Seasonality and Cyclicality

Our revenues, and operating results, and cash flows across all four of our segments typically exhibit seasonality. Revenues, and operating results, and cash flows tend to be lower for the quarter ending September 30 because none of the most popular floral and gift-givinggift‑giving holidays, which include Mother'sMother’s Day, Valentine'sValentine’s Day, Christmas, Easter, and Thanksgiving, fall within that quarter. Historically, the Provide Commerce business has generated an operating loss during the third quarter. Almost two-thirds of the Provide Commerce revenues and almost all of its operating profit have been generated in the first half of the year. In addition, depending on the year, Easter and the U.K. Mother'sMother’s Day sometimes fall within the quarter ending March 31 and sometimes fall within the quarter ending June 30. Furthermore, depending on the year, certain of the most popular floral and gift-givinggift‑giving holidays, such as Valentine'sValentine’s Day, may occur on a weekend or government holiday.holiday, which historically has negatively impacted orders. The Provide Commerce business experiences a greater level of seasonality than the legacy FTD business. The Provide Commerce business has historically generated an operating loss and used cash for operations during the third quarter. Historically, almost two‑thirds of the Provide Commerce revenues and almost all of its operating profit have been generated in the first half of the year. Within the Provide Commerce segment, the Personal Creations business is highly seasonal with approximately half of its revenues and substantially all of its operating profit generated in the fourth quarter with the Christmas season. As a result of these variations, we believe that comparisons of our 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 our historical performance and predicting our future financial performance. Our working capital cash and any short-termshort‑term borrowings may also fluctuate during the year as a result of the factors described above.

Revenue Sources

We generate revenues primarily from the sale of products and services, as further described below:

•

Products revenues.  Products revenues are derived primarily from selling floral, gourmet foods, personalized gifts and other gift items to consumers and include the related shipping and service fees. Products revenues also include revenues generated from sales of branded and non-branded containers, software and hardware systems, fresh-cut flowers, packaging and promotional products, and a wide variety of other floral-related supplies to floral network members.



•

Services revenues.  Services revenues related to orders sent through the floral network are variable based on the number of orders and/or on the value of orders and are recognized in the period in which the orders are delivered. Services revenues also include membership and other subscription-based fees from floral network members that are recognized monthly as earned, on a month-to-month basis.

International Operations

We have international operations primarily in the U.K., through which we provide floral, gift, and related products and services to consumers and to floral network members and other companies in need of floral and gifting solutions in the U.K. and the Republic of Ireland.

In connection with our separation from United Online, we formed a new, wholly-ownedwholly owned subsidiary in the Republic of India, FTD India Private Limited. Our operations in India are primarily responsible for technology development and support. We do not generate revenues directly from our operations in India. For information regarding risks associated with our international operations, see "Risk“Risk Factors,"” which appears in Item 1A of this Form 10-K.10‑K. For information regarding international long-livedlong‑lived assets, see Note 3—"“Segment Information"Information” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.10‑K.

11

Geographic revenue information was as follows for the periods presented (in thousands):

Technology

Our floral network services are provided utilizing internally-developeduse internally‑developed order processing, order transmission, message processing, and customer service systems which provide communication to our floral network members and third-partythird‑party suppliers. We also have developed reliable and secure e-commerce,e‑commerce, supply chain, customer relationship and transaction processing systems utilizing custom-builtcustom‑built and third-partythird‑party technologies, and have developed software to enhance the functionality of certain components of our services, including billing, email, customer support, logistics, and fulfillment for floral and gift products. We believe our proprietary supply chainWith the acquisition, we have multiple systems which enable the deliveryand platforms currently in place related to many of product on a specified delivery date, differentiate us from our competitors.these technologies.

For all systems, we maintain data centers in multiple locations in the U.S. and the U.K. In most cases, we have redundant systems to provide high levels of service availability and connectivity. We host some of our data center services in third-party co-locationthird‑party co‑location facilities.

In addition to our proprietary technology, we license from third parties a number of our software applications and components, including applications for our customer support, as well as some of our client and server applications. These licenses generally have terms ranging from several years to perpetual.

Government Regulations

We are subject to a number of international, federal, state, and local laws and regulations, including, without limitation, those relating to taxation, bulk email or "spam"“spam” advertising, user privacy and data protection, food production, safety, storage, marketing and distribution, consumer protection, supply chain operations, anti-bribery, labor, antitrust, and unclaimed property. In addition, proposed laws and regulations relating to some or all of the foregoing, as well as to other areas affecting our businesses, are continuously debated and considered for adoption in the U.S. and other countries, and such laws and regulations could be adopted in the future. For additional information regarding risks related to international, federal, state, and local laws and regulations, see "Risk Factors"“Risk Factors” which appears in Item 1A of this Form 10-K.

Proprietary Rights

Proprietary Rights

Our trade names, trademarks, including the Mercury Man logo, service marks, patents, copyrights, domain names, trade secrets, and other intellectual property are important to the success of our business. In particular, we view our primary trademarks, including the Mercury Man logo, as critical to our success. We principally rely upon patent, trademark, copyright, trade secret, domain name laws, and contract laws to protect our intellectual property and proprietary rights. We also license rights to use some of our intellectual property, including the Mercury Man logo, to third parties. We continuously assess whether to seek patent and other intellectual property protections for those aspects of our business and technologies that we believe constitute innovations providing competitive advantages. We generally enter into confidentiality or license agreements with our employees, consultants, and corporate partners, and generally control access to, and distribution of, our technologies, documentation, and other proprietary information. We consider our trademarks, including our FTD,

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Interflora, Flying Flowers, Flowers Direct, Drake Algar, ProFlowers, Shari'sShari’s Berries, Personal Creations, Cherry Moon Farms, Gifts.com, ProPlants, Sesame, Ink Cards, and Sincerely Postagramto be very valuable assets, and most of these trademarks have been registered in the U.S., the U.K. and/or, in certain cases, in other countries. WeAdditionally, we hold a patent relating to our Provide Commerce fulfillment operations. We also have pending patent applications relating to (i) order fulfillment and operations, (ii) products, and (iii) manufacturing techniques. Patents are generally valid for 14-2014‑20 years as long as their registrations are properly maintained. If the patents for which applications have been pending for numerous years are issued, the length of their validity may be shortened.

Employees

Employees

As of December 31, 20142015, we had 1,8071,618 employees, 1,463 of which 1,249 were located in North America, 228 of which237 were located in the U.K., and 116 of which132 were located in India. Included in the numbers above are the incremental 875 employees added as a result of the Acquisition on December 31, 2014. We alsoIn addition, we utilize part-timepart‑time and temporary employees to respond to fluctuating seasonal demand around holidays and peak periods. None of our employees are subject to collective bargaining agreements, and we consider our relationship with our employees to be good.

Executive Officers

        See Part III, Item 10 "Directors, Executive Officers and Corporate Governance" of this Form 10-K for information about executive officers of the registrant.Available Information

Available Information

        FTD'sFTD’s Annual Reports on Form 10-K,10‑K, Quarterly Reports on Form 10-Q,10‑Q, Current Reports on Form 8-K,8‑K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, changes in the stock ownership of our directors and executive officers, our code of ethics, and any other documents filed with, or furnished to, the SEC are available free of charge at FTD'sFTD’s investor relations website atwww.ftdcompanies.com. You can access our filings at our website as soon as reasonably practicable after such reports have been electronically filed with or furnished to the SEC. In addition, the SEC maintains a website atwww.sec.gov that contains reports, proxy and information statements, and other information regarding the Company that we file electronically with the SEC. The information on our website is not, and shall not be deemed to be, a part of this Form 10-K10‑K or incorporated into any other filings we make with the SEC. Throughout this Form 10-K,10‑K, we incorporate by reference information from other documents filed with the SEC.

By referring to our websites, including, without limitation,www.ftdcompanies.com, www.ftd.com,www.ftd.ca, www.interflora.co.uk,www.interflora.ie, www.flyingflowers.co.uk, www.flowersdirect.co.uk, www.drakealgar.com, www.providecommerce.com, www.proflowers.com,,www.berries.com,,www.cherrymoonfarms.com,,www.personal creations.com,  www.roses.com,,www.proplants.com, andwww.gifts.com, we do not incorporate these websites or their contents into this Form 10-K.

10‑K.

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ITEM 1A.  RISK FACTORS
FACTORS

Our business and our common stock are subject to a number of risks and uncertainties. In addition, there are a number of risks and uncertainties associated with our recent2014 acquisition of Provide Commerce in December and our 2013 separation from United Online.Online in November. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Form 10-K.10‑K. Based on information currently known, we believe that the following information identifies the most significant risk factors relating to our business and our common stock, including risks related to our recent acquisition of Provide Commerce and our separation from United Online.

If any of the following events occur, our business, financial condition, results of operations, and cash flows could be materially adversely affected, and the trading price of our common stock could materially decline.

Risks Relating to Our Business

If we are unable to successfully integrate the Provide Commerce business with our legacy business, the anticipated benefits of the Acquisition may not be realized. In addition, future results will suffer if we do not effectively manage our expanded operations following the Acquisition.

        The Acquisition involves the combination of two companies that formerly operated as independent companies. Integration will require substantial management attention and could detract attention from the day-to-day business of the combined company. Potential difficulties we may encounter as part of the integration process or consequences of the integration process, all of which could materially and adversely affect our business, financial condition, results of operations, and cash flows, include the following:

•

the potential inability to successfully combine the Provide Commerce business with our legacy business in a manner that permits us to achieve the cost synergies expected to be achieved and the inability to achieve other benefits anticipated from the Acquisition;



•

the potential inability to integrate Provide Commerce's customer-facing products and services, such as its centralized customer service centers, direct-to-consumer marketing programs, various web-based applications and enhanced technology applications;



•

challenges leveraging the customer information and technology of the two companies;



•

challenges implementing our diversification strategy, including challenges achieving revenue growth from sales of each company's products and services to the customers of the other company;



•

challenges offering products and services across our expanded brand portfolio;



•

the need to revisit assumptions about reserves, revenues, capital expenditures, and operating costs, including expected synergies;



•

challenges faced by a potential diversion of the attention of our management as a result of the integration, which in turn could adversely affect each company's ability to maintain relationships with customers, floral network members, employees and other constituencies or our ability to achieve the anticipated benefits of the Acquisition;



•

the potential loss of key employees, customers or strategic partners of FTD and/or Provide Commerce, or the ability to attract or retain key management and other key personnel, which could have an adverse effect on our ability to integrate and operate the Provide Commerce business;

campaigns or other aspects of their business, or may respond more quickly and effectively than we can to new or changing opportunities or customer requirements.

The floral network services market is highly competitive as well, and retail florists and supermarkets may choose from a variety of providers that offer similar products and services. In addition, the number of retail florists has been declining over a number of years. As the number of retail florists decreases,decline, competition for the business of the remaining retail florists will intensify. Wemay intensify.We believe the primary competitive factors in this market are price, order volume, customer service, services offered, strength of brand, and fulfillment capabilities. Our key competitors in the U.S. floral network services market include providers of online or e-commercee‑commerce services, retailers and wholesalers of floral-relatedfloral‑related products, and other floral network services. In the international market, our key competitors include other floral network service providers.

Increased competition in the consumer market or the floral network services market may result in lower revenues, reduced gross margins, loss of market share, and increased marketing expenditures. We cannot provide assurances that we will be able to compete successfully or that competitive pressures will not materially and adversely affect our business, financial condition, results of operations, and cash flows.

If we are unable to successfully complete the integration of the Provide Commerce business with our legacy business, the anticipated benefits of the Acquisition may not be realized. In addition, future results will suffer if we do not effectively manage our expanded operations.

The Acquisition involved the combination of two companies that formerly operated as independent companies. Integration has required and will continue to require substantial management attention and could detract attention from the day‑to‑day business of the combined company. Potential difficulties we may encounter as part of the integration process or consequences of the integration process, all of which could materially and adversely affect our business, financial condition, results of operations, and cash flows, include the following:

Our future success depends, in part, upon our ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the diversification strategy and revenue growth, management and monitoring of new operations and associated increased costs and complexity. In this regard, there can be no assurances that all of the goals and anticipated benefits of the Acquisition will be achievable.

If we cannot complete the integration of our legacy business and the Provide Commerce business successfully, we may fail to realize the expected benefits of the Acquisition, including the annual cost synergies of approximately $25 million, which are expected to be achieved by the end of 2017. We could also encounter additional transaction and integration-related costs, may fail to realize all of the benefits anticipated in the Acquisition, or be subject to other factors that affect our estimates of anticipated benefits.

Our business is subject to online security risks, and a security breach or inappropriate access to, or use of, our networks, computer systems, or services or those of third‑party vendors could expose us to liability, claims, and a loss of revenue.

The success of our business depends on the security of our networks and, in part, on the security of the network infrastructures of our third‑party vendors. In connection with conducting our business in the ordinary course, we store and transmit customer and member information, including personally identifiable information. Unauthorized or inappropriate access to, or use of, our networks, computer systems, or services, whether intentional, unintentional or as a result of criminal activity, could potentially jeopardize the security of confidential information, including credit card information, of our customers and of third parties. A number of other websites have publicly disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks on portions of their sites. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the perception of the effectiveness of our security measures could be harmed and we could lose members, customers, or vendors. A party that is able to circumvent our security measures could misappropriate our proprietary information or the information of our members or customers, cause interruption in our operations, or damage our computers or those of our members or customers.

