<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1997
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
FTD CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7389 13-3711271
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
3113 WOODCREEK DRIVE
DOWNERS GROVE, ILLINOIS 60515
(630) 719-7800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
SCOTT D. LEVIN, ESQ.
FTD CORPORATION
3113 WOODCREEK DRIVE
DOWNERS GROVE, ILLINOIS 60515
(630) 719-7800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
-------------------------
COPIES OF ALL COMMUNICATIONS TO:
MARC WEINGARTEN, ESQ.
SCHULTE ROTH & ZABEL LLP
900 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 756-2000
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock $.01 par value.......................... $8,882,104.50 $2,691.55
=======================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) of the Securities Act of 1933.
-------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
FTD CORPORATION
---------------------
CROSS REFERENCE SHEET
PURSUANT TO RULE 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-1 ITEM NO. AND CAPTION LOCATION IN PROSPECTUS
----------------------------- ----------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus..................... Facing Page; Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus................................ Inside Front Cover Page; Outside Back
Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges.......................... Outside Front Cover Page; Prospectus
Summary; Risk Factors; Selected Historical
Financial Data
4. Use of Proceeds.................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price.................... Outside Front Cover Page;
The Offering
6. Dilution........................................... Dilution
7. Selling Security Holders........................... Not Applicable
8. Plan of Distribution............................... Outside Front Cover Page;
The Offering
9. Description of Securities to be Registered......... Outside Front Cover Page; Prospectus
Summary; Capitalization; Description of
Capital Stock
10 Interests of Named Experts and Counsel............. Legal Matters; Experts
11 Information with Respect to the Registrant......... Outside Front Cover Page; Prospectus
Summary; Risk Factors; Dividend Policy;
Capitalization; Selected Historical
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Security Ownership of Certain
Beneficial Owners and Management;
Relationship with Affiliates; Description
of Capital Stock; Description of Bank
Credit Agreement
12 Disclosure of Commission Position on
Indemnification for Securities Act Liabilities..... Not Applicable
</TABLE>
<PAGE> 3
PROSPECTUS
573,039 SHARES
FTD CORPORATION
CLASS A COMMON STOCK
------------------------
FTD Corporation ("FTD" or the "Company") hereby offers (the "Offering") in
the United States up to 573,039 shares (the "Shares") of Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), at a price of $[ ]
per Share (the "Offering Price"), for sale solely to certain members of FTD
Association (as defined). The Shares are being offered hereunder to satisfy
certain obligations of FTD contained in the Mutual Support Agreement (as
defined). The Shares offered hereby will be subject to certain restrictions on
transfer. See "THE OFFERING -- Restrictions on Transfer of Shares; Optional
Redemption." The subscription period for the Offering will terminate at 5:00
P.M., New York City time, on , 199 , unless extended at FTD's
discretion for up to an additional 60-day period (the "Offering Termination
Date").
All subscriptions are irrevocable. No minimum aggregate number of Shares
must be subscribed for in order for the Offering to close. If at the Offering
Termination Date less than all of the Shares offered shall have been subscribed
for, subscriptions that have been accepted by FTD shall remain effective, and
the Offering shall terminate with respect to the unsubscribed Shares.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS PRIOR TO MAKING A DECISION TO PURCHASE
SHARES.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
------------------------
<TABLE>
<CAPTION>
==============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) FTD(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................. $ None $
- --------------------------------------------------------------------------------------------------------------
Total................................. $ None $
==============================================================================================================
</TABLE>
(1) There will be no underwriters. The Shares will be offered for sale solely to
certain FTD Association members directly by FTD.
(2) There is no firm commitment for the sale of the Shares offered hereunder.
However, assuming the sale of all of the Shares for cash, the total proceeds
will be as shown above. FTD will also pay estimated expenses of
approximately $ .
------------------------
The date of this Prospectus is , 199 .
<PAGE> 4
AVAILABLE INFORMATION
FTD has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Shares being offered by this Prospectus. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto, certain portions of which have been
omitted pursuant to the rules and regulations of the Commission. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete. With respect to each such contract,
agreement or other document filed or incorporated by reference as an exhibit to
the Registration Statement, reference is made to such exhibit for a more
complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
FTD is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and in accordance therewith files
reports and other information with the Commission. Such reports and other
information filed by FTD with the Commission may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will also be available
for inspection and copying at the regional offices of the Commission located at
7 World Trade Center, New York, New York 10048 and at 500 West Madison Street
(Suite 1400), Chicago, Illinois 60661. Copies of such material may also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a Website that contains reports, proxy and information statements and
other information regarding registrants such as FTD that file electronically
with the Commission. The address of the Commission's Website is
http://www.sec.gov.
FTD will continue to be subject to the informational requirements of the
Exchange Act for so long as the Class A Common Stock continues to be held by at
least 300 holders of record. For so long as FTD is subject to the Exchange Act,
it will provide an annual report to stockholders and such other reports as may
be required by the Exchange Act to be provided to stockholders. If the Company
ceases to be subject to the Exchange Act, the Company will no longer be required
to file with the Commission annual reports containing consolidated financial
statements audited by its independent certified public accountants or quarterly
reports containing unaudited consolidated financial statements for each of the
first three quarters of each fiscal year, and the Company does not intend to
distribute such reports to its stockholders.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements of FTD, including the
notes thereto, appearing elsewhere in this Prospectus. Unless otherwise stated
in this Prospectus, references to the "Company" or "FTD" include FTD Corporation
and its wholly-owned subsidiary, Florists' Transworld Delivery, Inc., a Michigan
corporation (the "Operating Company"). This Offering is being made solely to
certain members of FTD Association pursuant to the Mutual Support Agreement,
dated December 18, 1994, between Florists' Transworld Delivery, Inc. (as
successor to Florists' Transworld Delivery Association, a Michigan non-profit
cooperative association (the "Old Association")) and FTD Association, as amended
(the "Mutual Support Agreement"). All references in this Prospectus to "members"
refer to the members of FTD Association. See "BUSINESS -- The Acquisition and
Relationship with FTD Association." Except where specifically stated otherwise,
all information contained in this Prospectus relating to the Common Stock,
including the Summary Consolidated Financial Data, Selected Historical Financial
Data and the Consolidated Financial Statements, assumes that (i) all of the
Shares offered hereby are sold and (ii) no shares of Class B Common Stock are
converted. See "USE OF PROCEEDS." References in this Prospectus to fiscal years
are to FTD's fiscal years ending on June 30. Certain capitalized terms used and
not defined in this summary shall have the meanings given to them elsewhere in
this Prospectus.
FTD
FTD is the world's largest floral services organization based on number of
members and affiliated organizations. All of the operations of FTD are conducted
through the Operating Company, the successor to a non-profit cooperative
organization founded by a group of retail florists in the United States in 1910.
FTD Association has a membership of approximately 21,000 retail florist shops
primarily in the U.S. and Canada and, through affiliated or related
organizations, approximately 32,000 additional retail florist shops in
approximately 140 other countries. Through these members FTD offers consumers
expedited delivery of high-quality FTD-branded products in the U.S. and Canada
and non-branded floral products throughout most of the world.
FTD's principal executive offices are located at 3113 Woodcreek Drive,
Downers Grove, Illinois 60515, and its telephone number is (630) 719-7800.
Except for certain trade association activities which are being conducted
by FTD Association, FTD, through the Operating Company, operates all of the
businesses conducted by the Old Association prior to the acquisition (the
"Acquisition") by FTD on December 19, 1994, of all of the outstanding equity of
the Old Association pursuant to an Agreement and Plan of Merger, dated August 2,
1994 (the "Merger Agreement"), among FTD, FTD Association and the Old
Association. Neither FTD nor the Operating Company has any ownership interest in
FTD Association; however, as provided in the Merger Agreement, the Operating
Company and FTD Association have entered into the Mutual Support Agreement,
which governs the relationship between the Operating Company and FTD
Association.
FTD promotes a worldwide brand based on the FTD Mercury Man logo, one of
the most recognized corporate logos in the world according to consumer
recognition studies. See "BUSINESS -- Marketing and Advertising." A significant
portion of FTD's revenues, operating income and competitive advantage is derived
from FTD's technology-based transaction processing businesses, which include the
Mercury Network, Clearinghouse, Advantage Software and Direct Access
(1-800-SEND-FTD). In addition to the foregoing, FTD's operations include
Marketplace and other businesses which support and enhance the retail florist
industry. See "BUSINESS -- Operations." The main businesses of FTD are the
following:
Marketplace. FTD's Marketplace is one of the largest wholesale suppliers of
hardgoods to retail florists in the U.S. based on total sales. Marketplace
products include both FTD-branded and non-branded holiday and everyday floral
arrangement containers and products, as well as packaging, promotional products
and a wide variety of other floral-related supplies. By capitalizing on FTD's
sourcing expertise and volume purchases, Marketplace is able to provide FTD
florists with a broad selection of products at attractive prices.
3
<PAGE> 6
Marketplace also enters into promotional partnerships to design, promote
and sell FTD-branded products. To date, FTD has participated in partnerships
with companies such as Gerber Products Company, Mars, Inc. and Disney
Enterprises, Inc. For example, collectible containers featuring Winnie the Pooh
and his friends have been developed for friendship, new baby, Christmas,
Valentine's Day and Easter floral arrangements. M&M's have been included in the
Sweet Surprise floral arrangement since 1993. The Company believes that FTD's
large retail network and brand recognition make it a valuable corporate partner
for such ventures.
Clearinghouse. FTD's Clearinghouse provides billing and collection services
to both the florist with whom the customer places a delivery order (the "Sending
Florist") and the florist that fills the order locally in flowers-by-wire
transactions (the "Receiving Florist"). In fiscal 1997, FTD cleared floral
orders aggregating in excess of $492 million in retail sales. Revenue from FTD's
Clearinghouse is generated by FTD retaining a percentage of the sales price of
orders sent through Clearinghouse.
FTD is a joint venture participant in Interflora, Inc., a floral services
organization with non-FTD member florists, which enables florists to transmit
and receive orders outside the Americas.
Mercury Network. FTD's Mercury Network is one of the largest proprietary
telecommunications networks in the world, based on the total number of
participating retail outlets, linking together FTD and approximately 16,400 of
the 21,000 FTD florists. FTD's on-line florists may use the Mercury Network to
transmit orders cleared through FTD or through competing clearinghouses and to
send messages. In fiscal 1997, the Mercury Network transmitted approximately
14.5 million orders among U.S. and Canadian florists.
Direct Access. FTD's Direct Access business offers retail customers the
opportunity to place orders directly with FTD by dialing a toll free number
(1-800-SEND-FTD), through online services such as Compuserve or through FTD
Florists' Online Internet site (www.ftd.com). Revenue from the Direct Access
business is generated by FTD's receipt of a percentage of the sales price as the
Sending Florist and a service charge from the consumer.
Other Businesses. FTD has developed several other businesses to support and
enhance FTD florists' retail floral operations, including greeting cards,
Advantage Software for florists' operations, publications, and credit card
authorization and processing services.
4
<PAGE> 7
THE OFFERING
COMMON STOCK OFFERED.......... Up to 573,039 shares of Class A Common Stock,
par value $.01 per share, of FTD are being
offered in the United States solely to Active
Members of FTD Association (defined in the
Articles of Incorporation of FTD Association as
an FTD Association member that is an
individual, partnership, firm or corporation of
good reputation engaged in the retail floral
business) ("Active Members"). Completion of the
Offering is not conditioned upon the sale of
any minimum number of Shares and consequently
the Company is unable to estimate the proceeds,
if any, to be received from the Offering.
Assuming all of the Shares are sold, the
proceeds to the Company will be approximately
$[ ] million. The Company will pay
expenses of approximately $[ ] in
connection with the Offering. The Offering is
being made to satisfy certain obligations of
the Company under the Mutual Support Agreement.
See "BUSINESS -- The Acquisition and
Relationship with FTD Association."
COMMON STOCK OUTSTANDING AFTER
THE OFFERING................ 6,646,878 shares of Class A Common Stock
1,566,686 shares of Class B Common Stock
TOTAL SHARES OUTSTANDING...... 8,213,564 total shares of Common Stock*
COMMON STOCK.................. Except with respect to voting rights, the Class
A Common Stock and Class B Common Stock, par
value $.0005 per share (the "Class B Common
Stock" and collectively with the Class A Common
Stock, the "Common Stock") are substantially
identical. Each share of Class A Common Stock
is entitled to one vote, while, except as may
be required by law, shares of Class B Common
Stock are non-voting. The Class A Common Stock
and Class B Common Stock will be entitled to
share ratably, as a single class, in any
dividends declared by the Company on the Common
Stock. The Class B Common Stock was issued in
connection with the Acquisition to the Fleet
Funds to satisfy certain restrictions on stock
ownership applicable to bank holding companies
and also was issued upon exercise of the
Warrants. See "DESCRIPTION OF CAPITAL STOCK."
OFFERING TERMINATION.......... The Offering will terminate at 5:00 P.M., New
York City time, on [ ], 199 , unless
extended, at FTD's discretion, for up to an
additional 60-day period (the "Offering
Termination Date").
NO MINIMUM NUMBER OF SHARES
REQUIRED TO BE SOLD......... The Shares are being offered by FTD pursuant to
the Mutual Support Agreement. Completion of the
sale of the Shares pursuant to the Offering is
not conditioned upon the sale of any minimum
number of Shares. Therefore, if at the Offering
Termination Date less than all of the Shares
offered shall have been subscribed for pursuant
to subscription agreements ("Subscription
Agreements") accepted by FTD, subscriptions
that have been accepted by FTD
- ---------------
* Assumes all Shares are sold and excludes 217,000 shares of Class A Common
Stock issuable upon exercise of options outstanding under the Company's 1994
Stock Award and Incentive Plan. See "DESCRIPTION OF CAPITAL STOCK."
5
<PAGE> 8
shall remain effective, and the Offering shall
terminate with respect to the unsubscribed
Shares. See "RISK FACTORS" and "THE OFFERING."
ALL SUBSCRIPTIONS WILL BE IRREVOCABLE BY THE
PURCHASER WHEN A COMPLETED SUBSCRIPTION
AGREEMENT IS RECEIVED BY FTD.
NOTICE OF COMMENCEMENT OF THE
OFFERING; PARTICIPATING
MEMBERS..................... Each Active Member in the United States
received a notice of the commencement of the
Offering (the "Notice") advising Active Members
who wish to consider purchasing Shares in the
Offering (each a "Participating Member") to
contact FTD to receive a copy of this
Prospectus and the subscription materials. By
contacting FTD and requesting a copy of this
Prospectus and the subscription materials,
Active Members became eligible to subscribe for
Shares.
PARTICIPATING MEMBERS'
ALLOCATIONS................... Active Members will be allocated a number of
Shares for which they may subscribe.
Participating Members who wish to purchase
Shares must subscribe to purchase at least the
lesser of (i) 100 Shares or (ii) their entire
specified allocation. To the extent that a
Participating Member does not subscribe for
such minimum amount, such member will no longer
have any right to participate in the Offering.
FTD may, in its sole discretion, elect to
reoffer any or all unsubscribed Shares to other
Active Members. Participating Members may
indicate in the Subscription Agreement that
they would like to purchase additional Shares,
if available. The Company may reoffer any
unsubscribed Shares to members selected in a
manner the Company deems appropriate.
PROCEDURES FOR SUBSCRIBING
FOR SHARES.................. Each Participating Member will receive a copy
of this Prospectus and subscription materials
from FTD which will set forth their allocation
and provide instructions for purchasing Shares.
Participating Members who elect to purchase
Shares must complete, sign and deliver the
Subscription Agreement included in the
subscription materials to FTD before 5:00 P.M.,
New York City time, on the Offering Termination
Date.
Anyone with questions or needing assistance
concerning the procedures for purchasing Shares
should call FTD at (630) 719-7800 and ask to
speak to a representative about the FTD Member
Offering.
PAYMENT OF PURCHASE PRICE..... Participating Members that elect to purchase
Shares will be billed for the purchase price of
the Shares through FTD's Clearinghouse system.
Any Participating Member who fails to pay any
portion of its bill for the purchase price by
, 199 , unless extended at FTD's
discretion for up to an additional 60-day
period (the "Final Payment Date"), will not be
entitled to purchase Shares, and the
Subscription Agreement executed by such
Participating Member will automatically
terminate and the billing for the purchase
price of the Shares will be reversed.
USE OF PROCEEDS............... The cash proceeds from the Offering will be
used to defray expenses of the Offering,
estimated to be approximately $[ ], and
for working capital needs and general corporate
6
<PAGE> 9
purposes of the Operating Company. See "USE OF
PROCEEDS."
RESTRICTIONS ON TRANSFER...... Prior to the earlier of (i) three years from
the closing of the Offering or (ii) 180 days
after the consummation of an Initial Public
Offering (as defined) (the "Restriction
Period"), the Shares will be subject to certain
restrictions on transfer. During this period,
Shares may not be transferred by Participating
Members, except as described below, other than
to (1) family members or affiliates (as such
term is defined in Rule 12b-2 promulgated under
the Exchange Act) of such Participating Member
or (2) subject to the Company's right of first
refusal to purchase such Shares, other Active
Members of FTD Association in good standing.
See "THE OFFERING -- Restrictions on Transfer
of Shares; Optional Redemption."
OPTIONAL REDEMPTION........... If any Participating Member ceases to be an
Active Member of FTD Association, FTD will have
the option during the Restriction Period of
redeeming any Shares held by such Participating
Member or any family member or affiliate of
such Participating Member to whom such
Participating Member transferred Shares at the
greater of (i) the Fair Market Value (as
defined) of the Shares and (ii) the Offering
Price. See "THE OFFERING -- Restrictions on
Transfer of Shares; Optional Redemption."
RISK FACTORS.................. See "RISK FACTORS" for a discussion of certain
factors that should be considered by
prospective investors prior to making a
decision to purchase Shares in the Offering.
7
<PAGE> 10
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical data of the Old
Association for the fiscal years ended June 30, 1993 and 1994 and the period
from July 1, 1994 to December 18, 1994, and of FTD for the period December 19,
1994 to June 30, 1995 and the fiscal years ended June 30, 1996 and 1997. The
selected historical balance sheet and statement of operations data as of and for
the fiscal years ended June 30, 1993 and 1994 were derived from the audited
consolidated financial statements of the Old Association. The Acquisition was
consummated on December 19, 1994. The selected historical statement of
operations data for the period from December 19, 1994 to June 30, 1995, and for
the years ended June 30, 1996 and 1997, and the balance sheet data as of June
30, 1995, 1996 and 1997 were derived from the audited consolidated financial
statements of FTD. The information contained in this table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements for the
years ended June 30, 1997, 1996 and 1995, of FTD, including the notes thereto,
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
CONSOLIDATED FTD CORPORATION OLD ASSOCIATION
--------------------------------------------------- ----------------------------------
DECEMBER 19,
YEAR ENDED JUNE 30, 1997 YEAR 1994 JULY 1
------------------------- ENDED THROUGH THROUGH YEAR ENDED JUNE 30,
AS JUNE 30, JUNE 30, DECEMBER 18, -------------------
ACTUAL ADJUSTED(1) 1996 1995 1994 1994 1993
------ ----------- -------- ------------ ------------ ---- ----
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue................ $162,583 $162,583 $166,255 $ 96,518 $75,333 $166,560 $169,195
Cost of goods sold and
services provided.......... 96,306 96,306 104,386 58,567 49,109 102,260 103,622
Selling, general and
administrative............. 55,769 55,769 58,376 30,669 28,684 57,625 61,073
-------- -------- -------- -------- ------- -------- --------
Income (loss) from
operations................. 10,508 10,503 3,493 7,282 (2,460) 6,675 4,500
Other expense, net(2)........ 11,839 11,839 12,067 5,827 77 795 1,178
Income taxes (benefit)(3).... 416 416 (1,813) 1,021 35 92 42
Minority interest(4)......... (14) (14) (33) 8 -- -- --
Cumulative effect of
accounting change(5)....... -- -- -- -- -- 6,277 --
-------- -------- -------- -------- ------- -------- --------
Net income (loss)............ $ (1,733) $ (1,733) $ (6,728) $ 426 $(2,572) $ (489) $ 3,280
======== ======== ======== ======== ======= ======== ========
Earnings(loss) per share(6)
Primary.................... $ (.23) $ (.21) $ (1.01) $ 0.06
Fully Diluted.............. $ (.23) $ (.21) $ (1.01) $ 0.06
OTHER DATA:
Depreciation and
amortization............. $ 15,606 $ 15,606 $ 14,231 $ 6,525 $ 4,911 $ 10,144 $ 9,043
Capital expenditures....... 2,614 2,614 4,950 3,082 1,413 8,134 18,200
Ratio of earnings to fixed
charges(7)............... -- -- 1.2x -- 2.9x 2.0x
BALANCE SHEET DATA:
(at end of period)
Working capital............ $ 5,466 $ 14,071 $ 2,718 $ 6,546 $ 16,918 $ 12,581
Total assets............... 181,724 190,456 196,082 203,864 135,506 125,816
Long-term debt, including
current portion.......... 82,400 82,400 96,277 100,757 33,463 33,746
Total equity............... $ 27,172 $ 35,904 $ 29,140 $ 35,080 $ 36,216 $ 40,521
</TABLE>
8
<PAGE> 11
- -------------------------
(1) As adjusted to give effect to this Offering, assuming all Shares are sold
for cash and no Class B Common Stock is converted.
(2) Interest expense in fiscal 1993 is also net of $185 of interest capitalized
as construction in progress.
(3) Taxes on income for the fiscal years ended June 30, 1993 and 1994 and the
period July 1 through December 18, 1994 are generally applicable to the Old
Association's Canadian operations. During these periods, the Old Association
conducted substantially all of its business activities as a member-owned
non-profit cooperative association and, accordingly, no provision for U.S.
income taxes was required. Taxes on income for the period December 19, 1994
through June 30, 1995 and for the fiscal years ended June 30, 1996 and 1997
represent operations after conversion from a cooperative association to a
for-profit corporation, which resulted in a provision for U.S. income tax
liabilities to be recorded.
(4) Represents FTD's interest in Renaissance Greeting Cards, Inc.
("Renaissance").
(5) Effective July 1, 1993, the Old Association and its consolidated
subsidiaries adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Post-Retirement Benefits Other Than Pensions,"
for its unfunded post-retirement health care program. See note 8 to the
consolidated financial statements of FTD.
(6) The Old Association was a member-owned non-profit cooperative association
and, accordingly, no stock was issued.
(7) In calculating the ratio of earnings to fixed charges, earnings consists of
net income prior to income taxes, minority interest and cumulative effect of
accounting change, plus fixed charges. Fixed charges consist of interest
expense and the component of rental expense believed by management to be
representative of the interest factor thereon. Earnings for the period July
1 through December 18, 1994 were insufficient to cover fixed charges by
$2,537. Earnings for the year ended June 30, 1996 and 1997, were
insufficient to cover fixed charges by $8,574 and $1,331, respectively.
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<PAGE> 12
RISK FACTORS
Prospective investors should consider carefully the following factors as
well as the other information set forth in this Prospectus prior to making a
decision to purchase Shares in the Offering.
ABSENCE OF MARKET VALUE IN DETERMINING OFFERING PRICE
No established public trading market exists for the Class A Common Stock,
and accordingly, the Offering Price for the Shares has not been set based on any
market price of the Class A Common Stock or pursuant to arms' length negotiation
with any third party. Rather, the Offering Price has been determined by the
Board of Directors of FTD after giving consideration to many complex factors,
including the historical operations and prospects of the Company, competitive
conditions in the floral industry and general economic conditions. No assurance
can be given that the Offering Price is equal to the fair value of the Shares.
RESTRICTIONS ON TRANSFER; REDEMPTION; ABSENCE OF PUBLIC MARKET
The transfer of the Shares will be restricted until the earlier of (i)
three years from the closing of the Offering or (ii) 180 days after the
consummation of an Initial Public Offering. Until such time, the Shares can be
transferred only to family members or affiliates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) of the Participating Member or,
subject to FTD's right of first refusal, to another Active Member of FTD
Association in good standing. In addition, if any Participating Member ceases to
be an Active Member of FTD Association, FTD will have the option of redeeming
any Shares held by such Participating Member or any family member or affiliate
of such Participating Member to whom such Participating Members transferred such
Shares at the greater of (i) the Fair Market Value of the Shares as determined
in the good faith discretion of an officer of the Company and (ii) the Offering
Price. See "THE OFFERING -- Restrictions on Transfer of Shares; Optional
Redemption." The Class A Common Stock is not currently listed for trading on any
securities exchange, and there can be no assurance that a trading market for the
Class A Common Stock will ever exist.
NO MINIMUM NUMBER OF SHARES REQUIRED TO BE SOLD
The Shares are being offered by FTD to satisfy its obligations pursuant to
the Mutual Support Agreement. Completion of the sale of the Shares pursuant to
the Offering is not conditioned upon the sale of any minimum number of Shares.
All subscriptions will be irrevocable by subscribers when received by FTD. Those
Shares subscribed for under subscriptions accepted by FTD as of the Offering
Termination Date will constitute the Shares sold in the Offering.
RECENT NET OPERATING LOSSES
The Company's revenue decreased approximately 2.2% for fiscal 1997 and
decreased approximately 3.3% for fiscal 1996 compared to the prior fiscal years.
The Company reported net losses of approximately $1.7 million and $6.7 million
in fiscal 1997 and 1996, respectively. The net loss in fiscal 1997 was partially
attributable to certain non-recurring expenses of $4.5 million related to FTD's
facility consolidation efforts including the writeoff of the trained workforce
intangible asset. Operating results for 1996 were negatively impacted by
increases in interest expense and the amortization of goodwill and other
intangible assets which were related to the Acquisition. There can be no
assurance that the Company will have net earnings in the future.
SUBSTANTIAL LEVERAGE; NEGATIVE TANGIBLE STOCKHOLDERS' EQUITY
FTD has consolidated indebtedness that is substantial in relation to its
stockholders' equity. As of June 30, 1997, FTD had $82.4 million principal
amount of long-term debt (including current portion of $ 9.3 million), $27.2
million of equity and a tangible net deficit (equity reduced by the amount of
goodwill and other intangible assets) of approximately $51.0 million. As of June
30, 1997, assuming the sale of all Shares in the Offering, the equity will be
$[ ] ($ per Share) and the tangible net deficit will be
$[ ]($ per Share). See "CAPITALIZATION."
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<PAGE> 13
The significant indebtedness has several important consequences for
purchasers of Shares including but not limited to the following: (i) a
substantial portion of FTD's cash flow from operations must be dedicated to debt
service and will not be available for other purposes; (ii) FTD's flexibility to
obtain additional financing in the future for working capital, capital
expenditures or acquisitions or to refinance indebtedness may be significantly
impaired; and (iii) FTD's substantial leverage may make it more vulnerable to
economic downturns and limit its ability to withstand competitive pressures or
take advantage of business opportunities.
FTD's ability to satisfy its debt service obligations depends on its future
operating performance, which will be affected by prevailing economic conditions
and financial, business and other factors, certain of which are beyond FTD's
control. If FTD is unable to service its indebtedness, it will be forced to
adopt an alternative strategy that may include actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing its
indebtedness or seeking additional equity capital. There can be no assurance
that any of these strategies could be effected on satisfactory terms, if at all.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Liquidity and Capital Resources."
CONTINUED APPLICABILITY OF CONSENT ORDER
The Operating Company is subject to certain operating restrictions pursuant
to the Modified Final Judgment, dated November 13, 1990, of the United States
District Court for the Eastern District of Michigan in United States of America
v. Florists' Telegraph Delivery Association, Civ. No. 56-15748, and United
States of America v. Florists' Transworld Delivery Association, Civ. No.
66-28784 (collectively referred to as the "Consent Order"). Among its terms, the
Consent Order prohibits restricting FTD Association membership to florists who
are not subscribers to a competing clearinghouse. The Consent Order expires on
August 1, 2005.
COMPETITION; CONTINUED DECLINE IN SHARE OF U.S. CLEARING BUSINESS
Management estimates, based on data provided by the American Floral
Endowment, an industry research organization, that FTD's share of the U.S.
clearing business (as measured by the percentage of total transactions cleared)
has declined from 54.0% in 1994 to approximately 40.0% in 1996. Management
believes that the decline in FTD's share has been due to competition from other
clearinghouses. FTD expects a continuing decrease in the number of floral orders
cleared by FTD, which it expects, based on historical trends, to be partially
offset by a continued increase in the average dollar amount per floral order
cleared. If the decline in the number of floral orders cleared is more severe
than the Company expects and/or the increase in the average dollar value per
transaction cleared is not realized, such decline could have a material adverse
effect on FTD's financial condition, results of operations and liquidity. See
"BUSINESS -- Competition."
FTD faces significant competition in its businesses. In particular, based
on FTD's Dual Member Study for 1996, over 80% of FTD's members subscribe to
competing clearinghouses, and competition to provide clearinghouse services is
intense. In addition, FTD's members may use the Mercury Network to transmit
orders to be cleared through competing clearinghouses.
RELIANCE ON THE RETAIL FLORIST INDUSTRY; DECLINE IN RETAIL FLORIST SALES
The operating and financial success of FTD's business has been and is
expected to continue to be dependent on the financial performance of the retail
florist industry. Management estimates, based on data provided by various
industry publications, that retail floriculture industry revenues (excluding
floral hardgoods) increased from $5.9 billion to $15.0 billion from 1983 through
1996. Retail florists are now second to mass merchants as a distribution channel
in the floral industry in the United States. This is primarily due to the growth
of non-traditional channels of distribution such as the mass merchandisers,
supermarkets, 1-800 numbers, on-line computer sales, mail order catalogs, home
shopping networks and audiotex telephone shopping. From 1983 to 1996 the share
of floral sales attributable to retail florists declined from 63% to
approximately 35%. There can be no assurance that the retail florist industry
will not continue to lose market share to other floral distribution channels,
nor that retail florist revenues and flowers-by-wire transactions will
11
<PAGE> 14
not decline in absolute terms. A sustained decline in the sales volume of the
retail florist industry could have a material adverse effect on FTD.
