FORM 10‑Q
| (Mark One) | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| |
| |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
| |
Delaware | 32-0255852 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
|
| |
719-7800
| Large accelerated filer | ☐ | Accelerated filer |
|
| |||
| Non-accelerated filer |
| Smaller reporting company | ☐ | ||||
| Emerging growth company | ☐ | ||||||
| ||||||
| Page | ||||||
2
Forward‑Looking
3
September 30, December 31, 2016 2015 ASSETS Current assets: Cash and cash equivalents $ $ Accounts receivable, net of allowances of $6,929 and $4,802 at September 30, 2016 and December 31, 2015, respectively Inventories Income taxes receivable Prepaid expenses and other current assets Total current assets Property and equipment, net Intangible assets, net Goodwill Other assets Total assets $ $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ $ Accrued liabilities Accrued compensation Deferred revenue Income taxes payable Current portion of long-term debt Total current liabilities Long-term debt Deferred tax liabilities, net Other liabilities Total liabilities Commitments and contingencies (Note 14) Stockholders’ equity: Preferred stock, 5,000,000 shares, par value $0.0001, authorized; no shares issued and outstanding — — Common stock, 60,000,000 shares, par value $0.0001, authorized; 29,652,452 and 29,427,365 shares issued at September 30, 2016 and December 31, 2015, respectively Treasury stock, 2,280,897 and 1,830,897 shares at September 30, 2016 and December 31, 2015, respectively Additional paid-in capital Accumulated deficit Accumulated other comprehensive loss Total stockholders’ equity Total liabilities and stockholders’ equity $ $ Quarter Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Revenues: Products $ $ $ $ Services Total revenues Operating expenses: Cost of revenues—products Cost of revenues—services Sales and marketing General and administrative Amortization of intangible assets Restructuring and other exit costs Total operating expenses Operating income/(loss) Interest income Interest expense Other income/(expense), net Income/(loss) before income taxes Provision/(benefit) for income taxes Net income/(loss) $ $ $ $ Earnings/(loss) per common share: Basic earnings/(loss) per share $ $ $ $ Diluted earnings/(loss) per share $ $ $ $ Quarter Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Net income/(loss) $ $ $ $ Other comprehensive loss: Foreign currency translation Cash flow hedges: Changes in net gains on derivatives, net of tax of $54 and $37 for the quarters ended September 30, 2016 and 2015, respectively and $147 and $31 for the nine months ended September 30, 2016 and 2015, respectively Other comprehensive loss Total comprehensive loss $ $ $ $ Accumulated Additional Other Total Common Stock Treasury Stock Paid-In Comprehensive Accumulated Stockholders’ Shares Amount Shares Amount Capital Loss Deficit Equity Balance at December 31, 2015 $ $ $ $ $ $ Net income — — — — — — Other comprehensive loss — — — — — — Stock-based compensation — — — — — — Tax shortfalls from equity awards — — — — — — Vesting of restricted stock units and related repurchases of common stock — — — — — Repurchases of common stock — — — — — Issuance of common stock through employee stock purchase plan — — — — — Balance at September 30, 2016 $ $ $ $ $ $ Nine Months Ended September 30, 2016 2015 Cash flows from operating activities: Net income $ $ Adjustments to reconcile net income to net cash used for operating activities: Depreciation and amortization Stock-based compensation Provision for doubtful accounts receivable Amortization of debt issuance costs Impairment of fixed assets Deferred taxes, net Excess tax (benefits) shortfalls from equity awards Gains on life insurance — Other, net Changes in operating assets and liabilities, net of acquisition related purchase accounting adjustments: Accounts receivable, net Inventories Prepaid expenses and other assets Accounts payable and accrued liabilities Deferred revenue Income taxes receivable or payable Other liabilities Net cash used for operating activities Cash flows from investing activities: Cash paid for acquisitions, net of cash acquired — Purchases of property and equipment Proceeds from life insurance — Purchases of intangible assets — Net cash used for investing activities Cash flows from financing activities: Payments on long-term debt Exercise of stock options and purchases from employee stock plans Repurchases of common stock Excess tax benefits (shortfalls) from equity awards Net cash used for financing activities Effect of foreign currency exchange rate changes on cash and cash equivalents Change in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period $ $ 2016. Recent Accounting Pronouncements statements upon adoption. 2. SEGMENT INFORMATION Quarter Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Products revenues: Consumer $ $ $ $ Provide Commerce Florist International Segment products revenues Services revenues: Florist International Segment services revenues Intersegment eliminations Consolidated revenues $ $ $ $ Quarter Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Intersegment revenues: Consumer $ $ $ $ Provide Commerce Florist Total intersegment revenues $ $ $ $ Quarter Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Segment operating income/(loss)(a) Consumer $ $ $ $ Provide Commerce Florist International Total segment operating income Unallocated expenses(b) Depreciation expense and amortization of intangible assets Operating income/(loss) Interest expense, net Other income/(expense), net Income/(loss) before income taxes $ $ $ $ Segment operating Unallocated expenses include various corporate costs, such as executive management, corporate finance, Quarter Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 U.S. $ $ $ $ U.K. Consolidated revenues $ $ $ $ 3. BALANCE SHEET COMPONENTS September 30, 2016 December 31, 2015 Current $ $ Past due Total $ $ September 30, 2016 December 31, 2015 Current $ $ Past due: 1 - 150 days past due 151 - 364 days past due 365 - 730 days past due 731 or more days past due Total $ $ Nine Months Ended September 30, 2016 2015 Allowance for credit losses: Balance at January 1 $ $ Provision Write-offs charged against allowance Balance at September 30 $ $ Ending balance collectively evaluated for impairment $ $ Ending balance individually evaluated for impairment $ $ Recorded investments in financing receivables: Balance collectively evaluated for impairment $ $ Balance individually evaluated for impairment $ $ Property and Equipment September 30, 2016 December 31, 2015 Land and improvements $ $ Buildings and improvements Leasehold improvements Equipment Computer equipment Computer software Furniture and fixtures Accumulated depreciation Total $ $ The I.S. Group Limited Provide Consumer Commerce Florist International Total Goodwill at December 31, 2015 $ $ $ $ $ Foreign currency translation — — — Goodwill at September 30, 2016 $ $ $ $ $ September 30, 2016 December 31, 2015 Gross Accumulated Gross Accumulated Value Amortization Net Value Amortization Net Complete technology $ $ $ $ $ $ Customer contracts and relationships Trademarks and trade names Total $ $ $ $ $ $ As of For the Year Ended Future Amortization Expense 2016 (remainder of year) $ 2017 2018 2019 2020 Thereafter Total $ The term loan is subject to amortization payments of $5.0 million per quarter and customary mandatory prepayments under certain conditions. The outstanding balance of the term loan and all amounts outstanding under the revolving credit facility are due upon maturity in September 2019. At For the Year Ended Future Minimum Principal Payments 2016 (remainder of year) $ 2017 2018 2019 2020 — Total $ Balance at Balance at December 31, Repayments September 30, 2015 of Debt 2016 Amended Credit Agreement: Revolving Credit Facility $ $ — $ Term Loan Total Principal Outstanding $ Debt Issuance Costs Total Debt, Net of Debt Issuance Costs $ $ The estimated fair values and notional values of outstanding derivative instruments at Estimated Fair Value of Notional Value of Derivative Instruments Derivative Instruments Balance Sheet September 30, December 31, September 30, December 31, Location 2016 2015 2016 2015 Derivative Assets: Interest rate caps Other assets $ $ $ $ Quarter Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Derivatives Designated as Cash Flow Hedging Instruments: Interest rate caps $ — $ $ $ September 30, 2016 December 31, 2015 Total Level 1 Level 2 Total Level 1 Level 2 Assets: Money market funds $ $ $ — $ $ $ — Derivative assets — — Total $ $ $ $ $ $ Liabilities: Non-qualified deferred compensation plan $ $ — $ $ $ — $ Total $ $ — $ $ $ — $ September 30, 2016 December 31, 2015 Level 2 Level 2 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value Long-term debt outstanding, including current portion $ $ $ $ six months ended June 30, 2017. Quarter Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Cost of revenues $ $ $ $ Sales and marketing General and administrative Total stock-based compensation expense $ $ $ $ year combined with a higher portion of pre-tax income expected to be earned in higher rate jurisdictions as well as a reduction in foreign tax benefits. In addition, tax deficiencies related to vesting of equity awards increased tax expense by $1.4 million. As noted in Note 1—“Description of Business, Basis of Presentation, Accounting Policies, and Recent Accounting Pronouncements,” ASU 2016-09 was adopted on January 1, 2017. As such, tax deficiencies or excess tax benefits are recorded in the provision for income taxes for the six months ended June 30, 2017 rather than in additional paid-in capital as was previously required. The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share amounts): Quarter Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Numerator: Net income/(loss) $ $ $ $ Income allocated to participating securities — — Net income/(loss) attributable to common stockholders $ $ $ $ Denominator: Basic average common shares outstanding Add: Dilutive effect of non-participating securities — — Diluted average common shares outstanding Basic earnings/(loss) per common share $ $ $ $ Diluted earnings/(loss) per common share $ $ $ $ Employee Facility Asset Termination Closure Impairments/ Costs Costs Write-offs Total Accrued as of December 31, 2015 $ $ $ — $ Charges Cash paid — Other adjustments Accrued as of September 30, 2016 $ $ $ — $ 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 15. SUPPLEMENTAL CASH FLOW INFORMATION Nine Months Ended September 30, 2016 2015 Cash paid for interest $ $ Cash paid for income taxes, net $ $ Quarter Ended Nine Months Ended September 30, Change September 30, Change 2016 2015 $ % 2016 2015 $ % (in thousands, except for percentages, average order values, average revenues per member, and exchange rates) Consolidated: Consolidated revenues $ $ $ % $ $ $ % Consumer: Segment revenues(a) $ $ $ % $ $ $ % Segment operating income $ $ $ % $ $ $ % Consumer orders % % Average order value $ $ $ % $ $ $ % Provide Commerce: Segment revenues(a) $ $ $ % $ $ $ % Segment operating income/(loss) $ $ $ % $ $ $ % Consumer orders % % Average order value $ $ $ % $ $ $ % Florist: Segment revenues(a) $ $ $ % $ $ $ % Segment operating income $ $ $ % $ $ $ % Average revenues per member $ $ $ % $ $ $ % International: Segment revenues (in USD) $ $ $ % $ $ $ % Segment revenues (in GBP) £ £ £ % £ £ £ % Segment operating income (in USD) $ $ $ % $ $ $ % Consumer orders % % Average order value (in USD) $ $ $ % $ $ $ % Average order value (in GBP) £ £ £ % £ £ £ % Average currency exchange rate: GBP to USD Segment revenues are prior to intersegment eliminations. See Note 2—“Segment Information” of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form Quarter Ended Nine Months Ended September 30, Change September 30, Change 2016 2015 $ % 2016 2015 $ % (in thousands, except percentages) Revenues $ $ $ % $ $ $ % Operating expenses: Cost of revenues % % Sales and marketing % % General and administrative % % Amortization of intangible assets % — % Restructuring and other exit costs % % Total operating expenses % % Operating income/(loss) % % Interest expense, net % % Other income/(expense), net % n/m % Income/(loss) before income taxes % % Provision/(benefit) for income taxes n/m % n/m % Net income/(loss) $ $ $ % $ $ $ % 2017. Excluding the impact of foreign currency exchange rates, revenues declined $13.2 million, primarily due to a $16.6 million decrease in revenues from our Consumer segment and partially offset by a $1.9 million increase in revenues from our Provide segment. 2017. respectively. During the Other realized during the 2016 period. year combined with a higher portion of pre-tax income expected to be earned in higher tax rate jurisdictions as well as a reduction in foreign tax benefits. In addition, tax deficiencies related to vesting of equity awards increased tax expense by $1.4 million. As noted in Note 1—“Description of Business, Basis of Presentation, Accounting Policies, and Recent Accounting Pronouncements” of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q, ASU 2016-09 was adopted on January 1, 2017. As such, tax deficiencies or excess tax benefits are recorded in the provision for income taxes for the six months ended June 30, 2017 rather than in additional paid-in capital as was previously required. Quarter Ended Nine Months Ended September 30, Change September 30, Change 2016 2015 $ % 2016 2015 $ % (in thousands, except percentages and average order values) Segment revenues $ $ $ % $ $ $ % Segment operating income $ $ $ % $ $ $ % Key metrics and other financial data: Consumer orders % % Average order value $ $ $ % $ $ $ % Segment operating margin % % % % refunds. 2016. Quarter Ended Nine Months Ended September 30, Change September 30, Change 2016 2015 $ % 2016 2015 $ % (in thousands, except percentages and average order values) Segment revenues $ $ $ % $ $ $ % Segment operating income/(loss) $ $ $ % $ $ $ % Key metrics and other financial data: Consumer orders % % Average order value $ $ $ % $ $ $ % Segment operating margin % % % % Quarter Ended Nine Months Ended September 30, Change September 30, Change 2016 2015 $ % 2016 2015 $ % (in thousands, except percentages and average revenues per member) Segment revenues $ $ $ % $ $ $ % Segment operating income $ $ $ % $ $ $ % Key metrics and other financial data: Average revenues per member $ $ $ % $ $ $ % Segment operating margin % % % % Florist Segment Revenues 2016. Quarter Ended Nine Months Ended September 30, Change September 30, Change 2016 2015 $ % 2016 2015 $ % (in thousands, except percentages, average order values, and exchange rates) Segment revenues (in USD) $ $ $ % $ $ $ % Impact of foreign currency — — Segment revenues (in constant currency)(1) $ $ $ % $ $ $ % Segment revenues (in GBP) £ £ £ % £ £ £ % Segment operating income (in USD) $ $ $ % $ $ $ % Impact of foreign currency — — Segment operating income (in constant currency)(1) $ $ $ % $ $ $ % Key metrics and other financial data: Consumer orders % % Average order value (in USD) $ $ $ % $ $ $ % Average order value (in GBP) £ £ £ % £ £ £ % Segment operating margin % % % % Average currency exchange rate: GBP to USD USD at prior year foreign currency exchange rate. . Quarter Ended Nine Months Ended September 30, Change September 30, Change 2016 2015 $ % 2016 2015 $ % (in thousands, except percentages) Unallocated expenses $ $ $ % $ $ $ % transaction-related costs. The interest rates applicable to borrowings under the 2017. At June 30, 2017, the remaining borrowing capacity under the Credit Agreement, which was reduced by $2.7 million in outstanding letters of credit, was $232.3 million, subject to certain limitations under covenants contained in the Credit Agreement. After giving effect to the net leverage ratio contained in the Credit Agreement, approximately $100 million was available for additional borrowing as of June 30, 2017 based on 3.25 times the total of Adjusted EBITDA (as defined in the Credit Agreement) for the last twelve months. 