2009 Annual Report
F o c uS
SpeciAl BonuS: 2010 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,
confections, balloons and plush stuffed animals perfect for every occasion. 1-800-FloWeRS® (1-800-356-9377 or
www.1800flowers.com), was listed as a Top 50 online Retailer by internet Retailer in 2006, 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 art-
ists and hand-delivered the same day, and spectacular flowers shipped overnight from its Fresh From our Growers® collec-
tion. As always, 100% satisfaction and freshness are guaranteed. The company’s Bloomnet® international 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 pop-
corn 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); wine gifts from Ambrosia® (www.ambrosia.com)
and Geerlings&WadeSM (www.geerwade.com); gift baskets from 1-800-BASKeTS.coM® (www.1800baskets.com) and
Designpac® gifts (www.designpac.com); as well as celebrations® (www.celebrations.com), a new premier online destination
for fabulous party ideas and planning tips. 1-800-FloWeRS.coM, inc. is involved in a broad range of corporate
social responsibility initiatives including continuous expansion and enhancement of its environmentally-friendly “green”
programs, various philanthropic and charitable efforts and special private-sector skills training programs for military
veterans. Shares in 1-800-FloWeRS.coM, inc. are traded on the nASDAQ Global Select Market, ticker symbol: FlWS.
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 2010 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.
Financial Highlights
(From continuing Operations(1))
June 28,
2009
June 29,
2008
Years ended
JulY 1,
2007
JulY 2,
2006
(in millions, except percentages and per share data)
Total net Revenues
Gross profit Margin
operating expense Ratio(2)
Adjusted EBITDA
Adjusted EPS
$714.0
39.4%
37.2%
$ 36.5 (3)
$ 0.11(4)
$739.2
42.2%
34.4%
$ 57.1
$ 0.34
$725.7
42.2%
34.4%
$ 57.2
$ 0.32
$584.8
40.0%
36.9%
$ 18.1
$ 0.03
JulY 3,
2005
$498.4
39.3%
34.9%
$ 21.7
$ 0.10
(1) During fiscal 2009, the Company made the strategic decision to divest its Home and Children’s Gifts business segment. The Company has classified the results of opera-
tions of its Home & Children’s Gifts segment as discontinued operations for all periods presented. Also, the Company’s fiscal 2009 results include a number of non-recurring
items which impact comparability. These items are excluded from the adjusted results presented in the table above and throughout the enclosed Financial Section.
(2) Operating expense ratio excludes depreciation and amortization and, for fiscal 2009, excludes non-recurring items (goodwill and intangible impairment of $85.4 million
and severance and other restructuring costs of $2.5 million) which impact comparability.
(3) Fiscal 2009 EBITDA is adjusted for non-recurring charges which impact comparability. Refer to the Company’s 10-K filing for reconciliations of net income (loss) from
continuing operations to adjusted EBITDA from continuing operations.
(4) Fiscal 2009 EPS is adjusted for non-recurring charges which impact comparability. Refer to the Company’s 10-K filing for reconciliations of net income (loss) from
continuing operations to adjusted net income (loss) from continuing operations.
Fiscal 2009 Achievements
• Achieved adjusted EBITDA and EPS from continuing
operations of $36.5 million and $0.11, respectively, despite
the impact of the dramatic economic downturn on
consumer demand.
• Achieved implementation of programs to drive $50 million
in operating expense reductions, based on FY08 pro forma
operating expenses.
• Made strategic decision to divest the Home and
children’s Gifts category, enabling increased focus on key
growth opportunities and significantly reducing working
capital needs.
• Revised bank credit facility agreement to provide ample
access to capital and increased flexibility in loan covenants.
Total Revenues
(From continuing Operations(1))
(in Millions)
EBITDA (1) (3)
$584.8
$498.4
$21.7
$18.1
$725.7
$739.2
$714.0
$57.2
$57.1
$36.5
FY05
FY06
FY07
FY08
FY09
% Revenues by category
Key Strategic Priorities
• Know and Take Care of Our Customers.
• Maintain and Enhance Financial Strength
and Flexibility.
• Continue to Innovate and Invest for the Future.
Gourmet Food
& Gift Baskets
33%
1-800-Flowers.com
Consumer Floral
58%
Financial Report Insert
See inside rear cover pocket
9%
BloomNet® Wire Service
To Our Shareholders
What are the key strategic priorities that
you are focused on?
Jim:
As we saw the consumer continue to struggle and the overall
economic environment unravel last year, we focused on three
key priorities which have served us well in good times and in
challenging times. And those three key priorities are:
1) Make sure we know our customer and take care of them as
best we can;
2) Make sure we take care of our finances: manage for cash,
manage our balance sheet, make sure we have the right
financing and banking relationships in place. We’ve done that
as well;
3) And third and finally, we’ve been here for 33 years, we’re
going to be here for at least another 33…let’s make sure we
continue to invest in innovation for the future.
What changes have you made to enhance future
growth opportunities?
Jim:
enhancing our future growth opportunities, and our current
growth initiatives as well, brought us to a strategic decision-
making process which led to our decision to divest ourselves of
our home and children’s gift business. This business has a differ-
ent asset and financial profile compared with our core flower
and gourmet food gift businesses. Therefore, we determined
these businesses don’t leverage our platform as well as do the
floral and gourmet categories. As a result, we’ve designated
them discontinued operations. it wasn’t an easy decision to
come to, but we decided let’s segregate them so that investors
could see clearly what our future investments were going to be
and how they would yield the best results.
How important is customer knowledge?
Chris:
As a company, we are focused on providing the right products
and the right services to our customers to help them express
themselves and connect to the important people in their lives.
in order to do so, we really need to know them and take care
of them. We have developed very specific personas for each
of our good, better and best customer segments in each of
our brands. We take that data and our deep understanding
of those customers and make sure that we are developing the
right products for all of their needs throughout the year and
making sure that our marketing programs are reaching them
in their daily lives and speaking to them in a voice that engages
them and really connects with them. in addition, we’re learning
our customers are migrating to new platforms, new technolo-
gies, new ways of communication. Social networking is a great
example of that. We need to make sure that we’re involved in
social networking because that’s where our customers are. And
we continue to enhance our capabilities there. in fact this year
we launched an application in Facebook that allows our cus-
tomers to conduct commerce within Facebook…the first of any
application to do so. in taking care of our customers we need
This year, our message is presented in an interview format.
Founder and ceo Jim Mccann and president chris Mccann
discuss fiscal 2009 results and their outlook for fiscal 2010.
How did 1-800-FLOWERS.COM react to the
unprecedented changes in the economy in fiscal 2009?
Jim:
clearly 1-800-Flowers was impacted by the overall consumer
environment. We were reminded that there’s a discretionary
nature to our business as well. So when we saw, as we reached
the holiday period, that the top line and bottom line were not
going to be what we wanted, we reacted by making sure we were
doing the right things in terms of taking care of our customer,
and secondly, we reduced our operating expenses by over $50
million. Regarding that $50 million reduction, two things: one is
it’s on top of the $25 million we had taken out in the previous
two years and it was all achieved within the fiscal year, including
the expenses related to it. The result of that was our operating
expenses are a great deal lower going into fiscal 2010. And
for the fiscal year ended June 09, we still had positive adjusted
EPS and positive adjusted EBITDA. In fact the EBITDA was
over $36 million.
[note: $50 million cost reduction is based on pro forma fiscal
2008 operating expenses.]
How will 1-800-FLOWERS.COM improve its financial
results in fiscal 2010?
Chris:
in fiscal 2010 we believe we are very well positioned to drive
improved bottom line results throughout the year. The reason
for this is based on the improvements we made to our operating
platform during this past fiscal year. in fact, our guidance is not
predicated on any improvement in the consumer economy. We
feel it is prudent, on our part, to look out at the economy and
assume that the consumer will continue to be under pressure.
