UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

ý        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

OR

o        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to              

Commission file number 001-32425

FTD Group, Inc.

(Exact name of registrant as specified in its charter)

3113 Woodcreek Drive
Downers Grove, IL 60515
(Address of principal executive offices)

(630) 719-7800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).  YES o NO ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).  YES o NO ý

As of November 9, 2005, there were 29,482,182 outstanding shares of the issuer’s Common Stock, par value $0.01 per share.

FTD GROUP, INC.

INDEX TO FORM 10-Q

PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements

FTD GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

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FTD GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME  (LOSS)

(Unaudited)

(In thousands, except per share amounts)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

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FTD GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

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 FTD Group, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1.  Description of the Business

FTD Group, Inc., formerly Mercury Man Holdings Corporation, is a Delaware corporation that was formed in 2003 by Green Equity Investors IV, L.P. (“Green Equity Investors”), a private investment fund affiliated with Leonard Green & Partners, L.P., solely for the purpose of acquiring majority ownership of FTD, Inc.  As used in this Form 10-Q, the term the “Company” refers to FTD Group, Inc., including its wholly-owned subsidiary, FTD, Inc.

FTD, Inc. is a Delaware corporation that commenced operations in 1994 and includes the operations of its principal operating subsidiary, Florists’ Transworld Delivery, Inc., a Michigan corporation (“FTD” or the “Operating Company”).  The operations of FTD include those of its wholly-owned subsidiaries, FTD.COM INC. (“FTD.COM”) and FTD Canada, Inc. (formerly known as Florists’ Transworld Delivery Association of Canada, Ltd.), and its indirect wholly-owned subsidiary, Renaissance Greeting Cards, Inc. (“Renaissance”).  Substantially all of the Company’s operations are conducted through FTD and its subsidiaries.

On February 24, 2004, the Company completed a going private transaction, in which Nectar Merger Corporation, which was a wholly-owned subsidiary of the Company, merged with and into FTD, Inc. with FTD, Inc. continuing as the surviving corporation (the “2004 Going Private Transaction”).

On November 23, 2004, the Company filed a registration statement with the Securities and Exchange Commission, (the “SEC”) on Form S-1 (Registration No. 333-120723), relating to an initial public offering of the Company’s Common Stock (the “IPO”).  The registration statement was declared effective by the SEC on February 8, 2005.  The Company issued an aggregate of 15,842,893 shares in connection with the IPO.  See Note 3 for further detail.

On February 7, 2005, the stockholders approved an increase in the number of authorized shares to 75,000,000, as well as a 1-for-3 reverse stock split.  All common share and per share amounts reflect this reverse stock split.

The Company provides floral-related products and services to consumers and retail florists, as well as other retail locations offering floral products, in the floral retail market.  The Company generates its revenue from two segments, the florist segment and the consumer segment.

Through its florist segment, the Company provides products and services, such as clearinghouse services, publishing products and services, technology products and services and floral shop supplies, to approximately 20,000 FTD members in the U.S. and Canada, and connects approximately 30,000 additional florists through affiliated or related organizations in 150 countries outside of North America.

The consumer segment is comprised of FTD.COM, an Internet and telephone marketer of flowers and specialty gifts, which sells products directly to consumers primarily through the www.ftd.com Web site and the 1-800-SEND-FTD toll-free telephone number.

Seasonality.  In view of seasonal variations in the revenues and operating results of the Company’s florist and consumer business segments, the Company believes that comparisons of its revenues and operating results for any period with those of the immediately preceding period or the same period of the preceding fiscal year may be of limited relevance in evaluating the Company’s historical performance and predicting the Company’s future financial performance.  The Company’s working capital, cash and short-term borrowings also fluctuate during the year as a result of the factors set forth below.

Revenues and operating results tend to be lower for the quarter ending September 30 because none of the most popular floral and gift holidays, which include Valentine’s Day, Easter, Mother’s Day, Thanksgiving and Christmas, fall within that quarter.  In addition, depending on the year, the popular floral holiday of Easter sometimes falls within the quarter ending March 31 (as it did in fiscal year 2005) and sometimes falls within the quarter ending June 30 (as it did in fiscal year 2004).