2016 Nine Months Ended September 30, 2016 2015 Net cash used for operating activities $ $ Net cash used for investing activities $ $ Net cash used for financing activities $ $ 2016. six months ended June 30, 2017. Policies, and Recent Accounting (In thousands, except for share and per share amounts) Number of Shares Approximate Dollar Purchased as Part Value of Shares that Total Average of Publicly May Yet Be Number of Price Paid Announced Purchased Under Shares Per Plans or the Plans Period Purchased Share Programs(a) or Programs July 1 - July 31 $ $ August 1 - August 31 — — — September 1 - September 30 — — — Total $ $ FTD Companies, Inc. (Registrant) By: /s/ Chief Financial Officer Form Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 101.INS 101.SCH 101.CAL 101.LAB 101.PRE 101.DEF16,192 57,892 26,696 28,177 27,517 25,611 2,843 5,450 10,662 15,767 83,910 132,897 58,078 64,753 289,727 340,559 551,208 561,656 22,197 21,863 1,005,120 1,121,728 40,444 82,448 30,632 54,087 13,763 21,193 6,305 5,421 875 840 20,000 20,000 112,019 183,989 260,966 274,946 97,489 112,769 6,490 8,798 476,964 580,502 3 3 (62,035) (50,000) 687,576 678,558 (47,898) (52,119) (49,490) (35,216) 528,156 541,226 1,005,120 1,121,728 June 30, 2017 December 31, 2016 ASSETS Current assets: Cash and cash equivalents $ 79,356 $ 81,002 Accounts receivable, net of allowances of $4,552 and $4,962 at June 30, 2017 and December 31, 2016, respectively 22,211 26,659 Inventories 24,867 24,996 Prepaid expenses and other current assets 9,496 13,697 Total current assets 135,930 146,354 Property and equipment, net 53,227 57,559 Intangible assets, net 267,092 272,798 Goodwill 467,522 463,465 Other assets 21,726 22,138 Total assets $ 945,497 $ 962,314 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 41,885 $ 70,254 Accrued liabilities 68,650 68,274 Accrued compensation 12,598 19,165 Deferred revenue 6,141 4,911 Income taxes payable 1,970 2,005 Current portion of long-term debt 20,000 20,000 Total current liabilities 151,244 184,609 Long-term debt 241,986 256,306 Deferred tax liabilities, net 88,111 85,932 Other liabilities 6,729 7,740 Total liabilities 488,070 534,587 Commitments and contingencies (Note 14) Stockholders’ equity: Preferred stock, 5,000,000 shares, par value $0.0001, authorized; no shares issued and outstanding — — Common stock, 60,000,000 shares, par value $0.0001, authorized; 29,975,848 and 29,731,189 shares issued at June 30, 2017 and December 31, 2016, respectively 3 3 Treasury stock, 2,430,897 shares at June 30, 2017 and December 31, 2016 (65,221 ) (65,221 ) Additional paid-in capital 699,716 694,773 Accumulated deficit (131,452 ) (150,191 ) Accumulated other comprehensive loss (45,619 ) (51,637 ) Total stockholders’ equity 457,427 427,727 Total liabilities and stockholders’ equity $ 945,497 $ 962,314 4142,726 157,745 738,986 820,020 30,428 30,774 103,341 102,081 173,154 188,519 842,327 922,101 103,838 113,504 518,477 568,106 4,405 4,763 13,757 14,613 35,012 38,249 168,885 185,299 25,745 30,252 83,378 92,750 15,240 15,317 45,873 46,054 612 1,495 2,230 5,907 184,852 203,580 832,600 912,729 (11,698) (15,061) 9,727 9,372 135 122 410 371 (2,429) (2,450) (7,273) (7,366) (9) 131 1,804 557 (14,001) (17,258) 4,668 2,934 (4,028) (779) 447 (440) (9,973) (16,479) 4,221 3,374 (0.36) (0.57) 0.15 0.12 (0.36) (0.57) 0.15 0.11 Three Months Ended
June 30, Six Months Ended
June 30, 2017 2016 2017 2016 Revenues: Products $ 293,228 $ 302,249 $ 574,192 $ 595,540 Services 34,918 35,990 70,447 72,913 Total revenues 328,146 338,239 644,639 668,453 Operating expenses: Cost of revenues—products 198,682 205,075 390,809 414,158 Cost of revenues—services 4,497 4,669 8,744 9,352 Sales and marketing 76,224 65,957 145,120 133,873 General and administrative 27,039 28,389 55,794 58,133 Amortization of intangible assets 3,819 15,217 7,639 30,633 Restructuring and other exit costs 136 1,185 944 1,618 Total operating expenses 310,397 320,492 609,050 647,767 Operating income 17,749 17,747 35,589 20,686 Interest income 122 154 237 275 Interest expense (2,562 ) (2,409 ) (4,950 ) (4,844 ) Other income, net 223 4 198 1,813 Income before income taxes 15,532 15,496 31,074 17,930 Provision for income taxes 5,816 3,721 12,335 4,404 Net income $ 9,716 $ 11,775 $ 18,739 $ 13,526 Earnings per common share: Basic earnings per share $ 0.35 $ 0.42 $ 0.67 $ 0.48 Diluted earnings per share $ 0.35 $ 0.42 $ 0.67 $ 0.48 5(9,973) (16,479) 4,221 3,374 (2,902) (5,020) (14,510) (4,227) 86 57 236 49 (2,816) (4,963) (14,274) (4,178) (12,789) (21,442) (10,053) (804) Three Months Ended
June 30, Six Months Ended
June 30, 2017 2016 2017 2016 Net income $ 9,716 $ 11,775 $ 18,739 $ 13,526 Other comprehensive income/(loss): Foreign currency translation 4,124 (7,597 ) 5,846 (10,518 ) Cash flow hedges: Changes in net gains on derivatives, net of tax of $53 and $51 for the three months ended June 30, 2017 and 2016, respectively, and $107 and $93 for the six months ended June 30, 2017 and 2016, respectively 87 81 172 150 Other comprehensive income/(loss) 4,211 (7,516 ) 6,018 (10,368 ) Total comprehensive income $ 13,927 $ 4,259 $ 24,757 $ 3,158 629,427 3 (1,831) (50,000) 678,558 (35,216) (52,119) 541,226 4,221 4,221 (14,274) (14,274) 9,767 9,767 (408) (408) 163 (1,645) (1,645) (450) (12,035) (12,035) 62 1,304 1,304 29,652 3 (2,281) (62,035) 687,576 (49,490) (47,898) 528,156 Common Stock Treasury Stock Shares Amount Shares Amount Balance at December 31, 2016 29,731 $ 3 (2,431 ) $ (65,221 ) $ 694,773 $ (51,637 ) $ (150,191 ) $ 427,727 Net income — — — — — — 18,739 18,739 Other comprehensive income — — — — — 6,018 — 6,018 Stock-based compensation — — — — 5,870 — — 5,870 Vesting of restricted stock units and related repurchases of common stock 184 — — — (1,969 ) — — (1,969 ) Issuance of common stock through employee stock purchase plan 61 — — — 1,042 — — 1,042 Balance at June 30, 2017 29,976 $ 3 (2,431 ) $ (65,221 ) $ 699,716 $ (45,619 ) $ (131,452 ) $ 457,427 74,221 3,374 63,502 63,265 10,803 8,204 2,936 1,315 1,020 1,020 398 1,282 (14,519) (9,108) 408 (311) (1,583) 76 44 (1,791) 2,592 (2,025) (2,922) 5,623 8,828 (72,996) (59,951) 1,037 (2,022) 1,982 (11,462) (2,284) (6,852) (3,192) (2,704) (9,935) (12,018) (10,700) 1,946 (60) (10,072) (20,695) (15,000) (35,000) 1,304 485 (13,680) (22,021) (408) 311 (27,784) (56,225) (652) (872) (41,700) (80,496) 57,892 95,595 16,192 15,099 Six Months Ended
June 30, 2017 2016 Cash flows from operating activities: Net income $ 18,739 $ 13,526 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,583 42,516 Stock-based compensation 5,870 7,480 Provision for doubtful accounts receivable 779 2,808 Amortization of debt issuance costs 680 680 Impairment of fixed assets — 398 Deferred taxes, net 1,758 (8,935 ) Gains on life insurance — (1,583 ) Other, net (69 ) 60 Changes in operating assets and liabilities: Accounts receivable, net 3,887 697 Inventories 170 2,412 Prepaid expenses and other assets 5,049 4,844 Accounts payable and accrued liabilities (36,060 ) (45,927 ) Deferred revenue 1,154 2,374 Income taxes receivable or payable 66 4,970 Other liabilities (997 ) (1,925 ) Net cash provided by operating activities 19,609 24,395 Cash flows from investing activities: Purchases of property and equipment (6,370 ) (8,176 ) Proceeds from life insurance — 944 Net cash used for investing activities (6,370 ) (7,232 ) Cash flows from financing activities: Proceeds from long-term debt 70,000 — Payments on long-term debt (85,000 ) (10,000 ) Exercise of stock options and purchases from employee stock plans 1,042 1,304 Repurchases of common stock withheld for taxes (1,969 ) (1,640 ) Repurchases of common stock — (8,172 ) Net cash used for financing activities (15,927 ) (18,508 ) Effect of foreign currency exchange rate changes on cash and cash equivalents 1,042 (448 ) Change in cash and cash equivalents (1,646 ) (1,793 ) Cash and cash equivalents, beginning of period 81,002 57,892 Cash and cash equivalents, end of period $ 79,356 $ 56,099 8, Canada, and the United Kingdom (“U.K.”), and the Republic of Ireland, we have worldwide presence as our Mercury Man logo is displayed in approximately 40,00035,000 floral shops in nearly 150over 125 countries. Our diversified portfolio of brands also includes ProFlowers®, ProPlants®, Shari’s Berries®, Personal Creations®, RedEnvelope®, Flying Flowers®, Flowers Direct®, Ink CardsTM™, PostagramTM™, and Gifts.comTM™. While floral arrangements and plants are our primary offerings, we also market and sell gift items, including gourmet-dipped berries and other sweets,specialty foods, personalized gifts, premium fresh fruit baskets, gift baskets, wine and champagne, jewelry, and spa products.FTD.COM Inc. (“FTD.COM”), Provide Commerce, Inc. (“Provide Commerce”), FTD.COM Inc. (“FTD.COM”), and Interflora British Unit (“Interflora”). The operations of the Company include those of its subsidiary, Interflora, Inc., of which one‑thirdone-third is owned by a third party. The Company’s corporate headquarters is located in Downers Grove, Illinois. The Company also maintains offices in San Diego and San Francisco, California; Woodridge, Illinois; Centerbrook, Connecticut; Sleaford, England; Quebec, Canada; and Hyderabad, India. The Company hasIndia; and distribution centers in various locations throughout the U.S.2015,2016, was derived from the Company’s audited consolidated financial statements, included in the Company’s Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2015,2016, but does not include all of the disclosures required by GAAP.flows of the Company.flows. The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make accounting policy elections, estimates, and assumptions that affect a number of reported amounts and related disclosures in the condensed consolidated financial statements. Management bases its estimates on historical experience and assumptions that it believes are reasonable. Actual results could differ from those estimates and assumptions. The most significant areas of the condensed consolidated financial statements that require management’s judgment include the Company’s revenue recognition, goodwill, indefinite‑livedindefinite-lived intangible assets and other long‑livedlong-lived assets, allowance for doubtful accounts, income taxes, and legal contingencies.10‑K10-K for the year ended December 31, 2015.10‑K10-K for the year ended December 31, 2015,2016, for a discussion of the Company’s accounting policies.9Accounting Standards Update (“ASU”) 2015-03, Interest—Imputation of Interest, became effective as of January 1, 2016. This update requires that debt issuance costs related to a debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, also became effective as of January 1, 2016. This update clarifies that an entity may elect to present debt issuance costs related to a line-of-credit arrangement as an asset, regardless of whether or not there are any outstanding borrowings on the line-of-credit arrangement. The Company elected to present all debt issuance costs, including those associated with the Company’s revolving credit facility, consistently as a direct deduction from the carrying amount of the liability. The Company has applied the provisions of ASU 2015-03 retrospectively to all periods presented, as required by the update. This resulted in a reclassification which reduced both other assets and the related outstanding debt by $4.0 million and $5.1 million at September 30, 2016 and December 31, 2015, respectively.March 2016,July 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-04, Liabilities—Extinguishment of Liabilities—Recognition of Breakage for Certain Prepaid Stored-Value Products. The amendments in this ASU specify how a company should derecognize amounts related to expected breakage of prepaid store-value products. Breakage should be recognized in proportion to the pattern of rights expected to be exercised by the product holder to the extent that it is probable a significant reversal of the recognized breakage amount will not subsequently occur. The new standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted, and is to be applied retrospectivelyor using a modified retrospective approach. The Company’s accounting for breakage already follows the guidance in this ASU. Therefore, the Company considered this ASU to have been adopted upon issuance.Recently Issued Accounting StandardsIn May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers. The amendments in this ASU affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The amendments in this ASU require an entity to recognize revenue related to the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, in March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) to clarify the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. Further, in April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing to clarify identifying performance obligations and the licensing implementation guidance. This guidance includes indicators to assist an entity in evaluating whether promised goods and services are distinct along with guidance to determine whether an entity promises to grant a license to a customer with either a right to use the entity’s intellectual property at a point in time or a right to access the entity’s intellectual property over a period of time. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, which amends the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. The guidance also clarifies that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. In addition, ASU 2016-12 clarifies how an entity should evaluate the collectability threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. The guidance under this topic was deferred by ASU 2015-14, issued by the FASB in August 2015, and is now effective for fiscal years and interim periods beginning on or after December 15, 2017 with early adoption permitted as of the original effective date for periods beginning after December 15, 2016. The Company is currently assessing the impact of these updates on its consolidated financial statements.In July 2015, FASB issued ASU Update (“ASU”) 2015-11, Inventory—Simplifying the Measurement of Inventory (Topic 330), which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. The ASU defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted the guidance in the first quarter of 2017 on a prospective basis, as required, with no impact on its consolidated financial statements.does not applycould increase or reduce the Company’s reported income tax expense or benefit and cash flows from operating activities depending on the difference between the future price of the Company’s common stock at vesting or exercise as compared to inventorythe grant price.measured using last-in, first-out orpermitted for any goodwill impairment test performed on testing dates after January 1, 2017. As the retail inventory method. The update appliesamendments within this ASU are meant to all other inventory, which includes10inventory that is measured using first-in, first-out or average cost methods.the Company’s goodwill for impairment, the Company elected to early adopt this ASU beginning January 1, 2017. The amendments in this ASU will be effectiveapplied prospectively to all of the Company’s future goodwill impairment tests performed on an interim or annual basis.the Companythose goods or services. In addition, new and enhanced disclosures will be required. The guidance under this topic was deferred by ASU 2015-14 and is now effective for fiscal years and the interim periods within those years,beginning on or after December 15, 2017, with early adoption permitted as of the original effective date for periods beginning after December 15, 2016. The amendments must be applied prospectively and early adoption is permitted. TheCompany plans to adopt Topic 606 in the first quarter of 2018, either on a full retrospective basis for each prior reporting period presented or on a modified retrospective basis with the cumulative effect of initially applying the new guidance recognized at the date of initial application. Although the Company is currently assessingcontinuing to evaluate the impacts of its pending adoption of Topic 606, the Company does not believe there will be a material impact of this update onto its consolidated financial statements.Liabilities.Liabilities (Subtopic 825-10). The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The amendments in this ASU will be effective for the Company for fiscal years, and interim periods within those years, beginning after December 15, 2017. The amendments must be applied prospectively and early adoption is permitted for certain measurement enhancements within this amendment. Earlyamendment, early adoption is not permitted for other aspects updated in this amendment. The Company is currently assessing the impact ofdoes not believe that this update will have a significant impact on its consolidated financial statements.In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation. The amendments in this ASU simplify several aspects of the accounting for stock-based compensation, including the income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The new standard is effective for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. These amendments are to be applied on a retrospective, modified retrospective, or prospective basis, depending on the related items. The Company is currently assessing the impact of this update on its consolidated financial statements.ClarificationClassification of Certain Cash Receipts and Cash Payments. This update was issued to address the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows by adding or clarifying guidance on eight specific cash flow issues. The amendments in this ASU will be effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The amendments should be applied retrospectively to all periods presented, unless deemed impracticable, in which case, prospective application is permitted. The Company does not anticipate the adoption of this update to have a material impact on its consolidated financial statements.Consumer, Provide Commerce, Consumer, Florist, and International.51,298 59,573 220,887 245,295 57,112 60,465 390,751 440,249 10,328 10,692 38,417 39,510 27,379 30,765 102,660 108,809 146,117 161,495 752,715 833,863 26,277 26,061 88,538 86,412 4,222 4,773 15,037 15,891 30,499 30,834 103,575 102,303 (3,462) (3,810) (13,963) (14,065) 173,154 188,519 842,327 922,101 Three Months Ended