With this said, should the consumer economy improve, we will
be able to drive enhanced profitability as well as top line revenue
this coming year.
to make sure that we make the continued enhancements to our
customer service platform and our e-commerce platforms. So we
already have award-winning websites but we don’t rest on our
laurels there. We make sure that we’re constantly moving ahead
and innovating our web platforms, whether that’s improved
graphics, improved order selection and checkout processes, and
just making it easier for our customers to shop. In addition, this
year we’ll continue to migrate our gourmet food and gift brands
onto our new Fresh Digital e-commerce platform, significantly
enhancing their e-commerce capabilities and also allowing us to
more easily deploy our cross-brand marketing capabilities. This
will allow us to effectively roll out our multi-brand gift cards as
well as our Fresh Rewards loyalty program across all of our floral
and food gift brands.
How have you enhanced your financial strength
and flexibility?
Jim:
in terms of our finances, we’ve already talked about our operat-
ing expenses: a $50 million reduction in the fiscal year that just
ended, 09, so we’re in good position going forward. now in terms
of our balance sheet, we finished the year with approximately $30
million in cash and no borrowings on our revolving credit facility.
Second, during the year, we paid down $20 million additional
on our term debt and we’ve adjusted our agreements with our
banks to eliminate the net worth covenant and to give us more
flexibility going forward so that we have good cash, good
borrowing capability and a really flexible balance sheet to
take advantage of what we think will be a lot of opportunities
going forward.
Chris:
And going forward, as we look at capital expenditures, last year
in fiscal 2009 we spent about $19 million. This year our plans call
for that to be less than $15 million. And when you combine that
with our focus on reducing inventory and improving working
capital, you see how we’ll generate significantly improved Free
cash Flow in fiscal 2010.
What were customer metrics for fiscal 2009?
Chris:
looking at 2009 from a customer’s perspective, because of the
incredible strength of our brand, 5 million e-commerce custom-
ers turned to us to express themselves and connect with the
important people in their lives. in addition, we attracted over
two and a half million new customers to our brands. And, over
50 percent of our transactions came from repeat customers, re-
ally demonstrating the strength that we have and our continued
focus on knowing our customers and most importantly, servicing
their needs every day, day in and day out.
What is your guidance for fiscal 2010?
Jim:
clearly 2009 was a difficult year. concerning guidance for 2010,
when we were planning in the Spring we said let’s expect that the
consumer environment won’t get a lot better. The good news is,
the world seems to be stabilizing, but we can’t take that into
account as we make our plans. We’re assuming that from a top
line perspective we’ll be flat to down 5 percent. We thought
that this was the prudent way to plan. now, from a bottom line
perspective, in spite of that top line challenge, we’re expecting
a great deal of improvement on the bottom line. our eBiTDA
we’re forecasting to be up 20 percent. our epS we’re forecast-
ing to be up 30 percent. Should the consumer environment
improve during this fiscal year, i think we have a great deal of
evidence that we will benefit disproportionately on the bottom
line from any top line growth we get as a result of our lower
operating costs.
What sets 1-800-FLOWERS.COM apart
as a company and an investment?
Jim:
From a business point of view, i think what sets
1-800-FloWeRS.coM apart is that as a leading e-commerce
player we have extraordinary flexibility in terms of a much lower
capital requirement than traditional retailers, particularly when
you look at inventory. Secondly, i think we have demonstrated
the leverage in our platform to reduce our operating expenses
and our cApeX scenario. And then the third is that we have a
very strong balance sheet with ample reserves and capabilities
to give us a great deal of flexibility as we look ahead at all the
options we see developing in front of us.
Chris:
And of course we have a great e-commerce leading brand
in 1-800-Flowers.com. 1-800-Flowers coupled with our
Bloomnet wire service puts us in a great position to catch an
even greater share of the floral gifting market. plus now, as we
look at 1-800-Baskets.com, leveraging what we’ve assembled
already in the gourmet food and gift basket category is enabling
us to really go after and capture a leading share of what is a $16
billion gourmet food and gift basket category.
Jim:
So you see a good solid business, with great financial flexibility,
improving operating expenses and ratios across the board. You
see us in a good solid category in the flower and gift business,
you see us growing into a very exciting gourmet gift food cat-
egory which is large and getting larger. And you see us con-
stantly innovating and developing new techniques of engaging
our customer. i think we have positioned our company really
well to stay a leading innovator in the e-commerce category.
But more importantly, we’re engaging our customers and we’re
helping them every day to express themselves and connect to
the important people in their lives.
Jim Mccann chris Mccann
chairman and ceo president
January • 2010
FocuS:
1-800-Baskets.com®
Highlighting 1-800-FLOWERS.COM’s marketing
focus in fiscal 2009 and culminating in fiscal
2010 was the launch of 1-800-Baskets.com.
This launch represents the manifestation of
a strategy to bring together the Company’s
many assets, brands, products and services
to serve customers’ celebratory needs more
comprehensively and become their pre-
ferred destination for all their gifting choices.
In addition to attracting a wider customer
base and creating new opportunities in the
multi-billion dollar gourmet food gifts cat-
egory, 1-800-Baskets.com is part of a dual
branded website approach featuring shared
tabs and a common shopping cart with the
1-800-Flowers.com® site. This enables expo-
sure to the new 1-800-Baskets.com brand
without substantial additional marketing
expense to birth a new brand.
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10
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4
11
5
12
18
Martin Luther King Jr.’s Birthday
(observed)
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25
26
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
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New Year’s Day
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15
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29
2
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16
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30
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13
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February • 2010
FocuS:
Social
Networking
1-800-FLOWERS.COM was among the first
businesses to embrace the Internet in 1992
and the first merchant to transact on AOL.
Today, the Company continues to be a
pioneer in web marketing by seizing the
opportunities that exist in the new com-
munications channels of social networking
including Facebook, Twitter and the blogo-
sphere. In fiscal 2009, 1-800-FLOWERS.COM
was the first e-commerce company to
complete a transaction without leaving the
Facebook page. The Company’s highly inter-
active Facebook page enables customers to
access fresh floral products simply by click-
ing on the “Shop!” tab, thereby bringing the
award winning online florist and gift shop
to Facebook’s more than 250 million users.
Customers can also share their thoughts
with other Facebook fans and provide input,
and even offer suggestions to help design
new products.
S u n D A Y
M o n D A Y
T u e S D A Y
1
8
2
Groundhog Day
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Valentine’s Day
15
Presidents’ Day
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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
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march • 2010
FocuS:
BloomNet®
Wire Service
In fiscal 2009, BloomNet further solidified
its standing as the industry benchmark for
quality, dependability and value. Profes-
sional florists look to BloomNet for an
array of innovations to help them grow
their businesses profitably including
LocateMyFlorist.com, an online portal that
enables consumers to search and locate
BloomNet florists with the click of a mouse.
BloomNet also offers the digital convenience
and speed of the industry’s first Directory
online. And to help create a superior cus-
tomer experience and generate repeat sales
for BloomNet florists, BloomNet introduced
a comprehensive Quality Assurance Pro-
gram during fiscal 2010 – utilizing detailed
metrics to assure that orders are fulfilled to
the highest possible standards.
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28
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M o n D A Y
T u e S D A Y
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Passover Begins at Sunset
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F R i D A Y
S A TuR D A Y
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First Day of Spring
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St.. Patrick’s Day
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April • 2010
FocuS:
Value
Throughout its history, 1-800-FLOWERS.COM
has focused on responding to the changing
needs of its customers. Increasingly, consum-
ers are looking for cutting-edge design and
top quality combined with excellent value.
During fiscal 2009, the Company responded
to the demands of a challenging economic
environment by introducing a value-price
merchandising strategy, featuring beauti-
ful products at attractive price points.
One example is the “30 Gifts Under $30”
collection, featured during Mother’s Day
on the 1-800-FLOWERS.COM site. Positive
customer reception led to an expansion of
this initiative across the Company’s multiple
gift brands, helping customers cost effec-
tively express themselves and connect to the
important people in their lives.
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Easter
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25
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T u e S D A Y
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Administrative Professionals’
Week Begins
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F R i D A Y
S A TuR D A Y
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April Fool’s Day
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Administrative Professionals’ Day
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may • 2010
FocuS:
Customer
Engagement
1-800-FLOWERS.COM has intensified its
efforts to engage customers in direct dia-
logue – inviting them “behind the curtain”
through online forums, emails, blogs and
panels where they could help enable the
Company to better understand and serve
their celebratory needs. A focal point of this
effort in fiscal 2009 was the highly successful
SPOT A MOMSM campaign which spotted
and celebrated millions of moms across the
nation as part of the Mother’s Day holiday.
