<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
Commission File Number
000-21277
IOS BRANDS CORPORATION
----------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 13-3711271
-------- ---------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
3113 WOODCREEK DRIVE
DOWNERS GROVE, IL 60515-5420
----------------------------
(Address of Principal Executive Offices) (Zip Code)
(630) 719-7800
(Registrant's Telephone Number, Including Area Code)
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 and 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of February 1, 2000, there were 12,380,270 outstanding shares of the
Registrant's Class A Common Stock, par value $.01 per share, and 2,948,750
outstanding shares of the Registrant's Class B Common Stock, par value $.0005
per share.
<PAGE> 2
IOS BRANDS CORPORATION
INDEX
PAGE
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets............................. 3
Condensed Consolidated Statements of Operations and Comprehensive
Income............................................................ 4
Condensed Consolidated Statements of Cash Flows................... 5
Notes to Condensed Consolidated Financial Statements.............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk........ 16
Part II. Other Information
Item 1. Legal Proceedings................................................ 18
Item 4. Submission of Matters to a Vote of Security Holders.............. 18
Item 6. Exhibits and Reports on Form 8-K................................. 18
Signatures................................................................. 19
Exhibit Index.............................................................. 20
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
IOS BRANDS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 1999
ASSETS (UNAUDITED) (AUDITED)
--------------- --------------
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $41,372 $2,468
Accounts receivable, less allowance for doubtful accounts
of $1,873 at December 31, 1999 and $1,681 at June 30, 1999 24,640 22,813
Inventories 14,340 13,641
Deferred income taxes 3,005 3,045
Prepaid expenses 3,847 4,088
Distribution agreements 881 1,707
---------------- --------------
TOTAL CURRENT ASSETS 88,085 47,762
Property and equipment, less accumulated depreciation
of $35,227 at December 31, 1999 and $33,504 at June 30, 1999 15,842 15,984
OTHER ASSETS:
Deferred financing costs, less accumulated amortization
of $581 at December 31, 1999 and $445 at June 30, 1999 923 1,059
Deferred income taxes 6,519 1,440
Other noncurrent assets 11,682 6,722
Goodwill and other intangibles, less accumulated amortization
of $15,181 at December 31, 1999 and $13,654 at June 30, 1999 70,203 71,730
---------------- --------------
TOTAL OTHER ASSETS 89,327 80,951
TOTAL ASSETS $193,254 $144,697
================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $47,747 $32,425
Customer deposits and accrued customer incentive programs 17,577 15,751
Other accrued liabilities 8,468 6,164
---------------- --------------
TOTAL CURRENT LIABILITIES 73,792 54,340
Long-term debt 57,250 51,750
Pension and other post-retirement benefits 5,580 5,755
Preferred stockholders' equity in a subsidiary company - 9,074
Minority interest in subsidiary 43,246 -
STOCKHOLDERS' EQUITY:
Common stock:
Class A 123 123
Class B 2 2
Paid-in capital 37,170 37,018
Accumulated deficit (21,213) (10,648)
Cumulative translation adjustments (69) (96)
Unamortized restricted stock (767) (913)
Treasury stock (1,860) (1,708)
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 13,386 23,778
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $193,254 $144,697
================ ===============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
IOS BRANDS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31, December 31,
1999 1998 1999 1998
------------------------- -------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
REVENUES:
Technology Products and Services $ 32,509 $ 29,267 $ 61,119 $ 53,353
Marketplace and Other 14,162 13,491 26,464 28,344
Direct to Consumer 20,947 11,632 31,723 17,207
--------- --------- --------- ---------
Total revenues $ 67,618 $ 54,390 $ 119,306 $ 98,904
--------- --------- --------- ---------
COSTS OF GOODS SOLD AND SERVICES PROVIDED:
Technology Products and Services 6,767 4,753 13,848 10,112
Marketplace and Other 10,507 8,534 19,952 18,958
Direct to Consumer 16,517 9,132 25,264 13,626
--------- --------- --------- ---------
Total costs of goods sold and services
provided 33,791 22,419 59,064 42,696
--------- --------- --------- ---------
OPERATING EXPENSES:
Advertising and selling 32,594 17,931 52,545 32,588
General and administrative 11,588 8,964 22,245 18,052
--------- --------- --------- ---------
Total operating expenses 44,182 26,895 74,790 50,640
Income (loss) from operations (10,355) 5,076 (14,548) 5,568
--------- --------- --------- ---------
OTHER INCOME AND EXPENSES:
Interest income (648) (141) (830) (316)
Interest expense 1,474 2,162 2,727 4,540
Foreign exchange (gain) loss and other income (41) (25) 96 (72)
--------- --------- --------- ---------
Total other income and expenses 785 1,996 1,993 4,152
--------- --------- --------- ---------
Income (loss) before income tax, minority interest
and extraordinary item (11,140) 3,080 (16,541) 1,416
--------- --------- --------- ---------
Income tax expense (benefit) (3,346) 1,444 (4,965) 625
Minority interest in loss of subsidiary (1,003) -- (1,011) --
--------- --------- --------- ---------
Net income (loss) before extraordinary item (6,791) 1,636 (10,565) 791
--------- --------- --------- ---------
Extraordinary item:
Loss on early extinguishment of debt, net of
income tax benefit of $3,428 -- (3,714) -- (3,714)
--------- --------- --------- ---------
Net loss ($ 6,791) ($ 2,078) ($ 10,565) ($ 2,923)
--------- --------- --------- ---------
Other comprehensive income (loss):
Foreign currency translation adjustments 22 22 27 (36)
--------- --------- --------- ---------
Comprehensive loss ($ 6,769) ($ 2,056) ($ 10,538) ($ 2,959)
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE:
Basic and diluted before extraordinary item ($ 0.44) $ 0.11 ($ 0.69) $ 0.05
========= ========= ========= =========
Extraordinary item -- ($ 0.24) -- ($ 0.24)
========= ========= ========= =========
Basic and diluted ($ 0.44) ($ 0.13) ($ 0.69) ($ 0.19)
========= ========= ========= =========
Common shares used in the calculation of basic and
diluted earnings (loss) per share 15,345 15,364 15,345 15,364
========= ========= ========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
IOS BRANDS CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
December 31,
1999 1998
------------ ------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($10,565) ($ 2,923)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 4,346 5,797
Minority interest in loss of subsidiary (1,011) --
Accounts receivable (1,827) (1,495)
Deferred income taxes (5,039) (2,988)
Other current assets (694) (1,465)
Accounts payable 15,322 10,524
Customer deposits and accrued customer incentive programs 1,826 (4,497)
Other accrued liabilities 2,403 1,870
------------ ------------
Net cash provided by operating activities $ 4,761 $ 4,823