A significant number of our members and customers authorize us to bill their payment card accounts (credit or debit) directly for all amounts charged by us. These members and customers provide payment card information and other personally identifiable information which, depending on the particular payment plan, may be maintained to facilitate future payment card transactions. We rely on third‑party and internally‑developed encryption and authentication technology to provide the security and authentication to effectively secure transmission of confidential information, including payment card numbers. Advances in computer capabilities, new discoveries in the field of cryptography, or other developments may result in the technology used by us to protect transaction data being breached or compromised. Non‑technical means, for example, actions by an employee, can also result in a data breach. Under payment card rules and our contracts with our card processors, if there is a breach of payment card information that we store, we could be liable to the banks that issue the payment cards for their related expenses and penalties. In addition, if we fail to follow payment card industry security standards, even if there is no compromise of customer information, we could incur significant fines or lose our ability to give our members and customers the option of using payment cards. If we were unable to accept payment cards or are limited in our acceptance of payment cards, our businesses could be materially and adversely affected.

We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. Security breaches, including any breach related to us or the parties with which we have commercial relationships, could damage our reputation and expose us to a risk of loss, litigation, and possible liability. We cannot assure you that the security measures we take will be effective in preventing these types of activities. We also cannot assure you that the security measures of our third‑party vendors, including network providers, providers of customer and billing support services, and other vendors, will be adequate. In addition to potential legal liability, these activities may adversely impact our reputation or our revenues and may interfere with our ability to provide our products and services,

all of which could materially and adversely affect our business. In addition, the coverage and limits of our insurance policies may not be adequate to reimburse us for losses caused by security breaches.

Significant problems with our key systems or those of our third‑party vendors could materially and adversely affect our business, financial condition, results of operations, and cash flows.

The systems underlying the operations of our business are complex and diverse and must efficiently integrate with third‑party systems, such as credit card processors. Key systems include, without limitation, order transmission, distribution, fulfillment and processing, including the systems for transmitting orders through our floral networks and to third‑party suppliers; billing; website and database management; customer support; telecommunications network management; and internal financial systems. Some of these systems are outsourced to third parties, and other systems, such as Interflora’s order transmission, fulfillment and billing system and our customer service telephone system, are not redundant. All information technology and communication systems are subject to reliability issues, denial of service attacks, integration and compatibility concerns, and security threatening intrusions. The continued and uninterrupted performance of our key systems is critical to our success. Unanticipated problems affecting these systems could cause interruptions in our services. In addition, if our third‑party vendors face financial or other difficulties, our business could be adversely impacted. Any significant errors, damage, failures, interruptions, delays, or other problems with our systems or those of our third‑party vendors could adversely impact our ability to satisfy our customers and could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Our revenues, and operating results, and cash flow fluctuate on a seasonal basis and may suffer if revenues during peak seasons do not meet our expectations. As a result of the acquisition of the Provide Commerce business, we will experience a greater level of seasonality than prior to the Acquisition, which could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Our business is seasonal, and our quarterly revenues and operating results typically exhibit seasonality. Revenues, and operating results, and cash flows tend to be lower for the quarter ending September 30 because none of the most popular floral and gift-givinggift‑giving holidays, which include Mother'sMother’s Day, Valentine'sValentine’s Day, Christmas, Easter, and Thanksgiving, falls within that quarter. In addition, depending on the year, Easter and the U.K. Mother'sMother’s Day sometimes fall within the quarter ending March 31 and sometimes fall within the quarter ending June 30. Furthermore, depending on the year, certain of the most popular floral and gift-givinggift‑giving holidays, such as Valentine'sValentine’s Day, may occur on a weekend or government holiday.holiday, which historically has negatively impacted orders.

The Provide Commerce business experiences a greater level of seasonality than our legacy business. Historically, theThe Provide Commerce business has historically generated an operating loss and used cash in operations during the third quarter. Almost two-thirdstwo‑thirds of its revenue and almost all of its operating profit have been generated in the first half of the year. Within the Provide Commerce segment, the Personal Creations business is highly seasonal with approximately half of its revenues and substantially all of its operating profit is generated in the fourth quarter during the Christmas season. Any heightened seasonality of our business as a result of the Acquisition could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Our operating results may suffer if revenues during our peak seasons do not meet expectations, as we may not generate sufficient revenues to offset increased costs incurred in preparation for peak seasons. Our working capital and cash flowslevel of indebtedness may also fluctuate during the year as a result of the factors set forth above. Moreover, the operational risks described elsewhere in these risk factors may be significantly exacerbated if those risks were to occur during a peak season. For example, severe weather around Valentine'sprior to or on Valentine’s Day, Mother'sMother’s Day, or another popular floral or gift-givinggift‑giving holiday could materially and adversely affect our business, financial condition, results of operations, and cash flows. Similarly, we could be materially and adversely affected if we do not accurately estimate customer demand and appropriately manage inventory levels in the Provide Commerce business.

We face risks relatingare dependent on third parties who fulfill orders and deliver goods and services to operatingour customers and doing business internationally that could materiallytheir failure to provide our customers with high‑quality products within the required timeframe and adversely affectmaintain a high level of customer service may harm our business, financial condition, results of operations,brands and cash flows.

        Our businesses operate in a number of countries outside the U.S., principally the U.K. and the Republic of Ireland for our Interflora subsidiary, and also India for our technology development and support operations. Conducting international operations involves risks and uncertainties, including:

•

adverse fluctuations in foreign currency exchange rates;



•

difficulties in managing and staffing international operations;



•

potentially adverse tax consequences, including the complexities of foreign value added taxes and restrictions on the repatriation of earnings;



•

increased financial accounting, tax and reporting burdens and complexities;



•

compliance with U.S. laws affecting operations outside the U.S., such as the Foreign Corrupt Practices Act;



•

lack of familiarity with, and unexpected changes in, foreign regulatory requirements;



•

the burdens of complying with a wide variety of foreign laws, regulations, and legal and regulatory standards;



•

political, social, and economic instability abroad, terrorist attacks and security concerns in general; and

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•

reduced or varied protection for intellectual property and proprietary rights.

        The occurrence of any one of these risks could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We believe that our success in promoting and enhancing our brands depends on our ability to provide our customers high‑quality products within the required timeframe and maintain a high level of customer service. Our business depends, in part, on the ability of our floral network members and third‑party suppliers who fulfill our orders to

do so at high‑quality levels. We work with our floral network members and third‑party suppliers to develop best practices for quality assurance; however, we generally do not directly control or continuously monitor any floral network member or third‑party supplier. A failure to maintain our relationships with key floral network members and third‑party suppliers or the failure of our floral network members and third‑party suppliers to fulfill orders to our customers’ satisfaction, at an acceptable level of quality and within the required timeframe, could adversely impact our brands and cause us to lose customers, which could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Additionally, because we depend upon third parties for the delivery of our products, strikes, or other service interruptions affecting these shippers could have an adverse effect on our ability to deliver our products on a timely basis. If any of our shippers are unable or unwilling to deliver our products, we would have to engage alternative shippers, which could increase our costs. A disruption in any of our shippers’ delivery of our products could cause us to lose customers or could increase our costs, which could materially and adversely affect our business, financial condition, results of operations, and cash flows.

If the supply of flowers and/or strawberries becomes limited, the price of our floral and/or strawberry products could rise or our products may become unavailable, which could result in our not being able to meet consumer demand and could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Many factors, such as weather conditions, agricultural limitations, restrictions relating to the management of pests and disease, and fair trade and other social or environmental issues, affect the supply of flowers and strawberries and the price of our floral and strawberry products. If the supply of flowers and/or strawberries available for sale is limited, the wholesale prices of flowers and strawberries could rise, which would cause us to increase our prices or could result in a reduction in our profits. An increase in our prices could result in a decline in consumer demand for our floral and strawberry products, which would decrease our revenues. Alternatively, we may not be able to obtain high-qualityhigh‑quality flowers and/or strawberries in an amount sufficient to meet consumer demand. Even if available, flowers and strawberries from alternative sources may be of lesser quality or be more expensive than those currently offered by us. A large portion of our supply of flowers is sourced from Colombia, the U.S., Kenya, Holland, Ecuador, Holland, and Kenya andThailand. In addition, a large portion of our supply of strawberries is sourced from the U.S. and Mexico.

The availability and price of our products could be affected by a number of other factors affecting suppliers, including:

•

severe weather;



•

·

severe weather;

·

disease, infestation, and other biological problems;

·

import duties and quotas;

·

time‑consuming import regulations or controls at airports;

·

changes in trading status;

·

economic uncertainties and currency fluctuations;

·

foreign government laws and regulations;

·

political, social, and economic instability, terrorist attacks, and security concerns in general;

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nationalization;

·

fair trade and other social or environmental certifications, requirements, or practices;

·

governmental bans or quarantines;

·

disruption in transportation and delivery;

·

trade restrictions, including U.S. retaliation against foreign trade practices; and

Our consumer businesses rely heavily on email campaigns, and other biological problems;

The success of our business is dependent on our floral network members and on the financial performance of the retail floral industry.

A significant portion of our profitability is dependent on our floral network members. Certain relationships with floral network members are non-exclusive and subject to their discretion in terms of network participation. The amount of revenues and profits we generate from individual floral network members can vary significantly. We have lost, and

may continue to lose, floral network members as a result of declines in the number of

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local retail florists as a result of economic factors and competition, as well as our members choosing not to do business with us. Certain of our floral network members may choose not to do business with us as a result of the Acquisition. There can be no assurance that the decline in the number of floral network members will not increase in the future, or that we will not lose floral network members that generate significant revenues for our business, either of which could materially and adversely affect our business, financial condition, results of operations, and cash flows.

In addition, the operating and financial success of our business has been, and is expected to continue to be, dependent on the financial performance of the retail floral industry. There can be no assurance that the retail floral industry will not decline, that consumer preferences for, and purchases of, floral products will not decline, or that retail florist revenues or inter-cityinter‑city floral delivery transactions will not decline in absolute terms. A sustained decline in the sales volume of the retail floral industry could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We are exposed to the credit risk of our floral network members.

When an FTD or Interflora floral network member fulfills an order from an originating member, we become liable to the fulfilling member for payment on the order, even if we do not receive payment from the originating member. Accordingly, we are exposed to the credit risk of our floral network members. We cannot provide assurances that the exposure will not be greater than the amounts we have reserved for this exposure. An increase in this exposure, coupled with material instances of defaults, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We are dependent on our strategic relationships to help promote our consumer websites. Failure to establish, maintain, or enhance thesesuch relationships could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We believe that our strategic relationships with leading online retailers and direct marketers are critical to attract customers, facilitate broad market acceptance of our products and brands, and enhance our sales and marketing capabilities. A failure to maintain existing strategic relationships or to establish additional relationships that generate a significant amount of traffic from other websites could limit the growth of our business. Establishing and maintaining relationships with leading online retailers and direct marketers is competitive and expensive. We may not successfully enter into additional strategic relationships. In addition, we may not be able to renew existing strategic relationships beyond their current terms or may be required to pay significant fees to maintain and expand these strategic relationships. Further, many online retailers and direct marketers that we may approach to establish an advertising presence or with whom we already have an existing relationship may also provide advertising services for our competitors. As a result, these companies may be reluctant to enter into, maintain, or expand a strategic relationship with us. Our business, financial condition, results of operations, and cash flows may suffer if we fail to enter into new strategic relationships, or maintain or expand existing strategic relationships, or if these strategic relationships do not result in traffic on our websites sufficient to justify costs.

In addition, we are subject to many risks beyond our control that influence the success or failure of our strategic relationships. For example, if any of the online retailers or direct marketers with which we have strategic relationships experience financial or operational difficulties that materially and adversely affect their ability to satisfy their obligations under their agreements with us, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.

We may be unsuccessful at acquiring future additional businesses, services or technologies. Even if we make acquisitions in the future, it may not improve our results of operations and could also materially and adversely affect our business, financial condition, results of operations, and cash flows.

        Acquisitions of businesses, services or technologies may provide us with an opportunity to diversify the products and services we offer, leverage our assets and core competencies, complement our existing business, or expand our geographic reach. We may evaluate a wide variety of potential strategic transactions that we believe may complement our existing business. However, we may not realize the anticipated benefits and synergies of an acquisition, and our attempts at integrating an acquired

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business may not be successful. Acquiring businesses, services or technologies involves many operational and financial risks, including risks relating to:

•

disruption of our ongoing business and significant diversion of resources and management time from day-to-day responsibilities;



•

acquisition financings that involve the issuance of potentially dilutive equity or the incurrence of debt;



•

reduction of cash and other resources available for operations and other uses;



•

exposure to risks specific to the acquired businesses, services or technologies to which we are not currently exposed;



•

risks of entering markets in which we have little or no direct prior experience;



•

unforeseen obligations or liabilities;



•

difficulty assimilating the acquired customer bases, technologies, and operations;



•

difficulty assimilating and retaining management and employees of the acquired businesses;



•

potential impairment of relationships with customers or vendors as a result of changes in management of the acquired businesses or other factors;



•

large write-offs either at the time of the acquisition or in the future, the incurrence of restructuring and other exit costs, the amortization of identifiable intangible assets, and the impairment of amounts capitalized as goodwill, intangible assets, and other long-lived assets; and



•

lack of, or inadequate, controls, policies, and procedures appropriate for a public company, and the time, cost, and difficulties related to the implementation of such controls, policies, and procedures or the remediation of any deficiencies.

