UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2006

or

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.

Delaware		87-0719190
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

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 þ NO o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one):

     Large accelerated filer o                     Accelerated filer þ                     Non-accelerated filer o

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

     As of February 6, 2007, there were 28,334,856 outstanding shares of the issuer’s Common Stock, par value $0.01 per share.

 

 

FTD GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX

Part I. Financial Information
Item 1.		Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets			2
		Condensed Consolidated Statements of Income and Comprehensive Income			3
		Condensed Consolidated Statements of Cash Flows			4
		Notes to Condensed Consolidated Financial Statements			5
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3.		Quantitative and Qualitative Disclosures about Market Risk			21
Item 4.		Controls and Procedures			22
Part II. Other Information
Item 1.		Legal Proceedings			23
Item 1A.		Risk Factors			23
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			23
Item 4.		Submission of Matters to a Vote of Security Holders			23
Item 6.		Exhibits			24
Signatures					25
Exhibit Index
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FTD GROUP, INC.

		December 31, 2006				June 30, 2006
ASSETS
Current assets:
Cash and cash equivalents		$	30,760			$	10,954
Accounts receivable, less allowance for doubtful accounts of $5,084 at December 31, 2006 and $4,437 at June 30, 2006			54,846				26,044
Inventories, net			5,191				3,542
Other current assets			9,375				5,985
Total current assets			100,172				46,525
Property and equipment:
Property and equipment, at cost			33,687				25,265
Less accumulated depreciation			8,400				6,051
Property and equipment, net			25,287				19,214
Other assets:
Computer software, net			14,331				10,577
Other noncurrent assets			22,642				21,405
Intangible assets, less accumulated amortization of $7,544 at December 31, 2006 and $5,993 at June 30, 2006			15,027				14,780
Trademark			186,451				121,577
Goodwill			416,518				336,659
Total other assets			654,969				504,998
Total assets		$	780,428			$	570,737
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	82,145			$	45,273
Notes payable			22,684				—
Other accrued liabilities			28,237				24,083
Current maturities of long-term debt			1,500				1,125
Total current liabilities			134,566				70,481
Senior secured credit facility			148,125				48,875
Senior subordinated notes			170,117				170,117
Post-retirement benefits, accrued pension obligations and other liabilities			5,119				2,368
Deferred income taxes			81,590				61,160
Stockholders’ equity:
Common stock: $0.01 par value, 75,000,000 shares authorized; 29,482,182 shares issued as of December 31, 2006 and June 30, 2006			295				295
Additional paid-in capital			234,844				233,362
Retained earnings (accumulated deficit)			9,996				(1,554	)
Accumulated other comprehensive income			6,587				200
Treasury stock, at cost, 1,147,326 shares as of December 31, 2006 and 1,504,480 shares as of June 30, 2006			(10,811	)			(14,567	)
Total stockholders’ equity			240,911				217,736
Total liabilities and stockholders’ equity		$	780,428			$	570,737

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

FTD GROUP, INC.

		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2006				2005				2006				2005
Revenues:
Products		$	115,828			$	81,359			$	189,701			$	137,189
Services			35,712				27,826				70,610				57,865
Total revenues			151,540				109,185				260,311				195,054
Costs of products sold and services provided:
Products			84,392				56,346				140,546				97,655
Services			4,926				4,776				9,195				9,325
Total costs of products sold and services provided			89,318				61,122				149,741				106,980
Gross profit:
Products			31,436				25,013				49,155				39,534
Services			30,786				23,050				61,415				48,540
Total gross profit			62,222				48,063				110,570				88,074
Operating expenses:
Advertising and selling			24,855				21,890				41,419				39,541
General and administrative			20,354				11,467				36,764				23,396
Total operating expenses			45,209				33,357				78,183				62,937
Income from operations			17,013				14,706				32,387				25,137
Other income and expenses:
Interest income			(339	)			(129	)			(637	)			(295	)
Interest expense			7,009				4,986				15,235				9,767
Other expense (income), net			249				(44	)			(1,295	)			(88	)
Total other expenses, net			6,919				4,813				13,303				9,384
Income before income tax			10,094				9,893				19,084				15,753
Income tax expense			3,987				3,992				7,534				6,425
Net income		$	6,107			$	5,901			$	11,550			$	9,328
Other comprehensive income:
Foreign currency translation adjustments			3,987				29				6,387				130
Comprehensive income		$	10,094			$	5,930			$	17,937			$	9,458
Net income per Common Share — basic		$	0.22			$	0.20			$	0.41			$	0.32
Net income per Common Share — diluted		$	0.21			$	0.19			$	0.39			$	0.31
Weighted average common shares outstanding:
Basic			28,335				29,404				28,283				29,429
Diluted			29,762				30,417				29,479				30,481

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

FTD GROUP, INC.

