amounts reported within total revenues and costs of products sold and services
provided have been reclassified between products and services in the fiscal year 2006 financial
statements to conform to current year presentation. Such reclassifications primarily related to
service fees in the consumer segment and did not affect reported total revenues or costs of
products sold and services provided.
Recently Issued Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Standards (SFAS) No. 158, Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans an amendment of FASB Statement No. 87, 88, 106 and 132(R), (SFAS 158),
effective for the Companys fiscal year ending June 30, 2007. SFAS 158 requires the balance sheet
recognition of the overfunded or underfunded status of a defined benefit postretirement plan as an
asset or liability along with a corresponding after-tax adjustment to accumulated other
comprehensive income (loss) included in stockholders equity. The Company is currently evaluating
the impact the adoption of SFAS 158 will have on the Companys consolidated financial statements.
In June 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in
Income Taxes an Interpretation of FASB Statement No. 109 (SFAS 109). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an entitys financial statements in
accordance with SFAS 109 and prescribes that a company should use a more-likely-than-not
recognition threshold based on the technical merits of the tax position taken or expected to be
taken. Tax positions that meet the more-likely-than-not recognition threshold should be measured
in order to determine the tax benefit to be recognized in the financial statements. Additionally,
FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. FIN 48 is effective for the Companys fiscal year
ending June 30, 2008, with early adoption
5
permitted. The Company is currently evaluating the impact the adoption of FIN 48 will have on
the Companys consolidated financial statements.
Note 2. Acquisition of Interflora Holdings Limited
On July 31, 2006, in connection with the Companys international expansion strategy, the
Company completed the acquisition of Interflora for a purchase price of approximately $122.8
million (£66 million) plus transaction related costs totaling $2.3 million. Approximately $98.6
million of the acquisition price was paid in cash at closing and $1.9 million of cash was acquired
in connection with the purchase. The consideration included approximately $23.3 million (£12.5
million) as notes payable of which, $21.6 million (£11.6 million) will be paid in May 2007 and the
remainder, $1.7 million (£0.9 million), will be paid in August 2008. The remainder of the purchase
price ($3.2 million) was funded through the issuance of 216,374 shares of common stock (consisting
of treasury shares) to certain senior managers of Interflora. The Company financed the acquisition
with a new senior secured credit facility consisting of a $150.0 million term loan and a $75.0
million revolving credit facility. The proceeds from the new facility were also used to repay the
Companys existing term loan. Refer to Note 4 below. In addition, the Company entered into
foreign currency forward exchange contracts totaling £61.8 million to hedge the acquisition cost.
A contract in the amount of £51.0 million was settled on July 28, 2006 and resulted in a gain of
$1.4 million, which has been recorded in other income, net within the Condensed Consolidated
Statements of Income and Comprehensive Income. The remaining forward contracts include a contract
for £10 million, expected to be settled during the fourth quarter of fiscal year 2007 and a
contract for £0.8 million, expected to be settled during the first quarter of fiscal year 2009.
The settlement of these contracts coincide with the due dates of the notes payable related to the
acquisition of Interflora. For the three-month and six-month periods ended December 31, 2006,
other expense (income), net included $0.2 million of expense and $1.3 million of income,
respectively, primarily related to mark-to-market adjustments on forward contracts.
Financial results for Interflora are included herein beginning August 1, 2006. The pro forma
information below presents the results of operations as if the acquisition occurred on July 1, 2005
(in thousands, except per share amounts). Pro forma financial information related to Interflora,
Inc. has not been included herein, as the operating results of Interflora, Inc. are not considered
material to the Companys operating results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Proforma revenues |
|
$ |
138,396 |
|
|
$ |
270,964 |
|
|
$ |
247,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proforma income from operations |
|
$ |
17,426 |
|
|
$ |
33,262 |
|
|
$ |
29,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proforma net income |
|
$ |
6,827 |
|
|
$ |
11,720 |
|
|
$ |
10,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proforma net income per share basic |
|
$ |
0.23 |
|
|
$ |
0.41 |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
|
Proforma net income per share diluted |
|
$ |
0.22 |
|
|
$ |
0.40 |
|
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
The preliminary allocation of the acquisition cost is shown in the table below (in
thousands). Such allocation will be finalized when appraisals and fair value adjustments are
completed.
|
|
|
|
|
Goodwill |
|
$ |
76,024 |
|
Trademark |
|
|
61,764 |
|
Computer software |
|
|
4,372 |
|
Land and building |
|
|
2,942 |
|
Other intangible assets (customer list) |
|
|
1,711 |
|
Deferred tax liability |
|
|
(20,464 |
) |
Other assets acquired and liabilities assumed, net |
|
|
(1,211 |
) |
|
|
|
|
Total preliminary allocation of acquisition cost |
|
$ |
125,138 |
|
|
|
|
|
6
Goodwill and trademark assets are considered indefinite lived and therefore will not be
subject to amortization, but will instead be subject to an annual impairment test. Computer
software will be amortized over 5 years; the customer list will be amortized over 3 years.
The Company implemented a deferred compensation plan for certain members of Interflora
management. Under the terms of the plan, participants will be paid a cash bonus upon achieving a
specified annual earnings target if such target is achieved in any annual period within the next
seven years. The maximum payout under such plan is £2.9 million. During the three-month and
six-month periods ended December 31, 2006, the Company recorded $0.4 million and $0.6 million of
expense, respectively, related to this deferred compensation plan.
Note 3. Goodwill and Other Intangibles
Goodwill resulting from the Interflora acquisition will be reported as part of the
international segment.
The changes in the carrying amount of goodwill, trademark and amortizable intangible assets,
the related accumulated amortization as of December 31, 2006 and the estimated amortization expense
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
Florist |
|
|
International |
|
|
|
|
|
|
Segment |
|
|
Segment |
|
|
Segment |
|
|
Total |
|
Goodwill: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2006 |
|
$ |
178,141 |
|
|
$ |
158,518 |
|
|
$ |
|
|
|
$ |
336,659 |
|
Acquisition of Interflora |
|
|
|
|
|
|
|
|
|
|
76,024 |
|
|
|
76,024 |
|
Impact of foreign exchange |
|
|
|
|
|
|
|
|
|
|
3,835 |
|
|
|
3,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006 |
|
$ |
178,141 |
|
|
$ |
158,518 |
|
|
$ |
79,859 |
|
|
$ |
416,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademark: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2006 |
|
$ |
67,842 |
|
|
$ |
53,735 |
|
|
$ |
|
|
|
$ |
121,577 |
|
Acquisition of Interflora |
|
|
|
|
|
|
|
|
|
|
61,764 |
|
|
|
61,764 |
|
Impact of foreign exchange |
|
|
|
|
|
|
|
|
|
|
3,110 |
|
|
|
3,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006 |
|
$ |
67,842 |
|
|
$ |
53,735 |
|
|
$ |
64,874 |
|
|
$ |
186,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006 |
|
|
June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
Net |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
Amortizable Intangible Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer lists |
|
$ |
14,634 |
|
|
$ |
7,474 |
|
|
$ |
7,160 |
|
|
$ |
12,836 |
|
|
$ |
5,940 |
|
|
$ |
6,896 |
|
Non-compete agreements |
|
|
100 |
|
|
|
70 |
|
|
|
30 |
|
|
|
100 |
|
|
|
53 |
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
14,734 |
|
|
$ |
7,544 |
|
|
$ |
7,190 |
|
|
$ |
12,936 |
|
|
$ |
5,993 |
|
|
$ |
6,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Also included within Intangible Assets on the balance sheet is a URL asset, valued at $7.8
million, which is an indefinite lived asset and is subject to an annual impairment test.
|
|
|
|
|
Estimated amortization expense (in thousands): |
|
|
|
|
For the remaining six-month period ending June 30, 2007 |
|
$ |
1,601 |
|
For the year ending June 30, 2008 |
|
$ |
3,180 |
|
For the year ending June 30, 2009 |
|
$ |
2,332 |
|
For the year ending June 30, 2010 |
|
$ |
77 |
|
Note 4. Financing Arrangements
On July 28, 2006, in connection with the Interflora acquisition, FTD, Inc. entered into a new
senior secured credit facility consisting of a $150.0 million term loan and a $75.0 million
revolving credit facility (the 2006 Credit Agreement). Borrowings under the 2006 Credit
Agreement bear interest based on a margin over, at FTD Inc.s option, either the base rate or the
London Bank Offered Rate (LIBOR). The applicable margin for borrowings varies based on the
Companys consolidated leverage ratio, as defined in the 2006 Credit Agreement. The interest rate
at December 31, 2006 on the term loan was 7.35%. The Credit Agreement also requires the Company to
pay
7
commitment fees on the unused portion of the revolving credit facility. Commitment fees
totaled $0.1 million for the three-month and six-month periods ended December 31, 2006. The 2006
Credit Agreement also includes covenants that, among other things, require that FTD, Inc. maintain
a ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation
and amortization (subject to certain adjustments) of no more than 5.75 to 1.00 and a fixed charge
ratio of no less than 1.30 to 1.00. Such ratios adjust quarterly in accordance with the terms of
the 2006 Credit Agreement. FTD, Inc. was in compliance with all debt covenants as of December 31,
2006.
