2008 Annual Report
Pick the best. We always do.
Special Bonus
2009 Desk Diary & Gift Planner
ABOUT 1-800-FLOWERS.COM, Inc.
1-800-FLOWERS.COM, Inc. is the world’s leading florist and gift shop. For more than 30 years, 1-800-FLOWERS.COM, Inc.
has been providing customers with fresh flowers and the finest selection of plants, gift baskets, gourmet foods, con-
fections, balloons and plush stuffed animals perfect for every occasion. One of the top 50 online retailers by Internet
Retailer, as well as 2008 Laureate Honoree by the Computerworld Honors Program and the recipient of ICMI’s 2006
Global Call Center of the Year Award, 1-800-FLOWERS.COM® (1-800-356-9377 or www.1800flowers.com) offers the
best of both worlds: exquisite arrangements created by some of the nation’s top floral artists and hand-delivered
the same day, and spectacular flowers shipped overnight “Fresh From Our Growers.®” As always, 100% satisfaction
and freshness are guaranteed. The Company’s BloomNet® (www.mybloomnet.net) international floral wire service
provides a broad range of quality products and value-added services designed to help professional florists grow their
businesses profitably. The 1-800-FLOWERS.COM, Inc. “Gift Shop” also includes gourmet gifts such as popcorn and
specialty treats from The Popcorn Factory® (1-800-541-2676 or www.thepopcornfactory.com); exceptional cookies
and baked gifts from Cheryl&Co.® (1-800-443-8124 or www.cherylandco.com); premium chocolates and confec-
tions from Fannie May Confections Brands (www.fanniemay.com and www.harrylondon.com); gourmet foods
from Greatfood.com® (www.greatfood.com); wine gifts from Ambrosia® (www.ambrosia.com); gift baskets from
1-800-BASKETS.COM® (www.1800baskets.com) and DesignPac Giftssm (www.designpac.com) as well as Home Decor
and Children’s Gifts from Plow & Hearth® (1-800-627-1712 or www.plowandhearth.com), Wind & Weather®
(www.windandweather.com), HearthSong® (www.hearthsong.com) and Magic Cabin® (www.magiccabin.com).
1-800-FLOWERS.COM, Inc. stock is traded on the NASDAQ Global Select Market under ticker symbol FLWS.
BEST-IN-CLASS BUSINESS PARTNERS
Our tag line, “Pick the best, We always do” refers to the great products and services that we choose every day to help
our customers connect and express themselves to the important people in their lives. It also applies to the best-in-
class partners that we work with every day to help us enhance our performance in everything we do...from customer
knowledge software, to creating a superior online shopping experience, to optimizing our internal financial report-
ing and database management capabilities. Among the “best of the best” of these business partners are:
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
A number of statements contained in this report, other than statements of historical fact, are forward-looking with-
in the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertain-
ties that could cause actual results to differ materially from those expressed or implied in the applicable statements.
These risks and uncertainties include, but are not limited to: the Company’s ability to achieve cost efficient growth;
its ability to maintain and enhance its online shopping web sites to attract customers; its ability to successfully
introduce new products and product categories; its ability to maintain and enhance profit margins for its various
products; its ability to provide timely fulfillment of customer orders; its ability to cost effectively acquire and retain
customers; its ability to continue growing revenues; its ability to compete against existing and new competitors; its
ability to manage expenses associated with necessary general and administrative and technology investments;
its ability to cost effectively manage inventories; its ability to improve its bottom line results; its ability to leverage
its operating infrastructure; its ability to achieve its stated results guidance for fiscal 2009 and general consumer
sentiment and economic conditions that may affect levels of discretionary customer purchases of the Company’s
products. For a more detailed description of these and other risk factors, please refer to the Company’s SEC filings
including the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The Company ex-
pressly disclaims any intent or obligation to update any of the forward looking statements made in this report or in
any of its SEC filings except as may be otherwise stated by the Company.
Years Ended
FINANCIAL HIGHLIGHTS
Total Net Revenues
Gross Profit Margin
Operating Expense Ratio
EBITDA(1)
EPS (GAAP)
JuNE 29,
2008
JulY 1,
2007
JulY 2,
2006
JulY 3,
2005
JuNE 27,
2004
(in millions, except percentages and per share data)
$919.4
42.8%
36.5%
$ 61.6
$ 0.32
$781.7 $670.7 $604.0
$912.6
41.1% 41.9%
41.7%
43.0%
37.2% 35.8%
38.8%
37.2%
$ 26.4 $ 36.4
$ 57.4 $ 26.7
$ 0.12 $ 0.60(2)
$ 0.26 $ 0.05
(1) Earnings Before Interest, Taxes, Depreciation and Amortization, excludes accounting for effect of stock-based compensation. A reconciliation of EBITDA
to net income, including accounting for the effect of stock-based compensation, is included as part of the enclosed Financial Section.
(2) For the year ended June 27, 2004, EPS included a net income tax benefit of $19.2 million, or $0.28 per share and was prior to the adoption of FASB 123R.
FISCAL 2008 ACHIEVEMENTS
• Grew EPS 23 percent to $0.32 per diluted share
• Grew EBITDA(1) 9.3 percent to $61.6 million
• Reduced Operating Expense Ratio 70 basis points to 36.5%
• Grew Free Cash Flow(3) 166 percent to $38 million
• Acquired DesignPac Gifts LLC for $38 million, increasing
Company’s Gourmet Food and Gift Baskets total annual
revenue run rate to more than $250 million
TOTAL REVENUES
Total Net Revenues
(in millions)
EBITDA(1)
$919.4
$912.6
$57.4
$61.6
$781.7
$26.7
FY06
FY07
FY08
$604.0
$670.7
$36.4
FY04
$26.4
FY05
FINANCIAL REPORT INSERT
See inside rear cover pocket
$32
FY04
CATEGORY RESULTS
FREE CASH FLOW(3)
(in millions)
($3)
FY05
($6)
FY06
$14
FY07
$38
FY08
Consumer
Floral
Gourmet Food
& Gift Baskets
Home and
Children’s Gifts
BloomNet
Wire Service
$491.7
$196.3
FY08
$53.5
$180.2
$24.6
$62.9
$3.4 $18.5
$491.4
$192.7
FY07
$44.4
$186.9
$26.4
$64.6
($1.2) $14.2
Net Revenue(4)
(in millions)
Category Contribution(5)
(in millions)
Net Revenue(4)
(in millions)
Category Contribution(5)
(in millions)
(3) The Company calculates Free Cash Flow as net cash provided by operating activities less capital expenditures.
(4) Excludes intercompany eliminations.
(5) The Company defines Category Contribution as earnings before interest, taxes, depreciation and amortization and before allocation of corporate overhead
expenses, including accounting for the effect of stock-based compensation.
TO OUR SHAREHOLDERS
Our mission is to help our customers
connect and express themselves to the
important people in their lives. A key ele-
ment in achieving this goal is “knowing our
customer” – understanding their needs,
their personalities and their interests – and
tailoring our marketing messages and mer-
chandising programs accordingly. This focus,
combined with the strength of our brand,
enabled us to attract more than 3.4 million
new customers in fiscal 2008, with the vast
majority coming to us online. For the year,
some seven million e-commerce customers
placed orders across all of our gift brands,
with approximately 50 percent of them
repeat customers. This illustrates our ability
to deepen our relationship with our
existing customers and become their
trusted source for all of their gifting and
connective occasions.
Driving Strong Bottom-Line reSuLtS
During fiscal 2008 we increased our
net income and earnings per share by 23
percent to $21 million, or $0.32 per share;
grew EBITDA approximately 10 percent to
$62 million and we generated approximately
$38 million in free cash flow. These strong
bottom-line results were achieved despite
the challenging economic environment that
impacted consumer demand and restricted
top-line growth throughout the year. We
accomplished this by focusing on the key
strategic priorities that we have outlined in
the past, including:
• Leveraging the strength of our brand to
deepen our relationship with our millions
of customers as their preferred florist and
gift shop;
• Seeking profitable revenue growth by
targeting our marketing and merchandis-
ing investments in these areas on our key
business categories; and
• Enhancing our operating expense ratio by
leveraging our business platform.
Leveraging our BuSineSS PLatform
As we continue to grow our business, we
are able to leverage our platform to obtain
lower rates for services such as telecom-
munications, insurance and printing. These
efforts, combined with our strategy to deploy
our marketing investments to areas that
provide the best returns, such as email and
online search, have enabled us to lower the
operating cost platform of our business. As
a result, during fiscal 2008, we reduced our
operating expense ratio by 70 basis points
to 36.5 percent. This was in addition to the
160 basis point improvement we achieved in
fiscal 2007.
This positive trend illustrates the
effectiveness of the broad range of initiatives
we have underway to improve our operating
efficiency and reduce costs. During fiscal
2008, these initiatives included the expansion
of our Home Agent Network (HAN) program
through which we are supplementing our
service platform with home agents. This
effort not only reduces the need for fixed
facilities, but also enhances agent retention
by eliminating their commuting costs and
allowing for more flexible work schedules.
fLoraL Category LeaDerShiP
In our core consumer floral business, we
continued to build our market leadership
position through innovative marketing and
merchandising programs. One such initia-
tive, our Fresh Rewards Loyalty Program,
the industry’s first and only loyalty program,
ranks among our most successful to date.
During fiscal 2008, we expanded this pro-
gram adding new features and functionality.
As a result, the program continued to attract
millions of existing and new customers who
tend to purchase more frequently and at a
higher average order value.
Importantly, the Fresh Rewards Loyalty
Program enables us to deepen our relation-
ship with our customers and introduce them
to the broad range of products in our florist
and gift shop – from exclusive, signature
floral arrangements, such as the highly suc-
cessful Happy Hour Collection™ (including
the hot Happy Hour Minis™ introduced in
fiscal 2008), to the new “Everything Cupcake”
line, launched in fiscal 2009, featuring the
whimsical Cupcakes in Bloom™ fresh floral
arrangement, as well as butter-cream frosted
edible cupcakes, perfect for any celebration.
Another key program is our exclusive
partnership with Martha Stewart Living
Omnimedia, which we introduced at the end
of fiscal 2008. This innovative relationship
allows us to leverage the best of both brands
– lifestyle icon Martha Stewart’s unparalleled
design talent with 1-800-FLOWERS.COM’s
market leadership position. Martha gives us
differentiation and a competitive advantage
which, we believe, will enable us to grow rev-
enues, even in the current economy. We are
very excited about our plans to expand this
program throughout fiscal 2009, beginning
with a stepped up media program utiliz-
ing both our own marketing programs as
well as the powerful Martha Stewart media
properties.
BLoomnet a growth “CataLySt”
The BloomNet Wire Service business
continues to be a “catalyst” for both top and
bottom line growth. Throughout fiscal 2008,
BloomNet continued to grow its market
share by establishing itself as the industry’s
leading innovator. The introduction of
our Digital Directory – the industry’s first
and only online florist resource – has been
very successful, with thousands of florists
adopting the new technology as they join
the digital age. In addition, many of these
florists are also opting into BloomNet’s
industry-leading “green” effort by joining the
“Florists for Forests” program. This program
allows florists to help the environment by
eliminating the need for a paper-based
directory and, in return, have BloomNet
plant trees on their behalf. BloomNet also
achieved increased market penetration for
its suite of technology services, including
web-site hosting and retail store manage-
ment systems. More and more florists are
choosing BloomNet – and its superior value
proposition – as their preferred wire service.
On the product front, we accelerated
BloomNet’s growth outlook through a
small asset acquisition in July. These assets
complement BloomNet’s existing prod-
uct offering and enable us to expand and
deepen our relationships with our florists by
helping them not just survive, but to thrive
– even in a challenging economic environ-
ment. The combination of these assets, and
the resulting sales synergies should increase
BloomNet’s revenue growth rate during
fiscal 2009 to more than double the 20
percent level achieved in fiscal 2008. Based
on the wholesale nature of the product
offering, gross margin and contribution
margin percent will be reduced. However, we
expect gross margin dollars and contribution
margin dollars will increase throughout fiscal
2009 as a result of the anticipated strong
revenue growth.
BeComing a LeaDing PLayer in
gourmet fooD anD gift BaSketS
Through a combination of strategic ac-
quisitions and organic initiatives, our Gour-
met Foods and Gift Baskets category has
become a key growth area for us. Through
brands that resonate with our customers,
such as Fannie May Confections, Cheryl&Co.
bakery gifts, and The Popcorn Factory, we
are fast becoming a leading player in this
highly fragmented $16 billion dollar gift
category. During fiscal 2008 we expanded
our offerings with new product launches
and increased customization capabilities at
Fannie May, Cheryl&Co. and The Popcorn
Factory. While overall revenue growth in the
category was impacted by slower wholesale
business, the new ecommerce capabilities
that we have created for these brands con-
tinued to grow steadily.
During the fourth quarter of fiscal 2008,
we announced the acquisition of DesignPac
Gifts, a leading designer and assembler of
gourmet gift baskets, gourmet food gift tow-
ers and gift sets. DesignPac brings proven
capabilities and experience in the design,
sourcing, production and distribution of
gift baskets and gift sets, as well as strong
relationships with many of the leading
retailers throughout the country. We look
forward to leveraging these capabilities
and relationships to significantly boost our
nascent 1-800Baskets.com brand as well as
enhance the growth and profitability of all
our gourmet gift brands during fiscal 2009
and in the years ahead.
Bottom-Line imProvementS
in home anD ChiLDren’S giftS
As our guidance at the beginning of
the year indicated, throughout fiscal 2008
we focused our efforts in this category
on managing the business for improved
bottom-line performance. During the year,
we discontinued two underperforming titles;
we further strengthened the management
team, particularly in the areas of sourcing
and logistics; we revised catalog circulation
and marketing programs; and we stepped
up new product development and sourcing
efforts with a focus on unique, proprietary
gifts. As a result, category contribution im-
proved almost $5 million to a profit of $3.4
million, compared with a loss of more than
$1 million in fiscal 2007. While the home
décor category has been hit particularly
hard by the macro economy during the past
several years, we believe the changes that we
have made in this business will enable us to
continue to improve the performance of this
segment in fiscal 2009 and beyond.
CorPorate SoCiaL reSPonSiBiLity
Our company has long been involved in a
broad range of corporate social responsibility
initiatives including continuous expansion
and enhancement of environmentally-friendly
“green” programs, philanthropic and
charitable efforts and special private-
sector skills training programs for military
veterans. Throughout fiscal 2008 we built
upon these efforts, launching new programs
such as our electronics recycling drive in
our 1-800-FlOWERS.COM consumer floral
business and the WineTasting Network’s
successful initiative to convert its packaging
from Styrofoam to “earth friendly” corru-
gated/pulp materials. Our most ambitious
efforts involve planting trees – ultimately
millions of them in fact, all over the country
through BloomNet’s Florists for Forests
program and Plow & Hearth’s Campaign to
Reforest America, among others. All of these
programs are designed to involve both our
associates and our customers in ways that
help deepen our relationships and grow our
business using environmentally sustainable
and socially responsible business practices.
PoSitioneD weLL in a ChaLLenging
environment
In the first half of fiscal 2008, when we
saw the consumer begin to pull back, we
responded quickly in our planning and
execution. We adjusted spending appropri-
ately and thereby delivered strong bottom-
line growth, despite the challenged top-line.
As we look ahead into fiscal 2009, we believe
our proven ability to leverage our business
platform to reduce operating expense ratio,
positions us well to achieve continued
double-digit growth in our EBITDA, EPS
and Free Cash Flow even in an uncertain
economic environment.
In terms of revenue growth for fiscal
2009, we believe that the guidance we have
provided is prudent in the face of increas-
ingly cautious consumer spending. We
expect to grow our revenues through a
combination of contributions from our
recent acquisitions as well as organic initia-
tives, including:
• The full-year benefit from the exclusive
relationship with Martha Stewart Living
Omnimedia for both 1-800-FLOWERS.COM
and BloomNet;
• BloomNet’s expanded products and
services offerings designed to deepen our
relationship with florists and increase
market share gains;
• Continued strong ecommerce-channel
growth, new web sites and product
launches and expanded customization
capabilities in our Gourmet Food and Gift
Baskets businesses;
• And expansion of our Enterprise Customer
Value (ECV) efforts, including cross-mar-
keting and merchandising efforts across all
of our brands.
We expect to further improve our
operating expense ratio by approximately
50-to-100 basis points while concurrently
increasing gross profit margin in most of our
businesses through a combination of sourc-
ing, product mix and pricing initiatives. On
a consolidated basis, we have planned for a
slightly lower gross profit margin percentage
in fiscal 2009, reflecting the wholesale gross
profit margin percentage associated with
our recent acquisitions. However, it is im-
portant to note that these businesses have
relatively lower operating expenses and, as a
result, we expect them to be nicely accretive
to our EBITDA and EPS for the year.
Furthermore, we believe that in chal-
lenging times strong companies like ours
often have the opportunity to grow their
business strategically and emerge with
a larger and stronger business platform.
Toward this end, we have a strong balance
sheet and excellent liquidity that we further
strengthened through an expansion of
our bank credit facility completed at the
beginning of the current fiscal year. Our new
credit facility expands our borrowing capac-
ity by $150 million to $293 million.
Our strong balance sheet, combined
with our growing free cash flow generation,
positions us well to continue to make the
investments in our business that drive both
near-term and long-term growth.
• Our $20 million in Capital Expenditures
enables us to upgrade and expand our
technology platform to enhance our cus-
tomers’ experience;
• Our liquidity enables us to make smart,
accretive acquisitions, as we have in the
past, that enhance our revenue growth
opportunities as well as our profitability;
• Our product development efforts
continue to expand our offerings for our
customers and thereby deepen those
relationships; and
• Our targeted marketing programs enable
us to cost efficiently attract millions of
new customers while deepening our rela-
tionships with our existing customer base.
We believe these efforts will enable us
to continue to grow our business profit-
ably and build long-term shareholder value.
We thank all of our stakeholders for their
continued support.
Sincerely,
Jim McCann
Chairman and CEO President
Chris McCann
January/09
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Customer Service Platform.
During fiscal 2008,
1-800-FLOWERS.COM continued
to evolve its customer service
initiatives, increasingly shifting
toward a network of home-based
agents. This strategy enables the
recruitment and retention of
the best people – highly skilled
professionals who are eager to
join the Company and gain the
flexibility of working at home.
Utilizing sophisticated call rout-
ing technologies to assist custom-
ers, home agents are integral in
boosting customer satisfaction
and repeat business. Further-
more, 1-800-FLOWERS.COM is
able to cost effectively scale up
the number of agents for peak
holidays.