June 30, Six Months Ended
June 30, 2017 2016 2017 2016 Products revenues: Provide Commerce $ 179,691 $ 176,542 $ 335,559 $ 333,639 Consumer 80,113 90,876 152,917 169,483 Florist 12,813 11,872 28,982 28,089 International 25,446 28,516 65,887 74,667 Segment products revenues 298,063 307,806 583,345 605,878 Services revenues: Florist 31,277 31,486 61,614 62,261 International 3,755 4,589 9,051 10,815 Segment services revenues 35,032 36,075 70,665 73,076 Intersegment eliminations (4,949 ) (5,642 ) (9,371 ) (10,501 ) Consolidated revenues $ 328,146 $ 338,239 $ 644,639 $ 668,453 (2,951) (3,160) (12,022) (13,182) (440) (590) (1,707) (661) (71) (60) (234) (222) (3,462) (3,810) (13,963) (14,065) 12 Three Months Ended
June 30, Six Months Ended
June 30, 2017 2016 2017 2016 Intersegment revenues: Provide Commerce $ (505 ) $ (656 ) $ (981 ) $ (1,266 ) Consumer (4,330 ) (4,901 ) (8,172 ) (9,072 ) Florist (114 ) (85 ) (218 ) (163 ) Total intersegment revenues $ (4,949 ) $ (5,642 ) $ (9,371 ) $ (10,501 ) Three Months Ended
June 30, Six Months Ended
June 30, 2017 2016 2017 2016 U.S. $ 298,945 $ 305,134 $ 569,701 $ 582,971 U.K. 29,201 33,105 74,938 85,482 Consolidated revenues $ 328,146 $ 338,239 $ 644,639 $ 668,453 income/(loss)income to consolidated operating income/(loss)income and income/(loss)income before income taxes (in thousands):5,059 9,641 22,457 27,995 (1,847) (5,679) 27,406 29,307 11,362 10,067 36,722 36,327 4,130 3,460 16,158 15,260 18,704 17,489 102,743 108,889 (9,416) (11,198) (29,514) (36,252) (20,986) (21,352) (63,502) (63,265) (11,698) (15,061) 9,727 9,372 (2,294) (2,328) (6,863) (6,995) (9) 131 1,804 557 (14,001) (17,258) 4,668 2,934 Three Months Ended
June 30, Six Months Ended
June 30, 2017 2016 2017 2016 Provide Commerce $ 14,543 $ 22,177 $ 27,990 $ 29,253 Consumer 6,577 10,878 12,237 17,307 Florist 12,248 12,550 26,202 25,360 International 3,066 3,963 8,598 11,380 Total segment operating income 36,434 49,568 75,027 83,300 (9,400 ) (10,582 ) (20,855 ) (20,098 ) Depreciation expense and amortization of intangible assets (9,285 ) (21,239 ) (18,583 ) (42,516 ) Operating income 17,749 17,747 35,589 20,686 Interest expense, net (2,440 ) (2,255 ) (4,713 ) (4,569 ) Other income, net 223 4 198 1,813 Income before income taxes $ 15,532 $ 15,496 $ 31,074 $ 17,930 (a) income/(loss)income is operating income/(loss)income excluding depreciation, amortization, litigation and dispute settlement charges orand gains, transaction-related costs, restructuring and other exit costs, and impairment of goodwill and intangible assets. Stock‑basedIn addition, stock-based and incentive compensation and general corporate expenses are not allocated to the segments. Segment operating income/(loss)income is prior to intersegment eliminations and excludes other income/(expense), net.(b) legal, and certain human resourceslegal costs. In addition, unallocated expenses include stock‑basedstock-based and incentive compensation, for all eligible Company employees, restructuring and other exit costs, transaction-related costs, and litigation and dispute settlement charges orand gains.Geographic revenues to external customers were as follows for the periods presented (in thousands):141,553 152,981 724,630 797,401 31,601 35,538 117,697 124,700 173,154 188,519 842,327 922,101 1311,594 11,102 838 746 12,432 11,848 June 30, 2017 December 31, 2016 Current $ 11,065 $ 11,490 Past due 835 865 Total $ 11,900 $ 12,355 June 30, 2017 December 31, 2016 11,594 11,102 $ 11,065 $ 11,490 110 152 223 120 155 175 119 129 236 242 213 230 337 177 280 386 12,432 11,848 $ 11,900 $ 12,355 SeptemberJune 30, 20162017 and December 31, 2015,2016, totaled $0.9 million and $0.8$1.0 million, respectively.706 3,200 131 233 (66) (2,799) 771 634 767 588 4 46 861 693 11,571 11,044 Six Months Ended
June 30, 2017 2016 Allowance for credit losses: Balance at January 1 $ 846 $ 706 Provision 184 88 Write-offs charged against allowance (249 ) (58 ) Balance at June 30 $ 781 $ 736 Ending balance collectively evaluated for impairment $ 745 $ 736 Ending balance individually evaluated for impairment $ 36 $ — Recorded investments in financing receivables: Balance collectively evaluated for impairment $ 856 $ 839 Balance individually evaluated for impairment $ 11,044 $ 11,254 SeptemberJune 30, 20162017 and December 31, 2015.2016. The average recorded investment in such loans was less than $0.1 million in each offor both the ninesix months ended SeptemberJune 30, 20162017 and 2015.2016. Interest income recognized on impaired loans was less than $0.1 million in each ofboth the ninesix months ended SeptemberJune 30, 20162017 and 2015.2016.141,575 1,601 16,195 16,303 16,691 16,691 13,996 13,711 27,556 27,067 58,504 50,897 3,406 3,564 137,923 129,834 (79,845) (65,081) 58,078 64,753 June 30, 2017 December 31, 2016 Land and improvements $ 1,575 $ 1,565 Buildings and improvements 16,162 16,080 Leasehold improvements 17,899 16,290 Equipment 15,507 14,771 Computer equipment 25,568 26,633 Computer software 64,929 61,332 Furniture and fixtures 3,798 3,310 145,438 139,981 Accumulated depreciation (92,211 ) (82,422 ) Total $ 53,227 $ 57,559 $5.7$5.5 million and $6.0 million for the quartersthree months ended SeptemberJune 30, 20162017 and 2015,2016, respectively, and $17.6$10.9 million and $17.2$11.9 million for the ninesix months ended SeptemberJune 30, 2017 and 2016, and 2015, respectively.SeptemberJune 30, 2016,2017, Liberty Interactive Corporation (“Liberty”) owned approximately 37%37.0% of the issued and outstanding shares of FTD common stock. An Investor Rights Agreement governs certain rights of and restrictions on Liberty in connection with the shares of FTD common stock that Liberty owns. On December 31, 2014, in conjunction with the acquisition of Provide Commerce, Provide Commerce and Liberty entered into a services agreement (the “Services Agreement”), under which Provide Commerce, on a short-term transitional basis, provided Liberty with certain support service and other assistance after the acquisition in respect of the RedEnvelope business, an online e-commerce business that was not acquired by FTD as part of the acquisition. Fees of $0.3 million were earned in 2015 during the term of the Services Agreement. On April 1, 2015, Provide Commerce and Liberty entered into an amendment to the Services Agreement to extend the term of the Services Agreement to June 30, 2015. The Services Agreement terminated on June 30, 2015.The acquisition purchase price was subject to adjustment based upon the final closing working capital, which adjustment was determined to be $9.9 million. In April 2015, FTD made a payment to Liberty in full satisfaction of this adjustment.On April 30, 2015, the Company, through a wholly owned subsidiary, entered into a Purchase and Sale Agreement with an indirect wholly owned subsidiary of Liberty, pursuant to which the Company acquired certain residual assets previously used by Liberty in the RedEnvelope business for a cash purchase price of $0.3 million. The purchase price was allocated to the assets acquired based on their relative fair values, resulting in allocated values of $0.1 million to fixed assets, $0.1 million to inventory, and $0.1 million to the trademark and trade name.15$1.6$1.4 million, respectively, at SeptemberJune 30, 20162017 and December 31, 2015, respectively,2016, and is included in other assets in the condensed consolidated balance sheets. I.S. Group supplies floral-related products to Interflora’s floral network members in both the U.K. and the Republic of Ireland as well as to other customers. Interflora derives revenues from I.S. Group from (i) the sale of products (sourced from third-party suppliers) to I.S. Group for which revenue is recognized on a gross basis, (ii) commissions on products sold by I.S. Group (sourced from third-party suppliers) to floral network members, and (iii) commissions for acting as a collection agent on behalf of I.S. Group. Revenues related to products sold to and commissions earned from I.S. Group were $0.5$0.4 million and $0.6$0.5 million in the quartersthree months ended SeptemberJune 30, 2017 and 2016, respectively, and 2015, and $1.8$1.1 million and $2.0$1.4 million forin the ninesix months ended SeptemberJune 30, 2017 and 2016, and 2015.respectively. In addition, Interflora purchases products from I.S. Group for sale to consumers. The cost of revenues related to products purchased from I.S. Group was $0.1 million and less than $0.1 million in the quartersthree months ended SeptemberJune 30, 20162017 and 2015,2016, respectively, and $0.4$0.1 million and $0.3 million forin the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively. Amounts due from I.S. Group were $0.2 million and $0.3 million at SeptemberJune 30, 20162017 and December 31, 2015,2016, respectively, and amounts payable to I.S. Group were $0.9$0.8 million and $1.4$1.2 million at SeptemberJune 30, 20162017 and December 31, 2015,2016, respectively.LONG‑LIVEDLONG-LIVED ASSETSninesix months ended SeptemberJune 30, 20162017 were as follows (in thousands):133,226 231,501 109,651 87,278 561,656 (10,448) (10,448) 133,226 231,501 109,651 76,830 551,208 Provide Commerce Consumer Florist International Total Goodwill at December 31, 2016 $ 147,501 $ 133,226 $ 109,651 $ 73,087 $ 463,465 Foreign currency translation — — — 4,057 4,057 Goodwill at June 30, 2017 $ 147,501 $ 133,226 $ 109,651 $ 77,144 $ 467,522 The gross goodwill balance was $752.5 million at September 30, 2016.Provide Commerce in December 2014 and the acquisition of the Company by United Online, Inc. in August 2008 and the acquisition of Provide Commerce in December 2014 and consist of the following (in thousands):76,752 (53,153) 23,599 77,494 (48,438) 29,056 192,982 (181,594) 11,388 195,209 (149,636) 45,573 269,572 (14,832) 254,740 274,606 (8,676) 265,930 539,306 (249,579) 289,727 547,309 (206,750) 340,559 June 30, 2017 December 31, 2016 Gross Value Accumulated Amortization Net Gross Value Accumulated Amortization Net Complete technology $ 76,774 $ (58,624 ) $ 18,150 $ 76,486 $ (54,705 ) $ 21,781 Customer contracts and relationships 193,048 (193,048 ) — 192,183 (192,183 ) — Trademarks and trade names: Definite-lived 120,333 (20,847 ) 99,486 120,290 (16,817 ) 103,473 Indefinite-lived 149,456 — 149,456 147,544 — 147,544 Total $ 539,611 $ (272,519 ) $ 267,092 $ 536,503 $ (263,705 ) $ 272,798 indefinite‑livedindefinite-lived assets for which there is no associated amortization expense or accumulated amortization. At SeptemberJune 30, 20162017 and December 31, 2015,2016, such indefinite‑livedindefinite-lived assets, after impairment and foreign currency translation adjustments, totaled $149.3$149.5 million and $154.2$147.5 million, respectively.16SeptemberJune 30, 2016,2017, estimated future intangible assets amortization expense for each of the next five years and thereafter, was as follows (in thousands):15,209 15,273 15,273 15,273 8,004 71,387 140,419 For the Year Ended Future Amortization Expense 2017 (remainder of the year) $ 7,639 2018 15,278 2019 15,278 2020 8,009 2021 8,006 Thereafter 63,426 Total $ 117,636 July 17, 2013,September 19, 2014, FTD Companies, Inc. entered into a credit agreement (the “2013 Credit“Credit Agreement”) with Interflora, certain wholly-ownedwholly owned domestic subsidiaries of FTD Companies, Inc. party thereto as guarantors, the financial institutions party thereto from time to time, Bank of America Merrill Lynch and Wells Fargo Securities, LLC, as joint lead arrangers and book managers, and Bank of America, N.A., as administrative agent which provided for a $350 million five‑year revolving credit facility. On July 17, 2013, FTD Companies, Inc. drew $220 million of the new $350 million revolving credit facility and used this, together with approximately $19 million of its existing cash balance, to repay amounts outstanding under its previous credit facility in full and to pay fees and expenses related to the 2013 Credit Agreement. On September 19, 2014, the Company entered into an amendment to the 2013 Credit Agreement which amended and restated the 2013 Credit Agreement in its entirety (as amended and restated, the “Amended Credit Agreement”). Among other things, the Amendedlenders. The Credit Agreement provided for a term loan in an aggregate principal amount of $200 million, the proceeds of which were used to repay a portion of outstanding revolving loans, and also provided for a revolving loan advance (the “Acquisition Advance”) to finance the cash portion of the Provide Commerce acquisition purchase price.The proceeds of the term loan were used to repay a portion of outstanding revolving loans and, onfinancefund the cash portion of the acquisition purchase price of Provide Commerce. The obligations under the Amended Credit Agreement are guaranteed by certain of FTD Companies, Inc.’s wholly-ownedwholly owned domestic subsidiaries (together with FTD Companies, Inc., the “U.S. Loan Parties”). In addition, the obligations under the Amended Credit Agreement are secured by a lien on substantially all of the assets of the U.S. Loan Parties, including a pledge of all of the outstanding capital stock of certain direct subsidiaries of the U.S. Loan Parties (except with respect to foreign subsidiaries and certain domestic subsidiaries whose assets consist primarily of foreign subsidiary equity interests, in which case such pledge is limited to 66% of the outstanding capital stock). Amended Credit Agreement are based on either LIBOR plus a margin ranging from 1.50% per annum to 2.50% per annum, or a base rate plus a margin ranging from 0.50% per annum to 1.50% per annum, calculated according to the Company’s net leverage ratio. At SeptemberJune 30, 2016,2017, the base rate margin was 0.75% per annum and the LIBOR margin was 1.75% per annum. In addition, the Company pays a commitment fee ranging from 0.20% per annum to 0.40% per annum on the unused portion of the revolving credit facility. The stated interest rates (based on LIBOR) at SeptemberJune 30, 2016,2017 under the term loan and the revolving credit facility were 2.59%3.05% and 2.27%2.98%, respectively. The effective interest rates at SeptemberJune 30, 2016,2017 under the term loan and the revolving credit facility were 3.39%3.99% and 3.06%3.51%, respectively. The commitment fee rate at SeptemberJune 30, 2016,2017 was 0.25%. The Amended Credit Agreement contains customary representations and warranties, events of default, affirmative covenants and negative covenants, that, among other things, require the Company to maintain compliance with a maximum net leverage ratio and a