		Six Months Ended
		December 31,
		2006				2005
Cash flows from operating activities:
Net income		$	11,550			$	9,328
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			7,201				5,116
Gain from sale of business and related transaction			—				(991	)
Stock-based compensation expense			959				304
Amortization and write off of deferred financing costs			2,294				776
Provision for doubtful accounts			1,481				1,769
Deferred income taxes			753				862
Decrease in cash due to changes in operating assets and liabilities, net of acquisition			(5,275	)			(908	)
Net cash provided by operating activities			18,963				16,256
Cash flows from investing activities:
Acquisition of business, net of cash acquired			(96,717	)			—
Capital expenditures			(4,849	)			(5,425	)
Proceeds from sale of business			—				3,500
Net cash used in investing activities			(101,566	)			(1,925	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of financing costs			148,536				—
Repayments of long-term debt			(50,375	)			(5,936	)
Excess tax benefit from stock-based compensation			654				196
Proceeds from exercise of stock options			422				184
Purchase of company stock			—				(3,307	)
Net cash provided by (used in) financing activities			99,237				(8,863	)
Effect of foreign exchange rate changes on cash and cash equivalents			3,172				130
Net increase in cash and cash equivalents			19,806				5,598
Cash and cash equivalents at beginning of period			10,954				8,890
Cash and cash equivalents at end of period		$	30,760			$	14,488
Supplemental disclosures of cash flow information
Cash paid for:
Interest		$	12,386			$	8,972
Income taxes, net		$	9,676			$	2,539
Non-cash disclosure:
Issuance of notes payable associated with the purchase of Interflora Holdings Limited		$	23,313
Issuance of treasury stock associated with the purchase of Interflora Holdings Limited		$	3,206
Issuance of notes receivable associated with the sale of Renaissance						$	1,805

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

FTD Group, Inc.

Note 1. Description of the Business

Basis of Presentation

     These condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and footnote disclosures normally included in audited financial statements. However, in the opinion of management, all adjustments consisting only of normal recurring adjustments, unless otherwise noted herein, necessary to present fairly the results of operations, financial position and cash flows have been made. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in FTD Group, Inc.’s Annual Report on Form 10-K for the year ended June 30, 2006. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.

     As used in this Form 10-Q, the term “Company” refers to FTD Group, Inc. and its consolidated subsidiaries, including FTD, Inc. taken as a whole. FTD, Inc. is a Delaware corporation that commenced operations in 1994 and includes the operations of its principal operating subsidiaries, Florists’ Transworld Delivery, Inc. (“FTD” or the “Operating Company”), FTD.COM, INC. (“FTD.COM”) and Interflora British Unit.

     On July 31, 2006, the Company completed its acquisition of Interflora Holdings Limited (“Interflora”), the parent company of Interflora British Unit, a U.K. based provider of floral-related products and services to consumers and retail floral locations in the U.K. and the Republic of Ireland. Refer to Note 2 below. As a result of the Interflora acquisition, the Company also acquired majority control of Interflora, Inc. Interflora, Inc. is an international clearinghouse for flowers-by-wire order exchanges between its members. The results of operations associated with Interflora and Interflora, Inc. are included in a new international segment.

     All intercompany accounts and transactions have been eliminated in consolidation.

     Certain amounts reported within total revenues and costs of products sold and services provided have been reclassified between products and services in the fiscal year 2006 financial statements to conform to current year presentation. Such reclassifications primarily related to service fees in the consumer segment and did not affect reported total revenues or costs of products sold and services provided.

Recently Issued Accounting Pronouncements

     In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Standards (“SFAS”) No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statement No. 87, 88, 106 and 132(R), (“SFAS 158”), effective for the Company’s fiscal year ending June 30, 2007. SFAS 158 requires the balance sheet recognition of the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability along with a corresponding after-tax adjustment to accumulated other comprehensive income (loss) included in stockholders’ equity. The Company is currently evaluating the impact the adoption of SFAS 158 will have on the Company’s consolidated financial statements.