        In addition to the risks set forth above, an acquisition of a foreign business involves risks associated with foreign currency exchange rates, potentially unfamiliar economic, political, and regulatory environments, and integration difficulties due to language, cultural, and geographic differences. Any of these risks, whether the acquired business is domestic or foreign, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We may be unable to increase capacity or introduce enhancements to our consumer websites, mobile apps, or our various telephone numbers in a timely manner or without service interruptions, which could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        A key element of our business strategy is to generate a high volume of traffic on our consumer websites, through our mobile apps, and through our various telephone numbers. However, we may not be able to accommodate all of the growth in user demand on our consumer websites, mobile apps, or through our various telephone numbers. Our inability to add additional hardware and software to upgrade our existing technology or network infrastructure to accommodate, in a timely manner, increased traffic to our consumer websites or our mobile apps, or our various telephone numbers, may cause decreased levels of customer service and satisfaction. Failure to implement new systems effectively or within a reasonable period of time could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        We also regularly introduce additional or enhanced features and services to retain current customers and attract new customers to our consumer websites and mobile apps. If we introduce a feature or a service that is not favorably received, our current customers may not use our consumer websites or mobile apps as frequently, or we may not be successful in attracting new customers. We

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may also experience difficulties that could delay or prevent us from introducing new services and features. Furthermore, these new services or features may contain errors that are discovered only after they are introduced. We may need to significantly modify the design of these services or features to correct errors. If customers encounter difficulty with or do not accept new services or features, this could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Our marketing efforts may not be successful or may become more expensive, either of which could increase our costs and materially and adversely affect our business, financial condition, results of operations, and cash flows.

We spend significant resources marketing our brands, products, and services. We rely on relationships with a wide variety of third parties, including internet search providers such as Google, internet advertising networks, retailers, and direct marketers, to source new customers and to promote our products and services. In addition, from time to time, we may spend a significant amount on marketing, including through television advertising. With any of our brands, products, and services, if our marketing activities are inefficient or unsuccessful, if important third-partythird‑party relationships or marketing strategies, such as internet search engine marketing and search engine optimization, become more expensive or unavailable, or are suspended or terminated, for any reason, if there is an increase in the proportion of consumers visiting our websites or purchasing our products and services by way of marketing channels with higher marketing costs

as compared to channels that have lower or no associated marketing costs, or if our marketing efforts do not result in our products and services being prominently ranked in internet search listings, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.

Our consumer business relies heavily on email campaigns, and any disruptionsCurrent or restrictions on the sending of emails or increase in the associated costs could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        We generate a significant portion of our consumer orders from the emails we send to customers who have previously ordered products from us. We also engage in a number of third-party email marketing campaigns in which such third parties include our marketing offers in the emails they send.

        An increase in the number of customers to whom we are not able to send emails, or who elect to not receive or are unable to receive our emails could adversely affect our business, financial condition, results of operations, and cash flows. From time to time, internet service providers block bulk email transmissions or otherwise experience technical difficulties that result in our inability to successfully deliver emails to our customers. Third parties may also block, impose restrictions on, or start to charge for, the delivery of emails through their email systems. Due to the importance of email to our businesses, any disruption or restriction on the distribution of emails or increase in the associated costsfuture economic conditions could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We are dependent on third parties who fulfill ordersEconomic conditions in the U.S. and deliver goodsthe European Union have been and may remain challenging for the foreseeable future. Our products and services are discretionary and dependent upon levels of consumer spending. Consumer spending patterns are difficult to predict and are sensitive to, among other factors, the general economic climate, consumers’ levels of disposable income, consumer debt, and overall consumer confidence. These challenging economic conditions have adversely impacted certain aspects of our businesses in a number of ways, including reduced demand, more aggressive pricing for similar products and services by our competitors, increased credit risks, increased credit card failures, a loss of customers, and their failure to provide our customers with high-quality products within the required timeframe and maintain a high levelincreased use of customer service may harm our brands and could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        We believe that our success in promoting and enhancing our brands depends on our ability to provide our customers high-quality products within the required timeframe and maintain a high level of customer service. Our business depends, in part, on the abilitydiscounted pricing for certain of our floral network membersproducts and third-party suppliers who fulfill our ordersservices. It is likely that these and other factors will continue to do so at high-quality levels. We work with our floral network members and third-party suppliers to develop best practices for quality assurance; however, we

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generally do not directly control or continuously monitor any floral network member or third-party supplier. A failure to maintain our relationships with key floral network members and third-party suppliers, or the failure of our floral network members and third-party suppliers to fulfill orders to our customers' satisfaction, at an acceptable level of quality and within the required timeframe, could adversely impact our brandsbusinesses, at least in the near term. Challenging economic conditions also may adversely impact our key vendors and cause us to lose customers, whichcustomers. Such economic conditions and decreased consumer spending have, in certain cases, resulted in, and may in the future result in, a variety of negative effects such as a reduction in revenues, increased costs, lower gross margin and operating margin percentages, increased allowances for doubtful accounts and write‑offs of accounts receivable, increased provisions for excess and obsolete inventories and recognition of impairments of assets, including goodwill and other intangible and long‑lived assets. Any of the above factors could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        Additionally, because we depend upon third parties for the delivery of our products, strikes or other service interruptions affecting these shippers could have an adverse effect on our ability to deliver our products on a timely basis. If any of our shippers are unable or unwilling to deliver our products, we would have to engage alternative shippers, which could increase our costs. A disruption in any of our shippers' delivery of our products could cause us to lose customers or could increase our costs, which could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We rely on our own distribution facilities to fulfill our customers' orders and to distribute our products into the carrier delivery system. A disruption in service at one or more of our distribution facilities or delivery failures or delays could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        Our Provide Commerce business fulfills many customer orders through company-operated distribution facilities. We may be unable to fulfill our customers' orders through one or more of our various distribution facilities in a timely manner, or at all, due to a number of factors that may affect one or more of such distribution facilities, including:

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a failure to maintain or renew one or more of our existing lease agreements for any of our company-operated distribution facilities;



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a prolonged power or equipment failure;



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an employee strike or other labor stoppage;



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a disruption in the transportation infrastructure including bridges and roads;



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weather issues at our distribution facilities or along the delivery routes;



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a refrigeration failure; or



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a fire, flood, hurricane, tornado or other disaster.

        In the event we are unable to fulfill our customers' orders through one or more of our distribution facilities, we will attempt to fulfill the orders via another source to ensure timely delivery. However, we cannot guarantee that our other distribution facilities or third-party suppliers will have the capacity or the variety of flowers, gifts or berries to fulfill all affected orders in a timely manner. In addition, if operations from one or more of our distribution facilities become permanently disrupted due to any of the factors noted above or other factors, we may not be able to secure a replacement distribution facility in a location on terms acceptable to us or at all. Our business, financial condition, results of operations, and cash flows could be materially and adversely affected if we experience temporary or permanent disruptions at one or more of our distribution facilities.

Issues or concerns related to the quality and safety of our products, ingredients or packaging could cause a product recall and/or result in harm to our reputation, which could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        As a result of the Acquisition, we have expanded our offerings of food products. These expanded offerings increase our exposure to risks posed by food spoilage and contamination, misbranding,

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product tampering or other adulteration, allergens, product recall, and consumer product liability claims. Issues related to quality and safety of our products, ingredients or packaging, could jeopardize our image and reputation. Negative publicity related to these types of concerns, or related to product contamination or product tampering, whether valid or not, could decrease demand for our products, or cause delivery disruptions. We may need to recall products if any of our products become unfit for consumption or use or due to misbranding. In addition, we could potentially be subject to litigation or government actions, which could result in payments of fines or damages. Costs and/or lost revenues associated with these potential actions could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Shifts in the mix of products versus services sold, and types of products and services sold, could materially and adversely affect our financial results.

The cost of revenues associated with our products revenues is generally higher than that associated with our services revenues. In addition, the cost of revenues associated with certain products and services may be higher than that associated with other products and services. As a result, changes in the proportion of revenues that is represented by products revenues versus services revenues, and certain types of products and services versus others, could materially and adversely affect our revenues, cost of revenues, cost of revenues as a percentage of revenues, and operating income.

Shifts in the mix of products and services sold at standard pricing as compared to discounted pricing or the failure to maintain our standard pricing for products and services could materially and adversely affect our financial results.

Due to economic conditions and for competitive and other reasons, we have been offering broader and greater discounts to the consumer, both on a promotional basis to consumers generally, as well as through strategic arrangements with third parties that have a fixed, and in certain cases greater, discount or other associated costs. We also offer discounts on our floral network service fees from time to time on a promotional basis. Shifts in the mix of products and services sold that have resulted in increases in the proportion of products and services sold at a discount, and at times at greater discounts, including through such strategic arrangements, have resulted, and may in the future result, in reduced revenues, an increase in cost of revenues as a percentage of revenues, and a decrease in operating income. We currently intend to continue selling a portion of our products and services at a discount, including through such strategic arrangements, and there are no assurances that the portion of products and services sold at a discount will not continue to increase. The continued use of discounts, including through such strategic arrangements, for our products and services may result in our becoming more reliant upon offering discounts in order to sell our products and services, which could result in our having to reduce our standard pricing, and could materially and adversely affect our financial results.

Our success is dependent on the intellectual property ("IP") that we use, and any infringement or misappropriation of our IP could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        We regard the "FTD®", "Interflora®", "ProFlowers®", "Shari's Berries®", "Personal Creations®", "Cherry Moon Farms®", "Gifts.com™", "ProPlants™", and "Sincerely™" trademarks, the "Mercury Man" logo, the "www.ftd.com", the "www.proflowers.com", "www.berries.com", "www.personalcreations.com", "www.cherrymoonfarms.com", "www.gifts.com", "www.proplants.com", and the "Interflora.co.uk" and other internet domain names and the other service marks, trademarks, and other intellectual property that we use in our business as being critical to our success. Our company and our subsidiaries have applied for the registration of, and have been issued, trademark registrations for trademarks and service marks used in our business in the U.S., the U.K., and various

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other foreign countries; however, in some other countries, there are certain pre-existing and potentially conflicting trademark registrations held by third parties. We rely on a combination of copyright, trademark, and trade secret laws, confidentiality procedures, contractual provisions, and license and other agreements with employees, customers and others to protect our intellectual property rights. In addition, we may also rely on the third-party owners of the intellectual property rights we license to protect those rights. We license some of our intellectual property rights, including the Mercury Man logo, to third parties. The steps taken by us and those third parties to protect our intellectual property rights may not be adequate, and other third parties may infringe or misappropriate our intellectual property rights. This could materially and adversely affect our business, financial condition, results of operations, and cash flows. Furthermore, the validity, enforceability, and scope of protection of intellectual property in internet-related industries are uncertain and still evolving.

        We are also subject to the risk of claims alleging that our business practices infringe on the intellectual property rights of others. These claims could result in lengthy and costly litigation. Moreover, resolution of any such claim against us may require our company or one of our subsidiaries to obtain a license to use the intellectual property rights at issue or possibly to cease using those rights altogether. Any of those events could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Significant problems with our key systems or those of our third-party vendors could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        The systems underlying the operations of our business are complex and diverse and must efficiently integrate with third-party systems, such as credit card processors. Key systems include, without limitation, order transmission, distribution, fulfillment and processing, including the systems for transmitting orders through our floral networks and to third-party suppliers; billing; website and database management; customer support; telecommunications network management; and internal financial systems. Some of these systems are outsourced to third parties, and other systems, such as Interflora's order transmission, fulfillment and billing system and our customer service telephone system, are not redundant. All information technology and communication systems are subject to reliability issues, denial of service attacks, integration and compatibility concerns, and security threatening intrusions. The continued and uninterrupted performance of our key systems is critical to our success. Unanticipated problems affecting these systems could cause interruptions in our services. In addition, if our third-party vendors face financial or other difficulties, our business could be adversely impacted. Any significant errors, damage, failures, interruptions, delays, or other problems with our systems or those of our third-party vendors could adversely impact our ability to satisfy our customers and could materially and adversely affect our business, financial condition, results of operations, and cash flows.

In connection with the Acquisition, the FTD board of directors changed, which may affect the strategy and operations of the combined company as compared to that of FTD and Provide Commerce prior to the Acquisition.

        Following the close of the Acquisition, Liberty owns approximately 35% of the issued and outstanding shares of FTD common stock. In connection with the close of the Acquisition, the FTD board of directors increased from seven to eleven directors, with Liberty selecting four new directors for appointment to the FTD board. In addition, the Investor Rights Agreement contains certain rights in favor of Liberty with regard to the appointment and election of Liberty nominees to the FTD board. Although the Liberty directors do not constitute a majority of the FTD board, they may exercise influence over the decisions of the FTD board. This new composition of the FTD board may affect our business strategy and operating decisions subsequent to the Acquisition, as Liberty has significant influence over our affairs, policies, and operations, such as the appointment of management, and the strategic direction of the company, including decisions as to whether to enter into or otherwise pursue strategic transactions. In addition, there can be no assurances that the new board will function effectively as a team and that there will not be any material adverse effects on our business as a result.

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Certain of the businesses we acquired from Provide Commerce are in the early stages of operations and therefore subject to additional risks, uncertainties, expenses, and difficulties frequently encountered with respect to early stage businesses.

        Certain of the businesses we acquired from Provide Commerce, including Gifts.com and Sincerely, are in the early stages of operations and require additional investment. The prospects for these businesses must be considered in light of the risks, uncertainties, expenses, and difficulties frequently encountered with respect to businesses in their early stages of operations. These businesses must compete with established competitors having substantially greater experience and resources. Failure by us to implement or execute business strategies successfully could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We may be unable to make, on a timely basis, necessary changes to the internal control structure of Provide Commerce, which was acquired on December 31, 2014.

        In performing the audit of the consolidated financial statements of Provide Commerce for the year ended December 31, 2013, Provide Commerce's external auditor identified several deficiencies in the internal control over financial reporting which were considered to be material weaknesses in Provide Commerce's internal controls.