The multi-channel SPOT A MOM market-
ing program and movement garnered the
attention of influential bloggers, Facebook
fans and Twitter “tweeters” who in turn
helped to spread the word. Thousands of
inspiring stories about moms were submit-
ted and they will be compiled into a new
book titled “Celebrating Mom,” scheduled
for release prior to Mother’s Day 2010.
S u n D A Y
M o n D A Y
T u e S D A Y
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9
Mother’s Day
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30
Memorial Day (observed)
31
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F R i D A Y
S A TuR D A Y
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Cinco de Mayo
6
7
National Bring Your Mom
to Work Day
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June • 2010
S u n D A Y
M o n D A Y
T u e S D A Y
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14
Flag Day
15
FocuS:
Home Agent
Network
6
13
Delivering best in class customer service re-
mained a top priority at 1-800-FLOWERS.COM
in fiscal 2009. The Company increased focus
on its Home Agent Network (HAN), closing
three of its brick and mortar customer
service centers and inviting agents at those
locations to become home-based agents.
Utilizing state-of-the-art remote call routing
technologies to ensure customer satisfaction
and help drive repeat business, the HAN
program provides significant scheduling
flexibility for 1-800-FLOWERS.COM while
saving substantial capital expense that
would otherwise be tied up in physical loca-
tions. Based on these benefits, together with
the top quality scores achieved by home
agents, the Company plans to continue
expanding its HAN program in 2010.
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Father’s Day
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First Day of Summer
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T HuR S D A Y
F R i D A Y
S A TuR D A Y
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July • 2010
FocuS:
Cross Brand
Marketing
With its expanded offering of great gift brands,
1-800-FLOWERS.COM is increasingly focused
on widening its cross-brand marketing and
merchandising efforts to leverage its customer
traffic, database and advertising reach. A key
initiative in this area during fiscal 2009 was
the development and launch in early fiscal
2010 of the new 1-800-Baskets.com® brand
and website. The launch leverages the tre-
mendous brand equity and online traffic of
1-800-Flowers.com® by creating a new, dual
brand website that shares a single shopping
cart, Fresh Rewards® Loyalty program, ad-
dress book and much more. Similarly, the
Company has expanded its cross-brand Gift
Card program, featuring multi-brand cards
that are available on the Company’s many
websites as well as in third-party mass
market retail outlets. This program promises
to significantly raise brand awareness on
a nationwide level.
S u n D A Y
M o n D A Y
T u e S D A Y
4
Independence Day
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Parents’ Day
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F R i D A Y
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Bastille Day
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August • 2010
FocuS:
OPEX
Reduction
Reacting rapidly and decisively to an
historic economic downturn during fiscal
2009, 1-800-FLOWERS.COM accelerated
initiatives under its Process Enhancement
Programs (PEP) banner to achieve its target
of $50 million in operating cost savings. This
was on top of the more than $25 million in
operating expenses that the Company had
previously removed from its platform. The
focus on operating cost efficiencies is now in-
grained as part of the 1-800-FLOWERS.COM
corporate DNA, and the Company expects
to realize these cost reductions across all of
its businesses and brands throughout fiscal
2010 and beyond.
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National Friendship Week Begins
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September • 2010
FocuS:
Customer
Personas
The constant pursuit of customer
knowledge is pivotal to the growth of
1-800-FLOWERS.COM. The Company is
focused on learning all it can about its
customers in order to provide them with the
right products and services for all of their
connective and celebratory occasions. In fis-
cal 2009, 1-800-FLOWERS.COM launched an
intense effort to develop detailed “personas”
for different customer segments – good, better
and best. Sophisticated business analytics
were also applied to the large volumes of
data the Company has compiled about the
gifting preferences of its 35 million custom-
ers. This has enabled the development of
highly targeted online and offline market-
ing and merchandising programs that are
helping to attract and grow the customer
segments that provide the best return on
marketing spending.
S u n D A Y
M o n D A Y
T u e S D A Y
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Labor Day
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Grandparents’ Day
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27
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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
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Rosh Hashanah Begins at Sunset
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Patriot Day
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29
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Yom Kippur Begins at Sunset
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First Day of Fall
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October • 2010
FocuS:
BloomNet®
Wire Service
In fiscal 2009 and continuing through 2010,
BloomNet focused on increasing its value
added proposition to BloomNet florists,
introducing new initiatives to comple-
ment an already extensive assortment
of support services and a popular line of
products. Making its debut was floriology,
an informative full color monthly magazine
devoted to building community among flo-
rists by providing a forum for them to share
their own insights and success stories cover-
ing such topics as floral design, marketing
and social media. BloomNet also enhanced
two-way communication throughout its
wire service network by creating floral
design councils which invite florists to assist
1-800-FLOWERS.COM in the creation of
exciting new floral products.
S u n D A Y
M o n D A Y
T u e S D A Y
3
10
17
24
4
5
11
Columbus Day (observed)
12
19
26
18
25
Halloween 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
1
8
National Children’s Day
2
9
15
National Bosses’ Day
16
Sweetest Day
22
29
23
30
6
13
20
27
7
14
21
28
November • 2010
FocuS:
Mobile
Marketing
Even in the difficult economy that punctu-
ated fiscal 2009, 1-800-FLOWERS.COM con-
tinued its tradition of strategically innovat-
ing and investing for the future. Exemplifying
this are the Company’s floral industry-first
mobile commerce web storefront applica-
tions on Blackberry® and iPhone devices as
well as the creation of a storefront app for
Google’s Android platform which runs on
a variety of smartphones. Mobile com-
merce represents the next wave of Web 2.0
and 1-800-FLOWERS.COM is on the cutting
edge, positioning itself for significant growth
in this area as more and more customers
adopt mobile technology as their e-com-
merce preference.
7
14
21
28
S u n D A Y
M o n D A Y
T u e S D A Y
1
8
15
22
29
2
Election Day
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
5
11
Veteran’s Day
12
18
19
25
Thanksgiving Day
26
6
13
20
27
December • 2010
FocuS:
Product
Development
During fiscal 2009, 1-800-FLOWERS.COM
continued to focus on product innova-
tion, enhancing its leadership in floral gifts
through expert design offerings including
the “Martha Stewart for 1-800-Flowers.com
Boutique.” The Company also broadened its
best selling line of signature floral products
featuring such whimsical creations as the
Happy Hour Mini CollectionSM and the Slice
of LifeTM birthday cake slice-shaped arrange-
ment. Innovative ideas in gourmet foods
were also rolled out, notably shelf-stable
Cheryl&Co.® cookies, Fannie May® ice cream
and new flavor selections from The Popcorn
Factory®. Additionally, the Company utilized
the industry-leading product design capa-
bilities of its DesignPac Gifts subsidiary to
serve as the platform for its newest brand:
1-800-Baskets.com®.
5
12
19
S u n D A Y
M o n D A Y
T u e S D A Y
6
13
20
7
14
21
First Day of Winter
26
First Day of Kwanzaa
27
28
F R i D A Y
S A TuR D A Y
4
11
18
25
Christmas Day
W e D n e S D A Y
1
Hanukkah Begins at Sunset
T HuR S D A Y
2
8
15
22
9
16
23
29
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 promise
James A. cannivino
chairman & ceo
Direct insite, inc.
leonard J. elmore
Attorney,
eSpn Analyst
John J. conefry
Vice chairman
Astoria Financial corporation
lawrence V. calcano
chief executive officer
calcano capital Advisors
larry Zarin
Senior Vice president,
Marketing & corporate
communications
express Scripts, inc.
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
Timothy J. Hopkins
president
Madison Brands
1-800-FloWeRS.coM
Stephen Bozzo
Senior Vice president,
chief information officer
1-800-FloWeRS.coM
Jan Murley
interim president
consumer Floral Brand
1-800-FloWeRS.coM
David Taiclet
president
Gourmet Food & Gift Baskets
1-800-FloWeRS.coM
Mark l. nance
president
Bloomnet
1-800-FloWeRS.coM
Fiscal Year 2009
Financial Report
Selected Financial Data
1-800-FLOWERS.COM, Inc. and Subsidiaries
The selected consolidated statement of operations data for the years ended June 28, 2009, June 29, 2008 and
July 1, 2007 and the consolidated balance sheet data as of June 28, 2009 and June 29, 2008, have been derived
from the Company’s audited consolidated financial statements included elsewhere in this Annual Report. The selected
consolidated statement of operations data for the years ended July 2, 2006 and July 3, 2005, and the selected
consolidated balance sheet data as of July 1, 2007, July 2, 2006 and July 3, 2005, are derived from the Company’s
audited consolidated financial statements which are not included in this Annual Report.