     In June 2006, the FASB issued Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109 (“SFAS 109”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS 109 and prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken or expected to be taken. Tax positions that meet the more-likely-than-not recognition threshold should be measured in order to determine the tax benefit to be recognized in the financial statements. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for the Company’s fiscal year ending June 30, 2008, with early adoption

permitted. The Company is currently evaluating the impact the adoption of FIN 48 will have on the Company’s consolidated financial statements.

Note 2. Acquisition of Interflora Holdings Limited

     On July 31, 2006, in connection with the Company’s international expansion strategy, the Company completed the acquisition of Interflora for a purchase price of approximately $122.8 million (£66 million) plus transaction related costs totaling $2.3 million. Approximately $98.6 million of the acquisition price was paid in cash at closing and $1.9 million of cash was acquired in connection with the purchase. The consideration included approximately $23.3 million (£12.5 million) as notes payable of which, $21.6 million (£11.6 million) will be paid in May 2007 and the remainder, $1.7 million (£0.9 million), will be paid in August 2008. The remainder of the purchase price ($3.2 million) was funded through the issuance of 216,374 shares of common stock (consisting of treasury shares) to certain senior managers of Interflora. The Company financed the acquisition with a new senior secured credit facility consisting of a $150.0 million term loan and a $75.0 million revolving credit facility. The proceeds from the new facility were also used to repay the Company’s existing term loan. Refer to Note 4 below. In addition, the Company entered into foreign currency forward exchange contracts totaling £61.8 million to hedge the acquisition cost. A contract in the amount of £51.0 million was settled on July 28, 2006 and resulted in a gain of $1.4 million, which has been recorded in other income, net within the Condensed Consolidated Statements of Income and Comprehensive Income. The remaining forward contracts include a contract for £10 million, expected to be settled during the fourth quarter of fiscal year 2007 and a contract for £0.8 million, expected to be settled during the first quarter of fiscal year 2009. The settlement of these contracts coincide with the due dates of the notes payable related to the acquisition of Interflora. For the three-month and six-month periods ended December 31, 2006, other expense (income), net included $0.2 million of expense and $1.3 million of income, respectively, primarily related to mark-to-market adjustments on forward contracts.

     Financial results for Interflora are included herein beginning August 1, 2006. The pro forma information below presents the results of operations as if the acquisition occurred on July 1, 2005 (in thousands, except per share amounts). Pro forma financial information related to Interflora, Inc. has not been included herein, as the operating results of Interflora, Inc. are not considered material to the Company’s operating results.

		Three Months Ended				Six Months Ended
		December 31,				December 31,
		2005				2006				2005
Proforma revenues		$	138,396			$	270,964			$	247,571
Proforma income from operations		$	17,426			$	33,262			$	29,393
Proforma net income		$	6,827			$	11,720			$	10,307
Proforma net income per share — basic		$	0.23			$	0.41			$	0.35
Proforma net income per share — diluted		$	0.22			$	0.40			$	0.34

     The preliminary allocation of the acquisition cost is shown in the table below (in thousands). Such allocation will be finalized when appraisals and fair value adjustments are completed.

Goodwill		$	76,024
Trademark			61,764
Computer software			4,372
Land and building			2,942
Other intangible assets (customer list)			1,711
Deferred tax liability			(20,464	)
Other assets acquired and liabilities assumed, net			(1,211	)
Total preliminary allocation of acquisition cost		$	125,138

     Goodwill and trademark assets are considered indefinite lived and therefore will not be subject to amortization, but will instead be subject to an annual impairment test. Computer software will be amortized over 5 years; the customer list will be amortized over 3 years.

     The Company implemented a deferred compensation plan for certain members of Interflora management. Under the terms of the plan, participants will be paid a cash bonus upon achieving a specified annual earnings target if such target is achieved in any annual period within the next seven years. The maximum payout under such plan is £2.9 million. During the three-month and six-month periods ended December 31, 2006, the Company recorded $0.4 million and $0.6 million of expense, respectively, related to this deferred compensation plan.

Note 3. Goodwill and Other Intangibles

     Goodwill resulting from the Interflora acquisition will be reported as part of the international segment.