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (7,355) (5,339)
------------ ------------
Net cash used in investing activities (7,355) (5,339)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds of revolving credit borrowings 5,500 3,249
Repurchase of common stock, net -- (1,152)
Issuance of subsidiary common stock,net 35,971 --
------------ ------------
Net cash provided by financing activities 41,471 2,097
Effect of foreign exchange rate changes on cash 27 (36)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 38,904 1,545
Cash and cash equivalents at beginning of period 2,468 13,615
------------ ------------
Cash and cash equivalents at end of period $ 41,372 $ 15,160
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 1,907 $ 4,200
============ ============
Income taxes paid $ 114 $ 0
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
IOS BRANDS CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Basis of Presentation
At the Annual Meeting of Stockholders held on November 17, 1999, a
majority of the stockholders voted in favor on the proposal to amend the
Company's Restated Certificate of Incorporation to change the name of the
Company from FTD Corporation to IOS BRANDS CORPORATION. The unaudited condensed
consolidated financial statements as of and for the three and six month periods
ended December 31, 1999, include the accounts of IOS BRANDS CORPORATION and its
wholly-owned subsidiaries, Florists' Transworld Delivery, Inc. ("FTD") and Value
Network Service, Inc. ("VNS") (collectively, "the Company" or "IOS"). FTD, the
principal operating subsidiary of the Company, includes its wholly owned
subsidiaries Renaissance Greeting Cards, Inc. and FTD Canada, Inc., as well as
those of its majority owned subsidiary FTD.COM INC. ("FTD.COM"). These
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information pursuant to the rules and
regulations of the Securities and Exchange Commission and do not contain all
information included in the audited consolidated financial statements and notes
for the year ended June 30, 1999. The interim statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's latest Annual Report on Form 10-K. In the opinion of management, all
adjustments necessary for a fair presentation of the financial position, results
of operations and cash flows have been included (and any such adjustments are of
a normal, recurring nature).
Certain amounts in the condensed consolidated balance sheets,
statements of operations and comprehensive income and cash flows as of and for
the three and six month periods ended December 31, 1998 have been reclassified
to conform to the current period presentation. This includes the
reclassification of certain revenues generated from Direct to Consumer
activities which were previously reported net of costs relating to processing
and fulfillment and are now recorded on a gross basis. The corresponding costs
representing the amounts paid for processing and fulfillment have been
reclassified as Direct to Consumer costs of goods sold and services provided.
The Company has also made other reclassifications of costs of goods sold and
services provided and selling, general and administrative expenses in order to
conform to the current period presentation.
Note 2. Revenues from Sale of the Floral Selections Guide ("FSG")
Effective with the 1999 fiscal year, as a condition of FTD affiliation,
all FTD florists were required to purchase a FSG and related workbook. The
purchase of such FSG entitles the FTD florist to a non-exclusive,
non-transferable right for on premises use of the FSG for as long as the
purchaser remains an FTD florist in good standing. FTD will revise this FSG for
new FTD products every other fiscal year and recognize the related revenue at
the time of shipment to all FTD florists. In the six month period ended December
31, 1998 revenue from such FSG sales totaled $2.7 million.
Note 3. Capital Transactions
During the six month period ended December 31, 1999, pursuant to the
terms of the Company's stock award and incentive plan, options to purchase
88,400 Class A shares were granted and options to purchase 15,600 Class A shares
previously granted were canceled. In addition, the Company did not repurchase
into treasury any shares of outstanding common stock or issue any shares of
restricted stock to officers during the six month period ended December 31,
1999.
During the six month period ended December 31, 1998, the Company
granted options to purchase 137,100 Class A shares and 70,000 Class A shares
were issued to officers as restricted stock. In addition, options to purchase
1,500 Class A shares were exercised, options to purchase 11,700 Class A shares
previously granted were canceled and 50,866 and 51,250 Class A and B shares,
respectively, were repurchased into treasury.
6
<PAGE> 7
Note 4. Earnings Per Share
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share", basic earnings per share is calculated by
dividing net income by the weighted average number of common shares outstanding
and excludes the dilutive effect of unexercised common stock equivalents.
Diluted earnings (loss) per share is calculated by dividing net income by the
weighted average number of common shares outstanding and includes the dilutive
effect of unexercised common stock equivalents to the extent that they are not
anti-dilutive. Basic and diluted earnings per common share for the three and six
month periods ended December 31, 1999 were computed based on the weighted
average number of common shares outstanding of 15,344,870. For the three and six
month periods ended December 31, 1998, basic and diluted earnings per common
share were computed based on the weighted average number of common shares
outstanding of 15,364,251 and 15,363,597, respectively.
Shares associated with stock options which were not included in the
calculation of diluted earnings per share because their effect was anti-dilutive
consisted of approximately 258,000 shares and 195,000 shares in the three and
six month periods ended December 31, 1999, respectively and approximately
103,000 and 105,000 in the three and six month periods ended December 31, 1998,
respectively.
Note 5. Segment Information
In accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", the Company has identified three reportable
business segments based on the nature of its products and services and financial
reports.
These business segments include Technology Products and Services,
Marketplace and Other and Direct to Consumer. Technology Products and Services
consists of technology based products and services, offered to the Company's
customers. This includes FTD's Mercury equipment, Mercury Advantage systems,
Mercury Wings TM systems, Mercury Network, Clearinghouse, Flowers After Hours,
Publications, Credit Card processing, Interflora, Inc. and VNS. Marketplace and
Other consists of FTD's floral related products, specialty gift products and
greeting cards offered to FTD's customers for resale as well as the FSG and
other miscellaneous income items. Direct to Consumer includes FTD.COM's floral
and specialty gift order capabilities offered directly to consumers through the
1-800-SEND-FTD toll-free telephone number and the www.FTD.COM Internet site.