        As a result of the Acquisition, Provide Commerce is now included in FTD's reporting under the Exchange Act. In addition, under the Sarbanes-Oxley Act of 2002, we must assess whether we maintain effective disclosure controls and procedures and internal control over financial reporting. We may face difficulties or experience delays in developing and implementing changes and improvements to Provide Commerce's internal controls and accounting systems. We may need to commit substantial resources, including substantial time from existing accounting personnel and from external consultants, to implement additional procedures and improved controls. This in turn could materially and adversely affect our business, financial condition, results of operations, and cash flows, or harm our reputation or otherwise cause a decline in investor confidence and our stock price.

Our business could be shut down or could be materially and adversely affected by a catastrophic event.

        Our business could be materially and adversely affected by a catastrophic event. A disaster such as a fire, earthquake, flood, power loss, terrorism, or other similar event, affecting any of our facilities, data centers, or computer systems, or those of our third-party vendors, or a system interruption or delay that slows down the internet or makes the internet or our websites temporarily unavailable, could result in a significant and extended disruption of our operations and services. Any prolonged disruption of our services due to these or other events would severely impact our business. We do not carry flood insurance for our facilities, and the property, business interruption, and other insurance we do carry may not be sufficient to cover all losses, if any, that may occur as a result of any events which cause interruptions in our services.

Our business could suffer as a result of significant credit card or debit card fraud.

        Orders placed on our consumer websites, our mobile apps, or through our various telephone numbers typically are paid for using a credit card or debit card. Our revenues and gross margins could decrease if we experience significant credit card or debit card fraud. Failure to adequately detect and avoid fraudulent credit card or debit card transactions could cause us to lose our ability to accept credit cards or debit cards as forms of payment and result in charge-backs of the fraudulently charged amounts. Furthermore, widespread credit card or debit card fraud may lessen our customers' willingness to purchase products on our consumer websites, through our mobile apps, or via our various telephone numbers. As a result, such failure could materially and adversely affect our business, financial condition, results of operations, and cash flows.

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We are exposed to the credit risk of our floral network members.

        When an FTD or Interflora floral network member fulfills an order from an originating member, we become liable to the fulfilling member for payment on the order, even if we do not receive payment from the originating member. Accordingly, we are exposed to the credit risk of our floral network members. Although we reserve for this exposure, we cannot provide assurances that the exposure will not be greater than we anticipate. An increase in this exposure, coupled with material instances of defaults could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Fluctuations in foreign currency exchange rates could materially and adversely affect comparisons of our operating results.

We transact business in different foreign currencies and may be exposed to financial market risk resulting from fluctuations in foreign currency exchange rates, including the British Pound, the Euro, the Canadian Dollar, the Indian Rupee, and the Colombian Peso. Revenues and expenses in foreign currencies translate into higher or lower revenues and expenses in U.S. Dollars as the U.S. Dollar weakens or strengthens against such other currencies. Substantially all of the revenues of our international businesses are received, and substantially all expenses are incurred, in currencies other than the U.S. Dollar, which increases or decreases the related U.S. Dollar-reportedDollar‑reported revenues and expenses depending on

the fluctuations in foreign currency exchange rates. Certain of our key business metrics, such as average order value, are similarly affected by such foreign currency exchange rate fluctuations. Changes in global economic conditions, market factors, and governmental actions, among other factors, can affect the value of these currencies in relation to the U.S. Dollar. A strengthening of the U.S. Dollar compared to these currencies and, in particular, to the British Pound and the Euro, has had, and in future periods could have, an adverse effect on the comparisons of our revenues and operating income against prior periods. We cannot accurately predict the impact of future foreign currency exchange rate fluctuations on our operating results, and such fluctuations could materially and adversely affect the comparisons of such results against prior periods.

Changes in lawsWe face risks relating to operating and regulations and new laws and regulationsdoing business internationally that could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Our businesses operate in a number of countries outside the U.S., principally the U.K. and the Republic of Ireland for our Interflora subsidiary, and also India for our technology development and support operations. Conducting international operations involves risks and uncertainties, including:

The occurrence of any one of these risks could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Our success is dependent on the intellectual property (“IP”) that we use, and any infringement or misappropriation of our IP could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We regard the “FTD®”, “Interflora®”, “ProFlowers®”, “Shari’s Berries®”, “Personal Creations®”,  “RedEnvelope®”, “Cherry Moon Farms®”, “Flying Flowers®”, “Flowers DirectTM”, “Roses.com”™, “Gifts.com™”, “ProPlants®”, “Sincerely™”, “Sesame®”, “Ink Cards™”, and “Postagram™” trademarks, the “Mercury Man” logo®, the “www.ftd.com”, the “www.proflowers.com”, “www.berries.com”, “www.personalcreations.com”, “www.cherrymoonfarms.com”, “www.proplants.com”, and the “Interflora.co.uk” and other internet domain names and the other service marks, trademarks, and other intellectual property that we use in our business as being critical to our success. Our company and our subsidiaries have applied for the registration of, and have been issued, trademark registrations for trademarks and service marks used in our business in the U.S., the U.K., and various other foreign countries; however, in some other countries, there are certain pre‑existing and potentially conflicting trademark registrations held by third parties. We rely on a combination of copyright, trademark, and trade secret laws, confidentiality procedures, contractual provisions, and license and other agreements with employees, customers, and others to protect our intellectual property rights. In addition, we may also rely on the third‑party owners of the intellectual property rights we license to protect those rights. We license some of our intellectual property rights, including the Mercury Man logo, to third parties. The steps taken by us and those third parties to protect our intellectual property rights may not be adequate, and other third parties may infringe or misappropriate our intellectual property rights. This could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Furthermore, the validity, enforceability, and scope of protection of intellectual property in internet‑related industries are uncertain and still evolving.

We are also subject to a varietythe risk of international, federal, state, and local laws and regulations, including, without limitation, those relating to taxation, bulk email or "spam," advertising, including, without limitation, targeted or behavioral advertising, user privacy and data protection, consumer protection, antitrust, and unclaimed property. Compliance with the various laws and regulations, which in many instances are either unclear or unsettled, is complex. New laws and regulations, such as those being considered or recently enacted by certain states or the federal government related to automatic-renewal practices, user privacy, targeted or behavioral advertising, floral-related fees and advertising, and taxation, could impact our revenues or certain ofclaims alleging that our business practices infringe on the intellectual property rights of others. These claims could result in lengthy and costly litigation. Moreover, resolution of any such claim against us may require our company or thoseone of our advertisers.subsidiaries to obtain a license to use the intellectual property rights at issue or possibly to cease using those rights altogether. Any of those events could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We have a substantial amount of indebtedness, much of which was incurred in connection with the Acquisition. This level of indebtedness could adversely affect our ability to raise additional capital to fund operations, our flexibility in operating our business and our ability to react to changes in the lawseconomy or our industry.

At December 31, 2015, we had $300 million of indebtedness outstanding, on which quarterly payments of $5 million are due from 2015 through July 1, 2019, with the remaining balance due upon maturity in September 2019. Such indebtedness includes $180 million outstanding under a term loan and regulations applicable$120 million outstanding under revolving loans that were incurred to finance the Acquisition. Our substantial indebtedness could have significant consequences for our business and financial condition. For example:

We cannot assure you that our cash flows, combined with additional borrowings under the current and any future credit agreements, will be available in an amount sufficient to enable us to repay our indebtedness, or to fund other

liquidity needs. For additional information regarding our credit agreement see Note 7 - “Financing Arrangements” of the enactmentNotes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10 K.

In addition, we may incur substantial additional indebtedness in the future, which could cause the related risks to intensify. We may need to refinance all or a portion of our indebtedness on or before their respective maturities. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. The terms of any additional lawsdebt may give the holders rights, preferences, and privileges senior to those of holders of our common stock, particularly in the event of liquidation. The terms of any new debt may also impose additional and more stringent restrictions on our operations than are currently in place. If we are unable to refinance our debt, we may default under the terms of our indebtedness, which could lead to an acceleration of the debt. We do not expect that we could repay all of our outstanding indebtedness if the repayment of such indebtedness was accelerated.

Incidents involving or regulations,allegations of food-borne illnesses, food tampering, food contamination, or mislabeling relating to our products, whether or not accurate, could harm our business.

As a result of the Acquisition, we have expanded our offerings of food products. These expanded offerings increase our exposure to risks posed by food spoilage and contamination, misbranding, product tampering or other adulteration, allergens, product recall, and consumer product liability claims. Issues related to quality and safety of our products, ingredients, or packaging could jeopardize our image and reputation. Instances or reports, whether true or not, of food-safety issues, such as food-borne illnesses, food tampering, food contamination or mislabeling, either during manufacturing, packaging, storing or preparation, have in the past severely injured the reputations of companies in the food processing, grocery and quick-service restaurant sectors and could affect us as well. Any report linking us to food-borne illnesses or food tampering, contamination, mislabeling or other food-safety issues could damage our brand value and severely hurt sales of our food products, and possibly lead to product liability claims, litigation (including class actions) or damages. If customers become ill from food-borne illnesses, tampering, contamination, mislabeling or other food-safety issues, we could be forced to temporarily close some supply chain facilities, as well as recall products. In addition, instances of food-safety issues, even those involving solely the products or stores of competitors or of suppliers or distributors (regardless of whether we use or have used those suppliers or distributors), could, by resulting in negative publicity about us or the failurefoodservice industry in general, adversely affect our sales. A decrease in customer orders as a result of food-safety concerns or negative publicity, the payment of fines or damages relating to comply with,product recalls or increased enforcement activityfood-safety claims or litigation or government actions, could materially and adversely affect our business, financial condition, results of such lawsoperations, and regulations, could significantly impactcash flows.

We may be unable to increase capacity or introduce enhancements to our productsconsumer websites, mobile sites and services, our costs, or the manner in which weapplications, or our advertisers conduct business, all ofvarious telephone numbers in a timely manner or without service interruptions, which could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Our business could incur substantial tax liabilities for past sales and lose future salessuffer as a result of the increased tax cost that would be borne by the customer. Also, states may seek to reclassify the status of internet order gatherers, such assignificant credit card or debit card fraud.

Orders placed on our consumer business, as persons thatwebsites, our mobile sites and applications, or through our various telephone numbers typically are deemedpaid for using a credit or debit card. Our revenues and gross margins could decrease if we experience significant credit or debit card fraud. Failure to fulfill the underlying order, in which case, a state may seekadequately detect and avoid fraudulent credit or debit card transactions could cause us to impose taxes on the receipts generated from consumer orders fulfilled and delivered by florists or other third parties outside such state. In addition, future changes in the operation of our online, mobile, and telephonic sales channels could result in the imposition of additional sales and use tax or other tax obligations.

        Additionally, in accordance with current industry practice by international floral and gift direct marketers and our interpretation of applicable law, we collect and remit value added taxes on certain consumer orders placed through Interflora. Future changes in the operation of our business could result in the imposition of additional tax obligations. Moreover, if a foreign taxing authority successfully challenges our current practice or implements new legislative initiatives, we could incur substantial tax liabilities for past sales and lose future sales as a result of the increased tax costs that would be borne by the customer. The imposition of additional tax liabilities for past or future sales could decrease our ability to competeaccept credit or debit cards as forms of payment and result in charge‑backs of the fraudulently charged amounts. Furthermore, widespread credit or debit card fraud may lessen our customers’ willingness to purchase products on our consumer websites, through our mobile sites or applications, or via our various telephone numbers. As a result, such failure could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We utilize outsourced staff and temporary employees, who may not be as well‑trained or committed to our customers as our permanent employees, and their failure to provide our customers with traditional retailers and reducehigh‑quality customer service may cause our sales,customers not to return, which could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We are subjectutilize and rely on a significant number of outsourced staff and temporary employees, in addition to incomeour permanent employees, to take orders, to respond to customer inquiries, and various other taxesto work in our distribution facilities to process and fulfill orders. These outsourced staff and temporary employees may not have the same level of commitment to our customers or be as well‑trained as our permanent employees. In addition, we may not hire enough outsourced staff or temporary employees to adequately handle the increased volume of telephone calls we receive and orders we fulfill and ship during peak periods. We maintain only a limited number of permanent customer support and distribution center employees and rely on third‑party vendors for outsourced customer support. Our permanent employees may not be able to provide the necessary range or level of customer support services in the U.S.event that one or more of our third‑party vendors unexpectedly become unable or unwilling to provide some or all of these services to us. In addition, we may not be able to adequately staff our distribution centers during peak periods to enable us to fulfill and numerous foreign jurisdictions. Significant judgment is required in evaluatingship orders on a timely basis. If our consolidated provision for income taxes. Duringcustomers are dissatisfied with the ordinary coursequality of business, there are many transactions forthe customer service they receive they may not place orders with us again, which the ultimate tax determination is uncertain. We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income and other taxes against us. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions, and our historical recognition of other tax matters. The results of an audit or litigation could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        In connection with our internet-based transactions,Our business could be shut down or could be materially and adversely affected by a number of states have been considering adopting legislation or instituting policy initiatives, including those that would facilitatecatastrophic event.

Our business could be materially and adversely affected by a finding of nexus to exist between internet companies with the states, aimed at expanding the reach of sales and use taxes or imposing state incomecatastrophic event. A disaster such as a fire, earthquake, flood, power loss, terrorism, or other taxes on various innovative theories, including agency attribution from independent third-party service providers. Such legislationsimilar event, affecting any of our facilities, data centers, or initiativescomputer systems, or those of our third‑party vendors, or a system interruption or delay that slows down the internet or makes the internet or our websites temporarily unavailable, could result in a significant and extended disruption of our operations and services. Any prolonged disruption of our services due to these or other events would severely impact our business. We do not carry flood insurance for our facilities, and the impositionproperty, business interruption, and other insurance we do carry may not be sufficient to cover all losses, if any, that may occur as a result of any events which cause interruptions in our services.