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Note 2.  Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the SEC, and do not contain all information included in the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2005.  The interim unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s consolidated financial statements for the fiscal year ended June 30, 2005.  In the opinion of management, the information furnished herein reflects all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented.

Note 3.  Initial Public Offering

On February 14, 2005, the Company closed the sale of 13,100,000 shares of Common Stock at a price of $13.00 per share in a firm commitment underwritten initial public offering.  In addition, on that date, 2,307,693 shares of Common Stock were sold at the public offering price to Green Equity Investors IV, L.P., the Company’s principal stockholder and an affiliate.  On March 15, 2005, the Company closed the sale of 435,200 shares of Common Stock at the public offering price to satisfy the underwriter’s over-allotment option.  The offering was effected pursuant to a Registration Statement on Form S-1 (File No. 333-120723), which the Securities and Exchange Commission declared effective on February 8, 2005.  Goldman, Sachs & Co. and Citigroup were the managing underwriters for the offering.

Of the approximately $206.0 million in gross proceeds raised by the Company in the offering and the underwriter’s overallotment option, approximately $12.3 million was paid to the underwriters in connection with the underwriting discount.

Of the $193.6 million balance of proceeds to the Company:

•                  $186.8 million was used to repurchase all outstanding shares of the Company’s 14% Senior Redeemable Exchangeable Cumulative Preferred Stock and all outstanding shares of the Company’s 12% Junior Redeemable Exchangeable Cumulative Preferred Stock, including a prepayment premium of $21.5 million;

•                  $5.3 million was used to redeem a portion of FTD, Inc.’s 7.75% Senior Subordinated Notes due 2014 (the “Notes”);

•                  $1.4 million was used to pay for fees and expenses of the offering; and

•                  the balance was used for general corporate purposes.

Note 4.  Acquisition

On December 19, 2004, FTD.COM completed the acquisition of certain assets of The Flower Concierge, Inc. (doing business as Florist.com) (“Flower Concierge”), pursuant to an asset purchase agreement by and among FTD.COM, Flower Concierge and Aron and Celina Benon (the “Flower Concierge Agreement”).  Flower Concierge was acquired to gain new customers and increase order volume, among other reasons.  Flower Concierge was a direct marketer of flowers and specialty gifts and was an FTD member prior to this acquisition.

Pursuant to the terms of the Flower Concierge Agreement, the purchase price for the assets acquired was $8.5 million, including $0.2 million of acquisition costs.  The purchase price was funded through a $5.3 million promissory note, which accrued interest at 6.0% annually and was paid in full on January 3, 2005, with the remainder funded from existing cash balances.  The assets acquired primarily consisted of Flower Concierge’s Web site, www.florist.com, valued at $7.8 million, a customer list, non-compete agreements and $0.2 million of goodwill.

The results of operations associated with the purchase of certain assets of Flower Concierge since the closing date are included in the consolidated financial statements and were accounted for using the purchase method of accounting.  Accordingly, the financial statements reflect the allocation of the total purchase price to the net intangible assets acquired, based on their respective fair values.  Pro forma financial information related to this

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acquisition has not been included herein as the operating results of Flower Concierge are not considered material to the Company’s operating results.

 Note 5.  Net Income (Loss) Per Common Share

The computations of basic and diluted net income (loss) per common share for the three-month periods ended September 30, 2005 and 2004 are as follows (in thousands, except per share amounts):

Shares associated with stock options that were not included in the computation of net income (loss) per share because their effect was anti-dilutive consisted of 90,000 shares and 2,099,457 shares for the three-month periods ended September 30, 2005 and 2004, respectively.

Note 6.  Financing Arrangements

Long-term debt consisted of the following (in thousands):

$135.0 million Senior Secured Credit Facility

In connection with the consummation of the 2004 Going Private Transaction, FTD, Inc. entered into the 2004 Credit Agreement with a syndicate of financial institutions, including Credit Suisse First Boston, acting through its Cayman Islands Branch, as administrative agent, UBS Securities LLC, as syndication agent, and Wells Fargo Bank, N.A., as documentation agent.  Borrowings under the 2004 Credit Agreement are secured by first priority security interests in, and mortgages on, substantially all of FTD, Inc.’s tangible and intangible assets, including the assets of FTD Group, Inc.