The 2006 Credit Agreement imposes various restrictions on the Company, including restrictions
that limit FTD, Inc.s ability to incur liens or encumbrances, make investments or acquisitions,
incur additional debt, enter into sale leaseback transactions, incur certain contingent
liabilities, make certain restricted junior payments and other similar distributions, enter into
mergers, consolidations and similar combinations, sell assets or engage in similar transfers, amend
certain material agreements, including the indenture governing the 7.75% Senior Subordinated Notes
(the Notes), make capital expenditures and engage in transactions with affiliates.
In conjunction with the Companys completion of a going private transaction on February 24,
2004, FTD, Inc. entered into a senior secured credit facility (the 2004 Credit Agreement). There
was $50.0 million in outstanding debt at June 30, 2006 under the 2004 Credit Agreement, which was
subsequently paid off on July 28, 2006. As a result of repaying the 2004 Credit Agreement, the
Company wrote off $1.8 million of deferred financing costs, net of accumulated amortization, during
the first quarter of fiscal year 2007. This expense is recorded in interest expense in the
accompanying Condensed Consolidated Statements of Income and Comprehensive Income. In connection
with the 2006 Credit Agreement, the Company incurred $1.5 million of deferred financing costs,
which were allocated, pro rata, to the six-year revolving credit facility and the seven-year term
loan and are being amortized using the effective interest method.
At December 31, 2006, the Company had $149.6 million outstanding under the 2006 Credit
Agreement and $25.8 million in outstanding letters of credit, $24.5 million of which related to the
notes payable from the acquisition of Interflora, and, as a result, the revolving credit facility
had availability of approximately $49.2 million.
Note 5. Net Income Per Common Share
The computations of basic and diluted net income per common share for the three-month and
six-month periods ended December 31, 2006 and 2005 are as follows (in thousands, except per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Net income |
|
$ |
6,107 |
|
|
$ |
5,901 |
|
|
$ |
11,550 |
|
|
$ |
9,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding basic |
|
|
28,335 |
|
|
|
29,404 |
|
|
|
28,283 |
|
|
|
29,429 |
|
Effect of dilutive securities stock options |
|
|
1,427 |
|
|
|
1,013 |
|
|
|
1,196 |
|
|
|
1,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding diluted |
|
|
29,762 |
|
|
|
30,417 |
|
|
|
29,479 |
|
|
|
30,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share of Common Stock basic |
|
$ |
0.22 |
|
|
$ |
0.20 |
|
|
$ |
0.41 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share of Common Stock diluted |
|
$ |
0.21 |
|
|
$ |
0.19 |
|
|
$ |
0.39 |
|
|
$ |
0.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three-month and six-month periods ended December 31, 2006 there were 12,500 and
1,015,217 outstanding stock options, respectively, that were not included in the computation of
diluted earnings per share because the exercise prices of the options were greater than the average
market prices of the Companys Common Stock during the periods and therefore, were anti-dilutive.
For the three-month and six-month periods ended December 31, 2005, there were 175,000 and 100,000,
respectively, outstanding stock options which were not included in the computation of diluted
earnings per share because their effect was anti-dilutive.
Note 6. Pension and Other Post-Retirement Benefit Plans
The Companys defined benefit pension plan and post-retirement benefit plan relate to a
limited number of employees and retirees. Such plans were frozen in 1997. The table below
provides the components of pension
8
expense for the defined benefit plan for the three-month and
six-month periods ended December 31, 2006 and 2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaried Employees Pension Plan |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Service cost |
|
$ |
13 |
|
|
$ |
14 |
|
|
$ |
26 |
|
|
$ |
28 |
|
Interest cost |
|
|
26 |
|
|
|
27 |
|
|
|
52 |
|
|
|
55 |
|
Expected return on assets |
|
|
(23 |
) |
|
|
(22 |
) |
|
|
(46 |
) |
|
|
(45 |
) |
Amortization |
|
|
1 |
|
|
|
9 |
|
|
|
2 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
17 |
|
|
$ |
28 |
|
|
$ |
34 |
|
|
$ |
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides the components of net periodic post-retirement benefit costs
for the three-month and six-month periods ended December 31, 2006 and 2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retiree Medical Plan |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Interest cost |
|
$ |
22 |
|
|
$ |
20 |
|
|
$ |
44 |
|
|
$ |
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
22 |
|
|
$ |
20 |
|
|
$ |
44 |
|
|
$ |
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 7. Stock-Based Compensation
The Company adopted SFAS 123 (R), Share-Based Payment (SFAS 123 (R)) on July 1, 2005 using
the modified prospective method and Black-Scholes as the option valuation model. During the
three-month and six-month periods ended December 31, 2006 and 2005, the Company granted 12,500 and
1,380,217 options, and 7,500 and 62,500 options, respectively, to various employees and directors
of the Company. Outstanding non-qualified stock options have an expiration date ten years from the
date of grant and begin vesting as early as the date of grant, dependent upon the individual
agreements. All stock options were granted with an exercise price equal to the fair market value
of the Companys stock on the date of grant.
During the six-month period ended December 31, 2006, 116,666 options were forfeited, none of
which were forfeited during the three-month period ended December 31, 2006. During the three-month
and six-month periods ended December 31, 2005, 150,667 options were forfeited. During the
six-month period ended December 31, 2006, 140,780 options were exercised, none of which were
exercised during the three-month period ended December 31, 2006. During the three-month and
six-month periods ended December 31, 2005, the Company issued 25,556 and 30,391 shares,
respectively, of Common Stock in connection with the exercise of vested stock options. In
addition, during the three-month period ended December 31, 2005, the Company reissued 31,112 shares of
Treasury Stock in connection with the exercise of vested stock options.
Stock-based compensation expense was $0.6 million and $1.0 million, and $0.1 million and $0.3
million for the three-month and six-month periods ended December 31, 2006, and 2005, respectively.
Stock-based compensation expense for the three-month and six-month periods ended December 31, 2006
may not be indicative of the expense for the entire fiscal year.
Note 8. Commitments and Contingencies
The Company is involved in various claims and lawsuits and other matters arising in the normal
course of business. In the opinion of management of the Company, although the outcome of these
claims and suits are
9
uncertain, they should not have a material adverse effect on the Companys
financial condition, liquidity or results of operations.
Note 9. Segment Information
For purposes of managing the Company, management reviews segment financial performance to the
operating income level for each of its reportable segments. As such, interest income, interest
expense and tax expense are reviewed on a consolidated corporate basis. Revenue and expenses
earned and charged between segments are eliminated in consolidation.
The consumer segment is an Internet and telephone marketer of flowers and specialty gifts,
which sells products directly to consumers primarily through the www.ftd.com Web site and the
1-800-SEND-FTD toll-free telephone number.
The florist segment includes all services and products sold to FTD members and other retail
locations offering floral products. Services include clearinghouse, membership, technology access
and support and online services. Products include containers, technology systems and fresh
flowers.
The international segment is primarily comprised of Interflora, which has both a florist
business and consumer business, provides products and services to enable its members to send and
deliver floral orders. Interflora is also an Internet and telephone marketer of flowers and
specialty gift items to consumers, operating primarily through the www.interflora.co.uk Web site
and a toll-free telephone number.
The corporate segment includes costs related to corporate headquarters, including accounting,
executive, legal, facilities, information technology and credit and collections. Costs related to
facilities, information technology and credit and collections are allocated to the consumer and
florist segments.
Of the Companys assets totaling $780.4 million at December 31, 2006, the assets of the
Companys consumer segment totaled approximately $264.9 million, the assets of the Companys
international segment totaled $193.3 million and the assets of the Companys florist segment and
corporate headquarters totaled $322.2 million.