minimum consolidated fixed charge coverage ratio, and impose restrictions and limitations on, among other things, investments, dividends, share repurchases, and asset sales, and the Company’s ability to incur additional debt and additional liens.17SeptemberJune 30, 2016,2017, the future minimum principal payments through the maturity date of the Amended Credit Agreement were as follows for each of the next five years (in thousands):5,000 20,000 20,000 240,000 285,000 For the Year Ended Future Minimum Principal Payments 2017 (remainder of the year) $ 10,000 2018 20,000 2019 235,000 Total $ 265,000 SeptemberJune 30, 2016,2017, the remaining borrowing capacity under the Amended Credit Agreement, which was reduced by $2.9$2.7 million in outstanding letters of credit, was $227.1 million. The carrying amounts$232.3 million, subject to certain limitations under covenants contained in the Credit Agreement. After giving effect to the net leverage ratio contained in the Credit Agreement, approximately $100 million was available for additional borrowing as of June 30, 2017 based on 3.25 times the term loan and revolving credit facility are nettotal of debt issuance costs asAdjusted EBITDA (as defined in the Company adopted ASU 2015-03 (see Note 1) duringCredit Agreement) for the nine months ended September 30, 2016 and applied the changes retrospectively, as required by the ASU. last twelve months.ninesix months ended SeptemberJune 30, 2016,2017, were as follows (in thousands): December 31, 2016 Draw Down of Debt Repayments of Debt June 30, 2017 Credit Agreement: 120,000 120,000 $ 120,000 $ 70,000 $ (75,000 ) $ 115,000 180,000 (15,000) 165,000 160,000 — (10,000 ) 150,000 300,000 (15,000) 285,000 280,000 $ 70,000 $ (85,000 ) 265,000 (5,054) (4,034) (3,694 ) (3,014 ) 294,946 280,966 $ 276,306 $ 261,986 Company’s Amended Credit Agreement. The gains or losses on the instruments are reported in other comprehensive income/(loss) to the extent that they are effective and are reclassified into earnings when the cash flows attributable to 3-month LIBOR interest payments are recognized in earnings.18SeptemberJune 30, 20162017 and December 31, 20152016 were as follows (in thousands): Estimated Fair Value of Derivative Instruments Notional Value of Derivative Instruments Balance Sheet Location June 30, 2017 December 31, 2016 June 30, 2017 December 31, 2016 1 35 130,000 130,000 Other assets $ — $ 1 $ 130,000 $ 130,000 lossincome/(loss) (in thousands):(38) (34) (296) Three Months Ended
June 30, Six Months Ended
June 30, 2017 2016 2017 2016 Derivatives Designated as Cash Flow Hedging Instruments: Interest rate caps $ — $ (7 ) $ (1 ) $ (34 ) $1.0$0.6 million and $1.4$0.8 million at SeptemberJune 30, 20162017 and December 31, 2015,2016, respectively. At SeptemberJune 30, 2016,2017, $0.6 million of this amount was expected to be reclassified from accumulated other comprehensive lossincome/(loss) into interest expense in the condensed consolidated statements of operations within the next twelve months. During each of the quartersthree months ended SeptemberJune 30, 2017 and 2016, $0.2 million and 2015, $0.1 million, respectively, was reclassified from accumulated other comprehensive lossincome/(loss) into interest expense in the condensed consolidated statements of operations. During each ofboth the ninesix month periods ended SeptemberJune 30, 2017 and 2016, and 2015, $0.4$0.3 million was reclassified from accumulated other comprehensive lossincome/(loss) into interest expense in the condensed consolidated statements of operations.1,747 1,747 7,024 7,024 1 1 35 35 1,748 1,747 1 7,059 7,024 35 2,437 2,437 3,950 3,950 2,437 2,437 3,950 3,950 June 30, 2017 December 31, 2016 Total Level 1 Level 2 Total Level 1 Level 2 Assets: Cash equivalents $ 24,677 $ 24,677 $ — $ 13,197 $ 13,197 $ — Derivative assets — — — 1 — 1 Total $ 24,677 $ 24,677 $ — $ 13,198 $ 13,197 $ 1 Liabilities: Non-qualified deferred compensation plan $ 1,304 $ — $ 1,304 $ 2,371 $ — $ 2,371 Total $ 1,304 $ — $ 1,304 $ 2,371 $ — $ 2,371 and $12.0 million at SeptemberJune 30, 20162017 and December 31, 20152016, respectively, and are included in other assets in the accompanying condensed consolidated balance sheets.long‑termlong-term debt using a discounted cash flow approach that incorporates a market interest yield curve with adjustments for duration and risk profile. In determining the market interest yield curve, the Company considered, among other factors, its estimated credit spread. At SeptemberJune 30, 2016,2017, the Company estimated its credit spread as 1.5%1.0% and 2.1%1.6% for the term loan and revolving credit facility, respectively, resulting in yield-to-maturity estimates for the term loan and revolving credit facility of 2.4% and 3.0%, respectively. At December 31, 2015,2016, the Company estimated its credit spread as 2.1%1.4% and 2.7%2.0% for the term loan and revolving credit facility, respectively, resulting in yield-to-maturity estimates for the term loan and revolving credit facility of 3.5%2.8% and194.1% 3.4%, respectively. The table below summarizes the carrying amounts and estimated fair values for long-term debt (in thousands):285,000 285,000 300,000 297,876 June 30, 2017 December 31, 2016 Level 2 Level 2 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Long-term debt outstanding, including current portion $ 265,000 $ 265,000 $ 280,000 $ 280,000 short‑termshort-term accounts receivable, accounts payable, and accrued liabilities approximate their carrying amounts because of their short‑termshort-term nature.On February 27, 2014, the Company’s board of directors authorized a common stock repurchase program (the “2014 Repurchase Program”) that allowed FTD Companies, Inc. to repurchase up to $50 million of its common stock in both open market and privately negotiated transactions. During the year ended December 31, 2015, the Company repurchased 1.8 million shares under the 2014 Repurchase Program at an average cost per share of $27.31, fully utilizing the $50 million authorization. two‑yeartwo-year period in both open market and privately negotiated transactions. As of September 30,December 31, 2016, the company hashad repurchased 0.450.6 million shares under the 2016 Repurchase Program at an average cost per share of $26.75. In addition, during October 2016, the$25.37. The Company repurchased an additional 0.15 milliondid not repurchase any shares under this program during the 2016 Repurchase Program at an average cost per share of $21.24. Repurchased shares generally are held in treasury pending use for general corporate purposes, including issuances under various employee and director stock plans.ninesix months ended SeptemberJune 30, 2016, 0.22017, 0.3 million RSUs vested for which 0.1 million shares were withheld to cover the minimum statutory withholding taxes of $1.6$2.0 million.2015,2017, stockholders approved the amendment and restatement of the FTD Companies, Inc. Third Amended and Restated 2013 Incentive Compensation Plan (as so amended and restated, the “Plan”“Amended Plan”), which amended and restated in its entirety the FTD Companies, Inc. Amended and Restated 2013 Incentive Compensation Plan, as previously amended June 9, 2015. The Amended Plan provides for the granting of awards to employees and non-employee directors, including stock options, stock appreciation rights, RSUs, and other stock based awards. Under the Plan, 5.2 million shares of FTD common stock have been reserved for issuance of awards. At SeptemberJune 30, 2016,2017, the Company had 3.03.2 million shares available for issuance under the Plan.On March 7, 2016,Amended Plan, which includes additional shares approved by shareholders in June 2017. In addition, eligible employees of the Company are able to participate in the FTD Companies, Inc. 2015 Employee Stock Purchase Plan through which employees may purchase shares of FTD common stock at a discount.0.30.4 million shares. The RSUs granted will generally vest in four equal annual installments beginning on February 15, 2017.January 3, 2018. The weighted average fair market value of the underlying stock on the grant date was $23.12.$24.01.$17.70.20On March 7, 2016, the compensation committee of the FTD board of directors adopted the 2016 Management Bonus Plan (the “Bonus Plan”). The Bonus Plan is an annual incentive programwhich will pay out in cash, stock, or a combination of both, depending on level and performance of each eligible employee. During the quarter and nine months ended September 30, 2016, the Company recorded $0.1 million and $1.0 million, respectively, of stock-based compensation expense associated with the Bonus Plan which is included in accrued compensationin the condensed consolidated balance sheets. The stock‑based compensation expense incurred for bothall equity and liability-classified stock-based awardsplans in the quartersthree months ended SeptemberJune 30, 2017 and 2016 and 2015 hasthe six months ended June 30, 2017 and 2016 have been included in the condensed consolidated statements of operations as follows (in thousands): Three Months Ended
June 30, Six Months Ended
June 30, 2017 2016 2017 2016 45 36 111 65 $ 63 $ 28 $ 134 $ 66 870 1,014 3,251 2,151 1,615 1,147 2,330 2,381 2,408 2,814 7,441 5,988 1,851 2,265 3,406 5,033 3,323 3,864 10,803 8,204 $ 3,529 $ 3,440 $ 5,870 $ 7,480 quarter ended September 30, 2016, the Company recorded a tax benefit of $4.0 million on a pre-tax loss of $14.0 million, compared to a tax benefit of $0.8 million on pre-tax loss of $17.3 million for the quarter ended September 30, 2015. The effective tax rate increased primarily due to an expected increase in full year pre-tax income compared to the prior year.During the ninethree months ended SeptemberJune 30, 2016,2017, the Company recorded a tax provision of $0.4$5.8 million on pre-tax income of $4.7$15.5 million, compared to a tax benefitprovision of $0.4$3.7 million on pre-tax income of $2.9$15.5 million for the ninethree months ended SeptemberJune 30, 2015.2016. The effective tax rate increased primarily due to an expected increase in fullexpected fiscal year pre-tax income over the prior year combined with a higher portion of pre-tax income expected to be earned in higher rate jurisdictions as well as a reduction in foreign tax benefits. In addition, tax deficiencies related to vesting of equity awards increased tax expense by $0.5 million. As noted in Note 1—“Description of Business, Basis of Presentation, Accounting Policies, and Recent Accounting Pronouncements,” ASU 2016-09 was adopted on January 1, 2017. As such, tax deficiencies or excess tax benefits are recorded in the provision for income taxes for the three months ended June 30, 2017 rather than in additional paid-in capital as was previously required.year.non‑forfeitablenon-forfeitable right to dividends irrespective of whether dividends are actually declared or paid or whether the awards ultimately vest. Accordingly, the Company computes earnings per share pursuant to the two‑classtwo-class method in accordance with ASC 260, Earnings Per Share.21(9,973) (16,479) 4,221 3,374 (85) (52) (9,973) (16,479) 4,136 3,322 27,386 28,667 27,560 28,857 52 52 27,386 28,667 27,612 28,909 (0.36) (0.57) 0.15 0.12 (0.36) (0.57) 0.15 0.11 Three Months Ended
June 30, Six Months Ended
June 30, 2017 2016 2017 2016 Numerator: Net income $ 9,716 $ 11,775 $ 18,739 $ 13,526 Income allocated to participating securities (228 ) (246 ) (434 ) (279 ) Net income attributable to common stockholders $ 9,488 $ 11,529 $ 18,305 $ 13,247 Denominator: Basic average common shares outstanding 27,452 27,640 27,415 27,647 Add: Dilutive effect of securities — 55 34 58 Diluted average common shares outstanding 27,452 27,695 27,449 27,705 Basic earnings per common share $ 0.35 $ 0.42 $ 0.67 $ 0.48 Diluted earnings per common share $ 0.35 $ 0.42 $ 0.67 $ 0.48 earnings/(loss)earnings per common share computations exclude stock options and RSUs which are antidilutive. Weighted‑averageWeighted-average antidilutive shares for the quarter and ninethree months ended SeptemberJune 30, 2017 and 2016 were 2.14.1 million and 2.2 million, respectively, and for the six months ended June 30, 2017 were 3.5 million and 2.3 million, respectively.40 1,452 1,492 596 1,060 574 2,230 (302) (1,692) (1,994) 12 (46) (574) (608) 346 774 1,120 During the nine months ended September 30, 2016, the Company incurred restructuring and other exit costs of $2.2 million primarily related to lease termination and exit costs. Such costs are associated primarily with the shutdown of certain Provide Commerce locations. The Company currently does not expect significant additional costs related to these actions. Employee Termination Costs Facility Closure Costs Total Accrued as of December 31, 2016 $ 8,566 $ 1,378 $ 9,944 Charges 637 307 944 Cash paid (2,631 ) (602 ) (3,233 ) Other – non-cash (3,373 ) — (3,373 ) Accrued as of June 30, 2017 $ 3,199 $ 1,083 $ 4,282 putative nationwide class of consumers allegedly damaged by Provide Commerce’s purported unauthorized or otherwise allegedly improper transferring of the putative class members’ billing information to EMI, who then posted allegedly unauthorized charges to their credit or debit card accounts for membership fees for the Membership Programs. On February 22, 2010, Provide Commerce and EMI respectively filed motions to dismiss. On August 13, 2010,In 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 theoperative fourth amended complaint, on December 14, 2011. The fourth amended complaint is the operative complaint. Plaintiffs assertplaintiffs asserted ten claims against Provide Commerce and EMI in the fourth amended complaint:EMI: (1) breach of contract (against Provide22assert their claims individually and on behalf of a putative nationwide class. Plaintiffs soughtseek damages, attorneys’ fees, and costs. Provide Commerce and EMI filed motions to dismissAfter motion practice regarding the claims of plaintiffs Lawler, Walters, Cox,asserted 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 informally resolve this matter. On April 9, 2012,the matter, the parties reached an agreement on the high level terms of a settlement on April 9, 2012, 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”(the “Settlement”). Upon reaching, which 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 Settlement. The court granted the plaintiffs’ unopposed motion for preliminary approval of the Settlementpreliminarily approved on June 13, 2012. After notice to the purported 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.but did not rule. On February 4, 2013, the court entered its final order approving class action settlement,the Settlement, granting plaintiffs’ motion for attorneys’ fees, costs, and incentive awards, and overruling objections filed by a single objector to the Settlement.objector. 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 its opinion in Frank v. Netflix. The Ninth Circuit’s mandate issued on April 14, 2015, and the matter is now pending before the district court to consider final approval of the Settlement in light of 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, theFebruary 27, 2015. 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 pending final settlement approval motion was heard byAfter briefing, the district court conducted a hearing on July 27, 2016 and takentook the matter under submission. On August 9, 2016, the district court entered an order reapproving the Settlement without any changes, and accordingly entered judgment and dismissed the case with prejudice. TheOn September 6, 2016, the objector filed a notice of appealappeal. On November 22, 2016, plaintiffs filed a motion for summary affirmance of the district court’s judgment, to which the objector responded and filed a cross-motion for sanctions. Plaintiffs’ motion for summary affirmance temporarily stayed briefing on September 6, 2016.the appeal. On March 2, 2017, the Ninth Circuit denied plaintiffs’ motion for summary affirmance and objector’s cross-motion for sanctions, and reset the briefing schedule. The objector filed his opening brief on May 1, 2017. Thirteen state Attorneys General filed an amicus brief in support of the objector on May 8, 2017. The parties filed their answering briefs on June 30, 2017. Various legal aid organizations filed an amicus brief in support of no party regarding cy pres relief also on June 30, 2017. The objector’s optional reply brief is presently due August 14, 2017. The date for oral argument on the appeal has not yet been set. that has been previously accrued, and makes adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount. The Company may be unable to estimate a possible loss or range of possible loss due to various reasons, including, among others: (i) if the damages sought are indeterminate, (ii) if the proceedings are in early stages, (iii) if there is uncertainty as to the outcome of pending appeals, motions or settlements, (iv) if there are significant factual issues to be determined or resolved, and (v) if there are novel or unsettled legal theories presented. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any. At Septemberboth June 30, 20162017 and December 31, 2015,2016, the Company had reserves totaling $3.8$3.0 million and $2.6 million, respectively, for estimated losses related to certain legal matters. With respect to other legal matters, the Company has determined, based on its current knowledge, that the amount of possible loss or range of loss, including any reasonably possible losses in excess of amounts already accrued, is not reasonably estimable. However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond the Company’s control. As such, there can be no assurance that the final outcome of these matters will not materially and adversely affect the Company’s business, financial condition, results of operations, or cash flows.5,764 6,088 12,688 20,696 16. SUBSEQUENT EVENTOn November 3, 2016, Christopher W. Shean, one of the Directors of FTD Companies, Inc., was appointed interim President and Chief Executive Officer of the Company, effective immediately. Mr. Shean succeeds Robert S. Apatoff, who has stepped down from these positions and from the FTD Board of Directors. Mr. Apatoff will continue in a transitional advisory role with the Company through December 31, 2016. Under the terms of Mr. Apatoff’s employment agreement, he is entitled to the severance and other benefits described in such agreement, including estimated cash severance payments totaling approximately $4.6 million as well as full and accelerated vesting of all of his outstanding nonvested restricted stock units and unvested stock options, subject in each case to his compliance with certain covenants in the employment agreement. Mr. Apatoff’s employment agreement has previously been filed with the SEC.24 Six Months Ended
June 30, 2017 2016 Cash paid for interest $ 4,074 $ 3,601 Cash paid for income taxes, net 10,517 8,201 (together(which together with its subsidiaries may be referred to herein as the “Company,” “FTD,” “we,” “us,” or “our”) is a premier floral and gifting company with a vision to be the leading and most trusted floral and gifting company in the world. Our mission is to inspire, support, and delight our customers when expressing life’s most important sentiments. We provide floral, specialty foods, gift, and related products and services to consumers, retail florists, and other retail locations and companies in need of floral and gifting solutions. Our business uses the highly‑highly recognized FTD® and Interflora® brands, both supported by the iconic Mercury Man® logo. While we operate primarily in the United States (“U.S.”), Canada, and the United Kingdom (“U.K.”), and the Republic of Ireland, we have worldwide presence as our Mercury Man logo is displayed in approximately 40,00035,000 floral shops in nearly 150over 125 countries. Our diversified portfolio of brands also includesProFlowers®, ProPlants®, Shari’s Berries®, Personal Creations®, RedEnvelope®, Flying Flowers®, Flowers Direct®, Ink CardsTMCards™, Postagram,Postagram™, and Gifts.comTMGifts.com™. While floral arrangements and plants are our primary offerings, we also market and sell gift items, including gourmet‑dippedgourmet-dipped berries and other sweets,specialty foods, personalized gifts, gift baskets, wine and champagne, jewelry, and spa products.Consumer, Provide Commerce, Consumer, Florist, and International.and Canada. Our Consumer segment operates primarily through the www.ftd.com website, associated mobile sites, and the 1‑800‑SEND‑FTD1-800-SEND-FTD telephone number. Through our Provide Commerce segment, we are a leading direct marketer of floral and gift products for consumers, including specialty foods, personalized gifts, and other gifting products, primarily in the U.S. Our Provide Commerce segment operates primarily through the www.proflowers.com, www.berries.com, www.personalcreations.com, www.proplants.com, and www.gifts.com websites, associated mobile sites and applications, and various telephone numbers. Through our Florist segment, we are a leading provider of products and services to our floral network members, whichincluding services that enable our floral network members to send, receive, and deliver floral orders. Floral network members include traditional retail florists, andas well as other non‑floristnon-florist retail locations, primarily in the U.S. and Canada. WeOur Florist segment also provideprovides products and services to other companies in need of floral and gifting solutions. Our International segment consists of Interflora, which operates primarily in the U.K. and the Republic of Ireland. Interflora is a leadingpremier direct marketer of floral and gift products, for consumers and operates primarily through itsthe www.interflora.co.uk, www.flyingflowers.co.uk, and www.interflora.iewww.flowersdirect.co.uk websites, associated mobile sites and applications, and various telephone numbers. Interflora also provides products and services to floral network members other retailers, and to other companies in need of floral and gifting solutions.transaction‑relatedtransaction-related costs, restructuring and other exit costs, and impairment of goodwill and intangible assets. Stock‑basedIn addition, stock-based and incentive compensation and general corporate expenses are not allocated to the segments. Segment operating income is prior to intersegment eliminations and excludes other income income/(expense), net. See Note 2—“Segment Information” of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10‑Q10-Q for a reconciliation of segment operating income to consolidated operating income and consolidated income before income taxes.in the U.S. and Canada, primarily from the www.ftd.com, www.proflowers.com, www.berries.com, and www.personalcreations.com websites, associated mobile sites and applications, the 1‑800‑SEND‑FTD telephone number and various other telephone numbers; and in the U.K. and the Republic of Ireland, primarily through the www.interflora.co.uk, www.flyingflowers.co.uk, and 25www.interflora.ieour consumer websites, associated mobile sites and applications, and various telephone numbers. The number of consumer orders is not adjusted for non‑deliverednon-delivered orders that are refunded on or after the scheduled delivery date. Orders originating with a florist or other retail location for delivery to consumers are not included as part of this number.Consumer, Provide Commerce, Consumer, and International segments is tracked in their local currency, the U.S. Dollar (“USD”) for both the ConsumerProvide Commerce and Provide CommerceConsumer segments and the British Pound (“GBP”) for the International segment. The local currency amounts received for the International segment are then translated into USD at the average currency exchange rate for the period. Average order value includes merchandise revenues and shipping or service fees paid by the consumer, less discounts and refunds (net of refund‑relatedrefund-related fees charged to floral network members).non‑members.non-members. Floral network members include our retail florists and other non‑floristnon-florist retail locations who offer floral and gifting solutions. Average revenues per member is calculated by dividing Florist segment revenues for the period, excluding sales to non‑members,non-members, by the average number of floral network members for the period.173,154 188,519 (15,365) (8) 842,327 922,101 (79,774) (9) 51,298 59,573 (8,275) (14) 220,887 245,295 (24,408) (10) 5,059 9,641 (4,582) (48) 22,457 27,995 (5,538) (20) 645 706 (61) (9) 2,890 3,217 (327) (10) 74.58 74.01 0.57 1 72.04 70.86 1.18 2 57,112 60,465 (3,353) (6) 390,751 440,249 (49,498) (11) (1,847) (5,679) 3,832 67 27,406 29,307 (1,901) (6) 1,115 1,216 (101) (8) 7,780 8,801 (1,021) (12) 49.78 48.63 1.15 2 49.48 49.60 (0.12) (0) 36,605 36,753 (148) (0) 126,955 125,922 1,033 1 11,362 10,067 1,295 13 36,722 36,327 395 1 3,233 3,064 169 6 10,874 10,144 730 7 31,601 35,538 (3,937) (11) 117,697 124,700 (7,003) (6) 24,045 22,941 1,104 5 84,133 81,554 2,579 3 4,130 3,460 670 19 16,158 15,260 898 6 560 546 14 3 1,979 1,972 7 0 46.32 53.45 (7.13) (13) 48.90 51.89 (2.99) (6) 35.27 34.51 0.76 2 34.98 33.95 1.03 3 1.31 1.55 1.40 1.53 Three Months Ended
June 30, Change Six Months Ended
June 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands, except for percentages, average order values, average revenues per member, and exchange rates) Consolidated: Consolidated revenues $ 328,146 $ 338,239 $ (10,093 ) (3 )% $ 644,639 $ 668,453 $ (23,814 ) (4 )% Provide Commerce: $ 179,691 $ 176,542 $ 3,149 2 % $ 335,559 $ 333,639 $ 1,920 1 % Segment operating income $ 14,543 $ 22,177 $ (7,634 ) (34 )% $ 27,990 $ 29,253 $ (1,263 ) (4 )% Consumer orders 3,562 3,542 20 1 % 6,468 6,665 (197 ) (3 )% Average order value $ 49.86 $ 49.22 $ 0.64 1 % $ 51.26 $ 49.44 $ 1.82 4 % Consumer: $ 80,113 $ 90,876 $ (10,763 ) (12 )% $ 152,917 $ 169,483 $ (16,566 ) (10 )% Segment operating income $ 6,577 $ 10,878 $ (4,301 ) (40 )% $ 12,237 $ 17,307 $ (5,070 ) (29 )% Consumer orders 1,092 1,223 (131 ) (11 )% 2,033 2,245 (212 ) (9 )% Average order value $ 69.17 $ 70.14 $ (0.97 ) (1 )% $ 70.97 $ 71.26 $ (0.29 ) — % Florist: $ 44,090 $ 43,358 $ 732 2 % $ 90,596 $ 90,350 $ 246 — % Segment operating income $ 12,248 $ 12,550 $ (302 ) (2 )% $ 26,202 $ 25,360 $ 842 3 % Average revenues per member $ 3,981 $ 3,742 $ 239 6 % $ 8,122 $ 7,631 $ 491 6 % International: Segment revenues (in USD) $ 29,201 $ 33,105 $ (3,904 ) (12 )% $ 74,938 $ 85,482 $ (10,544 ) (12 )% Segment revenues (in GBP) £ 22,798 £ 23,053 £ (255 ) (1 )% £ 59,679 £ 59,617 £ 62 — % Segment operating income (in USD) $ 3,066 $ 3,963 $ (897 ) (23 )% $ 8,598 $ 11,380 $ (2,782 ) (24 )% Consumer orders 532 541 (9 ) (2 )% 1,374 1,419 (45 ) (3 )% Average order value (in USD) $ 45.57 $ 49.90 $ (4.33 ) (9 )% $ 44.91 $ 49.49 $ (4.58 ) (9 )% Average order value (in GBP) £ 35.61 £ 34.77 £ 0.84 2 % £ 35.79 £ 34.53 £ 1.26 4 % 1.28 1.44 1.26 1.43 (a) 10‑Q10-Q for a reconciliation of segment revenues to consolidated revenues.26condensed consolidated financial statementsCondensed Consolidated Financial Statements and accompanying notes thereto included in Part I, Item 1 of this Form 10‑Q.173,154 188,519 (15,365) (8) 842,327 922,101 (79,774) (9) 108,243 118,267 (10,024) (8) 532,234 582,719 (50,485) (9) 35,012 38,249 (3,237) (8) 168,885 185,299 (16,414) (9) 25,745 30,252 (4,507) (15) 83,378 92,750 (9,372) (10) 15,240 15,317 (77) (1) 45,873 46,054 (181) 612 1,495 (883) (59) 2,230 5,907 (3,677) (62) 184,852 203,580 (18,728) (9) 832,600 912,729 (80,129) (9) (11,698) (15,061) 3,363 22 9,727 9,372 355 4 (2,294) (2,328) 34 1 (6,863) (6,995) 132 2 (9) 131 (140) (107) 1,804 557 1,247 (14,001) (17,258) 3,257 19 4,668 2,934 1,734 59 (4,028) (779) (3,249) 447 (440) 887 (9,973) (16,479) 6,506 39 4,221 3,374 847 25 n/m = not meaningful Three Months Ended
June 30, Change Six Months Ended
June 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands, except percentages) Revenues $ 328,146 $ 338,239 $ (10,093 ) (3 )% $ 644,639 $ 668,453 $ (23,814 ) (4 )% Operating expenses: Cost of revenues 203,179 209,744 (6,565 ) (3 )% 399,553 423,510 (23,957 ) (6 )% Sales and marketing 76,224 65,957 10,267 16 % 145,120 133,873 11,247 8 % General and administrative 27,039 28,389 (1,350 ) (5 )% 55,794 58,133 (2,339 ) (4 )% Amortization of intangible assets 3,819 15,217 (11,398 ) (75 )% 7,639 30,633 (22,994 ) (75 )% Restructuring and other exit costs 136 1,185 (1,049 ) (89 )% 944 1,618 (674 ) (42 )% Total operating expenses 310,397 320,492 (10,095 ) (3 )% 609,050 647,767 (38,717 ) (6 )% Operating income 17,749 17,747 2 — % 35,589 20,686 14,903 72 % Interest expense, net (2,440 ) (2,255 ) (185 ) (8 )% (4,713 ) (4,569 ) (144 ) (3 )% Other income, net 223 4 219 NM 198 1,813 (1,615 ) (89 )% Income before income taxes 15,532 15,496 36 — % 31,074 17,930 13,144 73 % Provision for income taxes 5,816 3,721 2,095 56 % 12,335 4,404 7,931 180 % Net income $ 9,716 $ 11,775 $ (2,059 ) (17 )% $ 18,739 $ 13,526 $ 5,213 39 % $15.4$10.1 million, or 3%, for the quarterthree months ended SeptemberJune 30, 2016,2017 compared to the quarterthree months ended SeptemberJune 30, 2015. The decrease in consolidated revenues was primarily due to an $8.3 million decrease in revenues from our Consumer segment,2016, or 2% on a $3.9 million decrease ($1.7 million increase in constant currency) in revenues from our International segment primarily due to strengthening of the USD to GBP exchange rate, a $3.4 million decrease in revenues associated with our Provide Commerce segment, and a $0.1 million decrease in revenues from our Florist segment.currency basis. Foreign currency exchange rates unfavorably impacted revenues by $5.6$3.5 million during the quarter ended September 30, 2016.Consolidated revenues decreased $79.8 million for the ninethree months ended SeptemberJune 30, 2016, compared to2017. Excluding the nine months ended September 30, 2015. The decrease in consolidatedimpact of foreign currency exchange rates, revenues wasdeclined $6.6 million, primarily due to a $49.5 million decrease in revenues associated with our Provide Commerce segment, a $24.4$10.8 million decrease in revenues from our Consumer segment and a $7.0 million decrease ($4.0 million increase in constant currency) in revenues from our International segment primarily due to strengthening of the USD to GBP exchange rate, partially offset by a $1.0$3.1 million increase in revenues from our FloristProvide segment.$11.0$10.6 million during the ninesix months ended SeptemberJune 30, 2016.$10.0$6.6 million for the quarterthree months ended SeptemberJune 30, 2016,2017 compared to the quarterthree months ended SeptemberJune 30, 2015.2016. The decrease in consolidated cost of revenues was primarily due to a $4.2$6.4 million decrease of costs associated with our Consumer segment, driven by the reduction in revenues, and a $2.5 million decrease ($0.1 million in constant currency) of costs associated with our International segment partially offset by a $2.0 million increase of costs associated with our Provide Commerce segment. Foreign currency exchange rates had a $2.4 million favorable impact on cost of revenues for the three months ended June 30, 2017. Consolidated cost of revenues as a percentage of consolidated revenues was 62% for both of the three month periods ended June 30, 2017 and 2016.$2.6$0.4 million increase of costs associated with our Florist segment. These increases were partially offset by a $0.3 million decrease (increase of $1.2($0.2 million increase in constant currency) of costs associated with our International segment. Foreign currency exchange rates had a $0.5 million favorable impact on sales and marketing expenses for the three months ended June 30, 2017. Consolidated sales and marketing expenses, as a percentage of consolidated revenues, was 23% for the three months ended June 30, 2017 compared to 20% for the three months ended June 30, 2016.