     The changes in the carrying amount of goodwill, trademark and amortizable intangible assets, the related accumulated amortization as of December 31, 2006 and the estimated amortization expense are as follows (in thousands):

		Consumer				Florist				International
		Segment				Segment				Segment				Total
Goodwill:
Balance at June 30, 2006		$	178,141			$	158,518			$	—			$	336,659
Acquisition of Interflora			—				—				76,024				76,024
Impact of foreign exchange			—				—				3,835				3,835
Balance at December 31, 2006		$	178,141			$	158,518			$	79,859			$	416,518
Trademark:
Balance at June 30, 2006		$	67,842			$	53,735			$	—			$	121,577
Acquisition of Interflora			—				—				61,764				61,764
Impact of foreign exchange			—				—				3,110				3,110
Balance at December 31, 2006		$	67,842			$	53,735			$	64,874			$	186,451

		December 31, 2006												June 30, 2006
										Net
		Gross Carrying				Accumulated				Carrying				Gross Carrying				Accumulated				Net Carrying
		Amount				Amortization				Amount				Amount				Amortization				Amount
Amortizable Intangible Assets:
Customer lists		$	14,634			$	7,474			$	7,160			$	12,836			$	5,940			$	6,896
Non-compete agreements			100				70				30				100				53				47
Total		$	14,734			$	7,544			$	7,190			$	12,936			$	5,993			$	6,943

     Also included within Intangible Assets on the balance sheet is a URL asset, valued at $7.8 million, which is an indefinite lived asset and is subject to an annual impairment test.

Estimated amortization expense (in thousands):
For the remaining six-month period ending June 30, 2007		$	1,601
For the year ending June 30, 2008		$	3,180
For the year ending June 30, 2009		$	2,332
For the year ending June 30, 2010		$	77

Note 4. Financing Arrangements

     On July 28, 2006, in connection with the Interflora acquisition, FTD, Inc. entered into a new senior secured credit facility consisting of a $150.0 million term loan and a $75.0 million revolving credit facility (the “2006 Credit Agreement”). Borrowings under the 2006 Credit Agreement bear interest based on a margin over, at FTD Inc.’s option, either the base rate or the London Bank Offered Rate (“LIBOR”). The applicable margin for borrowings varies based on the Company’s consolidated leverage ratio, as defined in the 2006 Credit Agreement. The interest rate at December 31, 2006 on the term loan was 7.35%. The Credit Agreement also requires the Company to pay

commitment fees on the unused portion of the revolving credit facility. Commitment fees totaled $0.1 million for the three-month and six-month periods ended December 31, 2006. The 2006 Credit Agreement also includes covenants that, among other things, require that FTD, Inc. maintain a ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation and amortization (subject to certain adjustments) of no more than 5.75 to 1.00 and a fixed charge ratio of no less than 1.30 to 1.00. Such ratios adjust quarterly in accordance with the terms of the 2006 Credit Agreement. FTD, Inc. was in compliance with all debt covenants as of December 31, 2006.

     The 2006 Credit Agreement imposes various restrictions on the Company, including restrictions that limit FTD, Inc.’s ability to incur liens or encumbrances, make investments or acquisitions, incur additional debt, enter into sale leaseback transactions, incur certain contingent liabilities, make certain restricted junior payments and other similar distributions, enter into mergers, consolidations and similar combinations, sell assets or engage in similar transfers, amend certain material agreements, including the indenture governing the 7.75% Senior Subordinated Notes (the “Notes”), make capital expenditures and engage in transactions with affiliates.

     In conjunction with the Company’s completion of a going private transaction on February 24, 2004, FTD, Inc. entered into a senior secured credit facility (the “2004 Credit Agreement”). There was $50.0 million in outstanding debt at June 30, 2006 under the 2004 Credit Agreement, which was subsequently paid off on July 28, 2006. As a result of repaying the 2004 Credit Agreement, the Company wrote off $1.8 million of deferred financing costs, net of accumulated amortization, during the first quarter of fiscal year 2007. This expense is recorded in interest expense in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. In connection with the 2006 Credit Agreement, the Company incurred $1.5 million of deferred financing costs, which were allocated, pro rata, to the six-year revolving credit facility and the seven-year term loan and are being amortized using the effective interest method.