The following tables summarize the Company’s consolidated statement of operations and balance sheet data.
The Company acquired selected assets of Geerlings & Wade, Inc. in March 2009 and Napco Marketing Corp. in July 2008,
DesignPac Gifts, LLC in April 2008, Fannie May Confections Brands, Inc. in May 2006, Cheryl & Co. in March 2005 and
The Winetasting Network in November 2004. The following financial data reflects the results of operations of these subsid-
iaries since their respective dates of acquisition. During the fourth quarter of fiscal 2009, the Company made the strategic
decision to divest its Home & Children’s Gifts business segment to focus on its core Consumer Floral, BloomNet Wire
Service and Gourmet Foods & Gift Baskets categories. The Company has classified the results of operations of its Home &
Children’s Gifts segment as discontinued operations for all periods presented. 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 28, June 29, July 1, July 2, July 3,
2009 2008 2007 2006 2005
(in thousands, except per share data)
Consolidated Statement of Operations 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
Goodwill and intangible impairment
Total operating expenses
Operating income (loss)
Other income (expense), net (3)
Income (loss) from continuing operations
before income taxes
Income tax expense (benefit) from
continuing operations
Income (loss) from continuing operations
Income (loss) from discontinued operations,
before income taxes
Impairment of discontinued business
Income tax expense (benefit) from
$498,519
215,431
713,950
432,744
281,206
175,839
21,000
50,451
21,010
85,438
353,738
(72,532)
(9,295)
(81,827)
(15,326)
(66,501)
(4,996)
(34,758)
discontinued operations
(7,838)
Income (loss) from discontinued operations
(31,916)
Net income (loss) $ (98,417)
Net income (loss) per common share (basic):
From continuing operations
From discontinued operations
Net income (loss) per common share (basic)
Net income (loss) per common share (diluted):
From continuing operations
From discontinued operations
Net income (loss) per common share (diluted)
Weighted average shares used in the calculation
of net income (loss) per common share:
Basic
Diluted
$ (1.05)
(0.50)
$ (1.55)
$ (1.05)
(0.50)
$ (1.55)
$584,174
155,037
739,211
426,916
312,295
183,430
19,611
52,107
17,822
––
272,970
39,325
(4,170)
35,155
13,126
22,029
(1,785)
––
(810)
(975)
$ 21,054
0.35
$
$ (0.02)
0.33
$
$
0.34
(0.01)
0.32
$576,627
149,023
725,650
419,083
306,567
180,238
18,871
50,236
15,353
––
264,698
41,869
(6,133)
35,736
14,755
20,981
(6,727)
––
(2,864)
(3,863)
$ 17,118
0.33
$
$ (0.06)
0.27
$
$
0.32
(0.06)
0.26
$521,161
63,661
584,822
350,733
234,089
160,932
17,689
37,373
13,595
––
229,589
4,500
(47)
4,453
2,382
2,071
1,915
––
799
1,116
3,187
0.03
0.02
0.05
0.03
0.02
0.05
$
$
$
$
$
$461,305
37,057
498,362
302,439
195,923
131,431
13,273
29,481
12,587
––
186,772
9,151
2,174
11,325
4,606
6,719
1,922
––
792
1,130
7,849
0.10
0.02
0.12
0.10
0.02
0.12
$
$
$
$
$
63,565
63,565
63,074
65,458
63,786
65,526
65,100
66,429
66,038
67,402
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 28, 2009, June 29,
2008, July 1, 2007, and July 2, 2006 consisted of 52 weeks, while the fiscal year 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.
Note (3): Other income (expense), net during the fiscal year ended June 28, 2009 includes the write-off of deferred financing costs of approximately $3.2
million related to the April 14, 2009 modification of the Company’s 2008 Credit Facility.
2
Selected Financial Data (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
As of
June 28, June 29, July 1, July 2, July 3,
2009 2008 2007 2006 2005
(in thousands)
Consolidated Balance Sheet Data:
Cash and equivalents
and short-term investments
Working capital
Total assets
Long-term liabilities
Total stockholders’ equity
$ 29,562
43,679
286,127
73,945
133,783
$ 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
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 or
www.Geerwade.com); and gift baskets from
1-800-BASKETS.COM® (www.1800baskets.com)
and DesignPac GiftsSM (www.designpac.com).
During the fourth quarter of fiscal 2009, the Company
made the strategic decision to divest its Home &
Children’s Gifts business segment to focus on its core
Consumer Floral, BloomNet Wire Service and Gourmet
Foods & Gift Baskets categories. The Company has
classified the results of operations of its Home &
Children’s Gifts segment, which includes 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), as discontinued operations for all
periods presented.
1-800-FLOWERS.COM, Inc. stock is traded on the
NASDAQ Global Select Market under ticker symbol FLWS.
As a provider of gifts to consumers and wholesalers
for resale to consumers, the Company is subject to
changes in consumer confidence and the economic
conditions that impact our customers. The demand for the
Company’s products is affected by the financial health of
our customers, which is influenced by macro economic
issues such as unemployment, fuel and energy costs,
weakness in the housing market and unavailability of
consumer credit. During the recent economic downturn,
the demand for our products has been adversely affected
by the reduction in consumer spending, and the
Company’s results for the fiscal year ended June 28,
2009 reflect the impact of the global economic downturn.
However, during fiscal 2009, the Company took signifi-
cant steps to reduce its operating cost structure to improve
its results in the near-term; including:
(cid:127) During the fourth quarter the Company made the stra-
tegic decision to divest its Home & Children’s Gifts segment
in order to focus its efforts and investments on its key Con-
sumer Floral, BloomNet Wire Service and Gourmet Foods
& Gift Baskets categories which better leverage the
Company’s business platform and offer the greatest oppor-
tunity for revenue and earnings growth.
(cid:127) The Company implemented enterprise-wide cost
reduction programs including a 15% reduction in its sala-
ried, full-time labor force, as well as reductions in variable
labor commensurate with lower order volumes.
(cid:127) The IT infrastructure was reduced through consolida-
tion of hosting sites, reducing footprints and rationalizing
maintenance and support applications.
(cid:127) Marketing programs across the enterprise were
evaluated and spending on such programs has been
scaled to levels appropriate to current consumer demand
in order to achieve desired returns on these investments.
3
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Gross Profit from Continuing Operations:
Years Ended
June 28, June 29, July 1,
2009 % Change 2008 % Change 2007
(in thousands)
Gross profit:
1-800-Flowers.com
Consumer
Floral
BloomNet
Wire Service
Gourmet Food &
Gift Baskets
Corporate(*)
Intercompany
eliminations
Total gross profit
from continuing
operations
$152,045 (20.1%)
36.6%
$190,259
38.7%
(1.4%) $192,921
39.3%
35,374
55.3%
17.6%
2.5%
94,021
39.1%
289 (70.2%)
25.8%
30,080
56.2%
91,713
46.7%
970
39.9%
21.1%
4.0%
27.0%
24,844
56.0%
88,207
45.8%
764
46.2%
(524)
(727)
(169)
$281,206 (10.0%)
$312,295
1.9% $306,567
39.4%
42.2%
42.2%
Adjusted EBITDA (**) from Continuing Operations:
Years Ended
June 28, June 29, July 1,
2009 % Change 2008 % Change 2007
(in thousands)
1-800-Flowers.com
Consumer
Floral
BloomNet
Wire Service
Gourmet Food &
Gift Baskets
$ 40,882
(35.1%)
$ 62,967
(3.4%) $ 65,166
19,093
3.2%
18,509
30.7%
14,162
23,433
(4.7%)
24,593
(6.8%)
26,377
Category Contribution
Margin Subtotal 83,408
(49,492)
Corporate(*)
Severance and other
(21.4%)
(1.2%)
106,069
(48,922)
0.3%
(0.9%)
105,705
(48,483)
restructuring
costs
Adjusted EBITDA
from continuing
operations
2,543 100.0%
–– ––
––
$ 36,459
(36.2%)
$ 57,147
0.1% $ 57,222
(cid:127) Brick-and-mortar customer service centers were
closed, reducing fixed costs, as the Company further
virtualized its customer service platform, utilizing technol-
ogy to expand its home agent network.