The following table reports the Companys operating results by reportable segment for the
three-month periods ended December 31, 2006 and 2005:
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
Gross Segment |
|
|
Eliminations |
|
|
Consolidated |
|
|
Gross Segment |
|
|
Eliminations |
|
|
Consolidated |
|
|
|
(in thousands) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
$ |
73,941 |
|
|
$ |
(4,466 |
) |
|
$ |
69,475 |
|
|
$ |
68,003 |
|
|
$ |
(4,721 |
) |
|
$ |
63,282 |
|
Florist segment |
|
|
44,702 |
|
|
|
(124 |
) |
|
|
44,578 |
|
|
|
45,989 |
|
|
|
(86 |
) |
|
|
45,903 |
|
International segment |
|
|
37,422 |
|
|
|
65 |
|
|
|
37,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
156,065 |
|
|
|
(4,525 |
) |
|
|
151,540 |
|
|
|
113,992 |
|
|
|
(4,807 |
) |
|
|
109,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Products Sold and
Services Provided: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
50,709 |
|
|
|
(669 |
) |
|
|
50,040 |
|
|
|
47,040 |
|
|
|
(643 |
) |
|
|
46,397 |
|
Florist segment |
|
|
13,908 |
|
|
|
(844 |
) |
|
|
13,064 |
|
|
|
14,953 |
|
|
|
(851 |
) |
|
|
14,102 |
|
International segment |
|
|
25,740 |
|
|
|
(24 |
) |
|
|
25,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
498 |
|
|
|
|
|
|
|
498 |
|
|
|
623 |
|
|
|
|
|
|
|
623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,855 |
|
|
|
(1,537 |
) |
|
|
89,318 |
|
|
|
62,616 |
|
|
|
(1,494 |
) |
|
|
61,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
23,232 |
|
|
|
(3,797 |
) |
|
|
19,435 |
|
|
|
20,963 |
|
|
|
(4,078 |
) |
|
|
16,885 |
|
Florist segment |
|
|
30,794 |
|
|
|
720 |
|
|
|
31,514 |
|
|
|
31,036 |
|
|
|
765 |
|
|
|
31,801 |
|
International segment |
|
|
11,682 |
|
|
|
89 |
|
|
|
11,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
(498 |
) |
|
|
|
|
|
|
(498 |
) |
|
|
(623 |
) |
|
|
|
|
|
|
(623 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
65,210 |
|
|
|
(2,988 |
) |
|
|
62,222 |
|
|
|
51,376 |
|
|
|
(3,313 |
) |
|
|
48,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and Selling: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
8,855 |
|
|
|
|
|
|
|
8,855 |
|
|
|
7,835 |
|
|
|
|
|
|
|
7,835 |
|
Florist segment |
|
|
15,850 |
|
|
|
(3,076 |
) |
|
|
12,774 |
|
|
|
17,368 |
|
|
|
(3,313 |
) |
|
|
14,055 |
|
International segment |
|
|
3,296 |
|
|
|
(70 |
) |
|
|
3,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
28,001 |
|
|
|
(3,146 |
) |
|
|
24,855 |
|
|
|
25,203 |
|
|
|
(3,313 |
) |
|
|
21,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
6,439 |
|
|
|
(692 |
) |
|
|
5,747 |
|
|
|
4,871 |
|
|
|
(623 |
) |
|
|
4,248 |
|
Florist segment |
|
|
2,031 |
|
|
|
|
|
|
|
2,031 |
|
|
|
946 |
|
|
|
|
|
|
|
946 |
|
International segment |
|
|
5,722 |
|
|
|
121 |
|
|
|
5,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
6,041 |
|
|
|
692 |
|
|
|
6,733 |
|
|
|
5,650 |
|
|
|
623 |
|
|
|
6,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
20,233 |
|
|
|
121 |
|
|
|
20,354 |
|
|
|
11,467 |
|
|
|
|
|
|
|
11,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
before Corporate Allocations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
7,938 |
|
|
|
(3,105 |
) |
|
|
4,833 |
|
|
|
8,257 |
|
|
|
(3,455 |
) |
|
|
4,802 |
|
Florist segment |
|
|
12,913 |
|
|
|
3,796 |
|
|
|
16,709 |
|
|
|
12,722 |
|
|
|
4,078 |
|
|
|
16,800 |
|
International segment |
|
|
2,664 |
|
|
|
38 |
|
|
|
2,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
(6,539 |
) |
|
|
(692 |
) |
|
|
(7,231 |
) |
|
|
(6,273 |
) |
|
|
(623 |
) |
|
|
(6,896 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
16,976 |
|
|
|
37 |
|
|
|
17,013 |
|
|
|
14,706 |
|
|
|
|
|
|
|
14,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Allocations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
1,053 |
|
|
|
|
|
|
|
1,053 |
|
|
|
867 |
|
|
|
|
|
|
|
867 |
|
Florist segment |
|
|
2,331 |
|
|
|
|
|
|
|
2,331 |
|
|
|
2,683 |
|
|
|
|
|
|
|
2,683 |
|
International segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
(3,384 |
) |
|
|
|
|
|
|
(3,384 |
) |
|
|
(3,550 |
) |
|
|
|
|
|
|
(3,550 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
6,885 |
|
|
|
(3,105 |
) |
|
|
3,780 |
|
|
|
7,390 |
|
|
|
(3,455 |
) |
|
|
3,935 |
|
Florist segment |
|
|
10,582 |
|
|
|
3,796 |
|
|
|
14,378 |
|
|
|
10,039 |
|
|
|
4,078 |
|
|
|
14,117 |
|
International segment |
|
|
2,664 |
|
|
|
38 |
|
|
|
2,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
(3,155 |
) |
|
|
(692 |
) |
|
|
(3,847 |
) |
|
|
(2,723 |
) |
|
|
(623 |
) |
|
|
(3,346 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
16,976 |
|
|
$ |
37 |
|
|
$ |
17,013 |
|
|
$ |
14,706 |
|
|
$ |
|
|
|
$ |
14,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
$ |
993 |
|
|
$ |
|
|
|
$ |
993 |
|
|
$ |
840 |
|
|
$ |
|
|
|
$ |
840 |
|
Florist segment |
|
|
797 |
|
|
|
|
|
|
|
797 |
|
|
|
862 |
|
|
|
|
|
|
|
862 |
|
International segment |
|
|
1,129 |
|
|
|
|
|
|
|
1,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
966 |
|
|
|
|
|
|
|
966 |
|
|
|
965 |
|
|
|
|
|
|
|
965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,885 |
|
|
$ |
|
|
|
$ |
3,885 |
|
|
$ |
2,667 |
|
|
$ |
|
|
|
$ |
2,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
The following table reports the Companys operating results by reportable segment for the
six-month periods ended December 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
Gross Segment |
|
|
Eliminations |
|
|
Consolidated |
|
|
Gross Segment |
|
|
Eliminations |
|
|
Consolidated |
|
|
|
(in thousands) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
$ |
124,809 |
|
|
$ |
(7,941 |
) |
|
$ |
116,868 |
|
|
$ |
112,953 |
|
|
$ |
(8,112 |
) |
|
$ |
104,841 |
|
Florist segment |
|
|
88,583 |
|
|
|
(184 |
) |
|
|
88,399 |
|
|
|
90,344 |
|
|
|
(131 |
) |
|
|
90,213 |
|
International segment |
|
|
54,946 |
|
|
|
98 |
|
|
|
55,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
268,338 |
|
|
|
(8,027 |
) |
|
|
260,311 |
|
|
|
203,297 |
|
|
|
(8,243 |
) |
|
|
195,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Products Sold and
Services Provided: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
84,614 |
|
|
|
(1,127 |
) |
|
|
83,487 |
|
|
|
77,917 |
|
|
|
(1,062 |
) |
|
|
76,855 |
|
Florist segment |
|
|
29,199 |
|
|
|
(1,671 |
) |
|
|
27,528 |
|
|
|
30,636 |
|
|
|
(1,696 |
) |
|
|
28,940 |
|
International segment |
|
|
37,752 |
|
|
|
(40 |
) |
|
|
37,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
1,014 |
|
|
|
|
|
|
|
1,014 |
|
|
|
1,185 |
|
|
|
|
|
|
|
1,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152,579 |
|
|
|
(2,838 |
) |
|
|
149,741 |
|
|
|
109,738 |
|
|
|
(2,758 |
) |
|
|
106,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
40,195 |
|
|
|
(6,814 |
) |
|
|
33,381 |
|
|
|
35,036 |
|
|
|
(7,050 |
) |
|
|
27,986 |
|
Florist segment |
|
|
59,384 |
|
|
|
1,487 |
|
|
|
60,871 |
|
|
|
59,708 |
|
|
|
1,565 |
|
|
|
61,273 |
|
International segment |
|
|
17,194 |
|
|
|
138 |
|
|
|
17,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
(1,014 |
) |
|
|
|
|
|
|
(1,014 |
) |
|
|
(1,185 |
) |
|
|
|
|
|
|
(1,185 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
115,759 |
|
|
|
(5,189 |
) |
|
|
110,570 |
|
|
|
93,559 |
|
|
|
(5,485 |
) |
|
|
88,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and Selling: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
13,741 |
|
|
|
|
|
|
|
13,741 |
|
|
|
12,367 |
|
|
|
|
|
|
|
12,367 |
|
Florist segment |
|
|
28,574 |
|
|
|
(5,325 |
) |
|
|
23,249 |
|
|
|
32,659 |
|
|
|
(5,485 |
) |
|
|
27,174 |
|
International segment |
|
|
4,542 |
|
|
|
(113 |
) |
|
|