We have incurred substantial expenses related to the Acquisition and expect to continue to incur substantial expenses related to the integration of the Provide Commerce business and the achievement of synergies.

We incurred $6.7 million and $12.4 million in transaction and integration‑related costs during the years ended December 31, 2015 and 2014, respectively. We expect to incur additional salescosts, which may be material, associated with integrating the Provide Commerce business and use taxes,the achievement of synergies. There are many factors beyond our control that could affect the total amount or the paymenttiming of state income or other taxes, on certain transactions conducted overour integration expenses. Moreover, many of the internet. In addition, advertisersexpenses that will be incurred are, by their nature, difficult to estimate accurately. To the extent our integration expenses are higher than anticipated and other third parties may choose to not do business with us in order to avoid nexus with certain states. If such legislation is enacted, or such initiatives are instituted, and unless overturned by the courts, the legislation or initiatives could subject us to substantially increased tax liabilities for past and future sales or state income or other taxes, require us to collect additional sales and use taxes, cause our future sales to decrease, or otherwise materially and adversely affectmaterial, our business, financial condition, results of operations, and cash flows.flows could be materially and adversely affected and our ability to meet the leverage ratio and fixed charged ratio mandated by our Amended and Restated Credit Agreement may be impaired.

Legal actions or investigations could subject us to substantial liability, require us to change our business practices, and materially and adversely affect our business, financial condition, results of operations, and cash flows.

We are currently, and have been in the past, party to various legal actions and investigations. These actions may include, without limitation, claims by private parties in connection with consumer protection and other laws, claims that we infringe third-partythird‑party patents, trademarks, copyrights or other intellectual property or proprietary rights, securities laws claims, claims involving marketing practices or unfair competition, claims in connection with employment practices, breach of contract claims, and other business-relatedbusiness‑related claims. The nature of our business could subject us to additional claims for similar matters, as well as a wide variety of other claims, including, without limitation, for privacy and security matters. The failure to successfully defend against these and other types of claims, including claims relating to our business practices, could result in our incurring significant liabilities related to judgments or settlements or require us to change our business practices. Infringement claims may also result in our being required to obtain licenses from third parties, which licenses may not be available on acceptable terms, if at all. Both the cost of defending claims, as well as the effect of settlements and judgments, could cause our results of operations to fluctuate significantly from period to period and could materially and adversely affect our business, financial condition, results of operations, and cash flows. In addition, we also file actions against third parties from time to time for various reasons, including, without limitation, to protect our intellectual property rights, to enforce our contractual rights, or to make other business-relatedbusiness‑related claims. The legal fees, costs, and expenses associated with these actions may be significant, and if we were to lose these actions, we may be required to pay the other party'sparty’s legal fees, costs, and expenses, which also may be significant and could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Various governmental agencies have in the past asserted claims, instituted legal actions, inquiries or investigations, or imposed obligations relating to our business practices, such as our marketing, billing, customer retention, renewal, cancellation, refund, and disclosure practices, and they may continue to do so in the future. We received civil investigative demandsFor example, in 2015, we entered into settlements and subpoenas, as applicable, frommade settlement payments relating to an inquiry by a multi-state group of Attorneys General. The primary focus of the Federal Trade Commission ("FTC") andunderlying inquiry concerned the Attorneys General of various states, primarily regarding their respective investigations into certainCompany’s former post-transaction sales practices and certain of our marketing, billing, renewal and privacy practices and disclosures related to our FTD.COM business. We have cooperated with these investigations. However, the outcome of these or any other governmental investigations or their potential implications for our business are uncertain.practices. We may not prevail in existing or future claims and any judgment against us or settlement or resolution of such claims may involve the payment of significant sums, including damages, fines, penalties, or assessments, or changes to our business practices. Defending against lawsuits, inquiries, and investigations also involves significant expense and diversion of management'smanagement’s attention and resources from other matters.

Additional governmental investigations or other legal actions may be instituted in connection with prior sales practices or other current or former business practices. Enforcement actions or changes in enforcement policies and procedures could result in changes to our business practices, as well as significant damages, fines, penalties, or assessments, which could decrease our revenues or increase the costs of operating our business. To the extent that our services and business practices change as a result of claims or actions by governmental agencies or private parties, or we are required to pay significant sums, including damages, fines, penalties, or assessments, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.

The Separation and Distribution Agreement which was executed between usFTD and United Online in connection with the Separation,Company’s November 2013 separation from United Online (the “Separation”) provides United Online with the right to control the litigation and settlement of certain litigation matters that relate to us, United Online, and our respectiveits predecessors and its consolidated subsidiaries and the Company, its predecessors and its consolidated subsidiaries, and which were asserted before the Separation, as well as specified litigation matters thatwhich are asserted after the Separation. These matters include matters relating to the ongoing investigation relating

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to our and United Online'sCompany’s former post-transaction sales practices referenced above and certainor other current or former business practices described above. The Separation and Distribution Agreement also provides for the allocation of liabilities and expenses between United Online and the Company with respect to these matters. In May 2015, FTD and United Online entered into an amendment to the Separation and Distribution Agreement providing for the parties to jointly coordinate the litigation and settlement of certain specified litigation matters which are asserted after the Separation. In addition, pursuant to such amendment, the foregoing obligations of the parties will terminate on May 20, 2017, provided that for certain matters that may be pending as of such date, such obligations will terminate no later than May 20, 2019. The Separation and Distribution Agreement also establishes procedures with respect to claims subject to indemnification, insurance claims, and related matters. The Company and United Online may not prevail in future claims and any judgments against the Company, or settlement or resolution of such claims may involve the payment of significant sums, including damages, fines, penalties, or assessments, or changes to the Company’s business practices. See Note 15—"“Commitments and Contingencies—Legal Matters"Matters” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K. The Separation10‑K.

We may be unsuccessful at acquiring future additional businesses, services, or technologies. Even if we make acquisitions in the future, it may not improve our results of operations and Distribution Agreementcould also provides United Online with the right to allocate certain liabilitiesmaterially and expenses toadversely affect our business, financial condition, results of operations, and cash flows.

Acquisitions of businesses, services, or technologies may provide us with respectan opportunity to these matters.diversify the products and services we offer, leverage our assets and core competencies, complement our existing business, or expand our geographic reach. We and United Onlinemay evaluate a wide variety of potential strategic transactions that we believe may complement our existing business. However, we may not prevailrealize the anticipated benefits and synergies of an acquisition, and our attempts at integrating an acquired business may not be successful. Acquiring businesses, services, or technologies involves many operational and financial risks, including risks relating to:

In addition to the risks set forth above, an acquisition of a foreign business involves risks associated with foreign currency exchange rates, potentially unfamiliar economic, political, and regulatory environments, and integration difficulties due to language, cultural, and geographic differences. Any of these risks, whether the acquired business is domestic or other existing or future legal claims and any judgments against us and, in respect of the matters under United Online's control, we have limited rights to contest the terms of any settlement or other resolution agreed to by United Online and its allocation of liabilities and expenses to us. It is possible that we and United Online may have differing interests in respect of the terms of any such settlement or other resolution of the matters under United Online's control. The settlement or other resolution of litigation claims by us, or by United Online in respect of the matters under United Online's control, may involve the payment of significant sums, including damages, fines, penalties, or assessments, or changes to our business practices, andforeign, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Certain of our directors may have actual or potential conflicts of interest because of their employment with and possible stock ownership of Liberty.

We have employees of Liberty on our board of directors, which may lead to conflicting interests. Our board of directors includes Robin Pringle and Christopher Shean, who are employees of Liberty. These individuals may have actual or apparent conflicts of interest with respect to matters involving or affecting each company.

Governmental regulation of the collection and use of personal information or our failure to comply with these regulations could materially and adversely affect our business.

The FTC has regulations regarding the collection and use of personal information obtained from individuals when accessing websites, with particular emphasis on access by minors. In addition, other governmental authorities have regulations to govern the collection and use of personal information that may be obtained from customers or visitors to websites. These regulations include requirements that procedures be established to disclose and notify users of our websites of our privacy and security policies, obtain consent from users for collection and use of personal information, and provide users with the ability to access, correct, or delete personal information stored by us. In addition, the FTC and other governmental authorities have made inquiries and investigations of companies'companies’ practices with respect to their users'users’ personal information collection and dissemination practices to confirm these are consistent with stated privacy policies and to determine whether precautions are taken to secure consumers'consumers’ personal information. The FTC and certain state agencies also have made inquiries, and in a number of situations, brought actions against companies to enforce the privacy policies of these companies, including policies relating to security of consumers'consumers’ personal information.

        As discussed in the preceding risk factor, we have been cooperating with the Attorneys General of various states in connection with their inquiries and investigations of, among other things, the privacy policy of our FTD.COM business. Becoming subject to the regulatory and enforcement efforts of the FTC, a state agency, or other governmental authority could have a material adverse effect on our ability to collect demographic and personal information from users, which, in turn, could have a material adverse effect on our marketing efforts, business, financial condition, results of operations, and cash flows. In addition, the negative publicity regarding the existence or results of an investigation could have an adverse impact on customers'customers’ willingness to use our websites and services and thus could adversely impact our future revenues.

Certain of our international businesses, such as our international consumer and floral network businesses, must also comply with data protection and privacy laws in the U.K., including the Data Protection Act 1998. If we or any of the third-partythird‑party service providers on which we rely fail to transmit customer information and payment details in a secure manner, or if they otherwise fail to protect customer privacy in online transactions, or if they transfer personal information outside the European Economic Area without complying with certain required conditions, then we risk being exposed to civil and criminal liability in the U.K., usually in the form of fines, as well as claims from individuals alleging damages as a result of the alleged non-compliance.non‑compliance. We may also be required to alter our data collection and use practices. Any of the foregoing could materially and adversely affect our business, financial condition, results of operations, and cash flows.

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Provide Commerce may have liabilities that are not known, probable or estimable at this time.

        As a result of the Acquisition, Provide Commerce has become an indirect wholly-owned subsidiary of FTDChanges in laws and we have effectively assumed all of its liabilities, whether or not asserted. Thereregulations and new laws and regulations could be unasserted claims or assessments that we failed or were unable to discover or identify prior to the close of the Acquisition. In addition, there may be liabilities that are neither probable nor estimable at this time which may become probablematerially and estimable in the future. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business. We may learn additional information about Provide Commerce that adversely affects us, such as unknown, unasserted, or contingent liabilities and issues relating to compliance with applicable laws.

We have incurred substantial expenses related to the Acquisition and expect to incur substantial expenses related to the integration of the Provide Commerce business and the achievement of synergies.

        We incurred $12.4 million in transaction-related costs during the year ended December 31, 2014. We expect to incur additional costs, which may be material, associated with integrating the Provide Commerce business and the achievement of synergies. There are many factors beyond our control that could affect the total amount or the timing of our integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. To the extent our integration expenses are higher than anticipated and are material, our business, financial condition, results of operations, and cash flows could be materially and adversely affected and our ability to meet the leverage ratio and fixed charged ratio mandated by our Amended and Restated Credit Agreement may be impaired.flows.

We utilize outsourced staffare subject to a variety of international, federal, state, and temporary employees, who may not belocal laws and regulations, including, without limitation, those relating to taxation, bulk email or “spam,” advertising, including, without limitation, targeted or behavioral advertising, user privacy and data protection, food production, safety, storage, marketing and distribution, consumer protection, supply chain operations, anti -bribery, labor, antitrust, and unclaimed property. Compliance with the various laws and regulations, which in many instances are either unclear or unsettled, is complex. New laws and regulations, such as well-trainedthose being considered or committedrecently enacted by certain states or the federal government related to automatic renewal practices, user privacy, targeted or behavioral advertising, floral related fees and advertising, and taxation, could impact our customers asrevenues or certain of our permanent employees,business practices or those of our advertisers. Any changes in the laws and theirregulations applicable to us, the enactment of any additional laws or regulations, or the failure to providecomply with, or increased enforcement activity of, such laws and regulations, could significantly impact our customers with high-quality customer service may causeproducts and services, our customers not to return,costs, or the manner in which we or our advertisers conduct business, all of which could materially and adversely affect our business, financial condition, results of operations, and cash flows.

        We utilizeForeign, state, and relylocal governments may attempt to impose additional sales and use taxes, value added taxes, or other taxes on a significant numberour business activities, including our past sales, which could decrease our ability to compete, reduce our sales, and could materially and adversely affect our business, financial condition, results of outsourced staffoperations, and temporary employees,cash flows.

In accordance with current industry practice by domestic floral and gift order gatherers and our interpretation of applicable law, our consumer businesses collect and remit sales and use taxes on consumer orders that are delivered in addition to our permanent employees, to take and distribute orders and respond to customer inquiries. These outsourced staff and temporary employees may not have the same level of commitment to our customers or be as well-trained as our permanent employees. In addition, we may not hire enough outsourced staff or temporary employees to adequately handle the increased volume of telephone calls we receive and orders we fulfill and ship during peak periods. We maintain only a limited number of permanent customer supportstates where it has a physical presence or other form of jurisdictional nexus. If states successfully challenge this practice and distribution center employeesimpose sales and relyuse taxes on third-party vendorsorders delivered in states where we do not have physical

presence or another form of jurisdictional nexus, we could incur substantial tax liabilities for outsourced customer support. Our permanent employeespast sales and lose future sales as a result of the increased tax cost that would be borne by the customer. Also, states may not be ableseek to providereclassify the necessary rangestatus of internet order gatherers, such as our consumer businesses, as persons that are deemed to fulfill the underlying order, in which case, a state may seek to impose taxes on the receipts generated from consumer orders fulfilled and delivered by florists or level of customer support servicesother third parties outside such state. In addition, future changes in the event that one or moreoperation of our third-party vendors unexpectedly become unableonline, mobile, and telephonic sales channels could result in the imposition of additional sales and use tax or unwilling to provide someother tax obligations.