$2.5$0.3 million decrease in costs associated with our Consumer segment, and a $0.5 million decrease inof costs associated with our Florist segment. Foreign currency exchange rates had a $3.8 million favorable impact on cost of revenues for the quarter ended September 30, 2016. Consolidated cost of revenues, as a percentage of consolidated revenues, remained consistent at 63% for the quarter ended September 30, 2016 compared to the quarter ended September 30, 2015.27Consolidated cost of revenues decreased $50.5 million for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015. The decrease in consolidated cost of revenues was primarily due to a $30.0 million decrease in costs associated with our Provide Commerce segment, a $13.4 million decrease in costs associated with our Consumer segment, a $5.2 million decrease (increase of $2.3 million in constant currency) in costs associated with our International segment, and a $1.8 million decrease in costs associated with our Florist segment. Foreign currency exchange rates had a $7.4 million favorable impact on cost of revenues for the nine months ended September 30, 2016. Consolidated cost of revenues, as a percentage of consolidated revenues, remained consistent at 63% for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015.Consolidated Sales and MarketingConsolidated sales and marketing expenses decreased $3.2 million during the quarter ended September 30, 2016 compared to the quarter ended September 30, 2015. The decrease in consolidated sales and marketing expenses was primarily due to a $1.5 million decrease in costs associated with our Provide Commerce segment, a $1.0 million decrease ($0.4 million in constant currency) in costs associated with our International segment, a $0.5 million decrease in costs associated with our Consumer segment, and a $0.4 million decrease in costs associated with our Florist segment. Foreign currency exchange rates had a $0.6$1.2 million favorable impact on sales and marketing expenses for the quartersix months ended SeptemberJune 30, 2016.2017. Consolidated sales and marketing expenses, as a percentage of consolidated revenues, remained consistent atwas 23% for the six months ended June 30, 2017 compared to 20% for the quartersix months ended SeptemberJune 30, 2016,2016.quarter ended September 30, 2015.Consolidated sales and marketing expenses decreased $16.4 million during the ninethree months ended SeptemberJune 30, 2016 compared to the nine months ended September 30, 2015.2016. The decrease in consolidated sales and marketing expenses was primarily due to a $12.6 million decrease in costs associated with our Provide Commerce segment, a $4.2 million decrease in costs associated with our Consumer segment, and a $1.4 million decrease ($0.2decreases of $1.2 million in constant currency)personnel-related costs, $0.9 million in transaction-related costs, associated with our International segment.$0.7 million in bad debt expense, and $0.5 million in technology costs. These decreases were partially offset by a $0.9$1.8 million increase in sales and marketing expenses associated with our Florist segment.costs related to corporate strategic planning. Foreign currency exchange rates had a $1.3$0.4 million favorable impact on salesgeneral and marketingadministrative expenses for the ninethree months ended SeptemberJune 30, 2016. Consolidated sales and marketing expenses, as a percentage of consolidated revenues, remained consistent at 20% for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015.Consolidated General and Administrative$4.5$2.3 million for the quartersix months ended SeptemberJune 30, 20162017 compared to the quartersix months ended SeptemberJune 30, 2015. Consolidated general and administrative expenses were lower2016. The decrease was primarily due to a reductiondecreases of $2.0 million in personnel related costs of $3.2 million, which included a decrease in headcount, incentive compensation expense, and stock-based compensation, a $0.5 million decrease in audit, professional fees, and other consulting fees, and a $0.3 million decrease in facility costs. In addition, consolidated bad debt expense, decreased $0.3$1.0 million for the quarter ended September 30, 2016.Consolidated general and administrative expenses decreased $9.4 million for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015. Consolidated general and administrative expenses were lower primarily due to a decrease in personnel related costs of $6.0 million, which included a decrease in headcount and incentive compensation expense partially offset by an increase in stock-based compensation of $1.5million, a reduction in transaction‑related costs of $4.0million, a reduction in facility costs of $1.1 million, and a reduction in technology costs, of $0.4 million.$0.7 million in personnel-related costs, and $0.6 million in legal expenses. These decreases were partially offset by increasesa $1.8 million increase in bad debtcosts related to corporate strategic planning. Foreign currency exchange rates had a $0.8 million favorable impact on general and administrative expenses for the six months ended June 30, 2017.of $1.7related to intangible assets decreased $11.4 million and depreciation of $0.7$23.0 million, respectively, for the ninethree and six months ended SeptemberJune 30, 2017 compared to the three and six months ended June 30, 2016 as certain intangible assets related to the Provide Commerce acquisition were fully amortized at December 31, 2016.quartersthree months ended SeptemberJune 30, 20162017 and 2015,2016, we incurred restructuring and other exit costs of $0.6$0.1 million and $1.5$1.2 million, respectively, related to the integration of Provide Commerce and legacy FTD businesses.ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, we incurred restructuring and other exit costs of $2.2$0.9 million and $5.9$1.6 million, respectively,respectively. Such restructuring costs were primarily related to the integration of Provide Commerceemployee termination costs and legacy FTD businesses.28Income/(Expense), netOther expense,income, net for the quarterthree months ended SeptemberJune 30, 2017 increased $0.2 million from the three months ended June 30, 2016. Other income, net for the six months ended June 30, 2017 decreased $1.6 million from the six months ended June 30, 2016 was less than $0.1 million. For the nine months ended September 30, 2016 other income, net was $1.8 million and wasdue primarily related to gains on corporate-owned life insurance policies that were held by Provide Commerce.quarter ended September 30, 2016, we recorded a tax benefit of $4.0 million on a pre‑tax loss of $14.0 million compared to a tax benefit of $0.8 million on pre‑tax loss of $17.3 million for the quarter ended September 30, 2015. The effective tax rate increased primarily due to an expected increase in full year pre-tax income compared to the prior year.During the ninethree months ended SeptemberJune 30, 2016,2017, we recorded a tax provision of $0.4$5.8 million on pre‑taxpre-tax income of $4.7$15.5 million compared to a tax benefitprovision of $0.4$3.7 million on pre‑taxpre-tax income of $2.9$15.5 million for the ninethree months ended SeptemberJune 30, 2015.2016. The effective tax rate increased primarily due to an expected increase in fullexpected fiscal year pre-tax income over the prior year combined with a higher portion of pre-tax income expected to be earned in higher tax rate jurisdictions as well as a reduction in foreign tax benefits. In addition, tax deficiencies related to vesting of equity awards increased tax expense by $0.5 million. As noted in Note 1—“Description of Business, Basis of Presentation, Accounting Policies, and Recent Accounting Pronouncements” of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q, ASU 2016-09 was adopted on January 1, 2017. As such, tax deficiencies or excess tax benefits are recorded in the provision for income taxes for the three months ended June 30, 2017 rather than in additional paid-in capital as was previously required.year.Consumer, Provide Commerce, Consumer, Florist, and International. Segment operating income is operating income excluding depreciation, amortization, litigation and dispute settlement charges orand gains, transaction‑relatedtransaction-related costs, restructuring and other exit costs, and impairment of goodwill and intangible assets. Stock‑basedIn addition, stock-based and incentive compensation and general corporate expenses are not allocated to the segments. Segment operating income is prior to intersegment eliminations and excludes other income,income/(expense), net.29 Three Months Ended
June 30, Change Six Months Ended
June 30, Change 2017 2016 $ % 2017 2016 $ % Segment revenues $ 179,691 $ 176,542 $ 3,149 2 % $ 335,559 $ 333,639 $ 1,920 1 % Segment operating income $ 14,543 $ 22,177 $ (7,634 ) (34 )% $ 27,990 $ 29,253 $ (1,263 ) (4 )% Consumer orders 3,562 3,542 20 1 % 6,468 6,665 (197 ) (3 )% Average order value $ 49.86 $ 49.22 $ 0.64 1 % $ 51.26 $ 49.44 $ 1.82 4 % Segment operating margin 8 % 13 % 8 % 9 % 51,298 59,573 (8,275) (14) 220,887 245,295 (24,408) (10) 5,059 9,641 (4,582) (48) 22,457 27,995 (5,538) (20) 645 706 (61) (9) 2,890 3,217 (327) (10) 74.58 74.01 0.57 1 72.04 70.86 1.18 2 10 16 10 11 Three Months Ended
June 30, Change Six Months Ended
June 30, Change 2017 2016 $ % 2017 2016 $ % Segment revenues $ 80,113 $ 90,876 $ (10,763 ) (12 )% $ 152,917 $ 169,483 $ (16,566 ) (10 )% Segment operating income $ 6,577 $ 10,878 $ (4,301 ) (40 )% $ 12,237 $ 17,307 $ (5,070 ) (29 )% Consumer orders 1,092 1,223 (131 ) (11 )% 2,033 2,245 (212 ) (9 )% Average order value $ 69.17 $ 70.14 $ (0.97 ) (1 )% $ 70.97 $ 71.26 $ (0.29 ) — % Segment operating margin 8 % 12 % 8 % 10 % $8.3$10.8 million, or 12%, for the quarterthree months ended SeptemberJune 30, 20162017 compared to the three months ended June 30, 2016 driven by an 11% decrease in order volume combined with a 1% decrease in average order value. The decrease in order volume was primarily related to a decrease in partner programs, including group buying, sympathy, and airlines, and was slightly offset by the shift of the Easter holiday into the second quarter ended September 30, 2015of 2017 from the first quarter of 2016. The decrease in partaverage order value was primarily due to the $4.1 millionlower service fee rates related to Mother’s Day holiday promotions and an increase in breakage revenue recorded in the third quarter of 2015. Excluding this breakage revenue, consumerorders through our Gold Program, which is a membership program that offers reduced service/shipping fees. These decreases were partially offset by lower refunds.revenuerevenues decreased $4.2$16.6 million, or 8%10%, for the quartersix months ended SeptemberJune 30, 20162017 compared to the quartersix months ended SeptemberJune 30, 20152016 driven by a 9% decrease in order volume partially offset by an increasecombined with a slight decrease in average order value. The decrease in order volume was primarily related to a decrease in partner programs, including group buying, sympathy, and airlines. The decrease in average order value of 1%.Consumer segment revenues decreased $24.4 million, or 10%, for the nine months ended September 30, 2016, comparedwas primarily due to the nine months ended September 30, 2015, primarily driven by a 10% decreaselower service fee rates related to Mother’s Day holiday promotions and an increase in order volume,Gold Program orders and was partially offset by an increase in average order value of 2%. In 2016, consumer order volume was negatively impacted by the Sunday timing of the Valentine’s Day holiday, which worsened from the Saturday day placement in 2015,favorable product mix and a decline in certain corporate partner programs such as sympathy and group buying. In addition, revenue was lower as compared to the prior year period due to the recognition of $4.1 million of breakage revenue in the third quarter of 2015.$4.6$4.3 million for the quarterthree months ended SeptemberJune 30, 20162017 compared to the quarterthree months ended SeptemberJune 30, 2015 in part2016 due to the $4.1 milliondecrease in breakage revenue recorded in the third quarter of 2015. Excluding this breakage, revenue decreased $4.2 millionrevenues as previously described above, partially offset by a $3.7decrease of $6.4 million in cost of revenues. The decrease in operating expenses. Costcost of revenues decreased $2.5 millionwas primarily driven by athe decrease in product and shipping costs associated with lower order volume. Other operatingSales and marketing expenses increased $0.1 million for the three months ended June 30, 2017 compared to the three months ended June 30, 2016. General and administrative expenses decreased primarily due to reduced spending associated with lower order volume and other operating expense savings.$0.2 million for the three months ended June 30, 2017 from the three months ended June 30, 2016. Consumer segment operating margin remains consistent at 10%was 8% for the quarterthree months ended SeptemberJune 30, 20162017 compared to 12% for the quarterthree months ended SeptemberJune 30, 2015 excluding the impact of the breakage in 2015.$5.5$5.1 million for the ninesix months ended SeptemberJune 30, 20162017 compared to the ninesix months ended SeptemberJune 30, 2015 as revenue decreased $24.4 million as described above, offset in part by an $18.9 million2016 due to the decrease in operating expenses. Costrevenues as previously described partially offset by a decrease of $11.1 million in cost of revenues. The decrease in cost of revenues decreased $13.4 millionwas primarily driven by athe decrease in product and shipping costs associated with the lower order volume. Other operatingSales and marketing expenses were flat for the six months ended June 30, 2017 compared to the six months ended June 30, 2016. General and administrative expenses decreased primarily due to reduced spending associated with lower order volume, lower fixed costs in$0.4 million for the customer service area, and other operating expense savings.six months ended June 30, 2017 from the six months ended June 30, 2016. Consumer segment operating margin decreasedwas 8% for the six months ended June 30, 2017 compared to 10% for the ninesix months ended SeptemberJune 30, 2016 compared to 11% for the nine months ended September 30, 2015.2016.30PROVIDE COMMERCE57,112 60,465 (3,353) (6) 390,751 440,249 (49,498) (11) (1,847) (5,679) 3,832 67 27,406 29,307 (1,901) (6) 1,115 1,216 (101) (8) 7,780 8,801 (1,021) (12) 49.78 48.63 1.15 2 49.48 49.60 (0.12) (0) (3) (9) 7 7 Provide Commerce Segment RevenuesProvide Commerce segment revenues decreased $3.4 million, or 6%, for the quarter ended September 30, 2016, compared to the quarter ended September 30, 2015, primarily driven by an 8% decrease in consumer order volume, partially offset by a 2% increase in average order value. The revenue decline is in part the result of a 12% decline in the ProFlowers business and a 2% decline in the Gourmet Foods business partially offset by an 11% growth in revenue in the Personal Creations business for the quarter.Provide Commerce segment revenues decreased $49.5 million, or 11%, for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015, primarily driven by a 12% decrease in consumer order volume. The revenue decline was largely due to an 18% decline in the ProFlowers business. Revenues for the Gourmet Foods business declined 3% for the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015, primarily driven by declines in the Valentine’s Day holiday period. Both ProFlowers and Gourmet Foods revenues were negatively impacted by the Sunday timing of the Valentine’s Day holiday, which worsened from the Saturday day placement in 2015. Personal Creations revenue increased 9% for the period.Provide Commerce Segment Operating Income/(Loss)Provide Commerce segment operating loss improved by $3.8 million, or 67%, for the quarter ended September 30, 2016 compared to the quarter ended September 30, 2015. Revenues decreased $3.4 million, which was offset in part by a decrease in operating expenses of $5.7 million as well as other adjustments. The decrease in operating expenses was due primarily to reductions in product and shipping costs, partially offset by the higher costs associated with the mix of shipping methods, and lower marketing and selling costs associated with the lower order volume during the quarter ended September 30, 2016.Provide Commerce segment operating income decreased $1.9 million, or 6%, for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015. Revenues decreased $49.5 million, which was offset in part by a decrease in operating expenses of $47.6 million. The decrease in operating expenses was due primarily to reductions in product and shipping costs, partially offset by the higher costs associated with the mix of shipping methods, lower marketing and selling costs, and lower personnel-related costs, which are both associated with the lower order volume during the nine months ended September 30, 2016. Further, segment operating income for the nine months ended September 30, 2016 benefited from the second quarter 2015 actions associated with the restructuring of the Gifts.com business and the closure of the Kalla business as compared to the nine months ended September 30, 2015. Provide Commerce segment operating margin remained consistent at 7% for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015.31 Three Months Ended