     At December 31, 2006, the Company had $149.6 million outstanding under the 2006 Credit Agreement and $25.8 million in outstanding letters of credit, $24.5 million of which related to the notes payable from the acquisition of Interflora, and, as a result, the revolving credit facility had availability of approximately $49.2 million.

Note 5. Net Income Per Common Share

     The computations of basic and diluted net income per common share for the three-month and six-month periods ended December 31, 2006 and 2005 are as follows (in thousands, except per share amounts):

		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2006				2005				2006				2005
Net income		$	6,107			$	5,901			$	11,550			$	9,328
Weighted average common shares outstanding — basic			28,335				29,404				28,283				29,429
Effect of dilutive securities — stock options			1,427				1,013				1,196				1,052
Weighted average common shares outstanding — diluted			29,762				30,417				29,479				30,481
Net income per share of Common Stock — basic		$	0.22			$	0.20			$	0.41			$	0.32
Net income per share of Common Stock — diluted		$	0.21			$	0.19			$	0.39			$	0.31

     For the three-month and six-month periods ended December 31, 2006 there were 12,500 and 1,015,217 outstanding stock options, respectively, that were not included in the computation of diluted earnings per share because the exercise prices of the options were greater than the average market prices of the Company’s Common Stock during the periods and therefore, were anti-dilutive. For the three-month and six-month periods ended December 31, 2005, there were 175,000 and 100,000, respectively, outstanding stock options which were not included in the computation of diluted earnings per share because their effect was anti-dilutive.

Note 6. Pension and Other Post-Retirement Benefit Plans

     The Company’s defined benefit pension plan and post-retirement benefit plan relate to a limited number of employees and retirees. Such plans were frozen in 1997. The table below provides the components of pension

expense for the defined benefit plan for the three-month and six-month periods ended December 31, 2006 and 2005 (in thousands):

		Salaried Employees’ Pension Plan
		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2006				2005				2006				2005
Service cost		$	13			$	14			$	26			$	28
Interest cost			26				27				52				55
Expected return on assets			(23	)			(22	)			(46	)			(45	)
Amortization			1				9				2				18
Net periodic benefit cost		$	17			$	28			$	34			$	56

     The following table provides the components of net periodic post-retirement benefit costs for the three-month and six-month periods ended December 31, 2006 and 2005 (in thousands):

		Retiree Medical Plan
		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2006				2005				2006				2005
Interest cost		$	22			$	20			$	44			$	40
Net periodic benefit cost		$	22			$	20			$	44			$	40

Note 7. Stock-Based Compensation

     The Company adopted SFAS 123 (R), Share-Based Payment (“SFAS 123 (R)”) on July 1, 2005 using the modified prospective method and Black-Scholes as the option valuation model. During the three-month and six-month periods ended December 31, 2006 and 2005, the Company granted 12,500 and 1,380,217 options, and 7,500 and 62,500 options, respectively, to various employees and directors of the Company. Outstanding non-qualified stock options have an expiration date ten years from the date of grant and begin vesting as early as the date of grant, dependent upon the individual agreements. All stock options were granted with an exercise price equal to the fair market value of the Company’s stock on the date of grant.

     During the six-month period ended December 31, 2006, 116,666 options were forfeited, none of which were forfeited during the three-month period ended December 31, 2006. During the three-month and six-month periods ended December 31, 2005, 150,667 options were forfeited. During the six-month period ended December 31, 2006, 140,780 options were exercised, none of which were exercised during the three-month period ended December 31, 2006. During the three-month and six-month periods ended December 31, 2005, the Company issued 25,556 and 30,391 shares, respectively, of Common Stock in connection with the exercise of vested stock options. In addition, during the three-month period ended December 31, 2005, the Company reissued 31,112 shares of Treasury Stock in connection with the exercise of vested stock options.

     Stock-based compensation expense was $0.6 million and $1.0 million, and $0.1 million and $0.3 million for the three-month and six-month periods ended December 31, 2006, and 2005, respectively. Stock-based compensation expense for the three-month and six-month periods ended December 31, 2006 may not be indicative of the expense for the entire fiscal year.

Note 8. Commitments and Contingencies

     The Company is involved in various claims and lawsuits and other matters arising in the normal course of business. In the opinion of management of the Company, although the outcome of these claims and suits are

uncertain, they should not have a material adverse effect on the Company’s financial condition, liquidity or results of operations.