(cid:127) Product assortments have been evaluated and
reformulated to meet reduced price points, providing for
better product margins and alleviating the reliance on
discounting and markdowns in order to improve demand.
We continue to evaluate further cost-reduction activities
as well as the need to adjust our operations in the event
that economic conditions deteriorate further. The Company
believes that its cost reduction initiatives, combined with
its ability to be innovative and execute quickly, will enable
it to strengthen its relative competitive position in this
difficult economic environment and to take advantage of
long-term growth opportunities when favorable business
conditions return.
The following tables set forth some of the Company’s
key financial information:
Category Information
The Company has 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 category contribution margin
or category “Adjusted EBITDA” (earnings before interest
(including write-off of deferred financing costs, taxes,
depreciation and amortization, goodwill and intangible
impairment and severance and other restructuring costs)
from each of the Company’s business categories. (As
noted previously, the Company’s Home & Children’s Gifts
segment has been classified as discontinued operations
and therefore excluded from category information below).
Net Revenues
Years Ended
June 28, June 29, July 1,
2009 % Change 2008 % Change 2007
(in thousands)
Net revenues from continuing operations:
1-800-Flowers.com
Consumer
Floral
BloomNet
Wire Service
Gourmet Food &
Gift Baskets
Corporate(*)
Intercompany
eliminations
$414,897 (15.6%)
$491,696
0.1% $491,404
63,933
19.5%
53,488
20.5%
44,379
240,200
22.4%
1,119 (54.0%)
196,298
2,431
1.9%
47.2%
192,698
1,652
(6,199) (31.8%)
(4,702)
(4.9%)
(4,483)
Total net revenues
from continuing
operations
$713,950
(3.4%)
$739,211
1.9% $725,650
4
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Discontinued Operations:
Years Ended
June 28, June 29, July 1,
2009 % Change 2008 % Change 2007
(in thousands)
Net revenues
from discontinued
operations $143,746
(20.2%)
$180,181
(3.6%) $186,948
Gross profit
from discontinued
operations
67,439
(17.2%)
81,459
(5.2%)
85,899
Adjusted EBITDA
from discontinued
operations $ (2,569) (539.9%)
$
584 113.3% $ (4,392)
(*) 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 Adjusted EBITDA, reflecting only the direct
controllable revenue and operating expenses of the categories.
As such, management’s measure of profitability for these catego-
ries does not include the effect of corporate overhead, described
above, depreciation and amortization, other income (net), including
deferred financing write-offs, income taxes, goodwill and intangible
impairment, and severance and other restructuring costs.
Management utilizes EBITDA, and adjusted financial information,
as a performance measurement tool because it considers such
information a meaningful supplemental measure of its performance
and believes it is frequently used by the investment community in
the evaluation of companies with comparable market capitalization.
The Company also uses EBITDA and adjusted financial information
as one of the factors used to determine the total amount of
bonuses available to be awarded to executive officers and other
employees. The Company’s credit agreement uses EBITDA and
adjusted financial information to measure compliance with
covenants such as interest coverage and debt incurrence.
EBITDA and adjusted financial information is also used by the
Company to evaluate and price potential acquisition candidates.
EBITDA and adjusted financial information have 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.
Due to the Company’s strategic decision to divest its
Home & Children’s Gifts segment and classify such as
Discontinued Operations as well as other non-recurring
charges incurred during fiscal 2009 (Goodwill and
intangible impairment; Deferred financing costs write-off;
and Severance and other restructuring costs), the
following Non-GAAP reconciliation table have been
included within MD&A.
Reconciliation of Net Income (Loss) from
Continuing Operations to Adjusted EBITDA
from Continuing Operations:
Years Ended
June 28, June 29, July 1,
2009 2008 2007
$(66,501)
$ 22,029
$ 20,981
Net income (loss)
from continuing
operations
Add:
Interest
expense
6,269
Depreciation and
amortization
21,010
Income tax
expense
––
Goodwill and intangible
impairment
85,438
Deferred financing cost
write-off
3,245
Severance and other
restructuring
costs
$ 2,543
Less:
Income tax
benefit
Interest
income
Other income
(expense)
Adjusted EBITDA
from continuing
operations
$ 15,326
314
(95)
5,039
17,822
13,126
––
––
––
––
826
43
7,212
15,353
14,755
––
––
––
––
1,077
2
$ 36,459
$ 57,147
$ 57,222
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
2009, 2008 and 2007 which ended on June 28, 2009,
June 29, 2008 and July 1, 2007 respectively, consisted of
52 weeks.
Net Revenues
Years Ended
June 28, June 29, July 1,
2009 % Change 2008 % Change 2007
(in thousands)
Net revenues:
E-Commerce $498,519
215,431
Other
$ 713,950
(14.7%)
39.0%
(3.4%)
$584,174
155,037
$739,211
1.3% $576,627
4.0%
149,023
1.9% $725,650
Net revenues consist primarily of the selling price of
the merchandise, service or outbound shipping charges,
less discounts, returns and credits.
During the fiscal year ended June 28, 2009, revenues
declined by 3.4% over the prior year period, resulting
from continued weakness in the retail economy causing a
decline in both customer orders as well as overall
average order values as consumers “traded down” to
5
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
lower price point products. The decline was partially
offset by revenue growth in the Company’s BloomNet
Wire Service category, which increased during the year
ended June 28, 2009 by 19.5% over the prior year due
to the acquisition of Napco, a wholesaler of floral
hardgoods, in July 2008, as well as growth from the
Gourmet Food & Gift Baskets category by 22.4%, due to
the incremental revenue associated with the acquisition
of DesignPac in May 2008 and Geerlings & Wade in
March 2009. Organic revenue, excluding the revenue
associated with the acquisitions of DesignPac, Napco,
and Geerlings & Wade, declined approximately 13.1%
during the fiscal year ended June 28, 2009. The
Company’s revenue growth of 1.9% during the fiscal
year ended June 29, 2008 was primarily attributable 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.
The Company fulfilled approximately 8.6 million,
9.8 million and 9.8 million orders through its e-com-
merce (combined online and telephonic) sales channel
during fiscal 2009, 2008 and 2007, respectively. The
Company’s e-commerce (combined online and tele-
phonic) sales channel average order value decreased
3.5% to $57.69 during fiscal 2009, as a result of in-
creased promotional pricing and markdowns and
consumers trading down to lower price point products,
whereas the average order value increased by 1.4%
to $59.79 during fiscal 2008, 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 increased during fiscal 2009 as a
result of the Company’s recent acquisitions of Napco and
DesignPac, and during fiscal 2008 due to growth within
the Company’s BloomNet Wire Service category.
The 1-800-Flowers.com Consumer Floral category
includes the operations of the 1-800-Flowers brand 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 from its franchise
operations. Net revenues during the fiscal year ended
June 28, 2009 decreased 15.6% over the prior year
period due to lower order volume as a result of continued
decline in demand throughout the consumer sector,
caused by the weak economy. Net revenues during the
fiscal year ended June 29, 2008 increased by 0.1% over
the prior year period, 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.
The BloomNet Wire Service category includes
revenues from membership fees as well as other product
and service offerings to florists. Net revenues during the
fiscal year ended June 28, 2009 increased by 19.5% over
the prior year, resulting entirely from the incremental
revenue generated by the acquisition of Napco in July
2008, as lower wholesale product sales due to florists
scaling back purchases due to the recession offset gains
in monthly service fees. Net revenues during the fiscal
year ended June 29, 2008 increased by 20.5% over the
prior year period primarily as a result of increased florists’
membership fees, expanded product and service
offerings, and pricing initiatives.
The Gourmet Food & Gift Baskets category includes
the revenues of Cheryl & Co., Fannie May (including
Harry London), Popcorn Factory, The Winetasting Network
(including Geerlings & Wade) and DesignPac brands.