June 30, Change Six Months Ended
June 30, Change 2017 2016 $ % 2017 2016 $ % Segment revenues $ 44,090 $ 43,358 $ 732 2 % $ 90,596 $ 90,350 $ 246 — % Segment operating income $ 12,248 $ 12,550 $ (302 ) (2 )% $ 26,202 $ 25,360 $ 842 3 % Average revenues per member $ 3,981 $ 3,742 $ 239 6 % $ 8,122 $ 7,631 $ 491 6 % Segment operating margin 28 % 29 % 29 % 28 % FLORIST SEGMENT36,605 36,753 (148) (0) 126,955 125,922 1,033 1 11,362 10,067 1,295 13 36,722 36,327 395 1 3,233 3,064 169 6 10,874 10,144 730 7 31 27 29 29 quarterthree months ended SeptemberJune 30, 2016 were consistent with2017 increased $0.7 million, or 2%, compared to the quarterthree months ended SeptemberJune 30, 2015. Services revenues increased $0.2 million due to a $0.5 million increase in subscription and other services revenues partially offset by a $0.3 million decrease in order-related revenues. Product revenues decreased $0.4 million2016 primarily due to a decrease in sales of fresh flowers, technology systems, and other products. Average revenues per member increased 6% for the quarter ended September 30, 2016 compared to the quarter ended September 30, 2015.Florist segment revenues increased $1.0 million for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015. Services revenues increased $2.1 million due to a $1.8 millionan increase in order-relatedproduct revenues and a $0.3 million increase in subscription and other services revenues.Product revenues decreased $1.1 million primarily due to a decrease infrom the sales of fresh flowers. Average revenues per member increased 7%6% for the ninethree months ended SeptemberJune 30, 20162017 compared to the ninethree months ended SeptemberJune 30, 2015.$1.3$0.8 million, or 13%3%, for the quartersix months ended SeptemberJune 30, 20162017 compared to the quartersix months ended SeptemberJune 30, 2015.2016 primarily due to a $0.6 million decrease in operating expenses. Operating expenses decreased primarily due to a $2.0 million decrease in bad debt expense. These decreases were partially offset by a $1.0 million increase in cost of revenues related to increased volume of fresh flower sales. The Florist segment operating margin increased to 31% for the quarter ended September 30, 2016 compared to 27% for the quarter ended September 30, 2015. Cost of revenues decreased $0.5 million, primarily driven by a decrease in technology costs and continued cost efficiencies realized across the business. Other operating expenses decreased $0.5 million, primarily driven by a decrease in bad debt expense and lower personnel costs.Florist segment operating income increased $0.4 million, or 1%, for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015, as the revenue increase of $1.0 million was offset by a $0.6 million increase in operating expenses. Cost of revenues decreased $1.8 million, primarily driven by the decrease in sales of fresh flowers and continued cost efficiencies realized across the business. Sales and marketing expenses increased $0.9 million associated with the increase in order-related revenues. General and administrative expenses increased $1.6 million primarily due to an increase in bad debt expense related to one member partially offset by lower personnel costs. The Florist segment operating margin remained consistent at 29% for the ninesix months ended SeptemberJune 30, 2016,2017 compared to 28% for the ninesix months ended SeptemberJune 30, 2015.3231,601 35,538 (3,937) (11) 117,697 124,700 (7,003) (6) 5,659 5,659 10,989 10,989 37,260 35,538 1,722 5 128,686 124,700 3,986 3 24,045 22,941 1,104 5 84,133 81,554 2,579 3 4,130 3,460 670 19 16,158 15,260 898 6 742 742 1,477 1,477 4,872 3,460 1,412 41 17,635 15,260 2,375 16 560 546 14 3 1,979 1,972 7 0 46.32 53.45 (7.13) (13) 48.90 51.89 (2.99) (6) 35.27 34.51 0.76 2 34.98 33.95 1.03 3 13 10 14 12 1.31 1.55 1.40 1.53 Three Months Ended
June 30, Change Six Months Ended
June 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands, except percentages, average order values, and exchange rates) Segment revenues (in USD) $ 29,201 $ 33,105 $ (3,904 ) (12 )% $ 74,938 $ 85,482 $ (10,544 ) (12 )% Impact of foreign currency 3,485 — 3,485 10,581 — 10,581 $ 32,686 $ 33,105 $ (419 ) (1 )% $ 85,519 $ 85,482 $ 37 — % Segment revenues (in GBP) £ 22,798 £ 23,053 £ (255 ) (1 )% £ 59,679 £ 59,617 £ 62 — % $ 3,066 $ 3,963 $ (897 ) (23 )% $ 8,598 $ 11,380 $ (2,782 ) (24 )% Impact of foreign currency 322 — 322 1,219 — 1,219 $ 3,388 $ 3,963 $ (575 ) (15 )% $ 9,817 $ 11,380 $ (1,563 ) (14 )% Key metrics and other financial data: Consumer orders 532 541 (9 ) (2 )% 1,374 1,419 (45 ) (3 )% Average order value (in USD) $ 45.57 $ 49.90 $ (4.33 ) (9 )% $ 44.91 $ 49.49 $ (4.58 ) (9 )% Average order value (in GBP) £ 35.61 £ 34.77 £ 0.84 2 % £ 35.79 £ 34.53 £ 1.26 4 % Segment operating margin 10 % 12 % 11 % 13 % Average currency exchange rate: GBP to USD 1.28 1.44 1.26 1.43 (1)(a) period‑over‑period.period-over-period. Our International segment operates principally in the U.K. We calculate constant currency by applying the foreign currency exchange rate for the prior period to the local currency results for the current period.11%12%, (increased $1.7($0.4 million, or 5%1%, in constant currency) for the quarterthree months ended SeptemberJune 30, 20162017 compared to the quarterthree months ended SeptemberJune 30, 2015.2016. The increasedecrease in revenues in constant currency was primarily due to an increasea decrease in order volume of 3%,2% partially offset by an increase in average order value of 2%, and an increase in revenues from the sales of wholesale flowers.$7.0$10.5 million, or 6%12%, (increased $4.0 million, or 3%,(flat in constant currency) for the ninesix months ended SeptemberJune 30, 20162017 compared to the ninesix months ended SeptemberJune 30, 2015. The increase in revenues2016. Revenues in constant currency was primarily due towere favorably impacted by an increase in average order value of 4% and increases in services revenues and products revenues from sales of wholesale flowers. These increases were partially offset by a decrease in order volume of 3%.increased $0.7decreased $0.9 million, or 19%23%, ($1.40.6 million, or 41%15%, in constant currency) for the quarterthree months ended SeptemberJune 30, 20162017 compared to the quarterthree months ended SeptemberJune 30, 2015. International segment operating margin increased to 13% for the quarter ended September 30, 2016 compared to 10%2016. The decrease in the quarter ended September 30, 2015. Revenues decreased $3.9 million (increased $1.7 million in constant currency) which were more thanrevenues as previously described was partially offset by a decrease indecreased operating expenses of $4.6$3.0 million ($0.3(increased $0.2 million increase in constant currency). Cost of revenues decreased $2.6$2.5 million ($1.20.1 million increase in constant currency). Sales and marketing expenses decreased $1.0$0.3 million ($0.4(increased $0.2 million in constant currency). The decrease in constant currency was primarily due to lower brand and direct marketing costs as well as lower personnel-related costs. General and administrative expenses decreased $1.0$0.2 million ($0.6(increased $0.1 million in constant currency) driven by lower legal costs offset in part by an increase in technology costs.International segment operating income increased $0.9 million, or 6%, ($2.4 million, or 16%, in constant currency), for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015.. International segment operating margin increaseddecreased to 14%10% for the ninethree months ended SeptemberJune 30, 20162017 compared to 12% for the ninethree months ended SeptemberJune 30, 2015. Revenues2016.$7.0$2.8 million, (increased $4.0or 24%, ($1.6 million, or 14%, in constant currency), which were more than for the six months ended June 30, 2017 compared to the six months ended June 30, 2016. The decrease in revenues as previously described was partially offset by a decrease indecreased operating expenses of $7.9$7.8 million ($1.6(increased $1.6 million increase in constant currency). Cost of revenues decreased $5.2$6.9 million ($2.3(increased $0.4 million increase in constant currency). Sales and marketing expenses decreased $1.4$0.7 million ($0.2(increased $0.5 million in constant currency). General and administrative expenses decreased $0.1 million (increased $0.7 million in constant currency). International segment operating margin decreased to 11% for the six months ended June 30, 2017 compared to 13% for the six months ended June 30, 2016.33expenses decreased $1.3 million ($0.5 million in constant currency) driven by a decrease in legal costs offset in part by an increase in technology costs.9,416 11,198 (1,782) (16) 29,514 36,252 (6,738) (19) Three Months Ended
June 30, Change Six Months Ended
June 30, Change 2017 2016 $ % 2017 2016 $ % (in thousands, except percentages) Unallocated expenses $ 9,400 $ 10,582 $ (1,182 ) (11 )% $ 20,855 $ 20,098 $ 757 4 % legal, and certain human resourceslegal costs. In addition, unallocated expenses include stock‑basedstock-based and incentive compensation, for all eligible Company employees, restructuring and other exit costs, transaction‑relatedtransaction-related costs, and litigation and dispute settlement charges and gains.$1.8$1.2 million for the quarterthree months ended SeptemberJune 30, 20162017 compared to the quarterthree months ended SeptemberJune 30, 2015. The2016. This decrease in unallocated expenses was primarily due to a $1.6decreases of $1.7 million decrease in personnel-related expenses, $1.0 million in restructuring costs, which included lower incentive compensation accruals and stock-based compensation. Partially offsetting this reduction was$0.9 million in transaction-related costs. These decreases were partially offset by $1.8 million costs related to corporate strategic planning and a $0.9$0.7 million increase in litigation and dispute settlement charges (net of insurance recoveries) incurred duringprofessional fees.quartersix months ended SeptemberJune 30, 20162017 compared to the quarter ended September 30, 2015.Unallocated expenses decreased $6.7 million for the ninesix months ended SeptemberJune 30, 2016 compared to the nine months ended September 30, 2015. The decrease in unallocated expenses2016. This increase was primarily due to a decrease in transaction-related costs$1.8 million of $4.0 million. We also incurred restructuring and other exit costs of $2.2 million primarily related to the integration of the Provide Commerce business during the nine months ended September 30, 2016 compared to $5.7 million incurred during the nine months ended September 30, 2015. In addition, costs related to auditcorporate strategic planning and othera $1.1 million in professional fees decreased $0.3 million. Partially offsetting these reductions was an increase in personnel-related costs of $0.4 million, which included an increase in stock-based compensation of $2.6 millionfees. These increases were partially offset by a decrease in incentive compensation expense, and an increasedecreases of $1.2$1.5 million in litigationpersonnel-related expenses, $0.7 million in restructuring costs, and dispute settlements (net of insurance recoveries)$0.2 million in the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015.2013 July 17, 2013,September 19, 2014, FTD Companies, Inc. entered into a credit agreement (the “2013 Credit“Credit Agreement”) with Interflora British Unit, certain wholly‑wholly owned domestic subsidiaries of FTD Companies, Inc. party thereto as guarantors, the financial institutions party thereto from time to time, Bank of America Merrill Lynch and Wells Fargo Securities, LLC, as joint lead arrangers and book managers, and Bank of America, N.A., as the administrative agent for the lenders, which provided for a $350 million five‑year revolving credit facility. On July 17, 2013, FTD Companies, Inc. drew $220 million of the $350 million revolving credit facility and used this, together with approximately $19 million of its existing cash balance, to repay amounts outstanding under its previous credit facility in full and to pay fees and expenses related to the 2013 Credit Agreement.On September 19, 2014, the Company entered into an amendment to the 2013 Credit Agreement (the “Amended Credit Agreement”). Among other things, the Amended Credit Agreement provided for a term loan in an aggregate principal amount of $200 million, the proceeds of which were used to repay a portion of outstanding revolving loans under the Amended Credit Agreement, and also provided for a revolving loan advance (the “Acquisition Advance”) to finance the cash portion of the acquisitionAcquisition purchase price. On December 31, 2014, we borrowed $120 million under the Acquisition Advance to fund the cash portion of the acquisitionAcquisition purchase price. Amended Credit Agreement are guaranteed by certain of FTD Companies, Inc.’s wholly‑wholly owned domestic subsidiaries (together with FTD Companies, Inc., the “U.S. Loan Parties”). In addition, the obligations under the Amended Credit Agreement are secured by a lien on substantially all of the assets of the U.S. Loan Parties, including a pledge of all of the outstanding capital stock of certain direct subsidiaries of the U.S. Loan Parties (except with respect to foreign subsidiaries and certain domestic subsidiaries whose assets consist primarily of foreign subsidiary equity interests, in which case such pledge is limited to 66% of the outstanding capital stock).34 Amended Credit Agreement are based on either LIBOR plus a margin ranging from 1.50% per annum to 2.50% per annum, or a base rate plus a margin ranging from 0.50% per annum to 1.50% per annum, calculated according to the Company’s net leverage ratio. At June 30, 2017, the base rate margin was 0.75% per annum and the LIBOR margin was 1.75% per annum. In addition, the Company pays a commitment fee ranging from 0.20% per annum to 0.40% per annum on the unused portion of the revolving credit facility. The stated interest rates (based on LIBOR) at SeptemberJune 30, 20162017 under the term loan and the revolving credit facility were 2.59%3.05% and 2.27%2.98%,respectively. The effective interest rates at SeptemberJune 30, 2016,2017 under the term loan and the revolving credit facility were 3.39%3.99% and 3.06%3.51%, respectively. The commitment fee rate at SeptemberJune 30, 20162017 was 0.25%. The Amended Credit Agreement contains customary representations and warranties, events of default, affirmative covenants, and negative covenants, that, among other things, require the Company to maintain compliance with a maximum net leverage ratio and a minimum consolidated fixed charge coverage ratio, and impose restrictions and limitations on, among other things, investments, dividends, share repurchases, and asset sales, and the Company’s ability to incur additional debt and additional liens. The Company was in compliance with all covenants under the Amended Credit Agreement at SeptemberJune 30, 2016.