These segments are evaluated regularly by management in deciding how to
allocate resources and assess performance. For purposes of managing the Company,
the chief operating decision maker reviews segment financial performance to the
operating income level for the Direct to Consumer business segment (FTD.COM) and
to the gross margin level for the Company's remaining business segments. Of the
Company's assets totaling $193.3 million as of December 31, 1999, the assets of
FTD.COM totaled $38.2 million, of which $33.2 million was cash and cash
equivalents. Financial resources utilized by FTD.COM are currently generated
from its own sources of liquidity. The assets of the Company's other two
operating business segments share the majority of the remaining assets of $155.1
million. Resource allocating decisions are not made on the basis of the
reportable segment's assets.
The Company's accounting policies for segments are the same as those on
a consolidated basis described in Note 1, Basis of Presentation. In connection
with the Initial Public Offering (IPO) of FTD.COM's Class A common stock, FTD
and FTD.COM entered into certain intercompany agreements governing various
interim and ongoing relationships, including a commission agreement,
indemnification agreement, trademark license agreement, a registration rights
agreement, a tax sharing agreement and a web site hosting agreement.
7
<PAGE> 8
The following tables detail the Company's operating results by
reportable business segment for the three and six month periods ended December
31, 1999 and 1998.
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED DECEMBER 31,
1999 1998
---- ----
---------- -------------- -------------- ---------- -------------- --------------
GROSS GROSS
SEGMENT ELIMINATIONS CONSOLIDATED SEGMENT ELIMINATIONS CONSOLIDATED
---------- -------------- -------------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Technology Products and Services
$ 32,947 $ (438) $ 32,509 $ 29,419 $ (152) $ 29,267
Marketplace and Other 14,162 -- 14,162 13,491 -- 13,491
Direct to Consumer 23,588 (2,641) 20,947 12,688 (1,056) 11,632
-------- -------- -------- -------- -------- --------
Total revenues 70,697 (3,079) 67,618 55,598 (1,208) 54,390
-------- -------- -------- -------- -------- --------
COSTS OF GOODS SOLD AND SERVICES
PROVIDED:
Technology Products and Services
7,471 (704) 6,767 4,753 -- 4,753
Marketplace and Other 10,507 -- 10,507 8,534 -- 8,534
Direct to Consumer 16,955 (438) 16,517 9,870 (738) 9,132
-------- -------- -------- -------- -------- --------
Total costs of goods sold and
services provided 34,933 (1,142) 33,791 23,157 (738) 22,419
-------- -------- -------- -------- -------- --------
OPERATING EXPENSES:
Technology and Marketplace 27,667 (2,956) 24,711 22,767 (2,403) 20,364
Direct to Consumer 18,452 (1,019) 19,471 4,598 1,933 6,531
-------- -------- -------- -------- -------- --------
Total operating expenses 46,119 (1,937) 44,182 27,365 (470) 26,895
-------- -------- -------- -------- -------- --------
OPERATING INCOME (LOSS) $(10,355) $ -- $(10,355) $ 5,076 $ -- $ 5,076
======== ======== ======== ======== ======== ========
GROSS MARGIN BY SEGMENT:
Technology Products and Services
$ 25,476 $ 266 $ 25,742 $ 24,666 $ (152) $ 24,514
Marketplace and Other 3,655 -- 3,655 4,957 -- 4,957
Direct to Consumer 6,633 (2,203) 4,430 2,818 (318) 2,500
-------- -------- -------- -------- -------- --------
Total $ 35,764 $ (1,937) $ 33,827 $ 32,441 $ (470) $ 31,971
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED DECEMBER 31,
1999 1998
---- ----
---------- -------------- -------------- ---------- -------------- --------------
GROSS GROSS
SEGMENT ELIMINATIONS CONSOLIDATED SEGMENT ELIMINATIONS CONSOLIDATED
---------- -------------- -------------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Technology Products and Services
$ 61,770 $ (651) $ 61,119 $ 53,583 $ (230) $ 53,353
Marketplace and Other 26,464 -- 26,464 28,344 -- 28,344
Direct to Consumer 36,031 (4,308) 31,723 18,793 (1,586) 17,207
--------- --------- --------- --------- --------- ---------
Total revenues 124,265 (4,959) 119,306 100,720 (1,816) 98,904
--------- --------- --------- --------- --------- ---------
COSTS OF GOODS SOLD AND SERVICES
PROVIDED:
Technology Products and Services
15,111 (1,263) 13,848 10,112 -- 10,112
Marketplace and Other 19,952 -- 19,952 18,958 -- 18,958
Direct to Consumer 25,915 (651) 25,264 14,730 (1,104) 13,626
--------- --------- --------- --------- --------- ---------
Total costs of goods sold and
services provided 60,978 (1,914) 59,064 43,800 (1,104) 42,696
--------- --------- --------- --------- --------- ---------
OPERATING EXPENSES:
Technology and Marketplace 51,952 (5,092) 46,860 43,893 (3,800) 40,093
Direct to Consumer 25,883 2,047 27,930 7,459 3,088 10,547
--------- --------- --------- --------- --------- ---------
Total operating expenses 77,835 (3,045) 74,790 51,352 (712) 50,640
--------- --------- --------- --------- --------- ---------
OPERATING INCOME (LOSS) $ (14,548) $ -- $ (14,548) $ 5,568 $ -- $ 5,568
========= ========= ========= ========= ========= =========
GROSS MARGIN BY SEGMENT:
Technology Products and Services
$ 46,659 $ 612 $ 47,271 $ 43,471 $ (230) $ 43,241
Marketplace and Other 6,512 -- 6,512 9,386 -- 9,386
Direct to Consumer 10,116 (3,657) 6,459 4,063 (482) 3,581
- -------------------------------- --------- --------- --------- --------- --------- ---------
Total $ 63,287 $ (3,045) $ 60,242 $ 56,920 $ (712) $ 56,208
========= ========= ========= ========= ========= =========
</TABLE>
<PAGE> 10
Note 6. Initial Public Offering of FTD.COM
On September 28, 1999, FTD's subsidiary FTD.COM agreed to issue and
sell 4,500,000 shares of its Class A common stock to the public in an IPO
transaction at a price of $8.00 per share, resulting in gross proceeds from the
offering of $36.0 million. The IPO closed on October 4, 1999, at which time
FTD.COM collected the gross proceeds of $36.0 million less underwriting
discounts of $2.5 million. In addition, the $33.5 million net cash received from
the underwriters was reduced by other offering expenses of $2.0 million. The net
proceeds of $31.5 million were recorded as minority interest in subsidiary.