SEASONALITY
FTD generated 22.8%, 25.6%, 29.4% and 22.2% of total revenue in the
quarters ended September 30, December 31, March 31 and June 30 of fiscal 1997,
respectively. FTD's revenue typically exhibits a modest degree of seasonality as
demonstrated in fiscal 1997. FTD's operating income also fluctuates over the
course of the fiscal year, with FTD generating slightly more of its operating
income in the fiscal quarters ending September 30 and March 31. This fluctuation
is primarily attributable to (i) increased advertising and promotional
expenditures during the holiday seasons in the fiscal quarters ending December
31 and June 30 and (ii) a Clearinghouse volume incentive program, which
experiences higher expenses as a result of increased volume during these holiday
seasons. FTD's working capital, cash and short-term borrowings also fluctuate
during the year as a result of the factors set forth above.
CONTROLLING STOCKHOLDERS
The principal stockholders of FTD Corporation are Perry Acquisition
Partners L.P. ("Perry Partners"), a group of five investment funds (the "Bain
Funds") controlled by Bain Capital, Inc. ("Bain"), and three investment funds
(the "Fleet Funds"), two of which are controlled by Fleet Financial Group, Inc.
("FFG"), and one of which is controlled by an affiliate of an FFG subsidiary
(referred to collectively herein as the "Principal Stockholders").
Perry Partners owns approximately 48.81% of the Common Stock, representing
approximately 61.40% of the total voting power. Following the consummation of
the Offering, Perry Partners will own approximately 45.40% of the Common Stock,
representing approximately 56.11% of the total voting power (assuming all of the
Shares are sold and no shares of Class B Common Stock are converted). By virtue
of such stock ownership and the terms of the Stockholders' Agreement (as
defined), Perry Partners has the power to control, subject to certain
exceptions, matters submitted to stockholders and to elect a majority of the
directors of FTD. The Bain Funds own in the aggregate approximately 10.09% of
the Common Stock, representing approximately 12.69% of the total voting power.
Following the consummation of the Offering, the Bain Funds will own, in the
aggregate, approximately 9.38%, of the Common Stock, representing approximately
11.60% of the total voting power (assuming all of the Shares are sold and no
shares of Class B Common Stock are converted). By virtue of the Stockholders'
Agreement, the consent of the Bain Funds is needed with respect to certain
actions submitted to the Board of Directors or stockholders of FTD, and the Bain
Funds have the right to have three of their designees nominated as directors of
FTD Corporation. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT" and "DESCRIPTION OF CAPITAL STOCK -- Stockholders' Agreement."
FTD Corporation currently has 1,566,686 shares of Class B Common Stock
outstanding, all of which are non-voting. The Fleet Funds own 19.85% of the
outstanding Class B Common Stock. Under certain circumstances the Class B Common
Stock may be converted to Class A Common Stock and such conversion could
decrease the proportionate voting power of the other stockholders. Additionally,
the Board of Directors of the Company is authorized to issue one or more series
of preferred stock. The issuance of such preferred stock could adversely effect
the voting power of the Class A Common Stock and could, under certain
circumstances, have the effect of preventing a change in control of the Company.
See "DESCRIPTION OF CAPITAL STOCK."
The Company has entered into a Management Consulting Services Agreement
with certain parties related to each of the Principal Stockholders to provide
financial advisory services to the Company. See "RELATIONSHIP WITH AFFILIATES."
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<PAGE> 15
THE ACQUISITION AND RELATIONSHIP WITH FTD ASSOCIATION
Pursuant to the terms of the Mutual Support Agreement between the Operating
Company and FTD Association, FTD's ability to change its operations is
restricted in certain ways. See "BUSINESS -- The Acquisition and Relationship
with FTD Association."
RESTRICTIONS ON FTD'S OPERATIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Company's credit agreement with its principal lenders (the "Bank Credit
Agreement") restricts the ability of FTD and its subsidiaries, including the
Operating Company, to, among other things, incur additional indebtedness, pay
dividends or make certain other restricted payments or investments, consummate
certain asset sales, enter into certain transactions with affiliates, incur
liens, merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets,
modify the material terms of its agreements with FTD Association and engage in
unrelated businesses. The Bank Credit Agreement also imposes limitations on
FTD's ability to restrict the ability of its subsidiaries to pay dividends or
make certain payments to FTD or any of its subsidiaries and on the ability of
FTD to issue preferred stock. In addition, the Indenture with respect to the
Operating Company's $60,000,000 principal amount 14% Series B Senior
Subordinated Notes due 2001 (the "Notes") imposes similar restrictions on the
Operating Company. The Bank Credit Agreement also requires FTD to maintain
specified financial ratios and satisfy certain financial tests. FTD's ability to
meet such financial ratios and tests may be affected by events beyond its
control, and there can be no assurance that FTD will meet such tests. A breach
of any of these covenants could result in an event of default under the Bank
Credit Agreement. In the event of an event of default under the Bank Credit
Agreement, the lenders could elect to declare all amounts borrowed under the
Bank Credit Agreement, together with accrued interest, to be immediately due and
payable and to terminate all commitments under the revolving credit facility. If
FTD were unable to repay all amounts declared due and payable, the lenders could
proceed against the collateral granted to them to satisfy the indebtedness and
other obligations due and payable. Substantially all of the assets of FTD and
its subsidiaries are pledged as security under the Bank Credit Agreement. If the
Bank Credit Agreement indebtedness were to be accelerated, there can be no
assurance that the assets of FTD would be sufficient to repay in full such
indebtedness and the other indebtedness of FTD, which, upon a liquidation of the
Company, are required to be paid in full before any distribution on the Common
Stock could be made. See "DESCRIPTION OF BANK CREDIT AGREEMENT."
RESTRICTIONS ON DIVIDENDS
The Company is currently prohibited from paying cash dividends on its
Common Stock, including the Class A Common Stock, by covenants contained in
certain of the Company's financing arrangements. See "DIVIDEND POLICY."
DILUTION
If all Shares offered hereby are sold, there will be a net tangible deficit
per share of $[ ]. This a difference of $[ ] from the Offering Price
of $[ ] per share. See "DILUTION."
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<PAGE> 16
THE OFFERING
GENERAL
FTD is offering in the United States to Active Members of FTD Association
(defined in the Articles of Incorporation of FTD Association as an FTD
Association member that is an individual, partnership, firm or corporation of
good reputation engaged in the retail floral business), who may legally purchase
Shares in the respective state in which they reside, up to 573,039 Shares at a
price of $[ ] per Share.
Active Members may legally purchase Shares if all required action has been
taken to register or qualify the Shares under the blue sky or state securities
laws of the state in which such member resides. The Company has made application
in all states to have the Shares registered or qualified for sale in such state;
however, there can be no assurance that such registration or qualification will
be obtained in each state. In order to purchase Shares in the Offering, an
Active Member must subscribe for Shares in accordance with the procedures
described below and the instructions contained in the subscription materials
accompanying this Prospectus. In certain states the Offering is being
facilitated through a registered broker in order to comply with applicable state
securities laws.
The Offering is being conducted by FTD pursuant to the Mutual Support
Agreement. Completion of the sale of the Shares pursuant to the Offering is not
conditioned upon the sale of any minimum number of Shares. If at the Offering
Termination Date less than all of the Shares have been subscribed for,
subscriptions that have been accepted by FTD will remain effective, and the
Offering shall terminate with respect to the unsubscribed Shares.
DETERMINATION OF OFFERING PRICE
The Offering Price has been determined by the Board of Directors of FTD
after giving consideration to many complex factors, including the historical
operations and prospects of the Company, competitive conditions in the floral
industry and general economic conditions. Although many factors have been
considered, the specific Offering Price of the Shares does not have any direct
relationship to the assets, earnings, book value or other measurable criteria of
the Company. No assurance can be given that the Offering Price is equal to the
fair value of the Shares.
PLAN OF DISTRIBUTION
The Company is offering and selling the Shares without the assistance of
any underwriter. Instead, in order to satisfy the broker/dealer registration
requirements of the state securities laws for an issuer or the agent
registration requirements for an employee of the issuer, except as otherwise
noted hereafter, the Offering will be made through a registered
broker/dealer in all jurisdictions.
NOTICE OF COMMENCEMENT OF THE OFFERING
Each Active Member in the United States received a Notice advising it to
contact FTD in order to receive a copy of this Prospectus and the subscription
materials if the Active Member wished to purchase shares in the Offering. By
contacting FTD and requesting a copy of this Prospectus and the subscription
materials, Active Members became eligible to subscribe for Shares.
MEMBERS' ALLOCATIONS
Each Active Member will be allocated a number of Shares for which it may
subscribe (the "Initial Allocation"). The subscription materials will set out
the Participating Member's Initial Allocation and the aggregate purchase price
of such Shares (the "Purchase Price"). FTD will determine each Participating
Member's Initial Allocation on a fair and equitable basis as determined solely
by the Company in accordance with the Mutual Support Agreement, and such
allocation will be based in part upon the amount of business such Participating
Member conducts through FTD. Additionally, the Company may, in its discretion,
reoffer any unsubscribed shares to members selected in a manner the Company
deems appropriate.
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<PAGE> 17
SUBSCRIPTION PROCEDURES
The Offering will terminate at 5:00 P.M., New York City time, on
, 199 , unless extended at FTD's discretion for up to an additional
60-day period. Participating Members may subscribe for Shares by properly
completing and signing a Subscription Agreement and delivering the Subscription
Agreement to the address set forth below prior to 5:00 P.M., New York City time,
on the Offering Termination Date. The instructions accompanying the Subscription
Agreement should be read carefully and followed in detail. COMPLETED
SUBSCRIPTION AGREEMENTS SHOULD BE SENT BY MAIL, OVERNIGHT DELIVERY OR HAND
DELIVERY TO:
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 WALL STREET, 46TH FLOOR
NEW YORK, NEW YORK 10005
ATTN: FTD MEMBER OFFERING
Participating Members who wish to purchase Shares must subscribe for and
purchase at least the lesser of (i) 100 Shares or (ii) all of their Initial
Allocation, or they will not be entitled to purchase any Shares. To the extent
that any Participating Member does not return a properly completed Subscription
Agreement and comply with the procedures set forth therein with respect to its
allocation ("Unsubscribed Shares"), such member will no longer have any right to
participate in the Offering. FTD may elect, in its sole discretion, to reoffer
any or all Unsubscribed Shares to other Active Members. Participating Members
who wish to purchase Unsubscribed Shares in addition to their Initial Allocation
should indicate the maximum number of Shares they would be willing to purchase
in the appropriate space provided in the Subscription Agreement. FTD will notify
each Participating Member of the total number of Shares allotted to them and the
aggregate Purchase Price following the Offering Termination Date.
THE METHOD OF DELIVERY OF THE SUBSCRIPTION AGREEMENT TO AMERICAN STOCK
TRANSFER & TRUST COMPANY ("AMERICAN STOCK TRANSFER"), FTD'S AGENT, WILL BE AT
THE ELECTION AND RISK OF EACH PARTICIPATING MEMBER. IF SENT BY MAIL, FTD
RECOMMENDS THAT COMPLETED SUBSCRIPTION AGREEMENTS BE SENT BY REGISTERED MAIL,
WITH RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE PROVIDED
FOR TO ENSURE DELIVERY OF THE SUBSCRIPTION AGREEMENT TO AMERICAN STOCK TRANSFER
PRIOR TO THE OFFERING TERMINATION DATE.
SUBSCRIPTION AGREEMENTS RECEIVED BY AMERICAN STOCK TRANSFER FROM
PARTICIPATING MEMBERS MAY NOT BE REVOKED.
RESTRICTIONS ON TRANSFER OF SHARES; OPTIONAL REDEMPTION
Shares sold to Participating Members in the Offering will be subject to
certain restrictions on transfer during the Restriction Period, which terminates
on the earlier of (i) three years from the closing of the Offering or (ii) 180
days after the consummation of an Initial Public Offering (as defined below).
During the Restriction Period, Shares may not be transferred by Participating
Members, except as described below, other than to (1) family members or
affiliates (as such term is defined in Rule 12b-2 promulgated under the Exchange
Act, summarized below) of such Participating Member or (2) subject to the
Company's right of first refusal, other Active Members of FTD Association in
good standing. FTD's right of first refusal gives FTD an irrevocable option for
30 days after it receives written notice from a Participating Member that such
Participating Member wishes to transfer his Shares, to purchase the Shares at
the price proposed to be paid by the purchaser. If FTD elects not to purchase
the Shares, the sale of the Shares must be consummated at the price proposed by
the purchaser within 20 days after FTD's option lapses.
Rule 12b-2 defines an affiliate of a person to mean a person that directly
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the person specified. For purposes of the
transfer restrictions on the Shares, Initial Public Offering means the sale of
Class A Common Stock to the public in an offering pursuant to an effective
registration statement filed with the Commission under the Securities Act that
results in an active trading market in the Class A Common Stock (such an active
trading market shall be deemed to exist if, among other things, the Class A
Common Stock is listed on a national securities exchange or on the Nasdaq Stock
Market-National Market System); provided that an
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<PAGE> 18
Initial Public Offering does not include an offering made in connection with a
business acquisition or combination or an employee benefit plan or an offering
of securities by FTD solely to members of FTD Association made pursuant to the
Mutual Support Agreement.
The certificates representing the Shares will contain a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SUBSCRIPTION AGREEMENT BETWEEN FTD CORPORATION (THE "COMPANY") AND THE ORIGINAL
HOLDER OF THIS SECURITY, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT
IN ACCORDANCE WITH THE PROVISIONS OF SUCH SUBSCRIPTION AGREEMENT. THE HOLDER OF
THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL
OF THE PROVISIONS OF SUCH SUBSCRIPTION AGREEMENT, INCLUDING RESTRICTIONS
RELATING TO THE TRANSFER OF SECURITIES REPRESENTED HEREBY.
If any Participating Member ceases to be an Active Member of FTD
Association, FTD will have the irrevocable option during the Restriction Period
to redeem any Shares held by such Participating Member or any family member or
affiliate of such Participating Member to whom such Shares have been transferred
at the greater of (i) the value of the Shares, determined in good faith by an
officer of the Company, in his sole discretion, based on the earnings, book
value and prospects of the Company in light of market conditions generally
("Fair Market Value") or (ii) the Offering Price.
PAYMENT OF PURCHASE PRICE
Participating Members will be billed for the Purchase Price through FTD's
Clearinghouse system. Any Participating Member who fails to pay any portion of
its bill for the Purchase Price by the Final Payment Date will not be entitled
to purchase Shares, and such Participating Member's Subscription Agreement will
automatically terminate and the billing for the Purchase Price will be reversed.
DETERMINATIONS AS TO VALIDITY; INQUIRIES
All questions concerning the timeliness, validity, form and eligibility of
Subscription Agreements and payments received will be determined by FTD, in its
sole discretion, and such determinations will be final and binding. FTD, in its
sole discretion, may waive any defect or irregularity, or permit a defect or
irregularity to be corrected within such time as it may determine, or reject the
purported subscription for Shares. Subscription Agreements will not be deemed to
have been received or accepted until all irregularities have been waived or
cured within such time as FTD determines in its sole discretion. FTD will not be
under any duty to give notification of any defect or irregularity in connection
with the submission of Subscription Agreements or incur any liability for
failure to give such notification.
ANYONE WITH QUESTIONS OR REQUIRING ASSISTANCE CONCERNING THE PROCEDURES FOR
PURCHASING SHARES SHOULD CALL FTD AT (630) 719-7800 AND ASK TO SPEAK TO A
REPRESENTATIVE ABOUT THE FTD MEMBER OFFERING.
ISSUANCE OF CERTIFICATES REPRESENTING SHARES
Certificates representing Shares purchased pursuant to the Offering will be
delivered to purchasers as soon as practicable following the Final Payment Date.
RIGHT TO AMEND OR TERMINATE THE OFFERING
FTD expressly reserves the right to amend the terms and conditions of the
Offering, whether the amended terms and conditions are more or less favorable to
Active Members or Participating Members. In the event of a material change in
the terms of the Offering, FTD will file a post-effective amendment to the
Registration Statement, of which this Prospectus is a part, and resolicit
subscribers to the extent required by the Commission. FTD expressly reserves the
right, at any time prior to delivery of Shares offered hereby, to
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<PAGE> 19
terminate or suspend the Offering, if the Offering is prohibited by law or
regulation or the Board of Directors concludes, in its sole judgment, that it is
not in the best interests of FTD to complete the Offering under the
circumstances. If the Offering is so terminated, all amounts debited from
Participating Member's accounts will be promptly credited to such accounts
without interest.
USE OF PROCEEDS
The Offering is being made pursuant to the Mutual Support Agreement. See
"THE OFFERING." The estimated proceeds of approximately $[ ] million
(assuming all of the Shares are sold for cash) from the consummation of the
Offering will be used by the Company to defray the expenses of the Offering,
estimated to be approximately $[ ], and for working capital needs and
general corporate purposes of the Operating Company, including acquisitions.
However, there is currently no definitive agreement in effect with respect to
the acquisition of any company, and there is no probable acquisition pending of
any company whose acquisition would have a material effect on the consolidated
financial statements of FTD.
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock since its inception
in March 1993. The Company is currently prohibited from paying cash dividends on
its Common Stock, including the Class A Common Stock, by covenants contained in
certain of the Company's financing arrangements. In the event the payment of
dividends is not prohibited in the future by such covenants, the decision
whether to pay dividends on the Common Stock will be determined by the Board of
Directors in light of the Company's earnings, cash flows, financial condition,
business prospects and other relevant factors. Holders of Class A and Class B
Common Stock will be entitled to share ratably, as a single class, in any
dividends paid on the Common Stock.
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CAPITALIZATION
The following table sets forth the consolidated capitalization of FTD as of
June 30, 1997 and as adjusted to give effect to the sale of the Shares offered
hereby (assuming (i) all of the Shares are sold for cash and (ii) no shares of
Class B Common Stock are converted). This table should be read in conjunction
with the consolidated financial statements of FTD and related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED
------ --------
(IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT, INCLUDING CURRENT PORTION:
Term loans under Bank Credit Agreement(1)................... $ 24,619 $ 24,619
14% Series B Senior Subordinated Notes due 2001(2).......... 57,748 57,748
Term loans.................................................. 33 33
-------- --------
Total long-term debt................................... 82,400 82,400
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock(3).......................................... -- --
Common stock -- Class A(4).................................. 62 68
Common stock -- Class B(5).................................. 1 1
Additional paid-in capital(6)............................... 35,639 44,365
Retained earnings........................................... (8,013) (8,013)
Notes Receivable............................................ (32) (32)
Treasury Stock.............................................. (485) (485)
-------- --------
Total stockholders' equity............................. 27,172 35,904
-------- --------
Total capitalization........................................ $109,572 $118,304
======== ========
</TABLE>
- -------------------------
(1) The Bank Credit Agreement also provides for revolving loans of up to $25
million. See "DESCRIPTION OF BANK CREDIT AGREEMENT."
(2) The Notes were issued at a discount from their initial aggregate face amount
of $60 million.
(3) As of June 30, 1997, there were 1,000,000 shares of preferred stock, par
value $.01 per share, authorized and no shares issued and outstanding.
(4) As of June 30, 1997, there were 30,000,000 shares of Class A Common Stock,
par value $.0l per share, authorized, 6,164,514 of such shares issued and
6,073,839 of such shares outstanding. After giving effect to the
consummation of the Offering, there will be 6,737,553 shares of Class A
Common Stock issued and 6,646,878 of such shares outstanding. As of June 30,
1997, there were outstanding options to purchase 217,000 shares of Class A
Common Stock, of which options to purchase 7,500 shares were then
exercisable.
(5) As of June 30, 1997, there were 3,000,000 shares of Class B Common Stock,
par value $.0005 per share, authorized and 1,566,686 of such shares issued
and outstanding.
(6) Adjusted to reflect the expenses of the Offering.
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DILUTION
The net tangible book value of the Company at [ ], 199 was
$[ ] per share of Common Stock. Net tangible book value per share after
giving effect to the Offering represents the amount of total tangible assets of
the Company less the amount of total liabilities, divided by the number of
shares of Common Stock outstanding, after giving effect to the sale by the
Company of up to 573,039 shares of Class A Common Stock in the Offering at the
Offering price of $[ ] per share. "Dilution" per share is determined by
subtracting pro forma net tangible book value per share from the amount to be
paid for a share of Class A Common Stock in the Offering.
The following table illustrates the calculation of the per share dilution
described above:
<TABLE>
<CAPTION>
PRO FORMA AFTER
GIVING EFFECT
EXISTING TO THE OFFERING
STOCKHOLDERS , 199
------------ ---------------
<S> <C> <C>
Offering Price per share.................................... $ $
Pro forma net tangible book value per share at ,
199 ..................................................... $[ ] $[ ]
Net tangible book value dilution per share to new
Investors................................................. $ $
</TABLE>
The following table sets forth on a pro forma basis the distribution
between existing stockholders and new investors with respect to the number of
shares of Common Stock purchased from the Company, the total effective cash cost
and the average price per share paid to the Company.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATIONS
----------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ % $[ ] % $
New investors.................... $
------- ---------
Total....................... 100.00% $ 100.00%
======= ====== ========= ======
</TABLE>
19
<PAGE> 22
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical data of the Old
Association for the fiscal years ended June 30, 1993 and 1994 and the period
from July 1, 1994 to December 18, 1994, and of FTD for the period December 19,
1994 to June 30, 1995 and the fiscal years ended June 30, 1996 and 1997. The
selected historical balance sheet and statement of operations data as of and for
the fiscal years ended June 30, 1993 and 1994 were derived from the audited
consolidated financial statements of the Old Association. The Acquisition was
consummated on December 19, 1994. The selected historical statement of
operations data for the period from December 19, 1994 to June 30, 1995, and for
the years ended June 30, 1996 and 1997, and the balance sheet data as of June
30, 1995, 1996 and 1997 were derived from the audited consolidated financial
statements of FTD. The information contained in this table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements for the
years ended June 30, 1997, 1996 and 1995, of FTD, including the notes thereto,
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
CONSOLIDATED FTD CORPORATION OLD ASSOCIATION
------------------------------------ ------------------------------------
DECEMBER 19, JULY 1
YEAR ENDED JUNE 30, 1994 THROUGH THROUGH YEAR ENDED JUNE 30,
-------------------- JUNE 30, DECEMBER 18, --------------------
1997 1996 1995 1994 1994 1993
---- ---- ------------ ------------ ---- ----
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Marketplace.................. $ 49,738 $ 57,924 $ 35,460 $28,556 $ 58,987 $ 63,606
Clearinghouse................ 34,383 37,070 24,738 16,093 42,386 44,717
Mercury Network.............. 37,558 34,138 17,618 13,865 30,113 27,596
Other........................ 40,904 37,123 18,702 16,818 35,074 33,276
-------- -------- -------- ------- -------- --------
Total revenue 162,583 166,255 96,518 75,333 166,560 169,195
Cost of goods sold and
services provided.......... 96,306 104,386 58,567 49,109 102,260 103,622
Selling, general, and
administrative............. 55,769 58,376 30,669 28,684 57,625 61,073
-------- -------- -------- ------- -------- --------
Income (loss) from
operations................. 10,508 3,493 7,282 (2,460) 6,675 4,500
Other expense, net(1)........ 11,839 12,067 5,827 77 795 1,178
Income taxes (benefit)(2).... 416 (1,813) 1,021 35 92 42
Minority interest(3)......... (14) (33) 8 -- -- --
Cumulative effect of
accounting change(4)....... -- -- -- -- 6,277 --
-------- -------- -------- ------- -------- --------
Net income (loss)............ $ (1,733) $ (6,728) $ 426 $(2,572) $ (489) $ 3,280
======== ======== ======== ======= ======== ========
Earnings (loss) per share(5)
Primary...................... $ (0.23) $ (1.01) $ 0.06
Fully Diluted................ $ (0.23) $ (1.01) $ 0.06
OTHER DATA:
Depreciation and
amortization............... $ 15,606 $ 14,231 $ 6,525 $ 4,911 $ 10,144 $ 9,043
Capital expenditures......... 2,614 4,950 3,082 1,413 8,134 18,200
Ratio of earnings to fixed
charges(6)................. -- -- 1.2x -- 2.9x 2.0x
BALANCE SHEET DATA:
(at end of period)
Working capital.............. $ 5,466 $ 2,718 $ 6,546 $ 16,918 $ 12,581
Total assets................. 181,724 196,082 203,864 135,506 125,816
Long-term debt, including
current portion............ 82,400 96,277 100,757 33,463 33,746
Total equity................. $ 27,172 $ 29,140 $ 35,080 $ 36,216 $ 40,521
</TABLE>
20
<PAGE> 23
- -------------------------
(1) Interest expense in fiscal 1993 is also net of $185 of interest capitalized
as construction in progress.
(2) Taxes on income for the fiscal years ended June 30, 1993 and 1994 and the
period July 1 through December 18, 1994 are generally applicable to the Old
Association's Canadian operations. During these periods, the Old Association
conducted substantially all of its business activities as a member-owned
non-profit cooperative association and, accordingly, no provision for U.S.
income taxes was required. Taxes on income for the period December 19, 1994
through June 30, 1995 and for the fiscal years ended June 30, 1996 and 1997
represent operations after conversion from a cooperative association to a
for-profit corporation, which resulted in a provision for U.S. income tax
liabilities to be recorded.
(3) Represents FTD's interest in Renaissance.
(4) Effective July 1, 1993, the Old Association and its consolidated
subsidiaries adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Post-Retirement Benefits Other Than Pensions,"
for its unfunded post-retirement health care program. See note 8 to the
consolidated financial statements of FTD.
(5) The Old Association was a member-owned non-profit cooperative association
and, accordingly, no stock was issued.
(6) In calculating the ratio of earnings to fixed charges, earnings consists of
net income prior to income taxes, minority interest and cumulative effect of
accounting change, plus fixed charges. Fixed charges consist of interest
expense and the component of rental expense believed by management to be
representative of the interest factor thereon. Earnings for the period July
1 through December 18, 1994 were insufficient to cover fixed charges by
$2,537. Earnings for the year ended June 30, 1996 and 1997, were
insufficient to cover fixed charges by $8,574 and $1,331, respectively.
21
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained in this Prospectus, certain
statements made herein are forward-looking statements that involve risks and
uncertainties and are subject to important factors that could cause FTD's actual
results to differ significantly from the results discussed in the
forward-looking statements, including without limitation, the effect of economic
and market conditions and the impact of competitive activities. The following
discussion should be read in conjunction with the Consolidated Financial
Statements including the notes thereto included elsewhere in this Prospectus.
See "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS."
EFFECT OF ACQUISITION ON RESULTS OF OPERATIONS
The Acquisition was consummated on December 19, 1994. Accordingly, the
results of operations from December 19, 1994 through June 30, 1995 and for the
years ended June 30, 1996 and 1997 represent those of FTD Corporation and its
consolidated subsidiaries. Results of operations prior to December 19, 1994 are
those of the Old Association. The Acquisition generally affected FTD's results
of operations as follows: (i) certain trade association activities previously
conducted by FTD are now being conducted by FTD Association; (ii) immediately
following the consummation of the Acquisition, the Operating Company was
converted from a non-profit cooperative association owned by its members to a
for-profit corporation; (iii) in connection with the Acquisition, FTD recorded a
$7.0 million liability subsequently adjusted to $3.9 million for the costs of
termination benefits and other expenses associated with FTD's employee headcount
reduction and the planned consolidation of FTD's data processing facilities;
(iv) as a result of the Acquisition, FTD's balance sheet carries significant
goodwill; (v) certain provisions of the Mutual Support Agreement may impact,
among other things, product pricing in transactions with FTD Association
members; and (vi) the Company has implemented or plans to implement several cost
reduction strategies, including a reduction in costs related to the Company's
Board of Directors, the elimination of costs associated with trade activities of
the Old Association and a reduction in various general and administrative
expenses of the Old Association (offset by additional costs related to the new
management team and out-sourcing certain functions).
RESULTS OF OPERATIONS
The following table illustrates the total revenue generated by FTD's major
businesses and summarizes FTD's historical results of operations for the three
fiscal years ended June 30, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUE:
Marketplace.......................................... $ 49,738 $ 57,924 $ 64,016
Clearinghouse........................................ 34,383 37,070 40,831
Mercury Network...................................... 37,558 34,138 31,483
Other................................................ 40,904 37,123 35,521
-------- -------- --------
Total revenue.......................................... 162,583 166,255 171,851
Cost of goods sold and services provided............... 96,306 104,386 107,676
Selling, general and administrative.................... 55,769 58,376 59,353
-------- -------- --------
Income from operations................................. $ 10,508 $ 3,493 $ 4,822
======== ======== ========
</TABLE>
YEAR ENDED JUNE 30, 1997 COMPARED TO YEAR ENDED JUNE 30, 1996
The following is a discussion of changes in the Company's financial
condition and results of operations for the year ended June 30, 1997 compared
with the year ended June 30, 1996.
Revenue decreased by $3.7 million, or 2.2%, to $162.6 million for the year
ended June 30, 1997 compared to $166.3 million for the year ended June 30, 1996.
The decline in revenue was the net result of decreases in Marketplace and
Clearinghouse revenue, partially offset by increases in Mercury Network and
Other revenue.
22
<PAGE> 25
Marketplace revenue decreased by $8.2 million, or 14.2%, to $49.7 million
for the year ended June 30, 1997 compared to $57.9 million for the year ended
June 30, 1996. The decrease from the prior year was the result of lower sales
volume of holiday products. Marketplace revenue was 30.6% and 34.8% of total
revenue for the years ended June 30, 1997 and 1996, respectively.
Clearinghouse revenue decreased by $2.7 million, or 7.3%, to $34.4 million
for the year ended June 30, 1997 from $37.1 million for the year ended June 30,
1996. This was the net result of a decline in the volume of floral orders
cleared through FTD and a 3.5% increase in the average revenue per order in
accordance with overall industry trends. The Company believes the decline in the
volume of orders cleared by FTD is due to competition from other clearinghouse
services, and the general decline in industry clearings which has resulted from
the general decline in the market share of retail florists. Clearinghouse
revenue was 21.1% and 22.3% of total revenue for the years ended June 30, 1997
and 1996, respectively.