Revenue is derived from the sale of cookies, baked gifts,
premium chocolates and confections, gourmet popcorn,
wine gifts and gift baskets through its E-commerce sales
channels (telephonic and online sales) and company-
owned and operated retail stores under the Cheryl & Co.
and Fannie May brands, as well as wholesale operations.
Net revenues during the fiscal year ended June 28, 2009
increased by 22.4% over the prior year period as a result
of incremental wholesale revenues generated by
DesignPac, acquired in April 2008. Net revenues
decreased 7.8%, excluding the revenues of DesignPac,
as a result of reduced consumer spending caused by the
economic down-turn. Net revenues for the fiscal year
ended June 29, 2008 increased 1.9% compared to the
prior fiscal year as a result of increased direct-to-con-
sumer order volume from Cheryl & Co. and Fannie May
Confections brands.
The Company expects economic conditions for
consumers will continue to be very challenging. Based
on this outlook, the Company anticipates that revenues
for the full fiscal year 2010 will be consistent to down
approximately 5 percent compared with the prior year.
Gross Profit
Years Ended
June 28, June 29, July 1,
2009 % Change 2008 % Change 2007
(in thousands)
Gross profit
Gross margin % 39.4%
$281,206 (10.0%) $312,295
42.2%
1.9% $306,567
42.2%
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 decreased during the fiscal year ended
June 28, 2009, through a combination of the decline in
revenues described above, offset in part by the incremen-
tal gross profit generated by the DesignPac and Napco
acquisitions and the reduction in gross margin percent-
age. Gross margin percentage during the fiscal year
ended June 28, 2009, decreased by 280 basis points,
primarily reflecting a combination of product mix associ-
6
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
ated with revenues from the Company’s most recent
acquisitions, which are primarily wholesale businesses,
as well as increased promotional and markdown activity
designed to improve sales. Gross profit increased during
the fiscal year ended June 29, 2008 in comparison to the
same period of the prior year, primarily as a result of the
revenue growth described above. Gross margin percent-
age during the fiscal year ended June 29, 2008 was
consistent with the prior year period.
The 1-800-Flowers.com Consumer Floral category
gross profit and gross profit margin percentage
decreased during the fiscal years ended June 28, 2009
and June 29, 2008, by 20.1% and 210 basis points,
and 1.4% and 60 basis points, over the respective prior
year periods, as a result of decreased sales volume and
promotional pricing, which has characterized the retail
sector as a result of the recession.
The BloomNet Wire Service category gross profit
increased during the fiscal year ended June 28, 2009
by 17.6% compared to the prior year, as a result of the
aforementioned revenue contribution from the Napco
acquisition in July 2008. Gross profit margins decreased
by 90 basis points during fiscal 2009 as a result of
product mix, including Napco’s wholesale products,
which bear lower margins. During the fiscal year ended
June 29, 2008 gross profit increased by 21.1% over the
prior year period as a result of the above mentioned
revenue growth resulting from an increase in member-
ship services and pricing initiatives, which also drove
a higher gross margin, which increased 20 basis points
in comparison to the prior year.
The Gourmet Food & Gift Baskets category gross profit
increased during the fiscal year ended June 28, 2009 by
2.5% over the prior year period as a result of the incre-
mental gross profit generated by DesignPac, which was
also the primary driver of the decrease in gross margin
percentage as DesignPac products carry lower whole-
sale margins. In addition, gross profit margins were
depressed as a result of increased promotional activity
during the key holiday periods within the category’s
E-Commerce and retail store sales channels. During the
fiscal year ended June 29, 2008 the Gourmet Food & Gift
Basket category gross profit 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% due to manufacturing efficien-
cies and sales channel/product mix.
During fiscal 2010, the Company expects its gross
margin percentage will improve slightly in comparison
to 2009 as a result of a positive shift in product mix and
anticipated gross margin improvements in most of its
businesses resulting from product sourcing and supply
chain initiatives, which are expected to reduce reliance
on promotional activity.
Marketing and Sales Expense
Years Ended
June 28, June 29, July 1,
2009 % Change 2008 % Change 2007
(in thousands)
Marketing and
sales
$175,839 (4.1%)
$183,430
1.8% $180,238
Percentage of
sales
24.6%
24.8%
24.8%
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 the fiscal year ended June 28, 2009, marketing
and sales expenses decreased 4.1% and 20 basis points
to 24.6% of net revenue in comparison to the prior year.
(Excluding the impact of severance and other restructur-
ing costs of $1.8 million including within marketing and
sales, marketing and sales expense decreased 5.1%
and 40 basis points in comparison to prior year.) The
overall decrease in expense reflects the success of the
Company’s ongoing cost reduction initiatives, including
accelerated efforts to reduce costs in the face of continu-
ing revenue declines, as well as the impact of
DesignPac’s cost structure which has low operating costs
relative to its revenue. These cost reduction programs,
which began in 2006, were designed to improve operat-
ing leverage across the Company’s brands, reducing the
Company’s operating expense ratio by 290 basis points
through fiscal 2008, and have been expanded and
accelerated to mitigate the revenue reductions that have
been associated with the current economic decline.
Within marketing and sales, the Company has under-
taken programs that have reduced or reallocated media,
portal spending, and customer prospecting through
catalogs, which were not expected to generate sufficient
returns in this challenging economic environment. In
addition, initiatives such as catalog print and paper
sourcing, co-mailing and e-mail pricing reductions, and
further virtualization of our consumer service platform
to reduce fixed facility and labor, have enabled the
Company to improve its cost structure. During the
fiscal year ended June 29, 2008, marketing and sales
expenses were consistent as a percentage of revenue
in comparison to fiscal 2007.
During the fiscal year ended June 28, 2009 the
Company added approximately 2.4 million new e-
commerce customers, compared to 2.8 million and 2.7
million in 2008 and 2007, respectively. Of the 5.0 million
total customers who placed e-commerce orders during
fiscal 2009, approximately 52% were repeat customers,
compared to 49% and 48% in 2008 and 2007, respec-
tively, 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.
7
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
During fiscal 2010, the Company expects that market-
ing and sales expense will continue to decrease in
comparison to the prior year, but remain consistent as a
percentage of net revenues due to the expectation of a
slight decline in sales resulting from anticipated weakness
in the economy through the fiscal 2010 holiday season.
Technology and Development Expense
Years Ended
June 28, June 29, July 1,
2009 % Change 2008 % Change 2007
(in thousands)
Technology and
development
Percentage of
$21,000 7.1%
$ 19,611
3.9% $ 18,871
sales
2.9%
2.7%
2.6%
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 the fiscal year ended June 28, 2009, technol-
ogy and development expense increased by 7.1% over
the prior year as a result of the incremental technology
and integration costs associated with the acquisitions of
DesignPac and Napco, and an increase in hosting costs,
as well as severance and restructuring costs associated
with the Company’s cost reduction programs in the
amount of $0.3 million. Fiscal 2009 restructuring initia-
tives included a reduction in the number of hosting sites
and footprint which will result in annualized savings
during fiscal 2010. During fiscal 2008, technology and
development expense increased 3.9% and 10 basis
points to 2.6% of net revenues, in comparison to the prior
year period as a result of increased labor costs. The
increased labor costs were necessary to support the
Company’s technology platform, and were partially offset
by savings derived from renegotiating certain technology
maintenance and license agreements
During the fiscal years ended June 28, 2009, June 29,
2008, and July 1, 2007 the Company expended $35.7
million, $32.2 million, and $29.5 million, respectively,
on technology and development, of which $14.7 million,
$12.6 million, and $10.6 million, respectively, has
been capitalized.
The Company believes that continued investment in
technology and development is critical to attaining its
strategic objectives, and expects that its spending for
fiscal 2010 will decrease slightly, as a percentage of net
revenues, in comparison to the prior year.