Prior to the IPO, FTD owned 100% of the outstanding common stock of FTD.COM.
There was no gain recorded by the Company upon the sale of FTD.COM's stock. The
Company's accounting policy is to account for a subsidiary direct sale of
unissued shares as a capital transaction.
Upon the closing of the IPO of FTD.COM on October 4, 1999, the 90,000
shares of FTD.COM's Series A 8% Cumulative Redeemable Convertible Preferred
Stock were automatically converted into 1,384,614 shares of FTD.COM Class A
common stock. Upon conversion, the Company reclassified the preferred
stockholders' equity in a subsidiary of $9.0 million to minority interest in
subsidiary and the accrued dividends of $74,301 were offset against the retained
earnings of FTD.COM.
On October 6, 1999, the underwriters of the IPO exercised their one
time option to purchase 495,000 additional shares of FTD.COM Class A common
stock at the IPO price of $8.00 per share, representing a portion of the
over-allotment option granted to the underwriters in connection with the IPO.
The net proceeds to FTD.COM from this issuance and sale of 495,000 shares of
Class A common stock were $3.7 million after deducting underwriting discounts
and commissions and were recorded as minority interest in subsidiary.
Upon completion of the above events, FTD owns approximately 87% of the
outstanding common stock of FTD.COM through its ownership of 40,920,000 shares
of Class B common stock (as adjusted for the 12-for-1 stock split on July 30,
1999). In addition, the minority interest of 13% is represented by the 4,500,000
shares of Class A common stock sold to the public, the 1,384,614 shares from the
conversion of the Series A preferred stock into shares of Class A common stock
and the issuance and sale of 495,000 shares of Class A common stock to the
underwriters pursuant to the underwriters' exercise of their over-allotment
option.
Note 7. Minority Interest in Subsidiary
The Company's condensed consolidated financial statements as of and for
the three and six month periods ended December 31, 1999, reflect the minority
interest in FTD's subsidiary FTD.COM. The Company's accounting policy is to
deduct the minority interest in net income (loss) to arrive at consolidated net
income.
The minority interest in loss of subsidiary of $1.0 million reflected
on the condensed consolidated statements of operations and comprehensive income
represents the net tax-effected loss attributable to the 13% minority
shareholders from the date of the IPO of FTD.COM for the three and six months
ended December 31, 1999.
The $43.2 million minority interest in subsidiary reflected on the
condensed consolidated balance sheets as of December 31, 1999 consists of the
$31.5 million net proceeds from the closing of the IPO, the $9.0 million from
the reclassification of the preferred stockholders' equity in a subsidiary, the
$3.7 million net proceeds from the underwriters exercise of their over-allotment
option, offset by the minority interest in loss of subsidiary of $1.0 million.
10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Effective November 18, 1999, FTD Corporation changed its name to IOS
Brands Corporation, which will allow the Company to build on the multi-brand
name recognition and distinguish it from the operating subsidiary Florists'
Transworld Delivery, Inc.
Except for the historical information contained in this report, certain
statements made herein are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 that reflect the Company's
expectations regarding its future growth, results of operations, performance and
business prospects and opportunities. Words such as "anticipates," "believes,"
"plans," "expects," "estimates," and similar expressions have been used to
identify these forward looking statements, but are not the exclusive means of
identifying these statements. These statements reflect the Company's current
beliefs and are based on information currently available to the Company.
Accordingly, these statements are subject to known and unknown risks,
uncertainties, and other factors that could cause the Company's actual growth,
results, performance and business prospects and opportunities to differ from
those expressed in, or implied by, these statements. These risks, uncertainties,
and other factors include the Company's ability to develop and market existing
and acquired products, the Company's ability to maintain its advertising
presence, the Company's ability to adjust to changes in technology, customer
preferences, enhanced competition and new competitors in the floral services
industry, current exchange rate and interest rate fluctuations, collection of
receivables and risks associated with general economic and business conditions,
which may reduce or delay customers' purchases of the Company's products and
services. The Company is not obligated to update or revise these forward-looking
statements to reflect new events or circumstances.
The Company generates its revenue from three principal areas of
operation. These areas have been identified as Technology Products and Services,
Marketplace and Other and Direct to Consumer.
Technology Products and Services consists primarily of:
- Mercury equipment, Mercury Advantage systems and Mercury Wings TM
systems sales, which includes both sales and leases of hardware
and software to FTD florists.
- Mercury Network, which is FTD's proprietary telecommunications
network used by florists to transmit orders through FTD or through
competing clearinghouses.
- Clearinghouse, which provides order billing and collection
services to both the sending and receiving florists and for which
FTD receives a percentage of the sales price for the service.
- Flowers After Hours, which is FTD's call forwarding service
whereby FTD receives orders for participating florists when that
florists' shop is closed or otherwise unavailable. FTD charges a
fee for each transaction processed.
- Publications, which consists of the FTD Directory published on a
quarterly basis on CD ROM as well as in paper book form.
Publications also includes revenues attributable to the set up and
maintenance of florists' Web sites for FTD Florists' Online
through FTD.COM's Internet site www.FTD.COM.
- Credit Card processing, which is a service offered to
participating florists whereby FTD pools the credit card
transactions of such florists to secure more favorable terms on
credit card transactions than the FTD florists could secure
individually.
- Interflora, Inc. is a joint venture between the Company,
Fleurop-Interflora and the Interflora British Unit. The joint
venture provides a floral services organization with non-FTD
member florists to enable florists to transmit and receive orders
outside North America.
The Marketplace and Other segment primarily represents FTD's wholesale
distribution of floral related products to florists. This includes 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. It also includes greeting cards, specialty gifts
and the FSG in addition to other miscellaneous income
11
<PAGE> 12
items.
The Direct to Consumer segment represents revenue derived from FTD's
majority owned subsidiary, FTD.COM. FTD.COM is an Internet and telephone
marketer of flowers and specialty gifts. This business segment includes consumer
orders generated by the 1-800-SEND-FTD toll-free telephone number and the
www.FTD.COM Web site. FTD.COM's revenue includes the sales price of flowers and
specialty gifts as well as a service fee charged to the consumer.