All of the Company’s consolidated net assets are owned, and all of the Company’s consolidated net sales are earned, by its direct and indirect subsidiaries.  As of September 30, 2005, restricted assets totaled $569.8 million.

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The 2004 Credit Agreement provides for aggregate borrowings of up to $135.0 million and consists of a five-year $50.0 million revolving credit facility and a seven-year $85.0 million term loan.  As the Company makes principal repayments on the term loan, the balance of the term loan is permanently reduced. A portion of the revolving credit facility is available as a letter of credit sub-facility and as a swing-line facility.  Borrowings under the revolving credit facility are used to finance working capital, capital expenditures, acquisitions, certain expenses associated with the bank credit facilities and letter of credit needs.  The revolving credit facility included $1.6 million in letters of credit outstanding and had availability of $43.4 million at September 30, 2005.

Borrowings under the 2004 Credit Agreement generally bear interest based on a margin over, at FTD, Inc.’s option, either the base rate (generally the applicable prime lending rate of Credit Suisse First Boston, as announced from time to time) or the London Interbank Offered Rate (“LIBOR”).  The applicable margin for borrowings under the 2004 Credit Agreement varies based upon FTD, Inc.’s Consolidated Leverage Ratio, as defined in the 2004 Credit Agreement, which was amended on November 15, 2004 to reduce the margins on the term loan.  The 2004 Credit Agreement requires FTD, Inc. to pay commitment fees on the unused portion of the revolving credit facility, which vary based on the utilization of the revolving credit facility.

The 2004 Credit Agreement includes covenants that, among other things, require that as of September 30, 2005, FTD, Inc. maintain a ratio of consolidated earnings before interest, taxes, depreciation and amortization (subject to certain adjustments) to consolidated interest expense of no less than 2.2 to 1.0, a fixed charge coverage ratio of no less than 1.5 to 1.0 and a leverage ratio not to exceed 5.5 to 1.0.  The Company was in compliance with all debt covenants as of September 30, 2005.  Debt covenant targets are adjusted quarterly in accordance with the terms of the 2004 Credit Agreement.

The 2004 Credit Agreement imposes various restrictions on the Company, including restrictions that limit FTD, Inc.’s ability to incur liens or encumbrances, make investments or acquisitions, incur additional debt, enter into sale leaseback transactions, incur certain contingent liabilities, make certain restricted junior payments and other similar distributions, enter into mergers, consolidations and similar combinations, sell assets or engage in similar transfers, amend certain material agreements, including the indenture governing the Notes, make capital expenditures and engage in transactions with affiliates.

There was $73.8 million in outstanding debt at September 30, 2005 under the 2004 Credit Agreement.  FTD, Inc. is permitted to voluntarily repay principal amounts outstanding or reduce commitments under the 2004 Credit Agreement at any time, in whole or in part, without premium or penalty, upon the giving of proper notice and subject to minimum amount requirements.  In addition, subject to certain exceptions, FTD, Inc. is required to prepay outstanding amounts under the 2004 Credit Agreement with a portion of its excess cash flow, the net proceeds of certain asset dispositions, casualty insurance and condemnation recovery events and upon the issuance of certain securities or debt.  The term loan is due in annual installments of $0.7 million per year with the remaining balance due at maturity, on February 28, 2011.  As a result of the excess cash flow payment requirements, as defined in the 2004 Credit Agreement, the current portion of the total outstanding debt as of September 30, 2005 is $1.3 million.

As a result of entering into the 2004 Credit Agreement, FTD, Inc. originally recorded $4.2 million of deferred financing costs, which were allocated, pro rata, to the five-year revolving credit facility and the seven-year term loan and are being amortized using the effective interest method over the respective terms.  During fiscal year 2005, the Company paid down the term loan by $15.8 million, which resulted in a write-off of deferred financing costs of $0.5 million.

$175.0 million 7.75% Senior Subordinated Notes due 2014

On February 6, 2004, Nectar Merger Corporation completed the issuance and sale of $175.0 million in aggregate principal amount of the $175.0 million 7.75% Senior Subordinated Notes due 2014.  Upon consummation of the 2004 Going Private Transaction, FTD, Inc. assumed Nectar Merger Corporation’s obligations under the Notes.  The Notes will mature on February 15, 2014 and interest is payable on February 15 and August 15 of each year.  The proceeds from the issuance of the Notes were used to finance the 2004 Going Private Transaction.