General and Administrative Expense
Years Ended
June 28, June 29, July 1,
2009 % Change 2008 % Change 2007
(in thousands)
General and
administrative
$50,451 (3.2%)
$ 52,107
3.7% $ 50,236
Percentage of
sales
7.1%
7.0%
6.9%
General and administrative expense consists of
payroll and other expenses in support of the Company’s
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 decreased by
3.2% during the fiscal year ended June 28, 2009, as the
prior year period reflects the achievement of certain cash
and equity performance based bonus targets, which were
not earned in fiscal 2009, as well as cost reduction
initiatives, offset in part by the incremental expenses of
DesignPac and Napco and severance and restructuring
costs of approximately $0.2 million. During fiscal 2008,
general and administrative expenses increased 3.7% as
a percentage of net revenues in comparison to the prior
year, due to increased professional fees and corporate
initiatives. The benefit of these increased costs in fiscal
2008 are reflected in the improvements within the
Company’s overall operating expense ratios, in
comparison to the same period of the prior year.
As a result of cost reduction initiatives, the Company
expects that its general and administrative expenses for
fiscal 2010 will decrease slightly as a percentage of net
revenues in comparison to the prior year.
Depreciation and Amortization
Years Ended
June 28, June 29, July 1,
2009 % Change 2008 % Change 2007
(in thousands)
Depreciation and
amortization
Percentage of
17.9% $ 17,822
$ 21,010
16.1% $ 15,353
sales
2.9%
2.4%
2.1%
Depreciation and amortization expense increased by
17.9% and 16.1% during the fiscal years ended June 28,
2009 and June 29, 2008, respectively, in comparison to
the prior year periods, as a result of capital additions for
technology platform improvements and the incremental
amortization related to the intangibles established as a
result of the acquisition of DesignPac in April 2008.
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. However, the Company is committed to reducing its
capital expenditures and coupled with the impairment
8
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
charge associated with certain of its amortizable intan-
gibles, the Company expects that depreciation and
amortization for fiscal 2010 will decrease in comparison
to the prior year.
Goodwill and Intangible Impairment
During fiscal 2009 the Gourmet Food & Gift Basket
segment experienced declines in revenue and operating
performance when compared to prior years and their
strategic outlook. The Company believes that this weak
performance was attributable to reduced consumer
spending due to the overall weakness in the economy.
Based upon the expectation of a continuation of the current
economic downturn, supported by lower order quantities
received for the upcoming holiday season by certain
wholesale customers, coupled with a decline of the
Company’s market capitalization and contraction of public
company multiples, the Company recorded goodwill and
intangible impairment charges of $85.4 million during the
year ended June 28, 2009. Of the total impairment charge,
approximately $65.6 million was related to goodwill and
$19.8 million was related to intangibles.
Other Income (Expense)
Years Ended
June 28, June 29, July 1,
2009 % Change 2008 % Change 2007
(in thousands)
Interest income
$ 314 (62.0%)
Interest expense (6,269) (24.4%)
Deferred financing
$ 826 (23.3%) $ 1,077
(7,212)
(5,039) (30.1%)
write-off
Other, net
(3,245) –– –– –– ––
(95) (320.9%)
43 2,050.0% 2
$ (9,295) 122.9% $(4,170) 32.0% $(6,133)
Other income (expense) consists primarily of interest
expense and amortization of deferred financing costs,
primarily attributable to the Company’s long-term debt
and revolving line of credit, partially offset by income
earned on the Company’s investments and available
cash balances.
Net borrowing costs increased during the fiscal year
ended June 28, 2009, in comparison to the prior year
period, primarily as a result of incremental borrowings
and related financing costs associated with the
Company’s credit facility (as defined below), whereas
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.
In order to fund the increase in working capital
requirements associated with DesignPac, 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 provided 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.
9
On April 14, 2009, the Company entered into an
amendment to the 2008 Credit Facility (the “Amended
2008 Credit Facility”). The Amended 2008 Credit Facility,
effective March 29, 2009, included a prepayment of $20.0
million, reducing the Company’s outstanding term loans
under the facility to $92.4 million upon closing. In
addition, the amendment reduced the Company’s
revolving credit line from $165.0 million to a seasonally
adjusted line ranging from $75.0 to $125.0 million.
Outstanding amounts under the Amended 2008 Credit
Facility will bear interest at the Company’s option at either:
(i) LIBOR plus a defined margin, or (ii) the agent bank’s
prime rate plus a margin. The applicable margins for the
Company’s term loans and revolving credit facility will
range from 3.00% to 4.50% for LIBOR loans and 2.00%
to 3.50% for ABR loans with pricing based upon the
Company’s leverage ratio. The repayment terms of the
existing term loans were reduced, on a pro-rata basis,
for the $20.0 million prepayment.
As a result of the modifications of its credit agree-
ments, during the quarter ended June 28, 2009, the
Company wrote-off $3.2 million of financing costs
associated with the term debt related to both the 2008
Credit Facility and the Amended 2008 Credit Facility.
During March 2009, the Company obtained a $5.0
million equipment lease line of credit with a bank and a
$5.0 million equipment lease line of credit with a vendor.
Interest under these lines, which both mature in April
2012, range from 2.99% to 7.48%. The borrowings are
payable in 36 monthly installments of principal and
interest commencing in April 2009.
Income Taxes
During the fiscal year ended June 28, 2009, the
Company recorded an income tax benefit of $15.3 million,
resulting in an effective tax rate for the fiscal year ended
June 28, 2009 of 18.7%. The Company’s effective tax rate
for the fiscal year ended June 28, 2009, differed from the
U.S. federal statutory rate of 35% primarily due to the
impact of the non-deductible portions of the goodwill and
other intangible impairment charges of $85.4 million and
various tax credits, partially offset by state income taxes.
During the fiscal years ended June 29, 2008 and
July 1, 2007, the Company recorded income tax expense
of $13.1 million and $14.8 million, respectively. The
Company’s effective tax rate for the fiscal years ended
June 29, 2008 and July 1, 2007 was 37.3% and 41.3%,
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 Company’s effective tax rate for the fiscal
years ended June 29, 2008 and July 1, 2007 differed
from the U.S. federal statutory rate of 35% primarily due to
state income taxes, partially offset by various tax credits.
At June 28, 2009, the Company’s federal net operating
loss carryforwards were approximately $4.2 million, which,
if not utilized, will begin to expire in fiscal year 2025.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Discontinued Operations
During the fourth quarter of fiscal 2009, the Company
made the strategic decision to divest its Home &
Children’s Gifts business segment to focus on its core
Consumer Floral, BloomNet Wire Service and Gourmet
Foods & Gift Baskets categories. Consequently, the
Company has classified the results of operations of its
Home & Children’s Gifts segment as discontinued
operations for all periods presented.
Results for discontinued operations are as follows:
Years Ended
June 28, June 29, July 1,
2009 % Change 2008 % Change 2007
(in thousands)
Net revenues
from discontinued
operations $143,746
(20.2%)
$180,181
(3.6%) $186,948
Gross profit
from discontinued
operations
67,439
(17.2%)
81,459
(5.2%)
85,899
Operating income (loss)
from discontinued
operations
Impairment of
discontinued
operations
Income (loss)
(4,996) (179.9%)
(1,785) 73.5%
(6,727)
(34,758) ––
–– ––
––
from discontinued
operations
(31,916) (3,173.4%)
(975) 74.8%
(3,863)
The Home & Children’s Gifts category includes
revenues from Plow & Hearth, Wind & Weather,
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) and company-owned and operated retail
stores under the Plow & Hearth brand.
During the fiscal years ended June 28, 2009 and June
29, 2008, net revenues from discontinued operations
decreased by 20.2% and 3.6%, respectively, over the prior
year periods primarily as a result of lower order volume
from the E-commerce sales channel, due to a combination
of reduced consumer spending, particularly in the home
décor product category, and a planned reduction in catalog
circulation, including the elimination of the Madison Place
and Problem Solvers catalog titles in fiscal 2008. Further
contributing to the revenue decline were lower retail store
sales, compared to the same periods of the prior year, due
to a decline in customer traffic.
Gross profit from discontinued operations during the
fiscal years ended June 28, 2009 and June 29, 2008,
decreased by 17.2% and 5.2%, respectively, over the
prior year periods as a result of the aforementioned
revenue declines. Gross margin percentage during fiscal
2009 increased 170 basis points to 46.9%, benefiting from
enhanced product sourcing and shipping initiatives, while
during fiscal 2008, the gross margin percentage 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 shipments.
Operating income (loss) from discontinued operations
during the fiscal year ended June 28, 2009 includes
approximately $0.4 million of restructuring costs associ-
ated with the Company’s cost reduction initiatives.