S u N D A Y
M O N D A Y
T uE S D A Y
4
11
18
25
5
12
6
13
19
Martin Luther King Jr.’s Birthday
(observed)
20
26
27
W E D N E S D A Y
T HuR S D A Y
F R I D A Y
S A TuR D A Y
1
New Year’s Day
8
15
22
29
2
9
16
23
30
7
14
21
28
3
10
17
24
31
February/09
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Products.
In addition to picking the best
products to help their customers
connect and express themselves
to the important people in their
lives, 1-800-FLOWERS.COM has
also picked the best products and
services to provide to its retail
florist customers – members of the
BloomNet wire service network.
Through a combination of internal
development and a small acquisi-
tion, BloomNet has expanded its
line of distinctive ceramic and
glass vases – and simultaneously
created new sales opportunities
for BloomNet Florists. The
BloomNet product line also in-
cludes a broad range of plush ani-
mals and gourmet food gift items.
BloomNet Florists can even benefit
from 1-800-FLOWERS.COM’s buy-
ing scale through access to unique
floral varieties.
1
8
15
22
S u N D A Y
M O N D A Y
T uE S D A Y
2
Groundhog Day
3
9
10
16
Presidents’ Day
17
23
24
W E D N E S D A Y
T HuR S D A Y
F R I D A Y
S A TuR D A Y
4
11
18
25
5
12
19
26
6
13
20
27
7
14
Valentine’s Day
21
28
March/09
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Design Partners.
In fiscal 2008, the Company
entered into a partnership with
Martha Stewart, creating the
exclusive “Martha Stewart for
1-800-Flowers.com Boutique.”
Included in the new product
line is a collection of some of the
most innovative gift items on
everyone’s list, such as stunning
floral arrangements in exclu-
sive containers and delectable
Martha Stewart gourmet gift
baskets. The addition of this
exciting new product line to the
1-800-FLOWERS.COM family of
brands deepens the Company’s
commitment to customers by
offering gifts personally inspired
by Martha and designed to make
every occasion special.
1
8
15
22
29
S u N D A Y
M O N D A Y
T uE S D A Y
2
9
16
23
30
3
10
17
St. Patrick’s Day
24
31
W E D N E S D A Y
T HuR S D A Y
F R I D A Y
S A TuR D A Y
4
11
18
25
5
12
19
26
6
13
7
14
20
First Day of Spring
21
27
28
April/09
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BloomNet Technologies.
As a leading wire service provider,
BloomNet offers its florist mem-
bers a wide array of best-in-class
advanced technology solutions
designed to grow their profits.
Among the many technologies
that were expanded upon in
fiscal 2008 is BloomNet’s Direc-
tory Online, the floral industry’s
first and only digital directory –
giving florists the ease of clicking
a mouse to search and select
the best qualified florists to fulfill
orders anywhere in the country.
BloomNet also provides florists
with many other profit-building
technologies including website
hosting, email marketing, point of
sale systems, and electronic map-
ping tools to enhance deliveries.
S u N D A Y
M O N D A Y
T uE S D A Y
5
12
Easter
19
26
6
13
7
14
20
Administrative Professionals’
Week Begins
21
27
28
W E D N E S D A Y
T HuR S D A Y
F R I D A Y
S A TuR D A Y
3
10
17
24
4
11
18
25
1
April Fool’s Day
2
8
Passover Begins at Sunset
9
15
16
22
Administrative Professionals’ Day
23
29
30
May/09
May/09
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Product Sourcing.
1-800-FLOWERS.COM sources
the best products from around
the world. Key to this effort, and
instrumental in designing gift
ideas that help the Company’s
customers connect with the
important people in their lives, are
the ingredients that go into those
products. In the case of floral gifts,
whether florist-fulfilled or direct
ship, 1-800-FLOWERS.COM works
closely with the finest farms in
South and Central America, South
Africa, Holland and the U.S. And
when it comes to gourmet food,
top quality ingredients include
rich cocoa from Africa and
delicious Georgia pecans, and so
much more.
S u N D A Y
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T uE S D A Y
3
4
5
Cinco de Mayo
12
19
10
Mother’s Day
11
18
17
24
25
Memorial Day (observed)
26
31
W E D N E S D A Y
T HuR S D A Y
F R I D A Y
National Bring Your Mom to
Work Day
1
6
13
20
27
7
14
21
28
8
15
22
29
S A TuR D A Y
2
9
16
23
30
June/09
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Corporate Social
Responsibility Programs.
Expansion of environmentally-
friendly “green” initiatives,
along with enhancement of
philanthropic and charitable
efforts, is a top priority at
1-800-FLOWERS.COM. In fiscal
2008, the Company continued
its dedication to implement-
ing the best corporate social
responsibility programs. Among
these is a partnership between
Plow & Hearth® and the National
Forest Foundation to help restore
natural habitats lost to forest
fires and the effects of modern
civilization. Through the
“Campaign to Reforest America,”
Plow & Hearth is donating one
tree for every customer order
with a goal of 1 million trees.
S u N D A Y
M O N D A Y
T uE S D A Y
1
8
7
14
Flag Day
15
21
Father’s Day
First Day of Summer
22
28
29
2
9
16
23
30
W E D N E S D A Y
T HuR S D A Y
F R I D A Y
S A TuR D A Y
3
10
17
24
4
11
18
25
5
12
19
26
6
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S u N D A Y
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July/09
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Technology Partners.
1-800-FLOWERS.COM is collabo-
rating with IBM to implement
a new e-commerce platform
called “Fresh Digital.” The robust
and highly scalable platform is
built upon IBM’s industry-best
Websphere Commerce technol-
ogy. Slated for launch in fiscal
2009, Fresh Digital will enable
all gift brands to efficiently share
customer data, shopping cart
information and other aspects
of e-commerce from a com-
mon platform. By taking full
advantage of the R&D resources
of IBM and other top technology
partners, 1-800-FLOWERS.COM is
able to optimize the investments
it makes in technology both im-
mediately and in the future.
5
12
19
6
13
20
26
Parents’ Day
27
7
14
Bastille Day
21
28
W E D N E S D A Y
T HuR S D A Y
F R I D A Y
S A TuR D A Y
1
8
15
22
29
2
9
16
23
30
3
10
17
24
31
4
Independence Day
11
18
25
August/09
B EST
E
K T H
C
I
P
WE A l
O
D
S
W AY
New Product Ideas.
Innovative design is a benchmark
of the 1-800-FLOWERS.COM
gift offering. Exemplifying this
are enticing food items from
Cheryl&Co.® and clever education-
al gifts from HearthSong®.
In early fiscal 2009, the Company
introduced Everything CupcakeTM,
a new and unique collection of
floral and edible cupcakes created
as a perfect way for customers to
connect with that special some-
one. Included in the new line is
Cupcake in BloomTM, a whimsical
floral cupcake made of carnations
set in a ceramic wrapper, topped
with a candle and highlighted by
a “Celebrate!” flag.
S u N D A Y
M O N D A Y
T uE S D A Y
2
9
16
23
3
4
10
National Friendship Week Begins
11
17
24
18
25
30
31
W E D N E S D A Y
T HuR S D A Y
F R I D A Y
S A TuR D A Y
5
12
19
26
6
13
20
27
7
14
21
28
1
8
15
22
29
September/09
B EST
E
K T H
C
I
P
WE A l
O
D
S
W AY
BloomNet Florists.
The BloomNet wire service wid-
ened its reach during fiscal 2008,
continuing to attract the best
professional florists from all over
the United States and beyond.
Among these florists are several
of the largest in North America –
such as Ashland Addison of
Chicago, Illinois, Mancuso’s Florist
of Saint Clair Shores, Michigan
and Field of Flowers of Davie,
Florida. Helping to spearhead the
growth of BloomNet are industry-
leading quality and service
standards. Also a vital part of
BloomNet’s value proposition for
retail florists is the development
of a “BloomNet Community” that
provides floral design expertise,
training and many other benefits.
S u N D A Y
M O N D A Y
T uE S D A Y
1
8
6
7
Labor Day
13
Grandparents’ Day
14
15
20
21
22
First Day of Fall
27
Yom Kippur Begins at Sunset
28
29
W E D N E S D A Y
T HuR S D A Y
F R I D A Y
S A TuR D A Y
3
10
17
24
4
5
11
Patriot Day
12
18
Rosh Hashanah Begins at Sunset
19
25
26
2
9
16
23
30
October/09
B EST
E
K T H
C
I
P
WE A l
O
D
S
W AY
Merchandising Programs.
1-800-FLOWERS.COM offers an
extensive variety of unique gift
ideas and signature products
that make it easy for customers
to express themselves in creative
ways. In fiscal 2008, the Company
broadened its personalization
efforts – including easy photo
uploads, customized ribbons and
special packaging options – to
help customers convey their senti-
ments more thoughtfully. New
and expanding personalization
possibilities are available from
The Popcorn Factory®, Cheryl&Co.®,
Fannie May® and other brands,
enabling customers to tailor the
look of their gifts and the mes-
sages accompanying them.
S u N D A Y
M O N D A Y
T uE S D A Y
4
5
6
11
National Children’s Day
12
Columbus Day (observed)
13
18
25
19
26
20
27
W E D N E S D A Y
T HuR S D A Y
F R I D A Y
S A TuR D A Y
1
8
15
22
29
7
14
21
28
2
9
3
10
16
National Bosses’ Day
17
Sweetest Day
23
30
24
31
Halloween
November/09
B EST
E
K T H
C
I
P
WE A l
O
D
S
W AY
Product Design.
The process of creating thought-
ful gifts for all occasions is a
driving force behind the success
of 1-800-FLOWERS.COM. During
fiscal 2008, the Company further
enhanced its gourmet food and
gift basket design capabilities
for all its brands with the acquisi-
tion of DesignPac Gifts, a leading
designer and assembler of
gourmet gift baskets, gourmet
food gift towers and gift sets.
Also a highly important part of
1-800-FLOWERS.COM’s product
design initiatives are the talents
of expert floral designers such as
Preston Bailey, Jane Carroll, Julie
Mulligan and Jane Packer who
create one-of-a-kind handcrafted
arrangements.
1
8
15
22
29
S u N D A Y
M O N D A Y
T uE S D A Y
3
Election Day
10
17
24
2
9
16
23
30
W E D N E S D A Y
T HuR S D A Y
F R I D A Y
S A TuR D A Y
4
5
11
Veteran’s Day
12
19
18
25
6
13
20
7
14
21
28
26
Thanksgiving Day
27
December/09
B EST
E
K T H
C
I
P
WE A l
O
D
S
W AY
Customer Engagement
Programs.
Keeping loyal customers happy
and stimulating repeat
purchases are two reasons why
1-800-FLOWERS.COM has grown
its business year after year. The
Company’s “Fresh Rewards®”
loyalty program, which includes
more than a million custom-
ers, lets members earn points
toward gift certificates when
they make purchases. Another
customer engagement program,
scheduled to be launched in fiscal
2009, will involve gift cards that
customers can use enterprise-
wide to purchase gifts from any
of 1-800-FLOWERS.COM’s family
of brands. The gift cards can be
conveniently used online, in-store
or when ordering by phone.
6
13
20
27
S u N D A Y
M O N D A Y
T uE S D A Y
1
8
15
7
14
21
First Day of Winter
22
28
29
W E D N E S D A Y
T HuR S D A Y
F R I D A Y
S A TuR D A Y
4
5
11
Hanukkah Begins at Sunset
12
18
19
25
Christmas Day
26
First Day of Kwanzaa
2
9
16
23
30
3
10
17
24
31
BOARD OF DIRECTORS
James F. McCann
Chairman and Chief
Executive Officer
1-800-FlOWERS.COM
Christopher G. McCann
President
1-800-FlOWERS.COM
Jan Murley
Interim President
Consumer Floral Brand
1-800-FlOWERS.COM
Jeffrey C. Walker
Chairman
Millennium Partners
James A. Cannivino
Chairman & CEO
Direct Insite, Inc.
leonard J. Elmore
Partner
Dreier, llP
John J. Conefry
Vice Chairman
Astoria Financial Corporation
Lawrence V. Calcano
Chief Executive Officer
Calcano Capital Advisors
James F. McCann
Chairman and Chief Executive Officer
1-800-FlOWERS.COM
Christopher G. McCann
President
1-800-FlOWERS.COM
William E. Shea
Senior Vice President,
Treasurer and Chief Financial Officer
1-800-FlOWERS.COM
CORPORATE OFFICERS
Gerard M. Gallagher
Senior Vice President of Business Affairs,
General Counsel and Corporate Secretary
1-800-FlOWERS.COM
Stephen Bozzo
Senior Vice President,
Chief Information Officer
1-800-FlOWERS.COM
Timothy J. Hopkins
President
Madison Brands
1-800-FlOWERS.COM
David Taiclet
President
Gourmet Food & Gift Baskets
1-800-FlOWERS.COM
Fiscal Year 2008
Financial Report
Selected Financial Data
1-800-FLOWERS.COM, Inc. and Subsidiaries
The following tables summarize the Company’s consolidated statement of income and balance sheet data.
The Company acquired DesignPac Gifts, LLC in April 2008, Fannie May Confections Brands, Inc. in May 2006,
Wind & Weather in October 2005, Cheryl & Co. in March 2005 and The Winetasting Network in November 2004.
The following financial data reflects the results of operations of these subsidiaries since their respective dates of
acquisition. This information should be read together with the discussion in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and the Company’s consolidated financial statements and notes to
those statements included elsewhere in this Annual Report.
Years Ended (1), (2)
June 29, July 1, July 2, July 3, June 27,
2008 2007 2006 2005 2004
(in thousands, except per share data)
Consolidated Statement of Income Data:
Net revenues:
E-commerce
Other
Total net revenues
Cost of revenues
Gross profit
Operating expenses:
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
Total operating expenses
Operating income
Other income (expense), net
Income before income taxes
Income tax expense (benefit)
Net income
Net income per common share:
Basic
Diluted
Shares used in the calculation of
net income per common share:
Basic
Diluted
$749,857
169,535
919,392
525,638
393,754
256,604
21,539
57,881
20,363
356,387
37,367
$749,238
163,360
912,598
520,132
392,466
262,303
21,316
56,017
17,837
357,473
34,993
$706,001
75,740
781,741
456,097
325,644
239,573
19,819
43,978
15,765
319,135
6,509
(3,997)
(5,984)
(141)
33,370
12,316
29,009
11,891
$ 21,054
$ 17,118
$
$
0.33
0.32
$
$
0.27
0.26
6,368
3,181
3,187
0.05
0.05
$
$
$
$620,831
49,848
670,679
395,028
275,651
198,935
14,757
35,572
14,489
263,753
11,898
1,349
13,247
5,398
7,849
0.12
0.12
$
$
$
$570,509
33,469
603,978
351,111
252,867
172,251
13,799
30,415
14,992
231,457
21,410
320
21,730
(19,174)
$ 40,904
$
$
0.62
0.60
63,074
65,458
63,786
65,526
65,100
66,429
66,038
67,402
65,959
68,165
Note (1): The Company’s fiscal year is a 52- or 53-week period ending on the Sunday nearest to June 30. Fiscal years ended
June 29, 2008, July 1, 2007, July 2, 2006 and June 27, 2004 consisted of 52 weeks, while the fiscal years ended July 3, 2005
consisted of 53 weeks.
Note (2): Effective July 4, 2005, the Company adopted the fair value recognition provisions of SFAS No. 123(R) using the
modified prospective application method.
As of
June 29, July 1, July 2, July 3, June 27,
2008 2007 2006 2005 2004
(in thousands)
Consolidated Balance Sheet Data:
Cash and equivalents
and short-term investments
Working capital
Investments-non current
Total assets
Long-term liabilities
Total stockholders’ equity
$ 12,124
33,416
––
371,338
63,739
231,465
$ 16,087
51,419
––
352,507
78,911
201,031
$ 24,599
44,250
––
346,634
79,221
193,183
$ 46,608
44,739
––
251,952
5,281
186,334
$103,374
83,704
8,260
261,552
8,874
186,390
2
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
1-800-FLOWERS.COM, Inc. and Subsidiaries
Overview
1-800-FLOWERS.COM, Inc. is the world’s
leading florist and gift shop. For more than 30 years,
1-800-FLOWERS.COM, Inc. has been providing
customers with fresh flowers and the finest selection of
plants, gift baskets, gourmet foods, confections, balloons
and plush stuffed animals perfect for every occasion.
1-800-FLOWERS.COM® (1-800-356-9377 or
www.1800flowers.com), was named as one of the top
50 online retailers by Internet Retailer, as well as 2008
Laureate Honoree by the Computerworld Honors
Program and the recipient of ICMI’s 2006 Global Call
Center of the Year Award. 1-800-FLOWERS.COM
offers the best of both worlds: exquisite arrangements
created by some of the nation’s top floral artists and
hand-delivered the same day, and spectacular flowers
shipped overnight under our Fresh From Our Growers®
program. As always, 100% satisfaction and freshness
are guaranteed. The Company’s BloomNet® interna-
tional floral wire service (www.mybloomnet.net)
provides a broad range of quality products and
value-added services designed to help professional
florists grow their businesses profitably.
The 1-800-FLOWERS.COM, Inc. “Gift Shop” also
includes gourmet gifts such as popcorn and specialty
treats from The Popcorn Factory® (1-800-541-2676
or www.thepopcornfactory.com); cookies and baked
gifts from Cheryl&Co.® (1-800-443-8124 or
www.cherylandco.com); premium chocolates and
confections from Fannie May Confections Brands®
(www.fanniemay.com and www.harrylondon.com);
gourmet foods from Greatfood.com®
(www.greatfood.com); wine gifts from Ambrosia®
(www.ambrosia.com or www.winetasting.com);
gift baskets from 1-800-BASKETS.COM®
(www.1800baskets.com) and DesignPac Gifts™
(www.designpac.com) as well as Home Decor
and Children’s Gifts from Plow & Hearth®
(1-800-627-1712 or www.plowandhearth.com),
Wind & Weather® (www.windandweather.com),
HearthSong® (www.hearthsong.com) and Magic
Cabin® (www.magiccabin.com).
Shares in 1-800-FLOWERS.COM, Inc. are traded
on the NASDAQ Global Select Market under ticker
symbol FLWS.
Category Information
During the first quarter of fiscal 2007, the Company
segmented its organization to improve execution and
customer focus and to align its resources to meet the
demands of the markets it serves. The following table
presents the contribution of net revenues, gross profit and
“EBITDA” (earnings before interest, taxes, depreciation
and amortization) from each of the Company’s business
categories.