Mercury Network revenue increased by $3.5 million, or 10.3%, to $37.6
million for the year ended June 30, 1997 from $34.1 million for the year ended
June 30, 1996. An increase in terminal leasing revenue, order transmission
income and sales of Advantage floral business systems were the major factors in
the revenue increase. Mercury Network revenue was 23.1% and 20.5% of total
revenue for the years ended June 30, 1997 and 1996, respectively.
Other revenue experienced a net increase of $3.8 million, or 10.2%, to
$40.9 million for the year ended June 30, 1997 from $37.1 million for the year
ended June 30, 1996. This increase was primarily due to growth in the order
volume of Direct Access (1-800-SEND-FTD) and publications revenue. Other revenue
was 25.2% and 22.4% of total revenue for the years ended June 30, 1997 and 1996,
respectively.
The cost of goods sold and services provided decreased by $8.1 million, or
7.8%, to $96.3 million for the year ended June 30, 1997 from $104.4 million for
the year ended June 30, 1996. This is primarily the result of lower cost of
goods sold related to the Marketplace sales discussed above. In addition, FTD
realized cost reductions resulting from improvements in customer service
operations. As a percentage of revenue, cost of goods sold and services provided
decreased slightly to 59.2% for the year ended June 30, 1997 from 62.8% for the
year ended June 30, 1996.
Selling, general and administrative expenses decreased by $2.6 million, to
$55.8 million for the year ended June 30, 1997 from $58.4 million for the year
ended June 30, 1996. This decrease is primarily due to FTD's decreased
advertising and promotional expenditures in fiscal 1997. In addition, a pension
curtailment gain of $2.7 million, a $0.8 million post-retirement curtailment
gain and a $0.5 million pension settlement gain were partially offset by costs
of $4.5 million due to FTD's facility consolidation efforts including the
writeoff of the trained workforce intangible asset.
Interest income for the years ended June 30, 1997 and 1996 was $1.5 million
and $1.4 million, respectively. The increase is attributable to higher average
invested cash. Interest expense for the year ended June 30, 1997 was $12.8
million as compared to $13.5 million in the prior year. The decrease of $0.7
million resulted from a reduction in debt during the year ended June 30, 1997.
See "-- Liquidity and Capital Resources."
Income taxes for the year ended June 30, 1997 reflect an expense of $ 0.4
million compared to a benefit of $1.8 million for the comparable period in the
prior year. The tax expenses for the year ended June 30, 1997, represents the
current year reduction to the company's deferred tax assets. The tax benefit for
the year ended June 30, 1996 represents the amount of deferred tax benefit
recognized as a result of the pretax loss incurred for the year.
As a result of the factors described above, a net loss of $ 1.7 million
resulted for the year ended June 30, 1997, an improvement of $5.0 million from a
net loss of $6.7 million for the year ended June 30, 1996.
YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995
The following is a discussion of changes in the Company's financial
condition and results of operations for the year ended June 30, 1996 compared
with the year ended June 30, 1995. For purposes of presenting a
23
<PAGE> 26
meaningful comparison, as stated above, the year ended June 30, 1995 includes
both: (i) results of the Operating Company's predecessor (Florists' Transworld
Delivery Association) for the period prior to the Acquisition on December 19,
1994; and (ii) the results of the Company from December 19, 1994 through June
30, 1995.
Revenue decreased by $5.6 million, or 3.3%, to $166.3 million for the year
ended June 30, 1996 compared to $171.9 million for the year ended June 30, 1995.
The decline in revenue was partly due to the elimination of $2.7 million in
revenue from trade association activities in the prior comparable period which,
since the Acquisition, have no longer been conducted by the Company. The balance
of the decline in revenue was the net result of decreases in Marketplace and
Clearinghouse revenue, partially offset by Mercury Network and Other revenue.
Marketplace revenue decreased by $6.1 million, or 9.5%, to $57.9 million
for the year ended June 30, 1996 compared to $64.0 million for the year ended
June 30, 1995. The decrease from the prior year was the result of lower sales of
holiday, seasonal and non-branded everyday containers. This was partially offset
by increased sales of the expanded perishables product line and FTD branded
everyday products. Marketplace revenue was 34.8% and 37.3% of total revenue for
the years ended June 30, 1996 and 1995, respectively.
Clearinghouse revenue decreased by $3.7 million, or 9.2%, to $37.1 million
for the year ended June 30, 1996 from $40.8 million for the year ended June 30,
1995. This was the net result of a decline in the volume of floral orders
cleared through FTD and a 3.1% increase in the average revenue per order in
accordance with overall industry trends. The Company believes the decline in the
volume of orders cleared by FTD is due to competition from other clearinghouse
services, and the general decline in industry clearings which has resulted from
the general decline in the market share of retail florists. Clearinghouse
revenue was 22.3% and 23.8% of total revenue for the years ended June 30, 1996
and 1995, respectively.
Mercury Network revenue increased by $2.6 million, or 8.4%, to $34.1
million for the year ended June 30, 1996 from $31.5 million for the year ended
June 30, 1995. An increase in terminal leasing revenue, order transmission
income and equipment sales were the major factors in the revenue increase.
Mercury Network revenue was 20.5% and 18.3% of total revenue for the years ended
June 30, 1996 and 1995, respectively.
Excluding the trade association related revenues from the prior year
discussed above, Other revenue experienced a net increase of $4.3 million, or
13.1%, to $37.1 million for the year ended June 30, 1996 from $32.8 million for
the year ended June 30, 1995. This increase was primarily due to growth in the
order volume of the Direct Access business and in the volume of listings in the
FTD Directory. Other revenue was 22.4% and 20.6% of total revenue for the years
ended June 30, 1996 and 1995, respectively.
The cost of goods sold and services provided decreased by $3.3 million, or
3.1%, to $104.4 million for the year ended June 30, 1996 from $107.7 million for
the year ended June 30, 1995. The decrease in cost of goods sold and services
provided is primarily due to a $6.2 million reduction in costs for products and
distribution related to the lower Marketplace sales volume and a $1.8 million
decrease due to lower costs of member programs which have not been conducted by
the Company since the Acquisition. Offsetting these decreases was a depreciation
expense increase of $1.1 million from the prior year primarily due to computer
hardware and software acquisitions. Other offsetting cost increases resulted
from the increase in Direct Access order volume, additional FTD Directory costs,
field service costs and Mercury Network product and other costs. As a percentage
of revenue, cost of goods sold and services provided remained relatively
constant, with an increase to 62.8% for the year ended June 30, 1996 from 62.7%
for the year ended June 30, 1995.
Selling, general and administrative expenses decreased by $0.9 million, or
1.5%, to $58.4 million for the year ended June 30, 1996 from $59.3 million for
the year ended June 30, 1995. Several factors contributed to the net decrease:
(i) non-recurring Acquisition related costs of $4.1 million were incurred by the
Company during the year ended June 30, 1995; (ii) the elimination of
approximately $1.3 million in costs of certain trade association activities in
fiscal 1995 which, since the Acquisition, have not been conducted by the
Company; (iii) various overhead reductions of $0.8 million affecting promotional
costs; (iv) advertising activities related to the Company's member incentive
program which was implemented during the year ended June 30, 1996 which amounted
to $4.7 million; and (v) amortization of goodwill and other intangibles
24
<PAGE> 27
increased by $1.8 million for the year ended June 30, 1996 from the prior
comparable period which included a partial year of amortization. Selling,
general and administrative expenses increased, as a percent of revenue, to 35.1%
from 34.5% for the year ended June 30, 1996 compared to 1995.
Interest income for the years ended June 30, 1996 and 1995 was $1.4 million
and $2.8 million, respectively. The decrease is attributable to lower average
invested cash due to cash utilized to effect the Acquisition. Interest expense
for the year ended June 30, 1996 was $13.5 million as compared to $8.7 million
in the prior year. The increase of $4.8 million resulted from a full year of
interest on the debt in fiscal 1996 versus a partial year of interest on the
debt in fiscal 1995. See "-- Liquidity and Capital Resources."
Income taxes for the year ended June 30, 1996 reflect a benefit of $1.8
million compared to an expense of $1.0 million for the prior year. The expense
in the prior year was due to the Operating Company's conversion from a
cooperative association to a for-profit corporation on December 19, 1994, the
date of the Acquisition, resulting in recognition of primarily deferred tax
expense for the period from December 19, 1994 through June 30, 1995. Income tax
expense prior to December 19, 1994 was entirely related to the Old Association's
Canadian operations. The tax benefit for the year ended June 30, 1996 represents
the amount of deferred tax benefit recognized as a result of the pretax loss
incurred for the year.
As a result of the factors described above, a net loss of $6.7 million
resulted for the year ended June 30, 1996, an increase of $4.6 million from a
net loss of $2.1 million for the year ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Interest payments on the Notes and interest and principal payments on
obligations under the Bank Credit Agreement represent significant liquidity
requirements for FTD. Borrowings under the Bank Credit Agreement bear interest
at floating rates and require interest payments on varying dates depending on
the interest rate option selected by FTD. Borrowings available under the Bank
Credit Agreement consist of a $45.0 million term loan facility and a $25.0
million revolving credit facility to finance working capital and letter of
credit needs. FTD has repaid $20.4 million of the term loans through June 30,
1997 and is required to repay principal amounts of $9.3 million in fiscal 1998,
$10.1 million in fiscal 1999 and $5.3 million in fiscal 2000. Any loan
outstanding under the revolving credit facility will mature on December 19,
1999. Under the terms of the Bank Credit Agreement, borrowings under the
revolving credit facility are required to be reduced to zero for 30 consecutive
days in each annual period. None of the $25.0 million revolving credit facility
available under the Bank Credit Agreement was borrowed from the date of
Acquisition through June 30, 1997. The Company believes, based on current
circumstances, that its cash flow, together with borrowings under the revolving
credit facility, will be sufficient to fund operations, including planned
capital expenditures, and to repay the term loans and make interest payments as
they become due through the term of the Notes and the Bank Credit Agreement.
In addition to its debt service obligations, FTD's remaining liquidity
demands will be primarily for capital expenditures and working capital needs. In
the fiscal years ended June 30, 1997 and 1996, FTD's capital expenditures were
$2.6 million and $5.0 million, respectively, related primarily in 1997 to
purchase additional office equipment and in 1996 to the upgrade of its Mercury
Network communications facilities through the purchase of its new Mercury 3000
terminals that are leased to FTD florists. FTD's expected capital expenditures
for fiscal 1998 are estimated to be approximately $5.0 million and will
primarily be used for improvements of internal customer service and information
systems and the Mercury Network. The Company believes that cash flow from
operations, together with borrowings available under the revolving credit
facility, will be sufficient to fund anticipated capital expenditures and
working capital needs.
The Bank Credit Agreement contains certain restrictive covenants with
respect to the Company that, among other things, create limitations (subject to
certain exceptions) on the declaration or payment of any dividend or making of
any distribution by the Company on shares of its common stock.
Cash provided by operating activities was $12.5 million for the year ended
June 30, 1997 compared to cash provided of $11.1 million for the year ended June
30, 1996. Factors contributing to this change in cash
25
<PAGE> 28
flow were: pension benefits of $2.9 million and an inventory build of $3.5
million, offset by certain program obligations to members.
Cash provided by investing activities was $3.6 million for the year ended
June 30, 1997 compared to cash used of $5.0 million for the year ended June 30,
1996. In fiscal 1997, the cash provided by investing activities primarily
consisted of the sale of the Company's previous headquarters in Southfield,
Michigan, which was offset by capital expenditures.
Cash used in financing activities was $14.4 million for the year ended June
30, 1997 compared to cash used of $4.0 million for the year ended June 30, 1996.
The net cash used in the year ended June 30, 1997, reflects primarily payment of
principal on the term loans.
Effective January 1, 1997 amendments to FTD's defined benefit pension plan
were adopted, including the elimination of the accrual of future benefits under
the plan. As a result of these amendments, and the corresponding remeasurement
of the accumulated and projected benefit of obligations under the plan, a pre-
tax pension curtailment gain of $2.7 million as well as a pre-tax settlement
gain of $0.5 million were recognized in income as a reduction in selling,
general and administrative costs during fiscal 1997. FTD has established a new
401(k) savings plan for all of its eligible employees.
On January 3, 1997, FTD's Board of Directors approved a plan to consolidate
corporate staff and operations into its Downers Grove, Illinois facility, which
has enabled FTD to improve program execution and is helping FTD to better serve
its customers. Leased office space in Boston, Massachusetts was subleased, and
land and buildings in Southfield, Michigan were sold. FTD's bank credit
agreement required FTD to use the net proceeds from the sale of assets to reduce
the outstanding term loan and as a result, future interest costs will be
reduced. In accordance with EITF Consensus no. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Cost to Exit an Activity,"
non-recurring charges in connection with the consolidation including severance,
asset impairment losses, and other costs aggregating $2.3 million were
recognized as selling, general and administrative costs during fiscal 1997.
Additional non-recurring expenses of $0.7 million were also incurred in
connection with the consolidation resulting in a total of $3.0 million in non-
recurring costs being recorded in fiscal 1997.
26
<PAGE> 29
BUSINESS
OVERVIEW
FTD is the world's largest floral services organization based on number of
members and affiliated organizations. FTD Association has a membership of
approximately 21,000 retail florist shops primarily in the U.S. and Canada and,
through affiliated or related organizations, approximately 32,000 additional
retail florist shops in approximately 140 other countries. Through these members
FTD offers consumers expedited delivery of high-quality FTD-branded products in
the U.S. and Canada and non-branded floral products throughout most of the
world.
FTD promotes a worldwide brand based on the FTD Mercury Man logo, one of
the most recognized corporate logos in the world according to consumer
recognition studies. See "-- Marketing and Advertising." A significant portion
of FTD's revenues, operating income and competitive advantage is derived from
FTD's technology-based transaction processing businesses, which include the
Mercury Network, Clearinghouse, Advantage Software and Direct Access
(1-800-SEND-FTD). In addition to the foregoing, FTD's operations include
Marketplace and other businesses which support and enhance the retail floral
industry. See "-- Operations."
THE ACQUISITION AND RELATIONSHIP WITH FTD ASSOCIATION
The Operating Company is the successor to a non-profit cooperative
organization founded by a group of retail florists in the United States in 1910.
The Operating Company was the surviving corporation after the acquisition on
December 19, 1994 by FTD Corporation of all of the outstanding equity of the Old
Association pursuant to the Merger Agreement. Upon consummation of the
Acquisition, the Operating Company became a wholly-owned subsidiary of FTD
Corporation. Immediately following the Acquisition, the Old Association was
converted from a non-profit corporation to a for-profit corporation and renamed
"Florists' Transworld Delivery, Inc."
FTD Corporation, through the Operating Company, operates all of the
businesses conducted by the Old Association prior to the Acquisition except for
certain trade association activities which are being conducted by FTD
Association, an Ohio non-profit corporation organized in connection with the
Acquisition and structured as a member-owned trade association ("FTD
Association"). Neither FTD nor the Operating Company has any ownership interest
in FTD Association; however, as provided in the Merger Agreement, the Operating
Company and FTD Association have entered into the Mutual Support Agreement,
which governs the relationship between the Operating Company and FTD
Association. Pursuant to the Mutual Support Agreement, among other things: (i)
existing and future members have the exclusive right, subject to execution of a
Trademark Membership License Agreement with the Operating Company, to use the
FTD logo and other FTD trademarks in connection with the operation of a retail
florist shop; (ii) all members in good standing are provided access to FTD's
Clearinghouse, Mercury Network and certain other FTD services and products;
(iii) the Operating Company's prices to members for specified services will not
be increased above those charged on July 1, 1994 prior to December 19, 1997
(except for adjustments for inflation); (iv) payments by the Operating Company
equal to a percentage of the value of every floral order cleared through FTD's
Clearinghouse are made to FTD Association; and (v) the Operating Company and FTD
Association may designate up to 20% but not fewer than two individuals to be
elected to the other's board of directors.
MARKETING AND ADVERTISING
FTD conducts extensive marketing and advertising programs on both a
national and local basis. FTD's national advertising (via television, radio,
magazines and Sunday newspaper supplements) generally promotes FTD florists,
FTD-branded products, 1-800-SEND-FTD and FTD Florists' Online Internet site
(www.ftd.com). FTD coordinates cooperative advertising on a local basis with
participating florists. FTD also provides FTD florists with advertising tools
such as billboard paper, slicks for print advertising and television and radio
tapes to be tagged with individual shop information. In addition, FTD provides
FTD florists with
27
<PAGE> 30
customized direct mail pieces, in-shop merchandising materials and FTD Floral
Selections, a counter display catalog featuring FTD products for all occasions.
FTD's marketing and advertising programs are designed to: (i) increase
consumer demand for FTD-branded floral arrangements which FTD florists clear
through Clearinghouse and components of which are Marketplace's FTD-branded
hardgoods; (ii) feature the FTD Mercury Man logo; and (iii) support the FTD
retail florists generally by encouraging consumers to associate FTD professional
florists with high-quality floral goods and outstanding customer service.
OPERATIONS
For each transaction cleared by FTD, FTD's Clearinghouse operations
collects the billing information from either the Mercury Network or the
Receiving Florist if the Mercury Network has not been used, and allocates funds
among FTD, the Sending Florist and the Receiving Florist. Generally, orders
received by the Receiving Florist by 2:00 p.m. will be delivered to the
recipient, in the same postal zip code on the same day. Floral orders between
FTD florists are transmitted primarily by FTD's Mercury Network.
FTD was initially formed to encourage flowers-by-wire transactions between
FTD florists, but over time FTD has developed a number of additional services
and products that support and enhance the retail floral operations of FTD
professional florists. Currently, FTD's primary operations are Marketplace,
Clearinghouse, Mercury Network and Other (including Direct Access).
The following table illustrates the percentage of total revenue generated
by the Operating Company's major businesses as a percentage of total revenue for
the three fiscal years ended June 30, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUE:
Marketplace................................................. 30.6% 34.8% 37.3%
Clearinghouse............................................... 21.1 22.3 23.8
Mercury Network............................................. 23.1 20.5 18.3
Other (including Direct Access)............................. 25.2 22.4 20.6
----- ----- -----
Total Revenue............................................... 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
Marketplace. The Company believes that Marketplace is one of the largest
wholesale suppliers of hardgoods to retail florists in the U.S. based on total
sales. Marketplace products include both FTD-branded and non-branded holiday and
everyday floral arrangement containers and products, as well as packaging,
promotional products and a wide variety of other floral-related supplies. By
capitalizing on FTD's sourcing expertise and volume purchases, Marketplace is
able to provide FTD florists with a broad selection of products at attractive
prices.
Marketplace also enters into promotional partnerships to design, promote
and sell FTD-branded products. To date, FTD has participated in partnerships
with companies such as Gerber Products Company, Mars, Inc. and Disney
Enterprises, Inc. For example, collectible containers featuring Winnie the Pooh
and his friends have been developed for friendship, new baby, Christmas,
Valentine's Day and Easter floral arrangements. M&M's have been included in the
Sweet Surprise floral arrangement since 1993. The Company believes that FTD's
large retail network and brand recognition make it a valuable corporate partner
for such ventures.
Clearinghouse. FTD's Clearinghouse provides billing and collection services
to both the Sending Florist and the Receiving Florist in flowers-by-wire
transactions. In fiscal 1997, FTD cleared floral orders aggregating in excess of
$492 million in retail sales. Revenue from FTD's Clearinghouse is generated by
FTD retaining a percentage of the sales price of orders sent through
Clearinghouse.
FTD is a joint venture participant in Interflora, Inc., a floral services
organization with non-FTD member florists, which enables florists to transmit
and receive orders outside the Americas.
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<PAGE> 31
Mercury Network. FTD's Mercury Network is one of the largest proprietary
telecommunications networks in the world, based on the total number of
participating retail outlets, linking together FTD and approximately 16,400 of
the 21,000 FTD florists. FTD's on-line florists may use the Mercury Network to
transmit orders cleared through FTD or through competing clearinghouses and to
send messages. In fiscal 1997, the Mercury Network transmitted approximately
14.5 million orders among U.S. and Canadian members.
Direct Access. FTD's Direct Access business offers retail customers the
opportunity to place orders directly with FTD by dialing a toll free number
(1-800-SEND-FTD), through online services such as Compuserve or through FTD
Florists' Online Internet site (www.ftd.com). Revenue from the Direct Access
business is generated by FTD's receipt of a percentage of the sales price as the
Sending Florist and a service charge from the consumer.
OTHER BUSINESSES
FTD has developed several other businesses to support and enhance FTD
florists' retail floral operations, including greeting cards, Advantage Software
for florists' operations, publications, and credit card authorization and
processing services.
Renaissance Greeting Cards. Through Renaissance, a subsidiary of the
Operating Company acquired in 1992, FTD produces greeting cards for special
occasions and holidays which are sold in over 7,900 retail outlets nationwide.
Renaissance cards are made using only recycled paper.
Advantage Software. FTD offers FTD florists computer software, which
operates on the Mercury computer system, that is customized to the needs of
retail florists. The Advantage Plus software package provides a comprehensive
range of payroll and accounting functions for the retail florist. In addition,
the package was expanded in 1997 with modules which streamline the delivery
process. These modules automatically calculate delivery rates, confirm accuracy
of addresses, build efficient delivery routes, print delivery maps and capture
recipient data for future marketing.
FTD Directory & Toll Free Listings. FTD produces the FTD Directory & Toll
Free Listings ("FTD Directory"), a directory of all current FTD florists, their
locations, product ordering information and minimum order amounts. In a typical
transaction, the Sending Florist is responsible for selecting the Receiving
Florist within the desired locale. Unless the Sending Florist has already
established a relationship with a particular florist in that locale, the Sending
Florist typically consults FTD Directory to identify a Receiving Florist. FTD
Directory is published periodically and is supplied to FTD florists in printed
form. FTD Directory is also available on CD-ROM.
Credit Card Authorization and Processing. FTD offers processing of credit
card transactions to participating FTD florists. By pooling the credit card
transactions of such florists, FTD is able to secure more favorable terms on
credit card transactions than they could secure individually. Credit card
authorizations can be obtained by telephone, with a dedicated authorization
terminal, or by using the accounting software offered to retail florists by FTD.
FTD also provides an address verification system to minimize fraud, as well as
statement and adjustment services. Revenue from FTD's credit card program is
generated by a monthly subscriber fee and discounts charged for transactions.
SEASONALITY
FTD generated 22.8%, 25.6%, 29.4% and 22.2% of total revenue in the
quarters ended September 30, December 31, March 31 and June 30 of fiscal 1997,
respectively. FTD's revenue typically exhibits a modest degree of seasonality as
demonstrated in fiscal 1997. FTD's operating income also fluctuates over the
course of the fiscal year, with FTD generating slightly more of its operating
income in the fiscal quarters ending September 30 and March 31. This fluctuation
is primarily attributable to (i) increased advertising and promotional
expenditures during the holiday seasons in the fiscal quarters ending December
31 and June 30 and (ii) a Clearinghouse volume incentive program, which
experiences higher expenses as a result of
29
<PAGE> 32
increased volume during these quarters. FTD's working capital, cash and
short-term borrowings also fluctuate during the year as a result of the factors
set forth above.
PROPERTIES
FTD's principal executive offices, consisting of approximately 120,000
square feet of office space, are owned by FTD and are located in Downers Grove,
Illinois. FTD leases office space through a subsidiary in Sanford, Maine. FTD
uses independent warehouse and distribution facilities in California, Ohio and
Ontario, Canada for product distribution.
TRADEMARKS
The FTD Mercury Man logo is a registered U.S. trademark which distinguishes
FTD's services and products from those offered by others and appears on the shop
window or door of each member. FTD also owns the rights to a number of other
trademarks, including "FTD," "FTDA" and "Florists' Transworld Delivery" and
trademarks for certain floral products, including the "Chicken Soup Bouquet,"
"Thanks a Bunch Bouquet," "Stay in Touch Bouquet," "Pick-Me-Up Bouquet,"
"Birthday Party Bouquet," "Anniversary Bouquet," "Puzzle Fun Bouquet" and "Sweet
Dreams Bouquet." FTD has licensed certain of its trademarks, including the FTD
Mercury Man logo, to FTD Association for use with its trade association
activities and to the FTD florists who have executed a Trademark Membership
License Agreement with the Operating Company.
COMPETITION
FTD's Clearinghouse operation has two primary competitors: American Floral
Services, Inc. and Teleflora LLC ("Teleflora"). Both of these competing services
offers some products and services which are comparable to those offered by FTD
and most FTD florists subscribe to at least one of these competing services.
FTD's Clearinghouse processes more orders than any competing services.
FTD's Marketplace operation competes in an extremely fragmented industry
against a large number of wholesalers. The Company believes that it has a
competitive advantage in this segment due to its multi-faceted relationship with
retail florists, its depth of product line and its ability to offer discounted
pricing because of FTD's substantial volume purchases.
The primary competitor for the Direct Access (1-800-SEND-FTD) business is
800-FLOWERS, Inc. Several other less significant companies operate in the toll
free and online services markets.
The Operating Company currently is subject to certain operating
restrictions pursuant to the Consent Order. Among its terms, the Consent Order
prohibits restricting FTD Association membership to florists who are not
subscribers to a competing clearinghouse. The Consent Order expires August 1,
2005.
EMPLOYEES
As of June 30, 1997, FTD employed approximately 380 full-time employees.
FTD considers its relations with its employees to be good. FTD employees are not
currently covered by any collective bargaining agreement.
LEGAL PROCEEDINGS
On July 16, 1997, Teleflora instituted an arbitration proceeding against
FTD in Southfield, Michigan. The arbitration was filed under the Commercial
Arbitration Rules of the American Arbitration Association alleging that FTD
breached a 1991 agreement by which FTD provides certain Mercury Network services
to Teleflora (the "1991 Agreement"). The specific claim is that FTD has failed
to negotiate in good faith a new contract on expiration of the 1991 Agreement as
required by its terms. Unspecified damages are alleged. FTD has filed an
answering statement that denies the allegations made by Teleflora. FTD
management believes that it has meritorious defenses to this action and intends
to contest Teleflora's allegations vigorously. An
30
<PAGE> 33
adverse decision could have a material adverse effect on the Company's financial
position and results of operations.
On July 21, 1997, Teleflora filed a complaint against FTD in United States
District Court for the Central District of California. On August 7, 1997,
Teleflora filed a first amended and supplemental complaint in that action. The
first amended and supplemental complaint contains six counts alleging
monopolization and attempted monopolization in violation of Section 2 of the
Sherman Act, discriminatory pricing in violation of Section 2 of the Clayton
Act, unfair competition in violation of California Business and Professions Code
Sections 17200, et seq., and a claim for breach of contract. The allegations
pertain to the 1991 Agreement. Teleflora seeks compensatory and treble damages
and declaratory relief, and has moved for a preliminary injunction. FTD
management believes that it has meritorious defenses to this action, and intends
to contest Teleflora's allegations vigorously. An adverse decision could have a
material adverse effect on the Company's financial position and results of
operations.
FTD is involved in various other lawsuits and matters arising in the normal
course of business. In the opinion of the management of FTD, although the
outcomes of these claims and suits are uncertain, they should not have a
material adverse effect on FTD's financial position or results of operations.
31
<PAGE> 34
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following individuals are the current directors and executive officers
of FTD. All directors are elected annually to serve until the next annual
meeting of stockholders and until their successors have been elected and
qualified. All executive officers of FTD serve at the pleasure of the Board of
Directors of FTD.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard C. Perry..................... 42 Chairman of the Board of Directors of FTD Corporation
and the Operating Company
Robert L. Norton..................... 50 President of FTD Corporation and Chief Executive
Officer, President and Director of the Operating Company
Veronica K. Ho....................... 37 Director of FTD Corporation and the Operating Company
Gary K. Silberberg................... 37 Director of FTD Corporation and the Operating Company
Geoffrey Rehnert..................... 40 Director of FTD Corporation
Habib Y. Gorgi....................... 41 Director of FTD Corporation and the Operating Company
Scott D. Levin....................... 35 Secretary of FTD Corporation and Vice President
Administration, General Counsel and Secretary of the
Operating Company
Francis C. Piccirillo................ 47 Treasurer of FTD Corporation and Vice President and
Chief Financial Officer of the Operating Company
William P. Phelan.................... 41 Director of the Operating Company
Catherine A. Hickman................. 46 Director of the Operating Company
Anthony P. Thonnerieux............... 50 Director of the Operating Company
Rock A. Davis........................ 42 Vice President Marketplace of the Operating Company
Fred Johnson......................... 49 Executive Vice President Technology of the Operating
Company
</TABLE>
The Principal Stockholders of FTD Corporation are Perry Partners, the Bain
Funds and the Fleet Funds. FTD Corporation and the Principal Stockholders have
entered into a stockholders' agreement, dated December 19, 1994 (the
"Stockholders' Agreement"), which provides, among other things, for the
composition of the Board of Directors of FTD. The Board of Directors of FTD
Corporation consists of nine directors, of which Perry Partners is entitled to
nominate six and the Bain Funds are entitled to nominate three. Each of the
Principal Stockholders has agreed to take all actions necessary, including
voting all of the securities owned by it, to cause such nominees to be elected
to the Board of Directors of FTD. See "DESCRIPTION OF CAPITAL STOCK --
Stockholders' Agreement."
Mr. Perry, Ms. Ho and Mr. Silberberg were elected to the Board of Directors
of FTD Corporation as designees of Perry. Mr. Rehnert and Mr. Gorgi were elected
to the Board of Directors of FTD Corporation as designees of the Bain Funds.
Directors' Fees. Directors of FTD Corporation do not receive any fees in
connection with their service as members of the Board of Directors. All
directors are reimbursed for the reasonable expenses incurred in connection with
each meeting attended.