4,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
46,857 |
|
|
|
(5,438 |
) |
|
|
41,419 |
|
|
|
45,026 |
|
|
|
(5,485 |
) |
|
|
39,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
11,379 |
|
|
|
(1,154 |
) |
|
|
10,225 |
|
|
|
8,526 |
|
|
|
(1,050 |
) |
|
|
7,476 |
|
Florist segment |
|
|
4,296 |
|
|
|
|
|
|
|
4,296 |
|
|
|
3,230 |
|
|
|
|
|
|
|
3,230 |
|
International segment |
|
|
8,745 |
|
|
|
257 |
|
|
|
9,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
12,087 |
|
|
|
1,154 |
|
|
|
13,241 |
|
|
|
11,640 |
|
|
|
1,050 |
|
|
|
12,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
36,507 |
|
|
|
257 |
|
|
|
36,764 |
|
|
|
23,396 |
|
|
|
|
|
|
|
23,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
before Corporate Allocations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
15,075 |
|
|
|
(5,660 |
) |
|
|
9,415 |
|
|
|
14,143 |
|
|
|
(6,000 |
) |
|
|
8,143 |
|
Florist segment |
|
|
26,514 |
|
|
|
6,812 |
|
|
|
33,326 |
|
|
|
23,819 |
|
|
|
7,050 |
|
|
|
30,869 |
|
International segment |
|
|
3,907 |
|
|
|
(6 |
) |
|
|
3,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
(13,101 |
) |
|
|
(1,154 |
) |
|
|
(14,255 |
) |
|
|
(12,825 |
) |
|
|
(1,050 |
) |
|
|
(13,875 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
32,395 |
|
|
|
(8 |
) |
|
|
32,387 |
|
|
|
25,137 |
|
|
|
|
|
|
|
25,137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Allocations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
1,870 |
|
|
|
|
|
|
|
1,870 |
|
|
|
1,602 |
|
|
|
|
|
|
|
1,602 |
|
Florist segment |
|
|
4,723 |
|
|
|
|
|
|
|
4,723 |
|
|
|
5,496 |
|
|
|
|
|
|
|
5,496 |
|
International segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
(6,593 |
) |
|
|
|
|
|
|
(6,593 |
) |
|
|
(7,098 |
) |
|
|
|
|
|
|
(7,098 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
|
13,205 |
|
|
|
(5,660 |
) |
|
|
7,545 |
|
|
|
12,541 |
|
|
|
(6,000 |
) |
|
|
6,541 |
|
Florist segment |
|
|
21,791 |
|
|
|
6,812 |
|
|
|
28,603 |
|
|
|
18,323 |
|
|
|
7,050 |
|
|
|
25,373 |
|
International segment |
|
|
3,907 |
|
|
|
(6 |
) |
|
|
3,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
(6,508 |
) |
|
|
(1,154 |
) |
|
|
(7,662 |
) |
|
|
(5,727 |
) |
|
|
(1,050 |
) |
|
|
(6,777 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
32,395 |
|
|
$ |
(8 |
) |
|
$ |
32,387 |
|
|
$ |
25,137 |
|
|
$ |
|
|
|
$ |
25,137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer segment |
|
$ |
1,933 |
|
|
$ |
|
|
|
$ |
1,933 |
|
|
$ |
1,457 |
|
|
$ |
|
|
|
$ |
1,457 |
|
Florist segment |
|
|
1,631 |
|
|
|
|
|
|
|
1,631 |
|
|
|
1,730 |
|
|
|
|
|
|
|
1,730 |
|
International segment |
|
|
1,705 |
|
|
|
|
|
|
|
1,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
1,932 |
|
|
|
|
|
|
|
1,932 |
|
|
|
1,929 |
|
|
|
|
|
|
|
1,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
7,201 |
|
|
$ |
|
|
|
$ |
7,201 |
|
|
$ |
5,116 |
|
|
$ |
|
|
|
$ |
5,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Information
This quarterly report on Form 10-Q contains various forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements
include statements regarding the Companys outlook, anticipated revenue growth and profitability;
anticipated benefits of its acquisition of Interflora Holdings Limited, anticipated benefits of
investments in new products, programs and offerings and opportunities and trends within both the
domestic and international floral businesses, including opportunities to expand these businesses
and capitalize on growth opportunities or increase penetration of service offerings. These
forward-looking statements are based on managements current expectations, assumptions, estimates
and projections about the Company and the Companys industry. Investors are cautioned that actual
results could materially differ from those contained in any forward-looking statements as a result
of: the Companys ability to acquire and retain FTD and Interflora members and continued
recognition by members of the value of the Companys products and services; the acceptance by
members of new or modified service offerings recently introduced; the Companys ability to sell
additional products and services to members; the Companys ability to expand existing marketing
partnerships and secure new marketing partners within the domestic and international consumer
businesses; the success of the Companys marketing campaigns; the ability to retain customers and
maintain average order value within the domestic and international consumer businesses; the
existence of failures in the Companys computer systems; competition from existing and potential
new competitors; levels of discretionary consumer purchases of flowers and specialty gifts; the
Companys ability to manage or reduce its level of expenses within both the domestic and
international businesses; actual growth rates for the markets in which the Company competes
compared with forecasted growth rates; the Companys ability to increase capacity and introduce
enhancements to its Web sites; the Companys ability to integrate Interflora and additional
partners or acquisitions, if any are identified; and other factors described in this quarterly
report on Form 10-Q and in the Companys annual report on Form 10-K, including under Item 1A
Risk Factors, as well as other potential risks and uncertainties, which are discussed in the
Companys other reports and documents filed with the Securities and Exchange Commission (SEC).
The Company expressly disclaims any obligation to update its forward-looking statements.
The following discussion should be read in conjunction with the consolidated financial
statements and notes to those statements that appear elsewhere in this Form 10-Q. The following
discussion contains forward-looking statements that reflect the Companys plans, estimates and
beliefs. The Companys actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to any differences include, but
are not limited to, those discussed under the captions Forward-Looking Information, Risk
Factors and elsewhere in this Form 10-Q.
Overview
FTD Group, Inc. is a leading global provider of floral products and services to consumers and
retail florists, as well as other retail locations offering floral products, in the U.S., Canada,
the U.K. and the Republic of Ireland. The business utilizes the highly recognized FTD and
Interflora brands, supported by the Mercury Man logo, which is displayed in approximately 50,000
floral shops globally. Throughout the fiscal year 2006, the Company conducted its business through
two operating segments, the consumer segment and the florist segment. Beginning in the first
quarter of fiscal year 2007, the Company began conducting business through a third operating
segment relating to its international operations, which includes the operations of Interflora
Holdings Limited (Interflora).
Please refer to the Overview section of Managements Discussion and Analysis of Financial
Condition and Results of Operations in FTD Group, Inc.s Annual Report on Form 10-K for the year
ended June 30, 2006, which was filed with the SEC on September 13, 2006. Except as discussed in
this Item 2, the Company is not aware of any material changes to such information.
Consumer Segment. The consumer segment is an Internet and telephone marketer of flowers and
specialty gifts, which sells products directly to consumers primarily through the www.ftd.com Web
site and the 1-800-SEND-FTD toll-free telephone number.
Florist Segment. The florist segment markets floral products and services to FTD members and
other retail locations offering floral products in the U.S. and Canada.