In view of the rapidly changing nature of the Company's Direct to
Consumer business and seasonal variations of the Company's other business
segments, the Company believes that comparisons of its operating results for any
period with those of the preceding period are not necessarily meaningful and
should not be relied upon as an indication of future performance. The Company's
revenues and operating results may vary from quarter to quarter due to a number
of factors, some of which are beyond the Company's control. This fluctuation is
primarily attributable to increased sales and advertising expenditures during
popular floral holiday seasons in the fiscal quarters ended March 31, June 30
and December 31. As a result of increased brand development costs, marketing
costs and systems and technology development costs in the Direct to Consumer
business segment, the Company expects to record significantly greater losses as
compared to the preceding periods for the remainder of the year ended June 30,
1999 and into the foreseeable future.
THREE MONTH PERIOD ENDED DECEMBER 31, 1999 COMPARED TO THE THREE MONTH PERIOD
ENDED DECEMBER 31, 1998.
Total revenues increased by $13.2 million, or 24.3%, to $67.6 million
for the quarter ended December 31, 1999 compared to $54.4 million for the
quarter ended December 31, 1998. This increase in revenue was primarily the
result of increases in the Direct to Consumer and Technology Products and
Services business segments.
Technology Products and Services segment revenue increased by $3.2
million, or 10.9%, to $32.5 million for the quarter ended December 31, 1999
compared to $29.3 million last year. This increase was primarily due to
increases in Clearinghouse and Credit Card Processing revenues.
Marketplace and Other segment revenue increased by $0.7 million, or
5.2%, to $14.2 million for the quarter ended December 31, 1999 over $13.5
million last year. The increase was primarily the result of an increase in
holiday product sales over the prior year.
Direct to Consumer segment revenue increased by $9.3 million, or 80.2%,
to $20.9 million for the quarter ended December 31, 1999 compared to $11.6
million a year ago. The increase over the prior year was primarily due to an
increase in the number of orders placed by consumers through the www.FTD.COM
Internet site.
Total cost of goods sold and services provided increased by $11.4
million, or 50.9%, to $33.8 million for the quarter ended December 31, 1999
compared to $22.4 million a year earlier. This increase was primarily
attributable to the costs associated with an increase in revenues in the Direct
to Consumer segment. As a percent of revenue, total costs of goods sold and
services provided increased to 50.0% for the quarter ended December 31, 1999
from 41.2% a year earlier. This was primarily due to decreased gross margins
relating to the Technology Products and Services and the Marketplace and Other
business segments.
Costs of goods sold and services provided associated with Technology
Products and Services increased $2.0 million, or 41.7% to $6.8 million for the
quarter ended December 31, 1999 compared to $4.8 million in the prior year. This
increase was primarily due to higher equipment and support costs associated with
increased sales of Mercury Advantage and Mercury Wings TM systems.
Costs of goods sold and services provided associated with Marketplace
and Other increased by $2.0 million, or 23.5%, to $10.5 million for the quarter
ended December 31, 1999 compared to $8.5 million a year ago. Selling holiday
product at a higher discount, as well as incurring incremental freight costs on
more volume, were leading causes of the increase. In addition, increased product
costs on new lines of holiday and branded products contributed to the increase
in cost of goods sold.
12
<PAGE> 13
Costs of goods sold and services provided associated with Direct to
Consumer increased $7.4 million, or 81.3%, to $16.5 million for the quarter
ended December 31, 1999 compared to $9.1 million last year. The increase was
primarily attributable to costs associated with processing and fulfilling more
consumer orders.
Advertising and selling expenses increased by $14.7 million, or 82.1%,
to $32.6 million for the quarter ended December 31, 1999 from $17.9 million a
year earlier. This was primarily due to increased costs associated with internet
marketing, national advertising, convention and trade shows.
General and administrative expenses increased $2.6 million, or 28.9%,
to $11.6 million for the quarter ended December 31, 1999 from $9.0 million a
year earlier. The increase was primarily due to increased payroll and
administrative costs to support the Company's growth.
Interest income increased by $0.5 million over the prior year, to $0.6
million for the quarter ended December 31, 1999, resulting from interest earned
on the unused proceeds of the IPO of FTD.COM. Interest expense decreased by $0.7
million from the prior year, to $1.5 million for the quarter ended December 31,
1999. The decrease is primarily due to the extinguishment of $60.0 million of
14% Senior Subordinated Notes on December 15, 1998 utilizing existing bank
credit facilities having a lower average borrowing rate.
The provision for income taxes and the effective tax rates for the
quarters ended December 31, 1999 and 1998, were a benefit of $3.3 million and
29.7% and a provision of $1.4 million and 45.2%, respectively. The change in
effective tax rates was primarily due to the effect of non-deductible goodwill
amortization and other items, which reduces the Company's tax rate when
operating in a pre-tax loss position and increases its effective tax rate when
operating in a pre-tax profit position.
The net loss for the quarter ended December 31, 1999 includes $1.0
million of minority interest in the loss of the Company's subsidiary FTD.COM
from the date of the IPO. The net income/loss before extraordinary item, was a
loss of $6.8 million for the quarter ended December 31, 1999 compared to income
of $1.6 million a year earlier, an $8.4 million decrease year on year. The
decrease was primarily the result of increased advertising, selling and
marketing expenses associated with the Company's recently launched national
advertising campaign and the Direct to Consumer business segment. The net loss
for the quarter ended December 31 1998, includes an after-tax extraordinary loss
of $3.7 million as a result of the extinguishment of debt as noted above.
SIX MONTH PERIOD ENDED DECEMBER 31, 1999 COMPARED TO THE SIX MONTH PERIOD ENDED
DECEMBER 31, 1998.
Total revenues increased by $20.4 million, or 20.6%, to $119.3 million
for the first half ended December 31, 1999 compared to $98.9 million a year
earlier. This increase was primarily the result of an increase in revenues in
the Direct to Consumer and Technology Products and Services business segments,
offset in part by a decrease in revenues in the Marketplace and Other business
segment.
Technology Products and Services segment revenue increased by $7.7
million, or 14.4%, to $61.1 million in the first half ended December 31, 1999
compared to $53.4 million last year. This increase was due in part to increases
in Clearinghouse and Credit Card Processing revenues and higher sales of the
Mercury Wings TM and Mercury Advantage systems.
Marketplace and Other segment revenue decreased by $1.8 million, or
6.4%, to $26.5 million for the first half ended December 31, 1999 from $28.3
million a year ago. The decrease was primarily the result of $2.7 million in
revenues for the Floral Selections Guide "FSG," (see Note 2. Revenues from Sale
of Floral Selections Guide), recorded in the first half of last year versus no
FSG revenues recorded in the first half ended December 31, 1999. This decrease
was partially offset by an increase in holiday product sales over the prior
year.
Direct to Consumer segment revenue increased by $14.5 million, or
84.3%, to $31.7 million for the first half ended December 31, 1999 compared to
$17.2 million a year earlier. The increase over the prior year was primarily due
to an increase in the number of orders placed by consumers through the
www.FTD.COM Internet site.
13
<PAGE> 14
Total cost of goods sold and services provided increased by $16.4
million, or 38.4%, to $59.1 million for the first half ended December 31, 1999
compared to $42.7 million a year earlier. This increase was primarily
attributable to the costs associated with an increase in revenues in the Direct
to Consumer segment. As a percent of revenue, total costs of goods sold and
services provided increased to 49.5% for the first half ended December 31, 1999
from 43.2% a year earlier. This was primarily due to decreased gross margins
relating to the Technology Products and Services and the Marketplace and Other
business segments.
Costs of goods sold and services provided associated with Technology
Products and Services increased $3.7 million, or 36.6% to $13.8 million for the
first half ended December 31, 1999 compared to $10.1 million in the prior year.
This increase was primarily due to higher equipment and support costs associated
with increased sales of Mercury Advantage and Mercury Wings TM systems.
Costs of goods sold and services provided associated with Marketplace
and Other increased by $1.0 million, or 5.3%, to $20.0 million for the first
half ended December 31, 1999, compared to $19.0 million a year ago. Cost of
goods sold in the first half of last year included $1.7 million of costs related
to the FSG versus no costs in the first half ended December 31, 1999. The
remaining increase in cost of goods sold for the first half ended December 31,
1999 over the same period last year was primarily due to selling holiday product
at a higher discount as well as incurring incremental freight costs on more
volume. In addition, increased product costs on new lines of holiday and branded
products contributed to the increase in cost of goods sold.
Costs of goods sold and services provided associated with Direct to
Consumer increased $11.7 million, or 86.0%, to $25.3 million for the first half
ended December 31, 1999 compared to $13.6 million a year ago. The increase was
primarily attributable to costs associated with processing and fulfilling more
consumer orders.
Advertising and selling expenses increased by $19.9 million, or 61.0%,
to $52.5 million for the first half ended December 31, 1999 from $32.6 million a
year earlier. This was primarily due to increased costs associated with national
advertising, Internet marketing, convention and trade shows.
General and administrative expenses increased $4.1 million, or 22.7%,
to $22.2 million for the first half ended December 31, 1999 from $18.1 million
for the same period a year earlier. This increase was primarily due to increased
payroll and administrative costs to support the growth of the Company and costs
associated with protecting the FTD brand and corporate rights.
Interest income increased by $0.5 million over the prior year, to $0.8
million for the first half ended December 31, 1999, resulting primarily from
interest earned on unused proceeds from the IPO of FTD.COM. Interest expense
decreased by $1.8 million from the prior year, to $2.7 million for the first
half ended December 31, 1999. The decrease was primarily attributable to a lower
borrowing rate year on year as a result of extinguishing $60.0 million of 14%
Senior Subordinated Notes on December 15, 1998 and utilizing existing bank
credit facilities having a lower average borrowing rate.
The provision for income taxes and the effective tax rates for the six
month periods ended December 31, 1999 and 1998 were a benefit of $5.0 million
and 30% and a provision of $0.6 million and 42.9%, respectively. The change in
effective tax rates was primarily due to the effect of non-deductible goodwill
amortization and other items, which reduces the Company's tax rate when
operating in a pre-tax loss position and increases its effective tax rate when
operating in a pre-tax profit position.
The net loss for the six month period ended December 31, 1999 includes
the minority interest in the loss of the Company's subsidiary FTD.COM from the
date of the IPO. The net income/loss before extraordinary item was a loss of
$10.6 million for the first half ended December 31, 1999 compared to income of
$0.8 million for the same period a year earlier, an $11.4 million decrease year
on year. The decrease was primarily the result of increased advertising, selling
and marketing expenses associated with the Company's recently launched national
advertising campaign and the Direct to Consumer business segment. The net loss
for the six months ended December 31 1998, includes an after-tax extraordinary
loss of $3.7 million as a result of the extinguishment of debt as noted above.
14
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $38.9 million to $41.4 million
as of December 31, 1999 from $2.5 million as of June 30, 1999. For the six
months ended December 31, 1998, cash and cash equivalents increased by $1.5
million to $15.2 million from $13.6 million as of June 30, 1998.
Cash provided by operating activities was $4.8 million for the six
months ended December 31, 1999 and 1998. Net losses increased $7.7 million to
$10.6 million for the six months ended December 31, 1999. The increase in net
losses was offset primarily by increases in cash provided by accounts payable
and accrued customer incentives.
Cash used in investing activities was $7.4 million for the six months
ended December 31, 1999 compared to $5.3 million for the same period a year ago.
Expenditures for depreciable fixed assets such as furniture and equipment were
$1.5 million and $2.0 million, respectively. Expenditures for amortizable
intangibles such as costs relating to the development and implementation of a
new software package and other information technology costs were $5.9 million,
of which $2.5 million related to the Direct to Consumer business segment, and
$3.3 million, respectively. The Company's anticipated capital expenditures for
fiscal 2000 are estimated to be in the range of $14.0 to $17.0 million, of which
approximately $9.0 million is expected to be used for developing the Company's
new internet site for the Direct to Consumer business segment and approximately
$5.0 million to $8.0 million will primarily be used for information technology
purchases.