Set forth below is certain biographical information about each of the
Company's directors and executive officers:
RICHARD C. PERRY
Chairman of the Board of Directors of FTD Corporation and the Operating
Company
Mr. Perry has been Chairman of the Board of Directors of FTD Corporation
since December 1994. Mr. Perry is also Chairman of the Board of Directors of the
Operating Company. Mr. Perry is the President
32
<PAGE> 35
and founder of Perry Corp., a private money management firm. Prior to forming
Perry Corp. in 1988, Mr. Perry was with Goldman, Sachs & Co. Mr. Perry is an
Adjunct Associate Professor at the New York University Stern School of Business
Administration. He is also a director of Radio & Records, Inc. and a trustee of
the Allen Stevenson School and the Board of Facing History and Ourselves. Mr.
Perry received a B.S. from the Wharton School of the University of Pennsylvania
in 1977 and an M.B.A. from New York University Graduate School of Business
Administration in 1980.
ROBERT L. NORTON
President of FTD Corporation and Chief Executive Officer, President and
Director of the Operating Company
Mr. Norton has been the President of FTD Corporation since January, 1997.
Mr. Norton is currently the Chief Executive Officer, President and Director of
the Operating Company. Mr. Norton joined the Operating Company in October 1996
as General Manager and became President and Chief Operating Office in January
1997. From March 1993 until May 1996, Mr. Norton was Vice Chairman and Chief
Financial Officer of Fabri-Centers of America, Inc., a retail chain of fabric
and craft stores. Mr. Norton received a B.S. from Cleveland State University in
1973.
VERONICA K. HO
Director of FTD Corporation and the Operating Company
Ms. Ho has been a member of the Board of Directors of FTD Corporation since
December 1994. Ms. Ho served as Vice President of FTD Corporation from December
1994 to September 1997. Ms. Ho is a member of the Board of Directors of the
Operating Company and a Managing Director of Perry Corp. Before joining Perry
Corp. in April 1993, Ms. Ho was Chief Financial Officer of Whitehall
Corporation, a producer of defense, electronics, and technology systems, from
April 1991 to March 1993. From 1986 to 1991, she was with several private
merchant banking firms specializing in management buyouts. Ms. Ho is also a
member of the Board of Directors of Radio & Records, Inc. and the New York
Advisory Board of Facing History and Ourselves. She received a B.A. from Brown
University in Economics and Applied Mathematics in 1982 and an M.B.A. from the
Harvard Graduate School of Business Administration in 1986. Ms. Ho is married to
Mr. Silberberg.
GARY K. SILBERBERG
Director of FTD Corporation and the Operating Company
Mr. Silberberg has been a member of the Board of Directors of FTD
Corporation since December 1994. Mr. Silberberg is also a member of the Board of
Directors of the Operating Company. Mr. Silberberg is a Managing Director of
Perry Corp. Prior to joining Perry Corp. in April 1994, Mr. Silberberg was a
principal of Baker Nye Investments, where he managed an investment portfolio for
seven years. Before that time, Mr. Silberberg practiced corporate law with
Skadden, Arps, Slate, Meagher & Flom, where he worked on a variety of
transactions, including strategic mergers and restructurings. Mr. Silberberg
received an Sc.B. in Economics and Applied Mathematics from Brown University in
1982 and a J.D. from Yale Law School in 1985. Mr. Silberberg is married to Ms.
Ho.
GEOFFREY REHNERT
Director of FTD Corporation
Mr. Rehnert has been a member of the Board of Directors of FTD Corporation
since December 1994. Mr. Rehnert has been a General Partner and Managing
Director of Bain since 1986. He is a director of ICON Health & Fitness, Inc., GT
Bicycles, Inc., and Kollmorgen Corporation. Mr. Rehnert received a B.A. from
Duke University and a J.D. from Stanford Law School.
33
<PAGE> 36
HABIB Y. GORGI
Director of FTD Corporation and the Operating Company
Mr. Gorgi has been a member of the Board of Directors of FTD Corporation
since January 1997. Mr. Gorgi is also a member of the Board of Directors of the
Operating Company. Mr. Gorgi was the Executive Vice President of various
investment funds controlled by Fleet Financial Group, Inc. ("FGR") from January
1986 to December 1995, when he became President of FGR. Mr. Gorgi serves on the
Board of Directors of several non-public companies. Mr. Gorgi earned a A.B. from
Brown University in 1978, and an M.B.A. from Columbia University in 1983.
SCOTT D. LEVIN
Secretary of FTD Corporation and Vice President Administration, General
Counsel and Secretary of the Operating Company
Mr. Levin joined FTD Corporation as Secretary in May 1996. Mr. Levin served
as Vice President of FTD Corporation from May 1996 to September 1997. Mr. Levin
also serves as Vice President Administration, General Counsel and Secretary of
the Operating Company. Prior to joining the Company, Mr. Levin practiced law
with Schulte Roth & Zabel LLP specializing in corporate and securities
transactions from April 1989 to April 1996. Mr. Levin received a B.A. in
Political Science and Philosophy from Boston College in 1984 and a J.D. from The
National Law Center of George Washington University in 1987.
FRANCIS C. PICCIRILLO
Treasurer of FTD Corporation and Vice President and Chief Financial Officer
the Operating Company
Mr. Piccirillo joined FTD Corporation as Treasurer in August 1997. Mr.
Piccirillo is also Vice President and Chief Financial Officer of the Operating
Company. Prior to that time, Mr. Piccirillo was Vice President/Treasurer of
Fabri-Centers of America, Inc. Mr. Piccirillo received a B.S. in Industrial
Management in 1971 and an M.B.A. in 1973 from Gannon University. In addition,
Mr. Piccirillo received a J.D. from Cleveland State University in 1976, and is a
Certified Public Accountant.
WILLIAM P. PHELAN
Director of the Operating Company
Mr. Phelan is a member of the Board of Directors of the Operating Company.
Mr. Phelan has been President of Chatham Capital Management, Inc., a private
equity capital firm, since January 1995. From January 1992 through March 1995,
Mr. Phelan was a partner in Fleet Private Equity Co., Inc. From 1988 through
December 1991, Mr. Phelan was a Senior Vice President at Cowen & Company, an
investment banking firm specializing in healthcare and technology-related
investment banking. Mr. Phelan received a B.B.A. in Accounting from Siena
College in 1978 and his M.S. in Taxation from City College of New York in 1983.
CATHERINE A. HICKMAN
Director of the Operating Company
Ms. Hickman is a member of the Board of Directors of the Operating Company.
Ms. Hickman was President of FTD Association from August 1996 to August 1997.
Ms. Hickman has owned and operated a retail florist business in Long Beach,
California for the past 25 years. Ms. Hickman received a teaching degree from
California State University at Long Beach in 1993.
34
<PAGE> 37
ANTHONY P. THONNERIEUX
Director of the Operating Company
Mr. Thonnerieux is a member of the Board of Directors of the Operating
Company. Mr. Thonnerieux currently serves as the President and is a member of
the Board of Trustees of FTD Association. Mr. Thonnerieux has been an active
partner in a retail florist business in Newton, New Jersey, for the past 25
years. He received a B.S. degree from Rider University in 1969.
ROCK A. DAVIS
Vice President Marketplace of the Operating Company
Mr. Davis is Vice President Marketplace of the Operating Company. Mr. Davis
joined the Operating Company as Vice President Direct Access in April 1995.
Previously, Mr. Davis was Senior Vice President of The Signature Group from June
1982 to July 1994. Prior to joining The Signature Group, Mr. Davis was in the
Audit Division of Arthur Andersen & Company. Mr. Davis received a B.S. in
General Management from Purdue University in 1977 and a Masters of Management
from Northwestern University in 1986. Mr. Davis is a Certified Public
Accountant.
FRED JOHNSON
Executive Vice President Technology of the Operating Company
Mr. Johnson joined the Operating Company as Executive Vice President
Technology in July 1997. Prior to that time, Mr. Johnson was Senior Vice
President MIS for Fabri Centers of America, Inc. Mr. Johnson received a B.S. in
engineering from Case Institute of Technology in 1969 and an M.B.A. from Case
Western Reserve University in 1977.
EXECUTIVE COMPENSATION
The following table sets forth, for the Company's last three fiscal years,
the compensation of those persons who were, at June 30, 1997, the chief
executive officer and the other four most highly compensated executive officers
of the Company and the Company's former chief executive officer and two persons
who
35
<PAGE> 38
would have been one of four most highly compensated executive officers during
fiscal 1997 but were not serving on June 30, 1997 (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
----------------------------
ANNUAL COMPENSATION(1) SECURITIES
-------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION($)
--------------------------- ---- ------ ----- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Robert L. Norton(2)......................... 1997 $185,096 $ -- 110,000 2,147(3)
President -- FTD Corporation
Chief Executive Officer and President
-- Operating Company
Margaret C. Whitman(4)...................... 1997 160,115 99,500 -- 130,421(5)
Former President and 1996 258,038 -- -- 100,517(6)
Chief Executive Officer 1995 85,600 100,000 255,000 7,018(7)
Rock A. Davis............................... 1997 152,788 6,000 5,000 2,800(3)
Vice President Marketplace -- 1996 125,288 11,000 30,000 2,693(3)
Operating Company 1995 2,404 -- -- 52(3)
Scott D. Levin.............................. 1997 137,885 25,000 30,000 18,127(8)
Secretary -- FTD Corporation
Vice President Administration, General
Counsel and Secretary -- Operating
Company 1996 17,788 -- -- 11,271(9)
Douglas L. Hagemann(10)..................... 1997 149,730 -- -- 11,808(11)
Former Vice President of Finance 1996 149,730 -- -- 2,859(3)
and Stockholder Relations -- Operating
Company 1995 144,422 16,500 -- 17,136(12)
Louis E. Nagy, Jr.(13)...................... 1997 153,004 -- -- 100,054(14)
Former Vice President Marketing and 1996 125,192 -- 30,000 14,516(15)
Product Development -- Operating Company 1995 40,866 17,500 -- 777(3)
</TABLE>
- -------------------------
(1) Includes cash bonuses paid in the referenced fiscal year with respect to
services rendered in the prior fiscal year. Excludes cash bonuses paid in
the following fiscal year with respect to services rendered in the
referenced fiscal year, which cash bonuses paid in fiscal 1998 with respect
to services rendered in fiscal 1997 are as follows: Rock A. Davis
($80,000), Scott D. Levin ($75,000) and Douglas L. Hagemann ($10,000). The
bonuses for Mr. Davis and Mr. Levin were paid pursuant to the Company's Key
Management Incentive Plan. See "-- Key Management Incentive Plan."
(2) Excludes a cash bonus paid to Mr. Norton in the first quarter of fiscal
1998 with respect to services rendered by Mr. Norton from the commencement
of his employment with the Company through September 30, 1997 pursuant to
the Norton Employment Arrangements. The amount of such bonus is $275,000.
See " -- Norton Employment Arrangements."
(3) Represents flexible dollars for use in connection with FTD's benefit plans.
(4) Ms. Whitman was President and Chief Executive Officer from March 1995 until
the termination of her employment agreement on January 3, 1997.
(5) Reflects $128,419 for the forgiveness of debt, and $ 2,002 for flexible
dollars for use in connection with FTD's benefits plans.
(6) Reflects $3,461 for flexible dollars for use in connection with FTD's
benefit plans and $97,056 for the forgiveness of debt used to purchase
shares of Common Stock.
(7) Reflects $1,370 for flexible dollars for use in connection with FTD's
benefit plans and $5,648 for the forgiveness of debt used to purchase
shares of Common Stock.
(8) Reflects $2,424 for flexible dollars for use in connection with FTD's
benefit plans and $15,703 for moving expenses.
(9) Reflects $275 for flexible dollars for use in connection with FTD's benefit
plans and $10,996 for moving expenses.
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<PAGE> 39
(10) Mr. Hagemann was Vice President Finance and Stockholder Relations from July
1996 until September 1997.
(11) Reflects $8,874 for Universal Life Insurance and $2,934 for flexible
dollars for use in connection with FTD's benefit plans.
(12) Reflects $14,327 for Universal Life Insurance and $2,809 for flexible
dollars for use in connection with FTD's benefit plans.
(13) Mr. Nagy was Vice President Marketing and Product Development of the
Operating Company from March 1995 until April 1997.
(14) Reflects $8,062 as part of severance arrangement with the Company, $89,552
for moving and related expenses and $2,440 for flexible dollars for use in
connection with FTD's benefit plans.
(15) Reflects $2,963 for flexible dollars for use in connection with FTD's
benefit plans and $11,553 for moving expenses.
The following table sets forth individual grants of stock options made to
the Named Officers during the fiscal year ended June 30, 1997. Options are
exercisable for Class A Common Stock, par value $.01 per share, of FTD
Corporation.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
----------------------------------------- AT ASSUMED ANNUAL RATES OF
PERCENT OF TOTAL STOCK PRICE APPRECIATION FOR
NUMBER OF SECURITIES OPTIONS GRANTED TO EXERCISE OR OPTION TERM
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- -------------------- ------------------ ----------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Norton...... 60,000(2) 23.5% $ 7.50 6/6/2007 $248,078 $611,076
50,000(2) 19.6% 25.00 6/6/2007
Rock A. Davis......... 5,000(2) 2.0% 7.50 3/20/2007 20,675 50,923
Scott D. Levin........ 10,000(3) 3.9% 7.50 10/1/2006 41,350 101,846
15,000(3) 5.9% 25.00 10/1/2006
5,000(4) 2.0% $ 7.50 3/20/2007 20,675 50,923
</TABLE>
- -------------------------
(1) Options granted under the FTD Corporation 1994 Stock Award and Incentive
Plan.
(2) Such options vest and become exercisable in four equal, cumulative
installments, with the first vesting date being September 30, 1998 for Mr.
Norton, and February 1, 1999 for Mr. Davis.
(3) Such options vest and become exercisable in four equal, cumulative
installments, with the first vesting date being April 18, 1998.
(4) Such options vest and become exercisable in four equal, cumulative
installments, with the first vesting date being February 1, 1999.
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<PAGE> 40
The following table sets forth the June 30, 1997 aggregate value of
unexercised options held by each of the Named Officers.
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT FISCAL YEAR-END VALUE OF UNEXERCISED
---------------------------------------------------- IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END
ACQUIRED ON VALUE ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Norton............ -- -- 0 110,000 $ -- $480,000
Rock A. Davis............... -- -- 7,500 27,500 $38,063 $154,188
Scott D. Levin.............. -- -- 0 30,000 $ -- $120,000
</TABLE>
- -------------------------
(1) Because no established public trading market exists for the underlying
securities, fiscal year-end option values were based on an assumed stock
price of $15.50 per share, which price is currently used by FTD for purposes
of granting additional options under the FTD Corporation 1994 Stock Award
and Incentive Plan. There can be no assurance that such price per share
represents the actual fair market value of a Share.
No options were exercised during the fiscal year ended June 30, 1997.
1994 Stock Award and Incentive Plan. The FTD Corporation 1994 Stock Award
and Incentive Plan (referred to herein as the "Option Plan") was adopted by the
Board of Directors of the Company and approved by the Company's stockholders on
December 9, 1994 and amended on June 12, 1995. The maximum number of shares of
Common Stock authorized for issuance under the Option Plan is equal to 15% of
the initial equity capital of the Company upon the consummation of the
Acquisition. The Option Plan is not subject to any provisions of the Employee
Retirement Income Security Act of 1974, as amended, nor is the Option Plan a
qualified plan within meaning of Section 401(a) of the Code.
The Option Plan is designed to enable the Company to attract and retain
highly qualified personnel who will contribute to the Company's success by their
ability, ingenuity and industry and to provide incentives to the participating
officers, other key employees, directors, consultants and advisors that are
linked directly to increases in stockholder value and will therefore inure to
the benefit of all stockholders of the Company.
Options may be granted to officers, other key employees of the Company
(collectively, the officers and key employees are referred to as "Eligible
Employees"), directors of the Company (other than members of the Compensation
Committee of the Board of Directors), and consultants and advisors to the
Company who are responsible for or contribute to the management, growth and/or
profitability of the business of the Company (each, a "Participant"). As of June
30, 1997, stock options to purchase an aggregate of 217,000 shares of Class A
Common Stock were outstanding (209,500 of which have not yet vested).
The Option Plan is administered by the Board of Directors or, if appointed
by the Board, the Compensation Committee (as applicable, the "Administrator").
The Company currently does not have a Compensation Committee. The Option Plan
permits the Administrator to determine which Participants shall receive awards,
the times when awards are to be granted and the number of shares, terms and
conditions on which the awards will be granted (not inconsistent with the terms
of the Option Plan). The Administrator is entitled to determine whether and to
what extent stock options, Stock Appreciation Rights ("SARs"), Limited Stock
Appreciation Rights ("LSARs"), Restricted Stock, Deferred Stock, Performance
Shares or a combination of the foregoing, are to be granted thereunder.
The Option Plan provides for grants of "Incentive Stock Options," meeting
the requirements of Section 422 of the Code and "Non-qualified Stock Options,"
which do not qualify as ISOs. Eligible Employees may be granted Incentive Stock
Options, Non-qualified Stock Options, or both, while all other Participants may
only be granted Non-qualified Stock Options, although all awards may be with or
without Stock Appreciation Rights or Limited Stock Appreciation Rights. The
option price per share under each Incentive Stock Option or Non-qualified Stock
Option is to be determined by the Administrator in its sole
38
<PAGE> 41
discretion at the time of grant but shall not, in the case of Incentive Stock
Options, be less than 100% of the Fair Market Value (as defined therein) of the
stock on such date. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 425(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company and an
Incentive Stock Option is granted to such employee, the option price of such
Incentive Stock Option (to the extent required by the Code at the time of grant)
shall be no less than 110% of the Fair Market Value of the Stock on the date
such Incentive Stock Option is granted. The Company is authorized to make loans
available to Participants in connection with the exercise of outstanding options
granted under the Option Plan as the Administrator, in its sole discretion, may
determine appropriate.
Unless otherwise determined by the Administrator, the options shall not be
transferable and shall only be exercisable during the optionee's lifetime by the
optionee. In the event that an employee is terminated for any reason, the Stock
Option may thereafter be exercised to the extent provided in the applicable
subscription or award agreement.
SARs and LSARs may be granted either alone ("Free Standing") or in
conjunction with all or part of any option granted under the Option Plan
("Related Rights"). LSARs may only be exercised within the 30-day period
following a Change of Control (as defined by the Administrator in the agreement
evidencing such LSAR), and, with respect to LSARs that are Related Rights, only
to the extent that the stock options to which they relate shall be exercisable
in accordance with the provisions of the Option Plan.
SARs that are Related Rights are exercisable only at such time or times and
to the extent that the stock options to which they relate shall be exercisable.
Upon the exercise of a SAR that is a Related Right, an optionee shall be
entitled to receive up to, but not more than, an amount in cash or that number
of shares of Common Stock (or in some combination of cash and shares of Common
Stock) equal in value to the excess of the Fair Market Value of one share of
Stock as of the date of exercise over the option price per share specified in
the related stock option multiplied by the number of share of Common Stock in
respect of which such Related Right SAR is being exercised. The Administrator
has the right to determine the form of payment.
SARs that are Free Standing are exercisable at such time or times and
subject to such terms and conditions as are determined by the Administrator at
or after the grant thereof. Upon the exercise of a SAR that is Free Standing, a
recipient shall be entitled to receive up to, but not more than, an amount in
cash or that number of shares of Common Stock (or any combination of cash or
shares of Common Stock) equal in value to the excess of the Fair Market Value of
one share of Common Stock as of the date of exercise over the price per share
specified in the grant thereof (which price shall be no less than 100% of the
Fair Market Value of the Common Stock on the date of grant) multiplied by the
number of shares of Common Stock in respect to which the right is being
exercised. The Administrator has the right to determine the form of payment.
Restricted Stock, Deferred Stock or Performance Share awards may be issued
either alone or in addition to other awards granted under the Option Plan. Such
awards are generally subject to restrictions on transfer and termination
determined in the discretion of the Administrator. Such restrictions may be
accelerated or waived in whole or in part based on such factors and such
circumstances as the Administrator may determine, in its sole discretion,
including, but not limited to, the attainment of certain performance related
goals, the Participant's termination of employment or service, death or
disability or the occurrence of a Change of Control (as defined in the agreement
evidencing such award).
Upon the award of any restricted stock or performance shares, the
participant will have the rights of a stockholder with respect to the shares,
including dividend rights, subject to the conditions and restrictions generally
applicable to restricted stock specifically set forth in the award agreement for
the participant's restricted stock or performance shares. Upon an award of
deferred stock, the participant will not have any rights of a stockholder, other
than the right to receive dividends, during the specified deferral period.
The Administrator may amend, alter or discontinue the Option Plan, provided
that any amendment which would (i) increase the total number of shares of stock
reserved for the purpose of the Option Plan, (ii) change the class of employees,
directors, consultants and advisors eligible to participate in the Option Plan
39
<PAGE> 42
or (iii) extend the maximum option period must be approved by the stockholders
to the extent such amendment would not affect the qualified status of the Option
Plan under Rule 16b-3 of the Act.
Pension Plan. Prior to January 1, 1997, the Company provided a qualified
defined benefit pension plan (the "Pension Plan") which covered all employees
who received a regular stated salary and who did not work a varied schedule for
purposes of meeting the peak demand requirements of the Company's business
(provisional employees). Effective January 1, 1997, amendments to the Pension
Plan were adopted, including the elimination of the accrual of future benefits
under the Pension Plan.
The following table shows the estimated annual pension benefits payable to
a covered participant upon normal retirement at age 65 under the Pension Plan,
based on the remuneration that is covered under the Pension Plan and years of
service with the Company and its subsidiaries:
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30
- ------------ - -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$ 50,000............... $ 4,150 8,300 12,450 16,600 20,750 24,900
60,000............... 5,025 10,050 15,075 20,100 25,125 30,150
70,000............... 5,900 11,800 17,700 23,600 29,500 35,400
80,000............... 6,775 13,550 20,325 27,100 33,875 40,650
90,000............... 7,650 15,300 22,950 30,600 38,250 45,900
100,000............... 8,625 17,050 25,575 34,100 42,625 51,150
110,000............... 9,400 18,800 28,200 37,600 47,000 56,400
120,000............... 10,275 20,550 30,825 41,100 51,375 61,650
130,000............... 11,150 22,300 33,450 44,600 55,750 66,900
140,000............... 12,025 24,050 36,075 48,100 60,125 72,150
150,000............... 12,900 25,600 38,700 51,600 64,500 77,400
to
270,000
</TABLE>
Pension Plan benefits, as shown above, are calculated based upon total
years of services to a maximum of 30 years and the average of the five highest
consecutive calendar years' salary, bonus and certain elements of other
compensation and assume that participants have contributed all years to the Tax
Deferred Account-Mandatory under the Company's 401(k) Retirement Savings Plan
(as amended, the "401(k) Plan"). The annual pension benefits shown are computed
as a straight life annuity with ten years certain period beginning at age 65,
and assume that participants will transfer the balance of the Tax Deferred
Account-Mandatory from the 401(k) Plan to the Pension Plan. The amounts paid
under the Pension Plan are not offset by any social security payments. Mr.
Hagemann is the only Named Officer eligible to receive benefits under the
Pension Plan. Mr. Hagemann's covered compensation and the estimated years of
service as of June 30, 1997 is $158,604 and 15.75 years.
401(k) Plan. FTD has amended, effective January 1, 1997, its 401(k) Plan
for all of its eligible employees to replace certain benefits eliminated under
the Pension Plan. Generally, any employee who has completed 12 months of service
and is over 21 years of age is eligible to participate in the 401(k) Plan. Each
eligible employee may elect to contribute to the 401(k) Plan, through payroll
deductions, up to 15% of his or her compensation for services rendered in any
year, not to exceed a statutorily prescribed annual limit. Participants in the
401(k) Plan are always fully vested in their own contributions. The 401(k) Plan
provides that the Company may make matching contributions to the 401(k) Plan
based on the Company's net income and at the discretion of the Board of
Directors. Each participant becomes fully vested in the Company's contributions
allocated to his or her account upon completion of five years of service. The
Company's contributions are tax-deductible to the Company. Company contributions
to the 401(k) Plan for fiscal 1997 were not significant, and no contributions
were made by the Company to the accounts of any of the Named Executive Officers.
Norton Employment Arrangements. FTD Corporation and the Operating Company
have entered into employment arrangements with Mr. Norton to serve as President
of FTD Corporation and President and
40
<PAGE> 43
Chief Executive Officer of the Operating Company. Although Mr. Norton does not
have an employment agreement with FTD, pursuant to the terms of letters from the
Operating Company to Mr. Norton dated October 17, 1996 and June 6, 1997
(collectively, the "Norton Employment Arrangements"), Mr. Norton is to receive
an initial annual base salary of $275,000 plus an annual bonus and salary
increase based on performance criteria established by the Board of Directors.
Mr. Norton's annual bonus is paid at the end of the first quarter of the fiscal
year based upon performance criteria met as of the end of the immediately
preceding fiscal year.
Pursuant to the Norton Employment Arrangements, Mr. Norton was granted
Non-Qualified Stock Options to purchase (i) 60,000 shares of Class A Common
Stock at an exercise price of $7.50 per share and (ii) 50,000 shares of Class A
Common Stock at an exercise price of $25.00 per share. Also, pursuant thereto,
Mr. Norton purchased 30,000 shares of Class A Common Stock at a price of $7.50
per share and the Company issued Mr. Norton 20,000 additional shares of Class A
Common Stock during the first quarter of fiscal 1998, which are subject to
restrictions on transfer and forfeiture in the event of termination of
employment prior to the expiration of a specified period of time.
The Norton Employment Arrangements provide that Mr. Norton shall be paid an
amount equal to twelve month's salary if his employment is terminated (other
than for cause) by the Operating Company at any time after October 28, 1997.
Levin Note. The Company loaned $150,000 to Mr. Levin pursuant to a
five-year, interest bearing recourse note dated June 30, 1997 (the "Levin
Note"), with accrued interest and principal due and payable at maturity. The
Levin Note bears interest at 7% per annum. At October 31, 1997, $153,530 in
principal and interest was outstanding under the Levin Note.
Severance Arrangements. The Company has agreed with Mr. Hagemann that he
will be entitled to receive, among other things, salary continuation until the
age of 62 (November 8, 1998) if his employment with the Company or an affiliate
of the Company were terminated by the Company for any reason other than cause
(as defined in the Merger Agreement) prior to such time. Mr. Hagemann's
severance benefit currently would equal approximately $199,640. The Company has
agreed to provide Mr. Nagy with up to 12 months salary continuation unless Mr.
Nagy obtains employment prior to the end of such 12 month-period.
Key Management Incentive Plan. Mr. Davis and Mr. Levin are participants in
the Company's Key Management Incentive Plan which covers approximately 30 key
employees of FTD and provides bonuses in the event that (i) the Company achieves
one or more targets based on FTD's EBITDA (earnings before interest, taxes,
depreciation and amortization), and (ii) the individual achieves specified
goals.
Compensation Committee Interlocks and Insider Participation. The Company
currently does not have a Compensation Committee. All matters which would
otherwise be determined by the Compensation Committee are considered by the
entire Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership
of FTD Corporation common stock as of June 30, 1997, by: (i) each person who is
known to the Company to own beneficially more than 5% of the outstanding shares
of Class A Common Stock; (ii) each director and each of the Named Officers
owning equity securities of FTD Corporation; and (iii) all executive officers
and directors of the Company as a
41
<PAGE> 44
group. To the knowledge of the Company, each of such stockholders has sole
voting and dispositive power as to the shares beneficially owned unless
otherwise noted.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
(VOTING) (NONVOTING)
----------------------- -----------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF
SHARES CLASS SHARES CLASS
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Perry Partners...................................... 3,729,431 61.40 -- --
599 Lexington Avenue
New York, NY 10022
Bain Funds.......................................... 770,802 12.69 -- --
Two Copley Plaza
Boston, MA 02116
Richard C. Perry(1)................................. 3,729,431 61.40 -- --
Habib Y. Gorgi(2)................................... 148,766 2.45 310,944 19.85
Geoffrey Rehnert(3)................................. 770,802 12.69 -- --
Robert L. Norton(4)................................. 30,000 * -- --
William P. Phelan(5)................................ 13,247 * 25,625 1.64
Rock A. Davis(6).................................... 12,500 * -- --
Scott D. Levin(7)................................... 3,333 * -- --
All executive officers and directors of FTD as a
group (13 people)(8).............................. 4,708,079 77.51 336,569 21.49
</TABLE>
- -------------------------
* Represents less than 1%
(1) The address of Mr. Perry is c/o the Company, 3113 Woodcreek Drive, Downers
Grove, Illinois 60515. All of the shares shown are held by Perry Partners.
Mr. Perry has a controlling interest in Perry Investors, L.L.C., the general
partner of Perry Partners. Accordingly, Mr. Perry may be deemed to have
voting and dispositive power with respect to the Shares held by Perry
Partners. Mr. Perry disclaims beneficial ownership of such Shares.
(2) The address of Mr. Gorgi is c/o Fleet Equity Partners, 50 Kennedy Plaza,
Providence, Rhode Island 02903. Includes shares owned by FGR, Fleet Equity
Partners VII, L.P. ("FEP"), and Chisholm Partners II, L.P. ("CPII"). Mr.
Gorgi is the President of FGR, Silverado V Corp. ("SVC"), and Silverado II
Corp. ("SIIC"). FGR and SVC are general partners of FEP, and SIIC is the
general partner of Silverado II L.P. ("SIILP"), which is the general partner
of CPII. Mr. Gorgi is also a limited partner of FEP and SIILP. As President
of FGR, SVC and SIIC, Mr. Gorgi may be deemed to share voting and
dispositive power with Robert M. Van Degna, Chairman & CEO of those
entities. Mr. Gorgi disclaims beneficial ownership of all shares which are
directly owned by FGR and those shares which are directly owned by FEP and
CPII, except for his pecuniary interest therein.
(3) The address of Mr. Rehnert is c/o Bain Capital, Inc., Two Copley Place,
Boston, Massachusetts 02116. All of the Shares shown are owned by the Bain
Funds. Mr. Rehnert is a Managing Director of Bain, which is a general
partner of the Bain Funds. Accordingly, Mr. Rehnert may be deemed to share
voting and dispositive power as to the shares held by the Bain Funds. Mr.