13
International Segment. The international segment, a new segment in fiscal year 2007, is
primarily comprised of Interflora, a U.K. based provider of floral and gift products and services
to consumers and retail floral locations in the U.K. and the Republic of Ireland, which was
acquired by the Company on July 31, 2006.
Corporate Segment. The corporate segment includes costs related to corporate headquarters,
including accounting, executive, legal, facilities, information technology and credit and
collections. Costs related to facilities, information technology and credit and collections are
allocated to the consumer and florist segments.
Seasonality. In view of seasonal variations in the revenues and operating results of the
Companys florist, consumer and international business segments, the Company believes that
comparisons of its revenues and operating results for any period with those of the immediately
preceding period, or in some instances, the same period of the preceding fiscal year may be of
limited relevance in evaluating the Companys historical performance and predicting the Companys
future financial performance. The Companys working capital, cash and short-term borrowings also
fluctuate during the year as a result of the factors set forth below.
Revenues and operating results tend to be lower for the quarter ending September 30 because
none of the most popular floral and gift holidays, which include Valentines Day, Easter, Mothers
Day, Thanksgiving and Christmas, fall within that quarter. In addition, depending on the year, the
popular floral holidays of Easter and Mothers Day in the U.K. sometimes fall within the quarter
ending March 31 and sometimes fall within the quarter ending June 30.
Three Months Ended December 31, 2006 compared to the Three Months Ended December 31, 2005
Total revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
% Change |
|
|
|
(in thousands) |
|
|
|
|
|
Consumer segment |
|
$ |
69,475 |
|
|
$ |
63,282 |
|
|
|
9.8 |
% |
Florist segment |
|
|
44,578 |
|
|
|
45,903 |
|
|
|
(2.9 |
%) |
International segment |
|
|
37,487 |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
151,540 |
|
|
$ |
109,185 |
|
|
|
38.8 |
% |
|
|
|
|
|
|
|
|
|
|
Second quarter fiscal year 2007 consolidated revenue grew $42.3 million, or 38.8%, to
$151.5 million, compared to revenue of $109.2 million for the same period of fiscal year 2006. The
Company acquired Interflora on July 31, 2006 and reports its results within the Companys
international segment. The international segment accounted for $37.5 million of the increase in
revenue for the period. Growth in the Companys domestic consumer and florist segments contributed
the remaining $4.8 million increase.
The consumer segment achieved revenues of $69.5 million in the second quarter of fiscal year
2007, compared to revenues of $63.3 million in the same period of fiscal year 2006, representing a
9.8% increase. Growth was driven by a 7.2% increase in order volume, which totaled 1,136,000
during the second quarter of fiscal year 2007 compared to 1,060,000 orders in the same period of
fiscal year 2006. Average order value increased slightly to $60.01 for the second quarter of
fiscal year 2007, compared to $59.33 for the same period of fiscal year 2006. The percentage of
Internet orders decreased slightly to 88.5% from 89.3% in the second quarter of fiscal year 2006,
partially due to strong growth in phone order volume. Also contributing to the increase in revenue
in the consumer segment is an increase in advertising revenue, which is related to a program the
Company initiated in December 2005.
Florist segment revenues are comprised of products and service offerings to FTD members and
other retail locations offering floral products. The florist segment achieved revenues of $44.6
million in the second quarter of fiscal year 2007, compared to revenues of $45.9 million in the
same period of fiscal year 2006. Revenues in the second quarter of the prior fiscal year included
$1.8 million of revenue related to Renaissance Greeting Cards, Inc. (Renaissance). The Company
sold substantially all the assets and certain liabilities of Renaissance in December 2005.
Excluding the revenue from the prior year related to Renaissance, revenues from the florist segment
grew 1.0% over the same period of the prior year primarily as a result of an increase in sales
related to the Companys
14
online services and an increase in the number of technology systems sold,
partially offset by a decrease in revenue from membership publications.
The international segment achieved revenues of $37.5 million in the second quarter of fiscal
year 2007, driven by sales volume in Interfloras consumer and florist businesses. Consumer orders
in the international segment totaled 473,000 with an average order value of $64.64. Internet
orders comprised 69.3% of the total order volume.
Total gross profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
% Change |
|
|
|
(in thousands) |
|
|
|
|
|
Consumer segment |
|
$ |
19,435 |
|
|
$ |
16,885 |
|
|
|
15.1 |
% |
Florist segment |
|
|
31,514 |
|
|
|
31,801 |
|
|
|
(0.9 |
%) |
International segment |
|
|
11,771 |
|
|
|
|
|
|
|
N/A |
|
Corporate |
|
|
(498 |
) |
|
|
(623 |
) |
|
|
(20.1 |
%) |
|
|
|
|
|
|
|
|
|
|
Total gross profit |
|
$ |
62,222 |
|
|
$ |
48,063 |
|
|
|
29.5 |
% |
|
|
|
|
|
|
|
|
|
|
Gross profit increased by $14.1 million, or 29.5% to $62.2 million for the second quarter
of fiscal year 2007, compared to gross profit for the second quarter of fiscal year 2006 of $48.1
million. Total gross margin decreased to 41.1% for the second quarter of fiscal year 2007 from
44.0% for the same period in fiscal year 2006, primarily due to the addition of the international
segment.
Gross profit associated with the consumer segment increased by $2.5 million, or 15.1%, to
$19.4 million for the second quarter of fiscal year 2007, compared to $16.9 million for the second
quarter of fiscal year 2006. Gross margin for the consumer segment increased to 28.0% for the
second quarter of fiscal year 2007, compared to 26.7% for same period in fiscal year 2006,
primarily due to an increase in advertising revenue and savings in product guarantee expense in the
current fiscal year due to process improvements implemented since the second quarter of fiscal year
2006, partially offset by an increase in promotional pricing.
Gross profit associated with the florist segment decreased by $0.3 million, or 0.9%, to $31.5
million for the second quarter of fiscal year 2007, compared to $31.8 million for the second
quarter of fiscal year 2006. Gross margin for the florist segment increased to 70.7% for the second
quarter of fiscal year 2007, compared to 69.3% for the same period in fiscal year 2006, primarily
due to the increase of technology system sales, including both an increase in profitability on
systems sold as well as an increase in number of units sold.
For the second quarter of fiscal year 2007, gross profit associated with the international
segment was $11.8 million and gross margin for the international segment was 31.4%.
Costs associated with corporate activities remained relatively consistent at $0.5 million for
the second quarter of fiscal year 2007, compared to $0.6 million for the second quarter of fiscal
year 2006. These costs are related to the development and maintenance of internal corporate
technology platforms supporting the florist and consumer segments.
Advertising and selling costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
% Change |
|
|
|
(in thousands) |
|
|
|
|
|
Consumer segment |
|
$ |
8,855 |
|
|
$ |
7,835 |
|
|
|
13.0 |
% |
Florist segment |
|
|
12,774 |
|
|
|
14,055 |
|
|
|
(9.1 |
%) |
International segment |
|
|
3,226 |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
Total advertising and selling costs |
|
$ |
24,855 |
|
|
$ |
21,890 |
|
|
|
13.5 |
% |
|
|
|
|
|
|
|
|
|
|
15
Advertising and selling costs increased $3.0 million, or 13.5%, to $24.9 million for the
second quarter of fiscal year 2007, compared to $21.9 million for the second quarter of fiscal year
2006. As a percentage of revenue, advertising and selling costs decreased to 16.4% for the second
quarter of fiscal year 2007 compared to 20.0% for the second quarter of fiscal year 2006.
Advertising and selling costs associated with the consumer segment increased $1.1 million, or
13.0%, to $8.9 million for the second quarter of fiscal year 2007, compared to $7.8 million for the
second quarter of fiscal year 2006. Advertising and selling costs as a percentage of revenue
associated with the consumer segment increased to 12.7% for the second quarter of fiscal year 2007
compared to 12.4% for the second quarter of fiscal year 2006. This increase was primarily due to a
higher mix of online search order volume and an increase in cost per order.
Advertising and selling costs associated with the florist segment decreased $1.3 million, or
9.1%, to $12.8 million for the second quarter of fiscal year 2007 compared to $14.1 million for the
second quarter of fiscal year 2006. Advertising and selling costs as a percentage of revenue
associated with the florist segment decreased to 28.7% for the second quarter of fiscal year 2007
compared to 30.6% for the second quarter of fiscal year 2006. The decrease in advertising and
selling costs was primarily due to the sale of Renaissance, which accounted for $1.2 million of
advertising and selling costs in the prior year quarter.