Additionally, in accordance with current industry practice by international floral and gift direct marketers and our interpretation of applicable law, we collect and remit value added taxes on certain consumer orders placed through Interflora. Future changes in the operation of our business could result in the imposition of additional tax obligations. Moreover, if a foreign taxing authority successfully challenges our current practice or all of these services to us. In addition,implements new legislative initiatives, we may not be able to adequately staff our distribution centers during peak periods to enable us to fulfillcould incur substantial tax liabilities for past sales and ship orders onlose future sales as a timely basis. If our customers are dissatisfied with the qualityresult of the customer service they receive they may not place ordersincreased tax costs that would be borne by the customer. The imposition of additional tax liabilities for past or future sales could decrease our ability to compete with us again,traditional retailers and reduce our sales, which could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Our business isWe are subject to online security risks,income and a security breach or inappropriate access to, or use of,various other taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating our networks, computer systems or services or those of third-party vendors could expose us to liability, claims, and a loss of revenue.

        The success of our business depends on the security of our networks and, in part, on the security of the network infrastructures of our third-party vendors. In connection with conducting our business inconsolidated provision for income taxes. During the ordinary course we storeof business, there are many transactions for which the ultimate tax determination is uncertain. We are subject to audit in various jurisdictions, and transmit customer and member information, including personally identifiable information. Unauthorized or inappropriate access to, or use of, our networks, computer

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systems or services, whether intentional, unintentional or as a result of criminal activity, could potentially jeopardize the security of confidential information, including credit card information, of our customers and of third parties. A number of other websites have publicly disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks on portions of their sites. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, wesuch jurisdictions may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the perception of the effectiveness of our security measures could be harmed and we could lose members, customers or vendors. A party that is able to circumvent our security measures could misappropriate our proprietary information or the information of our members or customers, cause interruption in our operations, or damage our computers or those of our members or customers.

        A significant number of our members and customers authorize us to bill their payment card accounts (credit or debit) directly for all amounts charged by us. These members and customers provide payment card informationassess additional income and other personally identifiable information which, depending on the particular payment plan, may be maintained to facilitate future payment card transactions. We rely on third-partytaxes against us. The final determination of tax audits and internally-developed encryption and authentication technology to provide the security and authentication to effectively secure transmission of confidential information, including payment card numbers. Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in the technology used by us to protect transaction data being breached or compromised. Non-technical means, for example, actions by an employee, can also result in a data breach. Under payment card rules and our contracts with our card processors, if there is a breach of payment card information that we store, we could be liable to the banks that issue the payment cards for theirany related expenses and penalties. In addition, if we fail to follow payment card industry security standards, even if there is no compromise of customer information, we could incur significant fines or lose our ability to give our members and customers the option of using payment cards. If we were unable to accept payment cards or are limited in our acceptance of payment cards, our businesseslitigation could be materially different from our historical income tax provisions and adversely affected.

        We may need to expend significant resources to protect against security breachesour historical recognition of other tax matters. The results of an audit or to address problems caused by breaches. Security breaches, including any breach related to us or the parties with which we have commercial relationships, could damage our reputation and expose us to a risk of loss, litigation and possible liability. We cannot assure you that the security measures we take will be effective in preventing these types of activities. We also cannot assure you that the security measures of our third-party vendors, including network providers, providers of customer and billing support services, and other vendors, will be adequate. In addition to potential legal liability, these activities may adversely impact our reputation or our revenues and may interfere with our ability to provide our products and services, all of which could materially and adversely affect our business. business, financial condition, results of operations, and cash flows.

In addition,connection with our internet‑based transactions, a number of states have been considering adopting legislation or instituting policy initiatives, including those that would facilitate a finding of nexus to exist between internet companies with the coveragestates, aimed at expanding the reach of sales and limits of our insurance policies may not be adequate to reimburse us for losses caused by security breaches.

If the Separation and related distribution of FTD common stock fails to qualify as a tax-free transaction for U.S. federaluse taxes or imposing state income tax purposes, then the distributionor other taxes on various innovative theories, including agency attribution from independent third‑party service providers. Such legislation or initiatives could result in significant tax liabilities.

        United Online received a private letter ruling from the Internal Revenue Service ("IRS")imposition of additional sales and an opinionuse taxes, or the payment of tax counsel, each substantially to the effect that the Separation and the distribution of shares of FTD common stock qualifies as a transaction that is tax-free for U.S. federalstate income tax purposes and will not result in the recognition, for U.S. federal income tax purposes, of income, gain or loss by United Online or its stockholders. The IRS ruling and the tax opinion relyother taxes, on certain facts, assumptions,transactions conducted over the internet. In addition, advertisers and undertakings,other third parties may choose to not do business with us in order to avoid nexus with certain states. If such legislation is enacted, or such initiatives are instituted, and certain representations from United Online andunless overturned by the courts, the legislation or initiatives could subject us regarding the

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to substantially increased tax liabilities for past and future conduct of both respective businessessales or state income or other taxes, require us to collect additional sales and other matters, and the tax opinion relies on the IRS ruling. Notwithstanding the IRS ruling and the tax opinion, the IRS could determine that the distribution should be treated as a taxable transaction if it determines that any of these facts, assumptions, representations,use taxes, cause our future sales to decrease, or undertakings is not correct, or that the distribution should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the tax opinion that are not covered by the IRS ruling.

        If the distribution ultimately were to be determined to be taxable, then a stockholder of United Online that received shares of our common stock in the distribution would be treated as having received a distribution of property in an amount equal to the fair market value of such shares on the distribution date and could incur significant income tax liabilities. Such distribution would be taxable to such stockholder as a dividend to the extent of United Online's current and accumulated earnings and profits. Any amount that exceeded United Online's earnings and profits would be treated first as a non-taxable return of capital to the extent of such stockholder's tax basis in its shares of United Online stock with any remaining amount being taxed as a capital gain. In addition, United Online would recognize a taxable gain in an amount equal to the excess, if any, of the fair market value of the shares of common stock of our company held by United Online on the distribution date over United Online's tax basis in such shares.

        In addition, under the terms of the Tax Sharing Agreement that we entered into with United Online, we are generally responsible for any taxes imposed on United Online that arise from the failure of the distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Internal Revenue Code (the "Code") to the extent such failure to qualify is attributable to actions, events or transactions relating to our stock, assets or business, or a breach of the relevant representations or any covenants made by us in the Tax Sharing Agreement, the materials submitted to the IRS in connection with the request for the IRS ruling or the representation letter provided to counsel in connection with the tax opinion. The amounts of such taxes could be significant.

We are bound by a number of agreements, including the Separation and Distribution Agreement and the Tax Sharing Agreement, that we entered into with United Online in connection with the Separation.

        In connection with the Separation, we entered into a number of agreements with United Online that govern the ongoing relationships between United Online and its subsidiaries and us after the Separation. As described more fully above, the Separation and Distribution Agreement governs the rights and obligations of our company and United Online regarding the Separation and provides United Online with the right to control the litigation and settlement of certain litigation matters that relate to us, United Online, and our respective predecessors and consolidated subsidiaries, which were asserted before the Separation, as well as specified litigation matters which are asserted after the Separation.

        The Tax Sharing Agreement governs the rights, responsibilities and obligations of United Online and our company with regard to various tax matters, including the payment of taxes, the preparation of tax returns and the administration of tax audits and disputes. The Tax Sharing Agreement allocates the responsibility for prior period taxes of the United Online consolidated tax reporting group between us and United Online. If however, United Online were unable to pay any prior period taxes for which it is responsible, we could be required to pay the entire amount of such taxes, and such amounts could be significant. Other provisions of federal, state, local, or foreign law may establish similar liability for other matters, including laws governing tax-qualified pension plans, as well as other contingent liabilities.

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The agreements that we entered into with United Online in connection with the Separation may involve, or may appear to involve, conflicts of interest.

        In connection with the Separation, we entered into certain agreements with United Online which provide for the allocation between the Company and United Online of certain assets, liabilities, and obligations of United Online and its subsidiaries, and govern the relationship between United Online and us following the Separation. We negotiated these agreements with United Online while we were still a wholly-owned subsidiary of United Online. Accordingly, some of our executive officers and directors were employees or directors of United Online or its subsidiaries at the time of the negotiations and, as such, had an obligation to serve the interests of United Online and its subsidiaries. As a result, they could be viewed as having had a conflict of interest.

Certain of our directors may have actual or potential conflicts of interest because of their cross directorships and stock ownership with United Online.

        We continue to have overlap in directors with United Online, which may lead to conflicting interests. Our board of directors includes Robert Berglass (the Chairman of our board of directors), James T. Armstrong, and Dennis Holt, who are members of the board of directors of United Online and have fiduciary duties to both United Online's and our stockholders. These individuals may have actual or apparent conflicts of interest with respect to matters involving or affecting each company.

We are subject to continuing contingent liabilities of United Online following the Separation.

        After the Separation, there continue to be several significant areas where the liabilities of United Online may become our obligations. For example, under the Code and the related rules and regulations, each corporation that was a member of the United Online consolidated tax reporting group during any taxable period or portion of any taxable period ending on or before the effective time of the distribution is jointly and severally liable for the U.S. federal income tax liability of the entire United Online consolidated tax reporting group for such taxable period. In connection with the Separation, we entered into a Tax Sharing Agreement with United Online that allocates the responsibility for prior period taxes of the United Online consolidated tax reporting group between our company and United Online. For a more detailed description, see Note 5—"Transactions with Related Parties" of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K. If United Online were unable to pay any prior period taxes for which it is responsible, however, we could be required to pay the entire amount of such taxes, and such amounts could be significant. Other provisions of federal, state, local, or foreign law may establish similar liability for other matters, including laws governing tax-qualified pension plans, as well as other contingent liabilities.

We might have been able to receive better terms from unaffiliated third parties than the terms we received from United Online in our agreements in connection with the Separation.

        The agreements related to the Separation, including the Separation and Distribution Agreement and the Tax Sharing Agreement, were negotiated in the context of our separation from United Online while we were still part of United Online. Although these agreements were intended to be on an arm's-length basis, they may not reflect terms that would have resulted from arm's-length negotiations among unaffiliated third parties. Conversely, certain agreements related to the Separation may include terms that are more favorable than those that would have resulted from arm's-length negotiations among unaffiliated third parties. Following expiration of these agreements, we will have to enter into new agreements with unaffiliated third parties, and such agreements may include terms that are less favorable to us. The terms of the agreements negotiated in the context of our Separation concerned, among other things, allocations of assets, liabilities, rights, indemnifications, and other obligations between United Online and us.

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Potential indemnification liabilities to United Online pursuant to the Separation and Distribution Agreement couldotherwise materially and adversely affect our company.business, financial condition, results of operations, and cash flows.

        Among other things, the Separation and Distribution Agreement provides for indemnification obligations designed to make our company financially responsible for substantially all liabilities that may exist relating to our business activities, whether incurred prior to or after the Separation. If we are required to indemnify United Online under the circumstances set forth in the Separation and Distribution Agreement, we may be subject to substantial liabilities.

A court could require that we assume responsibility for obligations allocated to United Online under the Separation and Distribution Agreement.

        Under the Separation and Distribution Agreement, from and after the Separation, we and United Online are responsible for the debts, liabilities, and other obligations related to the businesses which each company owns and operates following the consummation of the Separation. Although we do not expect to be liable for any obligations that are not allocated to us under the Separation and Distribution Agreement, a court could disregard the allocation agreed to between the parties, and require that we assume responsibility for obligations allocated to United Online, particularly if United Online were to refuse or were unable to pay or perform the allocated obligations.

In connection with the Separation, United Online has indemnified us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that United Online's ability to satisfy its indemnification obligations will not be impaired in the future.

        Pursuant to the Separation and Distribution Agreement, United Online will indemnify us for substantially all liabilities that exist relating to United Online's business activities, whether incurred prior to or after the Separation. However, third parties could seek to hold us responsible for any of the liabilities that United Online agrees to retain, and there can be no assurance that the indemnity from United Online will be sufficient to protect us against the full amount of such liabilities, or that United Online will be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from United Online any amounts for which we are held liable, we may be temporarily required to bear these losses.

Risks Relating to Our Common Stock

The limited public float and trading volume for FTD common stock may have an adverse impact and cause significant fluctuation of market price.

Our common stock is held by a relatively small number of stockholders. Liberty holds approximately 37% of our outstanding shares and six institutional stockholders hold significant blocks of 3.5% to 6.6%. Our officers, directors, and members of management acquire stock or have the potential to own stock through previously granted equity awards. Consequently, our common stock has a relatively small float and low average daily trading volume, which could affect a stockholder’s ability to sell our stock or the price at which it can be sold. In addition, future sales of substantial amounts of FTD in the public market by those larger stockholders, or the perception that these sales could occur, may adversely impact the market price of the stock and our common stock may fluctuate significantly.could be difficult for a stockholder to liquidate.