Rehnert disclaims beneficial ownership of such Shares. In addition, the
other Managing Directors of Bain, Joshua Bekenstein, Edward Conrad, David
Dominik, Paul Edgerley, Robert Gay, Adam Kirsch, Mark Nunnelly, Mitt Romney,
Stephan Pagliuca, Mark B. Wolpow and Robert White, may also be deemed to
share voting and dispositive power as to, and also disclaim beneficial
ownership of, such Shares.
(4) The address of Mr. Norton is c/o the Company, 3113 Woodcreek Drive, Downers
Grove, Illinois 60515. The Shares owned by Mr. Norton are subject to certain
restrictions on transfer.
(5) The address of Mr. Phelan is c/o the Company, 3113 Woodcreek Drive, Downers
Grove, Illinois 60515. All of the shares shown are owned by Turnberry
Partners, L.P. ("Turnberry"). Mr. Phelan is the President and sole
stockholder of Chatham Capital Management, Inc., the general partner of
Turnberry and is deemed to have voting and dispositive power as to the
shares held by Turnberry.
42
<PAGE> 45
(6) The address of Mr. Davis is c/o the Company, 3113 Woodcreek Drive, Downers
Grove, Illinois 60515. Includes 7,500 Shares issuable upon exercise of
outstanding options which are currently exercisable. The Shares owned by Mr.
Davis are subject to certain restrictions on transfer.
(7) The address of Mr. Levin is c/o the Company, 3113 Woodcreek Drive, Downers
Grove, Illinois 60515. The Shares owned by Mr. Levin are subject to certain
restrictions on transfer.
(8) Includes 7,500 Shares issuable upon exercise of outstanding options which
are currently exercisable.
Except as described above, no directors or executive officers of FTD
Corporation beneficially own any shares of Common Stock.
See "DESCRIPTION OF CAPITAL STOCK" for a description of certain voting
arrangements with respect to the Common Stock owned by the Principal
Stockholders and certain other rights and obligations with respect to such
Common Stock.
RELATIONSHIP WITH AFFILIATES
Management Consulting Services Agreement. Parties related to each of the
Principal Stockholders have entered into an agreement for management consulting
services (the "Management Consulting Services Agreement") with FTD pursuant to
which they will make available to the Operating Company's management, financial
and other corporate advisory services. Subject to certain limitations contained
in the Bank Credit Agreement and the Indenture with respect to the Notes, for
each fiscal year of the Company ending after June 30, 1995, the Operating
Company will pay dividends to FTD sufficient to allow FTD to pay such affiliates
$400,000 per year plus up to an additional $1.6 million per year conditioned
upon the achievement of certain levels of operating income, and reimbursement of
reasonable out-of-pocket expenses. Subject to certain conditions, such fee will
be shared by the parties thereto in proportion to their relative ownership
interests in FTD. Pursuant to the Management Consulting Services Agreement, the
Principal Stockholders will receive $1.0 million for the year ended June 30,
1997.
Certain directors of FTD Corporation will receive indirectly a portion of
the management fee as a result of their ownership interest in or other
relationship with the entities providing services to the Operating Company. Mr.
Rehnert, a director of FTD Corporation designated by the Bain Funds, is a
Managing Director of Bain Capital, Inc. Mr. Gorgi, a director of FTD Corporation
designated by the Bain Funds, is the President of certain entities which own
Shares, directly or indirectly through general partnership interests. Mr.
Phelan, a director of the Operating Company, designated by the Bain Funds, is
entitled to receive a portion of the fees to be paid by the Operating Company
under the Management Consulting Services Agreement to Fleet Growth Resources,
Inc. pursuant to an agreement with such entity, so long as Mr. Phelan remains a
director of the Operating Company. Mr. Perry, Ms. Ho and Mr. Silberberg,
directors of FTD Corporation designated by Perry Partners, have an interest in
Perry Investors, LLC. Assuming the relative ownership interest among the
Principal Stockholders remains unchanged, Bain Capital, Inc., Fleet Growth
Resources, Inc. and Perry Investors, LLC will be entitled to 23.33%, 11.67% and
65%, respectively, of the fees to be paid by the Company under the Management
Consulting Services Agreement. The portion of such fee each of such directors
will receive, if any, is discretionary.
Stockholders' Agreement. Pursuant to the Stockholders' Agreement, each of
the Principal Stockholders has agreed, among other things, (i) to vote its
shares of common stock in order to elect and maintain a board of directors of
FTD and each of its subsidiaries (including the Operating Company), which
consists of a designated number of nominees of Perry Partners and the Bain Funds
and, in the case of the Operating Company, FTD Association nominees as well,
(ii) that certain actions taken by the Company require the approval of two of
the directors nominated by Perry Partners and two of the directors nominated by
the Bain Funds and (iii) to certain restrictions on transferring its shares of
Class A Common Stock, including grants to the other Principal Stockholders of
certain rights with respect to the sale of its Class A Common Stock. See
"DESCRIPTION OF CAPITAL STOCK -- Stockholders' Agreement."
43
<PAGE> 46
DESCRIPTION OF CAPITAL STOCK
The following summary description of the material terms of the capital
stock of FTD Corporation does not purport to be complete and is qualified in its
entirety by reference to the Restated Certificate of Incorporation and Bylaws of
the Company. For a description of certain restrictions on transfer with respect
to the Shares offered hereby, see "THE OFFERING."
Upon the consummation of the Offering, the authorized capital stock of the
Company will consist of 30,000,000 shares of Class A Common Stock, par value
$.01 per share, 3,000,000 shares of Class B Common Stock, par value $.0005 per
share and 1,000,000 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock"). Following the Offering, the Company will have 6,646,878
shares of Class A Common Stock and 1,566,686 shares of Class B Common Stock
outstanding (assuming all of the Shares are sold and no shares of Class B Common
Stock are converted). No shares of Preferred Stock are issued and outstanding.
No established public trading market exists for FTD's common equity. As of
June 30, 1997, there were approximately 1,800 holders of Class A Common Stock
and approximately five holders of Class B Common Stock.
American Stock Transfer & Trust Company has been appointed the transfer
agent and registrar for the Class A Common Stock and Class B Common Stock.
COMMON STOCK
The Class A Common Stock and the Class B Common Stock rank equally and,
except with respect to voting power, are substantially identical in all material
respects. The Class B Common Stock was issued in connection with the Acquisition
to the Fleet Funds to satisfy certain restrictions on stock ownership applicable
to bank holding companies and was also issued upon exercise of the Warrants.
Dividends. The holders of Common Stock are entitled to receive dividends
when and as dividends are declared by the Board of Directors of FTD Corporation
out of funds legally available therefor, provided that if any shares of
Preferred Stock are at the time outstanding, the payment of dividends on the
Common Stock or other distributions may be subject to the declaration and
payment of full dividends on outstanding shares of Preferred Stock. FTD has not
paid any dividends on its common equity since its inception, and it has no
present intention of paying any such dividends. Any future determination as to
the payment of dividends will be at the discretion of the Board of Directors of
FTD, and will depend on the Company's financial condition, results of
operations, capital requirements, compliance with charter and contractual
restrictions, and such other factors as the Board of Directors deems relevant.
In addition, under the terms of its borrowings, the Company may not declare or
pay any dividend or make any distribution (other than dividends or distributions
payable solely in capital stock of the Company) on shares of its common stock to
holders of such common stock if at the time of such proposed dividend, or
immediately after giving effect thereto, certain financial conditions are not
satisfied. Notwithstanding the foregoing, the following, among other things, are
permitted: (1) payments by the Operating Company to or on behalf of FTD to fund
certain operating expenses of FTD; (2) payments by the Operating Company to FTD
pursuant to a tax sharing agreement between such parties as in effect on
December 19, 1994 or any amendment thereto or replacement agreement thereof; (3)
payments by the Operating Company to FTD to fund certain payments by FTD for
management services provided to the Operating Company; (4) payments by the
Operating Company to FTD to pay reasonable expenses incurred in connection with
this Offering; and (5) payments by the Operating Company to FTD to fund
repurchases by FTD of shares of its Common Stock or options to purchase Common
Stock held by former employees of FTD or its subsidiaries (subject to
restrictions).
Holders of Class A Common Stock and Class B Common Stock will be entitled
to share ratably, as a single class, in any dividends paid on the Common Stock.
No dividend may be declared or paid in cash, property, Common Stock or Preferred
Stock convertible into Common Stock on either the Class A Common Stock or Class
B Common Stock unless a corresponding dividend is paid simultaneously on the
other class of Common Stock. If stock dividends are declared, holders of Class A
Common Stock will receive shares of Class A Common Stock and holders of Class B
Common Stock will receive shares of Class B Common Stock; provided, however,
that if the dividends consist of other voting securities, then the Company shall
make
44
<PAGE> 47
available to each holder of Class B Common Stock, at such holder's request,
dividends consisting of non-voting securities otherwise identical to the voting
securities and which are convertible into or exchangeable for such voting
securities on the same terms as the Class B Common Stock is convertible into
Class A Common Stock. See "DIVIDEND POLICY."
Voting Rights. Each holder of Class A Common Stock is entitled to one vote
for each share of Class A Common Stock held on all matters submitted to a vote
of the Company's stockholders. Holders of Class B Common Stock are not entitled
to vote on any matters, except as otherwise required by law.
Conversion Rights. Shares of Class B Common Stock are convertible into
Class A Common Stock on a one-to-one basis at any time at the option of the
holders thereof, provided that shares of Class B Common Stock originally issued
to a bank holding company or an affiliate of a bank holding company shall be
converted into shares of Class A Common Stock by the original holder or any
direct or indirect transferee thereof only upon the occurrence of certain
conversion events set forth in the Restated Certificate of Incorporation.
Liquidation Rights. Upon any liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, any assets remaining
after the satisfaction in full of the prior rights of creditors, and the
aggregate liquidation preference of any Preferred Stock then outstanding will be
distributed to the holders of Class A Common Stock and Class B Common Stock,
ratably as a single class in proportion to the number of shares held by them.
Reorganization, Consolidation or Merger. In the event of a reorganization,
consolidation or merger of the Company, each holder of a share of Class A Common
Stock shall be entitled to receive the same kind and amount of property
receivable by a holder of a share of Class B Common Stock and each holder of a
share of Class B Common Stock shall be entitled to receive the same kind and
amount of property receivable by a holder of Class A Common Stock.
No Preemptive Rights. The holders of Class A Common Stock and Class B
Common Stock are not entitled to preemptive or subscription rights.
PREFERRED STOCK
Pursuant to the Restated Certificate of Incorporation, the Board of
Directors of FTD Corporation is authorized to establish and designate one or
more series of Preferred Stock, without further authorization of the Company's
stockholders, subject to the approval required pursuant to the Stockholders'
Agreement as described below. The Board of Directors is authorized to fix the
number of shares, the voting powers and such distinctive designations,
preferences and relative rights and limitations of any such series. Thus, any
series may, if so determined by the Board of Directors of the Company, have full
voting rights with the Class A Common Stock or superior or limited voting
rights, be convertible into Common Stock or another security of the Company, and
have such other relative preferences, rights and limitations as the Board of
Directors shall determine. As a result, any series of Preferred Stock could have
rights which would adversely affect the voting power of the Class A Common
Stock. The issuance of shares of Preferred Stock under certain circumstances may
have the effect of delaying, deterring or preventing a change in control of the
Company. The shares of any series or class of Preferred Stock need not be
identical.
STOCKHOLDERS' AGREEMENT
The shares of Common Stock owned by the Principal Stockholders are subject
to the Stockholders' Agreement. The following is a summary of certain provisions
of the Stockholders' Agreement.
Board of Directors; Voting Matters. Under the Stockholders' Agreement, the
Principal Stockholders have agreed to vote their shares of Common Stock in order
to elect (i) a Board of Directors of the Company which consists of six designees
of Perry Partners and three designees of the Bain Funds and (ii) Boards of
Directors of the Operating Company and each of its subsidiaries which consist of
six designees of Perry Partners, two designees of the Bain Funds and two
designees of FTD Association. For biographical information regarding the Board
of Directors of FTD Corporation and the Operating Company, see "MANAGEMENT."
45
<PAGE> 48
The affirmative vote of at least a majority of the members of the Board of
Directors of the Company or any of its subsidiaries, as the case may be, which
majority shall include at least two directors designated by Perry Partners and
two directors designated by the Bain Funds, is required with respect to certain
actions by the Company and the Operating Company, including, among others, the
following: (1) with certain exceptions, the issuance or sale by the Company or
any of its significant subsidiaries of any of its debt or equity securities
(other than the offerings, including this Offering, to FTD members required
under the Mutual Support Agreement ("FTD Member Offerings")) or any incurrence
of any material long-term indebtedness by the Company or any of its significant
subsidiaries; (2) with certain exceptions, the registration by the Company or
any of its subsidiaries of any of its securities; (3) certain material
acquisitions of assets or stock of another entity; (4) certain business
combinations and asset dispositions; (5) the declaration of dividends or the
payment of other distributions to stockholders of the Company; (6) with certain
exceptions, the repurchase or redemption by the Company or any of its
subsidiaries of any of its securities; (7) transactions with affiliates of the
Company (other than in the ordinary course); and (8) any material refinancing or
restructuring of the Bank Credit Agreement which is reasonably likely to have an
adverse effect on the Company.
Each annual operating budget for the Company and each of its significant
subsidiaries and the appointment of the Chairman, and the Chief Executive
Officer of the Company and the Operating Company require the approval of Perry
Partners and the Bain Funds.
Tag-Along Rights; Right of First Refusal. With respect to any proposed
transfer (other than with respect to offers and sales of Common Stock (i) in a
Public Offering (as defined in the Stockholders' Agreement), (ii) following a
Public Offering, pursuant to Rule 144 or Rule 144A under the Securities Act or
(iii) in an FTD Member Offering) by Perry Partners and its affiliates of Common
Stock which, when taken together with all prior transfers, represents more than
5% of the Common Stock initially held by Perry Partners upon consummation of the
Acquisition, each other stockholder of the Company who is a party to the
Stockholders' Agreement has the right to require the proposed transferee to
purchase a proportionate number of shares of Common Stock held by such
stockholder at the same price and upon the same terms and conditions as to be
paid and given to Perry Partners.
If any stockholder of the Company who is a party to the Stockholders'
Agreement at any time intends to transfer any Common Stock to a third party in a
bona-fide arms'-length transaction, the Company has an irrevocable option to
purchase all (but not less than all) of such Common Stock at the price offered
by the third party. If such option is not exercised by the Company, the other
stockholders party to the Stockholders' Agreement (excluding affiliates of the
selling stockholder) have an irrevocable option to purchase all (but not less
than all) of such securities at the applicable offer price.
Registration Rights. Subject to certain limitations, at any time and from
time to time after the earlier of (i) the Company's first Public Offering and
(ii) December 19, 1998, upon the written request (a "Registration Request") of
the holders of a majority of the Common Stock held by Perry Partners, its
affiliates and their transferees permitted under the Stockholders' Agreement
("Permitted Transferees"), on the one hand, or holders of a majority of the
Common Stock held by the Bain Funds, the Fleet Funds, their respective
affiliates and their Permitted Transferees, on the other hand (in each case, a
"Requesting Stockholder"), that the Company effect the registration under the
Securities Act of all or part of the Common Stock owned by such Requesting
Stockholder, the Company is obligated to use its best efforts to effect the
registration under the Securities Act of such Common Stock. Except with respect
to applicable underwriting discounts and commissions, such registration will
generally be at the expense of the Company.
Notwithstanding the foregoing, except in certain circumstances: (i) the
Company will not be required to effect more than one such registration within
any 360-day period; (ii) Perry Partners, its affiliates and their Permitted
Transferees are entitled to no more than five Registration Requests; and (iii)
the Bain Funds, the Fleet Funds, their respective affiliates and their Permitted
Transferees are entitled to no more than three Registration Requests; provided
that the limitations on the number of Registration Requests contained in clauses
(ii) and (iii) above do not apply to registrations where the Requesting
Stockholder agrees to pay all of the costs and expenses of each such
registration.
46
<PAGE> 49
If the Company at any time after the first Public Offering proposes to
register any shares of Common Stock under the Securities Act (except solely in
connection with any employee benefit plan or dividend reinvestment plan or a
merger or consolidation), including registrations pursuant to a Registration
Request, then upon the written request of any stockholder a party to the
Stockholders' Agreement, the Company, subject to certain limitations, is
obligated to use its best efforts to also register such stockholder's shares.
In connection with the registrations described above, to the extent
permitted by applicable law, the Company will indemnify each selling stockholder
and each selling stockholder will indemnify the Company and the other selling
stockholders against certain liabilities under the Securities Act and the
Exchange Act.
Termination. The Stockholders' Agreement (other than the tag-along
provisions, the registration rights provisions and certain provisions with
respect to the Bain Funds' and the Fleet Funds' obligations to pay Perry
Partners a portion of the profits they receive on certain sales of their Common
Stock) terminates on the earliest of (i) the date on which Perry Partners, the
Bain Funds and the Fleet Funds and their respective affiliates do not own in the
aggregate at least 35% of the Common Stock outstanding on a fully diluted basis,
(ii) the date on which either Perry Partners and its affiliates, on the one
hand, or the Bain Funds and the Fleet Funds and their respective affiliates, on
the other hand, do not own in the aggregate at least 10% of the Common Stock on
a fully-diluted basis or (iii) December 19, 2003.
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT
The Company, the Principal Stockholders and BT Securities Corporation and
Montgomery Securities (collectively, the "Initial Purchasers") have entered into
a Securityholders' and Registration Rights Agreement (the "Securityholders'
Agreement") with respect to the shares of Class B Common Stock issued upon
exercise of warrants issued to the Initial Purchasers in connection with the
Acquisition (the "Warrant Shares"). The Securityholders' Agreement provides that
the Initial Purchasers and persons to whom Registrable Securities (as defined in
the Securityholders' Agreement) are transferred (collectively, "Holders") have
the registration rights and other rights and obligations with respect to the
Registrable Securities described below.
Demand Registration Rights. At any time and from time to time, Holders
owning, individually or in the aggregate, not less than 25% of the Registrable
Securities may make a written request for registration under the Act of their
Registrable Securities (a "Demand Registration"). Subject to certain conditions,
within 120 days of the receipt of such written request for a Demand
Registration, the Company shall file with the Commission and use its best
efforts to cause to become effective under the Securities Act a registration
statement with respect to such Registrable Securities. Subject to the
satisfaction of certain conditions set forth in the Securityholders' Agreement,
the Company shall be required to register Registrable Securities pursuant to the
foregoing provisions on a maximum of two separate occasions.
If at any time the Company proposes to file a registration statement under
the Securities Act with respect to an offering by the Company for its own
account or for the account of any of its securityholders of any class of its
common equity securities (other than, among others, a registration statement
filed pursuant to the offering of securities of the Company in an FTD Members
Offering), then the Company is required to offer Holders of Registrable
Securities the opportunity to include such Registrable Securities.
Take-Along Rights. If at any time prior to the occurrence of a Triggering
Event (as defined below) any existing stockholder prior to the consummation of
the 1995 Members' Offering (the "Initial Equity Holders") or any of its
Permitted Transferees (as defined in the Securityholders' Agreement) (a
"Take-Along Seller"), directly or indirectly, transfers (other than in a bona
fide public distribution pursuant to an effective registration statement under
the Securities Act) in a single transaction or a series of related transactions
a number of shares of Common Stock greater than or equal to 15% of the shares of
Common Stock collectively owned by the Initial Equity Holders on December 19,
1994 to a Non-Qualified Transferee (as defined in the Securityholders'
Agreement) (other than any sale effected pursuant to the Mutual Support
Agreement), the Holders of Warrant Shares have the irrevocable exclusive option,
but not obligation, to sell to the Non-Qualified Transferee Warrant Shares in an
amount equal to up to such number of Shares proposed to be sold by such
Take-Along Seller (the "Take-Along Included Securities") determined in
accordance with the
47
<PAGE> 50
Securityholders' Agreement, at a price per Take-Along Included Security
comprising such Take-Along Included Securities identical to the price per share
of Common Stock to be paid by the Non-Qualified Transferee to the Take-Along
Seller and on other terms identical to the terms applicable to the Take-Along
Seller.
A "Triggering Event" means the earlier of (i) the date on which the Company
or the Operating Company or any of their respective successors or assigns
consummates an underwritten primary public offering of equity securities
pursuant to a registration statement under the Act after which at least 30% of
the total issued and outstanding common equity of the Company or of the
Operating Company has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 promulgated
under the Securities Act or (ii) the date on which any class of equity
securities of the Company or the Operating Company is listed on a national
securities exchange or authorized for quotation on the National Association of
Securities Dealers, Inc. Automated Quotations System (other than as a result of
any FTD Member Offering).
DESCRIPTION OF BANK CREDIT AGREEMENT
The Company has entered into the Bank Credit Agreement with Bankers Trust
Company, as agent (the "Agent") and other institutions party thereto (the
"Banks"), which will provide loans of up to $70.0 million. Loans under the Bank
Credit Agreement consist of $45.0 million in aggregate principal amount of term
loans (the "Term Loans") and the Revolving Credit Facility, which permits the
Operating Company to borrow up to $25.0 million to finance working capital needs
and have letters of credit issued on its behalf. This information relating to
the Bank Credit Agreement is qualified in its entirety by reference to the
complete text of the documents entered into in connection therewith. The
following is a description of the general terms of the Bank Credit Agreement.
Indebtedness of the Operating Company under the Bank Credit Agreement is
guaranteed by the Company and certain of its subsidiaries and is secured by (i)
a first priority perfected pledge of all capital stock of each direct and
indirect subsidiary of the Company (including the Operating Company), provided
that only 80% of the Capital Stock of Renaissance and only 65% of the Capital
Stock of foreign subsidiaries are so pledged, and (ii) a first priority security
interest in all of the receivables and the proceeds thereof, contracts, contract
rights, securities, equipment (other than certain equipment secured by purchase
money security interests), intellectual property, inventory and real estate
owned by FTD and its direct and indirect subsidiaries, other than Renaissance
and Florists' Transworld Delivery Association of Canada Limited.
Indebtedness under the Bank Credit Agreement bears interest at a floating
rate based (at FTD's option) upon (i) the Base Rate (defined as the higher of
(x) the applicable prime rate of Bankers Trust Company and (y) the Federal
Reserve reported certificate of deposit rate (as adjusted pursuant to the Bank
Credit Agreement) plus 1/2 of 1%) plus 2% or (ii) the Eurodollar Rate (as
defined in the Bank Credit Agreement) for one, two, three or six months, plus
3%. FTD is required to maintain specified levels of interest rate protection.
The Company used the Term Loans to provide a portion of the funds necessary
to consummate the Acquisition. The Term Loans and the Revolving Credit Facility
will mature on December 19, 1999. The Company is required to repay the Term
Loans in principal amounts of $9.3 million in fiscal 1998, $10.1 million in
fiscal 1999 and $5.3 million in fiscal 2000. In addition, the Bank Credit
Agreement provides for mandatory repayments, subject to certain exceptions, of
the Term Loans based on net asset sales outside the ordinary course of business
of the Company and its subsidiaries, the net proceeds of certain debt and equity
issuances, 60% of the net proceeds of Initial Public Offerings (as defined
therein) provided that the remaining 40% is applied to reduce the principal
amount of Notes outstanding and 50% of up to the first $1.5 million of Excess
Cash Flow (as defined therein) per annum and 75% of the Excess Cash Flow in
excess thereof.
The loans under the Revolving Credit Facility (the "Revolving Loans") may
be borrowed, repaid and reborrowed, but borrowings are required to be reduced to
zero for a period of 30 consecutive days in each annual period. FTD is required
to pay to the lenders under the Bank Credit Agreement a commitment fee
48
<PAGE> 51
equal to 1/2 of 1% per annum, payable on a quarterly basis, on the average
unused portion of the Revolving Credit Facility during such quarter. FTD is
required to pay to the lenders participating in the Revolving Credit Facility a
letter of credit fee equal to 3% per annum on the average daily stated amount of
each letter of credit outstanding. FTD is also required to pay fronting fees to
each letter of credit issuer equal to 1/4 of 1% per annum, payable on a
quarterly basis, on the average daily stated amount of each letter of credit
outstanding. Each of such letter of credit and fronting fees shall be payable
quarterly in arrears. The Agent and the Banks will receive such other fees as
have been separately agreed upon with the Agent.
The Bank Credit Agreement requires FTD to meet certain financial tests,
including minimum levels of EBITDA (as defined therein), minimum interest
coverage, minimum fixed charge coverage, maximum leverage, minimum net worth,
maximum amounts of capital expenditures and minimum current ratio. The Bank
Credit Agreement also contains covenants which, among other things, limit the
incurrence of additional indebtedness, declaration or payment of any dividend or
making any distribution on the Common Stock, transactions with affiliates, asset
sales, acquisitions, mergers and consolidations, prepayments of other
indebtedness (including the Notes), liens and encumbrances and other matters
customarily restricted in such agreements.
The Bank Credit Agreement contains customary events of default, including
payment defaults, breach of representations and warranties, covenant defaults,
cross-default to certain other indebtedness, certain events of bankruptcy and
insolvency, ERISA, judgment defaults, failure of any guaranty or security
agreement supporting the Bank Credit Agreement to be in full force and effect
and change of control of the Company or the Operating Company.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Class A
Common Stock by non-United States holders. As used herein, "non-United States
holder" means (i) a corporation, individual or partnership that is, for United
States federal income tax purposes, a foreign corporation, a non-resident alien
individual or a foreign partnership, (ii) an estate that is not subject to
United States taxation on income from sources without the United States that is
not effectively connected with the conduct of a trade or business within the
United States and (iii) a trust if either (A) a court in the United States is
not able to exercise primary supervision over the administration of such trust
or (B) one or more United States fiduciaries do not have the authority to
control all substantial decisions of such trust.
This discussion is based on current law which is subject to change
(possibly with retroactive effect) or different interpretations. This discussion
does not purport to deal with all aspects of federal income and estate taxation
that may be relevant to a particular non-United States holder's decision to
purchase Class A Common Stock.
ALL PROSPECTIVE NON-UNITED STATES HOLDERS OF CLASS A COMMON STOCK ARE
ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE UNITED STATES FEDERAL,
STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF CLASS A COMMON STOCK.
DIVIDENDS
Dividends, if any, paid to a non-United States holder of Class A Common
Stock will be subject to withholding of United States federal income tax at a
30% rate or such lower rate as may be specified by an applicable income tax
treaty. However, a non-United States holder will be taxed at ordinary federal
income tax rates (on a net income basis) on dividends that are effectively
connected with the conduct of a trade or business of such non-United States
holder within the United States (but only if, in cases in which a tax treaty
applies, such dividends are attributable to a permanent establishment of the
holder in the United States) and will not be subject to the withholding tax
described above. If such non-United States holder is a foreign
49
<PAGE> 52
corporation, it also may be subject to a United States branch profits tax at a
30% rate or such lower rate as may be specified by an applicable income tax
treaty.
Under current law, dividends paid to an address located in a country other
than the United States are presumed to be paid to a resident of such country
(unless the payer has knowledge to the contrary) for purposes of the withholding
discussed above and, under the current interpretation of United States Treasury
regulations, for purposes of determining the applicability of a tax treaty rate.
Under proposed United States Treasury regulations not currently in effect,
however, a Non-United States holder of Class A Common Stock who wishes to claim
the benefit of an applicable treaty rate (and avoid backup withholding, as
discussed below) would be required to satisfy applicable certification and other
requirements. Currently, certain certification and disclosure requirements must
be complied with in order to be exempt from withholding under the effectively
connected income exemption discussed above. A non-United States holder that is
eligible for a reduced rate of United States withholding tax pursuant to an
income tax treaty may obtain a refund of any excess amounts withheld by filing
an appropriate claim for refund with the Internal Revenue Service ("IRS").
DISPOSITION OF STOCK
Non-United States holders generally will not be subject to United States
federal income tax in respect of gain recognized on a disposition of Class A
Common Stock unless (i) the gain is effectively connected with a trade or
business conducted by the non-United States holder within the United States and,
if a tax treaty applies, is attributable to a permanent establishment of the
Non-United States holder that is located in the United States (in which case the
branch profits tax described under "Dividends" above may also apply if the
holder is a foreign corporation), (ii) in the case of a non-United States holder
who is a non-resident alien individual and holds Class A Common Stock as a
capital asset, such holder is present in the United States for 183 or more days
in the taxable year of the disposition, and either the income from the
disposition is attributable to an office or other fixed place of business
maintained by the holder in the United States or the holder has a "tax home" in
the United States (within the meaning of the Internal Revenue Code of 1986, as
amended (the "Code")), or (iii) the Non-United States holder is subject to tax
pursuant to certain Code provisions applicable to expatriates. (The foregoing is
based on the assumption that the Company is not and has not been a "United
States real property holding corporation" for federal income tax purposes. The
Company does not believe it has been or is currently, and does not anticipate
becoming, such a corporation.)
FEDERAL ESTATE TAXES
Class A Common Stock that is owned or treated as being owned by a
non-United States holder at the time of death will be included in such holder's
gross estate for United States federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise. Such individual's estate may be subject to
U.S. federal estate tax on the property includable in the estate for U.S.
federal estate tax purposes.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
The Company must report annually to the IRS and to each Non-United States
holder the amount of dividends paid to such holder and the tax withheld with
respect to such dividends, regardless of whether withholding was required.
Copies of the information returns reporting such dividends and withholding may
also be made available to the tax authorities in the country in which the
Non-United States holder resides under the provisions of an applicable income
tax treaty.
Under current law, backup withholding at the rate of 31% generally will not
apply to dividends paid to a Non-United States holder at an address outside the
United States (unless the payer has knowledge that the payee is a U.S. person).
Under proposed United States Treasury regulations not currently in effect,
however, a Non-United States holder will be subject to backup withholding unless
applicable certification requirements are met.
Payment of the proceeds of a sale of Class A Common Stock by or through a
U.S. office of a broker is subject to both backup withholding and information
reporting unless the beneficial owner provides the payer with its name and
address and certifies under penalties of perjury that it is a Non-United States
holder, or
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<PAGE> 53
otherwise establishes an exemption. In general, backup withholding and
information reporting will not apply to a payment of the proceeds of a sale of
Class A Common Stock by or through a foreign office of a foreign broker. If,
however, such broker is, for U.S. federal income tax purposes a U.S. person, a
controlled foreign corporation, or a foreign person that derives 50% or more of
its gross income for a certain period from the conduct of a trade or business in
the United States, such payments will be subject to information reporting, but
not backup withholding, unless (1) such broker has documentary evidence in its
records that the beneficial owner is a Non-United States holder and certain
other conditions are met, or (2) the beneficial owner otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against such holder's U.S. federal income tax
liability provided the required information is furnished in a timely manner to
the IRS.
The backup withholding and information reporting rules are under review by
the Treasury Department and their application to the Class A Common Stock could
be changed by future regulations. Non-United States holders should consult their
tax advisors regarding the application of these rules to their particular
situations, the availability of an exemption therefrom, the procedure for
obtaining such an exemption, if available, and the possible application of the
proposed United States Treasury regulations addressing the withholding and the
information reporting rules.
LEGAL MATTERS
The validity of the Shares will be passed upon for the Company by Schulte
Roth & Zabel LLP.
EXPERTS
The consolidated financial statements and schedule of FTD Corporation as of
June 30, 1997 and 1996, and for each of the years in the three-year period ended
June 30, 1997, have been included herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts upon the reports in
accounting and auditing.
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<PAGE> 54
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of June 30, 1997 and 1996.... F-3
Consolidated Statements of Operations for the years ended
June 30, 1997, 1996 and 1995.............................. F-4
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 1997, 1996 and 1995.................. F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 1997, 1996 and 1995.............................. F-6
Notes to Consolidated Financial Statements as of June 30,
1997 and 1996............................................. F-7
Independent Auditors' Report on Supplementary Information... F-21
Schedule II -- Valuation and Qualifying Accounts............ F-22
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable and therefore have
been omitted.
F-1
<PAGE> 55
KPMG LETTERHEAD
INDEPENDENT AUDITORS' REPORT
Board of Directors
FTD Corporation:
We have audited the accompanying consolidated balance sheets of FTD
Corporation and subsidiary as of June 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three year period ended June 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
FTD Corporation and subsidiary as of June 30, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three year
period ended June 30, 1997, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Detroit, Michigan
August 14, 1997
F-2
<PAGE> 56
FTD CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ 28,294 $ 26,650
Accounts receivable, less allowance for doubtful accounts
($2,211 in 1997, and $1,412 in 1996)...................... 24,979 24,080
Inventories, principally finished goods, net................ 14,992 12,468
Deferred income taxes....................................... 7,242 5,569
Other current assets........................................ 2,034 1,718
-------- --------
Total current assets.................................... 77,541 70,485
PROPERTY AND EQUIPMENT:
Land and improvements....................................... 1,600 2,500
Building and improvements................................... 7,601 13,169
Mercury consoles............................................ 22,472 23,187
Furniture and equipment..................................... 12,832 11,630
-------- --------
Total................................................... 44,505 50,486
Less accumulated depreciation............................... 23,925 15,158
-------- --------
Property and equipment, net............................. 20,580 35,328
OTHER ASSETS:
Deferred financing costs, less accumulated amortization
($2,724 in 1997 and $1,648 in 1996)....................... 3,394 4,470
Deferred income taxes....................................... -- 194
Other noncurrent assets..................................... 1,979 2,191
Goodwill and other intangibles, less accumulated
amortization ($7,528 in 1997 and $4,874 in 1996).......... 78,230 83,414
-------- --------
Total other assets...................................... 83,603 90,269
-------- --------
Total assets............................................ $181,724 $196,082
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt........................ $ 9,297 $ 8,496
Accounts payable............................................ 29,237 28,360
Accrued member incentive programs........................... 13,816 12,949
Accrued severance costs..................................... 1,245 1,319
Other accrued liabilities................................... 5,765 6,059
Members' deposits........................................... 9,991 8,876
Unearned income............................................. 2,724 1,708
-------- --------
Total current liabilities............................... 72,075 67,767
Long-term debt, less current maturities..................... 73,103 87,781
Post-retirement benefits, less current portion.............. 6,577 7,163
Accrued pension obligations................................. 876 4,061
Deferred income taxes....................................... 1,765 --
Minority interest in subsidiary............................. 156 170
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, no shares issued.............................. -- --
Common stock:
Class A, $0.01 par value, 30,000,000 shares authorized;
6,164,514 shares issued and 6,073,839 outstanding at
June 30, 1997; 6,160,181 issued and 6,134,549
outstanding at June 30, 1996............................ 62 62
Class B, $0.0005 par value, 3,000,000 shares authorized;
1,566,686 shares issued and outstanding at June 30, 1997
and 1996................................................ 1 1
Paid-in capital............................................. 35,639 35,607
Accumulated deficit......................................... (8,013) (6,275)
Notes receivable............................................ (32) (128)
Treasury stock, at cost, 90,675 shares Class A Common Stock
at June 30, 1997 25,632 shares Class A Common Stock at
June 30, 1996............................................. (485) (127)
-------- --------
Total stockholders' equity.............................. 27,172 29,140
-------- --------
Total liabilities and stockholders' equity.............. $181,724 $196,082
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 57
FTD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUES:
Marketplace................................................. $ 49,738 $ 57,924 $35,460
Clearinghouse............................................... 34,383 37,070 24,738
Mercury Network............................................. 37,558 34,138 17,618
Other....................................................... 40,904 37,123 18,702
-------- -------- -------
Total revenues......................................... 162,583 166,255 96,518
COSTS:
Products and distribution................................... 35,897 41,209 25,736
Floral order transmissions and processing services.......... 29,803 30,562 14,923
Member programs............................................. 30,606 32,615 17,908
-------- -------- -------
Total cost of goods sold and services provided......... 96,306 104,386 58,567
Selling, general and administrative expense................. 55,769 58,376 30,669
-------- -------- -------
Income from operations................................. 10,508 3,493 7,282
OTHER INCOME AND EXPENSES:
Interest income............................................. (1,480) (1,431) (1,719)
Interest expense............................................ 12,789 13,498 7,546
Loss on sale of Southfield Michigan facility................ 530 -- --
-------- -------- -------
Total other income and expenses........................ 11,839 12,067 5,827
Income (loss) before income tax expense (benefit) and
minority interest.................................... (1,331) (8,574) 1,455
Income tax expense (benefit)................................ 416 (1,813) 1,021
Minority interest in earnings (loss) of subsidiary.......... (14) (33) 8
-------- -------- -------
Net income (loss)...................................... $ (1,733) $ (6,728) $ 426
======== ======== =======
EARNINGS (LOSS) PER SHARE:
Primary..................................................... $(0.23) $(1.01) $0.06
Fully Diluted............................................... $(0.23) $(1.01) $0.06
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 58
FTD CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Class A, shares outstanding
Balance at beginning of year.............................. 6,135 6,029 0
Common stock issued to effect merger.................... 5,986
Additional common stock issued.......................... 149
Purchase of common stock from initial investors......... (552)
Sales of common stock in public offering................ 659
Repurchase of common stock.............................. (66) (33) (106)
Sale of common stock to officers........................ 4 32
------- ------- -------
Balance at end of year.................................... 6,073 6,135 6,029
------- ------- -------
Class B, shares outstanding
Balance at beginning of year.............................. 1,567 442
Common Stock issued to effect merger.................... 442
Exercise of common stock warrants....................... 1,125
------- ------- -------
Balance at end of year.................................... 1,567 1,567 442
------- ------- -------
Common stock Class A and Class B at par value
Balance at beginning of year.............................. $ 63 $ 66 $ 0
Repurchase of initial investment........................ (5)
Common stock issued to effect merger.................... 64
Additional common stock issued.......................... 2
Sale of treasury stock.................................. (1)
Sale of common stock in public offering................. 6
Change in par value of class B shares................... (4)
Exercise of common stock warrants....................... 1
------- ------- -------
Balance at end of year.................................... $ 63 $ 63 $ 66
======= ======= =======
Paid-in Capital
Balance at beginning of year.............................. $35,607 $35,385 $ 0
Repurchase of initial investment........................ (2,949)
Common stock issued to effect merger.................... 29,936
Additional common stock issued.......................... 949
Net income (loss)....................................... 4,500
Sale of treasury stock.................................. (499)
Sale of common stock in public offering................. 3,516
Repurchase of common stock.............................. 80
Sale of common stock to officers........................ 32 135
Change in par value of class B shares................... 4
Cancellation of shareholder receivable related to
repurchase of common stock............................. (65)
------- ------- -------
Balance at end of year.................................... $35,639 $35,607 $35,385
======= ======= =======
Retained Earnings (Accumulated Deficit)
Balance at beginning of year.............................. $(6,275) $ 449 $ 0
Net income (loss)....................................... (1,733) (6,728) 426
Foreign currency translation adjustment................. (5) 4 23
------- ------- -------
Balance at end of year.................................... $(8,013) $(6,275) $ 449
======= ======= =======
Stock Subscription and Notes Receivable
Balance at beginning of year.............................. $ (128) $ (319) $ 0
Repurchase of initial investment........................ 68
Additional common stock issued.......................... (319)
Sale of common stock to officers........................ (32) (12)
Amortization of shareholder notes receivable............ 70
Cancellation of shareholder receivable related to
repurchase of common stock............................. 65
Forgiveness of officers loan............................ 128
------- ------- -------
Balance at end of year.................................... $ (32) $ (128) $ (319)
======= ======= =======
Treasury Stock
Balance at beginning of year.............................. $ (127) $ (500) $ 0
Repurchase of common stock.............................. (358) (162) (500)
Sale of treasury stock.................................. 500
Sale of common stock to officers........................ 35
------- ------- -------
Balance at end of year.................................... $ (485) $ (127) $ (500)
======= ======= =======
Total Stockholders Equity................................... $27,172 $29,140 $35,081
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 59
FTD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ (1,733) $(6,728) $ 426
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 15,606 14,231 6,525
Amortization of deferred financing costs and original
issue discount.......................................... 1,404 1,359 708
Post-retirement benefits.................................. (586) 401 361
Pension................................................... (2,756) (120)
Minority interest in earnings (loss) of subsidiary........ (14) (33) 8
Undistributed loss of unconsolidated affiliate............ (30) (66) (54)
Loss on sale or disposal of assets........................ 530 663
Increase (decrease) in cash due to change in:
Accounts receivable..................................... (899) (3,219) 12,842
Inventories............................................. (2,524) 1,027 1,524
Deferred income taxes................................... 286 (2,035) 507
Other current assets.................................... (316) (159) 2,336
Accounts payable........................................ 877 1,491 (28,694)
Accrued member incentive programs....................... 867 6,194 (2,819)
Accrued severance costs................................. (74) (1,504) (1,075)
Other accrued liabilities, unearned income, and members'
deposits............................................... 1,837 (417) 1,907
-------- ------- --------
Net cash provided by (used in) operating activities... 12,475 11,085 (5,498)
CASH FLOWS FROM INVESTING ACTIVITIES:
Release of restricted cash related to credit deposit fund
investments............................................... 2,173
Proceeds from acquisition................................... 46,577
Payment to effect merger.................................... (109,028)
Capital expenditures, net................................... (2,614) (4,950) (3,082)
Proceeds from sale of Southfield Michigan facility.......... 6,224
-------- ------- --------
Net cash provided by (used in) investing activities... 3,610 (4,950) (63,360)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to deferred financing costs....................... (126)
Proceeds from long-term debt................................ 95,436
Repayments of long-term debt................................ (14,206) (4,762) (35,101)
Issuance of common stock.................................... 3,681 30,631
Repurchase of common stock.................................. (358) (3,037) (500)
Issuance of common stock warrants........................... 1 3,000
Decrease in notes receivable from stockholders.............. 128 138
-------- ------- --------
Net cash provided by (used in) financing activities... (14,436) (3,979) 93,340
Effect of foreign exchange rate changes on cash............. (5) 12
-------- ------- --------
Net increase in cash and cash equivalents................... 1,644 2,168 24,482
Cash and cash equivalents at beginning of period............ 26,650 24,482
-------- ------- --------
Cash and cash equivalents at end of period.................. $ 28,294 $26,650 $ 24,482
======== ======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid............................................... $ 11,458 $12,113 $ 6,704
======== ======= ========
Income taxes paid........................................... $ 237 $ 201 $ 260
======== ======= ========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Florists' Transworld Delivery Association (the "Acquired Company") was
acquired by FTD Corporation (the "Company") on December 19, 1994 (see note 2).
The acquisition was effected through a merger of the Acquired Company with a
subsidiary of the Company, with the Acquired Company surviving the merger as a
wholly owned subsidiary of the Company, as follows:
<TABLE>
<S> <C>
Cash utilized to effect merger.............................. $109,028
NONCASH ITEMS:
Reduction of proceeds from long-term debt for financing
costs..................................................... 5,992
Value ascribed to common stock warrants issued.............. 1,500
Reduction in accrued severance costs subsequent to initial
purchase price allocation................................. 3,138
Other purchase accounting adjustments for assets acquired
and liabilities assumed................................... (809)
--------
Total purchase price...................................... $118,849
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 60
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS
FTD Corporation (the "Company"), is a supplier of non-perishable hardgoods,
order clearing services, marketing support and other services, including
greeting cards, publications and credit card authorization and processing to the
retail floral industry and operates a toll free number that offers consumers the
opportunity to place orders directly with the Company.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company at June 30, 1997 and
1996, include the accounts of FTD Corporation and its wholly owned subsidiary,
Florists' Transworld Delivery, Inc. (the "Operating Company"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
Prior to the acquisition, the Company was inactive. The accompanying
consolidated statements of operations and cash flows for the year ended June 30,
1995 includes only the Operating Company's revenues, operating expenses and cash
flows for the period December 19, 1994 through June 30, 1995.
Certain amounts in the 1996 and 1995 consolidated financial statements have
been reclassified to conform to the 1997 presentation.
CASH AND CASH EQUIVALENTS
The Company's policy is to invest cash in excess of operating requirements
in income-producing investments. The Company considers all investments purchased
with maturities of three months or less at the date of purchase to be cash
equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments consist primarily of cash and cash equivalents,
accounts receivable, accounts payable, accrued member incentive programs,
accrued severance costs, other accrued liabilities, unearned income, member
deposits and long-term debt. At June 30, 1997, because of the short maturity of
those instruments other than Long-term debt, the fair value of these financial
instruments approximates the carrying amount. Long-term debt is discussed in
Note 4.
INVENTORIES
Inventories consist principally of finished goods and are stated at the
lower of cost, principally on a first in, first out basis, or market (net
realizable sales value).
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated over their
estimated useful lives using the straight-line method. The useful lives are ten
to 31.5 years for building and improvements, five years for Mercury consoles,
and five to ten years for furniture and equipment. Assets acquired on December
19, 1994 (see Note 2), have been recorded at fair value.
Upon sale or retirement of property and equipment, the cost and related
accumulated depreciation are eliminated from the respective accounts, and any
gain or loss incurred in the ordinary course of business is included as selling,
general and administrative expenses in the accompanying consolidated statements
of operations. Maintenance and repairs are charged to expense as incurred.
Expenditures which improve or extend the life of existing property and equipment
are capitalized.
F-7
<PAGE> 61
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
SYSTEMS SOFTWARE
Systems software, included in other noncurrent assets, is recorded at
purchase cost and is being amortized over its expected economic life of five
years using the straight-line method. Assets acquired on December 19, 1994 (see
Note 2), have been recorded at fair value.
INTANGIBLES
Deferred financing costs are being amortized over the life of the related
financing using the straight-line method. Goodwill is being amortized using the
straight line method over 30 years. Other intangibles consist of trademarks,
trained workforce, and software, and are being amortized over 40, 7, and 5
years, respectively, using the straight-line method.
The Company periodically evaluates whether events and circumstances that
have occurred indicate that the remaining balance of goodwill and other
intangibles may not be recoverable or that the remaining estimated useful lives
may warrant revision. When such factors indicate that goodwill and other
intangibles should be evaluated for possible impairment, the Company uses an
estimate of undiscounted future cash flows to measure whether the goodwill and
other intangibles is recoverable, and over what period (see Notes 2 and 3).
INCOME TAXES
The Company follows Statement of Financial Accounting Standards ("SFAS")
No. 109, Accounting for Income Taxes. SFAS No. 109 requires the asset and
liability method of accounting for income taxes in which deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS No.
109, the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date (see Note
7).
FOREIGN CURRENCY TRANSLATION
In accordance with SFAS No. 52, balance sheet accounts of the Company's
foreign operations are translated from Canadian currency into U.S. dollars at
year-end or historical rates, while income and expenses are translated at the
weighted average exchange rates for the year. Translation gains or losses
related to net assets located outside the United States are included in retained
earnings. Gains and losses resulting from foreign currency transactions are
included in net income.
EARNINGS PER SHARE
Earnings (loss) per share is calculated by dividing net income (loss) by
the weighted average common shares and common share equivalents outstanding
during the period. Where dilutive, unexercised stock options of the Company are
included as common stock equivalents using the treasury stock method.
REVENUES
Revenues earned by the Company for processing floral orders are recorded in
the month the orders are reported to the Company as filled. Revenues for other
services related to the processing of floral orders (including equipment rentals
and transmission charges) are recorded in the period the service is provided.
Sales of products are recorded when the products are shipped. Revenues relating
to publications are recognized in the periods in which the publications are
issued.
F-8
<PAGE> 62
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
STOCK-BASED COMPENSATION
Prior to July 1, 1996, the Company accounted for its stock options in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. As
such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price.
On July 1, 1996, the Company adopted SFAS No. 123 Accounting for
Stock-Based Compensation, which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair value-based method defined in SFAS No. 123 has been
applied. The Company has elected to continue apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosure provisions of SFAS No. 123 (see Note
11).
USE OF ESTIMATES
Management of the Company has made estimates and assumptions relating to
the reporting of assets and liabilities and related disclosures to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results may differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued SFAS No. 128,
"Earnings Per Share" in Fiscal 1997. This Statement establishes standards for
computing and presenting earnings per share and applies to entities with
publicly held Common Stock or potential Common Stock. This statement supersedes
Accounting Principles Board (APB) Opinion No. 15 and is effective for periods
ending after December 15, 1997. The Company will adopt this statement in the
second quarter of Fiscal 1998. Currently, the Company is evaluating the effect
of this statement.
The FASB also has recently issued two new accounting standards, SFAS No.
130, Reporting Comprehensive Income and SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. These statements will affect the
disclosure requirements for the Fiscal 1999 annual financial statements. The
Company does not know at this time the effect of these new statements.
(2) ACQUISITION
On December 19, 1994 (the "Merger Date"), FTD Corporation, a Delaware
corporation, completed an acquisition of all of the outstanding equity of
Florists' Transworld Delivery Association, a Michigan nonprofit cooperative
association (the "Acquired Company"), pursuant to the terms of an Agreement and
Plan of Merger (the "Merger Agreement") dated August 2, 1994. The acquisition
was effected through the merger (the "Merger") of FTD Acquisition Corp., a
wholly owned subsidiary of FTD Corporation, with and into the Acquired Company,
with the Acquired Company surviving the Merger as a wholly owned subsidiary of
FTD Corporation. Concurrent with the Merger, the Acquired Company was converted
from a nonprofit cooperative association to a for-profit corporation and renamed
"Florists' Transworld Delivery, Inc." (from and after the Merger Date, the
"Operating Company").
The Company has accounted for the Merger under the purchase method of
accounting, and accordingly, the Company's consolidated financial statements,
reflect the allocation of the total purchase price to the tangible and
intangible assets acquired and liabilities assumed of the Acquired Company as of
December 19, 1994, based on their respective estimated fair values.
F-9
<PAGE> 63
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(2) ACQUISITION -- CONTINUED
Upon consummation of the acquisition of the Operating Company by FTD
Corporation, management began to assess, formulate, and implement a plan to
involuntarily terminate and/or relocate employees of the Operating Company as
part of its relocation and/or consolidation efforts. The allocation of the total
purchase price referred to above included a reserve for the estimated cost of
planned termination, severance and relocation.
On January 3, 1997, the Operating Company's Board of Directors approved a
plan to consolidate corporate staff and operations into its Downers Grove,
Illinois facility. Leased office space in Boston, Massachusetts was sub-leased,
and land and buildings, in Southfield, Michigan were sold. The Company's bank
credit agreement required it to use the net proceeds from the sale of assets to
reduce the outstanding term loan. In accordance with EITF Consensus No. 94-3
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity," non-recurring charges in connection with this
consolidation including severance, asset impairment losses, and other costs
aggregating $3.0 million were recognized as selling, general and administrative
costs in the accompanying Consolidated Statement of Operations for the year
ended June 30, 1997. The severance costs results from the planned termination of
approximately 183 employees, who performed corporate and operating functions at
the Southfield and Boston locations. In addition, based on the consolidation of
the Company's facilities and the termination of a majority of the workforce as a
result of the closed facilities, the balance of $2.1 million, net of $0.6
million of amortization, for the intangible asset of trained workforce was
written off during the year ended June 30, 1997. The activity in such reserves
during the period December 19, 1994 through June 30, 1995 and the years ended
June 30, 1996 and 1997, can be summarized as follows (in thousands):
<TABLE>
<CAPTION>
SEVERANCE RELOCATION
BENEFITS COSTS OTHER TOTAL
--------- ---------- ----- -----
<S> <C> <C> <C> <C>
Initial estimate as of December 19, 1994................. $5,573 $600 $ 863 $7,036
Costs paid during the period December 19, 1994
through June 30, 1995.................................. 843 -- 232 1,075
------ ---- ------ ------
Remaining liability as of June 30, 1995.................. 4,730 600 631 5,961
------ ---- ------ ------
Costs paid during the year ending June 30, 1996.......... 1,310 41 153 1,504
Change in estimate....................................... 2,370 480 288 3,138
------ ---- ------ ------
Remaining liability as of June 30, 1996.................. 1,050 79 190 1,319
------ ---- ------ ------
Additional liability recognized due to consolidation..... 1,292 93 1,575 2,960
Cost paid during the year ending June 30, 1997........... 1,550 53 1,431 3,034
------ ---- ------ ------
Remaining liability as of June 30, 1997.................. $ 792 $119 $ 334 $1,245
====== ==== ====== ======
</TABLE>
(3) INTANGIBLES
At June 30, 1997 and 1996 goodwill and other intangible assets consisted of
the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Goodwill.................................................... $68,758 $69,188
Trademarks.................................................. 15,000 15,000
Trained Workforce........................................... -- 2,100
Software.................................................... 2,000 2,000
------- -------
Total....................................................... 85,758 88,288
Less accumulated amortization............................... 7,528 4,874
------- -------
Total....................................................... $78,230 $83,414
======= =======
</TABLE>
F-10
<PAGE> 64
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(3) INTANGIBLES -- CONTINUED
The Company had no intangibles prior to the Merger Date. The changes in
goodwill resulted from adjustments to the reserve for estimated costs of planned
termination, severance and relocation (see Note 2), as well as pension and
postretirement obligations (see Notes 8 and 9). The reduction in trained
workforce related from the consolidation of the Company's offices in Fiscal 1997
and the related impairment of this asset at that time (see Note 2).
(4) FINANCING ARRANGEMENTS
LONG-TERM DEBT (IN THOUSANDS)
At June 30, 1997 and 1996 long-term debt consisted of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Series B senior subordinated notes, interest payable
semiannnually at 14% due December 15, 2001, net of
unamortized discount of $2,252 and $2,580 at June 30, 1997
and 1996 respectively..................................... $57,748 $57,420
Term loan, payable quarterly at various amounts, plus
interest at a weighted average floating Eurodollar rate of
8.8%, and 8.5% at June 30, 1997 and 1996 respectively, due
December 15, 1999......................................... 24,619 38,781
Other....................................................... 33 76
------- -------
Total long-term debt................................. 82,400 96,277
Less current maturities..................................... 9,297 8,496
------- -------
Long-term debt, less current maturities.............. $73,103 $87,781
======= =======
</TABLE>
The principal payments required for each of the following five Fiscal years
are as follows (in thousands):
<TABLE>
<S> <C>
1998....................................................... $ 9,297
1999....................................................... 10,094
2000....................................................... 5,252
2001....................................................... 6
2002....................................................... 60,003
-------
Total................................................. $84,652
=======
</TABLE>
The Company's debt agreements include covenants which, among other things,
require that the Company maintain certain financial ratios and a minimum level
of consolidated net worth. The Company is in compliance with all debt covenants
at June 30, 1997. The Company's debt agreements also include restrictions on the
declaration and payment of dividends. The term loan agreement requires the
Company to repay principal of the loans to the extent cash flow generated in the
Fiscal year exceeds certain calculated amounts. As of June 30, 1997 the
estimated fair value of long-term debt, discounted at current rates, was
$87,652,000.
LINE OF CREDIT
The Company has a $25 million revolving line of credit, obtained at the
acquisition date, with a group of banks at an interest rate varying with prime
or other indices. There were no borrowings on this line during 1997 or 1996
however the Company has trade letters of credit of approximately $3.0 million
outstanding under this revolving line of credit agreement at June 30, 1997. The
agreement provides a maximum commitment for letters of credit of $5.0 million
and requires an annual commitment fee of 0.5% on the unused portion of the
commitment.
F-11
<PAGE> 65
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(5) LEASES
AS LESSOR
The Company leases Mercury consoles to members through leases classified as
operating leases for accounting purposes. The net investment in equipment leased
to members under operating leases, including equipment used for maintenance
purposes, was as follows at June 30, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Mercury consoles............................................ $22,472 $23,187
Less: Accumulated Depreciation.............................. 17,710 10,946
------- -------
Net Investment $ 4,762 $12,241
======= =======
</TABLE>
AS LESSEE
Rental expense with respect to operating leases related to facilities and
equipment was $1,005,000, $802,000 and $459,000 for the years ended June 30,
1997, 1996 and 1995, respectively. The minimum aggregate annual operating lease
obligations are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $1,160
1999........................................................ 637
2000........................................................ 333
2001........................................................ 333
Thereafter.................................................. 106
------
Total.................................................. $2,569
======
</TABLE>
(6) ADVERTISING AND SALES PROMOTION COSTS
The Company expenses advertising time and space costs and related residual
rights and contracts at the time the advertising is first broadcast or
displayed. Production and promotion costs are charged to expense when incurred.
Advertising credits earned by FTD members under the Company's sales incentive
program are charged to expense when earned.
In the years ended 1997, 1996 and 1995, advertising and sales promotion
expense was $28 million, $31 million and $16 million, respectively.
F-12
<PAGE> 66
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(7) INCOME TAXES
At June 30, 1997 and 1996, the Company's deferred tax assets and
liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current deferred tax assets:
Accrued Value Plus incentive obligations.................. $ 2,824 $ 3,058
Accrued severance costs................................... 399 499
Allowance for doubtful accounts........................... 814 518
Unearned income........................................... 970 617
Inventory................................................. 1,075 497
Accrued vacation.......................................... 132 246
Other..................................................... 1,028 134
------- -------
Current deferred tax assets................................. 7,242 5,569
------- -------
Noncurrent deferred tax assets:
Net operating loss carryforwards.......................... 3,131 4,844
Postretirement benefit obligations........................ 2,433 2,650
Accrued pension........................................... 324 1,503
Other..................................................... 254 197
------- -------
Noncurrent deferred tax assets.............................. 6,142 9,194
Noncurrent deferred tax liabilities -- tax over book
depreciation and difference in basis...................... 6,407 7,500
------- -------
Net noncurrent deferred tax assets (liabilities)............ (265) 1,694
------- -------
Deferred tax assets -- valuation allowance.................. (1,500) (1,500)
------- -------
Net deferred tax assets..................................... $ 5,477 $ 5,763
======= =======
</TABLE>
The deferred tax assets are subject to certain asset realization tests.
Company management believes that, under the principles of SFAS No. 109, based on
their evaluation of taxable income in future years and the uncertainty of fully
realizing the noncurrent deferred tax assets with very long lives, a valuation
allowance of $1.5 million is appropriate at June 30, 1997 and 1996.
The Company's net operating loss carryforwards at June 30, 1997 and 1996,
of approximately $8.5 million, and $10.8 million, respectively, the tax benefits
of which are included above as noncurrent deferred tax assets, will expire if
unused, as follows: $0.2 million in 2007; $2.3 million in 2008; $0.8 million in
2009; and $5.2 million in 2010. In addition, as a result of the Merger (see Note
2), the Company's pre-Merger net operating loss carryforwards of $3.3 million
available to be utilized in the future are limited to approximately $1.8 million
per year.
The provision for income taxes consists of the following components (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current..................................................... $130 $ 189 $ 144
Deferred.................................................... 286 (2,002) 877
---- ------- ------
Income Tax expense (benefit)................................ $416 $(1,813) $1,021
==== ======= ======
</TABLE>
F-13
<PAGE> 67
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(7) INCOME TAXES -- CONTINUED
The provision for income taxes for the years ended June 30, 1997, 1996 and
1995, differs from the amount computed by applying the U.S. federal income tax
rate (35%) to pretax income because of the effect of the following items (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Tax expense (benefit) at U.S. federal income tax rate...... $(466) $(3,001) $ 509
State income taxes (benefit), net of federal income tax
benefit.................................................. (27) (172) 29
Amortization of purchased goodwill......................... 893 842 464
Valuation allowance........................................ -- 500 --
Other items, net........................................... 16 18 19
----- ------- ------
Reported income tax expense (benefit)................. $ 416 $(1,813) $1,021
===== ======= ======
</TABLE>
(8) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Operating Company provides certain postretirement health care benefits
to substantially all employees who retired with a minimum of 10 years of service
and have attained 60 years of age. The plan retirees are required to share in
the cost of the benefit. During 1997, the consolidation of corporate staff and
operations into one facility (see Note 2), together with other factors, resulted
in the termination of numerous employees which significantly reduced the
expected years of future service of those employees and the Operating Company's
corresponding liability for certain postretirement benefits. These terminations
caused a decrease in the Operating Company's postretirement obligation and
generated a pretax gain of $0.8 million which was recorded as a reduction in
selling, general and administrative expenses. In addition, the Operating Company
amended its postretirement benefit plan effective January 1, 1997, and will no
longer provide such benefits to employees hired after January 1, 1997.
At June 30, 1997 and 1996 the status of the plan consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Retirees.................................................... $4,448 $4,198
Fully eligible active participants.......................... -- 62
Other active participants................................... 860 1,921
------ ------
Accumulated postretirement benefit obligation............... 5,308 6,181
Unrecognized net gain....................................... 1,526 1,238
------ ------
Accrued postretirement benefit liability.................... $6,834 $7,419
====== ======
</TABLE>
At June 30, 1995, the accrued postretirement benefit liability included
employees who were subsequently voluntarily or involuntarily terminated as part
of the Company's relocation and/or consolidation plan to relocate and/or
consolidate employees. Upon the completion of the Company's relocation and/or
consolidation plan, a reduction to the accrued postretirement benefit liability
of $590,000 was recorded to reflect the impact of this plan.
Net periodic postretirement benefit costs for the years ended June 30,
1997, 1996 and 1995 included the following components (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost................................................ $190 $194 $168
Interest cost............................................... 434 438 294
Unrecognized prior period gain.............................. (45) (54) --
---- ---- ----
Total....................................................... $579 $578 $462
==== ==== ====
</TABLE>
F-14
<PAGE> 68
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(8) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS -- CONTINUED
The discount rates used in determining the accumulated postretirement
benefit obligation ("APBO") were 7.75% at and for the year ended June 30, 1997,
7.5% at and for the year ended June 30, 1996, 8.5% for the year ended June 30,
1995 and 7.75% at June 30, 1995. The assumed health care cost trend rate used in
measuring the APBO was 9.8% and graded down to 5.75% over 11 years at June 30,
1997, 10.0% and graded down to 5.5% over 12 years at June 30, 1996 and 13.2% and
graded down to 6.4% over 13 years at June 30, 1995. If the current health care
cost trend rate assumption was increased by one percent, the APBO as of June 30,
1997, would increase approximately $558,000, or 10.5%, while the periodic cost
for the Fiscal year ended June 30, 1997, would have increased approximately
$64,800, or 11.2%.
(9) PENSION PLANS
During the quarter ended December 31, 1996, the level of lump sum
distributions made to participants in the Company's defined benefit pension plan
caused a partial pension plan settlement, resulting in the recognition of a
pre-tax pension settlement gain of $429,000. As virtually all of these
distributions were accrued as part of a purchase price allocation in connection
with the Merger, the settlement gain was accounted for as a reduction of
goodwill which arose as part of the Merger.
Prior to January 1, 1997, the Operating Company had both a defined benefit
and a defined contribution plan which covered substantially all domestic
employees. The Operating Company's funding policy was to contribute annually to
the defined benefit plan the amount deductible for income tax purposes. No
contributions were made in 1997, 1996, or 1995. The Operating Company's matching
contributions to the defined contribution plan are determined at the discretion
of its Board of Directors. No matching contributions were made in the year ended
June 30, 1997, 1996 or 1995 to the defined contribution plan.
Effective January 1, 1997, amendments to the Operating Company's defined
benefit pension plan were adopted, including the elimination of the accrual of
future benefits under the plan. As a result of these amendments, and the
corresponding remeasurement of the accumulated and projected benefit obligations
under the plan, a pre-tax pension curtailment gain of $2.7 million as well as a
pre-tax settlement gain of $0.5 million were recognized in income as a reduction
in selling, general and administrative costs. The Operating Company has
established a new 401(k) savings plan for all of its eligible employees to
replace the defined benefit pension plan.
Benefits under the defined benefit plan are based on the employee's age,
years of service, and the highest consecutive five-year average compensation.
Pension expense, including administrative costs, charged to the operations
for the above-mentioned plans amounted to $370,000, $903,000 and $491,000 in the
year ended June 30, 1997, 1996 and 1995, respectively.
Plan assets for the defined benefit plan consist of investments in common
stock, real estate properties, fixed income securities, and short-term
investments. Pension expense for the defined benefit plan in 1997, 1996 and 1995
was computed as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost.............................................. $ 299 $ 616 $ 360
Interest cost............................................. 546 820 387
Actual gain on plan assets................................ (495) (1,434) (566)
Net amortization and deferral............................. 20 901 310
------- ------- -----
Net Periodic Pension expense.............................. 370 903 491
Settlement gain........................................... (936) -- --
Curtailment gain.......................................... (2,665) -- --
------- ------- -----
Total Pension Cost / (Gain)............................... $(3,231) $ 903 $ 491
======= ======= =====
</TABLE>
F-15
<PAGE> 69
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(9) PENSION PLANS -- CONTINUED
At June 30, 1997 and 1996 the funded status of the defined benefit plan was
as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Actuarial present value of:
Vested benefit obligations................................ $ 2,457 $ 6,136
Nonvested benefit obligations............................. 573 840
------- -------
Accumulated benefit obligations........................... 3,030 6,976
======= =======
Projected benefit obligations............................... 3,144 10,653
Plan assets at fair value................................... (2,562) (5,780)
------- -------
Projected benefit obligations in excess of plan assets...... 582 4,873
Unrecognized net gain....................................... 1,272 212
------- -------
Total accrued pension obligations........................... $ 1,854 $ 5,085
======= =======
</TABLE>
For the period July 1, 1995 through March 1, 1996, the weighted average
discount rate was 7.75% preretirement and 6% postretirement for those
participating in the defined benefit plan on November 1, 1976, and 7.75% for all
others. For any benefits accrued after March 1, 1996, the weighted average
discount rate was 7.75% for both preretirement and postretirement for all plan
participants. For the year ended June 30, 1995, the weighted average discount
rate was 8.5% preretirement and 6% postretirement for those participating in the
defined benefit plan on November 1, 1976, and 8.5% for all others. The discount
rate used to calculate the projected benefit obligation at June 30, 1996 was
decreased to 7.5%. The discount rate used to calculate the projected benefit
obligation at June 30, 1997 was decreased to 7.0% for the period January 1, 1997
through June 30, 1997. The rate of increase in future compensation levels was
5.0% and the expected long-term rate of return on assets was 9.0%.
At June 30, 1995 the calculated projected benefit obligation assumed that
certain employees of FTD Association, who were formerly employees of the
Operating Company, were active plan participants continuing to earn benefits.
Subsequent to June 30, 1995, the status of FTD Association employees was changed
to vested terminated participants who were due a lump sum under the plan
agreement and, accordingly, the calculated projected benefit obligation was
increased by $734,000.
(10) NOTE RECEIVABLE AND OTHER RELATED PARTY TRANSACTIONS
Operating expenses for the years ended June 30, 1997, 1996 and 1995 include
$1,000,000 payable each period to certain investors of the Company for
management consulting services.
An agreement with a former officer of the Company ("Agreement") provided,
among other things, for the sale of 127,500 shares of Common Stock of the
Company at the assumed fair market value on the agreement date of $4.71 per
share. A portion of such purchase was financed through (i) a $100,000 one-year,
interest-free loan from the Company, and (ii) a $150,000 interest-bearing
recourse loan from the Company due June 30, 1996. The interest-free loan was
forgiven in its entirety by June 30, 1996 and was recorded as compensation
expense by the Operating Company in the amount of $97,000 for the year ended
June 30, 1996. The outstanding principal balance of the interest-bearing
recourse loan accrued interest at 9%. At June 30, 1996, $128,419 was outstanding
from these notes.
In November 1996, options for 255,000 shares of Class A Common Stock issued
to such former officer pursuant to the FTD Corporation 1994 Stock Award and
Incentive Plan were canceled. Also in November 1996, $128,419 and owing under
the $150,000 recourse loan was forgiven by the Operating Company. The Company
during the third quarter repurchased 45,689 shares of Class A Common Stock for
$241,898 from such former officer.
F-16
<PAGE> 70
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(10) NOTE RECEIVABLE AND OTHER RELATED PARTY TRANSACTIONS -- CONTINUED
The Company loaned an officer of the Company $150,000 pursuant to a five
year interest bearing note dated June 30, 1997, with accrued interest at 7% per
annum with principal due at maturity.
The Company and the Operating Company, pursuant to an employment
arrangement the current president was granted Non-Qualified Stock Options to
purchase (i) 60,000 shares of Class A Common Stock at an exercise price of $7.50
per share and (ii) 50,000 shares of Class A Common Stock at an exercise price of
$25.00 per share.
(11) 1994 STOCK AWARD AND INCENTIVE PLAN
The Company's 1994 Stock Award and Incentive Plan (the "Plan") was adopted
by the Board of Directors of the Company and approved by the Company's
stockholders on December 19, 1994, and amended on June 12, 1995. The maximum
number of shares of Common Stock authorized for issuance under the Plan is equal
to 15% of the initial equity capital of the Company upon the consummation of the
Merger.
The Plan provides for the granting of incentive stock options ("ISOs");
options which do not qualify as ISOs, known as nonqualified stock options
("NSOs"); or a combination of both ISOs and NSOs ("Options"), provided, however,
that ISOs may only be granted to employees of the Company and its subsidiaries.
Options granted under the Plan may be accompanied by stock appreciation rights
("SARs") or limited stock appreciation rights ("LSARs"), or both ("Rights"). The
Plan also provides for the granting of restricted stock, deferred stock, and
performance shares (together, referred to as "Restricted Awards"). The Plan is
not subject to any provisions of the Employee Retirement Income Security Act of
1974, as amended, nor is the Plan a qualified plan within the meaning of section
401(a) of the Internal Revenue Code of 1986, as amended.
Under the Agreement (see Note 10), a former officer was issued options in
Fiscal 1995 to purchase: (i) at an exercise price of $4.71 per share, 127,500
shares of the Company's Common Stock; and (ii) at an exercise price of $18.84
per share, 127,500 shares of the Company's Common Stock. During the year ended
June 30, 1995, another senior officer of the Company was granted options to
purchase: (i) at an exercise price of $4.71 per share, 40,000 shares of the
Company's Common Stock; and (ii) at an exercise price of $18.84 per share,
40,000 shares of the Company's Common Stock. As of June 30, 1995, options
covering 335,000 shares of the Class A Common Stock were outstanding, of which
none were exercisable.
During the year ended June 30, 1996, other senior officers were granted
options to purchase: (i) at an exercise price of $5.35 per share, 75,000 shares
of the Company's Common Stock; and (ii) at an exercise price of $21.40 per
share, 100,000 shares of the Company's Common Stock. During the year ended June
30, 1997, other employees have been granted options to purchase: (i) at an
exercise price of $7.50 per share, 163,500 shares of the Company's Common Stock;
and (ii) at an excercise price of $25.00 per share, 91,500 shares of the
Company's Common Stock. These options vest and become exercisable in four or
five equal installments. As of June 30, 1997 and 1996, options covering 217,000
and 430,000 shares respectively of Class A Common Stock were outstanding of
which 7,500 and 51,000 shares were vested, respectively and none were exercised.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for the Plan and accordingly, no compensation cost has been
recognized for the Plan. Had compensation cost for the Plan been determined
based on the fair value at the grant dates for options under the Plan consistent
with SFAS
F-17
<PAGE> 71
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(11) 1994 STOCK AWARD AND INCENTIVE PLAN -- CONTINUED
No. 123, the Company's net income and earnings per share would have been reduced
to the Pro Forma amounts shown in the table below:
PRO FORMA RESULTS
<TABLE>
<CAPTION>
1997 1997 1996 1996
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net Loss (in thousands)................... $(1,733) $(2,051) $(6,728) $(7,121)
Earnings per share:
Primary................................. $ (0.23) $ (0.27) $ (1.01) $ (1.07)
Fully Diluted........................... $ (0.23) $ (0.27) $ (1.01) $ (1.07)
</TABLE>
The pro forma disclosures shown are not representative of the future
effects on net earnings and earnings per share because the retroactive
application of SFAS No. 123 is prohibited.
The fair values of the options granted under the Plan during Fiscal 1997
and 1996 were determined at the grant date using the Black-Scholes option
pricing model. The significant assumptions used to calculate the fair value of
option grants were: risk-free interest rates ranging from 6.19% to 6.37%,
expected volatility of 50%, expected lives of 3.07 to 5.05 years and no expected
dividends for the shares.
SUMMARY STOCK OPTION ACTIVITY
<TABLE>
<CAPTION>
CLASS A WEIGHTED AVERAGE
# OF OPTIONS EXERCISE $
------------ ----------------
<S> <C> <C>
Outstanding @ December 19, 1994............................ -- --
Granted.................................................. 335,000 $11.78
------- -------
Outstanding @ June 30, 1995................................ 335,000 11.78
Granted.................................................. 175,000 14.52
Canceled................................................. 80,000 11.78
------- -------
Outstanding @ June 30, 1996................................ 430,000 12.89
Granted.................................................. 255,000 13.78
Canceled................................................. 468,000 2.88
------- -------
Outstanding @ June 30, 1997................................ 217,000 13.96
======= =======
Exercisable @ June 30, 1997................................ 7,500 $ 5.35
Weighted Average of Fair Value of options granted in Fiscal
1997..................................................... $ 2.29
Weighted Average of Fair Value of options granted in Fiscal
1996..................................................... $ 3.26
</TABLE>
STOCK OPTIONS OUTSTANDING
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
CLASS A OPTIONS EXERCISE WEIGHTED AVERAGE REMAINING
OUTSTANDING PRICE (RANGE) EXERCISE $ CONTRACTUAL LIFE
- --------------- ------------- ---------------- ----------------
<C> <C> <C> <C>
132,000 $ 5.35 - 7.50 $ 7.26 9.57 years
85,000 21.40 - 25.00 24.36 9.45 years
------- -------------- ------- ----------
217,000 $ 5.35 - 25.00 $13.96 9.52 years
======= ============== ======= ==========
</TABLE>
F-18
<PAGE> 72
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(12) COMMITMENTS AND CONTINGENCIES
On July 16, 1997, Teleflora LLC ("Teleflora") instituted an arbitration
against FTD in Southfield, Michigan. The arbitration was filed under the
Commercial Arbitration Rules of the American Arbitration Association alleging
that FTD breached a 1991 Agreement by which FTD provides certain Mercury Network
services to Teleflora (the "1991 Agreement"). The specific claim is that FTD has
failed to negotiate in good faith a new contract on expiration of the 1991
Agreement as required by its terms. Unspecified damages are alleged. FTD has
filed an answering statement that denies the allegations. FTD management
believes that it has meritorious defenses to this action and intends to contest
Teleflora's allegations vigorously. An adverse decision could have a material
adverse effect on the Company's financial position and results of operations.
On July 21, 1997, Teleflora filed a complaint against FTD in United States
District Court for the Central District of California. On August 7, 1997,
Teleflora filed a first amended and supplemental complaint in that action. The
first amended and supplemental complaint contains six counts alleging
monopolization and attempted monopolization in violation of Section 2 of the
Sherman Act, discriminatory pricing violation of Section 2 of the Clayton Act,
unfair competition in violation of California Business and Professions Code
Sections 17200 et seq., and a claim for breach of contract. The allegations
pertain to the 1991 Agreement. Teleflora seeks compensatory and treble damages,
and declaratory relief and have moved for a preliminary injunction. FTD
management believes that it also has meritorious defenses to this action and
intends to contest Teleflora's allegations vigorously. An adverse decision could
have a material adverse effect on the Company's financial position and results
of operations.
The Company is involved in various lawsuits and other matters arising in
the normal course of business. In the opinion of the management of the Company,
although the outcomes 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.
(13) CAPITAL STOCK
Class A and non-voting class B Common Stock rank equally and, except with
respect to voting power, are substantially identical in all material respects.
Class B Common Stock is convertible into Class A Common Stock on a one-to-one
basis.
The Company is authorized to establish and designate one or more series of
preferred stock.
Pursuant to the Merger Agreement, on July 5, 1995, the Company sold 658,483
shares of Class A Common Stock at a price of $5.35 to certain members of FTD
Association. The Company concurrently repurchased 552,239 shares of Class A
Common Stock and two shares of Class B Common Stock from existing stockholders
on a pro rata basis and recouped the costs associated with a previous purchase
of treasury stock.
Effective September 21, 1995, the stockholders of the Company, in an
unanimous Action by Written Consent, authorized a change in the par value of the
Class B Common Stock from $0.01 to $0.0005 per share.
Ninety thousand warrants were exercised in May, 1996 to purchase 1,125,000
shares of Class B Common Stock at a price of $0.01 per warrant, each of which
bought 12.5 shares of Class B Common Stock.
During Fiscal 1997 the Company repurchased into treasury 65,043 shares of
Class A Common Stock at a cost of approximately $358,000.
F-19
<PAGE> 73
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(14) QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (IN THOUSANDS, EXCEPT FOR PER
SHARE DATA):
<TABLE>
<CAPTION>
FISCAL 1997 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
----------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net Revenue....................... $37,068 $41,640 $47,841 $36,034
Income from Operations............ 2,403 1,417 6,742 (54)
Net Income (Loss)................. (548) (1,162) 2,270 (2,293)
Net Income (Loss) Per Common
Share:
Primary......................... $ (.07) $ (.15) $ .30 $ (.30)
Fully Diluted................... $ (.07) $ (.15) $ .30 $ (.30)
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1996 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
----------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net Revenue....................... $36,536 $45,865 $44,794 $39,060
Income from Operations............ 3,657 (1,463) 2,343 (1,044)
Net Income (Loss)................. 107 (3,067) (627) (3,141)
Net Income (Loss) Per Common
Share:
Primary......................... $ .01 $ (.43) $ (.09) $ (.47)
Fully Diluted................... $ .01 $ (.43) $ (.09) $ (.47)
</TABLE>
F-20
<PAGE> 74
KPMG LETTERHEAD
INDEPENDENT AUDITORS' REPORT
Board of Directors
FTD Corporation:
Under date of August 14, 1997, we reported on the consolidated balance
sheets of FTD Corporation and subsidiary as of June 30, 1997 and 1996 and the
related consolidated statements of operations, stockholder's equity, and cash
flows for each of the years in the three-year period ended June 30, 1997, which
are included in the prospectus. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule in the registration statement. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ KPMG PEAT MARWICK LLP
Detroit, Michigan
August 14, 1997
F-21
<PAGE> 75
FTD CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
--------------------------
BALANCE CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COST AND OTHER END OF
PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
------------ ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR 1996
Allowance for doubtful accounts (shown as
deduction from Accounts Receivable in
balance sheet)......................... $1,589 $ 895 $80(a) $1,152(b) $1,412
Inventory valuation reserve (included in
Inventories, net in balance sheet)..... $ 345 $1,325 -- $1,276(c) $ 394
YEAR 1997
Allowance for doubtful accounts (shown as
deduction from Accounts Receivable in
balance sheet)......................... $1,412 $1,105 $75(a) $ 381(b) $2,211
Inventory valuation reserve (included in
Inventories, net in balance sheet)..... $ 394 $1,363 -- $ 52(c) $1,705
</TABLE>
- -------------------------
(a) Collection of accounts previously written off
(b) Uncollectible accounts written off
(c) Valuation writedown
F-22
<PAGE> 76
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, TO ANY PERSON MANY JURISDICTION IN, WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF FTD SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Risk Factors.......................... 10
The Offering.......................... 14
Use of Proceeds....................... 17
Dividend Policy....................... 17
Capitalization........................ 18
Dilution.............................. 19
Selected Historical Financial Data.... 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 27
Management............................ 32
Security Ownership of Certain
Beneficial Owners and Management.... 41
Relationship with Affiliates.......... 43
Description of Capital Stock.......... 44
Description of Bank Credit
Agreement........................... 48
Certain United States Federal Income
Tax Consequences to Non-United
States Holders...................... 49
Legal Matters......................... 51
Experts............................... 51
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
573,039 SHARES
FTD CORPORATION
CLASS A COMMON STOCK
--------------------
PROSPECTUS
--------------------
, 199
======================================================
<PAGE> 77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized list of the estimated expenses to be incurred
in connection with this offering of the securities being offered hereunder other
than underwriting discounts and commissions. All of these expenses will be borne
by the Company.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 2,692
Blue sky fees and expenses.................................. 5,000*
Printing and engraving expenses............................. 2,000*
Legal fees and expenses..................................... 100,000*
Accounting fees and expenses................................ 10,000*
Transfer agent and registrar fees........................... 12,500*
Miscellaneous fees and expenses............................. 17,808*
--------
Total.................................................. $150,000*
========
</TABLE>
- -------------------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 102(b)(7) of the Delaware General Corporation Law
(the "DGCL"), Article Seventh of the Certificate of Incorporation of FTD
Corporation eliminates in certain circumstances the liability of directors of
the Company for monetary damages for breach of their fiduciary duty as
directors. This provision does not eliminate the liability of a director: (i)
for breach of the director's duty of loyalty to the Company or its stockholders;
(ii) for acts or omissions by the director not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) under Section 174 of
the DGCL; or (iv) for transactions from which the director derived an improper
personal benefit. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation except that no indemnification may be made in
respect of any claim, issue, or matter as to which such person shall have been
adjudged to be liable to the corporation, unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
II-1
<PAGE> 78
Section 145 of the DGCL further provides that to the extent a director,
officer, employee, or agent of a corporation has been successful in the defense
of any action, suit, or proceeding referred to in subsections (a) and (b) or in
the defense of any claim, issue, or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification provided for by Section 145 of
the DGCL shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and empowers the corporation to purchase and
maintain insurance on behalf of any person acting in any of the capacities set
forth in the second preceding paragraph against any liability asserted against
him or incurred by him in any such capacity or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145 of the DGCL.
The Bylaws of FTD Corporation require the Company, under certain
circumstances, to indemnify any person who is or was a director or officer
against expense (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The Bylaws of the
Company also provide that expenses incurred by a director or officer in
defending or investigating a threatened or pending action, suit or proceeding
shall be paid by the Company in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Company as authorized in the
Bylaws.
In addition, the Company has directors' and officers' reimbursements and
liability insurance which insures against liabilities that directors and
officers of the Company may incur in such capacities. The risks covered by such
policies do not exclude liabilities under the Securities Act.
II-2
<PAGE> 79
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
</TABLE>
3.1 Restated Certificate of Incorporation of the Registrant.
(Incorporated by reference to Exhibit 3.1 of the
Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1997 (the "Registrant's 1997 Form 10-K").)
3.2 Bylaws of the Registrant. (Incorporated by reference to
Exhibit 3.2 of the Registrant's 1997 Form 10-K.)
4.1 Indenture, dated as of December 1, 1994 (the "Indenture"),
by and between Florists' Transworld Delivery, Inc. and First
Trust of New York, National Association, as Trustee.
(Incorporated by reference to Exhibit 4.1 of the Florists'
Transworld Delivery, Inc. Registration Statement on Form S-1
(File No. 33-88628) (the "FTDI S-1").)
4.2 Supplemental Indenture, dated as of December 19, 1994, to
the Indenture. (Incorporated by reference to Exhibit 4.3 of
the FTDI S-1.)
4.3 Form of Subscription Agreement among FTD and certain
stockholders of FTD. (Incorporated by reference to Exhibit
4.3 of Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form S-1 (File No. 33-91582) (the
"FTD S-1").)
4.4 Form of Subscription Agreement among FTD and Participating
Members.
5.1 Opinion of Schulte Roth & Zabel LLP.
10.1 Credit Agreement, dated as of December 19, 1994, among the
Registrant, Florists' Transworld Delivery, Inc., the various
lending institutions party thereto and Bankers Trust
Company, as Agent. (Incorporated by reference to Exhibit
10.1 of the FTDI S-1.)
10.2 First Amendment to Credit Agreement, dated as of August 30,
1995, among the Registrant, Florists' Transworld Delivery,
Inc., the lending institutions party to the Credit Agreement
and Bankers Trust Company, as Agent. (Incorporated by
reference to Exhibit 10.1(b) of the Florists' Transworld
Delivery, Inc. Annual Report on Form 10-K for fiscal year
ended June 30, 1995.)
10.3 Second Amendment to Credit Agreement, dated as of June 11,
1996, among the Registrant, Florists' Transworld Delivery,
Inc., the lending institutions party to the Credit Agreement
and Bankers Trust Company, as Agent. (Incorporated by
reference to Exhibit I(d) of the Registrant's Registration
Statement on Form 8-A, filed August 28, 1996.)
10.4 Third Amendment to Credit Agreement, dated as of November
21, 1996, among the Registrant, Florists' Transworld
Delivery, Inc., the lending institutions party to the Credit
Agreement and Bankers Trust Company, as Agent. (Incorporated
by reference to Exhibit 10(b) of the Registrant's Quarterly
Report on Form 10-Q for fiscal quarter ended December 31,
1996.)
10.5 Pledge Agreement, dated December 19, 1994, by and among the
Registrant, Florists' Transworld Delivery, Inc., FTD
Holdings, Incorporated, FTD Direct Access, Inc., Directory
Advertising, Inc. and Bankers Trust Company, as Agent.
(Incorporated by reference to Exhibit 10.2 of the FTDI S-1.)
10.6 Security Agreement, dated December 19, 1994, by and among
the Registrant, Florists' Transworld Delivery, Inc., certain
subsidiaries of the Registrant and Bankers Trust Company, as
Agent. (Incorporated by reference to Exhibit 10.3 of the
FTDI S-1.)
10.7 Consultation Agreement and Covenant Not to Compete, dated as
of August 2, 1994, by and between Florists' Transworld
Delivery, Inc. and John A. Borden. (Incorporated by
reference to Exhibit 10.8 of the FTDI S-1.)
10.8 Mutual Support Agreement, dated as of December 18, 1994, by
and between Florists' Transworld Delivery, Inc. and FTD
Association. (Incorporated by reference to Exhibit 10.9 of
the FTDI S-1.)
II-3
<PAGE> 80
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.9 Supplement to Mutual Support Agreement, dated as of January 11, 1996, by and between Florists' Transworld
Delivery, Inc. and FTD Association. (Incorporated by reference to Exhibit 10.9 of the Registrant's 1997
Form 10-K.)
10.10 Trademark License Agreement, dated as of December 18, 1994, by and between Florists' Transworld Delivery,
Inc. and FTD Association. (Incorporated by reference to Exhibit 10.10 of the FTDI S-1.)
10.11 Securityholders' and Registration Rights Agreement, dated as of December 19, 1994, among the Registrant,
Florists' Transworld Delivery, Inc., BT Securities Corporation and Montgomery Securities. (Incorporated
by reference to Exhibit 10.11 of the FTD S-1.)
10.12 Tax Sharing Agreement, dated as of December 19, 1994, between the Registrant and Florists' Transworld
Delivery, Inc. (Incorporated by reference to Exhibit 10.12 of the FTDI S-1.)
10.13 Stockholders' Agreement, dated as of December 19, 1994, among the Registrant and certain stockholders of
the Registrant. (Incorporated by reference to Exhibit 10.13 of the FTD S-1.)
10.14 FTD Corporation 1994 Stock Award and Incentive Plan. (Incorporated by reference to Exhibit 10.14 of the
FTD S-1.)
10.15 Letter dated October 17, 1996 regarding Norton employment arrangements. (Incorporated by reference to
Exhibit 10.15 of the Registrant's 1997 Form 10-K.)
10.16 Letter dated June 6, 1997, amending Norton employment arrangements. (Incorporated by reference to Exhibit
10.16 of the Registrant's 1997 Form 10-K.)
10.17 Description of Key Management Incentive Plan. (Incorporated by reference to Exhibit 10.6 of Florists'
Transworld Delivery, Inc.'s Quarterly Report on Form 10-Q for fiscal quarter ended March 31, 1997.)
10.18 Promissory Note, dated June 30, 1997, made by Scott D. Levin (Incorporated by reference to Exhibit 10.18
of the Registrant's 1997 Form 10-K.)
10.19 Agreement dated as of April 30, 1997, between the Registrant and Louis Nagy. (Incorporated by reference
to Exhibit 10.11 of Florists' Transworld Delivery, Inc.'s Annual Report on Form 10-K for the fiscal year
ended June 30, 1997.)
11.1 Computation of Earnings Per Share. (Incorporated by reference to Exhibit 11-1 of the Registrant's 1997
Form 10-K.)
21.1 Subsidiaries of the Registrant. (Incorporated by reference to Exhibit 21.1 of the FTD S-1.)
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Schulte Roth & Zabel LLP. (Included in its opinion filed as Exhibit 5.1 hereof.)
24.1 Power of Attorney. (Included in signature page.)
27.1 Financial Data Schedule.
99.1 Form of Notice of Commencement of Offering -- U.S.
99.2 Form of Share Allocation Letter.
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered
II-4
<PAGE> 81
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) (sec.
230.424(b) of this chapter) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
(b) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the Prospectus, to deliver, or
cause to be delivered to each person to whom the Prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the Prospectus to provide such interim financial information.
(c) The undersigned Registrant hereby undertakes as follows:
1. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of such Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-5
<PAGE> 82
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Downers
Grove, State of Illinois, on October 6, 1997.
FTD CORPORATION
By: /s/ ROBERT L. NORTON
------------------------------------
Name: Robert L. Norton
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below hereby constitutes and appoints Scott D. Levin and Francis Piccirillo and
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all prior post-effective amendments to this
Registration Statement, any subsequent Registration Statement for the same
offering which may be filed under Rule 462(b) (a "Rule 462(b) Registration
Statement") and any and all pre- or post-effective amendments thereto, and to
file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing which they, or any of them, may deem
necessary or advisable to be done in connection with this Registration Statement
or any Rule 462(b) Registration Statement, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or any substitute or substitutes
for any or all of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RICHARD C. PERRY Chairman of the Board of Directors October 6, 1997
- ---------------------------------------------
Richard C. Perry
/s/ ROBERT L. NORTON President October 6, 1997
- ---------------------------------------------
Robert L. Norton
/s/ FRANCIS C. PICCIRILLO Treasurer (Principal Financial October 6, 1997
- --------------------------------------------- Officer and Principal Accounting
Francis C. Piccirillo Officer)
/s/ VERONICA K. HO Director October 6, 1997
- ---------------------------------------------
Veronica K. Ho
/s/ GARY K. SILBERBERG Director October 6, 1997
- ---------------------------------------------
Gary K. Silberberg
/s/ GEOFFERY REHNERT Director October 6, 1997
- ---------------------------------------------
Geoffery Rehnert
/s/ HABIB Y. GORGI Director October 6, 1997
- ---------------------------------------------
Habib Y. Gorgi
</TABLE>
II-6
<PAGE> 83
INDEX TO EXHIBITS
(ITEM 16(A))
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- ------- ----------------------- ------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Registrant.
(Incorporated by reference to Exhibit 3.1 of the
Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1997 (the "Registrant's 1997 Form 10-K").)
3.2 Bylaws of the Registrant. (Incorporated by reference to
Exhibit 3.2 of the Registrant's 1997 Form 10-K.)
4.1 Indenture, dated as of December 1, 1994 (the "Indenture"),
by and between Florists' Transworld Delivery, Inc. and First
Trust of New York, National Association, as Trustee.
(Incorporated by reference to Exhibit 4.1 of the Florists'
Transworld Delivery, Inc. Registration Statement on Form S-1
(File No. 33-88628) (the "FTDI S-1").)
4.2 Supplemental Indenture, dated as of December 19, 1994, to
the Indenture. (Incorporated by reference to Exhibit 4.3 of
the FTDI S-1.)
4.3 Form of Subscription Agreement among FTD and certain
stockholders of FTD. (Incorporated by reference to Exhibit
4.3 of Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form S-1 (File No. 33-91582)
(the "FTD S-1").)
4.4 Form of Subscription Agreement among FTD and Participating
Members.
5.1 Opinion of Schulte Roth & Zabel LLP.
10.1 Credit Agreement, dated as of December 19, 1994, among the
Registrant, Florists' Transworld Delivery, Inc., the various
lending institutions party thereto and Bankers Trust
Company, as Agent. (Incorporated by reference to Exhibit
10.1 of the FTDI S-1.)
10.2 First Amendment to Credit Agreement, dated as of August 30,
1995, among the Registrant, Florists' Transworld Delivery,
Inc., the lending institutions party to the Credit Agreement
and Bankers Trust Company, as Agent. (Incorporated by
reference to Exhibit 10.1(b) of the Florists' Transworld
Delivery, Inc. Annual Report on Form 10-K for fiscal year
ended June 30, 1995.)
10.3 Second Amendment to Credit Agreement, dated as of June 11,
1996, among the Registrant, Florists' Transworld Delivery,
Inc., the lending institutions party to the Credit Agreement
and Bankers Trust Company, as Agent. (Incorporated by
reference to Exhibit I(d) of the Registrant's Registration
Statement on Form 8-A,
filed August 28, 1996.)
10.4 Third Amendment to Credit Agreement, dated as of November
21, 1996, among the Registrant, Florists' Transworld
Delivery Inc., the lending institutions party to the Credit
Agreement and Bankers Trust Company, as Agent. (Incorporated
by reference to Exhibit 10(b) of the Registrant's Quarterly
Report on Form 10-Q for fiscal quarter ended December 31,
1996.)
10.5 Pledge Agreement, dated December 19, 1994, by and among the
Registrant, Florists' Transworld Delivery, Inc., FTD
Holdings, Incorporated, FTD Direct Access, Inc., Directory
Advertising, Inc. and Bankers Trust Company, as Agent.
(Incorporated by reference to Exhibit 10.2 of the FTDI S-1.)
10.6 Security Agreement, dated December 19, 1994, by and among
the Registrant, Florists' Transworld Delivery, Inc., certain
subsidiaries of the Registrant and Bankers Trust Company, as
Agent. (Incorporated by reference to Exhibit 10.3 of the
FTDI S-1.)
10.7 Consultation Agreement and Covenant Not to Compete, dated as
of August 2, 1994, by and between Florists' Transworld
Delivery, Inc. and John A. Borden. (Incorporated by
reference to Exhibit 10.8 of the FTDI S-1.)
10.8 Mutual Support Agreement, dated as of December 18, 1994, by
and between Florists' Transworld Delivery, Inc. and FTD
Association. (Incorporated by reference to Exhibit 10.9 of
the FTDI S-1.)
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- ------- ----------------------- ------
<C> <S> <C>
10.9 Supplement to Mutual Support Agreement, dated as of January
11, 1996, by and between Florists' Transworld Delivery, Inc.
and FTD Association. (Incorporated by reference to Exhibit
10.9 of the Registrant's 1997 10-K.)
10.10 Trademark License Agreement, dated as of December 18, 1994,
by and between Florists' Transworld Delivery, Inc. and FTD
Association. (Incorporated by reference to Exhibit 10.10 of
the FTDI S-1.)
10.11 Securityholders' and Registration Rights Agreement, dated as
of December 19, 1994, among the Registrant, Florists'
Transworld Delivery, Inc. BT Securities Corporation and
Montgomery Securities. (Incorporated by reference to Exhibit
10.11 of the FTD S-1.)
10.12 Tax Sharing Agreement, dated as of December 19, 1994,
between the Registrant and Florists' Transworld Delivery,
Inc. (Incorporated by reference to Exhibit 10.12 of the FTDI
S-1.)
10.13 Stockholders' Agreement, dated as of December 19, 1994,
among the Registrant and certain stockholders of the
Registrant. (Incorporated by reference to Exhibit 10.13 of
the FTD S-1.)
10.14 FTD Corporation 1994 Stock Award and Incentive Plan.
(Incorporated by reference to Exhibit 10.14 of FTD S-1).
10.15 Letter dated October 17, 1996 regarding Norton employment
arrangements. (Incorporated by reference to Exhibit 10.15 of
the Registrant's 1997 Form 10-K.)
10.16 Letter dated June 6, 1997, amending Norton employment
arrangements. (Incorporated by reference to Exhibit 10.16 of
the Registrant's 1997 Form 10-K.)
10.17 Description of Key Management Incentive Plan. (Incorporated
by reference to Exhibit 10.6 of Florists' Transworld
Delivery, Inc.'s Quarterly Report on Form 10-Q for fiscal
quarter ended March 31, 1997.)
10.18 Promissory Note, dated June 30, 1997, made by Scott D.
Levin. (Incorporated by reference to Exhibit 10.18 of the
Registrant's 1997 Form 10-K.)
10.19 Agreement dated as of April 30, 1997, between the Registrant
and Louis Nagy. (Incorporated by reference to Exhibit 10.11
of Florists' Transworld Delivery, Inc.'s Annual Report on
Form 10-K for the fiscal year ended June 30, 1997.)
11.1 Computation of Earnings Per Share (Incorporated by reference
to Exhibit 11.1 the Registrant's 1997 Form 10-K.)
21.1 Subsidiaries of the Registrant. (Incorporated by reference
to Exhibit 21.1
of the FTD S-1.)
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Schulte Roth & Zabel LLP. (Included in its
opinion filed as
Exhibit 5.1 hereof.)
24.1 Power of Attorney. (Included in signature page.)
27.1 Financial Data Schedule.
99.1 Form of Notice of Commencement of Offering -- U.S.
99.2 Form of Share Allocation Letter.
</TABLE>
<PAGE> 1
EXHIBIT 4.4
FTD CORPORATION
FORM OF SUBSCRIPTION AGREEMENT
THE OFFERING WILL TERMINATE AT 5:00 P.M., NEW YORK CITY TIME, ON
________ __, 199_ (THE "EXPIRATION DATE"). SUBSCRIPTION
AGREEMENTS MUST BE RECEIVED BY FTD CORPORATION BY 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE.
[AFFIX LABEL HERE]
Initial Allocation of Shares [ ]
On the terms and subject to the conditions set forth in this Agreement, I
hereby subscribe for and agree to purchase the number of shares (the "Shares")
of Class A Common Stock, par value $.01 per share (the "Class A Common Stock"),
of FTD Corporation (the "Company") indicated below in the box entitled "Shares
To Be Purchased," at a price of $[ ] per Share. I acknowledge that I am
an Active Member of FTD Association (as such term is defined in the Articles of
Incorporation of FTD Association) and am therefore entitled to purchase the
Shares, provided, however, that the Company shall have no obligation to sell
any Shares to any Active Member who is a resident of a jurisdiction in which
the sale of Class A Common Stock to him would constitute a violation of the
securities, "Blue Sky" or other laws of such jurisdiction. See "THE OFFERING"
section of the Prospectus, dated ________ __, 199_ (the "Prospectus"), for a
complete description of the procedures for subscribing for Shares of Class A
Common Stock. For a description of certain of the risks associated with an
investment in the Shares, see the information set forth in the Prospectus under
the heading "RISK FACTORS."
RESTRICTIONS ON TRANSFER OF COMMON STOCK; OPTIONAL REDEMPTION
By executing this Agreement, I agree to be bound by the restrictions on
transfer of the Shares and the provisions regarding optional redemption of the
Shares by the Company under certain circumstances, all as set forth in more
detail on the attached Exhibit A.
<PAGE> 2
FTD CORPORATION
INVESTMENT PROCEDURES
Prospective investors should complete the following steps prior to 5:00 p.m. on
the Expiration Date:
(1) Complete and return this Subscription Agreement by mail, overnight
delivery or hand delivery to:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Attn: FTD Member Offering
(2) Upon acceptance of the subscription, a copy of the executed
Subscription Agreement, signed as accepted on behalf of the Company,
will be returned to the investor.
2
<PAGE> 3
PAYMENT OF PURCHASE PRICE
I agree that I will be billed through Florists' Transworld Delivery,
Inc.'s ("FTD") Clearinghouse system for the aggregate purchase price of the
Shares (the "Purchase Price"). I further agree that if I fail to pay any
portion of my bill for the Purchase Price by ________ __, 199_, unless extended
at the Company's discretion for up to an additional sixty-day period (the
"Final Payment Date"), I will not be entitled to purchase Shares, and this
Agreement will automatically terminate and the billing for the Purchase Price
will be reversed. As soon as practicable following the Final Payment Date, the
Company will deliver to me a duly executed stock certificate representing the
Shares, registered as set forth herein.
To the extent that other Active Members of FTD Association do not purchase
the Shares of Class A Common Stock allocated to them ("Unsubscribed Shares"),
the Company may elect, at its sole discretion and in a manner the Company deems
appropriate, to reoffer the Unsubscribed Shares to other Active Members. I
understand that if I would like to purchase any Unsubscribed Shares, I should,
ox captioned "Shares To Be Purchased," indicate the maximum number of
additional shares of Class A Common Stock I would like to purchase, in addition
to my Initial Allocation. I understand the Company will notify me of the total
number of Shares of Class A Common Stock allotted to me and the total purchase
price for such Shares following the Expiration Date.
If this Agreement is executed on behalf of a corporation, partnership,
trust or other entity, I represent that the person(s) signing this Agreement
has/have been duly authorized to execute this Agreement and all other
instruments in connection with the purchase of the Shares and the signature(s)
is/are binding upon such corporation, partnership, trust or other entity. The
Company retains the right to request the production of an appropriate
certification of such authorization.
In the event there is any conflict between this Agreement and the
Prospectus, the terms set forth in the Prospectus shall be controlling.
This Agreement constitutes the entire agreement between the parties hereto
with respect to the offering and sale of the Shares hereof and may be amended
only in writing by the parties to be bound hereby.
__________________________
Shares will be issued in the name(s) and sent to the address specified in
the box captioned "Stock Registration."
3
<PAGE> 4
SHARES TO BE PURCHASED
Initial Allocation:
Instruction: Your "Initial Allocation" is the number of Shares set forth on
the cover letter accompanying this Subscription Agreement. You
may subscribe to purchase your Initial Allocation in full (or, if
your Initial Allocation exceeds 100 Shares, you may subscribe to
purchase any number of Shares not less than 100 but not greater
than your Initial Allocation). Indicate below the number of
shares you will purchase. Please complete the following
sentence:
I HEREBY SUBSCRIBE TO PURCHASE FROM THE COMPANY _______________________
SHARES AT A PURCHASE PRICE OF $[ ] PER SHARE.
REQUEST TO PURCHASE ADDITIONAL SHARES:
Instruction: Indicate below the maximum number of additional Shares you
agree to purchase if Unsubscribed Shares are available.
FTD Corporation cannot guarantee that any Unsubscribed
Shares will be available. Please complete the following
sentence:
I HEREBY SUBSCRIBE TO PURCHASE FROM THE COMPANY UP TO ___________________
ADDITIONAL SHARES AT A PURCHASE PRICE OF $[ ] PER SHARE IF UNSUBSCRIBED
SHARES ARE AVAILABLE.
4
<PAGE> 5
STOCK REGISTRATION
(See Guidelines for Registering Stock on page 8)
__________________________________________ ___________________________
Name(s) in which stock is to be registered Member Code #
__________________________________________ ___________________________
Name(s) in which stock is to be registered Member Code #
_____________________________________________________________________
Street Address
____________________________________ ___________________________
City County
____________________________________ ___________________________
State Zip Code
___________________________________________________________________________
Social Security or Tax ID Number
Day Telephone __________________________________
Evening Telephone ___________________________________
The manner of ownership shall be:
[] Individual
[] Joint Tenants
[] Tenants in Common
[] Other _______________________________________________________
(write in corporation, partnership, trust, estate, etc.)
Delivery of stock certificate will be made to the address you specify above.
5
<PAGE> 6
SUBSTITUTE FORM W-9
[ ] CHECK THIS BOX IF THE FOLLOWING STATEMENT IS TRUE: I AM NOT SUBJECT TO
BACKUP WITHHOLDING EITHER (1) BECAUSE I AM EXEMPT FROM BACKUP
WITHHOLDING, (2) I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE
THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR DIVIDENDS, OR (3) THE INTERNAL REVENUE SERVICE HAS
NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. UNDER THE
PENALTY OF PERJURY, I CERTIFY, BY SIGNING THIS AGREEMENT BELOW, THAT THE
INFORMATION CONTAINED HEREIN, INCLUDING THE SOCIAL SECURITY NUMBER OR
TAXPAYER IDENTIFICATION NUMBER GIVEN ABOVE, IS TRUE, CORRECT AND
COMPLETE.
________________________________________________________________________________
INSTRUCTIONS FOR SUBSTITUTE FORM W-9
If the box under the caption "Substitute Form W-9" is not checked, the
Company will withhold federal income taxes from any dividends the Company pays
on the Class A Common Stock. Therefore, if the statement next to such box is
true, it is in the Participating Member's best interest to check the indicated
box, as this will increase the amount received by the Participating Member if
and when dividends are paid by the Company on the Shares.
6
<PAGE> 7
ACKNOWLEDGMENT
I have received and carefully reviewed the Prospectus with respect to the
offering and sale of the Shares, including the information set forth under the
heading "RISK FACTORS" which describes certain of the risks associated with an
investment in the Shares. No information or representations have been given to
me by representatives of the Company or anyone else other than those contained
in the Prospectus. I understand that I may not sell, transfer or assign this
Subscription Agreement, or any interest herein, and I may not transfer or
assign the Shares except in accordance with this Subscription Agreement and
applicable laws.
This Subscription Agreement cannot be revoked by me and it shall become an
agreement binding on the Company only upon its acceptance by the Company.
After acceptance by the Company, this Subscription Agreement shall also be
binding on my heirs, estate, legal representatives, assigns and successors, and
shall survive my death, disability or dissolution.
THIS SUBSCRIPTION AGREEMENT MUST BE RECEIVED BY 5:00 P.M. NEW YORK CITY
TIME ON ________ __, 199_ IN ORDER TO PARTICIPATE IN THE OFFERING. RETURN YOUR
COMPLETED SUBSCRIPTION AGREEMENT IN THE ENVELOPE PROVIDED.
SIGNATURE(S) OF STOCKHOLDER(S)
(See Guidelines for Registering Stock on Page 8)
NOTE: THIS SUBSCRIPTION AGREEMENT IS NOT VALID UNLESS SIGNED.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
___________________________________________ _______________________
Signature Date
___________________________________________ _______________________
Signature Date
___________________________________________________________
Title (if subscribing as custodian, corporate officer, etc.)
ACCEPTANCE
Accepted and agreed for __________________ Shares of Class A Common Stock
at a total Purchase Price of $___________________.
FTD Corporation
By:___________________________
Authorized Officer
7
<PAGE> 8
================================================================================
GUIDELINES FOR REGISTERING STOCK
For reasons of clarity and standardization, the stock transfer industry
has developed uniform stockholder registrations which we will use in issuing
your FTD Corporation Stock Certificate(s). If you have any questions, please
consult your legal advisor.
Stock ownership must be registered in one of the following manners.
- --------------------------------------------------------------------------------
GENERAL INSTRUCTIONS: o Include the first name, middle initial and last
name of each person listed. Avoid the use of
an initial in place of the first name.
o Do not use titles such as "Mr.," "Mrs.," "Dr.",
etc.
o Omit words that do not affect ownership rights
such as "special account," "personal property,"
etc.
o Check the appropriate space in the box
captioned "Stock Registration" to indicate
manner of ownership.
- --------------------------------------------------------------------------------
INDIVIDUAL: Instructions: In the box captioned "Stock
Registration," print the first name, middle initial
and last name of the stockholder. In the box
captioned "Signature(s) of Stockholder(s)," the
stockholder must sign his or her name.
- --------------------------------------------------------------------------------
JOINT TENANTS: Joint Tenancy with Right of Survivorship identifies
two or more persons as owners of the stock. Upon
the death of one of the owners, ownership
automatically passes to the surviving tenant(s).
Instructions: In the box captioned "Stock
Registration," print the first name, middle initial
and last name of each joint tenant. In the box
captioned "Signature(s) of Stockholder(s)," each
stockholder must sign his or her name.
8
<PAGE> 9
- --------------------------------------------------------------------------------
TENANTS IN COMMON: Tenants in Common identifies two or more persons as
owners of the stock. Upon the death of one co-
tenant, ownership of the stock passes to the heirs
of the deceased co-tenant and the surviving co-
tenant(s).
Instructions: In the box captioned "Stock
Registration," print the first name, middle initial
and last name of each co-tenant. In the box
captioned "Signature(s) of Stockholder(s)," each
stockholder must sign his or her name.
- --------------------------------------------------------------------------------
CORPORATION OR Instructions: In the box captioned "Stock
PARTNERSHIP: Registration," print the name of the corporation,
partnership, trust, estate or other entity. In the
box captioned "Signature(s) of Stockholder(s)," the
authorized signatory/signatories for the
corporation, partnership, trust, estate or other
entity must sign his, her or their names, as the
case may be.
================================================================================
FOR ASSISTANCE COMPLETING THIS SUBSCRIPTION AGREEMENT OR QUESTIONS REGARDING
THE OFFERING, CALL FTD CORPORATION AT (630) 719-7800 AND ASK TO SPEAK TO A
REPRESENTATIVE ABOUT THE FTD MEMBER OFFERING.
9
<PAGE> 10
EXHIBIT A
RESTRICTIONS ON TRANSFER
OF COMMON STOCK; OPTIONAL REDEMPTION
The Participating Member executing the Subscription Agreement to which
this exhibit is attached hereby agrees that, until the earlier of (i) three
years from the Final Payment Date (as defined in the Subscription Agreement) or
(ii) 180 days after the consummation of an Initial Public Offering (as defined
below) (the "Restriction Period"), the Participating Member shall not transfer
the Shares except to (1) Family Members (as defined below) or Affiliates (as
such term is defined in Rule 12b-2 promulgated under the Securities Exchange
Act of 1934, as amended) of the Participating Member or (2) subject to the
Company's right of first refusal (as described below), other Active Members of
FTD Association in good standing. "Family Members" shall mean with respect to
any Participating Member, a spouse, parent, child or any of the lineal
descendants of such Participating Member. Rule 12b-2 defines an "Affiliate" of
a person to mean a person that, directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with
the person specified.
The Participating Member further agrees that, during the Restriction
Period, any transfer other than to a Family Member or Affiliate will be subject
to the Company's right of first refusal. During the Restriction Period, the
Participating Member agrees to give the Company written notice at least 30 days
in advance of the proposed sale of Shares (the "Notice Period"), stating the
Participating Member's intention to make such sale, the name of the proposed
purchaser, the number of Shares to be sold (the "Offered Shares"), the proposed
amount and form of consideration to be paid for the Offered Shares (the "Offer
Price") and the other material terms upon which such sale is proposed. During
the Notice Period, the Company shall have an irrevocable option to purchase all
(but not less than all) of the Offered Shares at the applicable Offer Price.
The option of the Company shall be exercisable by written notice to the
Participating Member given on or before the 30th day of the Notice Period. The
Participating Member agrees that, if at the end of the Notice Period the
Company has not elected to exercise its option to purchase the Offered Shares,
the Participating Member is free, for a period of 20 days following the date
the Company's option lapses, to consummate the sale of the Offered Shares to
the purchaser at a price equal to or greater than the Offer Price.
If the Company exercises its option, the closing of the purchase of the
Offered Shares with respect to which such option has been exercised shall take
place on the 20th business day after the later of (i) the date the Company
gives notice of such exercise and the fair market value determination, as
provided below, if any, is completed and (ii) the expiration of such time as
the Company may reasonably require in order to comply with applicable United
States federal and state laws and regulations, which in no event shall be more
than 60 days after the date specified in clause (i). Upon exercise by the
Company of its option, the Company and the Participating Member shall be
legally obligated to consummate the purchase contemplated thereby and shall use
their best efforts to make all necessary filings and to secure any approvals
required and to comply as soon as practicable with all applicable United States
federal and state laws and regulations in connection therewith. If any portion
of the Offer Price is proposed to be paid in a form other than
10
<PAGE> 11
cash, the Company shall have the option to pay such consideration in the form
proposed or in an amount of cash equal to the fair market value of such
non-cash consideration. The fair market value of any non-cash consideration
shall be determined by the mutual agreement of the Company and the
Participating Member or, if they cannot so agree within 20 business days after
exercise of the option, by a nationally recognized investment banking firm
selected by the Company and the Participating Member (which investment banking
firm shall be retained by, and the fees and expenses of which shall be shared
equally by the Company on the one hand, and the Participating Member on the
other hand). No transfer to another Active Member may occur in accordance with
these provisions unless the transferee shall agree to be bound, to the same
extent as the Participating Member, by the terms of the Subscription Agreement.
Such agreement shall be evidenced by the acceptance by the transferee of
securities containing the legend set forth below.
"Initial Public Offering" shall mean the sale of Class A Common Stock to
the public in an offering pursuant to an effective registration statement filed
with the Securities and Exchange Commission under the Securities Act of 1933,
as amended, which results in an active trading market in the Class A Common
Stock (such an active trading market shall be deemed to exist if, among other
things, the Class A Common Stock is listed on a national securities exchange or
on the Nasdaq National Market); provided that an Initial Public Offering does
not include an offering made in connection with a business acquisition or
combination or any employee benefit plan or an offering of securities by the
Company solely to members of FTD Association.
The certificates representing the Shares shall contain a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A SUBSCRIPTION AGREEMENT BETWEEN FTD
CORPORATION (THE "COMPANY") AND THE ORIGINAL HOLDER OF
THIS SECURITY, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY. NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
SUCH SUBSCRIPTION AGREEMENT. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES
TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH
SUBSCRIPTION AGREEMENT, INCLUDING RESTRICTIONS
RELATING TO THE TRANSFER OF SECURITIES REPRESENTED
HEREBY.
The Participating Member hereby agrees that if the Participating Member
ceases to be an Active Member of FTD Association during the Restriction Period,
the Company will have the irrevocable option for a period of 60 days following
the date the Participating Member ceases to be an Active Member to redeem any
Shares held by the Participating Member or any Family Member or Affiliate of
the Participating Member to which such Shares have been transferred at the
greater of (i) the then Fair Market Value (as defined below) of the Shares or
(ii) $[ ] per
11
<PAGE> 12
Share. The Participating Member agrees to give the Company prompt notice
that the Participating Member has ceased to be an Active Member.
"Fair Market Value" as applied to any Shares shall mean the value of such
Shares, determined in good faith by an officer of the Company, in his sole
judgment, based on the earnings, book value and prospects of the Company in
light of market conditions generally.
The Participating Member hereby agrees that if the funds necessary to
consummate any such purchase of his, her or their Shares, as the case may be,
have been duly provided by the Company and are available to the Participating
Member on the date of purchase fixed in the written demand addressed to the
stockholder, then from and after such date all rights and privileges incident
to the ownership of the Shares (including, but not limited to, the right of
dividends thereon) shall cease, except the right to receive the purchase price
plus a sum equal to any dividends declared but remaining unpaid on the date of
purchase without interest; and from and after such date of purchase the Company
shall be at liberty to cancel the certificate or certificates representing said
Shares upon the books of the Company.
12
<PAGE> 1
EXHIBIT 5.1
<PAGE> 2
EXHIBIT 5.1
________________, 1997
FTD Corporation
3113 Woodcreek Drive
Downers Grove, Illinois 60515
Ladies and Gentlemen:
We have acted as special counsel for FTD Corporation, a Delaware
corporation (the "Company"), in connection with the preparation of the
Registration Statement on Form S-1[, as amended] (the "Registration
Statement"), filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), relating to 573,039 shares of the Company's Class A Common Stock,
par value $.01 per share (the "Common Stock"), which shares are to be sold by
the Company to Active Members of FTD Association in the United States pursuant
to subscription agreements ("Subscription Agreements"), a form of which has
been filed as an exhibit to the Registration Statement. Capitalized terms used
but not defined herein shall have the meaning set forth in the Registration
Statement.
As special counsel to the Company, in connection with this opinion we have
examined and relied upon such records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to form the basis
for the opinions set forth herein. In our examinations, we have assumed the
genuineness of all signatures, the legal capacity of natural persons signing or
delivering any instrument, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such latter documents.
We are attorneys admitted to practice in the State of New York, and the
opinions set forth below and any reference to statutes, rules or regulations
herein are limited to the laws of the United States of America and the State of
New York, and the General Corporation Law of the State of Delaware.
<PAGE> 3
FTD Corporation
___________, 1997
Page 2
Based upon the foregoing, we are of the opinion that the shares of Common
Stock to be issued and sold by the Company pursuant to the Subscription
Agreements will, when issued in accordance with the terms of the Subscription
Agreements and against payment therefor as set forth therein, be validly
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm appearing under the
heading "Legal Matters" in the Prospectus. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the General Rules and Regulations of
the Commission thereunder.
Very truly yours,
<PAGE> 1
EXHIBIT 23.1
KPMG Letterhead
Board of Directors
FTD Corporation:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
(signed) KPMG Peat Marwick LLP
Detroit, Michigan
October 6, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FTD
CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 28,294
<SECURITIES> 0
<RECEIVABLES> 24,979
<ALLOWANCES> 2,211
<INVENTORY> 14,992
<CURRENT-ASSETS> 77,541
<PP&E> 44,505
<DEPRECIATION> 23,925
<TOTAL-ASSETS> 181,724
<CURRENT-LIABILITIES> 72,075
<BONDS> 73,103
0
0
<COMMON> 62
<OTHER-SE> 27,172
<TOTAL-LIABILITY-AND-EQUITY> 181,724
<SALES> 49,738
<TOTAL-REVENUES> 162,583
<CGS> 35,897
<TOTAL-COSTS> 96,306
<OTHER-EXPENSES> 55,769
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,789
<INCOME-PRETAX> (1,331)
<INCOME-TAX> 416
<INCOME-CONTINUING> (1,733)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,733)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
<PAGE> 1
Exhibit 99.1
To U.S. Members
FTD CORPORATION
Notice of Offering
573,039 Shares of
Class A Common Stock
Price: $[ ] per share
Dear FTD Association Member:
FTD Corporation is making an offering of up to 7.5% of its outstanding
common stock to FTD Association Active Members. FTD Corporation is the owner of
all of the outstanding capital stock of Florists' Transworld Delivery, Inc.
FOR FURTHER INFORMATION ABOUT THIS OFFERING, YOU MUST EITHER:
(1) SEND A MERCURY MESSAGE WHICH READS "PLEASE SEND ME A PROSPECTUS FOR THE
1997 FTD MEMBER OFFERING" TO MERCURY #_________ OR
(2) CALL FTD's STOCK TRANSFER AGENT AT (800) ___-____ AND ASK FOR
INFORMATION ABOUT THE "FTD MEMBER OFFERING."
THE OFFERING WILL TERMINATE ON ________ __, 199_, UNLESS EXTENDED BY FTD
CORPORATION. If you respond, you will receive a Prospectus and Subscription
Agreement with more information about the offering. YOU ARE NOT OBLIGATED TO
PURCHASE ANY SHARES.
This Notice of Offering is neither an offer to sell nor a solicitation of
an offer to buy any securities, nor shall there be any sale of securities in any
State in which an offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of such State. FTD
Corporation has filed a registration statement with respect to the Offering
which has been declared effective by the U.S. Securities and Exchange
Commission. The Offering is made only by the Prospectus which is part of such
registration statement.
Dated: ________ __, 199_
<PAGE> 1
Exhibit 99.2
[DATE]
[FLORIST]
[ADDRESS]
Dear FTD Association Member:
We are very pleased to inform you that in response to your request for
information concerning the offer to purchase shares of FTD Corporation Class "A"
Common Stock, you have been allocated a total of [ ] shares at $[ ] per share.
As you can see, the total purchase price of $[ ] has been billed to you on the
enclosed [month] Clearinghouse statement. Any balance due on this statement must
be paid by [ ], in accordance with normal Clearinghouse terms.
Please complete and return the attached Subscription Agreement by mail,
overnight delivery or hand delivery to: American Stock Transfer & Trust
Company, 40 Wall Street, 46th Floor, New York, New York 10005, Attn: FTD
Member Offering.
The completed Subscription Agreement must be received by the Company
prior to 5:00 p.m. on ________ __, 199_. Upon acceptance of the subscription,
a copy of the executed Subscription Agreement, signed as accepted on behalf of
the Company, will be returned to you.
You will be billed for any Shares subscribed for through FTD's
Clearinghouse system. If you fail to pay any portion of your bill for the
Purchase Price by the Final Payment Date you will not be entitled to purchase
Shares, your Subscription Agreement will automatically terminate and the
billing for the Purchase Price will be reversed.
We appreciate your interest and support. We hope you share our excitement
for the future of FTD.
Sincerely,
FTD Corporation