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The Notes are unsecured, senior subordinated obligations, ranking junior in right of payment to all of FTD, Inc.’s existing and future senior indebtedness and equal in right of payment to all of the Company’s existing and future senior subordinated indebtedness.  The Notes rank senior in right of payment to all of FTD, Inc.’s existing and future subordinated indebtedness and are unconditionally guaranteed by the Company and FTD, Inc.’s subsidiary guarantors on a senior subordinated basis.

The indenture governing the Notes provides for certain limitations on FTD, Inc.’s ability to incur additional indebtedness, issue disqualified capital stock, make restricted payments, permit restrictions on dividends or other payment restrictions affecting subsidiaries, layer indebtedness, enter into liens securing indebtedness, enter into transactions with affiliates or guarantors, enter into certain merger, sale or consolidation transactions and release guarantors.

As a result of issuing the Notes, the Company recorded $6.7 million of deferred financing costs, which are being amortized using the effective interest method.  During fiscal year 2005 the Company redeemed $4.9 million of the Notes, which resulted in a write-off of deferred financing costs of $0.2 million.

Note 7.  Preferred Stock Subject to Mandatory Redemption

The Company has authorized 200,000 shares of preferred stock, par value $0.01 per share.  The Company had issued 72,695 shares of 14% mandatorily redeemable Senior exchangeable cumulative preferred stock, par value $0.01 per share (the “Senior Preferred”), and 72,695 shares of 12% mandatorily redeemable Junior exchangeable cumulative preferred stock, par value $0.01 per share (the “Junior Preferred” and together with the Senior Preferred, the “Preferred Stock”), in conjunction with the 2004 Going Private Transaction.  Each share of Preferred Stock was non-voting, non-participating and had a liquidation value of $1,000 per share as of the date of issue.  The liquidation value, plus accrued and unpaid dividends, was payable on August 24, 2024, the mandatory redemption date.  Because the shares were mandatorily redeemable at a fixed date, such shares were classified as a liability on the related consolidated balance sheet, pursuant to SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity, and the related dividends reflected as interest expense.

The Company used $186.8 million of the net proceeds of its IPO to redeem in full all of the Company’s outstanding shares of its Preferred Stock, including a prepayment premium of $21.5 million which was incurred during the third quarter of fiscal year 2005.

Note 8. Pension and Other Post Retirement Benefit Plans

Note 9.  Related Party Transactions

In connection with the 2004 Going Private Transaction, FTD, Inc. entered into a management services agreement with Leonard Green & Partners, L.P.  Under the management services agreement, Leonard Green & Partners, L.P. provided management, consulting and financial planning services in exchange for an annual management fee of $2.0 million, payable in equal monthly installments commencing in March 2004.  This agreement was terminated in February 2005, in connection with the IPO in consideration of a lump sum payment of

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$12.5 million by FTD, Inc. to Leonard Green & Partners L.P., in accordance with the management services agreement.  For the three-month period ended September 30, 2004, the Company incurred expenses of $0.5 million, related to the management services agreement.

Note 10.  Capital Stock Transactions

During the three-month period ended September 30, 2005 the Company issued 4,835 shares of Common Stock in connection with the exercise of vested stock options.

On September 30, 2004, the Company sold 275,559 shares of Common Stock to certain members of the Company’s management for cash consideration of $826,667, which represented fair market value on the date of purchase.  The Company invested the proceeds in FTD, Inc.

On February 7, 2005, the stockholders approved an increase in the number of authorized shares to 75,000,000 as well as a 1-for-3 reverse stock split.  All common share and per share amounts reflect this reverse stock split.

On February 14, 2005, the Company completed an initial public offering of 15,407,693 shares of Common Stock and on March 15, 2005, the underwriters exercised their over-allotment option and purchased 435,200 shares of Common Stock.  See Note 3 for further detail.

Note 11.  Stock Awards and Incentive Plans

The Company’s Stock Option Plan was adopted and approved by the Board of Directors on September 30, 2004, and provided for the issuance of up to 2,192,778 shares of Common Stock of the Company in connection with the granting of incentive or non-qualified stock options.