Net Revenues
Years Ended
June 29, July 1, July 2,
2008 % Change 2007 % Change 2006
(in thousands)
Net revenues:
1-800-Flowers.com
Consumer
Floral
BloomNet
Wire Service
Gourmet Food &
Gift Baskets
$491,696
0.1% $491,404
8.7% $452,188
53,488
20.5%
44,379
48.5%
29,884
196,298
1.9%
192,698
83.5%
105,002
Home & Children’s
Gifts
Corporate(*)
Intercompany
Eliminations
Total net
revenues
180,181
2,431
(3.6%)
47.2%
186,948
1,652
(5.1%)
19.0%
196,919
1,388
(4,702)
(4.9%)
(4,483) (23.2%)
(3,640)
$919,392
0.7% $912,598
16.7% $781,741
Gross Profit
Years Ended
June 29, July 1, July 2,
2008 % Change 2007 % Change 2006
(in thousands)
Gross profit:
1-800-Flowers.com
Consumer
Floral
BloomNet
Wire Service
Gourmet Food &
Gift Baskets
Home & Children’s
Gifts
Corporate(*)
Intercompany
Eliminations
Total gross
profit
3
$190,259
38.7%
(1.4%)
$192,921
39.3%
13.2% $170,352
37.7%
30,080
56.2%
21.1%
91,713
46.7%
4.0%
81,459
45.2%
970
39.9%
(5.2%)
27.0%
24,844
56.0%
88,207
45.8%
85,899
45.9%
764
46.2%
55.4%
85.9%
(6.2%)
38.7%
15,989
53.5%
47,442
45.2%
91,555
46.5%
551
39.7%
(727)
(169)
(245)
$393,754
0.3% $392,466
20.5% $325,644
42.8%
43.0%
41.7%
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
EBITDA (**)
Years Ended
Reconciliation of Net Income to EBITDA:
Years Ended
June 29, July 1, July 2,
2008 % Change 2007 % Change 2006
June 29, July 1, July 2,
2008 2007 2006
(in thousands)
(in thousands)
Category Contribution Margin:
1-800-Flowers.com
Consumer
Floral
BloomNet
$ 62,967
(3.4%)
$ 65,166
40.1% $ 46,518
Wire Service
Gourmet Food &
Gift Baskets
Home & Children’s
18,509
30.7%
14,162
99.3%
7,106
24,593
(6.8%)
26,377 286.4%
6,827
Gifts
3,438 383.0% (1,215) (117.0%)
7,134
Category Contribution
Margin Subtotal 109,507
(51,777)
$ 57,730
Corporate(*)
EBITDA
104,490
54.6%
(51,660) (14.0%)
67,585
4.8%
(0.2%)
(45,311)
9.3% $ 52,830 137.2% $ 22,274
(*) Corporate expenses consist of the Company’s enterprise
shared service cost centers, and include, among other items,
Information Technology, Human Resources, Accounting and
Finance, Legal, Executive and Customer Service Center
functions, as well as Stock-Based Compensation. In order to
leverage the Company’s infrastructure, these functions are
operated under a centralized management platform, providing
support services throughout the organization. The costs of these
functions, other than those of the Customer Service Center,
which are allocated directly to the above categories based upon
usage, are included within corporate expenses as they are not
directly allocable to a specific category.
(**) Performance is measured based on category contribution
margin or category EBITDA, reflecting only the direct controllable
revenue and operating expenses of the categories. As such,
management’s measure of profitability for these categories does
not include the effect of corporate overhead, described above,
nor does it include depreciation and amortization, other income
(net), and income taxes. Management utilizes EBITDA as a
performance measurement tool because it considers such
information a meaningful supplemental measure of its perfor-
mance and believes it is frequently used by the investment
community in the evaluation of companies with comparable
market capitalization. The Company also uses EBITDA as one of
the factors used to determine the total amount of bonuses
available to be awarded to executive officers and other employ-
ees. The Company’s credit agreement uses EBITDA (with
additional adjustments) to measure compliance with covenants
such as interest coverage and debt incurrence. EBITDA is also
used by the Company to evaluate and price potential acquisition
candidates. EBITDA has limitations as an analytical tool, and
should not be considered in isolation or as a substitute for
analysis of the Company’s results as reported under GAAP. Some
of these limitations are: (a) EBITDA does not reflect changes in, or
cash requirements for, the Company’s working capital needs; (b)
EBITDA does not reflect the significant interest expense, or the
cash requirements necessary to service interest or principal
payments, on the Company’s debts; and (c) although depreciation
and amortization are non-cash charges, the assets being
depreciated and amortized may have to be replaced in the future,
and EBITDA does not reflect any cash requirements for such
capital expenditures. Because of these limitations, EBITDA should
only be used on a supplemental basis combined with GAAP
results when evaluating the Company’s performance.
Net income
$ 21,054
$ 17,118
$ 3,187
Add:
Interest
expense
5,081
Depreciation and
amortization
20,363
Income tax
expense
Less:
Interest
income
Other income
EBITDA
12,316
999
85
$ 57,730
7,390
17,837
11,891
1,381
25
$ 52,830
1,407
15,765
3,181
1,260
6
$ 22,274
Results of Operations
The Company’s fiscal year is a 52- or 53-week period
ending on the Sunday nearest to June 30. Fiscal years
2008, 2007 and 2006, which ended on June 29, 2008,
July 1, 2007 and July 2, 2006, respectively, consisted of
52 weeks.
Net Revenues
Years Ended
June 29, July 1, July 2,
2008 % Change 2007 % Change 2006
(in thousands)
Net revenues:
E-Commerce $749,857
169,535
Other
$ 919,392
0.1% $749,238
3.8%
0.7% $912,598
6.1% $706,001
75,740
16.7% $781,741
163,360 115.7%
Net revenues consist primarily of the selling price of
the merchandise, service or outbound shipping charges,
less discounts, returns and credits.
The Company’s revenue growth of 0.7% during the
fiscal year ended June 29, 2008 was primarily attribut-
able to the continued expansion of the Company’s
BloomNet Wire Service business, which increased 20.5%
over the prior fiscal year, as well as growth from the
Gourmet Food & Gift Basket business, which increased
1.9% over the same period of the prior year, partially
offset by a decline in the Home and Children’s Gifts
business as a result of the discontinuation of non-
performing catalog titles in order to improve the overall
operating results within this category. During this chal-
lenging consumer environment, which was characterized
by cautious consumer spending and aggressive promo-
tional activity by competitors across the gifting industry,
the Company made the decision not to chase revenue
growth in its direct-to-consumer businesses, instead
focusing on achieving its primary goal of leveraging its
4
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
business platform to drive profitable growth while
reducing its operating expense ratio. As a result, despite
the difficult retail consumer environment experienced
during the year, the Company was able to achieve
EBITDA growth of 9.3%, on more modest revenue growth,
and despite the negative contribution from DesignPac
(acquired on April 30, 2008), due to the highly seasonal
nature of its business.
The Company’s revenue growth of 16.7% during the
fiscal year ended July 1, 2007 was due to a combination
of organic growth, as well as the acquisitions of Fannie
May Confections Brands, a manufacturer and retailer of
premium chocolates and other confections, acquired on
May 1, 2006 and Wind & Weather, a direct marketer of
weather-themed gifts, acquired on October 31, 2005.
Organic revenue growth, including post acquisition
growth of the aforementioned acquisitions, adjusted for
the disposition of certain Company owned floral retail
stores, during fiscal 2007 was approximately 8%.
The Company fulfilled approximately 11.5 million,
11.6 million and 11.3 million orders through its e-
commerce (combined online and telephonic) sales
channel during fiscal 2008, 2007 and 2006, respectively.
The Company’s e-commerce (combined online and
telephonic) sales channel average order value increased
1.3% to $65.21 during fiscal 2008, and 3.2% to $64.37
during fiscal 2007, primarily as a result of increased
service and shipping charges (in line with industry
norms) to partially offset the impact of increased fuel
costs passed on from freight carriers.
Other revenues for the fiscal years ended June 29,
2008 and July 1, 2007, increased in comparison to
the same periods of the prior year due the continued
revenue growth of the Company’s BloomNet Wire Service
category. Also contributing to the increase in other
revenues during fiscal 2007 was the increase from the
retail/wholesale component of Fannie May Confections
Brands, which was acquired in May 2006.
The 1-800-Flowers.com Consumer Floral category
includes the 1-800-Flowers brand operations which
derives revenue from the sale of consumer floral products
through its e-commerce sales channels (telephonic and
online sales) and company-owned and operated retail
floral stores, as well as royalties and rental income from
its franchise operations. Net revenues during the fiscal
years ended June 29, 2008 and July 1, 2007, increased
by 0.1% and 8.7% over the respective prior year periods,
primarily from an increased average order value from its
e-commerce sales channel, offset in part by lower retail
sales from its company-owned floral stores due to the
planned transition of Company stores to franchise
ownership. Fiscal 2007 net revenues were also favorably
affected by increased order volume from its e-commerce
sales channel.
The BloomNet Wire Service category includes
revenues from membership fees as well as other service
and product offerings to florists. Net revenues during the
fiscal years ended June 29, 2008 and July 1, 2007
5
increased by 20.5% and 48.5% over the respective prior
year periods, primarily as a result of increased florists’
membership fees, expanded product and service
offerings, and pricing initiatives. During fiscal 2007, net
revenues were also favorably affected by the introduction
of BloomNet’s Floral Selection Guide, which is published
once every three years.
The Gourmet Food & Gift Basket category includes the
operations of the Cheryl & Co., Fannie May Confections
Brands, The Popcorn Factory, The Winetasting Network
and DesignPac Gifts brands. Revenue is derived from
the sale of cookies, baked gifts, premium chocolates and
confections, gourmet popcorn, wine gifts and gourmet gift
baskets through its E-commerce sales channels (tele-
phonic and online sales) and company-owned and
operated retail stores under the Cheryl & Co. and Fannie
May Confections brands, as well as wholesale opera-
tions. Net revenue for the fiscal year ended June 29,
2008 increased 1.9% compared to the prior fiscal year as
a result of increased direct-to-consumer order volume
from Cheryl & Co. and Fannie May Confections brands.
Revenues from DesignPac, which was acquired on April
30, 2008, were immaterial during fiscal 2008 due to the
highly seasonal nature of its business. Net revenue
during the fiscal year ended July 1, 2007 increased by
83.5% over the prior year period, as a result of the
contribution of Fannie May Confections Brands, which
was acquired in May 2006, and strong organic growth
from Cheryl & Co.
The Home & Children’s Gifts category includes
revenues from the Plow & Hearth, Wind & Weather,
Problem Solvers, Madison Place, HearthSong and Magic
Cabin brands. Revenue is derived from the sale of home
decor and children’s gifts through its e-commerce sales
channels (telephonic and online sales) or company-
owned and operated retail stores operated under the
Plow & Hearth brand. Net revenue during the fiscal year
ended June 29, 2008 decreased by 3.6% over the prior
year period due to the planned elimination of the Madi-
son Place and Problem Solvers catalog titles, which were
launched during fiscal 2007. Excluding these titles, fiscal
2008 net revenue for the Home & Children’s Gifts
category was relatively consistent with the prior year
period. Net revenue during the fiscal year ended July 1,
2007 decreased by 5.1% over the prior year period due
to a lack of new “hit” products and an overall macro
decline in customer demand within this category. During
the second quarter of fiscal 2007, efforts to expand titles
outside of the core Plow & Hearth brand did not attract the
level of customer demand to justify the increase in
marketing costs. In response to the poor results, during
the third quarter of fiscal 2007, management imple-
mented several changes to improve the performance
within this category: (i) revised the aforementioned plans
to expand and add titles, (ii) strengthened the manage-
ment team, (iii) improved the creative look and feel of the
catalogs and (iv) revised the circulation plans for all titles
to place more focus on the category’s existing customer
base. As a result, during fiscal 2008, category contribu-
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
tion margin within this category improved by $4.6 million,
from a loss of $1.2 million, to contribution of $3.4 million.
While the Company does not anticipate any significant
improvement in the current economic environment during
fiscal 2009, it expects to achieve revenue growth in
excess of 10 percent compared with the prior year period.
Revenue growth is expected to come from a combination
of organic initiatives and contributions from its recent
acquisitions. Among the organic initiatives that the
Company believes will help drive profitable growth are
(i) the first year benefit from the exclusive relationship
with Martha Stewart Living Omnimedia for both 1-800-
FLOWERS.COM and BloomNet; (ii) BloomNet’s ex-
panded products and service offerings, designed to
deepen its relationship with florists and increase market
share gains; (iii) Fannie May’s continued strong
ecommerce channel growth; (iv) Cheryl & Co.’s new
product introductions, increased customization capabili-
ties and improved website functionality; as well as
(v) continued focus on cross-marketing and merchandis-
ing across all enterprise brands.
Gross Profit
Years Ended
June 29, July 1, July 2,
2008 % Change 2007 % Change 2006
(in thousands)
Gross profit
Gross margin % 42.8%
$393,754 0.3% $392,466
43.0%
20.5% $325,644
41.7%
Gross profit consists of net revenues less cost of
revenues, which is comprised primarily of florist fulfillment
costs (primarily fees paid directly to florists), the cost of
floral and non-floral merchandise sold from inventory or
through third parties, and associated costs including
inbound and outbound shipping charges. Additionally,
cost of revenues include labor and facility costs related to
direct-to-consumer and wholesale production operations.
Gross profit increased during the fiscal years ended
June 29, 2008 and July 1, 2007, in comparison to the
same periods of the prior years, primarily as a result of
the revenue growth described above. Gross margin
percentage during the fiscal year ended June 29, 2008
decreased 20 basis points, primarily as a result of
increased promotional activity and higher fuel surcharges
from third party shippers. During fiscal 2007, gross profit
percentage increased by 130 basis points as a result of
product mix and pricing initiatives, as well as continued
improvements in customer service, and fulfillment, as a
result of improved outbound shipping rates, and mer-
chandising programs.
The 1-800-Flowers.com Consumer Floral category
gross profit and gross profit margin percentage de-
creased by 1.4% and 60 basis points, respectively during
fiscal 2008, as a result of increased promotional activity
and higher fuel surcharges from third party shippers.
During fiscal 2007, gross profit and gross margin percent-
age increased 13.2% and 160 basis points, respectively,
6
as a result of the aforementioned increase in net revenue,
as well improvements in sourcing, reduced outbound
shipping rates, and pricing initiatives.
The BloomNet Wire Service category gross profit for
the fiscal years ended June 29, 2008 and July 1, 2007,
increased by 21.1% and 55.4% over the respective prior
year periods as a result of the above mentioned revenue
growth resulting from an increase in membership
services and pricing initiatives.
The Gourmet Food & Gift Basket category gross profit
for the fiscal year ended June 29, 2008 increased by
4.0% over the prior year period as a result of higher
revenues and higher gross margin percentage, which
increased 90 basis points to 46.7%, as a result of
manufacturing efficiencies, and sales channel mix.
During fiscal 2007, gross profit increased 85.9% primarily
as a result of the incremental revenue generated by
Fannie May Confections Brands and strong organic
growth within the Cheryl & Co. brand, combined with an
increase in gross margin percentage of 60 basis points,
to 45.8%, as a result of improvements in outbound
shipping rates and merchandising programs across all
brands within the category.
The Home & Children’s Gift category gross profit for
the fiscal years ended June 29, 2008 and July 1, 2007
decreased by 5.2% and 6.2% over the respective prior
year periods as a result of the aforementioned revenue
decline, combined with lower gross margin percentages.
The gross margin percentage during fiscal 2008 declined
70 basis points to 45.2%, due to promotional offers
designed to re-engage core customers who had left the
brand during fiscal 2007 when it had unsuccessfully
moved away from its traditional product offerings, as well
as from higher fuel surcharges on its outbound ship-
ments. During fiscal 2007, the gross margin percentage
declined 60 basis points to 45.9%, due to sales mix and
markdowns to move inventory.
During fiscal year 2009, the Company expects its
gross margin percentage will decline slightly as a result
of the acquisition of DesignPac, which carries a lower
wholesale gross margin, but a strong overall contribution
margin due to its efficient high volume packaging and
distribution operations. This mix decline is expected to be
partially offset by anticipated gross margin improvements
in most of its existing businesses through a combination
of product sourcing, fulfillment improvements and pricing
initiatives.
Marketing and Sales Expense
Years Ended
June 29, July 1, July 2,
2008 % Change 2007 % Change 2006
(in thousands)
Marketing and
sales
$256,604 (2.2%)
$262,303
9.5% $239,573
Percentage of
sales
27.9%
28.7%
30.6%
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Marketing and sales expense consists primarily of
advertising and promotional expenditures, catalog costs,
online portal and search costs, retail store and fulfillment
operations (other than costs included in cost of revenues)
and customer service center expenses, as well as the
operating expenses of the Company’s departments
engaged in marketing, selling and merchandising activities.
During fiscal 2008, marketing and sales expenses
decreased by 2.2% from the prior year, and declined from
28.7% of net revenues to 27.9% of net revenues as a result
of improved operating leverage from a number of cost-
saving initiatives, including catalog printing and e-mail
pricing improvements, and planned reductions in catalog
prospecting and the discontinuation of the Madison Place
and Problem Solvers titles within the Home & Children’s
category, as well as continued growth and operating
improvements within the BloomNet Wire Service category.
During fiscal 2007, marketing and sales expense
increased over the prior year period by 9.5% as a result
of several factors, including: (i) incremental expenses
associated with the acquisition of Fannie May Confec-
tions Brands in May 2006, (ii) incremental variable costs
to accommodate higher sales volumes, and (iii) person-
nel associated with the expansion of the BloomNet Wire
Service business. However, marketing and sales
expenses decreased from 30.6% to 28.7% of net rev-
enues, reflecting improved operating leverage from cost-
saving initiatives and the completion of the investment
phase of BloomNet, including the absorption of incremen-
tal personnel to expand membership, increase product
and service offerings, and increased BloomNet Technolo-
gies penetration. This leverage was achieved through
significant improvement within the Company’s 1-800-
Flowers Consumer Floral, BloomNet Wire Service and
Gourmet Food & Gift Baskets categories. As efforts to grow
the Home & Children’s Gifts businesses through the
introduction of titles outside the core Plow & Hearth brand
did not attract the necessary level of consumer demand to
justify the costs, as noted above, non-productive titles were
discontinued during the latter half of fiscal 2007, resulting
in improved contribution margin during fiscal 2008.