Advertising and selling costs associated with the international segment totaled $3.2 million,
or 8.6% of international segment revenue for the second quarter of fiscal year 2007.
General and administrative costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
% Change |
|
|
|
(in thousands) |
|
|
|
|
|
Consumer segment |
|
$ |
5,747 |
|
|
$ |
4,248 |
|
|
|
35.3 |
% |
Florist segment |
|
|
2,031 |
|
|
|
946 |
|
|
|
114.7 |
% |
International segment |
|
|
5,843 |
|
|
|
|
|
|
|
N/A |
|
Corporate |
|
|
6,733 |
|
|
|
6,273 |
|
|
|
7.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative costs |
|
$ |
20,354 |
|
|
$ |
11,467 |
|
|
|
77.5 |
% |
|
|
|
|
|
|
|
|
|
|
General and administrative costs increased by $8.9 million, or 77.5%, to $20.4 million
for the second quarter of fiscal year 2007, compared to $11.5 million for the second quarter of
fiscal year 2006.
General and administrative costs associated with the consumer segment increased by $1.5
million, or 35.3%, to $5.7 million for the second quarter of fiscal year 2007, compared to $4.2
million for the second quarter of fiscal year 2006. This increase is primarily due to investment
spending in the consumer segments technology infrastructure, including increased headcount as well
as an increase in amortization expense associated with technology improvements put in service over
the last year.
General and administrative costs associated with the florist segment increased by $1.1 million
to $2.0 million for the second quarter of fiscal year 2007, compared to $0.9 million for the second
quarter of fiscal year 2006. The increase is primarily due to an offset in the prior year related
to the $1.0 million gain recognized as a result of the sale of Renaissance.
General and administrative costs associated with the international segment were $5.8 million
for the second quarter of fiscal year 2007.
Corporate general and administrative costs increased by $0.4 million, or 7.3%, to $6.7 million
for the second quarter of fiscal year 2007, compared to $6.3 million for the second quarter of
fiscal year 2006, primarily as a result of an increase in salaries and audit fees, partially offset
by a decrease in legal fees.
16
Other income and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
% Change |
|
|
|
(in thousands) |
|
|
|
|
|
Interest income |
|
$ |
(339 |
) |
|
$ |
(129 |
) |
|
|
162.8 |
% |
Interest expense |
|
|
7,009 |
|
|
|
4,986 |
|
|
|
40.6 |
% |
Other expense (income), net |
|
|
249 |
|
|
|
(44 |
) |
|
|
(665.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income and expenses |
|
$ |
6,919 |
|
|
$ |
4,813 |
|
|
|
43.8 |
% |
|
|
|
|
|
|
|
|
|
|
Interest income increased to $0.3 million for the second quarter of fiscal year 2007
compared to $0.1 million for the second quarter of fiscal year 2006 primarily due to increased
average cash balances in fiscal year 2007.
Interest expense increased by $2.0 million, or 40.6%, to $7.0 million for the second quarter
of fiscal year 2007, compared to $5.0 million for the second quarter of fiscal year 2006. The
increase related to an increase in outstanding indebtedness related to the July 2006 refinancing of
the Companys credit facility in connection with the Interflora acquisition, whereby the Company
entered into a new senior secured credit facility.
Other expense (income), net increased to $0.2 million of expense for the second quarter of
fiscal year 2007, compared to income of $44,000 for the second quarter of fiscal year 2006. The
loss in fiscal year 2007 primarily related to foreign currency exchange losses on indebtedness
which was entered into in connection with the Interflora acquisition, partially offset by
recognized gains on foreign currency forward exchange contracts the Company entered into in
connection with the Interflora acquisition.
Six Months Ended December 31, 2006 compared to the Six Months Ended December 31, 2005
The Company acquired Interflora on July 31, 2006, and, as a result, five months of
Interfloras financial results are included in the six-month period ended December 31, 2006.
Total revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
% Change |
|
|
|
(in thousands) |
|
|
|
|
|
Consumer segment |
|
$ |
116,868 |
|
|
$ |
104,841 |
|
|
|
11.5 |
% |
Florist segment |
|
|
88,399 |
|
|
|
90,213 |
|
|
|
(2.0 |
%) |
International segment |
|
|
55,044 |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
260,311 |
|
|
$ |
195,054 |
|
|
|
33.5 |
% |
|
|
|
|
|
|
|
|
|
|
Six-month period ended December 31, 2006 consolidated revenue grew $65.2 million, or
33.5%, to $260.3 million, compared to revenue of $195.1 million for the same period of the prior
fiscal year. The international segment accounted for $55.0 million of this increase in revenue.
Growth in the Companys consumer and florist segments contributed the remaining $10.2 million
increase.
The consumer segment achieved revenues of $116.9 million in the six-month period ended
December 31, 2006, compared to revenues of $104.8 million in the same period of the prior fiscal
year, representing a 11.5% increase. Growth was driven by an 8.9% increase in order volumes, which
totaled 1,904,000 during the six-month period ended December 31, 2006 compared to 1,749,000 orders
in the same period of the prior fiscal year. Average order value increased slightly to $60.22 for
the six-month period ended December 31, 2006, compared to $59.71 for the same period of the prior
fiscal year. The percentage of Internet orders for the six-month period ended December 31, 2006
decreased slightly to 88.3% from 88.8% for the six-month period ended December 31, 2005. Also
contributing to the increase in revenue is advertising revenue, which is related to a program
the Company initiated in December 2005.
17
Florist segment revenues are comprised of products and service offerings to FTD members and
other retail locations offering floral products. The florist segment achieved revenues of $88.4
million in the six-month period ended December 31, 2006, compared to revenues of $90.2 million in
the same period of the prior fiscal year. Revenues in the six-month period ended December 31, 2005
included $3.9 million of revenue related to Renaissance. Excluding the revenue from the prior year
related to Renaissance, revenues from the florist segment grew 2.4% over the same period of the
prior year primarily as a result of an increase in the number of technology systems sold and an
increase in sales related to the Companys online services.
The international segment achieved revenues of $55.0 million in the six-month period ended
December 31, 2006, driven by sales volume in Interfloras consumer and florist businesses.
Consumer orders in the international segment totaled 701,000 during the period, with an average
order value of $64.07. Internet orders comprised 69.4% of the total order volume for the period.
Total gross profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
% Change |
|
|
|
(in thousands) |
|
|
|
|
|
Consumer segment |
|
$ |
33,381 |
|
|
$ |
27,986 |
|
|
|
19.3 |
% |
Florist segment |
|
|
60,871 |
|
|
|
61,273 |
|
|
|
(0.7 |
%) |
International segment |
|
|
17,332 |
|
|
|
|
|
|
|
N/A |
|
Corporate |
|
|
(1,014 |
) |
|
|
(1,185 |
) |
|
|
(14.4 |
%) |
|
|
|
|
|
|
|
|
|
|
Total gross profit |
|
$ |
110,570 |
|
|
$ |
88,074 |
|
|
|
25.5 |
% |
|
|
|
|
|
|
|
|
|
|
Gross profit increased by $22.5 million, or 25.5%, to $110.6 million for the six-month
period ended December 31, 2006, compared to gross profit for the same period of the prior fiscal
year of $88.1 million. Total gross margin decreased to 42.5% for the six-month period ended
December 31, 2006 from 45.2% for the same period of the prior fiscal year, primarily due to the
addition of the international segment.
Gross profit associated with the consumer segment increased by $5.4 million, or 19.3%, to
$33.4 million for the six-month period ended December 31, 2006, compared to $28.0 million for the
same period of the prior fiscal year. Gross margin for the consumer segment increased to 28.6% for
the six-month period ended December 31, 2006, compared to 26.7% for same period of the prior fiscal
year, primarily due to an increase in advertising revenue and savings in product guarantee expense
in the current fiscal year period due to process improvements implemented since December 31, 2005.
Gross profit associated with the florist segment decreased by $0.4 million, or 0.7%, to $60.9
million for the six-month period ended December 31, 2006, compared to $61.3 million for the same
period of the prior fiscal year. Gross margin for the florist segment increased to 68.9% for the
six-month period ended December 31, 2006, compared to 67.9% for the same period in the prior fiscal
year, primarily due to the increase of technology system sales, including both an increase in
profitability of systems sold as well as an increase in number of units sold, partially offset by
the sale of Renaissance, a high gross margin business, as well as a decrease in membership fee
revenue and member publications revenue, both of which are high margin items.