        The Company's common stock began trading "regular way" on the NASDAQ Global Select Market under the symbol "FTD" on November 1, 2013. There can be no assurance that an active trading market for our common stock will be sustained in the future. The lack of an active trading market may make it more difficult for you to sell our shares and could lead to our share price being depressed or more volatile. In addition, the

The market price of our common stock may fluctuate significantly.

We cannot predict the prices at which our common stock may trade in the future. The market price of our common stock may fluctuate significantly, depending upon many factors, some of which may be beyond our control, including, but not limited to:

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a shift in our investor base;



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our quarterly or annual earnings, or those of other companies in our industry;



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actual or anticipated fluctuations in our operating results;



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success or failure of our business strategy;

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our ability to obtain financing as needed;



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changes in accounting standards, policies, guidance, interpretations, or principles;



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changes in laws and regulations affecting our business, including tax legislation;



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announcements by us or our competitors of significant acquisitions or dispositions;



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the failure of securities analysts to cover our common stock;



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changes in earnings estimates by securities analysts or our ability to meet our earnings guidance;



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the operating and stock price performance of other comparable companies;



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investor perception of us and the floral and gift retail industry;



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overall market fluctuations; and



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general economic conditions and other external factors.

Stock markets in general have also experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could materially and adversely affect the trading price of our common stock.

As a significant stockholder of FTD,us, Liberty has significant influence over actions requiring stockholder approval andus, its presence may affect the ability of a third party to acquire control of us.us and its interests may not coincide with yours.

        In connection with the Acquisition, we issued 10,203,010 sharesAs of FTD common stock to Liberty on December 31, 2014, representing2015, Liberty beneficially owned approximately 35%37% of the issued and outstanding shares of FTD common stock atstock. In connection with the close of the Acquisition. As a result,Acquisition, Liberty selected four new directors for appointment to the ownershipFTD board and voting intereststhe FTD board of directors increased from seven to eleven directors. In addition, the Investor Rights Agreement contains certain rights in FTDfavor of pre-Acquisition FTD stockholders has been significantly reduced, which decreasesLiberty with regard to the ability of such stockholders to influence theappointment and election of Liberty nominees to the FTD board. Although the Liberty directors do not constitute a majority of the FTD board, they may exercise influence over the decisions of the FTD board. This composition of the FTD board may affect our business strategy and operating decisions, as Liberty has significant influence other matters. Liberty'sover our affairs, policies, and operations, such as the appointment of management, and the strategic direction of the company, including decisions as to whether to enter into or otherwise pursue strategic transactions. Liberty’s interests may not in all cases be aligned with the interests of other FTD stockholders. In addition, pre-Acquisition stockholders may experience dilution in their claim to our earnings per share as a result of the issuance of FTD common stock to Liberty.

Furthermore, having Liberty as a significant stockholder may have the effect of making it more difficult for a third partythird-party to acquire, or of discouraging a third partythird-party from seeking to acquire, a majority of the outstanding shares of FTD common stock or control of the FTD board of directors through a proxy solicitation. In that regard, the Investor Rights Agreement contains certain provisions that may magnify these risks, including Liberty'sLiberty’s right, in certain

circumstances in response to a third partythird-party tender offer for shares of FTD common stock, to commence its own tender offer, restrictions on Liberty'sLiberty’s ability to transfer shares of FTD common stock during the restricted period and thereafter, the waiver of Section 203 of the General Corporation Law of the State of Delaware ("DGCL"(“DGCL”) with respect to Liberty and its affiliates and the prohibition upon FTD from implementing a stockholder rights plan, unless the plan exempts certain actions by Liberty in accordance with the terms of the Investor Rights Agreement.

Future sales of FTD common stock by Liberty, or the perception that such sales could occur, could cause our stock price to decline.

        Liberty may sell shares of FTD common stock following the transaction under certain circumstances. The Investor Rights Agreement which imposes certain restrictions on Liberty'sLiberty’s ability to transfer its shares of FTD common stock, including, among other things, an 18-month18‑month prohibition on the transfer of any shares of FTD common stock by Liberty, subject to certain limited exceptions. The Investor Rights Agreement also grants Liberty certain registration rights that, after the 18-month18‑month restricted period, would permit Liberty to sell a large number of shares of FTD common stock in a

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short period of time. The 18-month restricted period will expire on June 30, 2016. The sale of a substantial number of shares of FTD common stock by Liberty or our other stockholders within a short period of time, or the perception that such sales could occur, could cause our stock price to decline, make it more difficult for us to raise funds through future offerings of our common stock or acquire other businesses using our common stock as consideration.

Your percentage ownership in our company may be diluted in the future.

We have established equity incentive plans that will provide for the grant of common stock-basedstock‑based equity awards to our directors, officers, and employees. Your percentage ownership in our company may be diluted in the future because of equity awards that we expect to grant under these plans. In addition, we may issue equity as all or part of the consideration paid for acquisitions and strategic investments we may make in the future. If we issue additional common equity, either through public or private offerings or rights offerings, your percentage ownership in our company would decline if you do not participate on a ratable basis.

Provisions in our charter documents and the DGCL could discourage potential acquisition proposals, could delay, deter, or prevent a change in control, and could limit the price certain investors might be willing to pay for our common stock.

Certain provisions of the DGCL and our certificate of incorporation and bylaws may inhibit a change of control not approved by our board of directors or changes in the composition of our board of directors, which could result in the entrenchment of current management. These provisions include:

We believe these provisions protect our stockholders from coercive or harmful takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with adequate time to assess any acquisition proposal, and are not intended to make our company immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of our company and our stockholders.

We currently do not expect to pay any cash dividends and the price of our stock may not appreciate.

We presently intend to retain future earnings, if any, to reinvest in the growth of our businesses, to make interest payments on or pay down our debt, and to fund potential acquisitions. As a result, we do not currently expect to pay any cash dividends. If we do not pay dividends, the price of our common stock must appreciate for you to recognize a gain on your investment upon sale. This appreciation may not occur.

We may issue preferred stock with terms that could dilute the voting power or reduce the value of our common stock.

While we have no specific plan to issue preferred stock, our certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designation, powers, privileges, preferences, including preferences over our common stock with respect to dividends and distributions, terms of redemption and relative participation, or other rights, if any, of the shares of each such series of preferred stock and any qualifications, limitations or restrictions thereof, as our board of directors may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. For example, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock.

ProvisionsRisks Relating to Our Relationship with Our Former Parent

If the Separation and related distribution of FTD common stock fails to qualify as a tax‑free transaction for U.S. federal income tax purposes, then the distribution could result in our charter documentssignificant tax liabilities.

United Online received a private letter ruling from the Internal Revenue Service (“IRS”) and an opinion of tax counsel, each substantially to the effect that the Separation and the DGCLdistribution of shares of FTD common stock qualifies as a transaction that is tax free for U.S. federal income tax purposes and will not result in the recognition, for U.S. federal income tax purposes, of income, gain, or loss by United Online or its stockholders. The IRS ruling and the tax opinion rely on certain facts, assumptions, and undertakings, and certain representations from United Online and us, regarding the past and future conduct of both respective businesses and other matters, and the tax opinion relies on the IRS ruling. Notwithstanding the IRS ruling and the tax opinion, the IRS could discourage potential acquisition proposals, could delay, deterdetermine that the distribution should be treated as a taxable transaction if it determines that any of these facts, assumptions, representations, or preventundertakings is not correct, or that the distribution should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the tax opinion that are not covered by the IRS ruling.

If the distribution ultimately were to be determined to be taxable, then a changestockholder of United Online that received shares of our common stock in control,the distribution would be treated as having received a distribution of property in an amount equal to the fair market value of such shares on the distribution date and could limitincur significant income tax liabilities. Such distribution would be taxable to such stockholder as a dividend to the priceextent of United Online’s current and accumulated earnings and profits. Any amount that exceeded United Online’s earnings and profits would be treated first as a non‑taxable return of capital to the extent of such stockholder’s tax basis in its shares of United Online stock with any remaining amount being taxed as a capital gain. In addition, United Online would recognize a taxable gain in an amount equal to the excess, if any, of the fair market value of the shares of common stock of our company held by United Online on the distribution date over United Online’s tax basis in such shares.

In addition, under the terms of the Tax Sharing Agreement that we entered into with United Online, we are generally responsible for any taxes imposed on United Online that arise from the failure of the distribution to qualify as tax free for U.S. federal income tax purposes within the meaning of Section 355 of the Internal Revenue Code (the “Code”) to the extent such failure to qualify is attributable to actions, events or transactions relating to our stock, assets or business, or a breach of the relevant representations or any covenants made by us in the Tax Sharing Agreement, the materials submitted to the IRS in connection with the request for the IRS ruling or the representation letter provided to counsel in connection with the tax opinion. The amounts of such taxes could be significant.

We are bound by a number of agreements, including the Separation and Distribution Agreement and the Tax Sharing Agreement, that we entered into with United Online in connection with the Separation.

In connection with the Separation, we entered into a number of agreements with United Online that govern the ongoing relationships between United Online and its subsidiaries and us after the Separation. As described more fully

above, the Separation and Distribution Agreement governs the rights and obligations of our company and United Online regarding the Separation and provides United Online with the right to control the litigation and settlement of certain investors might be willinglitigation matters that relate to us, United Online, and our respective predecessors and consolidated subsidiaries, which were asserted before the Separation, as well as specified litigation matters which are asserted after the Separation.

The Tax Sharing Agreement governs the rights, responsibilities, and obligations of United Online and our company with regard to various tax matters, including the payment of taxes, the preparation of tax returns, and the administration of tax audits and disputes. The Tax Sharing Agreement allocates the responsibility for prior period taxes of the United Online consolidated tax reporting group between us and United Online. If however, United Online were unable to pay any prior period taxes for our common stock.

        Certainwhich it is responsible, we could be required to pay the entire amount of such taxes, and such amounts could be significant. Other provisions of federal, state, local, or foreign law may establish similar liability for other matters, including laws governing tax‑qualified pension plans, as well as other contingent liabilities.

The agreements that we entered into with United Online in connection with the DGCLSeparation may involve, or may appear to involve, conflicts of interest.

In connection with the Separation, we entered into certain agreements with United Online which provide for the allocation between the Company and United Online of certain assets, liabilities, and obligations of United Online and its subsidiaries, and govern the relationship between United Online and us following the Separation. We negotiated these agreements with United Online while we were still a wholly owned subsidiary of United Online. Accordingly, some of our certificateexecutive officers and directors were employees or directors of incorporationUnited Online or its subsidiaries at the time of the negotiations and, bylawsas such, had an obligation to serve the interests of United Online and its subsidiaries. As a result, they could be viewed as having had a conflict of interest.

Certain of our directors may inhibit a changehave actual or potential conflicts of control not approved by ourinterest because of their cross directorships and stock ownership with United Online.

We continue to have overlap in directors with United Online, which may lead to conflicting interests. Our board of directors or changes in the compositionincludes Robert Berglass (the Chairman of our board of directors, which could result in the entrenchmentdirectors) and James T. Armstrong, who are members of current management. These provisions include:

•

advance notice requirements for nominations of candidates for election to our board of directors or for proposing matters that can be acted on by stockholders at annual meetings of stockholders;



•

limitations on who may call special meetings of stockholders;



•

limitations on the ability of stockholders to amend, alter or repeal our bylaws;



•

the division of our board of directors into three classes with staggered terms;



•

limitations on the removal of directors;



•

the inability of the stockholders to act by written consent; and



•

the authority of our board of directors to issue, without stockholder approval, "blank check" preferred stock with such terms as the board of directors of United Online and have fiduciary duties to both United Online’s and our stockholders. These individuals may determinehave actual or apparent conflicts of interest with respect to increasematters involving or affecting each company.

We are subject to continuing contingent liabilities of United Online following the numberSeparation.

After the Separation, there continue to be several significant areas where the liabilities of outstanding sharesUnited Online may become our obligations. For example, under the Code and thwartthe related rules and regulations, each corporation that was a takeover attempt.

We might have been able to receive better terms from unaffiliated third parties than the terms we received from United Online in our agreements in connection with the Separation.

The agreements related to the Separation, including the Separation and Distribution Agreement and the Tax Sharing Agreement, were negotiated in the context of our separation from United Online while we were still part of United Online. Although these agreements were intended to be on an arm’s‑length basis, they may not reflect terms that would have resulted from arm’s‑length negotiations among unaffiliated third parties. Conversely, certain agreements related to the Separation may include terms that are more favorable than those that would have resulted from

 We believe these provisions protect our stockholders from coercive or harmful takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of

arm’s‑length negotiations among unaffiliated third parties. Following expiration of these agreements, we will have to enter into new agreements with unaffiliated third parties, and such agreements may include terms that are less favorable to us. The terms of the agreements negotiated in the context of our Separation concerned, among other things, allocations of assets, liabilities, rights, indemnifications, and other obligations between United Online and us.

directors with adequate timePotential indemnification liabilities to assess any acquisition proposal,United Online pursuant to the Separation and are not intendedDistribution Agreement could materially and adversely affect our company.

Among other things, the Separation and Distribution Agreement provides for indemnification obligations designed to make our company immune from takeovers. However, these provisions apply even iffinancially responsible for substantially all liabilities that may exist relating to our business activities, whether incurred prior to or after the offerSeparation. If we are required to indemnify United Online under the circumstances set forth in the Separation and Distribution Agreement, we may be considered beneficial by some stockholderssubject to substantial liabilities.

A court could require that we assume responsibility for obligations allocated to United Online under the Separation and could delay or prevent an acquisition that our board of directors determines is not inDistribution Agreement.

Under the best interests of ourSeparation and Distribution Agreement, from and after the Separation, we and United Online are responsible for the debts, liabilities, and other obligations related to the businesses which each company owns and our stockholders.