During the fiscal year ended June 29, 2008 the
Company added approximately 3.4 million new e-
commerce customers, compared to 3.5 million and 3.6
million in fiscal 2007 and fiscal 2006, respectively. Of the
6.8 million total customers who placed e-commerce
orders during the fiscal 2008, approximately 50% were
repeat customers, compared to 48% and 46% in fiscal
2007 and fiscal 2006, respectively, reflecting the
Company’s ongoing focus on deepening the relationship
with its existing customers as their trusted source for gifts
and services for all of their celebratory occasions.
During fiscal 2009, the Company expects that
marketing and sales expense will continue to decrease
as a percentage of net revenue in comparison to the prior
years, in part due to the acquisition of DesignPac which,
as noted above, carries a lower wholesale gross margin,
but a strong overall contribution margin due to its cost
efficient, high volume product assembly and distribution
operations, as well as Company initiatives which will gain
further leverage within existing operations.
7
Technology and Development Expense
Years Ended
June 29, July 1, July 2,
2008 % Change 2007 % Change 2006
(in thousands)
Technology and
development
Percentage of
$21,539 1.0%
$ 21,316
7.6% $ 19,819
sales
2.3%
2.3%
2.5%
Technology and development expense consists
primarily of payroll and operating expenses of the
Company’s information technology group, costs associ-
ated with its web sites, including hosting, design, content
development and maintenance and support costs related
to the Company’s order entry, customer service, fulfillment
and database systems.
During fiscal 2008, technology and development
expense increased 1.0%, in comparison to the prior
year period as a result of increased labor costs, but
increased labor costs were necessary to support the
Company’s technology platform, and were offset in part
by savings derived from renegotiating various technology
maintenance and license agreements.
During fiscal 2007, technology and development
expense decreased 20 basis points to 2.3% of net
revenue, reflecting improved operating leverage,
however, technology and development expense in-
creased by 7.6% over the prior year period, as a result of
the incremental expenses associated with Fannie May
Confections Brands, as well as for increases in the cost of
maintenance and license agreements required to support
the Company’s technology platform.
During the fiscal years ended June 29, 2008, July 1,
2007, and July 2, 2006 the Company expended $35.3
million, $32.3 million, and $33.6 million, respectively, on
technology and development, of which $13.8 million,
$11.0 million, and $13.8 million, respectively, has been
capitalized.
The Company believes that continued investment in
technology and development is critical to attaining its
strategic objectives, and as such, the Company expects that
its spending for the fiscal 2009 will be consistent, as a
percentage of net revenues, in comparison to the prior year.
General and Administrative Expense
Years Ended
June 29, July 1, July 2,
2008 % Change 2007 % Change 2006
(in thousands)
General and
administrative
$57,881 3.3%
$ 56,017
27.4% $ 43,978
Percentage of
sales
6.3%
6.1%
5.6%
General and administrative expense consists of
payroll and other expenses in support of the Company’s
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
executive, finance and accounting, legal, human re-
sources and other administrative functions, as well as
professional fees and other general corporate expenses.
General and administrative expense increased 3.3%
during the fiscal year ended June 29, 2008 and by 20
basis points as a percentage of net revenues in compari-
son to the prior year, due to increased professional fees
and corporate initiatives. The benefit of these increased
costs are reflected in the improvements within the
Company’s overall operating expense ratios, in compari-
son to the same period of the prior year.
During the fiscal year ended July 1, 2007 general and
administrative expense increased 27.4% and by 50 basis
points as a percentage of net revenues in comparison to
the prior year period, primarily as a result of: (i) incremen-
tal expenses associated with the acquisitions of Fannie
May Confections Brands in May 2006, (ii) increased legal
and professional fees, and (iii) the achievement of certain
performance related bonus targets in fiscal 2007 which
were not earned in the prior fiscal year.
Although the Company believes that its current
general and administrative infrastructure is sufficient to
support existing requirements and drive operating
leverage, the Company expects that its fiscal 2009
general and administrative expenses will be consistent,
as a percentage of net revenue, with fiscal 2008.
Depreciation Amortization
Years Ended
June 29, July 1, July 2,
2008 % Change 2007 % Change 2006
(in thousands)
Depreciation and
amortization
Percentage of
14.2% $ 17,837
$ 20,363
13.1% $ 15,765
sales
2.2%
2.0%
2.0%
Depreciation and amortization expense increased by
14.2% during the fiscal 2008 in comparison to the prior
year as a result of capital additions for technology
platform improvements and the incremental amortization
expense related to the intangibles established as a result
of the acquisition of DesignPac, which was acquired on
April 30, 2008.
Depreciation and amortization expense increased by
13.1% during the fiscal year ended July 1, 2007 in
comparison to the prior year period primarily as a result of
the incremental amortization expense as a result of the
acquisitions of Fannie May Confections Brands and Wind
& Weather in fiscal 2006, as well as depreciation associ-
ated with completed technology projects designed to
provide improved order/warehouse management
functionality across the enterprise.
The Company believes that continued investment in
its infrastructure, primarily in the areas of technology and
development, including the improvement of the technol-
ogy platforms are critical to attaining its strategic objec-
tives. As a result of these improvements, and the increase
8
in amortization expense associated with intangibles
established as a result of recent acquisitions, the Com-
pany expects that depreciation and amortization for the
fiscal 2009 will increase slightly as a percentage of net
revenues in comparison to the prior year.
Other Income (Expense)
Years Ended
June 29, July 1, July 2,
2008 % Change 2007 % Change 2006
(in thousands)
Interest income
Interest expense
Other, net
$ 999 (27.7)% $ 1,381 9.6% $1,260
(5,081) 31.2% (7,390) (425.2)% (1,407)
85 240.0% 25 316.7% 6
$ (3,997) 33.2% $ (5,984) (4,144.0)% $ (141)
Other income (expense) consists primarily of interest
income earned on the Company’s investments and
available cash balances, offset by interest expense,
primarily attributable to the Company’s long-term debt,
and revolving line of credit.
Net borrowing costs declined during fiscal 2008, in
comparison to fiscal 2007, as a result of declining interest
rates and a reduction in outstanding debt.
Net borrowing costs increased during fiscal 2007, in
comparison to fiscal 2006, due to the interest expense
incurred in order to finance the acquisition of Fannie May
Confections Brands, Inc. on May 1, 2006. On May 1, 2006,
the Company entered into a $135.0 million secured credit
facility with JPMorgan Chase Bank, N.A., as administra-
tive agent, and a group of lenders (the “2006 Credit
Facility”). The 2006 credit facility, as amended, included
an $85.0 million term loan and a $75.0 million revolving
facility, which bear interest at LIBOR plus 0.625% to
1.125%, with pricing based upon the Company’s lever-
age ratio. At closing, the Company borrowed $85.0
million of the term facility to acquire all of the outstanding
capital stock of Fannie May Confections Brands, Inc.
On August 28, 2008, the Company entered into a
$293.0 million Amended and Restated Credit Agreement
with JPMorgan Chase Bank, N.A., as administrative
agent, and a group of lenders (the “2008 Credit Facility”).
The 2008 Credit Facility provides for borrowings of up to
$293.0 million, including: (i) a $165.0 million revolving
credit commitment, (ii) $60.0 million of new term loan
debt, and (iii) $68.0 million of existing term loan debt
associated with the Company’s 2006 Credit Facility.
Interest is at LIBOR plus 1.5% to 2.5% for the Company’s
existing term loan and revolving credit facility, and LIBOR
plus 2.0% to 3.0%, for the Company’s new term loan, with
pricing based upon the Company’s leverage ratio. At
closing of the 2008 Credit Facility, the Company utilized
the proceeds of the new term loan to pay down amounts
outstanding under its previous revolving credit facility.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Income Taxes
During the fiscal years ended June 29, 2008, July 1,
2007 and July 2, 2006, the Company recorded income
tax expense of $12.3 million, $11.9 million and $3.2
million, respectively. The Company’s effective tax rate for
the fiscal years ended June 29, 2008, July 1, 2007 and
July 2, 2006 was 36.9%, 41.0% and 50.0%, respectively.
The decrease in the effective tax rate during the fiscal
year ended June 29, 2008 resulted primarily from lower
state taxes, as well as various tax credits programs. The
decrease in the effective tax rate during the fiscal year
ended July 1, 2007 resulted from the dilution of the
impact of stock-based compensation recognized in
accordance with SFAS No. 123(R), over an increased
level of income before taxes in comparison the prior fiscal
year. The Company’s effective tax rate for the fiscal years
ended June 29, 2008, July 1, 2007 and July 2, 2006
differed from the U.S. federal statutory rate of 35%
primarily due to state income taxes, partially offset by
various tax credits.
At June 29, 2008, the Company’s federal net operating
loss carryforwards were approximately $4.5 million, which,
if not utilized, will begin to expire in fiscal year 2025.
Liquidity and Capital Resources
At June 29, 2008 the Company had working capital
of $33.4 million, including cash and equivalents of
$12.1 million, compared to working capital of $51.4
million, including cash and equivalents of $16.1 million,
at July 1, 2007.
Net cash provided by operating activities of $57.9
million for the fiscal year ended June 29, 2008 was
primarily attributable to net income, adjusted to add back
non-cash charges for depreciation and amortization,
deferred income taxes and stock-based compensation,
offset in part by increases in inventory (due primarily to
the recently acquired DesignPac business).
Net cash used in investing activities of $57.7 million
for the fiscal year ended June 29, 2008 was primarily
attributable to the payment of Fannie May Confections
Brands “earn-out” incentives ($4.4 million), as well as
capital expenditures, primarily related to the Company’s
technology and distribution infrastructure, and the
acquisition of DesignPac ($33.3 million) on April 30,
2008. DesignPac is a designer, assembler and distributor
of gourmet gift baskets, gourmet food towers and gift sets,
including a broad range of branded and private label
components, based in Melrose Park, IL. The purchase
price of approximately $33.3 million in cash, net of cash
acquired, is subject to “earn-out” incentives which amount
to a maximum of $2.0 million through the years ending
June 27, 2010, upon achievement of specified perfor-
mance targets.
Net cash used in financing activities of $4.2 million for
the fiscal year ended June 29, 2008 was primarily due to
the scheduled repayments (net) of the Company’s debt
and bank borrowings against the Company’s 2006 Credit
Facility and the repurchase of 133,609 shares of treasury
stock, offset in part by proceeds from employee stock
option exercises and the related excess tax benefits.
In order to fund the increase in working capital
requirements associated with DesignPac, and to provide
operating flexibility, on August 28, 2008, the Company
entered into a $293.0 million Amended and Restated
Credit Agreement with JPMorgan Chase Bank, N.A., as
administrative agent, and a group of lenders (the “2008
Credit Facility”). The 2008 Credit Facility provides for
borrowings of up to $293.0 million, including: (i) a $165.0
million revolving credit commitment, (ii) $60.0 million of
new term loan debt, and (iii) $68.0 million of existing term
loan debt associated with the Company’s previous credit
facility. Interest is at LIBOR plus 1.5% to 2.5% for the
Company’s existing term loan and revolving credit facility,
and LIBOR plus 2.0% to 3.0%, for the Company’s new
term loan, with pricing based upon the Company’s
leverage ratio. At closing of the 2008 Credit Facility, the
Company utilized the proceeds of the new term loan to
pay down amounts outstanding under its previous
revolving credit facility. The repayment terms of the
existing term loan remain unchanged, while the new term
loan is required to be repaid in equal quarterly installments
of $3.0 million beginning in December 2008, with the final
installment payment due on August 28, 2013. The 2008
Credit Facility contains various conditions to borrowing,
and affirmative and negative financial covenants. The
obligations of the Company and its subsidiaries under the
2008 Credit Facility are secured by liens on all personal
property of the Company and its subsidiaries.
The Company expects to borrow against its 2008
Credit Facility to fund working capital requirements related
to pre-holiday manufacturing and inventory purchases. At
June 29, 2008, the Company had no outstanding amounts
under its revolving credit facility. However, it anticipates
borrowing against the facility prior to the end of its first
quarter. The Company anticipates that such borrowings
will peak during its fiscal second quarter, before being
repaid prior to the end of that quarter.
On January 21, 2008, the Company’s Board of
Directors authorized an increase to its stock repurchase
plan which, when added to the funds remaining on its
earlier authorization, increased the amount available for
repurchase to $15.0 million. Any such purchases could
be made from time to time in the open market and
through privately negotiated transactions, subject to
general market conditions. The repurchase program will
be financed utilizing available cash. As of June 29, 2008,
$14.0 million remains authorized but unused.
Under this program, as of June 29, 2008, the Com-
pany had repurchased 1,660,786 shares of common
stock for $12.3 million, of which, $1.1 million (133,609
shares), $0.2 million (24,627 shares) and $1.3 million
(182,000 shares) were repurchased during the fiscal
years ending June 29, 2008, July 1, 2007 and July 2,
2006, respectively. In a separate transaction, during fiscal
2007, the Company’s Board of Directors authorized the
repurchase of 3,010,740 shares of common stock from an
affiliate. The purchase price was $15,689,000, or $5.21
9
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
per share. The repurchase was approved by the disinterested members of the Company’s Board of Directors and was
in addition to the Company’s then existing stock repurchase authorization.
At June 29, 2008, the Company’s contractual obligations consist of:
Payments due by period
Less than More than
Total 1 year 1 - 3 years 3 - 5 years 5 years
(in thousands)
Long-term debt,
including interest (*)
$ 78,498
$ 16,830
$ 35,167
$
26,501
$
––
Capital lease obligations
Operating lease obligations
Sublease obligations
Purchase commitments (**)
52
70,217
8,507
82,783
13
12,048
2,814
72,783
21
18,863
3,324
10,000
18
15,121
1,483
––
––
24,185
886
––
Total
$240,057
$ 104,488
$ 67,375
$
43,123
$ 25,071
(*) On August 28, 2008, the Company entered into a $293.0 million Amended and Restated Credit Agreement (the “2008 Credit
Facility”). The 2008 Credit Facility provides for borrowings of up to $293.0 million, including: (i) a $165.0 million revolving credit commit-
ment, (ii) $60.0 million of new term loan debt, and (iii) $68.0 million of existing term loan debt associated with the Company’s previous
credit facility. The repayment terms of the existing term loan remain unchanged, while the new term loan is required to be repaid in equal
quarterly installments of $3.0 million beginning in December 2008, with the final installment payment due on August 28, 2013.
(**) Purchase commitments consist primarily of inventory, equipment purchase orders and online marketing agreements made in the
ordinary course of business.
Critical Accounting Policies and Estimates
The Company’s discussion and analysis of its
financial position and results of operations are based
upon the consolidated financial statements of 1-800-
FLOWERS.COM, Inc., which have been prepared in
accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements
requires management to make estimates and assump-
tions that affect the reported amount of assets, liabilities,
revenue and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis,
management evaluates its estimates, including those
related to revenue recognition, inventory and long-lived
assets, including goodwill and other intangible assets
related to acquisitions. Management bases its estimates
and judgments on historical experience and on various
other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for
making judgments about the carrying values of assets
and liabilities. Actual results may differ from these
estimates under different assumptions or conditions.
Management believes the following critical accounting
policies, among others, affect its more significant judg-
ments and estimates used in preparation of its consoli-
dated financial statements.
Revenue Recognition
Net revenues are generated by E-commerce opera-
tions from the Company’s online and telephonic sales
channels as well as other operations (retail/wholesale)
and primarily consist of the selling price of merchandise,
service or outbound shipping charges, less discounts,
returns and credits. Net revenues are recognized upon
product shipment. Shipping terms are FOB shipping point.
Net revenues generated by the Company’s BloomNet
Wire Service operations include membership fees as well
as other products and service offerings to florists.
Membership fees are recognized monthly in the period
earned, and products sales are recognized upon product
shipment with shipping terms of FOB shipping point.
Accounts Receivable
The Company maintains allowances for doubtful
accounts for estimated losses resulting from the inability
of its customers or franchisees to make required pay-
ments. If the financial condition of the Company’s
customers or franchisees were to deteriorate, resulting in
an impairment of their ability to make payments, addi-
tional allowances may be required.
Inventory
The Company states inventory at the lower of cost or
market. In assessing the realization of inventories, we are
required to make judgments as to future demand require-
ments and compare that with inventory levels. It is
possible that changes in consumer demand could cause
a reduction in the net realizable value of inventory.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price
over the fair value of the net assets acquired and is
evaluated annually for impairment. The cost of intangible
assets with determinable lives is amortized to reflect the
pattern of economic benefits consumed, on a straight-line
basis, over the estimated periods benefited, ranging from
3 to 16 years.
The Company performs an annual impairment test as
of the first day of its fiscal fourth quarter, or earlier if
indicators of potential impairment exist, to evaluate
goodwill. Goodwill is considered impaired if the carrying
amount of the reporting unit exceeds its estimated fair
value. In assessing the recoverability of goodwill, the
Company reviews both quantitative as well as qualitative
10
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
factors to support its assumptions with regard to fair value.
Judgment regarding the existence of impairment indica-
tors is based on market conditions and operational
performance of the Company. Future events could cause
the Company to conclude that impairment indicators exist
and that goodwill and other intangible assets associated
with our acquired businesses is impaired.
Capitalized Software
The carrying value of capitalized software, both
purchased and internally developed, is periodically
reviewed for potential impairment indicators. Future
events could cause the Company to conclude that
impairment indicators exist and that capitalized software
is impaired.
Stock-based Compensation
SFAS No. 123R requires the measurement of stock-
based compensation expense based on the fair value of
the award on the date of grant. The Company determines
the fair value of stock options issued by using the Black-
Scholes option-pricing model. The Black-Scholes option-
pricing model considers a range of assumptions related
to volatility, dividend yield, risk-free interest rate and
employee exercise behavior. Expected volatilities are
based on historical volatility of the Company’s stock price.
The dividend yield is based on historical experience and
future expectations. The risk-free interest rate is derived
from the US Treasury yield curve in effect at the time of
grant. The Black-Scholes model also incorporates
expected forfeiture rates, based on historical behavior.
Determining these assumptions are subjective and
complex, and therefore, a change in the assumptions
utilized could impact the calculation of the fair value of the
Company’s stock options.
Income Taxes
The Company has established deferred income tax
assets and liabilities for temporary differences between
the financial reporting bases and the income tax bases of
its assets and liabilities at enacted tax rates expected to
be in effect when such assets or liabilities are realized or
settled. The Company has recognized as a deferred tax
asset the tax benefits associated with losses related to
operations, which are expected to result in a future tax
benefit. Realization of this deferred tax asset assumes
that we will be able to generate sufficient future taxable
income so that these assets will be realized. The factors
that we consider in assessing the likelihood of realization
include the forecast of future taxable income and avail-
able tax planning strategies that could be implemented to
realize the deferred tax assets.
It is the Company’s policy to provide for uncertain tax
positions and the related interest and penalties based
upon management’s assessment of whether a tax benefit
is more-likely-than-not to be sustained upon examination
by taxing authorities. To the extent that the Company
prevails in matters for which a liability for an unrecognized
tax benefit is established or is required to pay amounts in
excess of the liability, the Company’s effective tax rate in a
given financial statement period may be affected.
Recent Accounting Pronouncements
In May 2008, the FASB issued SFAS No. 162, “The
Hierarchy of Generally Accepted Accounting Principles”
(“SFAS No. 162”). SFAS No. 162 is intended to improve
financial reporting by identifying a consistent framework,
or hierarchy, for selecting accounting principles to be
used in preparing financial statements that are presented
in conformity with generally accepted accounting
principles. SFAS No. 162 will become effective 60 days
following the SEC’s approval of the Public Company
Accounting Oversight Board amendments to AU Section
411, “The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles.” The Com-
pany does not anticipate the adoption of SFAS No. 162
will have a material impact on its results of operations,
cash flows or financial condition.
In April 2008, the FASB issued FSP FAS 142-3,
“Determination of the Useful Life of Intangible Assets”
(“FSP FAS 142-3”). FSP FAS 142-3 amends the factors
that should be considered in developing renewal or
extension assumptions used to determine the useful life
of a recognized intangible asset under FASB Statement
No.142, Goodwill and Other Intangible Asset. FSP FAS
142-3 also requires expanded disclosure related to the
determination of intangible asset useful lives. FSP FAS
142-3 is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim
periods within those fiscal years. The Company is
currently evaluating the impact that the adoption of FSP
FAS 142-3 will have on its consolidated results of
operation, cash flows or financial condition.
In March 2008, the FASB issued Statement No.161,
“Disclosures about Derivative Instruments and Hedging
Activities” (“SFAS No. 161”). SFAS No. 161 amends and
expands the disclosure requirements of Statement No.
133, “Accounting for Derivative Instruments and Hedging
Activities” and it requires qualitative disclosures about
objectives and strategies for using derivatives and
quantitative disclosures about credit-risk-related contin-
gent features in derivative agreements. SFAS No. 161 is
effective for financial statements issued for fiscal years
and interim periods beginning after November 15, 2008.
The Company does not anticipate the adoption of SFAS
No. 161 will have a material impact on its results of
operations, cash flows or financial condition.
In December 2007, the FASB issued Statement No.
141 (revised 2007), “Business Combinations” (“SFAS No.
141R”). SFAS No. 141R establishes principles and
requirements for how the acquirer in a business combina-
tion recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed,
any controlling interest in the business and the goodwill
acquired. SFAS No. 141R further requires that acquisi-
tion-related costs and costs associated with restructuring
or exiting activities of an acquired entity will be expensed
as incurred. SFAS No. 141R also establishes disclosure
requirements that will require disclosure of the nature and
financial effects of the business combination. SFAS No.
11
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
141R will impact business combinations for the Company
that may be completed on or after June 29, 2009. The
Company cannot anticipate whether the adoption of
SFAS No. 141R will have a material impact on its results
of operations and financial condition as the impact is
solely dependent on the terms of any business combina-
tion entered into by the Company after June 29, 2009 and
the terms of such transactions.
In February 2007, the FASB issued SFAS No. 159,
“The Fair Value Option for Financial Assets and Financial
Liabilities” (“SFAS No. 159”). SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. This
statement provides companies with an option to measure
selected financial assets and liabilities at fair value. The
Company does not expect the adoption of SFAS No. 159
to have a material impact on its consolidated results of
operations, cash flows or financial condition.
In September 2006, the FASB issued Statement
No. 157, “Fair Value Measurements” (“SFAS 157”) which
defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value
measurements. In February 2008, the FASB issued FASB
Staff Position (FSP) No. 157-2, delaying the effective date
of SFAS 157 for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or dis-
closed at fair value on a nonrecurring basis. The delayed
portions of SFAS 157 will be adopted by the Company
beginning in its fiscal year ending June 27, 2010, while
all other portions of the standard will be adopted by the
Company beginning in its fiscal year ending June 28,
2009, as required. The Company does not expect that
SFAS 157 will have a material impact on its consolidated
results of operations, cash flows or financial condition.
Quantitative and Qualitative Disclosures
About Market Risk
The Company’s earnings and cash flows are subject to
fluctuations due to changes in interest rates primarily from
its investment of available cash balances in money market
funds and investment grade corporate and U.S. govern-
ment securities, as well as from outstanding debt. As of
June 29, 2008, the Company’s outstanding debt, including
current maturities, approximated $68.1 million, of which
$68.0 million was variable rate debt. Each 25 basis point
change in interest rates would have a corresponding effect
on our interest expense of approximately $0.2 million as of
June 29, 2008. Under its current policies, the Company
does not use interest rate derivative instruments to
manage exposure to interest rate changes.
Cautionary Statements Under the Private
Securities Litigation Reform Act of 1995
Our disclosures and analysis in this annual report
contain some forward-looking statements that set forth
anticipated results based on management’s plans and
assumptions. From time to time, we also provide forward-
looking statements in other statements we release to the
public as well as oral forward-looking statements. Such
statements give our current expectations or forecasts of
future events; they do not relate strictly to historical or
current facts. We have tried, wherever possible, to identify
such statements by using words such as “anticipate,”
“estimate,” “expect,” “project,” “intend,” “plan, “believe” and
similar expressions in connection with any discussion of
future operating or financial performance. In particular,
these include statements relating to future actions; the
effectiveness of our marketing programs; the performance
of our existing products and services; our ability to attract
and retain customers and expand our customer base; our
ability to enter into or renew online marketing agreements;
our ability to respond to competitive pressures; expenses,
including shipping costs and the costs of marketing our
current and future products and services; the outcome of
contingencies, including legal proceedings in the normal
course of business; and our ability to integrate acquisitions.
We cannot guarantee that any forward-looking
statement will be realized, although we believe we have
been prudent in our plans and assumptions. Achievement
of future results is subject to risk, uncertainties and
potentially inaccurate assumptions. Should known or
unknown risks or uncertainties materialize, or should
underlying assumptions prove inaccurate, actual results
could differ materially from past results and those antici-
pated, estimated or projected. You should bear this in mind
as you consider forward looking statements.
We undertake no obligation to publicly update
forward-looking statements, whether as a result of new
information, future events or otherwise. You are advised,
however, to consult any further disclosures we make on
related subjects in our 10-K, 10-Q and 8-K reports to the
SEC. Also note we provide the following cautionary
discussion of risks, uncertainties and possibly inaccurate
assumptions relevant to our business. These are factors
that, individually or in the aggregate, we think could
cause our actual results to differ materially from expected
and historical results. We note these factors for investors
as permitted by the Private Securities Litigation Reform
Act of 1995. You should understand that it
is not possible to predict or identify all such factors.
Consequently, you should not consider the following to
be a complete discussion of all potential risks and
uncertainties.
12
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Quarterly Results of Operations
The following table provides unaudited quarterly consolidated results of operations for each quarter of fiscal years
2008 and 2007. The Company believes this unaudited information has been prepared substantially on the same basis as
the annual audited consolidated financial statements and all necessary adjustments, consisting of only normal recurring
adjustments, have been included in the amounts stated below to present fairly the Company’s results of operations.
The operating results for any quarter are not necessarily indicative of the operating results for any future period.
Three Months Ended
Jun. 29, Mar. 30, Dec. 30, Sep. 30, Jul. 1, Apr. 1, Dec. 31, Oct. 1,
2008 2008 2007 2007 2007 2007 2006 2006
(in thousands, except per share data)
Net revenues:
E-commerce
(telephonic/online) $183,710 $177,476 $274,168 $114,503
31,307
36,103
Other
42,091
60,034
$194,228 $175,592 $270,159 $109,259
27,873
38,187
37,593
59,707
219,813
219,567
334,202
145,810
231,821
213,779
329,866
137,132
Total net revenues
Cost of revenues
Gross Profit
Operating expenses:
128,501
130,062
181,146
91,312
89,505
153,056
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
59,644
5,370
14,064
5,515
60,587
5,515
13,151
5,011
93,594
5,419
15,448
4,967
Total operating expenses
84,593
84,264
119,428
68,102
85,929
59,881
42,779
5,235
15,218
4,870
132,833
127,092
177,889
98,988
86,687
151,977
61,873
5,485
14,545
4,812
86,715
59,023
5,469
14,198
4,447
99,037
5,201
13,931
3,834
83,137
122,003
82,318
54,814
42,370
5,161
13,343
4,744
65,618
Operating income (loss)
6,719
5,241
33,628
(8,221)
12,273
3,550
29,974 (10,804)
Other income (expense), net
(533)
(685) (1,430)
(1,349)
(979)
(1,347)
(2,178)
(1,480)
Income (loss) before income taxes
Income tax expense (benefit)
6,186
1,888
4,556
32,198
(9,570)
11,294
1,266
12,942
(3,780)
4,732
2,203
1,150
27,796
(12,284)
10,874
(4,865)
Net income (loss) $ 4,298 $ 3,290 $ 19,256
$ (5,790) $ 6,562 $ 1,053 $16,922 $ (7,419)
Net income (loss) per share:
Basic $ 0.07 $ 0.05 $ 0.31
$ (0.09)
$0.10 $ 0.02 $ 0.26 $ (0.11)
Diluted $ 0.07 $ 0.05 $ 0.29
$ (0.09)
$0.10 $ 0.02 $0.26 $ (0.11)
The Company’s quarterly results may experience seasonal fluctuations. Due to the Company’s expansion into
non-floral products, including the recent acquisition of DesignPac Gifts, LLC, which was acquired in May 2008,
Thanksgiving through Christmas holiday season, which falls within the Company’s second fiscal quarter, generates
the highest proportion of the Company’s annual revenues. Additionally, as the result of a number of major floral
gifting occasions, including Mother’s Day, Administrative Professionals Week and Easter, revenues also rise during
the Company’s fiscal fourth quarter. For fiscal 2008, however, the Easter holiday occurred in the Company’s fiscal
third quarter, thus moving revenue from the Company’s fiscal fourth quarter to its fiscal third quarter. For fiscal 2009,
the Easter Holiday returns to the Company’s fiscal fourth quarter.
13
Consolidated Balance Sheets
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands, except share data)
June 29, July 1,
2008 2007
Assets
Current Assets:
Cash and equivalents
Receivables, net
Inventories
Deferred income taxes
Prepaid and other
Total current assets
Property, plant and equipment, net
Goodwill
Other intangibles, net
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
Current maturities of long-term debt and obligations under capital leases
Total current liabilities
Long-term debt and obligations under capital leases
Deferred income taxes
Other liabilities
Total liabilities
Commitments and contingencies
Stockholders’ equity:
$ 12,124
13,443
67,283
7,977
8,723
109,550
65,737
124,164
68,760
3,127
$ 371,338
$ 63,248
12,886
76,134
55,250
5,527
2,962
139,873
$ 16,087
17,010
62,051
19,260
9,576
123,984
62,561
112,131
52,750
1,081
$ 352,507
$ 62,433
10,132
72,565
68,000
8,230
2,681
151,476
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued
Class A common stock, $.01 par value, 200,000,000 shares authorized,
31,368,241 and 30,298,019 shares issued in 2008 and 2007, respectively
314
303
Class B common stock, $.01 par value, 200,000,000 shares authorized,
42,138,465 shares issued in 2008 and 2007
Additional paid-in capital
Retained deficit
Treasury stock, at cost – 4,724,326 and 4,590,717 Class A shares in 2008 and
2007, respectively, and 5,280,000 Class B shares
Total stockholders’ equity
Total liabilities and stockholders’ equity
421
279,718
421
269,270
(17,839) (38,893)
(31,149) (30,070)
201,031
231,465
$ 371,338
$352,507
See accompanying notes.
14
Consolidated Statements of Income
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands, except per share data)
Years Ended
June 29, July 1, July 2,
2008 2007 2006
Net revenues
Cost of revenues
Gross profit
$919,392
525,638
393,754
$912,598
520,132
392,466
$781,741
456,097
325,644
Operating expenses:
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
Total operating expenses
Operating income
256,604
21,539
57,881
20,363
356,387
37,367
262,303
21,316
56,017
17,837
357,473
34,993
239,573
19,819
43,978
15,765
319,135
6,509
Other income (expense):
Interest income
1,260
Interest expense (5,081) (7,390) (1,407)
6
Other, net
(141)
Total other income (expense), net
85
(3,997)
25
(5,984)
1,381
999
Income before income taxes
Income tax expense
33,370
12,316
29,009
11,891
6,368
3,181
Net income
$ 21,054
$ 17,118
$ 3,187
Net income per common share:
Basic
Diluted
Weighted average shares used in the calculation of
net income per common share:
Basic
Diluted
$
$
0.33
0.32
$
$
0.27
0.26
$
$
0.05
0.05
63,074
65,458
63,786
65,526
65,100
66,429
See accompanying notes.
15
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Consolidated Statements of Cash Flows
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands)
Years Ended
June 29, July 1, July 2,
2008 2007 2006
Operating activities:
Net income
Reconciliation of net income to net cash
$ 17,118
21,054
$
$
3,187
provided by operations:
Depreciation and amortization
Deferred income taxes
Bad debt expense
Stock-based compensation
Excess tax benefits from stock based compensation
Other non-cash items
Changes in operating items, excluding the effects of
acquisitions:
Receivables
Inventories
Prepaid and other
Accounts payable and accrued expenses
Other assets
Other liabilities
Net cash provided by operating activities
Investing activities:
Capital expenditures
Acquisitions, net of cash acquired
Dispositions
Proceeds from sales of investments
Other
Net cash used in investing activities
Financing activities:
Acquisition of treasury stock
Excess tax benefits from stock based compensation
Proceeds from employee stock options
Proceeds from bank borrowings and revolving line of credit
Repayment of notes payable and bank borrowings
Repayment of capital lease obligations
Other
Net cash (used in) provided by financing activities
Net change in cash and equivalents
Cash and equivalents:
Beginning of year
End of year
20,363
8,581
2,203
3,534
(2,196)
810
1,422
(4,410)
889
7,284
(1,926)
294
57,902
(19,942)
(37,849)
463
––
(387)
(57,715)
(1,079)
2,196
4,729
110,000
(119,966)
(30)
––
(4,150)
(3,963)
16,087
12,124
$
17,837
10,325
1,880
4,600
––
(791)
(5,737)
(9,800)
771
(5,562)
177
1,523
32,341
15,765
2,175
476
4,336
––
125
1,316
(9,106)
5,513
(1,046)
(6,208)
(1,795)
14,738
(18,043)
(347)
1,463
––
242
(20,491)
(96,874)
––
6,647
2
(16,685) (110,716)
(15,877)
––
2,007
110,000
(119,913)
(385)
––
(24,168)
(1,324)
––
558
105,000
(22,482)
(1,228)
92
80,616
(8,512)
(15,362)
24,599
$ 16,087
39,961
$ 24,599
Supplemental Cash Flow Information:
- Interest paid amounted to $5,081, $7,390, and $1,407 for the years ended June 29, 2008, July 1, 2007 and July 2, 2006, respectively.
- The Company paid income taxes of approximately $2,141, $1,429 and $23, net of tax refunds received, for the years ended
June 29, 2008, July 1, 2007, and July 2, 2006, respectively.
See accompanying notes.
17
Notes to Consolidated Financial Statements
1-800-FLOWERS.COM, Inc. and Subsidiaries
June 29, 2008
Note 1. Description of Business
For more than 30 years, 1-800-FLOWERS.COM, Inc.
has been providing customers with fresh flowers and
the finest selection of plants, gift baskets, gourmet foods,
confections, balloons and plush stuffed animals perfect
for every occasion. 1-800-FLOWERS.COM® offers the
best of both worlds: exquisite arrangements individually
created by some of the nation’s top floral artists and
hand-delivered the same day, and spectacular flowers
shipped overnight under our Fresh From Our Growers®
program. As always, 100 percent satisfaction and
freshness are guaranteed. The Company’s BloomNet®
(www.mybloomnet.net) international floral wire service
provides a broad range of quality products and value-
added services designed to help professional florists
to grow their businesses profitably. The 1-800-
FLOWERS.COM, Inc. “Gift Shop” also includes
gourmet gifts such as popcorn and specialty treats
from The Popcorn Factory® (1-800-541-2676 or
www.thepopcornfactory.com); exceptional cookies
and baked gifts from Cheryl&Co.® (1-800-443-8124 or
www.cherylandco.com); premium chocolates and
confections from Fannie May Confections Brands
(www.fanniemay.com and www.harrylondon.com);
gourmet foods from Greatfood.com®
(www.greatfood.com); wine gifts from Ambrosia®
(www.ambrosia.com or www.winetasting.com); gift
baskets from 1-800-BASKETS.COM®
(www.1800baskets.com) and DesignPac Giftssm
(www.designpac.com) as well as Home Decor and
Children’s Gifts from Plow & Hearth® (1-800-627-1712
or www.plowandhearth.com), Wind & Weather®
(www.windandweather.com), HearthSong®
(www.hearthsong.com) and Magic Cabin®
(www.magiccabin.com). 1-800-FLOWERS.COM, Inc.
stock is traded on the NASDAQ Global Select Market
under ticker symbol FLWS.
Note 2. Significant Accounting Policies
Fiscal Year
The Company’s fiscal year is a 52- or 53-week period
ending on the Sunday nearest to June 30. Fiscal years
2008, 2007 and 2006, which ended on June 29, 2008,
July 1, 2007 and July 2, 2006, respectively, consisted of
52 weeks.
Basis of Presentation
The consolidated financial statements include
the accounts of 1-800-FLOWERS.COM, Inc. and its
wholly-owned subsidiaries (collectively, the “Company”).
All significant intercompany accounts and transactions
have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity
with U.S. generally accepted accounting principles
requires management to make estimates and assump-
tions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could
differ from those estimates.
Cash and Equivalents
Cash and equivalents consist of demand deposits
with banks, highly liquid money market funds, United
States government securities, overnight repurchase
agreements and commercial paper with maturities of
three months or less when purchased.
Inventories
Inventories are valued at the lower of cost or market
using the first-in, first-out method of accounting.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost
reduced by accumulated depreciation. Depreciation
expense is recognized over the assets’ estimated useful
lives using the straight-line method. Amortization of
leasehold improvements and capital leases are calcu-
lated using the straight-line method over the shorter of the
lease terms, including renewal options expected to be
exercised, or estimated useful lives of the improvements.
Estimated useful lives are periodically reviewed, and
where appropriate, changes are made prospectively. The
Company’s property plant and equipment is depreciated
using the following estimated lives:
Buildings
Leasehold Improvements
Furniture, Fixtures and Equipment
Software
40 years
3 - 10 years
3 - 10 years
3 - 5 years
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived intangibles are not
amortized, but are evaluated annually for impairment.
The Company performs its annual impairment test as of
the first day of its fiscal fourth quarter, or earlier if indica-
tors of potential impairment exist, to evaluate goodwill.
Goodwill is considered impaired if the carrying amount of
the reporting unit exceeds its estimated fair value. In
assessing the recoverability of goodwill, the Company
reviews both quantitative as well as qualitative factors to
support its assumptions with regard to fair value. To date,
there has been no impairment of these assets.
The cost of intangible assets with determinable lives is
amortized to reflect the pattern of economic benefits
consumed, on a straight-line basis, over the estimated
periods benefited, ranging from 3 to 16 years.
Deferred Catalog Costs
The Company capitalizes the costs of producing and
distributing its catalogs. These costs are amortized in
direct proportion with actual sales from the corresponding
catalog over a period not to exceed 26-weeks. Included
within prepaid and other current assets was $3.4 million
and $4.3 million at June 29, 2008 and July 1, 2007,
respectively, relating to prepaid catalog expenses.
Investments
The Company considers all of its debt and equity
securities, for which there is a determinable fair market
value and no restrictions on the Company’s ability to sell
within the next 12 months, as available-for-sale. Avail-
18
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
able-for-sale securities are carried at fair value, with
unrealized gains and losses reported as a separate
component of stockholders’ equity. For the years ended
June 29, 2008, July 1, 2007 and July 2, 2006, there were
no significant unrealized gains or losses. Realized gains
and losses are included in other income. The cost basis
for realized gains and losses on available-for-sale
securities is determined on a specific identification basis.
Fair Values of Financial Instruments
The recorded amounts of the Company’s cash and
equivalents, short-term investments, receivables,
accounts payable, and accrued liabilities approximate
their fair values principally because of the short-term
nature of these items. The fair value of investments,
including available-for-sale securities, is based on
quoted market prices where available. The fair value of
the Company’s long-term obligations, the majority of
which are carried at a variable rate of interest, are
estimated based on the current rates offered to the
Company for obligations of similar terms and maturities.
Under this method, the Company’s fair value of long-term
obligations was not significantly different than the
carrying values at June 29, 2008 and July 1, 2007.
Concentration of Credit Risk
Financial instruments that potentially subject the
Company to significant concentrations of credit risk
consist principally of cash and equivalents, investments
and accounts receivable. The Company maintains cash
and equivalents and investments with high credit, quality
financial institutions. Concentration of credit risk with
respect to accounts receivable are limited due to the
Company’s large number of customers and their disper-
sion throughout the United States, and the fact that a
substantial portion of receivables are related to balances
owed by major credit card companies. Allowances
relating to consumer, corporate and franchise accounts
receivable ($1.4 million at June 29, 2008 and July 1,
2007) have been recorded based upon previous experi-
ence and management’s evaluation.
Revenue Recognition
Net revenues are generated by E-commerce opera-
tions from the Company’s online and telephonic sales
channels as well as other operations (retail/wholesale)
and primarily consist of the selling price of merchandise,
service or outbound shipping charges, less discounts,
returns and credits. Net revenues are recognized upon
product shipment and do not include sales tax. Shipping
terms are FOB shipping point. Net revenues generated
by the Company’s BloomNet Wire Service operations
include membership fees as well as other products and
service offerings to florists. Membership fees are recog-
nized monthly in the period earned, and products sales
are recognized upon product shipment with shipping
terms of FOB shipping point.
Cost of Revenues
Cost of revenues consists primarily of florist fulfillment
costs (fees paid directly to florists), the cost of floral and
non-floral merchandise sold from inventory or through
third parties, and associated costs including inbound and
outbound shipping charges. Additionally, cost of revenues
19
includes labor and facility costs related to manufacturing
and production operations.
Marketing and Sales
Marketing and sales expense consists primarily of
advertising and promotional expenditures, catalog costs,
online portal and search expenses, retail store and
fulfillment operations (other than costs included in cost of
revenues), and customer service center expenses, as
well as the operating expenses of the Company’s
departments engaged in marketing, selling and merchan-
dising activities.
The Company expenses all advertising costs, with the
exception of catalog costs (see Deferred Catalog Costs
above) at the time the advertisement is first shown.
Advertising expense was $127.2 million, $133.2 million
and $127.4 million for the years ended June 29, 2008,
July 1, 2007 and July 2, 2006, respectively.
Technology and Development
Technology and development expense consists
primarily of payroll and operating expenses of the
Company’s information technology group, costs associ-
ated with its web sites, including hosting, content devel-
opment and maintenance and support costs related to the
Company’s order entry, customer service, fulfillment and
database systems. Costs associated with the acquisition
or development of software for internal use are capital-
ized if the software is expected to have a useful life
beyond one year and amortized over the software’s
useful life, typically three to five years. Costs associated
with repair, maintenance or the development of web site
content are expensed as incurred as the useful lives of
such software modifications are less than one year.
Stock-Based Compensation
The Company records compensation expense
associated with stock options and other forms of equity
compensation in accordance with SFAS No. 123(R),
“Share-Based Payment.” The Company adopted the
modified prospective application method provided for
under SFAS 123(R) and consequently did not retroac-
tively adjust results from prior periods. Under this transi-
tion method, compensation cost associated with stock
options and awards recognized in the fiscal years ended
June 29, 2008, July 1, 2007 and July 2, 2006, includes:
(a) compensation cost of all stock-based payments
granted prior to, but not yet vested as of, July 4, 2005
(based on grant-date fair value estimated in accordance
with the original provisions of SFAS No. 123), and (b)
compensation cost for all stock-based payments granted
subsequent to July 3, 2005 (based on the grant-date fair
value estimated in accordance with the new provision of
SFAS No. 123(R)).
Income Taxes
The Company has established deferred income tax
assets and liabilities for temporary differences between
the financial reporting bases and the income tax bases of
its assets and liabilities at enacted tax rates expected to
be in effect when such assets or liabilities are realized or
settled. During fiscal 2008, the Company adopted the
provisions of Financial Accounting Standards Board
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes – an interpretation of FASB Statement No.
109” (“FIN 48”). FIN 48 prescribes a recognition and
measurement of tax positions taken or expected to be
taken in a tax return. For those benefits to be recognized,
a tax position must be more-likely-than-not to be sus-
tained upon examination by taxing authorities. There was
no material impact on the Company’s consolidated
financial position or results of operations as a result of the
adoption of the provisions of FIN 48.
Comprehensive Income
For the years ended June 29, 2008, July 1, 2007 and
July 2, 2006, the Company’s comprehensive income was
equal to the respective net income for each of the periods
presented.
Net Income Per Share
Basic net income per common share is computed
using the weighted-average number of common shares
outstanding during the period. Diluted net income per
share is computed using the weighted-average number
of common and dilutive common equivalent shares
(consisting primarily of employee stock options and
restricted stock awards) outstanding during the period.
Recent Accounting Pronouncements
In May 2008, the FASB issued SFAS No. 162, “The
Hierarchy of Generally Accepted Accounting Principles”
(“SFAS No. 162”). SFAS No. 162 is intended to improve
financial reporting by identifying a consistent framework,
or hierarchy, for selecting accounting principles to be
used in preparing financial statements that are presented
in conformity with generally accepted accounting
principles. SFAS No. 162 will become effective 60 days
following the SEC’s approval of the Public Company
Accounting Oversight Board amendments to AU Section
411, “The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles.” The Com-
pany does not anticipate the adoption of SFAS No. 162
will have a material impact on its results of operations,
cash flows or financial condition.
In April 2008, the FASB issued FSP FAS 142-3,
“Determination of the Useful Life of Intangible Assets”
(“FSP FAS 142-3”). FSP FAS 142-3 amends the factors
that should be considered in developing renewal or
extension assumptions used to determine the useful life
of a recognized intangible asset under FASB Statement
No.142, Goodwill and Other Intangible Asset. FSP FAS
142-3 also requires expanded disclosure related to the
determination of intangible asset useful lives. FSP FAS
142-3 is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim
periods within those fiscal years. The Company is
currently evaluating the impact that the adoption of FSP
FAS 142-3 will have on its consolidated results of
operation, cash flows or financial condition.
In March 2008, the FASB issued Statement No.161,
“Disclosures about Derivative Instruments and Hedging
Activities” (“SFAS No. 161”) SFAS No. 161 amends and
expands the disclosure requirements of Statement No.
133, “Accounting for Derivative Instruments and Hedging
20
Activities” and requires qualitative disclosures about
objectives and strategies for using derivatives amd
quantitative disclosures about credit-risk-related contin-
gent features in derivative agreements. SFAS No. 161 is
effective for financial statements issued for fiscal years
and interim periods beginning after November 15, 2008.
The Company does not anticipate the adoption of SFAS
No. 161 will have a material impact on its results of
operations, cash flows or financial condition.
In December 2007, the FASB issued Statement No.
141 (revised 2007), “Business Combinations” (“SFAS No.
141R”). SFAS No. 141R establishes principles and
requirements for how the acquirer in a business combina-
tion recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed,
any controlling interest in the business and the goodwill
acquired. SFAS No. 141R further requires that acquisi-
tion-related costs and costs associated with restructuring
or exiting activities of an acquired entity will be expensed
as incurred. SFAS No. 141R also establishes disclosure
requirements that will require disclosure of the nature and
financial effects of the business combination. SFAS No.
141R will impact business combinations for the Company
that may be completed on or after June 29, 2009. The
Company cannot anticipate whether the adoption of
SFAS No. 141R will have a material impact on its results
of operations and financial condition as the impact is
solely dependent on the terms of any business combina-
tion entered into by the Company after June 29, 2009.
In February 2007, the FASB issued SFAS No. 159, “The
Fair Value Option for Financial Assets and Financial
Liabilities” (“SFAS No. 159”). SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. This
statement provides companies with an option to measure
selected financial assets and liabilities at fair value. The
Company does not expect the adoption of SFAS No. 159
to have a material impact on its consolidated results of
operations, cash flows or financial condition.
In September 2006, the FASB issued Statement
No. 157, “Fair Value Measurements” (“SFAS 157”) which
defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value
measurements. In February 2008, the FASB issued FASB
Staff Position (FSP) No. 157-2, delaying the effective date
of SFAS 157 for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or dis-
closed at fair value on a nonrecurring basis. The delayed
portions of SFAS 157 will be adopted by the Company
beginning in its fiscal year ending June 27, 2010, while
all other portions of the standard will be adopted by the
Company beginning in its fiscal year ending June 28,
2009, as required. The Company does not expect that
SFAS 157 will have a material impact on its consolidated
results of operations, cash flows or financial condition.
Reclassifications
Certain balances in the prior fiscal years have been
reclassified to conform with the presentation in the current
fiscal year.
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 3. Net Income Per Common Share
The following table sets forth the computation of basic
and diluted net income per common share:
Years Ended
years ending June 27, 2010, upon achievement of
specified performance targets. In its most recently
completed year ended December 31, 2007, prior to the
acquisition, DesignPac generated revenues of approxi-
mately $53.3 million.
June 29, July 1, July 2,
2008 2007 2006
(in thousands, except per share data)
Numerator:
Net income
Denominator:
$ 21,054
$17,118
$ 3,187
Weighted average
shares outstanding
Effect of dilutive securities:
63,074
63,786
65,100
Employee stock
options (1)
Employee restricted
stock awards
1,808
1,282
1,282
576
2,384
458
1,740
47
1,329
Adjusted weighted-average
shares and assumed
conversions
65,458
65,526
66,429
Net income per common share:
Basic
Diluted
$
$
0.33
0.32
$
$
0.27
0.26
$ 0.05
$ 0.05
Note (1): The effect of options to purchase 3.2 million, 5.8 million
and 5.9 million shares for the years ended June 29, 2008, July 1,
2007, and July 2, 2006, respectively, were excluded from the
calculation of net income per share on a diluted basis as their
effect is anti-dilutive.
Note 4. Acquisitions
The Company accounts for its business combinations
in accordance with SFAS No. 141, “Business Combina-
tions,” which addresses financial accounting and report-
ing for business combinations and requires that all such
transactions be accounted for using the purchase
method. Under the purchase method of accounting for
business combinations, the aggregate purchase price for
the acquired business is allocated to the assets acquired
and liabilities assumed based on their estimated fair
values at the acquisition date.
Acquisition of DesignPac Gifts LLC
On April 30, 2008, the Company acquired all of
the membership interest in DesignPac Gifts LLC
(DesignPac), a designer, assembler and distributor of
gourmet gift baskets, gourmet food towers and gift sets,
including a broad range of branded and private label
components, based in Melrose Park, IL. The acquisition,
for approximately $33.3 million in cash, net of cash
acquired, was financed utilizing a combination of
available cash generated from operations and through
borrowings against the Company’s revolving credit facility.
The purchase price is subject to “earn-out” incentives
which amount to a maximum of $2.0 million through the
As described further under “Subsequent Events” in
order to fund the increase in working capital requirements
associated with DesignPac, and to provide for additional
operational flexibility, on August 28, 2008, the Company
entered into a $293.0 million Amended and Restated Credit
Agreement with JPMorgan Chase Bank N.A., as administra-
tive agent, and a group of lenders (the “2008 Credit Facility”).
The 2008 Credit Facility provides for borrowings of up to
$293.0 million, including: (i) a $165.0 million revolving credit
commitment, (ii) $60.0 million of new term loan debt, and (iii)
$68.0 million of existing term loan debt associated with the
Company’s previous credit facility. Interest is at LIBOR plus
1.5% to 2.5% for the Company’s existing term loan and
revolving credit facility, and LIBOR plus 2.0% to 3.0%, for
the Company’s new term loan, with pricing based upon the
Company’s leverage ratio.
The Company is in the process of finalizing its
allocation of the purchase price to individual assets
acquired and liabilities assumed as a result of the
acquisition of DesignPac. This will result in potential
adjustments to the carrying value of DesignPac’s re-
corded assets and liabilities, the establishment of certain
additional intangible assets, revisions of useful lives of
intangible assets, some of which will have indefinite lives
not subject to amortization, and the determination of any
residual amount that will be allocated to goodwill. The
preliminary allocation of the purchase price included in
the current period balance sheet is based on the best
estimates of management and is subject to revision
based on final determination of asset fair values and
useful lives. The following table summarizes the alloca-
tion of purchase price to the estimated fair values of
assets acquired and liabilities assumed at the
date of the acquisition of DesignPac:
DesignPac
Purchase
Price
Allocation
(in thousands)
Current assets
Property, plant and equipment
Intangible assets
Goodwill
Other
Total assets acquired
Current liabilities
Total liabilities assumed
Net assets acquired
$ 1,287
1,172
18,908
12,085
81
33,533
184
184
$33,349
Although not finalized, of the $18.9 million of acquired
intangible assets related to the DesignPac acquisition, $6.4
million was assigned to trademarks that are not subject to
amortization, while the remaining acquired intangibles of
21
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
capital line. The Company has since relocated the
operations of Wind & Weather to its Madison, Virginia
facility, and terminated operations in California.
Pro forma Results of Operation
The following unaudited pro forma consolidated
financial information has been prepared as if the acquisi-
tions of DesignPac, Fannie May Confections Brands and
Wind & Weather had taken place at the beginning of
fiscal year 2006. The following unaudited pro forma
information is not necessarily indicative of the results of
operations in future periods or results that would have
been achieved had the acquisitions taken place at the
beginning of the periods presented.
Years Ended
June 29, July 1, July 2,
2008 2007 2006
(in thousands, except per share data)
Net revenues
Operating income
Net income
Net income per
common share
Basic
Diluted
$973,140
$ 44,227
$ 24,250
$963,620
$ 39,608
$ 18,751
$900,321
$ 18,601
$ 5,734
$ 0.38
$ 0.37
$
$
0.29
0.29
$ 0.09
$ 0.09
Note 5. Inventory
The Company’s inventory, stated at cost, which is not in
excess of market, includes purchased and manufactured
finish goods for resale, packaging supplies, raw material
ingredients for manufactured products and associated
manufacturing labor, and is classified as follows:
Years Ended
June 29, July 1,
2008 2007
(in thousands)
Finished goods
Work-in-process
Raw materials
$48,986
3,442
14,855
$67,283
$43,113
3,911
15,027
$62,051
$12.5 million were allocated primarily to customer related
intangibles which are being amortized over the assets’
determinable useful life of 10 years. Approximately $12.1
million of goodwill is deductible for tax purposes.
Acquisition of Fannie May Confections Brands, Inc.
On May 1, 2006, the Company acquired all of the
outstanding common stock of Fannie May Confections
Brands, Inc. (hereafter referred to as “Fannie May Confec-
tions Brands”), a manufacturer and multi-channel retailer
and wholesaler of premium chocolate and other confec-
tions under the well-known Fannie May, Harry London and
Fanny Farmer brands. The acquisition, for a purchase price
of approximately $96.6 million in cash, including the
achievement of certain “earn-out” incentives and transac-
tion costs, included a 200,000-square foot manufacturing
facility in North Canton, Ohio and 52 Fannie May retail
stores in the Chicago area, where the chocolate brand has
been a tradition since 1920. The purchase price was
subject to “earn-out” incentives which amounted to a
maximum of $6.0 million (of which $4.4 million was
achieved), upon achievement of specified earnings targets.
In order to finance the Fannie May Confections Brands
acquisition, on May 1, 2006, the Company entered into a
$135.0 million secured credit facility with JPMorgan Chase
Bank, N.A., as administrative agent, and a group of lenders
(the “2006 Credit Facility”). The 2006 Credit Facility, as
amended, which was subsequently amended and restated
on August 28, 2008 (refer to “Subsequent Events”), included
an $85.0 million term loan and a $75.0 million revolving
facility, which carried interest at LIBOR plus 0.625% to
1.125%, with pricing based upon the Company’s leverage
ratio. At closing, the Company borrowed $85.0 million of the
term facility to acquire all of the outstanding capital stock of
Fannie May Confections Brands.
Acquisition of Wind & Weather
On October 31, 2005, the Company acquired all of the
outstanding common stock of Wind & Weather, a Fort
Bragg, California based direct marketer of weather-
themed gifts, with annual revenues of approximately
$14.4 million during its then most recently completed
fiscal year ended March 31, 2005. The purchase price of
approximately $5.2 million, including acquisition costs,
was funded utilizing the Company’s then existing line of
credit which was repaid during the Company’s second
quarter of fiscal 2006 utilizing cash generated from
operations, and excludes the assumption of Wind &
Weather’s $1.2 million balance on its seasonal working
22
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 6. Goodwill and Intangible Assets
The change in the net carrying amount of goodwill is as follows (in thousands):
1-800-Flowers.com BloomNet Gourmet Home and
Consumer Wire Food and Children’s
Floral Service Gift Baskets Gifts Total
$
Balance at July 2, 2006
Acquisition of Wind & Weather
Acquisition of Fannie May
Confections Brands
Purchase Price Allocation of
Fannie May Confections-
Reclassification of goodwill
to intangible assets
Other
Balance at July 1, 2007
Acquisition of DesignPac
Other
$ 6,652
––
––
––
(300)
6,352
––
(187)
Balance at June 29, 2008 $ 6,165
$
––
––
––
––
––
––
––
––
––
The Company’s intangible assets consist of the following:
$105,935
––
$18,554
(54)
$131,141
(54)
6,023
––
6,023
(24,679)
––
87,279
12,085
373
$ 99,737
––
––
18,500
––
(238)
$ 18,262
(24,679)
(300)
112,131
12,085
(52)
$124,164
June 29, July 1,
2008 2007
Gross Gross
Amortization Carrying Accumulated Carrying Accumulated
Period Amount Amortization Net Amount Amortization Net
(in thousands)
Intangible assets with determinable lives:
Investment in
licenses
Customer lists
Other
Trademarks with
indefinite lives
Total intangible assets
14-16 years
3-10 years
5-8 years
$ 4,927 $ 4,408
6,042
1,208
11,658
25,570
3,868
34,365
––
46,053
$80,418
––
$11,658
$
519
19,528
2,660
22,707
46,053
$68,760
$ 4,927
14,260
2,639
21,826
39,676
$61,502
$4,085
3,919
748
8,752
––
$8,752
$
842
10,341
1,891
13,074
39,676
$52,750
The amortization of intangible assets for the years ended June 29, 2008, July 1, 2007 and July 2, 2006 was $2.9
million, $2.5 million, and $1.6 million, respectively. Future estimated amortization expense is as follows: 2009 - $4.0
million, 2010 - $3.9 million, 2011 - $3.4 million, 2012 - $2.2 million, and 2013 - $2.0 million, and thereafter - $7.2 million.
23
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 7. Property, Plant and Equipment
June 29, July 1,
2008 2007
(in thousands)
Land
Building and building improvements
Leasehold improvements
Furniture and fixtures
Equipment
Computer equipment
Telecommunication equipment
Software
$
2,516
15,944
21,051
6,032
26,258
57,832
9,331
69,158
208,122
$
2,516
16,209
19,087
5,637
21,278
54,942
9,106
57,763
186,538
Accumulated depreciation and
amortization
142,385
$ 65,737
123,977
$ 62,561
Note 8. Long-Term Debt
June 29, July 1,
2008 2007
(in thousands)
Term loan and revolving
credit line (1)
Commercial note (2)
Obligations under capital
leases (see Note 14)
Less current maturities of
long-term debt and obligations
under capital leases
$68,000
84
$76,500
1,553
12,886
$55,250
10,132
$68,000
(1) Term loan and revolving credit line - In order to
finance the acquisition of Fannie May Confections
Brands, Inc., on May 1, 2006, the Company entered into a
secured credit facility with JPMorgan Chase Bank, N.A.,
as administrative agent, and a group of lenders (the
“2006 Credit Facility”). The 2006 Credit Facility, as
amended, includes an $85.0 million term loan and a
$75.0 million revolving facility, which bear interest at
LIBOR (2.4% at June 29, 2008) plus 0.625% to 1.125%,
with pricing based upon the Company’s leverage ratio
(3.2% at June 29, 2008). At closing, the Company
borrowed $85.0 million of the term facility to acquire all of
the outstanding capital stock of Fannie May Confections
Brands. The Company is required to pay the outstanding
term loan in escalating quarterly installments, with the
final installment payment due on May 1, 2012. The 2006
Credit Facility contains various conditions to borrowing,
and affirmative and negative financial covenants. Concur-
rent with the establishment of the 2006 Credit Facility, the
Company’s previous $25.0 million revolving credit facilities
were terminated. The obligations of the Company and its
subsidiaries under the 2006 Credit Facility are secured by
liens on all personal property of the Company and its
subsidiaries. No amounts were outstanding under the
revolving credit facility at June 29, 2008.
As described further under “Subsequent Events” in
order to fund the increase in working capital requirements
associated with DesignPac, and to provide for additional
operational flexibility, on August 28, 2008, the Company
entered into a $293.0 million Amended and Restated Credit
Agreement with JPMorgan Chase Bank N.A., as administra-
tive agent, and a group of lenders (the “2008 Credit Facility”).
The 2008 Credit Facility provides for borrowings of up to
$293.0 million, including: (i) a $165.0 million revolving credit
commitment, (ii) $60.0 million of new term loan debt, and (iii)
$68.0 million of existing term loan debt associated with the
Company’s previous credit facility. Interest is at LIBOR plus
1.5% to 2.5% for the Company’s existing term loan and
revolving credit facility, and LIBOR plus 2.0% to 3.0%, for the
Company’s new term loan, with pricing based upon the
Company’s leverage ratio.
(2) Commercial note - Bank note relating to obliga-
tions arising from, and collateralized by, the underlying
assets of the Company’s Plow & Hearth facility in Madison,
Virginia. The note, dated June 27, 2003, in the amount of
$6.6 million, bears interest at 5.44% per annum, and
resulted from the consolidation and refinancing of a series
of fixed and variable rate mortgage and equipment notes.
The note is payable in 60 equal monthly installments of
principal and interest commencing August 1, 2003, of
which $0.1 million is outstanding at June 29, 2008.
Year Debt Maturities
(in thousands)
2009
2010
2011
2012
$12,886
12,750
17,000
25,500
$68,136
Note 9. Income Taxes
The Company adopted the provisions of FASB
Interpretation No. 48, Accounting for Uncertainty in
Income Taxes – an interpretation of FASB Statement No.
109, or FIN 48, on July 2, 2007. The Company did not
have any significant unrecognized tax benefits and there
was no material effect on its financial condition or results
of operations as a result of implementing FIN 48.
The Company files income tax returns in the U.S.
federal jurisdiction and various state jurisdictions. The tax
years that remain subject to examination are fiscal 2003
through fiscal 2006. The Company does not believe there
24
52
68,136
79
78,132
As of June 29, 2008, long-term debt maturities,
excluding amounts relating to capital leases, are as
follows:
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
will be any material changes in its unrecognized tax
positions over the next twelve months.
The significant components of the Company’s deferred
income tax assets (liabilities) are as follows:
The Company’s policy is to recognize interest and
penalties accrued on any unrecognized tax benefits as a
component of income tax expense. As of the date of
adoption of FIN 48, the Company did not have any
material accrued interest or penalties associated with any
unrecognized tax benefits, nor was any material interest
expense recognized during the year.
Significant components of the income tax provision
are as follows:
Years Ended
June 29, July 1, July 2,
2008 2007 2006
Years Ended
June 29, July 1, July 2,
2008 2007 2006
(in thousands)
Deferred income tax assets:
Net operating loss
carryforwards
Accrued expenses
and reserves
Stock-based
$ 3,483
$12,944
$25,963
5,876
6,318
6,325
compensation
3,407
2,529
1,098
(in thousands)
Deferred income tax liabilities:
Current provision:
Federal
State
Deferred provision:
Federal
State
Income tax
provision
$
2,207
1,528
3,735
$ (275)
1,841
1,566
$
351
655
1,006
8,767
(186)
8,581
9,082
1,243
10,325
2,120
55
2,175
Other intangibles
Installment sales
Tax in excess of
(8,834)
––
(9,112)
(9,285)
–– (25)
book depreciation (1,482) (1,649) (425)
Net deferred
income tax assets
$ 2,450
$11,030
$23,651
At June 29, 2008, the Company’s federal net operating
loss carryforwards were approximately $4.5 million, which,
if not utilized, will begin to expire in fiscal year 2025.
$ 12,316
$ 11,891
$
3,181
Note 10. Capital Stock
A reconciliation of the U.S. federal statutory tax rate to
the Company’s effective tax rate is as follows:
Years Ended
June 29, July 1, July 2,
2008 2007 2006
Tax at U.S. statutory rates
State income taxes, net
of federal tax benefit
35.0%
35.0%
3.1
6.9
7.3
35.0%
Non-deductible stock-based
compensation
0.1 1.7
8.5
Non-deductible goodwill
amortization
0.3
Tax credits
(0.8)
Tax settlements (0.4)
(0.4)
Other, net
36.9%
2.2
0.4
(0.4)
(5.0)
(3.1) ––
2.0
0.5
50.0%
41.0%
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts
of assets and liabilities for financial reporting pur-
poses and the amounts used for income tax purposes.
25
Holders of Class A common stock generally have the
same rights as the holders of Class B common stock,
except that holders of Class A common stock have one
vote per share and holders of Class B common stock
have 10 votes per share on all matters submitted to the
vote of stockholders. Holders of Class A common stock
and Class B common stock generally vote together as a
single class on all matters presented to the stockholders
for their vote or approval, except as may be required by
Delaware law. Class B common stock may be converted
into Class A common stock at any time on a one-for-one
share basis. Each share of Class B common stock will
automatically convert into one share of Class A common
stock upon its transfer, with limited exceptions.
On January 21, 2008, the Company’s Board of Direc-
tors authorized an increase to its stock repurchase plan
which, when added to the $8.7 million remaining on its
earlier authorization, increased the amount available for
repurchase to $15.0 million. Any such purchases could
be made from time to time in the open market and through
privately negotiated transactions, subject to general mar-
ket conditions. The repurchase program will be financed
utilizing available cash. As of June 29, 2008, $14.0 re-
mains authorized but unused.
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Under this program, as of June 29, 2008, the Com-
pany had repurchased 1,660,786 shares of common stock
for $12.3 million, of which $1.1 million (133,609 shares),
$0.2 million (24,627 shares) and $1.3 million (182,000
shares) were repurchased during the fiscal years ending
June 29, 2008, July, 1 2007 and July 2, 2006, respec-
tively. In a separate transaction, during fiscal 2007, the
Company’s Board of Directors authorized the repurchase
of 3,010,740 shares from an affiliate. The purchase price
was $15,689,000 or $5.21 per share. The repurchase was
approved by the disinterested members of the Company’s
Board of Directors and was in addition to the Company’s
existing stock repurchase authorization.
The amounts of stock-based compensation expense
recognized in the periods presented are as follows:
Years Ended
June 29, July 1, July 2,
2008 2007 2006
(in thousands, except per share data)
Stock options
Restricted stock awards
Total
Deferred income tax benefit
Stock-based compensation
$1,416
2,118
3,534
1,333
$2,736
1,864
4,600
1,353
$3,710
626
4,336
1,120
Note 11. Stock Based Compensation
expense, net
$2,201
$3,247
$3,216
The Company has stock options and restricted stock
awards outstanding to participants under the 1-800-
FLOWERS.COM 2003 Long Term Incentive and Share
Award Plan (the “Plan”). Options are also outstanding
under the Company’s 1999 Stock Incentive Plan, but no
further options may be granted under this plan. The Plan
is a broad-based, long-term incentive program that is
intended to attract, retain and motivate employees,
consultants and directors to achieve the Company’s long-
term growth and profitability objectives, and therefore align
stockholder and employee interests. The Plan provides for
the grant to eligible employees, consultants and directors
of stock options, share appreciation rights (“SARs”),
restricted shares, restricted share units, performance
shares, performance units, dividend equivalents, and other
share-based awards (collectively “Awards”).
The Plan is administered by the Compensation
Committee or such other Board committee (or the entire
Board) as may be designated by the Board (the “Commit-
tee”). Unless otherwise determined by the Board, the
Committee will consist of two or more members of the
Board who are non-employee directors within the
meaning of Rule 16b-3 of the Securities Exchange Act of
1934 and “outside directors” within the meaning of Section
162(m) of the Internal Revenue Code of 1986, as amended.
The Committee will determine which eligible employees,
consultants and directors receive awards, the types of
awards to be received and the terms and conditions thereof.
The Chief Executive Officer shall have the power and
authority to make Awards under the Plan to employees and
consultants not subject to Section 16 of the Exchange Act,
subject to limitations imposed by the Committee.
At June 29, 2008, the Company has reserved approxi-
mately 14.2 million shares of common stock for issuance,
including options previously authorized for issuance
under the 1999 Stock Incentive Plan.
Stock based compensation expense is recorded
within the following line items of operating expenses:
Years Ended
June 29, July 1, July 2,
2008 2007 2006
(in thousands)
Marketing and sales
Technology and
development
General and administrative
Total
$1,051
$1,605 $1,504
546
1,937
$3,534
690
2,305
$4,600
642
2,190
$4,336
Stock-based compensation expense has not been
allocated between business segments, but is reflected in
Corporate. (Refer to Note 13 – Business Segments.)
Stock Options Plans
The weighted average fair value of stock options on
the date of grant, and the assumptions used to estimate
the fair value of the stock options using the Black-Scholes
option valuation model, were as follows:
Years Ended
June 29, July 1, July 2,
2008 2007 2006
Weighted average fair
value of options granted
Expected volatility
Expected life (in years)
Risk-free interest rate
Expected dividend yield
$4.36
45%
5.3
4.1%
0.0%
$3.29
46%
5.3
4.6%
0.0%
$3.16
46%
5.3
4.6%
0.0%
26
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
The expected volatility of the option is determined using historical volatilities based on historical stock prices. The
Company estimated the expected life of options granted to be the average of the Company’s historical expected term
from vest date and the midpoint between the average vesting term and the contractual term. The risk-free interest rate is
determined using the yield available for zero-coupon U.S. government issues with a remaining term equal to the
expected life of the option. The Company has never paid a dividend, and as such the dividend yield is 0.0%.
The following table summarizes stock option activity during the year ended June 29, 2008:
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Options Price Term Value (000s)
9,152,665
Outstanding – beginning of period
201,000
Granted
Exercised (1,049,839)
Forfeited/Expired (431,482)
Outstanding – end of period
7,872,344
Options vested or expected to
vest at end of period
Exercisable at end of period
7,669,842
6,731,372
$8.10
$9.50
$4.50
$9.65
$8.47
$8.49
$8.63
4.0 years
3.9 years
3.5 years
$5,364
$5,336
$5,208
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between
the company’s closing stock price on the last trading day of fiscal 2008 and the exercise price, multiplied by the number of
in-the-money options) that would have been received by the option holders had all option holders exercised their options
on June 29, 2008. This amount changes based on the fair market value of the company’s stock. The total intrinsic value of
options exercised for the years ended June 29, 2008, July 1, 2007 and July 2, 2006 was $5.9 million, $1.0 million, and
$0.3 million, respectively.
The following table summarizes information about stock options outstanding at June 29, 2008:
Options Outstanding Options Exercisable
Weighted- Weighted- Weighted-
Average Average Average
Options Remaining Exercise Options Exercise
Exercise Price Outstanding Contractual Life Price Exercisable Price
2.00 - 4.50
$
$
5.25 - 6.52
$ 6.58 - 8.45
$ 8.56 - 12.87
$ 13.05 - 21.00
1,722,735
1,940,662
1,713,463
1,947,438
548,046
7,872,344
2.1 years
5.2 years
6.0 years
3.5 years
1.2 years
4.0 years
$ 4.03
$ 6.39
$ 7.42
$12.04
$20.33
$ 8.47
1,722,735
1,537,162
1,118,451
1,804,978
548,046
6,731,372
$ 4.03
$ 6.40
$ 7.26
$12.21
$20.33
$ 8.63
As of June 29, 2008, the total future compensation
cost related to nonvested options not yet recognized in
the statement of income was $2.4 million and the
weighted average period over which these awards are
expected to be recognized was 1.6 years.
The Company grants shares of Common Stock to its
employees that are subject to restrictions on transfer and
risk of forfeiture until fulfillment of applicable service
conditions and, in certain cases, holding periods (Restricted
Stock). In fiscal 2005, the Company recorded the grant date
fair value of unvested shares of Restricted Stock as
unearned stock-based compensation (“Deferred Compen-
sation”). In accordance with SFAS No. 123(R), in fiscal 2006,
the Company reclassified the balance of Deferred Compen-
sation against additional paid-in capital, and reduced its
shares of Class A Common Stock issued accordingly.
The following table summarizes the activity of non-vested
restricted stock during the year ended June 29, 2008:
Weighted
Average
Grant Date
Shares Fair Value
Non-vested – beginning of period 1,101,982 $ 5.70
Granted 665,399 $11.40
Vested (18,677) $ 7.44
Forfeited (473,551) $ 8.57
Non-vested – end of period 1,275,153 $ 7.58
The fair value of nonvested shares is determined
based on the closing stock price on the grant date. As of
27
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
June 29, 2008, there was $4.4 million of total unrecog-
nized compensation cost related to non-vested restricted
stock-based compensation to be recognized over a
weighted-average period of 1.7 years.
Note 12. Profit Sharing Plan
The Company has a 401(k) Profit Sharing Plan
covering substantially all of its eligible employees. All full-
time employees who have attained the age of 21 are
eligible to participate upon completion of one year of
service. Participants may elect to make voluntary contri-
butions to the 401(k) plan in amounts not exceeding
federal guidelines. On an annual basis the Company, as
determined by its board of directors, may make certain
discretionary contributions. Employees are vested in the
Company’s contributions based upon years of service.
The Company made contributions of $0.7 million, $0.5
million, and $0.4 million, for the years ended June 29,
2008, July 1, 2007 and July 2, 2006, respectively.
During fiscal 2008, the Company adopted a
nonqualified supplemental deferred compensation plan
for certain executives pursuant to Section 409A of the
Internal Revenue Code. Participants can defer from 1%
up to a maximum of 100% of salary and performance and
non-performance based bonus. The Company will match
50% of the deferrals made by each participant during the
applicable period, up to a maximum of $2,500. Employ-
ees are vested in the Company’s contributions based
upon years of participation in the plan. Distributions will
be made to Participants upon termination of employment
or death in a lump sum, unless installments are selected.