Cash provided by financing activities was $41.5 million for the six
months ended December 31, 1999, compared to $2.1 million for the same period a
year earlier. The net proceeds from FTD.COM's IPO generated $36.0 million of the
increase and the remainder came from an increase in borrowings under the bank
credit facilities. The Company intends to use the net proceeds from the IPO of
FTD.COM to fund FTD.COM's anticipated capital expenditures and working capital
needs.
The Company's principal sources of liquidity are cash from operations
and funds available for borrowing under the Company's Bank Credit Agreement
dated November 20, 1997 (the "Bank Credit Facilities"). The Bank Credit
Facilities consists of a $42.5 million Multiple Draw Term Loan Facility and a
$50.0 million Revolving Credit Facility and are used to finance working capital,
acquisitions, certain expenses associated with the Bank Credit Facilities and
letter of credit needs. As of December 31, 1999, the Company had $42.5 million
outstanding under the Multiple Draw Term Loan Facility, $14.8 million
outstanding under the Revolving Credit Facility and $1.4 million outstanding
under various letters of credit. The amount outstanding under the Multiple Draw
Term Loan Facility is scheduled to be permanently reduced, over a period of
sixteen consecutive unequal quarterly installments continuing thereafter until
the termination date of December 31, 2003, through cash flow from operations and
the use of the Revolving Credit Facility. The amounts outstanding under the
Revolving Credit Facility will mature on December 31, 2003. The Company's Bank
Credit Facilities include covenants, which, among other things require the
Company to maintain certain financial ratios and a minimum level of consolidated
net worth. As of December 31, 1999, the Company was in compliance with the
covenants contained in the Bank Credit Facilities.
In addition to its debt service obligations, the Company's remaining
liquidity requirements are primarily for capital expenditures, software
development costs and working capital needs. The Company believes, based on
current circumstances, that its existing and future cash flows from operations,
together with borrowings under the Revolving Credit Facility, will be sufficient
to fund its working capital needs, capital expenditures, potential acquisitions
and to make interest and principal payments as they become due under the terms
of the Bank Credit Facilities. The Company's Direct to Consumer business
segment, FTD.COM, may have long-term liquidity needs that may require it to
raise additional capital. If FTD.COM needed to raise additional capital and was
not able to do so, FTD.COM would have to alter its operating plan significantly,
which could have a material effect on the results of operations and financial
condition of FTD.COM and the Company.
15
<PAGE> 16
DEFERRED TAX ASSET
As of December 31, 1999 and June 30, 1999, the current and long-term
deferred tax assets were $3.0 million and $6.5 million and $3.0 million and $1.4
million, respectively. The long-term deferred tax asset for both periods
includes a $1.5 million valuation allowance. The Company's net operating loss
carryforwards at June 30, 1999 are approximately $17.2 million, the tax benefits
of which are included as noncurrent tax assets and will expire if unused as
follows: $2.4 million in 2007, $2.3 million in 2008, $0.8 million in 2009, $5.2
million in 2010 and $6.6 million in 2011. In addition, the tax benefit of $4.7
million as a result of a pre-tax loss of $16.5 million for the six-month period
ended December 31, 1999, is also included in the long-term deferred tax asset.
The Company expects to incur significant losses in the foreseeable future.
However, management believes that based on their evaluation of taxable income in
future years coupled with tax planning strategies that a $1.5 million valuation
allowance is appropriate as of December 31, 1999.
YEAR 2000 COMPLIANCE
The Company did not experience any significant malfunctions or errors
in its operating or business systems when the date changed from 1999 to 2000.
Based on its operations since January 1, 2000, the Company does not expect any
significant impact to its on-going business operations as a result of the "Year
2000 issue" and is currently not aware of any significant Year 2000 or similar
problems relating to the Company's customers, suppliers and vendors. However, it
is possible that the full impact of the date change, which was of concern due to
computer programs that use two digits instead of four digits to define years,
has not been fully recognized. For example, it is possible that Year 2000 or
similar issues, such as leap-year related problems, may occur with clearing
house, billing, payables, payroll or other financial closings at month, quarter
or year end. The Company believes that any such problems are likely to be minor
and correctable. In addition, the Company could still be negatively impacted if
its customers or suppliers are adversely affected by the Year 2000 or similar
issues. The Company currently is not aware of any significant Year 2000 or
similar problems that have arisen for its customers or suppliers.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk, which primarily relates to
interest rate risk. The Company's policy is to enter into certain derivative
instruments in an effort to hedge its underlying economic exposure and to manage
these instruments with the objective to reduce its exposure to changes in
interest rates. The Company currently does not use derivative instruments for
trading purposes.
The Company's exposure to interest rate risk is primarily a result of
borrowings under the Bank Credit Facilities, which are subject to interest rates
ranging from 7.56% to 8.00% as of December 31, 1999. On December 15, 1998, the
Company entered into an interest rate swap agreement at a fixed rate of 5.74%
plus a variable spread until December 31, 2000 in order to limit its exposure to
interest rate fluctuations. At December 31, 1999, the notional amount of the
interest rate swap agreement was $22.5 million and the variable spread was
1.50%. The Company believes the terms of the interest rate swap agreement are
sufficient precautions to limit the Company's exposure to changing interest
rates.
At December 31, 1999, $57.3 million of debt was outstanding under the
Bank Credit Facilities. Because the interest rate for the portion of the debt
that is covered by the interest rate swap agreement is effectively fixed,
changes in interest rates would have no impact on actual future interest expense
for that portion of the debt. Therefore, there is no earnings or liquidity risk
associated with either the interest rate swap agreement or that portion of the
debt to which the swap agreement relates. The fair market value of the interest
rate swap at December 31, 1999 was a loss of approximately $50 thousand and was
calculated based on future quarterly interest payments using the interest rate
effective at December 31, 1999. At December 31, 1999, a 100 basis point decrease
in interest rates would result in an approximate loss and payment to the
counterparty of $264 thousand on the interest rate swap agreement.
A portion of the Company's outstanding variable rate debt, which
totaled $34.8 million as of December 31, 1999, is not covered by an interest
rate swap agreement. An adverse change in interest rates during the time that
this portion of the debt is outstanding would cause an increase in the amount of
interest paid. The Company may
16
<PAGE> 17
pay down the loan prior to expiration in December 2003. However, if this portion
of the Company's borrowings were to remain outstanding for the remaining term of
the agreement, a 100 basis point increase in LIBOR would result in an increase
of $348 thousand to the amount of annualized interest paid on this portion of
the debt and annualized interest expense recognized in the consolidated
financial statements.