$5.0$5 million per quarter and customary mandatory prepayments under certain conditions. During the six months ended June 30, 2017, the Company made scheduled payments of $10 million under the term loan. The Company had net repayments of $5 million on the revolving credit facility during the six months ended June 30, 2017. The outstanding balance of the term loan and all amounts outstanding under the revolving credit facility are due upon maturity in September 2019.Amended Credit Agreement.NineSeptemberJune 30, 20162017 compared to NineSix Months Ended SeptemberJune 30, 2015$41.7$1.6 million to $16.2$79.4 million at SeptemberJune 30, 2016,2017, compared to $57.9$81.0 million at December 31, 2015.2016. Our summary cash flows for the periods presented were as follows (in thousands):(3,192) (2,704) (10,072) (20,695) (27,784) (56,225) Six Months Ended June 30, 2017 2016 Net cash provided by operating activities $ 19,609 $ 24,395 Net cash used for investing activities $ (6,370 ) $ (7,232 ) Net cash used for financing activities $ (15,927 ) $ (18,508 ) used forprovided by operating activities was $3.2decreased $4.8 million to $19.6 million for the ninesix months ended SeptemberJune 30, 20162017 compared to net cash used for operating activities of $2.7$24.4 million for the ninesix months ended SeptemberJune 30, 2015. The increase in net cash used for operating activities was primarily due to a $1.3 million change in operating assets and liabilities partially offset by an increase in net income.2016. Net cash provided by operating activities is driven by our net income adjusted for non‑cashnon-cash items including, but not limited to, depreciation and amortization, deferred taxes, stock‑basedstock-based compensation, gains on life insurance, and changes in operating assets and liabilities. The decrease in the net cash provided by operating activities was primarily due to a $15.8 million decrease in non-cash items offset by increases in net income of $5.2 million and net operating assets and liabilities of $5.8 million. The decreases in non-cash items related primarily to decreases in depreciation and amortization and deferred taxes. Changes in working capital can cause variationvariations in our cash flows provided by operating activities due to seasonality, timing, and other factors.by $10.6$0.9 million primarily due to the $9.9 millionfewer purchases of property and equipment, partially offset by prior year payment of the post-closing working capital adjustment and $1.9 million of proceeds received from life insurance during the nine months ended September 30, 2016.policies. Purchases of property and equipment were $12.0totaled $6.4 million during the ninesix months ended SeptemberJune 30, 2016,2017 compared to $10.7$8.2 million during the ninesix months ended SeptemberJune 30, 2015.2016. We currently anticipate that our total capital expenditures for 20162017 will be approximately $20in the range of $22 million - $25 million. The actual amount of future capital expenditures may fluctuate due to a number of factors, including, without limitation, potential future acquisitions and new business initiatives, which are difficult to predict and which could change significantly over time. Additionally, technological advances may require us to make capital expenditures to develop or acquire new equipment or technology in order to replace aging or technologically obsolete equipment.by $28.4 million. The decrease in net cash used for financing activities was$2.6 million primarily due to common stock shares repurchased totaling $8.2 million during the six months ended June 30, 2016 under our 2016 Repurchase Program. We did not repurchase any shares under this program during the six months ended June 30, 2017. Partially offsetting this decrease was the net repayment of $15.0 milliondebt of outstanding amounts under the Amended Credit Agreement during the nine months ended September 30, 2016 compared to repayment of $35.0totaling $15.0 million during the ninesix months35ended September 30, 2015. In addition,$10.0 million during the ninesix months ended SeptemberJune 30, 2016, we purchased 0.45 million shares of our common stock under the 2016 Repurchase Program, as described below, for a total cost of $12.0 million compared to $20.0 million to repurchase 0.7 million shares of our common stock in the prior period under the previous repurchase program, as described in Item 7 of the Company’s Form 10‑K for the year ended December 31, 2015. We withhold shares to cover withholding taxes on vested restricted stock units and pay these taxes in cash. We paid $1.6 million and $2.0 million related to withholding taxes on vested restricted stock units during the nine months ended September 30, 2016 and 2015, respectively.Amended Credit Agreement, capital expenditures, and acquisitions.then‑currentthen-current stockholders could be reduced. Furthermore, such equity or any debt securities that we issue might have rights, preferences, or privileges senior to holders of our common stock. In addition, trends in the securities and credit markets may restrict our ability to raise any such additional funds, at least in the near term.a new common stock repurchase program (the “2016the 2016 Repurchase Program”) thatProgram, which allows us to repurchase up to $60 million of FTD common stock from time to time over a two yeartwo-year period in both open market and privately negotiated transactions. The objective of the 2016 Repurchase Program is to offset the dilutive effect on earnings per share from stock-based compensation and allow for opportunistic stock purchases to return capital to shareholders. As of September 30,December 31, 2016, the Company has repurchased 0.450.6 million shares under the 2016 Repurchase Program at an average cost per share of $26.75.In addition,$25.37. The Company did not repurchase any shares of its common stock during October 2016, the Company repurchased an additional 0.15 million shares under the 2016 Repurchase Program at an average cost per share of $21.24.10‑K10-K for the year ended December 31, 2015.Off‑Balance2016.SeptemberJune 30, 2016,2017, we did not have any off‑balanceoff-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S‑KS-K promulgated by the SEC, that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.Recently AdoptedStandardsStandards Update (“ASU”) 2015-03, Interest—Imputation of Interest, became effective as of January 1, 2016. This update requires that debt issuance costs related to a debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, also became effective as of January 1, 2016. This update clarifies that an entity may elect to present debt issuance costs related to a line-of-credit arrangement as an asset, regardless of whether or not there are any outstanding borrowings on the line-of-credit arrangement. We elected to present all debt issuance costs, including those associated with our revolving credit facility, consistently as a direct deduction from the carrying amountPronouncements” of the liability. We have applied the provisions of ASU 362015-03 retrospectively to all periods presented, as required by the update. This resulted in a reclassification which reduced both other assets and the related outstanding debt by $4.0million and $5.1 million at September 30, 2016 and December 31, 2015, respectively.In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-04, Liabilities—Extinguishment of Liabilities—Recognition of Breakage for Certain Prepaid Stored-Value Products. The amendments in this ASU specify how a company should derecognize amounts related to expected breakage of prepaid stored-value products. Breakage should be recognized in proportionNotes to the pattern of rights expected to be exercised by the product holder to the extent that it is probable a significant reversal of the recognized breakage amount will not subsequently occur. The new standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted, and is to be applied retrospectively or using a modified retrospective approach. Our accounting for breakage already follows the guidanceCondensed Consolidated Financial Statements included in this ASU. Therefore, we have considered this ASU to have been adopted upon issuance.Recently Issued Accounting StandardsIn May 2014, FASB issued ASU 2014‑09, Revenue from Contracts with Customers. The amendments in this ASU affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The amendments in this ASU require an entity to recognize revenue related to the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, in March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) to clarify the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. Further, in April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing to clarify identifying performance obligations and the licensing implementation guidance. This guidance includes indicators to assist an entity in evaluating whether promised goods and services are distinct a long with guidance to determine whether an entity promises to grant a license to a customer with either a right to use the entity’s intellectual property at a point in time or a right to access the entity’s intellectual property over a period of time. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, which amends the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. The guidance also clarifies that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. In addition, ASU 2016-12 clarifies how an entity should evaluate the collectability threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. The guidance under this topic was deferred by ASU 2015-14, issued by the FASB in August 2015, and is now effective for fiscal years and interim periods beginning on or after December 15, 2017 with early adoption permitted as of the original effective date for periods beginning after December 15, 2016. We are currently assessing the impactPart I, Item 1 of this update on our consolidated financial statements.In July 2015, FASB issued ASU 2015-11, Inventory—Simplifying the Measurement of Inventory, which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. The ASU defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The update does not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The update applies to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost methods. The amendments in this ASU will be effective for the Company for fiscal years, and the interim periods within those years, beginning after December 15, 2016. The amendments must be applied prospectively and early adoption is permitted. We are currently assessing the impact of this update on our consolidated financial statements.In January 2016, FASB issued ASU 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure.The amendments in this ASU will be effective for the Company for fiscal years, and interim periods within those years, beginning after December 15, 2017. The amendments must be applied prospectively and early adoption is permitted for certain measurement enhancements within this amendment. Early adoption is not permitted for otheraspects updated in this amendment. The Company is currently assessing the impact of this update on its consolidated financial statements.In February 2016, FASB issued ASU 2016-02, Leases. This update requires the recognition of certain lease assets and lease liabilities on the balance sheet as well as the disclosure of key information about leasing arrangements. The amendments in this ASU require the recognition and measurement of leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients which may be elected by the Company. The amendments in this ASU will be effective for the Company for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. The Company is currently assessing the impact of this update on its consolidated financial statements.In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation—Stock Compensation. The amendments in this ASU simplify several aspects of the accounting for stock-based compensation, including the income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The new standard is effective for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. These amendments are to be applied on a retrospective, modified retrospective, or prospective basis, depending on the related items. We are currently assessing the impact of this update on its consolidated financial statements.In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses. This update seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments, including trade receivables, and other commitments to extend credit held by a reporting entity at each reporting date. The amendments require an entity to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects current expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The amendments will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which guidance is effective, which is a modified-retrospective approach. The Company is currently assessing the impact of this update on its consolidated financial statements.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Clarification of Certain Cash Receipts and Cash Payments. This update was issued to address the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows by adding or clarifying guidance on eight specific cash flow issues. The amendments in this ASU will be effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The amendments should be applied retrospectively to all periods presented, unless deemed impracticable, in which case, prospective application is permitted. The Company is currently assessing the impact of this update on its consolidated financial statements.10‑K10-K for the year ended December 31, 2015.2016.13a‑15(e)13a-15(e) and 15d‑15(e)15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, due to the material weakness in our internal control over financial reporting as described below, the Company’s disclosure controls and procedures are not effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and are not effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’sour management, including the Company’sour Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.3910‑Q.10-Q.It is expected thatOn March 29, 2017, the Prime Minister of the U.K. government will commence asubmitted formal notice to the E.U. in order to trigger Article 50 of the Treaty on European Union. This is the formal mechanism which begins the two-year process of negotiation to determinenegotiating the U.K.’s exit from the E.U. and the future terms of the U.K.’s withdrawal fromrelationship with the E.U., including the terms of trade between the U.K. and the E.U., and potentially other countries. A withdrawal could, among other outcomes, disrupt the free movement of goods, services and people between the U.K. and the E.U., undermine bilateral cooperation in key geographic areas, disrupt the markets we serve, and significantly disrupt trade between the U.K. and the E.U. or other nations as the U.K. pursues independent trade relations. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate. The effects of Brexit will depend on any agreements the U.K. makes to retain access to the E.U. or other markets either during a transitional period or more permanently. Compliance with new laws or regulations regarding trade, delivery and other cross-border activities between the U.K. and the E.U. could be costly, negatively impacting our business, financial condition, operating results and cash flows. Our International segment operates principally in the U.K. For the ninesix months ended SeptemberJune 30, 2016,2017, our International segment contributed approximately 14%12% of our consolidated revenues.following table provides information regarding repurchasesCompany did not repurchase any shares of our common stock during the quartersix months ended SeptemberJune 30, 2016:150,000 25.76 150,000 47,965 47,965 47,965 150,000 25.76 150,000 47,965 (a)On March 8, 2016, the Company’s board of directors authorized a common stock repurchase program that allows the Company to repurchase up to $60 million of its common stock from time to time over a two year period in both open market and privately negotiated transactions. No repurchases were made under the program prior to the second quarter of 2016.10‑Q10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.41Date: November 7, 2016August 8, 2017Becky A. SheehanBecky A. Sheehan(Principal (Principal Financial Officer and42Incorporated by
Reference toNo.No. Exhibit Description 10‑Q10-QFormFile No. Date
Filed10.1 Rhys Hughes ServiceThird Amended and Restated 2013 Incentive Compensation Plan Restricted Stock Unit Issuance Agreement Second AmendmentXX 10.2 Employment Agreement by and between Helen Quinn and FTD Companies, Inc.X10.3 Second Amendment to the FTD Companies, Inc. 2016 Management Bonus PlanX31.1 XX 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 XX 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 XX 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 XX XBRL Instance Document XX XBRL Taxonomy Extension Schema Document XX XBRL Taxonomy Calculation Linkbase Document XX XBRL Taxonomy Label Linkbase Document XX XBRL Taxonomy Presentation Linkbase Document XX XBRL Taxonomy Extension Definition Document XX 43