For the six-month period ended December 31, 2006, gross profit associated with the
international segment was $17.3 million and gross margin for the international segment was 31.5%.
Costs associated with corporate activities decreased $0.2 million, or 14.4%, to $1.0 million
for the six-month period ended December 31, 2006, compared to $1.2 million for the same period of
the prior fiscal year. This decrease is primarily related to a decrease in depreciation expense
due to assets becoming fully depreciated.
18
Advertising and selling costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
% Change |
|
|
|
(in thousands) |
|
|
|
|
|
Consumer segment |
|
$ |
13,741 |
|
|
$ |
12,367 |
|
|
|
11.1 |
% |
Florist segment |
|
|
23,249 |
|
|
|
27,174 |
|
|
|
(14.4 |
%) |
International segment |
|
|
4,429 |
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
Total advertising and selling costs |
|
$ |
41,419 |
|
|
$ |
39,541 |
|
|
|
4.7 |
% |
|
|
|
|
|
|
|
|
|
|
Advertising and selling costs increased $1.9 million, or 4.7%, to $41.4 million for the
six-month period ended December 31, 2006, compared to $39.5 million for the same period of the
prior fiscal year. As a percentage of revenue, advertising and selling costs decreased to 15.9%
for the six-month period ended December 31, 2006 compared to 20.3% for the same period of the prior
fiscal year.
Advertising and selling costs associated with the consumer segment increased $1.3 million, or
11.1%, to $13.7 million for the six-month period ended December 31, 2006, compared to $12.4 million
for the same period of the prior fiscal year. Advertising and selling costs as a percentage of
revenue associated with the consumer segment remained consistent at 11.8% for both of the six-month
periods.
Advertising and selling costs associated with the florist segment decreased $4.0 million, or
14.4%, to $23.2 million for the six-month period ended December 31, 2006 compared to $27.2 million
for the same period of the prior fiscal year. Advertising and selling costs as a percentage of
revenue associated with the florist segment decreased to 26.3% for the six-month period ended
December 31, 2006 compared to 30.1% for the six-month period ended December 31, 2005. The decrease
in advertising and selling costs was primarily due to the sale of Renaissance which accounted for
$2.5 million of advertising and selling costs in the six-month period ended December 31, 2006, with
the remaining decrease related to planned cost reductions related to more efficient member
marketing programs.
Advertising and selling costs associated with the international segment totaled $4.4 million,
or 8.0% of revenue for the six-month period ended December 31, 2006.
General and administrative costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
% Change |
|
|
|
(in thousands) |
|
|
|
|
|
Consumer segment |
|
$ |
10,225 |
|
|
$ |
7,476 |
|
|
|
36.8 |
% |
Florist segment |
|
|
4,296 |
|
|
|
3,230 |
|
|
|
33.0 |
% |
International segment |
|
|
9,002 |
|
|
|
|
|
|
|
N/A |
|
Corporate |
|
|
13,241 |
|
|
|
12,690 |
|
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative costs |
|
$ |
36,764 |
|
|
$ |
23,396 |
|
|
|
57.1 |
% |
|
|
|
|
|
|
|
|
|
|
General and administrative costs increased by $13.4 million, or 57.1%, to $36.8 million
for the six-month period ended December 31, 2006, compared to $23.4 million for the same period of
the prior fiscal year.
General and administrative costs associated with the consumer segment increased by $2.7
million, or 36.8%, to $10.2 million for the six-month period ended December 31, 2006, compared to
$7.5 million for the same period of
the prior fiscal year. This increase is primarily due to investment spending in the consumer
segments technology infrastructure, including increased headcount and an increase in amortization
expense associated with technology improvements put in service over the last year. Also
contributing to the increase in general and administrative expense is an increase in salaries and
headcount in other administrative areas.
General and administrative costs associated with the florist segment increased by $1.1
million, or 33.0%, to $4.3 million for the six-month period ended December 31, 2006, compared to
$3.2 million for the same period of the
19
prior fiscal year. The increase is primarily due to an
offset in the prior year related to the $1.0 million gain recognized as a result of the sale of
Renaissance.
General and administrative costs associated with the international segment were $9.0 million
for the six-month period ended December 31, 2006.
Corporate general and administrative costs increased by $0.5 million, or 4.3%, to $13.2
million for the six-month period ended December 31, 2006, compared to $12.7 million for the same
period of the prior fiscal year. This increase was primarily the result of an increase in salaries
partially offset by a decrease in legal expense in the current year period.
Other income and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
% Change |
|
|
|
(in thousands) |
|
|
|
|
|
Interest income |
|
$ |
(637 |
) |
|
$ |
(295 |
) |
|
|
115.9 |
% |
Interest expense |
|
|
15,235 |
|
|
|
9,767 |
|
|
|
56.0 |
% |
Other expense (income), net |
|
|
(1,295 |
) |
|
|
(88 |
) |
|
|
1371.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income and expenses |
|
$ |
13,303 |
|
|
$ |
9,384 |
|
|
|
41.8 |
% |
|
|
|
|
|
|
|
|
|
|
Interest income increased to $0.6 million for the six-month period ended December 31,
2006 compared to $0.3 million for the same period of the prior fiscal year primarily due to an
increase in average cash balances.
Interest expense increased by $5.4 million, or 56.0%, to $15.2 million for the six-month
period ended December 31, 2006, compared to $9.8 million for the same period of the prior fiscal
year. The increase related to an increase in outstanding indebtedness during the current year
period related to the purchase of Interflora as well as a $1.8 million write-off of unamortized
deferred financing costs associated with the refinancing of the Companys existing credit facility
in connection with the Interflora acquisition, whereby the Company entered into a new senior
secured credit facility.
Other income increased to $1.3 million for the six-month period ended December 31, 2006,
compared to $0.1 million for the same period of the prior fiscal year. This increase is primarily
related to recognized gains on foreign currency forward exchange contracts the Company entered into
in connection with the Interflora acquisition.
Liquidity and Capital Resources
As of December 31, 2006, the Companys debt balance totaled $344.2 million, including notes
payable of $24.5 million related to the Interflora acquisition, up from $220.1 million as of June
30, 2006. The Companys principal sources of liquidity are cash from operations and funds
available for borrowing under FTD, Inc.s senior secured credit facility (the 2006 Credit
Agreement) that was entered into on July 28, 2006, which replaced the 2004 senior secured credit
facility (the 2004 Credit Agreement) and provides for aggregate borrowings of up to $225 million,
consisting of a seven-year $150.0 million term loan and a six-year $75.0 million revolving credit
facility. As of December 31, 2006, the balance of the term loan under the 2006 Credit Agreement
was $149.6 million and the Company had $25.8 million of outstanding letters of credit, $24.5
million of which are related to the notes payable the Company issued in conjunction with the
Interflora acquisition and are included in the total debt balance reported above. Borrowings under
the revolving credit facility are used to finance working capital, capital expenditures,
acquisitions, certain expenses associated with the bank credit facilities and letter of credit
needs. The revolving credit facility had availability of $49.2 million as of December 31, 2006.
Cash and cash equivalents increased by $19.8 million to $30.8 million at December 31, 2006
from $11.0 million at June 30, 2006.
Net cash provided by operating activities was $19.0 million for the six-month period ended
December 31, 2006 and $16.3 million for the six-month period ended December 31, 2005. Net income,
adjusted for non-cash items, continues to be an important source of funds to finance operating
needs and capital expenditures, repay indebtedness and make other strategic investments.
20
Net cash used in investing activities was $101.6 million for the six-month period ended
December 31, 2006, which included $96.7 million of cash used for the Interflora acquisition and
$4.8 million of capital expenditures, primarily related to continued technology developments and
improvements.
Net cash used in investing activities was $1.9 million for the six-month period ended December
31, 2005, which consisted of $5.4 million of capital expenditures, primarily related to a new call
center which was opened in October 2005 and other technology developments and improvements, offset
by the proceeds received from the sale of Renaissance in December 2005.
Net cash provided by financing activities was $99.2 million for the six-month period ended
December 31, 2006, which primarily consisted of $148.5 million of net proceeds received from the
2006 Credit Agreement, offset by $50.0 million of repayments under the 2004 Credit Agreement and
$0.4 million of repayments under the 2006 Credit Agreement. Net cash proceeds from financing
activities were used to fund the acquisition of Interflora.