On February 7, 2005, the Company amended the Stock Option Plan to allow for the issuance of a total of 4,592,778 shares of Common Stock of the Company in connection with the 2005 Amended and Restated Equity Incentive Award Plan (the “2005 Plan”).  The principal purpose of the 2005 Plan is to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards.  The 2005 Plan provides for a variety of such awards, including non-qualified stock options, incentive stock options (within the meaning of the Internal Revenue Code of 1986, as amended), stock appreciation rights, restricted stock awards, restricted stock unit awards, deferred stock awards, dividend equivalents, performance share awards, performance stock unit awards, stock payment awards, performance-based awards and other stock-based awards.

During the three-month periods ended September 30, 2005 and 2004, the Company granted 55,000 options and 2,099,457 options, respectively, to various employees of the Company.  Outstanding non-qualified stock options have an expiration date ten years from the date of grant and begin vesting as early as the date of grant, dependent upon the individual agreements.  All stock options were granted with an exercise price equal to the fair market value on the date of grant.

During the three-month periods ended September 30, 2005 and 2004, no options were forfeited and during the three-month period ended September 30, 2005, 4,835 options were exercised.

Prior to July 1, 2005, the Company accounted for stock-based compensation programs according to the provisions of Accounting Principles Board Opinion (“ABP”) No. 25, Accounting for Stock Issued to Employees, as permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation.  Effective July 1, 2005, the Company adopted the fair value recognition provisions of FAS 123 (R), Share-Based Payments, using the modified prospective transition method and Black-Scholes as the option valuation model.  Under that transition method, compensation cost recognized in the three months ended September 30, 2005 included (i) compensation cost for all share-based payments granted prior to, but not yet vested as of July 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (ii) compensation cost for all share-based payments granted subsequent to July 1, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123 (R).  Results for prior periods have not been restated.

As a result of adopting FAS 123(R) on July 1, 2005, income before income taxes and net income for the three month period ended September 30, 2005 are $165,000 and $99,000 lower, respectively, than if the Company had

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continued to account for share-based compensation under APB No. 25.  Basic and diluted earnings per share for the three month period ended September 30, 2005 would have been $0.12 if SFAS No. 123(R) had not been adopted, compared to $0.12 basic earnings per share and $0.11 diluted earnings per share as reported.

The Company would have recognized additional compensation expense, net of tax, of $1,000 related to the Company’s stock options in the three-month period ended September 30, 2004 if the estimated fair value, as determined in accordance with SFAS No. 123, of the outstanding stock options of the Company had been recorded in the consolidated financial statements.  As such, the Company’s net loss would have been impacted as shown by the pro forma amount displayed in the table below (the pro forma disclosures shown are not representative of the future effects on net income (loss)):

The Company’s options granted to employees either vest equally each year over an approximate five-year period or vest in full after an approximate seven-year period unless certain performance acceleration targets are met.  If the performance targets are met, the vesting of the options will accelerate.  The first performance target was met so the first installment vested on June 30, 2005.  If certain additional performance targets are met, the remaining two installments will vest on June 30, 2006 and 2007.

The Company’s options granted to independent directors vest equally in thirds, one-third on the date of grant, one-third on the first anniversary of the date of grant and the remaining one-third on the second anniversary of the date of grant.

As a result, the cost recognized during the three-month period ended September 30, 2005 and the estimated cost indicated in the table above for the three-month period ended September 30, 2004, reflected only a partial vesting of such options.  If full vesting were assumed, the costs recognized and the estimated pro forma costs would have been higher than indicated above.

Note 12.  Commitments and Contingencies

The Company is involved in various claims and lawsuits and other matters arising in the normal course of business.  In the opinion of management of the Company, although the outcome of these claims and suits are uncertain, they should not have a material adverse effect on the Company’s financial condition, liquidity or results of operations.

The Company also has a commitment with a distribution center facility in Cincinnati, Ohio, where it stores and distributes product through June 30, 2008.

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Note 13.  Segment Information

Operating segments are components of the business for which separate financial information is available that is regularly reviewed by the enterprise’s chief operating decision maker to make decisions about resources to be allocated to each segment and to assess its performance.  Revenue and expenses earned and charged between segments are recorded at fair value and eliminated in consolidation.

For purposes of managing the Company, management reviews segment financial performance to the operating income level for each of its reportable segments.  As such, interest income, interest expense and tax expense are recorded on a consolidated corporate basis.

The florist segment includes all products and services sold to FTD members, encompassing clearinghouse services, publishing products and services, technology products and services and floral shop supplies.  The consumer segment encompasses sales of floral and specialty gift products, which are sold primarily to consumers through FTD.COM’s Web site, www.ftd.com, or its toll-free telephone number, 1-800-SEND-FTD.

The following table reports the Company’s operating results by reportable segment for the three-month periods ended September 30, 2005 and 2004:

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Note 14.  Financial Statements of Guarantors

The accompanying consolidated balance sheets, statements of operations and statements of cash flows presented herein represent the accounts of the Company and its Guarantor and non-Guarantor subsidiaries, as defined in the indenture to the Notes issued in February 2004.  The Notes are unconditionally guaranteed, on a joint and several basis, by the Guarantor subsidiaries including FTD Group, Inc. and all domestic subsidiaries of FTD, Inc.  Non-Guarantor subsidiaries include Florists’ Transworld Delivery Association of Canada, Ltd. and Florists’ Transworld Delivery de Mexico, both of which are insignificant and are therefore not separately presented.  As FTD, Inc., either directly or indirectly, owns 100% of each of the Guarantor subsidiaries (other than FTD Group, Inc.) and, as FTD, Inc. does not have any independent assets or operations apart from the Guarantor subsidiaries or FTD Group, Inc., separate subsidiary financial information has not been presented.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes to those statements that appear elsewhere in this Form 10-Q.  The following discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs.  The Company’s actual results could differ from those discussed in the forward-looking statements.  Factors that could cause or contribute to any differences include, but are not limited to, those discussed under the captions “Forward-Looking Information” and elsewhere in this Form 10-Q.

Overview

FTD Group, Inc. is a leading provider of floral-related products and services to consumers and retail florists, as well as other retail locations offering floral products, in the U.S. floral retail market.  The business is supported by the highly recognized FTD brand, which was established in 1910 and enjoys 96% brand recognition among the Company’s target market of U.S. consumers between the ages of 25 and 64, as well as by the Mercury Man logo, which is displayed in approximately 50,000 floral shops, globally.  The Company generates revenue from two business segments, the florist segment and the consumer segment.

Florist Segment.  The florist segment includes revenue associated with the services and products provided to FTD members and other retailers offering floral products. The following table sets forth the percentage of revenue in each category of the florist segment:

Consumer Segment.  The consumer segment is comprised of FTD.COM, an Internet and telephone marketer of flowers and specialty gifts, which sells products directly to consumers primarily through the www.ftd.com Web site and the 1-800-SEND-FTD toll-free telephone number.  FTD.COM offers same day delivery of floral orders to nearly 100% of the U.S. and Canadian populations.  The majority of orders are fulfilled by the Company’s network of approximately 20,000 FTD members who adhere to FTD.COM’s quality and service standards.  FTD.COM typically offers over 400 floral arrangements and over 800 specialty gift items, which are delivered via common courier, including unarranged boxed flowers, plants, gourmet food gifts, holiday gifts, bath and beauty products, jewelry, wine and gift baskets, dried flowers and stuffed animals.

Key Industry Trends.  The Company believes key trends in the floral retail market include the increasing role of floral direct marketers, particularly those marketing floral products over the Internet, which has resulted in increased orders for delivery to be placed through floral direct marketers versus traditional retail florists, the advent of retail consumer companies that deliver unarranged boxed flowers via common courier with no involvement of retail florists and the increased presence of supermarkets and mass merchants, which has reduced the cash and carry floral business for the traditional retail florist.  Each of these trends are addressed through the florist segment and consumer segment business strategies.

Business Strategy.  The Company plans to continue to expand the product and service offerings of the florist segment, while simplifying pricing strategies and improving sales and service capabilities, with the objective of improving product penetration and maintaining or growing the number of FTD members.  The Company is currently pursuing opportunities to expand its presence in a number of channels that have not historically represented a meaningful portion of the Company’s revenues, such as the supermarket channel and other mass market channels.

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The Company plans to continue to direct consumers to the Internet for their floral and specialty gift purchasing needs, as processing orders over the Internet is a profitable order generating vehicle and an efficient and convenient ordering method for the consumer.  The Company also plans to pursue growth in additional specialty gift categories as management believes the Company’s direct marketing expertise and brand strength allows the business to attract a wide range of quality specialty gift manufacturers.  Additionally, the Company plans to continue expanding the lower-priced floral offerings to meet consumer demand.  Management believes this is a growing segment of the market and the Company is expanding its marketing efforts and product offerings targeting this segment.  The network of FTD members enables the Company to offer same day delivery for many of these products, which management believes is a competitive advantage over the Company’s competitors who offer delivery on a next day basis through common courier.

The Company plans to continue to reduce its indebtedness and repurchase shares of its Common Stock with available cash generated from operations.

Seasonality.  In view of seasonal variations in the revenues and operating results of the Company’s florist and consumer business segments, the Company believes that comparisons of its revenues and operating results for any period with those of the immediately preceding period or the same period of the preceding fiscal year may be of limited relevance in evaluating the Company’s historical performance and predicting the Company’s future financial performance.  The Company’s working capital, cash and short-term borrowings also fluctuate during the year as a result of the factors set forth below.

Revenues and operating results tend to be lower for the quarter ending September 30 because none of the most popular floral and gift holidays, which include Valentine’s Day, Easter, Mother’s Day, Thanksgiving and Christmas, fall within that quarter.  In addition, depending on the year, the popular floral holiday of Easter sometimes falls within the quarter ending March 31 (as it did in fiscal year 2005) and sometimes falls within the quarter ending June 30 (as it did in fiscal year 2004).

Three Months ended September 30, 2005 compared to the three months ended September 30, 2004

Total revenues

Revenues increased by $3.8 million, or 4.6%, to $85.9 million for the three-month period ended September 30, 2005, compared to revenues for the three-month period ended September 30, 2004 of $82.1 million.  There were no revenues associated with corporate activities.

Management believes a key metric in driving revenues for the florist segment is the number of FTD members that use or purchase services and products provided by the florist segment, which is partially driven by membership.  Membership as of September 30, 2005 and 2004 was approximately 19,700 and 19,800 FTD members, respectively.  Average membership for the three-month period ended September 30, 2005 and 2004 was approximately 19,700 and 20,100 FTD members, respectively.  Revenues for the florist segment decreased by $1.4 million, or 3.0% to $44.3 million for the three-month period ended September 30, 2005, compared to revenues for the three-month period ended September 30, 2004 of $45.7 million.  This decrease in revenues is primarily related to the strategic elimination of certain specialty wholesaling product lines which were not running profitably or were inventory intensive and not core to the business.  Revenues related to all of the specialty wholesaling product lines were $11.5 million in the first quarter of fiscal year 2006 compared to $13.4 million in the same period of the prior fiscal year.  The florist segment, excluding the specialty wholesaling product lines, experienced revenues of $32.8 million in the first quarter of fiscal year 2006 compared to $32.3 million in the same period of the prior fiscal year.

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Management believes a key metric in driving revenues in the consumer segment is order volume.  The growth in order volume was the primary factor for the increase in revenues for the consumer segment of $5.2 million, or 14.3%, to $41.6 million for the three-month period ended September 30, 2005 compared to $36.4 million for the three-month period ended September 30, 2004.  Order volume increased 16.3% to 689,000 orders for the three-month period ended September 30, 2005, from 592,000 orders for the three-month period ended September 30, 2004.  Partially contributing to the increase in order volume were sales of specialty gifts, which include all orders delivered via common courier and comprised 36.4% of total order volume for the three-month period ended September 30, 2005, compared to 24.0% for the three-month period ended September 30, 2004.  Internet orders were 88.0% of total orders for the three-month period ended September 30, 2005, compared to 84.6% for the three-month period ended September 30, 2004.  Average order value for the three-month period ended September 30, 2005 was $60.31, which was slightly lower than average order value of $61.41 during the three-month period ended September 30, 2004.  This decrease in average order value is primarily related to an increase in demand for the lower priced product offerings.

Total costs of goods sold and services provided