Note 9. Segment Information

     For purposes of managing the Company, management reviews segment financial performance to the operating income level for each of its reportable segments. As such, interest income, interest expense and tax expense are reviewed on a consolidated corporate basis. Revenue and expenses earned and charged between segments are eliminated in consolidation.

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

     The florist segment includes all services and products sold to FTD members and other retail locations offering floral products. Services include clearinghouse, membership, technology access and support and online services. Products include containers, technology systems and fresh flowers.

     The international segment is primarily comprised of Interflora, which has both a florist business and consumer business, provides products and services to enable its members to send and deliver floral orders. Interflora is also an Internet and telephone marketer of flowers and specialty gift items to consumers, operating primarily through the www.interflora.co.uk Web site and a toll-free telephone number.

     The corporate segment includes costs related to corporate headquarters, including accounting, executive, legal, facilities, information technology and credit and collections. Costs related to facilities, information technology and credit and collections are allocated to the consumer and florist segments.

     Of the Company’s assets totaling $780.4 million at December 31, 2006, the assets of the Company’s consumer segment totaled approximately $264.9 million, the assets of the Company’s international segment totaled $193.3 million and the assets of the Company’s florist segment and corporate headquarters totaled $322.2 million.

     The following table reports the Company’s operating results by reportable segment for the three-month periods ended December 31, 2006 and 2005:

		Three Months Ended December 31,
		2006												2005
		Gross Segment				Eliminations				Consolidated				Gross Segment				Eliminations				Consolidated
		(in thousands)
Revenues:
Consumer segment		$	73,941			$	(4,466	)		$	69,475			$	68,003			$	(4,721	)		$	63,282
Florist segment			44,702				(124	)			44,578				45,989				(86	)			45,903
International segment			37,422				65				37,487				—				—				—
Total			156,065				(4,525	)			151,540				113,992				(4,807	)			109,185
Cost of Products Sold and Services Provided:
Consumer segment			50,709				(669	)			50,040				47,040				(643	)			46,397
Florist segment			13,908				(844	)			13,064				14,953				(851	)			14,102
International segment			25,740				(24	)			25,716				—				—				—
Corporate			498				—				498				623				—				623
			90,855				(1,537	)			89,318				62,616				(1,494	)			61,122
Gross Profit:
Consumer segment			23,232				(3,797	)			19,435				20,963				(4,078	)			16,885
Florist segment			30,794				720				31,514				31,036				765				31,801
International segment			11,682				89				11,771				—				—				—
Corporate			(498	)			—				(498	)			(623	)			—				(623	)
Total			65,210				(2,988	)			62,222				51,376				(3,313	)			48,063
Advertising and Selling:
Consumer segment			8,855				—				8,855				7,835				—				7,835
Florist segment			15,850				(3,076	)			12,774				17,368				(3,313	)			14,055
International segment			3,296				(70	)			3,226				—				—				—
Total			28,001				(3,146	)			24,855				25,203				(3,313	)			21,890
General and Administrative
Consumer segment			6,439				(692	)			5,747				4,871				(623	)			4,248
Florist segment			2,031				—				2,031				946				—				946
International segment			5,722				121				5,843				—				—				—
Corporate			6,041				692				6,733				5,650				623				6,273
Total			20,233				121				20,354				11,467				—				11,467
Operating Income (Loss) before Corporate Allocations:
Consumer segment			7,938				(3,105	)			4,833				8,257				(3,455	)			4,802
Florist segment			12,913				3,796				16,709				12,722				4,078				16,800
International segment			2,664				38				2,702				—				—				—
Corporate			(6,539	)			(692	)			(7,231	)			(6,273	)			(623	)			(6,896	)
Total			16,976				37				17,013				14,706				—				14,706
Corporate Allocations:
Consumer segment			1,053				—				1,053				867				—				867
Florist segment			2,331				—				2,331				2,683				—				2,683
International segment			—				—				—				—				—				—
Corporate			(3,384	)			—				(3,384	)			(3,550	)			—				(3,550	)
Total			—				—				—				—				—				—
Operating Income (Loss):
Consumer segment			6,885				(3,105	)			3,780				7,390				(3,455	)			3,935
Florist segment			10,582				3,796				14,378				10,039				4,078				14,117
International segment			2,664				38				2,702				—				—				—
Corporate			(3,155	)			(692	)			(3,847	)			(2,723	)			(623	)			(3,346	)
Total		$	16,976			$	37			$	17,013			$	14,706			$	—			$	14,706
Depreciation and Amortization:
Consumer segment		$	993			$	—			$	993			$	840			$	—			$	840
Florist segment			797				—				797				862				—				862
International segment			1,129				—				1,129				—				—				—
Corporate			966				—				966				965				—				965
Total		$	3,885			$	—			$	3,885			$	2,667			$	—			$	2,667

     The following table reports the Company’s operating results by reportable segment for the six-month periods ended December 31, 2006 and 2005:

		Six Months Ended December 31,
		2006												2005
		Gross Segment				Eliminations				Consolidated				Gross Segment				Eliminations				Consolidated
		(in thousands)
Revenues:
Consumer segment		$	124,809			$	(7,941	)		$	116,868			$	112,953			$	(8,112	)		$	104,841
Florist segment			88,583				(184	)			88,399				90,344				(131	)			90,213
International segment			54,946				98				55,044				—				—				—
Total			268,338				(8,027	)			260,311				203,297				(8,243	)			195,054
Cost of Products Sold and Services Provided:
Consumer segment			84,614				(1,127	)			83,487				77,917				(1,062	)			76,855
Florist segment			29,199				(1,671	)			27,528				30,636				(1,696	)			28,940
International segment			37,752				(40	)			37,712				—				—				—
Corporate			1,014				—				1,014				1,185				—				1,185
			152,579				(2,838	)			149,741				109,738				(2,758	)			106,980
Gross Profit:
Consumer segment			40,195				(6,814	)			33,381				35,036				(7,050	)			27,986
Florist segment			59,384				1,487				60,871				59,708				1,565				61,273
International segment			17,194				138				17,332				—				—				—
Corporate			(1,014	)			—				(1,014	)			(1,185	)			—				(1,185	)
Total			115,759				(5,189	)			110,570				93,559				(5,485	)			88,074
Advertising and Selling:
Consumer segment			13,741				—				13,741				12,367				—				12,367
Florist segment			28,574				(5,325	)			23,249				32,659				(5,485	)			27,174
International segment			4,542				(113	)			4,429				—				—				—
Total			46,857				(5,438	)			41,419				45,026				(5,485	)			39,541
General and Administrative
Consumer segment			11,379				(1,154	)			10,225				8,526				(1,050	)			7,476
Florist segment			4,296				—				4,296				3,230				—				3,230
International segment			8,745				257				9,002				—				—				—
Corporate			12,087				1,154				13,241				11,640				1,050				12,690
Total			36,507				257				36,764				23,396				—				23,396
Operating Income (Loss) before Corporate Allocations:
Consumer segment			15,075				(5,660	)			9,415				14,143				(6,000	)			8,143
Florist segment			26,514				6,812				33,326				23,819				7,050				30,869
International segment			3,907				(6	)			3,901				—				—				—
Corporate			(13,101	)			(1,154	)			(14,255	)			(12,825	)			(1,050	)			(13,875	)
Total			32,395				(8	)			32,387				25,137				—				25,137
Corporate Allocations:
Consumer segment			1,870				—				1,870				1,602				—				1,602
Florist segment			4,723				—				4,723				5,496				—				5,496
International segment			—				—				—				—				—				—
Corporate			(6,593	)			—				(6,593	)			(7,098	)			—				(7,098	)
Total			—				—				—				—				—				—
Operating Income (Loss):
Consumer segment			13,205				(5,660	)			7,545				12,541				(6,000	)			6,541
Florist segment			21,791				6,812				28,603				18,323				7,050				25,373
International segment			3,907				(6	)			3,901				—				—				—
Corporate			(6,508	)			(1,154	)			(7,662	)			(5,727	)			(1,050	)			(6,777	)
Total		$	32,395			$	(8	)		$	32,387			$	25,137			$	—			$	25,137
Depreciation and Amortization:
Consumer segment		$	1,933			$	—			$	1,933			$	1,457			$	—			$	1,457
Florist segment			1,631				—				1,631				1,730				—				1,730
International segment			1,705				—				1,705				—				—				—
Corporate			1,932				—				1,932				1,929				—				1,929
Total		$	7,201			$	—			$	7,201			$	5,116			$	—			$	5,116