We are an "emerging growth company" andoperates following the reduced disclosure requirements applicable to "emerging growth companies" may make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the JOBS Act. For as long as we continue to be an "emerging growth company," we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies. Among other things, we are not required to (1) provide an auditor's attestation report on the effectiveness of our system of internal control over financial reporting pursuant to Section 404consummation of the Sarbanes-Oxley Act, (2) comply with any new rules that may be adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (3) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise, (4) comply with any new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies under Section 102(b)(1) of the JOBS Act, (5) provide certain disclosure regarding executive compensation required of larger public companies, or (6) hold a nonbinding advisory vote on executive compensation and obtain stockholder approval of any golden parachute payments not previously approved. Accordingly, the information thatSeparation. Although we provide stockholders in our Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K, and in our other filings with the SEC, may be different than what is available with respect to other public companies. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price could be more volatile and materially and adversely affected.

        As an "emerging growth company," we have elected to take advantage of the extended transition period for complying with new or revised accounting standards until such standards are also applicable to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with non-emerging growth companies' effective dates for such new or revised standards.

        We will remain an "emerging growth company" until the earliest of (1) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (2) the date on which we are deemed to be a "large accelerated filer," as defined in Rule 12b-2 under the Exchange Act or any successor statute, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period, or (4) the end of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement filed under the Securities Act. As a result of the Acquisition, we anticipate that we will no longer qualify as an "emerging growth company" as of December 31, 2015.

We currently do not expect to be liable for any obligations that are not allocated to us under the Separation and Distribution Agreement, a court could disregard the allocation agreed to between the parties, and require that we assume responsibility for obligations allocated to United Online, particularly if United Online were to refuse or were unable to pay or perform the allocated obligations.

In connection with the Separation, United Online has indemnified us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that United Online’s ability to satisfy its indemnification obligations will not be impaired in the future.

Pursuant to the Separation and Distribution Agreement, United Online will indemnify us for substantially all liabilities that exist relating to United Online’s business activities, whether incurred prior to or after the Separation. However, third parties could seek to hold us responsible for any cash dividends andof the price of our stock may not appreciate.

        We presently intendliabilities that United Online agrees to retain, future earnings,and there can be no assurance that the indemnity from United Online will be sufficient to protect us against the full amount of such liabilities, or that United Online will be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from United Online any amounts for which we are held liable, we may be temporarily required to reinvest in the growth of our businesses, to make interest payments on or pay down our debt and to fund potential acquisitions. As a result, we do not currently expect to pay any cash dividends. If we do not pay dividends, the price of our common stock must appreciate for you to recognize a gain on your investment upon sale. This appreciation may not occur.

bear these losses.

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ITEM 1B.  UNRESOLVED STAFF COMMENTS
COMMENTS

None.

ITEM 2.  PROPERTIES

We own our corporate headquarters located in Downers Grove, Illinois, which houses our executive offices and our Consumer and Florist segments. We also own the building that is occupied by Interflora in Sleaford, England.

We lease threetwo facilities in the U.S. that serve as call centers for our Consumer and Provide Commerce segments. We also lease 1311 facilities in the U.S. that serve as distribution centers for our Provide Commerce and Florist segments.

We lease office space in San Diego Los Angeles, and San Francisco, California and Woodridge, Illinois, for our Provide Commerce segment, in Quebec, Canada, for our Florist segment, and in Hyderabad, India, for technology development and support related to our Consumer, Provide Commerce, Florist, and International segments. In addition, the International segment leases a flower shop in London, England. We believe that our existing facilities are in good condition and adequate to meet our current requirements, and that suitable additional or substitute space will be available, as needed, to accommodate any physical expansion of our corporate and operations facilities. Additionally, we continue to hold leases for two former distribution centers and one former call center at which we have ceased operations.

The Amended and Restated Credit Agreement includes a security interest in substantially all of our assets, including a mortgage on the owned real property at our Downers Grove, Illinois location. For additional information regarding our obligations under leases, see Note 15—"“Commitments and Contingencies"Contingencies” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.10‑K.

ITEM 3.  LEGAL PROCEEDINGS
PROCEEDINGS  

        In 2010, FTD.COMCommencing on August 19, 2009, the first of a series of consumer class action lawsuits was brought against Provide Commerce, Inc. and Classmates,co-defendant Regent Group, Inc. (a wholly-owned subsidiary ofd/b/a Encore Marketing International (“EMI”). Various cases were ultimately consolidated during the next three years into Case No. 09 CV 2094 in the United Online) received subpoenas from the Attorney GeneralStates District Court for the StateSouthern District of KansasCalifornia under the title In re EasySaver Rewards Litigation. Plaintiffs’ claims arise from their online enrollment in subscription based membership programs known as EasySaver Rewards, RedEnvelope Rewards, and Preferred Buyers Pass (collectively the Attorney General“Membership Programs”) offered and administered by EMI. Plaintiffs claim that their enrollment was allegedly deceptive and therefore the charges to their credit or debit card accounts for membership fees for the StateMembership Programs were unauthorized. On February 22, 2010, Provide Commerce and EMI respectively filed motions to dismiss. On August 13, 2010, the court entered an order granting in part and denying in part the motions. Between August 13, 2010 and December 2011, plaintiffs filed various amended complaints and added or dismissed certain named plaintiffs. Plaintiffs filed the fourth amended complaint on December 14, 2011. The fourth amended complaint is the operative complaint. Plaintiffs assert ten claims against Provide Commerce and EMI in the fourth amended complaint: (1) breach of Maryland, respectively. These subpoenas were issuedcontract (against Provide Commerce only); (2) breach of contract (against EMI only); (3) breach of implied covenant of good faith and fair dealing; (4) fraud; (5) violations of the California Consumers Legal Remedies Act; (6) unjust enrichment; (7) violation of the Electronic Funds Transfer Act (against EMI only); (8) invasion of privacy; (9) negligence; and (10) violations of the Unfair Competition Law. Plaintiffs assert their claims individually and on behalf of a Multistate Work Group that consistsputative nationwide class. Plaintiffs sought damages, attorneys’ fees, and costs. Provide Commerce and EMI filed motions to dismiss the claims of plaintiffs Lawler, Walters, Cox, and Dickey on January 24, 2012. The motions to dismiss were fully briefed as of February 23, 2012, but the court had not yet conducted a hearing or ruled on the motions. The parties participated in numerous settlement conferences and mediations throughout the case in an effort to resolve this matter. On April 9, 2012, the parties reached an agreement on the high level terms of a settlement, conditioned on the parties negotiating and executing a complete written agreement. In the weeks following April 9, 2012, the parties negotiated a formal written settlement agreement (“Settlement”). Upon reaching the Settlement, the hearing on the motions to dismiss was vacated, and Provide Commerce and EMI have not answered the fourth amended complaint in light of the Attorneys GeneralSettlement. The court granted the plaintiffs’ unopposed motion for preliminary approval of the Settlement on June 13, 2012. After notice to the class and briefing by the parties, the court conducted a final approval hearing (also known as a fairness hearing) on January 28, 2013, and took the matter under submission at the conclusion of the hearing. On February 4, 2013, the court entered its final order approving class action settlement, granting plaintiffs’ motion for attorneys’ fees, costs, and incentive awards, and overruling objections filed by a single objector to the Settlement. The court entered judgment on the settlement on February 21, 2013. The objector filed a notice of appeal with the Ninth Circuit Court of Appeals on March 4, 2013. After the completion of briefing, the Ninth Circuit set oral argument on the appeal for February 2, 2015. But on January 29, 2015, the Ninth Circuit entered an order deferring argument and resolution of the appeal pending the Ninth Circuit’s decision in a matter captioned Frank v.  Netflix, No. 12 15705+. The Ninth Circuit issued its opinion in Frank v.  Netflix, No. 12 15705+ on February 27, 2015, affirming the district court’s approval of a settlement between Walmart and a class of Netflix DVD subscribers. On March 19, 2015, the Ninth Circuit entered an order vacating the judgment in this matter and remanding it to the district court for further proceedings consistent with Frank v.Netflix. On April 23, 2015, the district court entered an order reopening the case and ordering the parties to jointly submit a memorandum summarizing the import of the Frank v. Netflix decision and stating their intentions going forward. On May 4, 2015, such memorandum was filed by the parties and the objector also filed his own memorandum regarding these same topics on such date. After receiving the parties and objector’s memoranda, the district court ordered supplemental briefing on the issue of final settlement approval on May 21, 2015. The parties filed their respective opening supplemental briefs on June 18, 2015, the objector filed his opposition supplemental brief on July 2, 2015, and the parties filed their respective reply supplemental briefs on July 16, 2015. The district court has not yet set the hearing date for the following states: Alabama, Alaska, Delaware, Florida, Idaho, Illinois, Kansas, Maine, Maryland, Michigan, Nebraska, New Mexico, New Jersey, North Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Texas, Vermont, Washington, and Wisconsin. The primary focus of the inquiry concerns certain post-transaction sales practices in which these companies previously engaged with certain third-party vendors. In the second quarter of 2012, FTD.COM and Classmates, Inc. received an offer ofpending final settlement from the Multistate Work Group consisting of certain injunctive relief and the consideration of two areas of monetary relief: (1) restitution to consumers and (2) a $20 million payment by these companies for the violations alleged by the Multistate Work Group and to reimburse the Multistate Work Group for its investigation costs. FTD.COM and Classmates, Inc. rejected the Multistate Work Group's offer. FTD.COM and Classmates, Inc. have since had ongoing discussions with the Multistate Work Group regarding a negotiated resolution, with the most recent proposal made by the companies on December 23, 2014 to resolve the matter without admitting liability by making a settlement payment in an aggregate amount of $8 million relating to both companies and $2.5 million restitution by Classmates, Inc. to a group of purchasers of its subscription services. On January 15, 2015, the Multistate Work Group responded to the companies' December 23, 2014 offer with a counter offer seeking a payment from FTD.COM and Classmates, Inc. of $8 million and restitution from Classmates, Inc. of $3 million. FTD.COM and Classmates, Inc. have not yet responded to the Multistate Work Group's latest counter offer. While the companies anticipate that settlement discussions will be ongoing, there can be no assurances as to the terms on which the companies and the Multistate Work Group may agree to settle this matter, or that any settlement of this matter may be reached. If no settlement is reached, certain Attorneys General of the Multistate

of Justice of European Union ("CJEU"(“CJEU”) for a preliminary ruling. In September 2011, the CJEU handed down its judgment on the questions referred by the High Court. In February 2012, the High Court scheduled the trial for April 2013. In September 2012, Interflora executed an indemnity agreement by which Interflora agreed to indemnify Interflora, Inc. against all losses and expenses arising out of this action which Interflora, Inc. may incur after July 10, 2012. The trial in this matter concluded in April 2013. In May 2013, the High Court ruled that Marks and Spencer infringed the Interflora trademarks. In June 2013, the High Court issued an injunction prohibiting Marks and Spencer from infringing the Interflora trademarks in specified jurisdictions and ordered Marks and Spencer to provide certain disclosures in order for damages to be quantified. The High Court granted Marks and Spencer permission to appeal the ruling. The appeal was heard by the Court of Appeal at a hearing held July 8-10, 2014. On November 5, 2014, the Court of Appeal issued its judgment upholding the appeal but did not determine the case in favor of either party, and instead remitted the case for a retrial by the High Court. On November 12, 2014, the Court of Appeal determined the order from its judgment, which became effective as of November 18, 2014, setting aside the order of the High Court from June of 2013. Pursuant to the order, Interflora made an interim payment of $0.3 million to Marks and Spencer towards the cost of the appeal and repaid the $1.8 million payment on account of its costs of the first High Court trial that Marks and Spencer was ordered to pay to Interflora in 2013. The part of the order lifting the injunction prohibiting Marks and Spencer from infringing the Interflora trademarks was lifted on December 2, 2014. No date or other directions have been set forAt a case management conference on June 18, 2015, the retrial.

        Commencing on August 19, 2009,High Court ordered that the first of a series of consumer class action lawsuits was brought against Provide Commerce and co-defendant Regent Group, Inc. d/b/a Encore Marketing International ("EMI"). These cases were ultimately consolidated duringparties take certain steps to allow it to determine the next three years into Case No. 09-CV-2094 in the United States District Court for the Southern District of California under the titleIn re EasySaver Rewards Litigation. Plaintiffs' claims arise from their online enrollment in

PART I
PART II
I

ITEM 5.  MARKET FOR REGISTRANT'SREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Principal Market

Our common stock is listed on the NASDAQ Global Select Market under the symbol "FTD."“FTD”. Prior to the separation from United Online, FTD'sFTD’s common stock began trading on the NASDAQ on a "when-issued"“when‑issued” basis on October 10, 2013, and on a "regular way"“regular way” basis on November 1, 2013, the Separation date. There was no public market for FTD common stock prior to October 10, 2013. The following table sets forth, for the periods presented, the high and low sales prices of FTD common stock on the NASDAQ. The quotations are as reported in published financial sources.

Upon vesting of restricted stock units ("RSUs"(“RSUs”) or exercise of stock options, we do not collect the minimum statutory withholding taxes in cash from employees. Instead, we automatically withhold, from the RSUs that vest or stock options exercised, the portion of those shares with a fair market value equal to the amount of the minimum statutory withholding taxes due. The withheld shares are accounted for as repurchases of common stock but are not considered repurchases under the Program. We then pay the minimum statutory withholding taxes in cash.

Purchases of Equity Securities by the Issuer and Affiliated Purchases

The following table provides information regarding repurchases of our common stock during the quarter ended December 31, 2015: