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 March 31, 2008

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

For the transition period from                      to                     

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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company 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 April 30, 2008, there were 29,832,301 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			14
Item 3. Quantitative and Qualitative Disclosures about Market Risk			24
Item 4. Controls and Procedures			25
Part II. Other Information
Item 1. Legal Proceedings			26
Item 1A. Risk Factors			26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			26
Item 6. Exhibits			27
Signature			28
Index of Exhibits			29
Certification of CEO
Certification of CFO
Section 906 Certifications

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FTD GROUP, INC.

		March 31, 2008				June 30, 2007
		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	33,997			$	25,462
Accounts receivable, less allowance for doubtful accounts of $6,736 at March 31, 2008 and $5,431 at June 30, 2007			38,958				32,416
Inventories, net			4,356				3,694
Other current assets			11,844				9,500
Total Current Assets			89,155				71,072
Property and Equipment:
Property and equipment			36,931				35,791
Less accumulated depreciation			14,425				11,018
Property and Equipment, net			22,506				24,773
Other Assets:
Computer software, net			12,674				12,699
Other noncurrent assets			23,228				21,085
Other intangible assets, less accumulated amortization of $11,548 at March 31, 2008 and $9,154 at June 30, 2007			11,052				13,454
Trademarks			187,525				187,816
Goodwill			417,645				418,001
Total Other Assets			652,124				653,055
Total Assets		$	763,785			$	748,900
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	70,547			$	52,009
Other accrued liabilities			29,856				28,511
Current maturities of long-term debt			1,242				8,475
Dividends payable			4,801				4,707
Total Current Liabilities			106,446				93,702
Senior secured credit facility			121,079				133,418
Senior subordinated notes			170,117				170,117
Post-retirement benefits, accrued pension obligations and other liabilities			5,319				4,535
Deferred income taxes			80,072				85,350
Stockholders’ Equity:
Common stock: $0.01 par value, 75,000 shares authorized; 29,832 shares issued as of March 31, 2008 and 29,482 shares issued as of June 30, 2007			298				295
Additional paid-in capital			237,142				235,589
Retained earnings			33,657				20,952
Accumulated other comprehensive income			9,655				9,933
Treasury stock, at cost, 519 shares as of June 30, 2007			—				(4,991	)
Total Stockholders’ Equity			280,752				261,778
Total Liabilities and Stockholders’ Equity		$	763,785			$	748,900

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

FTD GROUP, INC.

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2008				2007				2008				2007
Revenues:
Products		$	149,726			$	143,483			$	353,551			$	333,184
Services			42,261				39,416				117,670				110,026
Total revenues			191,987				182,899				471,221				443,210
Costs of Products Sold and Services Provided:
Products			114,193				108,168				268,142				248,714
Services			4,848				3,435				14,029				12,630
Total costs of products sold and services provided			119,041				111,603				282,171				261,344
Gross Profit:
Products			35,533				35,315				85,409				84,470
Services			37,413				35,981				103,641				97,396
Total gross profit			72,946				71,296				189,050				181,866
Operating Expenses:
Advertising and selling			29,575				27,348				69,163				68,767
General and administrative			23,912				21,498				63,415				58,262
Total operating expenses			53,487				48,846				132,578				127,029
Income from operations			19,459				22,450				56,472				54,837
Other Income and Expenses:
Interest income			(399	)			(489	)			(1,020	)			(1,126	)
Interest expense			5,456				6,444				17,998				21,679
Other (income) expense, net			23				570				(325	)			(725	)
Total other income and expenses			5,080				6,525				16,653				19,828
Income before income tax expense			14,379				15,925				39,819				35,009
Income tax expense			5,086				6,310				13,404				13,844
Net income		$	9,293			$	9,615			$	26,415			$	21,165
Other Comprehensive Income (Loss):
Foreign currency translation adjustments			(51	)			88				(278	)			6,475
Comprehensive income		$	9,242			$	9,703			$	26,137			$	27,640
Net income per Common Share — basic		$	0.31			$	0.34			$	0.90			$	0.75
Net income per Common Share — diluted		$	0.31			$	0.32			$	0.89			$	0.72
Weighted Average Common Shares Outstanding:
Basic			29,520				28,462				29,365				28,343
Diluted			29,755				29,827				29,698				29,510
Cash Dividends Declared per Common Share		$	0.1625			$	0.1625			$	0.4875			$	0.1625

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

FTD GROUP, INC.

		Nine Months Ended
		March 31,
		2008				2007
Cash Flows from Operating Activities:
Net income		$	26,415			$	21,165
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			9,463				10,890
Stock-based compensation expense			1,947				1,451
Amortization and write-off of deferred financing costs			742				2,512
Provision for doubtful accounts			2,504				2,088
Deferred income taxes			(5,817	)			2,706
Excess tax benefit from stock-based compensation			(2,421	)			(1,904	)
(Decrease) increase due to changes in operating assets and liabilities, net of acquisition:
Accounts receivable			(8,963	)			(9,743	)
Inventories			(663	)			(341	)
Other current assets			(1,007	)			1,058
Other noncurrent assets			(3,160	)			283
Accounts payable			17,849				2,444
Other accrued liabilities			5,365				4,784
Net cash provided by operating activities			42,254				37,393
Cash Flows from Investing Activities:
Capital expenditures			(4,795	)			(6,027	)
Dividends received			48				—
Acquisition of business, net of cash acquired			—				(96,717	)
Net cash used in investing activities			(4,747	)			(102,744	)
Cash Flows from Financing Activities:
Repayments of long-term debt			(19,572	)			(57,750	)
Dividends paid			(14,366	)			—
Proceeds from exercise of stock options			2,187				2,315
Excess tax benefit from stock-based compensation			2,421				1,904
Proceeds from issuance of common stock			6				—
Proceeds from issuance of long-term debt, net of financing costs			—				148,536
Net cash (used in) provided by financing activities			(29,324	)			95,005
Effect of foreign exchange rate changes on cash and cash equivalents			352				771
Net increase in cash and cash equivalents			8,535				30,425
Cash and cash equivalents at beginning of period			25,462				10,954
Cash and cash equivalents at end of period		$	33,997			$	41,379
Supplemental disclosures of cash flow information
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

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, 2007. 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.

     On July 31, 2006, the Company completed its acquisition of Interflora Holdings Limited (“Interflora”), 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 the international segment.

     All intercompany accounts and transactions have been eliminated in consolidation.

Recently Issued Accounting Pronouncements

     In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired in a business combination. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. For the Company, SFAS No. 141(R) is effective as of July 1, 2009. This statement is applicable to business combinations entered into subsequent to the effective date.

     In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51 (“SFAS No. 160”). SFAS No. 160 establishes accounting and reporting standards for noncontrolling ownership interests in entities controlled by parties other than the reporting entity, the amount of consolidated net income attributable to the controlling interest and to the noncontrolling interest, changes in a controlling entity’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the controlling entity and the interests of the noncontrolling owners. For the Company, SFAS No. 160 is effective as of July 1, 2009. The Company is currently evaluating the potential impact, if any, the adoption of SFAS No. 160 will have on the Company’s consolidated financial statements.

     In June 2007, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (“EITF 06-11”). EITF 06-11 provides that a realized income tax benefit from dividends or dividend equivalents that are charges to retained earnings and are paid

to employees for non-vested equity-classified share-based awards and equity-classified outstanding share options should be recognized as an increase to additional paid-in capital rather than a reduction of income tax expense. EITF 06-11 applies prospectively to the income tax benefits that result from dividends on equity-classified employee share-based payment awards and, for the Company, is effective as of July 1, 2008. The Company does not expect the adoption of EITF 06-11 to have a material impact on the Company’s consolidated financial statements.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 provides a company with the option to measure selected financial instruments and certain other items at fair value at specified election dates. The election may be applied on an item by item basis, with disclosure regarding reasons for partial election and additional information about items for which the company elects the fair value option. SFAS No. 159 is effective for the Company as of July 1, 2008. The Company is currently evaluating the potential impact, if any, the adoption of SFAS No. 159 will have on the Company’s consolidated financial statements.

     In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS No. 157 and its related pronouncements are effective for the Company as of July 1, 2008. The Company is currently evaluating the potential impact, if any, the adoption of SFAS No. 157 will have on the Company’s consolidated financial statements.

Note 2. Acquisition of Interflora Holdings Limited

     On July 31, 2006 the Company completed the acquisition of Interflora for a purchase price of approximately $122.8 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 notes payable, of which $23.1 million were paid in May 2007 and the remainder, $1.7 million, was paid on May 1, 2008. The remainder of the purchase price 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 (the “2006 Credit Agreement”) consisting of a $150.0 million term loan and a $75.0 million revolving credit facility. The proceeds from the 2006 Credit Agreement were also used to repay the Company’s existing term loan. 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 was recorded in other (income) expense, net within the Condensed Consolidated Statements of Income and Comprehensive Income. A contract in the amount of £10.0 million was settled on May 1, 2007 and resulted in a gain of $1.4 million, which offset the foreign currency loss on the notes in the same amount. The remaining forward contract for £0.8 million is expected to be settled during the first quarter of fiscal year 2009. For the three-month and nine-month periods ended March 31, 2008, other (income) expense, net, related to the mark-to-market adjustments on this forward contract and the related note payable was not significant. For the three-month and nine-month periods ended March 31, 2007, other (income) expense, net, included $0.1 million and $1.4 million, respectively, of income related to the mark-to-market adjustments on these forward contracts and the related notes payable.

     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, 2006 (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 material to the Company’s operating results.

		Nine Months Ended
		March 31,
		2007
Pro forma revenues		$	453,863
Pro forma income from operations		$	55,712
Pro forma net income		$	21,335
Pro forma net income per share — basic		$	0.75
Pro forma net income per share — diluted		$	0.72

     In conjunction with the acquisition, 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 seven years following the acquisition. The maximum payout under such plan is £2.6 million ($5.2 million translated at the March 31, 2008 exchange rate). The amounts accrued under this deferred compensation plan were $2.0 million and $0.9 million as of March 31, 2008, and 2007, respectively.

Note 3. Income Taxes

     Taxes on earnings reflect the estimated annual effective rates, excluding the effect of significant unusual items. Tax expense for the three months ended March 31, 2008 includes $0.4 million of tax benefit primarily related to the expiration of a tax statute associated with contingent tax liabilities. Tax expense in the nine months ended March 31, 2008 includes $1.7 million of tax benefit primarily related to a statutory income tax rate reduction in the U.K and the expiration of the aforementioned tax statute associated with contingent tax liabilities. Excluding these unusual items, the effective tax rate was 38.0% for the three-month and nine-month periods ended March 31, 2008. For the three-month and nine-month periods ended March 31, 2007, the effective rate was 39.6% and 39.5% respectively.

     Unrecognized tax benefits as of the adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN 48”) on July 1, 2007 were approximately $2.4 million. If recognized, $0.7 million of these unrecognized tax benefits would have reduced the effective tax rate. As a result of the implementation of FIN 48, the Company recognized a $0.7 million decrease in the liability for unrecognized tax benefits. This decrease in the liability resulted in an increase to beginning retained earnings of $0.7 million. The Company does not expect the total amount of unrecognized tax benefits to change significantly within the next twelve months. Consistent with prior periods, the Company recognizes interest and penalties related to unrecognized benefits as a component of tax expense. Reserves for interest and penalties are not significant. The Company is subject to U.S. Federal income tax examinations for the tax years ended June 30, 2005 through June 30, 2007. The examination period for the tax year ended June 30, 2004 expired on March 15, 2008. The Company is subject to income tax examinations in the U.K. for the twelve-month period ended May 31, 2007 and the one-month period ended June 30, 2007. In addition, the Company is subject to various state and local income tax examinations for the tax years ended June 30, 2003 through June 30, 2007. During the three and nine months ended March 31, 2008, unrecognized tax benefits decreased by $0.9 million, related to the expiration of the tax statute noted above. Unrecognized tax benefits as of March 31, 2008 were approximately $1.5 million. If recognized, $0.5 million of these unrecognized tax benefits would reduce the effective tax rate.

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. 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 Interbank 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 March 31, 2008 and 2007 on the term loan was 4.45% and 7.36%, respectively. The Credit Agreement also requires the Company to pay commitment fees on the unused portion of the revolving credit facility. For the three-month and nine-month periods ended March 31, 2008 and 2007, the commitment fees remained consistent at $0.1 million and $0.2 million, respectively. The Agreement also includes covenants that, among other things, require that FTD, Inc. maintain a certain ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation and amortization (subject to certain adjustments), as well as a certain fixed charge ratio. Such ratios adjust quarterly in accordance with the terms of the Agreement. FTD, Inc. was in compliance with all debt covenants as of March 31, 2008.

     On February 20, 2007, the Board of Directors of the Company approved, and the Company entered into, an amendment to the 2006 Credit Agreement, which, among other things, allows the Company to make certain restricted junior payments, including dividend payments, subject to certain conditions.

     Both the 2006 Credit Agreement and the indenture governing the 7.75% Senior Subordinated Notes (the “Notes”) impose 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, 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 with the proceeds from the 2006 Credit Agreement. As a result of repaying amounts borrowed under 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 March 31, 2008, the Company had $170.1 million of Notes outstanding, $122.3 million outstanding under the 2006 Credit Agreement, $1.7 million of notes payable related to the acquisition of Interflora (which were paid on May 1, 2008) and an additional $1.2 million in outstanding letters of credit and, as a result, the Company had approximately $72.1 million available under the revolving credit facility.

Note 5. Net Income Per Common Share

     The computations of basic and diluted net income per common share for the three-month and nine-month periods ended March 31, 2008 and 2007 are as follows (in thousands, except per share amounts):

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2008				2007				2008				2007
Net income		$	9,293			$	9,615			$	26,415			$	21,165
Weighted average common shares outstanding — basic			29,520				28,462				29,365				28,343
Effect of dilutive securities — stock options and restricted stock			235				1,365				333				1,167
Weighted average common shares outstanding — diluted			29,755				29,827				29,698				29,510
Net income per share of Common Stock — basic		$	0.31			$	0.34			$	0.90			$	0.75
Net income per share of Common Stock — diluted		$	0.31			$	0.32			$	0.89			$	0.72

     For the three-month and nine-month periods ended March 31, 2008 there were 1,256,076 and 974,999 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, their effect was anti-dilutive. For the three-month period ended March 31, 2007 all outstanding stock options were included in the computation of diluted earnings per share because the average market price of the Company’s Common Stock during the period was greater than the exercise price of all options. For the nine-month period ended March 31, 2007, there were 12,500 outstanding stock options which were not included in the computation of diluted earnings per share because their effect was anti-dilutive.

Note 6. Stock-Based Compensation

     During the three-month and nine-month periods ended March 31, 2008, the Company granted 30,000 and 330,000 shares, respectively, of restricted stock to certain members of management. During the nine-month period ended March 31, 2008, the Company granted 15,000 options to various directors of the Company in accordance with the Company’s director compensation plan, none of which were granted during the three-month period ended March 31, 2008. During the nine-month period ended March 31, 2007, the Company granted 1,380,217 options, to various employees and directors of the Company, none of which were granted during the three-month period ended March 31, 2007. The restricted shares vest equally each year over a five-year service period. 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, depending upon the individual agreements.  Vesting accelerates in connection with a change in control, as defined in the plan. 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 three-month and nine-month periods ended March 31, 2008, 5,000 and 221,332 options, respectively, were forfeited. During the nine-month period ended March 31, 2008, 20,000 shares of restricted stock were forfeited, none of which were forfeited in the three-month period ended March 31, 2008. During the three-month and nine-month periods ended March 31, 2007, 39,000 and 155,666 options, respectively, were forfeited. During the three-month and nine-month periods ended March 31, 2008, 4,333 and 559,597 options, respectively, were exercised. During the three-month and nine-month periods ended March 31, 2007, 605,879 and 746,659 options, respectively, were exercised.

     Stock-based compensation expense was $0.6 million and $1.9 million, and $0.5 million and $1.5 million for the three-month and nine-month periods ended March 31, 2008, and 2007, respectively.

Note 7. 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 outcomes of these matters are uncertain, they are not expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Note 8. 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 earned and expenses charged between segments are recorded at fair value and eliminated in consolidation.

     During the first quarter of the fiscal year ending June 30, 2008, the Company eliminated certain allocations of costs between its consumer and florist segments in order to simplify financial reporting and to reflect how the Company now manages its businesses. Certain reclassifications have been made to the basis of presentation to reflect the elimination of these allocations to facilitate comparable reporting. Such changes do not impact the consolidated financial statements.

     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 consumer segment encompasses sales of floral and specialty gift products, which are sold to consumers primarily in the U.S. and Canada through the Company’s web site, www.ftd.com, in addition to its toll-free telephone number, 1-800-SEND-FTD.

     The florist segment includes all products and services sold to FTD members and other retail locations offering floral products primarily in the U.S. and Canada, encompassing clearinghouse services, publishing services, online services, technology sales and leases, fresh flower sales and other specialty wholesale products.

     The international segment is primarily comprised of Interflora, 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. Interflora’s products and services enable its members to send and deliver floral orders. It is also an Internet and telephone marketer of flowers and specialty gift items to consumers, operating primarily thorough the www.interflora.co.uk Web site as well as a toll-free telephone number. Interflora was acquired by the Company on July 31, 2006. As such, the nine months ended March 31, 2008 includes the results of operations of Interflora for nine months, whereas the nine months ended March 31, 2007 includes the results of Interflora’s operations for only eight months.

     The Company’s total assets by segment are as follows (in thousands):

		March 31,
		2008				2007
Consumer segment		$	263,686			$	266,017
Florist segment*			315,588				316,139
International segment			184,511				197,228
Total		$	763,785			$	779,384

     The following tables report the Company’s operating results by reportable segment for the three-month and nine-month periods ended March 31, 2008 and 2007:

		Three Months Ended March 31,
		2008												2007
(In thousands)		Gross Segment				Eliminations				Consolidated				Gross Segment				Eliminations				Consolidated
Revenues:
Consumer segment		$	85,082			$	(3,396	)		$	81,686			$	83,244			$	(3,028	)		$	80,216
Florist segment			49,385				(121	)			49,264				49,221				(98	)			49,123
International segment			60,940				97				61,037				53,476				84				53,560
Total			195,407				(3,420	)			191,987				185,941				(3,042	)			182,899
Cost of Products Sold and Services Provided:
Consumer segment			58,435				(121	)			58,314				57,078				(98	)			56,980
Florist segment			17,483				—				17,483				16,639				—				16,639
International segment			42,761				(31	)			42,730				37,528				(37	)			37,491
Corporate			514				—				514				493				—				493
			119,193				(152	)			119,041				111,738				(135	)			111,603
Gross Profit:
Consumer segment			26,647				(3,275	)			23,372				26,166				(2,930	)			23,236
Florist segment			31,902				(121	)			31,781				32,582				(98	)			32,484
International segment			18,179				128				18,307				15,948				121				16,069
Corporate			(514	)			—				(514	)			(493	)			—				(493	)
Total			76,214				(3,268	)			72,946				74,203				(2,907	)			71,296
Advertising and Selling:
Consumer segment			11,681				—				11,681				11,346				—				11,346
Florist segment			15,935				(3,396	)			12,539				14,821				(3,028	)			11,793
International segment			5,324				31				5,355				4,292				(83	)			4,209
Total			32,940				(3,365	)			29,575				30,459				(3,111	)			27,348
General and Administrative:
Consumer segment			5,637				—				5,637				6,525				—				6,525
Florist segment			2,292				—				2,292				2,052				—				2,052
International segment			5,637				(26	)			5,611				6,486				61				6,547
Corporate			10,372				—				10,372				6,374				—				6,374
Total			23,938				(26	)			23,912				21,437				61				21,498
Operating Income (Loss) before Corporate Allocations:
Consumer segment			9,329				(3,275	)			6,054				8,295				(2,930	)			5,365
Florist segment			13,675				3,275				16,950				15,709				2,930				18,639
International segment			7,218				123				7,341				5,170				143				5,313
Corporate			(10,886	)			—				(10,886	)			(6,867	)			—				(6,867	)
Total			19,336				123				19,459				22,307				143				22,450
Corporate Allocations:
Consumer segment			1,311				—				1,311				1,151				—				1,151
Florist segment			2,479				—				2,479				2,284				—				2,284
International segment			—				—				—				—				—				—
Corporate			(3,790	)			—				(3,790	)			(3,435	)			—				(3,435	)
Total			—				—				—				—				—				—
Operating Income (Loss):
Consumer segment			8,018				(3,275	)			4,743				7,144				(2,930	)			4,214
Florist segment			11,196				3,275				14,471				13,425				2,930				16,355
International segment			7,218				123				7,341				5,170				143				5,313
Corporate			(7,096	)			—				(7,096	)			(3,432	)			—				(3,432	)
Total		$	19,336			$	123			$	19,459			$	22,307			$	143			$	22,450
Depreciation and Amortization:
Consumer segment		$	877			$	—			$	877			$	950			$	—			$	950
Florist segment			660				—				660				799				—				799
International segment			851				—				851				1,078				—				1,078
Corporate			656				—				656				862				—				862
Total		$	3,044			$	—			$	3,044			$	3,689			$	—			$	3,689

		Nine Months Ended March 31,
		2008												2007
(In thousands)		Gross Segment				Eliminations				Consolidated				Gross Segment				Eliminations				Consolidated
Revenues:
Consumer segment		$	200,459			$	(8,419	)		$	192,040			$	205,437			$	(8,353	)		$	197,084
Florist segment			137,037				(351	)			136,686				137,834				(312	)			137,522
International segment			142,197				298				142,495				108,422				182				108,604
Total			479,693				(8,472	)			471,221				451,693				(8,483	)			443,210
Cost of Products Sold and Services Provided:
Consumer segment			136,114				(351	)			135,763				140,779				(312	)			140,467
Florist segment			46,811				—				46,811				44,167				—				44,167
International segment			98,229				(99	)			98,130				75,280				(77	)			75,203
Corporate			1,467				—				1,467				1,507				—				1,507
			282,621				(450	)			282,171				261,733				(389	)			261,344
Gross Profit:
Consumer segment			64,345				(8,068	)			56,277				64,658				(8,041	)			56,617
Florist segment			90,226				(351	)			89,875				93,667				(312	)			93,355
International segment			43,968				397				44,365				33,142				259				33,401
Corporate			(1,467	)			—				(1,467	)			(1,507	)			—				(1,507	)
Total			197,072				(8,022	)			189,050				189,960				(8,094	)			181,866
Advertising and Selling:
Consumer segment			23,915				—				23,915				25,087				—				25,087
Florist segment			41,321				(8,419	)			32,902				43,395				(8,353	)			35,042
International segment			12,280				66				12,346				8,834				(196	)			8,638
Total			77,516				(8,353	)			69,163				77,316				(8,549	)			68,767
General and Administrative:
Consumer segment			14,515				—				14,515				16,750				—				16,750
Florist segment			6,570				—				6,570				6,348				—				6,348
International segment			17,584				6				17,590				15,231				318				15,549
Corporate			24,740				—				24,740				19,615				—				19,615
Total			63,409				6				63,415				57,944				318				58,262
Operating Income (Loss) before Corporate Allocations:
Consumer segment			25,915				(8,068	)			17,847				22,821				(8,041	)			14,780
Florist segment			42,335				8,068				50,403				43,924				8,041				51,965
International segment			14,104				325				14,429				9,077				137				9,214
Corporate			(26,207	)			—				(26,207	)			(21,122	)			—				(21,122	)
Total			56,147				325				56,472				54,700				137				54,837
Corporate Allocations:
Consumer segment			3,339				—				3,339				3,021				—				3,021
Florist segment			8,039				—				8,039				7,007				—				7,007
International segment							—				—				—				—				—
Corporate			(11,378	)			—				(11,378	)			(10,028	)			—				(10,028	)
Total			—				—				—				—				—				—
Operating Income (Loss):
Consumer segment			22,576				(8,068	)			14,508				19,800				(8,041	)			11,759
Florist segment			34,296				8,068				42,364				36,917				8,041				44,958
International segment			14,104				325				14,429				9,077				137				9,214
Corporate			(14,829	)			—				(14,829	)			(11,094	)			—				(11,094	)
Total		$	56,147			$	325			$	56,472			$	54,700			$	137			$	54,837
Depreciation and Amortization:
Consumer segment		$	2,645			$	—			$	2,645			$	2,883			$	—			$	2,883
Florist segment			1,970				—				1,970				2,430				—				2,430
International segment			2,882				—				2,882				2,783				—				2,783
Corporate			1,966				—				1,966				2,794				—				2,794
Total		$	9,463			$	—			$	9,463			$	10,890			$	—			$	10,890

Note 9. Subsequent Events

     On April 30, 2008, the Company and United Online, Inc. (“United Online”) announced that they had entered into a definitive merger agreement providing for the acquisition of the Company by United Online.

     Under the terms of the merger agreement, FTD stockholders will receive $7.34 in cash, 0.4087 of a share of United Online common stock (“United Online Stock”) and $3.31 principal amount of United Online 13% senior secured notes due 2013 (the “Notes”) for each share of FTD common stock in the merger, for a total value of $15.08 per share of FTD common stock based on United Online’s closing stock price of $10.83 on April 29, 2008. The total consideration to FTD stockholders will be approximately $456 million, consisting of $222 million in cash, 12.35 million shares of United Online Stock and $100 million aggregate principal amount of Notes. The remaining purchase price consists of repayment of FTD indebtedness and expenses incurred in connection with the transaction. Upon closing of the transaction, the former FTD stockholders will own approximately 15% of United Online.

     Under the terms of the merger agreement, United Online may elect to increase the per share cash consideration payable to FTD’s stockholders by $2.81 in full substitution of the Notes, in which case FTD stockholders will receive a total of $10.15 in cash and 0.4087 of a share of United Online Stock in exchange for each share of FTD common stock in the merger, or a total value of $14.58 per share of FTD common stock, based on United Online’s closing stock price of $10.83 on April 29, 2008. In such case, the total consideration to FTD stockholders will be approximately $440 million, consisting of $307 million in cash and 12.34 million shares of United Online Stock. FTD will notify its stockholders as to the amount of cash, United Online Stock and, if applicable, Notes consideration they will receive for each share of FTD common stock in the merger in the definitive proxy/prospectus materials to be mailed to FTD’s stockholders.

     In connection with the transaction, FTD’s 7.75% senior subordinated notes either will be defeased at closing or acquired and amended pursuant to a tender offer and consent solicitation.

     The acquisition is anticipated to close during the first quarter of the Company’s 2009 fiscal year. The transaction requires the approval of FTD stockholders and is subject to a financing condition and customary closing conditions. Green Equity Investors IV, L.P. and FTD Co-Investment, LLC, affiliates of Leonard Green & Partners, L.P. which collectively own approximately 31% of the outstanding shares of FTD, have agreed to vote their shares in favor of the transaction, subject to the terms of a voting agreement.

     Under the terms of the merger agreement, FTD has agreed to suspend all dividends on its common stock for 180 days after the date of the signing of the merger agreement.

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

Forward-Looking Information

     Unless the context otherwise indicates, as used in this Form 10-Q, the term “Company” refers to FTD Group, Inc. and its consolidated subsidiaries, taken as a whole. This Quarterly Report on Form 10-Q contains various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include statements regarding the Company’s outlook, anticipated revenue growth and profitability; anticipated benefits of its acquisition of Interflora Holdings Limited (“Interflora”), anticipated benefits of investments in new products, programs and offerings and opportunities and trends within both the domestic and international floral businesses, including opportunities to expand these businesses and capitalize on growth opportunities or increase penetration of service offerings. The international business includes the operations of Interflora. These forward-looking statements are based on management’s current expectations, assumptions, estimates and projections about the Company and the Company’s industry. Investors are cautioned that actual results could materially differ from those contained in any forward-looking statements as a result of: the Company’s ability to acquire and retain FTD and Interflora members and continued recognition by members of the value of the Company’s products and services; the acceptance by members of new or modified service offerings recently introduced; the Company’s ability to sell additional products and services to FTD and Interflora members; the Company’s ability to expand existing marketing partnerships and secure new marketing partners within the domestic and international consumer businesses; the success of the Company’s marketing campaigns; the ability to retain customers and maintain average order value within the domestic and international consumer businesses; the ability to manage foreign currency exchange rate risk; the Company’s performance during key holiday selling seasons such as Christmas, Valentine’s Day and Mother’s Day; the existence of failures in the Company’s computer systems; competition from existing and potential new competitors; levels of discretionary consumer purchases of flowers and specialty gifts; the Company’s ability to manage or reduce its level of expenses within both the domestic and international businesses; actual growth rates for the markets in which the Company competes compared with forecasted growth rates; the Company’s ability to increase capacity and introduce enhancements to its Web sites; the Company’s ability to integrate additional partners or acquisitions, if any are identified; and other factors described in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K, including under Item 1A — “Risk Factors,” as well as other potential risks and uncertainties, which are discussed in the Company’s other reports and documents filed with the Securities and Exchange Commission. The Company expressly disclaims any obligation to update its forward-looking statements.

     The following discussion should be read in conjunction with the condensed consolidated financial statements and notes to those statements that appear elsewhere in this Quarterly Report on 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 materially from those discussed in the forward-looking statements. Factors that could cause or contribute to any differences include, but are not limited to, those discussed under the captions “Forward-Looking Information,” “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

Overview

     FTD Group, Inc. is a leading provider of floral and specialty gift products to consumers and retail florists, as well as other retail locations offering floral products, primarily in the U.S., Canada, the U.K. and the Republic of Ireland. The business utilizes the highly recognized FTD and Interflora brands, both supported by the Mercury Man logo, which is displayed in approximately 45,000 floral shops worldwide. The Company conducts business through three operating segments, the consumer segment, the florist segment and the international segment.

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

     Florist Segment. The florist segment provides a comprehensive suite of products and services that enable FTD members to send and deliver floral orders. The Company provides these services to its network of independent members located primarily in the U.S. and Canada, which includes traditional retail florists as well as other retailers offering floral products.

     International Segment. The international segment is primarily comprised of Interflora, which serves both the florist and consumer markets in the U.K. and Republic of Ireland. Interflora markets floral products and specialty gifts direct to consumers in the U.K. and the Republic of Ireland through both the www.interflora.co.uk Web site and a toll-free telephone number. Interflora also provides various products and services to its members.

     Corporate Costs. Costs related to corporate headquarters, including accounting, executive, legal, facilities, corporate information technology and credit and collections are charged to Corporate. Costs related to facilities, corporate information technology and credit and collections are then allocated to the consumer and florist segments.

     Seasonality. In view of seasonal variations in the revenues and operating results of the Company’s florist, consumer and international segments, the Company believes that comparisons of its revenues and operating results for any period with those of the immediately preceding period, or in some instances, the same period of the preceding fiscal year may be of limited relevance in evaluating the 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 holidays of Easter and the U.K. Mother’s Day sometimes fall within the quarter ending March 31 and sometimes fall within the quarter ending June 30.

     Acquisition of Company by United Online, Inc. On April 30, 2008, the Company and United Online, Inc. (“United Online”) announced that they had entered into a definitive merger agreement providing for the acquisition of the Company by United Online.

     Under the terms of the merger agreement, FTD stockholders will receive $7.34 in cash, 0.4087 of a share of United Online common stock (“United Online Stock”) and $3.31 principal amount of United Online 13% senior secured notes due 2013 (the “Notes”) for each share of FTD common stock in the merger, for a total value of $15.08 per share of FTD common stock based on United Online’s closing stock price of $10.83 on April 29, 2008. The total consideration to FTD stockholders will be approximately $456 million, consisting of $222 million in cash, 12.35 million shares of United Online Stock and $100 million aggregate principal amount of Notes. The remaining purchase price consists of repayment of FTD indebtedness and expenses incurred in connection with the transaction. Upon closing of the transaction, the former FTD stockholders will own approximately 15% of United Online.

     Under the terms of the merger agreement, United Online may elect to increase the per share cash consideration payable to FTD’s stockholders by $2.81 in full substitution of the Notes, in which case FTD stockholders will receive a total of $10.15 in cash and 0.4087 of a share of United Online Stock in exchange for each share of FTD common stock in the merger, or a total value of $14.58 per share of FTD common stock, based on United Online’s closing stock price of $10.83 on April 29, 2008. In such case, the total consideration to FTD stockholders will be approximately $440 million, consisting of $307 million in cash and 12.34 million shares of United Online Stock. FTD will notify its stockholders as to the amount of cash, United Online Stock and, if applicable, Notes consideration they will receive for each share of FTD common stock in the merger in the definitive proxy/prospectus materials to be mailed to FTD’s stockholders.

     In connection with the transaction, FTD’s 7.75% senior subordinated notes either will be defeased at closing or acquired and amended pursuant to a tender offer and consent solicitation.

     The acquisition is anticipated to close during the first quarter of the Company’s 2009 fiscal year. The transaction requires the approval of FTD stockholders and is subject to a financing condition and customary closing conditions. Green Equity Investors IV, L.P. and FTD Co-Investment, LLC, affiliates of Leonard Green & Partners, L.P. which collectively own approximately 31% of the outstanding shares of FTD, have agreed to vote their shares in favor of the transaction, subject to the terms of a voting agreement.

     Under the terms of the merger agreement, FTD has agreed to suspend all dividends on its common stock for 180 days after the date of the signing of the merger agreement.

Three Months Ended March 31, 2008 compared to the Three Months Ended March 31, 2007

Revenues

		Three Months Ended
		March 31,
		2008				2007				% Change
(In thousands)
Consumer segment		$	81,686			$	80,216				1.8	%
Florist segment			49,264				49,123				0.3	%
International segment			61,037				53,560				14.0	%
Total revenues		$	191,987			$	182,899				5.0	%

     Total revenue grew $9.1 million, or 5.0% to $192.0 for the third quarter of fiscal year 2008, compared to total revenues of $182.9 million for the same period of fiscal year 2007. Interflora, which is included in the Company’s international segment, accounted for $7.4 million of the increase in revenue, approximately $0.9 million of which related to the impact of foreign currency rate changes.

     Revenues in the consumer segment increased $1.5 million, or 1.8% to $81.7 million in the third quarter of fiscal year 2008, compared to revenues of $80.2 million in the same period of fiscal year 2007. Revenue in the quarter was benefited by the shift of the Easter holiday into the third quarter compared with the prior year when Easter occurred in the fourth quarter. Additionally, average order value increased to $64.48 for the third quarter of fiscal year 2008, compared to $63.04 for the same period of fiscal year 2007. This increase was partially offset by a 0.6% decrease in order volumes, which totaled approximately 1,236,000 during the third quarter of fiscal year 2008 compared to approximately 1,243,000 orders in the same period of fiscal year 2007. The percentage of Internet orders decreased to 89.7% in the third quarter of fiscal year 2008 from 91.6% in the third quarter of fiscal year 2007.

     Revenues in the florist segment increased $0.2 million, or 0.3% to $49.3 million in the third quarter of fiscal year 2008, compared to revenues of $49.1 million in the same period of fiscal year 2007. The increase in revenue was primarily related to increases in sales of fresh flowers, partially offset by a planned reduction in sales of containers.

     Revenues in the international segment increased $7.4 million, or 14.0%, to $61.0 million in the third quarter of fiscal year 2008, compared to revenues of $53.6 million in the same period of fiscal year 2007. The increase was driven by increased order volume in Interflora’s consumer business and an increase in average order value, which was primarily related to favorable foreign currency movements between the U.S. dollar and the British pound. Consumer order volume increased 14.0% in the international segment to approximately 758,000 in the third quarter of fiscal year 2008, compared to orders of approximately 665,000 in the prior fiscal year third quarter. Average order value increased to $67.39 in the third quarter of fiscal 2008 compared to $66.68 of the prior year, driven by the favorable exchange rate trends. The percentage of Internet orders increased to 77.9% from 73.4% in the prior year.

Gross profit

		Three Months Ended
		March 31,
(In thousands)		2008				2007				% Change
Consumer segment		$	23,372			$	23,236				0.6	%
Florist segment			31,781				32,484				(2.2	%)
International segment			18,307				16,069				13.9	%
Corporate			(514	)			(493	)			4.3	%
Total gross profit		$	72,946			$	71,296				2.3	%

     Gross profit increased $1.6 million, or 2.3% to $72.9 million for the third quarter of fiscal year 2008, compared to gross profit for the third quarter of fiscal year 2007 of $71.3 million. Total gross margin decreased to 38.0% for the third quarter of fiscal year 2008 from 39.0% for the same period in fiscal year 2007.

     Gross profit associated with the consumer segment increased $0.2 million, or 0.6%, to $23.4 million for the third quarter of fiscal year 2008, compared to $23.2 million for the third quarter of fiscal year 2007. Gross margin for the consumer segment decreased to 28.6% for the third quarter of fiscal year 2008, compared to 29.0% for same period in fiscal year 2007, primarily due to the mix of products sold.

     Gross profit associated with the florist segment decreased by $0.7 million, or 2.2%, to $31.8 million for the third quarter of fiscal year 2008, compared to $32.5 million for the third quarter of fiscal year 2007. Gross margin for the florist segment decreased to 64.5% for the third quarter of fiscal year 2008, compared to 66.1% for the same period in fiscal year 2007, primarily due to the increase in sales of fresh flowers as they carry a lower margin than other products.

     Gross profit associated with the international segment increased $2.2 million, or 13.9%, to $18.3 million for the third quarter of fiscal year 2008, compared to $16.1 million for the prior year quarter ended March 31, 2007. The increase is primarily due to the increases in revenue discussed above. Gross margin for the international segment remained consistent at 30.0% for the third quarter of fiscal year 2008 and 2007.

Advertising and selling costs

		Three Months Ended
		March 31,
(In thousands)		2008				2007				% Change
Consumer segment		$	11,681			$	11,346				3.0	%
Florist segment			12,539				11,793				6.3	%
International segment			5,355				4,209				27.2	%
Total advertising and selling costs		$	29,575			$	27,348				8.1	%

     Advertising and selling costs increased $2.3 million, or 8.1%, to $29.6 million for the third quarter of fiscal year 2008, compared to $27.3 million for the third quarter of fiscal year 2007. As a percentage of revenue, advertising and selling costs increased to 15.4% for the third quarter of fiscal year 2008 compared to 15.0% for the third quarter of fiscal year 2007.

     Advertising and selling costs associated with the consumer segment increased $0.4 million, or 3.0%, to $11.7 million for the third quarter of fiscal year 2008, compared to $11.3 million for the third quarter of fiscal year 2007. The increase in advertising and selling costs was primarily due to the planned diversification of marketing spend between online and offline channels during the period. The company increased its spending in offline marketing channels which included direct marketing campaigns and efficiently managed its online advertising spend. Advertising and selling costs as a percentage of revenue associated with the consumer segment increased to 14.3% for the third quarter of fiscal year 2008 compared to 14.1% for the third quarter of fiscal year 2007.

     Advertising and selling costs associated with the florist segment increased $0.7 million, or 6.3%, to $12.5 million for the third quarter of fiscal year 2008, compared to $11.8 million for the third quarter of fiscal year 2007. The increase in advertising and selling costs was primarily due to a shift in timing of advertising expenses related to the Easter holiday and a florist membership event that occurred during the third quarter of the current fiscal year and during the fourth quarter of the prior fiscal year.

     Advertising and selling costs associated with the international segment increased $1.2 million, or 27.2%, to $5.4 million for the third quarter of fiscal year 2008, compared to $4.2 million for the same period of the prior fiscal year. The increase is primarily related to increases in online and direct mail marketing costs, as well as increased consumer order volumes. As a percentage of revenue, advertising and selling costs increased to 8.8% for the third quarter of fiscal year 2008 compared to 7.9% for the prior year period.

General and administrative costs

		Three Months Ended
		March 31,
(In thousands)		2008				2007				% Change
Consumer segment		$	5,637			$	6,525				(13.6	%)
Florist segment			2,292				2,052				11.7	%
International segment			5,611				6,547				(14.3	%)
Corporate			10,372				6,374				62.7	%
Total general and administrative costs		$	23,912			$	21,498				11.2	%