Note 13. Business Segments
During the first quarter of fiscal 2007, the Company
segmented its organization to improve execution and
customer focus and to align its resources to meet the
demands of the markets it serves. The Company’s
management reviews the results of the Company’s
operations by the following four business categories:
(cid:127) 1-800-Flowers.com Consumer Floral;
(cid:127) BloomNet Wire Service;
(cid:127) Gourmet Food and Gift Baskets; and
(cid:127) Home and Children’s Gifts.
Category performance is measured based on
contribution margin, which includes only the direct
controllable revenue and operating expenses of the
categories. As such, management’s measure of profitabil-
ity for these categories does not include the effect of
corporate overhead (see * below), which are operated
under a centralized management platform, providing
services throughout the organization, nor does it include
stock-based compensation, depreciation and amortiza-
tion, other income (net), and income taxes. Assets and
liabilities are reviewed at the consolidated level by
management and not accounted for by category.
Net Revenues
Years Ended
June 29, July 1, July 2,
2008 2007 2006
(in thousands)
Net revenues:
1-800-Flowers.com
Consumer Floral
BloomNet Wire
Service
Gourmet Food &
Gift Baskets
Home &
Children’s Gifts
Corporate (*)
Intercompany
$491,696
$491,404
$452,188
53,488
44,379
29,884
196,298
192,698
105,002
180,181
2,431
186,948
1,652
196,919
1,388
eliminations (4,702) (4,483) (3,640)
Total net revenues
$919,392
$912,598
$781,741
Operating Income
Years Ended
June 29, July 1, July 2,
2008 2007 2006
(in thousands)
Category Contribution Margin:
1-800-Flowers.com
Consumer Floral
BloomNet Wire
Service
Gourmet Food &
Gift Baskets
Home &
Children’s Gifts
Category Contribution
$ 62,967
$ 64,580
$ 46,518
18,509
14,169
7,106
24,593
26,377
6,827
3,438
(1,215)
7,134
Margin Subtotal
67,585
109,507
Corporate (*) (51,777) (51,081) (45,311)
103,911
Depreciation and
amortization (20,363) (17,837) (15,765)
Operating income (loss)
$ 37,367
$ 34,993
$ 6,509
(*) Corporate expenses consist of the Company’s enter-
prise shared service cost centers, and include, among
others, Information Technology, Human Resources,
Accounting and Finance, Legal, Executive and Customer
Service Center functions, as well as Stock-Based Compen-
sation. In order to leverage the Company’s infrastructure,
these functions are operated under a centralized manage-
28
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
ment platform, providing support services throughout the
organization. The costs of these functions, other than those
of the Customer Service Center which are allocated
directly to the above categories based upon usage, are
included within corporate expenses, as they are not
directly allocable to a specific category.
At June 29, 2008, the aggregate future sublease
rental income under long-term operating sub-leases for
land and buildings and corresponding rental expense
under long-term operating leases were as follows:
Sublease Sublease
Income Expense
Note 14. Commitments and Contingencies
(in thousands)
Leases
The Company currently leases office, store facilities,
and equipment under various operating leases through
fiscal 2019. As these leases expire, it can be expected that
in the normal course of business they will be renewed or
replaced. Most lease agreements contain renewal options
and rent escalation clauses and require the Company to
pay real estate taxes, insurance, common area mainte-
nance and operating expenses applicable to the leased
properties. The Company has also entered into leases that
are on a month-to-month basis. All leases and subleases
with an initial term of greater than one year are accounted
for under SFAS No. 13, Accounting for Leases. These
leases are classified as either capital leases, operating
leases or subleases, as appropriate.
As of June 29, 2008 future minimum payments under
non-cancelable capital lease obligations and operating
leases with initial terms of one year or more consist of the
following:
Obligations
Under
Capital Operating
Leases Leases
(in thousands)
2009
2010
2011
2012
2013
Thereafter
Total minimum lease payments
Less amounts representing interest
Present value of net minimum
lease payments
14
13
13
13
6
––
$ 59
(7)
$ 52
$14,863
11,906
10,279
8,938
7,666
25,070
$78,722
2009
2010
2011
2012
2013
Thereafter
$2,814
1,940
1,384
933
550
886
$8,507
$2,814
1,940
1,384
933
550
886
$8,507
Rent expense was approximately $19.8 million, $18.9
million, and $13.7 million for the years ended June 29,
2008, July 1, 2007 and July 2, 2006, respectively.
Litigation
There are various claims, lawsuits, and pending
actions against the Company and its subsidiaries incident
to the operations of its businesses. It is the opinion of
management, after consultation with counsel, that the
ultimate resolution of such claims, lawsuits and pending
actions will not have a material adverse effect on the
Company’s consolidated financial position, results of
operations or liquidity.
In the Company’s Form 10Q for the quarterly period
ended March 30, 2008, the Company disclosed that in
October 2007, 1-800-Flowers.Com., Inc. and its subsidiary,
1-800-Flowers Retail, Inc., (collectively “the Company”),
were served with a purported nationwide class action
lawsuit filed in the United States District Court, in and for
the Southern District of Florida (Grabein v. 1-800-
Flowers.Com., Inc., et al; Case No. 07-22235). The
Complaint alleged violation of the Federal Fair and
Accurate Credit Transaction Act (“FACTA”) based upon the
allegation that the Company printed/provided receipts to
consumers at the point of sale or transaction on which
receipts appeared more than the last five digits of custom-
ers’ credit or debit card numbers and/or the expiration
dates of such cards. The Complaint did not specify any
actual damages for any member of the purported class.
However, the Complaint sought statutory damages of $100
to $1,000 for each alleged willful violation of the statute, as
well as attorneys’ fees, costs, punitive damages and a
permanent injunction. The Company vigorously defended
the action and on June 13, 2008, the presiding Judge
issued a Final Order of Dismissal whereby the case was
dismissed with prejudice and no payment of any kind was
made by the Company or its subsidiary.
29
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 15. Subsequent Events
Acquisition of Napco Marketing Corp.
On July 21, 2008, the Company acquired selected
assets of Napco Marketing Corp. (Napco), a wholesale
merchandiser and marketer of products designed primarily
for the floral industry. The purchase price of approximately
$9.5 million included the acquisition of a fulfillment center
located in Jacksonville, FL, inventory, and certain other
assets, as well as the assumption of certain related
liabilities, including their seasonal line of credit of approxi-
mately $4.0 million. The acquisition was financed utilizing
a combination of available cash generated from operations
and through borrowings against the Company’s revolving
credit facility, which as described below, was subsequently
amended by the Company’s 2008 Credit Facility. The
purchase price is subject to “earn-out” incentives which
amount to a maximum of $1.6 million through the years
ending July 2, 2012, upon achievement of specified
performance targets.
2008 Credit Facility
On August 28, 2008, the Company entered into a
$293.0 million Amended and Restated Credit Agreement
with JPMorgan Chase Bank, N.A., as administrative
agent, and a group of lenders (the “2008 Credit Facility”).
The 2008 Credit Facility provides for borrowings of up to
$293.0 million, including: (i) a $165.0 million revolving
credit commitment, (ii) $60.0 million of new term loan
debt, and (iii) $68.0 million of existing term loan debt
associated with the Company’s previous credit facility.
Interest is at LIBOR plus 1.5% to 2.5% for the Company’s
existing term loan and revolving credit facility, and LIBOR
plus 2.0% to 3.0%, for the Company’s new term loan, with
pricing based upon the Company’s leverage ratio. At
closing of the 2008 Credit Facility, the Company utilized
the proceeds of the new term loan to pay down amounts
outstanding under its previous revolving credit facility. The
repayment terms of the existing term loan remain
unchanged, while the new term loan is required to be
repaid in equal quarterly installments of $3.0 million
beginning in December 2008, with the final installment
payment due on August 28, 2013. The 2008 Credit Facility
contains various conditions to borrowing, and affirmative
and negative financial covenants. The obligations of the
Company and its subsidiaries under the 2008 Credit
Facility are secured by liens on all personal property of
the Company and its subsidiaries.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
1-800-FLOWERS.COM, Inc. and Subsidiaries
We have audited the accompanying consolidated
balance sheets of 1-800-FLOWERS.COM, Inc. and
Subsidiaries (the “Company”) as of June 29, 2008 and
July 1, 2007, and the related consolidated statements
of income, stockholders’ equity, and cash flows for each
of the three years in the period ended June 29, 2008.
These financial statements are the responsibility of
the Company’s management. Our responsibility is to
express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight
Board (United States). 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.
Subsidiaries at June 29, 2008 and July 1, 2007,
and the consolidated results of their operations and their
cash flows for each of the three years in the period ended
June 29, 2008, in conformity with U.S. generally accepted
accounting principles.
As discussed in Note 9 to the consolidated financial
statements the Company adopted FASB Interpretation
No. 48 “Accounting for Uncertainty in Income Taxes –
an interpretation of FASB Statement No. 109,” effective
July 2, 2007.
We also have audited, in accordance with the
standards of the Public Company Accounting Oversight
Board (United States), 1-800-FLOWERS.COM, Inc. and
Subsidiaries’ internal control over financial reporting as
of June 29, 2008, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission
and our report dated September 10, 2008 expressed an
unqualified opinion thereon.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the consoli-
dated financial position of 1-800-FLOWERS.COM, Inc. and
Melville, New York
September 10, 2008
30
Management’s Report on Internal Control Over Financial Reporting
Management of the Company is responsible for
establishing and maintaining adequate internal control
over financial reporting. Internal control over financial
reporting is defined in Rules 13-a-15(f) and 15d-15(f)
under the Exchange Act as a process designed by, or
under the supervision of, the Company’s principal execu-
tive and principal financial officers and effectuated by the
Company’s board of directors, management and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance
with U.S. generally accepted accounting principles and
includes those policies and procedures that:
(cid:127) pertain to the maintenance of records that, in reason-
able detail, accurately and fairly reflect the transactions
and dispositions of the assets of the Company;
(cid:127) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with generally accepted account-
ing principles, and that receipts and expenditures of the
Company are being made only in accordance with authori-
zation of management and directors of the Company; and
(cid:127) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in
conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management assessed the effectiveness of the
Company’s internal control over financial reporting as of
June 29, 2008. In making this assessment, management
used the criteria established in “Internal Control-Inte-
grated Framework,” issued by the Committee of Sponsor-
ing Organizations of the Treadway Commission (COSO).
Based on this assessment, management believes
that, as of June 29, 2008 the Company’s internal control
over financial reporting is effective.
The Company acquired DesignPac Gifts LLC on April
30, 2008, and has excluded the acquired company from
its assessment of and conclusion on the effectiveness of
internal control over financial reporting. The acquired
business constituted approximately 10.0% of total assets
as of June 29, 2008, and less than one percent of
revenues for the fiscal year then ended.
Ernst & Young LLP, the Company’s independent
registered public accounting firm, has issued a report on
the effectiveness of the Company’s internal control over
financial reporting, as of June 29, 2008; their report is
included on the following page.
James F. McCann
Chief Executive Officer
Chairman of the Board of Directors
(Principal Executive Officer)
William E. Shea
Senior Vice President Finance and Administration
(Principal Financial and Accounting Officer)
31
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
1-800-FLOWERS.COM, Inc. and Subsidiaries
We have audited 1-800-FLOWERS.COM, Inc. and
Subsidiaries (the “Company”) internal control over
financial reporting as of June 29, 2008, based on criteria
established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). The
Company’s management is responsible for maintaining
effective internal control over financial reporting, and for
its assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on
the company’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assur-
ance about whether effective internal control over
financial reporting was maintained in all material re-
spects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating
the design and operating effectiveness of internal control
based on the assessed risk, and performing such other
procedures as we considered necessary in the circum-
stances. We believe that our audit provides a reasonable
basis for our opinion.
A company’s internal control over financial reporting is
a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes
in accordance with generally accepted accounting
principles. A company’s internal control over financial
reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting prin-
ciples, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3)
provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in
conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
As indicated in the accompanying Management’s
Report on Internal Control Over Financial Reporting,
management’s assessment of and conclusion on the
effectiveness of internal control over financial reporting
did not include the internal controls of DesignPac Gifts
LLC, which is included in the fiscal 2008 consolidated
financial statements of the Company and constituted
approximately 10.0% of total assets as of June 29, 2008
and less than one percent of revenues for the fiscal year
then ended. Our audit of internal control over financial
reporting of the Company also did not include an
evaluation of the internal control over financial reporting
of DesignPac Gifts LLC.
In our opinion, 1-800-FLOWERS.COM, Inc. and
Subsidiaries maintained, in all material respects, effective
internal control over financial reporting as of June 29,
2008, based on the COSO criteria.
We have also audited, in accordance with the
standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of
1-800-FLOWERS.COM, Inc. and Subsidiaries as of June
29, 2008 and July 1, 2007, and the related consolidated
statements of income, stockholders’ equity, and cash
flows for each of the three years in the period ended June
29, 2008 and our report dated September 10, 2008
expressed an unqualified opinion thereon.
Melville, New York
September 10, 2008
32
Market for Common Equity and Related Stockholder Matters
Market Information
1-800-FLOWERS.COM’s Class A common stock
trades on The Nasdaq Stock Market under the ticker
symbol “FLWS.” There is no established public trading
market for the Company’s Class B common stock. The
following table sets forth the reported high and low sales
prices for the Company’s Class A common stock for each
of the fiscal quarters during the fiscal years ended June
29, 2008 and July 1, 2007.
High Low
Year ended June 29, 2008
July 2, 2007 – September 30, 2007
October 1, 2007 – December 30, 2007
December 31, 2007 – March 30, 2008
March 31, 2008 – June 29, 2008
Year ended July 1, 2007
July 3, 2006 – October 1, 2006
October 2, 2006 – December 31, 2006
January 1, 2007 – April 1, 2007
April 2, 2007 – July 1, 2007
$12.38
$13.42
$ 9.00
$ 9.26
$ 6.10
$ 6.35
$ 8.00
$ 9.47
$ 8.47
$ 8.66
$ 6.35
$ 6.51
$ 4.33
$ 4.94
$ 5.84
$ 7.66
Rights of Common Stock
Holders of Class A common stock generally have the
same rights as the holders of Class B common stock,
except that holders of Class A common stock have one
vote per share and holders of Class B common stock
have 10 votes per share on all matters submitted to the
vote of stockholders. Holders of Class A common stock
and Class B common stock generally vote together as a
single class on all matters presented to the stockholders
for their vote or approval, except as may be required by
Delaware law. Class B common stock may be converted
into Class A common stock at any time on a one-for-one
share basis. Each share of Class B common stock will
automatically convert into one share of Class A common
stock upon its transfer, with limited exceptions.
Holders
As of September 4, 2008, there were approximately
271 stockholders of record of the Company’s Class A
common stock, although the Company believes that there
is a significantly larger number of beneficial owners. As of
September 4, 2008, there were approximately 22 stock-
holders of record of the Company’s Class B common stock.
Dividend Policy
Although the Company has never declared or paid
any cash dividends on its Class A or Class B common
stock, the Company anticipates that it will generate
increasing free cash flow in excess of its capital invest-
ment requirements. Although the Company has no
current intent to do so, the Company may choose, at
some future date, to use some portion of its cash for the
purpose of cash dividends.
Resales of Securities
36,923,032 shares of Class A and Class B common
stock are “restricted securities” as that term is defined in
Rule 144 under the Securities Act. Restricted securities
may be sold in the public market from time to time only if
registered or if they qualify for an exemption from
registration under Rule 144 or 701 under the Securities
Act. As of September 4, 2008, all of such shares of the
Company’s common stock could be sold in the public
market pursuant to and subject to the limits set forth in
Rule 144. Sales of a large number of these shares could
have an adverse effect on the market price of the
Company’s Class A common stock by increasing the
number of shares available on the public market.
Purchases of Equity Securities by the Issuer
On January 21, 2008, the Company’s Board of
Directors authorized an increase to its stock repurchase
plan which, when added to the $8.7 million remaining on
its earlier authorization, increased the amount available
for repurchase to $15.0 million. Any such purchases
could be made from time to time in the open market and
through privately negotiated transactions, subject to
general market conditions. The repurchase program will
be financed utilizing available cash. As of June 29, 2008,
$14.0 remains authorized but unused.
Under this program, as of June 29, 2008, the Com-
pany had repurchased 1,660,786 shares of common
stock for $12.3 million, of which $1.1 million (133,609
shares), $0.2 million (24,627 shares) and $1.3 million
(182,000 shares) were repurchased during the fiscal
years ending June 29, 2008, July, 1 2007 and July 2,
2006, respectively. In a separate transaction, during fiscal
2007, the Company’s Board of Directors authorized the
repurchase of 3,010,740 shares from an affiliate. The
purchase price was $15,689,000 or $5.21 per share. The
repurchase was approved by the disinterested members
of the Company’s Board of Directors and was in addition
to the Company’s existing stock repurchase authorization.
33
Comparison of 5 Year Cumulative Total Return*
Among 1-800-FLOWERS.COM, Inc., the Russell 2000 Index
and the NASDAQ Non-Financial Index
■
1-800-FLOWERS.COM, INC.
▼
Russell 2000
●
Nasdaq Non-Financial
* $100 invested on 6/30/03 in stock & index-including reinvestment of dividends.
Fiscal year ending June 30.
34
One Old Country Road, Suite 500
Carle Place, NY 11514
(516) 237-6000
STOCK EXCHANGE LISTING
NASDAQ Global Select Market
Ticker Symbol: FLWS
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, New York 11219
(718) 921-8200
INDEPENDENT AUDITORS
Ernst & Young LLP
395 North Service Road
Melville, New York 11747
(631) 752-6100
SEC COUNSEL
Cahill Gordon and Reindel LLP
80 Pine Street
New York, NY 10005
(212) 701-3000
SHAREHOLDER INQUIRIES
Copies of the Company’s reports on Forms
10-K and 10-Q as filed with the Securities
and Exchange Commission and additional
information about 1-800-FLOWERS.COM
may be obtained by visiting the Investor
Relations section at www.1800flowers.com,
by calling 516-237-6113,
or by writing to:
Investor Relations
1-800-FLOWERS.COM, Inc.
One Old Country Road, Suite 500
Carle Place, NY 11514
Timothy J. Hopkins
President
Madison Brands
1-800-FLOWERS.COM
David Taiclet
President
Gourmet Foods & Gift Baskets
Timothy J. Hopkins
President
Madison Brands
1-800-FlOWERS.COM
David Taiclet
President
Gourmet Food & Gift Baskets
1-800-FlOWERS.COM
One Old Country Road, Suite 500, Carle Place, NY 11514
(516) 237-6000 • www.1800flowers.com