The Company will continue to monitor changing economic conditions and
based on current circumstances, does not expect to incur a substantial loss in
future earnings or cash flows as a result of changing interest rates.
The Company is also exposed to foreign currency exchange rate risk with
respect to the Canadian dollar. The resulting Canadian exchange adjustments are
included in the accumulated other comprehensive income component on the
condensed consolidated statements of operations and did not have a material
effect on other comprehensive income for the three and six month periods ended
December 31, 1999 and 1998, respectively. The Company does not expect to be
materially affected by foreign currency exchange rate fluctuations in the future
based on historical foreign currency exchange rate fluctuations. The Company
therefore does not currently enter into derivative financial instruments as
hedges against foreign currency fluctuations of the Canadian dollar.
17
<PAGE> 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various lawsuits and matters arising in the
normal course of business. In the opinion of the Company's management, although
the outcomes of these claims and suits are uncertain, they should not have a
material adverse effect on the Company's business, financial condition or
results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on November 17, 1999.
(b) Not Applicable.
(c) At the Annual Meeting of Stockholders, the stockholders voted on
the following matters: (1) the election of six directors to serve
until the next meeting or until their successors are duly elected
and qualified and (2) the proposal to amend the Company's Restated
Certificate of Incorporation to change the name of the Company to
IOS BRANDS CORPORATION.
(1) Each nominee for director was elected by an affirmative vote
of the plurality of shares of Class A common stock entitled to
vote at the meeting. Abstentions and other shares not voted
were not counted as this would not have effected the result of
the vote. The elected directors are as follows:
Richard C. Perry
Veronica K. Ho
Gary K. Silberberg
Geoffrey Rehnert*
Habib Y. Gorgi
Robert L. Norton
* Mr. Rehnert resigned as of December 1, 1999 and Mr. Steve
Pagliuca has been appointed to fulfill his term effective as
of January 13, 2000.
(2) The proposal to amend the Company's Restated Certificate of
Incorporation to change the name of the Company to IOS BRANDS
CORPORATION was approved by the affirmative vote of the
holders of a majority of the shares of Class A common stock
entitled to vote at the meeting. Abstentions and other shares
not voted were not counted as this would not have effected the
result of the vote.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
3 Certificate of Amendment to the Certificate of Incorporation
of the Registrant
21 Subsidiaries of the Registrant
27 Financial Data Schedule
(b) Reports on Form 8-K
On November 24, 1999, the Company filed on Form 8-K under Item 5. Other
Events, reporting that effective November 18, 1999, the official name of the
Company was changed from FTD Corporation to IOS BRANDS CORPORATION.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the 11th day of February, 2000.
IOS BRANDS CORPORATION
By: /S/ Francis C. Piccirillo
------------------------------
Francis C. Piccirillo
Treasurer
(Principal financial officer
and officer duly authorized to
sign on behalf of registrant)
<PAGE> 20
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
3 Certificate of Amendment to the Certificate of
Incorporation of the Registrant
21 Subsidiaries of the Registrant
27 Financial Data Schedule
20
<PAGE> 1
Exhibit 3
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
FTD CORPORATION
(Adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware)
FTD Corporation, a Delaware corporation (the "Corporation"),
DOES HEREBY CERTIFY as follows:
1. That the Board of Directors of the Corporation, at a
meeting duly held on October 7, 1999, adopted a resolution proposing and
declaring advisable an amendment to Article FIRST (the "Amendment") of the
Corporation's Restated Certificate of Incorporation so that as amended it would
read in its entirety as follows:
FIRST: The name of the corporation is IOS BRANDS
CORPORATION (hereinafter the "Corporation").
2. That upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware, at the annual meeting of
stockholders held on November 17, 1999 (the "Meeting"), the holders of not less
than a majority of the shares of the Corporation entitled to vote at the Meeting
voted in favor of the Amendment.
3. That no shares of the Corporation were entitled to vote as
a class at the Meeting.
4. That the Amendment was duly adopted in accordance with the
applicable provisions of Section 242 of the General Corporation Law of the State
of Delaware.
5. That this Amendment shall become effective at 9:00 a.m.,
Eastern Standard Time, on November 18, 1999.
<PAGE> 2
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Amendment of the Restated Certificate of Incorporation to be
signed by the Corporation's President and attested by the Corporation's
Secretary this 18th day of November, 1999.
FTD CORPORATION
/s/ Robert L. Norton
--------------------
Robert L. Norton
President
ATTEST:
/s/ Francis C. Piccirillo
- -------------------------
Francis C. Piccirillo
Secretary
2
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Percentage Ownership
DIRECT SUBSIDIARIES
Value Network Service, Inc. a Delaware corporation 100%
Florists' Transworld Delivery, Inc., a Michigan corporation 100%
SUBSIDIARIES OF FLORISTS' TRANSWORLD DELIVERY, INC.
FTD Holdings, Incorporated, a Delaware corporation 100%
FTD of Canada Inc., a Canada corporation 100%
FTD.COM INC., a Delaware corporation 87%
SUBSIDIARIES OF FTD HOLDINGS, INCORPORATED
Renaissance Greeting Cards, Inc., a Maine corporation 100%
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) IOS
BRANDS CORPORATION THREE MONTHS ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 41,372
<SECURITIES> 0
<RECEIVABLES> 26,513
<ALLOWANCES> 1,873
<INVENTORY> 14,340
<CURRENT-ASSETS> 88,085
<PP&E> 51,069
<DEPRECIATION> 35,227
<TOTAL-ASSETS> 193,254
<CURRENT-LIABILITIES> 73,792
<BONDS> 57,250
0
0
<COMMON> 125
<OTHER-SE> 13,261
<TOTAL-LIABILITY-AND-EQUITY> 193,254
<SALES> 14,162
<TOTAL-REVENUES> 67,618
<CGS> 10,507
<TOTAL-COSTS> 33,791
<OTHER-EXPENSES> 44,182
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,474
<INCOME-PRETAX> (11,140)
<INCOME-TAX> (3,346)
<INCOME-CONTINUING> (6,791)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,791)
<EPS-BASIC> (0.44)
<EPS-DILUTED> (0.44)
</TABLE>