Net cash used in financing activities was $8.9 million for the six-month period ended December
31, 2005, which primarily consisted of $5.9 million of principal repayments under the 2004 Credit
Agreement and $3.3 million of repurchases of the Companys common stock.
On October 25, 2005, the Companys Board of Directors authorized a share repurchase program
totaling $30 million, effective through September 30, 2007. These purchases may be made from time
to time in both open markets and private transactions, dependent upon market and other conditions.
The Company may repurchase shares pursuant to a 10b5-1 plan, which would generally permit the
Company to repurchase shares at times when it might otherwise be prevented from doing so under U.S.
federal securities laws. No shares were repurchased under this program during six-month period
ended December 31, 2006.
Critical Accounting Policies and Estimates
The Companys consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. The preparation of these
financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the
reporting period.
Management bases its estimates and judgments on historical experience and on various other
factors that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities. Actual results may
differ from these estimates under different assumptions or conditions.
See the information concerning the Companys critical accounting policies included under Note
1 and Item 7 in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2006 as
filed with the SEC.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Companys exposure to interest rate risk is primarily the result of borrowings under its
bank credit facilities. At December 31, 2006, $149.6 million of debt was outstanding under the
2006 Credit Agreement and is subject to variable interest rates. Borrowings under the 2006 Credit
Agreement are secured by first priority security interests
in, and mortgages on, substantially all of the Companys tangible and intangible assets. The
Companys results of operations are affected by changes in market interest rates on these
borrowings. Approximately 43.5% (or $149.6 million aggregate principal amount) of the Companys
$344.2 million aggregate principal amount of indebtedness as of December 31, 2006 bore interest at
variable rates. A 1% increase in the variable interest rate would result in additional annual
interest expense of approximately $1.5 million.
The Company is exposed to foreign currency exchange rate risk with respect to the British
pound, the Canadian dollar and the Euro. The resulting foreign currency exchange adjustments are
included in the other comprehensive income caption on the consolidated statements of operations and
comprehensive income.
21
In conjunction with the acquisition of Interflora, the Company entered into forward exchange
contracts totaling £61.8 million to hedge the acquisition price. A contract in the amount of £51.0
million was settled on July 28, 2006 and resulted in a gain of $1.4 million, which has been
recorded in other expense (income), net within the Condensed Consolidated Statements of Income and
Comprehensive Income. The remaining forward contracts include a contract for £10 million, expected
to be settled during the fourth quarter of fiscal year 2007 and a contract for £0.8 million,
expected to be settled during the first quarter of fiscal year 2009. The settlement of these
contracts coincide with the due dates of the notes payable related to the acquisition of
Interflora.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on their evaluation for the period covered by this Quarterly Report on Form 10-Q, the
Chief Executive Officer and the Chief Financial Officer of FTD Group, Inc. have concluded that, as
of the end of such period, FTD Group, Inc.s disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Exchange Act) are effective to ensure that information
required to be disclosed by FTD Group, Inc. in the reports that it files or submits under the
Exchange Act are recorded, processed, summarized and reported within the time periods specified in
the SECs rules and forms.
Changes in Internal Control over Financial Reporting
The Company acquired Interflora on July 31, 2006 and, as a result of the acquisition, the
Companys internal controls over financial reporting with respect to the consolidation of its
financial statements have changed. Management of the Company expects that ongoing processes and
controls related to consolidation will continue to be modified during fiscal year 2007. There are
no other changes in internal control over financial reporting that occurred during the period that
have materially affected or are reasonably likely to materially affect the Companys internal
control over financial reporting.
22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various claims and lawsuits and other matters arising in the normal
course of business. In the opinion of management of the Company, although the outcome of these
claims and suits are uncertain, they should not have a material adverse effect on the Companys
financial condition, liquidity or results of operations.
Item 1A. Risk Factors
The Companys business, financial condition, results of operations or cash flows can be
impacted by a number of factors, any one of which could cause actual results to vary materially
from anticipated future results. See the discussion in Forward-Looking Information, Risk
Factors and elsewhere in the most recent Annual Report on Form 10-K and in Forward-Looking
Information and elsewhere in this Quarterly Report on Form 10-Q. There have been no material
changes to such risk factors provided in the Companys Annual Report on Form 10-K for the year
ended June 30, 2006.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) On July 31, 2006, in connection with the acquisition of Interflora, the Company sold
216,374 shares of its common stock (from its treasury), to certain senior managers of Interflora,
in exchange for shares of common stock of FTD, Inc. These shares of common stock of FTD, Inc. were
acquired by the Interflora senior managers in exchange for 216,374 preferred shares of FTD UK
Holdings Limited. These preferred shares of FTD UK Holdings Limited were acquired by the
Interflora senior managers as partial consideration for their equity securities in Interflora.
The 216,374 shares of common stock of FTD Group, Inc. were valued at $14.77 per share,
representing the closing price of such shares on the New York stock exchange on July 28, 2006, for
aggregate consideration of $3.2 million.
These shares of common stock of FTD Group, Inc. were issued in reliance upon the exemption
contained in Section 4(2) of the Securities Act of 1933, as amended, in reliance, among other
factors, upon various representations and warranties made by the senior managers of Interflora with
respect to their investment intentions, investment experience, financial capabilities and other
matters.
(c) On October 25, 2005, the Companys Board of Directors authorized a share repurchase
program totaling $30.0 million, effective through September 30, 2007. These purchases may be made
from time to time in both open market and private transactions, dependent upon market and other
conditions. The Company may repurchase shares pursuant to a 10b5-1 plan, which would generally
permit the Company to repurchase shares at times when it might otherwise be prevented from doing so
under U.S. federal securities laws. There were no purchases made by, or on behalf of, the Company,
or shares of the Companys common stock during the six-month period ended December 31, 2006.
Item 4. Submission of Matters to a Vote of Security Holders
|
(a) |
|
The Annual Meeting of the Stockholders was held on November 15, 2006. |
|
|
(b) |
|
At the Annual Meeting of Stockholders, the stockholders voted to elect ten
directors to the Board of Directors of the Company to serve for a term of one year. The
votes for the director nominees were as follows: |
|
|
|
|
|
|
|
|
|
Director Nominee |
|
For |
|
Withhold |
Peter J. Nolan |
|
|
20,725,423 |
|
|
|
5,969,664 |
|
Robert S. Apatoff |
|
|
20,612,966 |
|
|
|
6,082,121 |
|
Adam M. Aron |
|
|
26,471,837 |
|
|
|
223,250 |
|
John R. Baumer |
|
|
21,669,342 |
|
|
|
5,025,745 |
|
William J. Chardavoyne |
|
|
26,502,437 |
|
|
|
192,650 |
|
23
|
|
|
|
|
|
|
|
|
Director Nominee |
|
For |
|
Withhold |
Timothy J. Flynn |
|
|
20,702,654 |
|
|
|
5,992,433 |
|
Ted C. Nark |
|
|
20,734,926 |
|
|
|
5,960,161 |
|
Michael J. Soenen |
|
|
21,653,436 |
|
|
|
5,041,651 |
|
Thomas M. White |
|
|
26,505,937 |
|
|
|
189,150 |
|
Carrie A. Wolfe |
|
|
21,625,032 |
|
|
|
5,070,055 |
|
|
(c) |
|
The results of stockholder voting on Proposal 2 were as follows: |
|
|
|
|
Proposal 2 The ratification of the appointment of Ernst & Young LLP as the
Companys independent registered public accounting firm for the fiscal year ending
June 30, 2007. |
|
|
|
|
|
For |
|
Against |
|
Abstain |
25,950,917
|
|
743,920
|
|
250 |
Item 6. Exhibits
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Section 302 of
Sarbanes-Oxley Act of 2002. |
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Section 302 of
Sarbanes-Oxley Act of 2002. |
|
|
32 |
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. |
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
FTD Group, Inc. |
|
|
|
|
|
|
|
|
|
Date: February 7, 2007
|
|
By:
|
|
/S/ BECKY A. SHEEHAN |
|
|
|
|
|
|
Becky A. Sheehan
|
|
|
|
|
|
|
Chief Financial Officer |
|
|
|
|
|
|
(principal financial officer) |
|
|
25
EXHIBIT INDEX
|
|
|
Exhibit Number |
|
Description of Document |
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of
Sarbanes-Oxley Act of 2002. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of
Sarbanes-Oxley Act of 2002. |
|
|
|
32
|
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. |
26