During fiscal 2009, the Home and Children’s Gift
segment experienced significant declines in revenue and
operating performance when compared to prior years and
their strategic outlook. The Company believes that this
weak performance was attributable to reduced consumer
spending due to the overall weakness in the economy, and
in particular, as a result of the continued decline in demand
for home décor products. As a result of these factors, as
well as the Company’s plans to resize this category based
on the expectation of continued weakness in the home
décor retail sector, upon completion of the Company’s
impairment analysis, the goodwill and intangibles related
to this reporting unit were deemed to be fully impaired.
Therefore the Company recorded a goodwill and intan-
gible impairment charge of $20.0 million related to this
business segment. In the fourth quarter ended June 28,
2009, the Company made the strategic decision to divest
its Home & Children’s Gifts business segment. Conse-
quently, the Company has classified the results of its Home
& Children’s Gifts segment as a discontinued operation,
and recorded a charge of $14.7 million to write-down the
assets of the discontinued business to management’s
estimate of their fair value.
Liquidity and Capital Resources
At June 28, 2009, the Company had working capital
of $43.7 million, including cash and equivalents of $29.6
million, compared to working capital of $33.4 million,
including cash and equivalents of $12.1 million, at June
29, 2008.
Net cash provided by operating activities of $28.2
million for the fiscal year ended June 28, 2009 was
attributable to operating income, after adjusting for non-
cash charges related to goodwill and other intangible
charges ($85.4 million), impairment from discontinued
operations ($34.8 million) and depreciation and amortiza-
tion, offset by an increase in deferred taxes as a result of
the non-cash charges related to goodwill and other
intangibles, as well as seasonal changes in working
capital including lower accounts payable and accrued
expenses related to timing of vendor purchases, and
increases in inventory due to the upcoming launch of the
Company’s 1-800-BASKETS.com brand and unfavorable
revenues. Net cash provided by operating activities
includes cash provided by the operating activities of
discontinued operations of $7.2 million.
Net cash used in investing activities of $25.2 million for
the fiscal year ended June 28, 2009 was attributable to
capital expenditures, primarily related to the Company’s
technology and distribution infrastructure, and the acquisi-
tion of Napco in July 2008 and Geerlings & Wade in March
2009. Napco’s purchase price of approximately $9.4
million, included an up-front cash payment of $9.3 million,
10
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
net of cash acquired, and the expected portion of “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. As of June 28, 2009, the
Company does not expect that any of the specified
performance targets will be achieved.
Net cash provided by financing activities of $14.5 million
for the fiscal year ended June 28, 2009 was primarily from
bank borrowings related to the Company’s 2008 Credit
Facility, as subsequently amended, net of the repayment of
bank borrowings on outstanding debt and long-term capital
lease obligations, as well as debt issuance costs.
In order to fund the increase in working capital
requirements associated with DesignPac, 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 provided 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.
On April 14, 2009, the Company entered into an
amendment to the 2008 Credit Facility (the “Amended
2008 Credit Facility”). The Amended 2008 Credit Facility,
effective March 29, 2009, included a prepayment of $20.0
million, reducing the Company’s outstanding term loans
under the facility to $92.4 million upon closing. In addition,
the amendment reduced the Company’s revolving credit
line from $165.0 million to a seasonally adjusted line
ranging from $75.0 to $125.0 million. Outstanding amounts
under the Amended 2008 Credit Facility will bear interest
at the Company’s option at either: (i) LIBOR plus a defined
margin, or (ii) the agent bank’s prime rate plus a margin.
The applicable margins for the Company’s term loans and
revolving credit facility will range from 3.00% to 4.50% for
LIBOR loans and 2.00% to 3.50% for ABR loans with
pricing based upon the Company’s leverage ratio. The
repayment terms of the existing term loans were reduced,
on a pro-rata basis, for the $20.0 million prepayment.
As a result of the modifications of its credit agree-
ments, during the quarter ended June 28, 2009, the
Company wrote-off $3.2 million of financing costs
associated with the term debt related to both the 2008
Credit Facility and the Amended 2008 Credit Facility.
During March 2009, the Company obtained a $5.0
million equipment lease line of credit with a bank and a
$5.0 million equipment lease line of credit with a vendor.
Interest under these lines, which both mature in April
2012, range from 2.99% to 7.48%. The borrowings are
payable in 36 monthly installments of principal and
interest commencing in April 2009.
At June 28, 2009, the Company had no outstanding
amounts under its revolving credit facility.
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. The Company
repurchased $0.8 million of common stock during the
year ended June 28, 2009. As of June 28, 2009, $13.2
million remains authorized but unused.
Under this program, as of June 28, 2009, the Company
had repurchased 2,058,685 shares of common stock for
$13.1 million, of which $0.8 million (397,899 shares), $1.1
million (133,609 shares) and $0.2 million (24,627 shares)
were repurchased during the fiscal years ending June, 28,
2009, June 29, 2008 and July 1, 2007, 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 per share. The repur-
chase 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 28, 2009, the Company’s contractual obligations from continuing operations consist of:
Payments due by period
Less than More than
Total 1 year 1 - 2 years 3 - 5 years 5 years
(in thousands)
Long-term debt,
including interest
$ 97,255
$ 24,764
$ 59,646
$
12,845
$
––
Capital lease obligations,
including interest
Operating lease obligations
Sublease obligations
Marketing agreement
Purchase commitments (*)
6,214
50,107
7,721
7,000
29,521
2,264
11,441
2,455
3,500
29,521
3,944
19,078
3,406
3,500
––
6
13,873
1,469
––
––
5,715
391
––
Total
$197,818
$ 73,945
$ 89,574
$
28,193
$
6,106
(*) Purchase commitments consist primarily of inventory, equipment purchase orders and online marketing agreements made in the ordinary
course of business.
11
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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. Mem-
bership 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
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
12
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
In April 2009, the FASB issued FSP SFAS No. 107-1
and APB 28-1, “Interim Disclosures about Fair Value of
Financial Instruments.” FSP SFAS No. 107-1 and APB 28-
1 enhances consistency in financial reporting by increas-
ing the frequency of fair value disclosures. The FSP
relates to fair value disclosures for any financial instru-
ments that are not currently reflected on a company’s
balance sheet at fair value. Prior to the effective date of
this FSP, fair values for these assets and liabilities have
only been disclosed once a year. The FSP will now
require these disclosures on a quarterly basis, providing
qualitative and quantitative information about fair value
estimates for all those financial instruments not measured
on the balance sheet at fair value. The disclosure
requirement under this FSP is effective for the Company’s
interim reporting period ending on September 27, 2009.
In April 2008, the FASB issued FASB Staff Position
(FSP) FAS 142-3, “Determination of the Useful Life of
Intangible Assets.” This FSP 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 SFAS No. 142,
“Goodwill and Other Intangible Assets,” or SFAS 142.
The intent of this FSP is to improve the consistency
between the useful life of a recognized intangible asset
under SFAS 142 and the period of expected cash flows
used to measure the fair value of the asset under SFAS
141R and other generally accepted accounting prin-
ciples. This FSP is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. Early adoption is
prohibited. The Company is currently evaluating the
impact, if any, that this FSP will have on its results of
operations, financial position or cash flows.
In December 2007, the FASB issued Statement No.
141 (Revised), “Business Combinations” (“SFAS No.
141R”) and SFAS 160, “Noncontrolling Interests in
Consolidated Financial Statements (“SFAS 160”). SFAS
No. 141R and SFAS 160 revise the method of accounting
for a number of aspects of business combinations and
non-controlling interests, including acquisition costs,
contingencies (including contingent assets, contingent
liabilities and contingent purchase price), the impacts of
partial and step-acquisitions (including the valuation of
net assets attributable to non-acquired minority interests),
and post acquisition exit activities of acquired businesses.
SFAS 141R and SFAS 160 will be effective for the
Company during the fiscal year beginning 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.
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 June 2009, the FASB issued SFAS No. 168,
“The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles –
a replacement of FASB Statement No. 162.” SFAS No.
168 establishes the FASB Accounting Standards Codifi-
cation as the source of authoritative accounting principles
and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental
entities that are presented in conformity with generally
accepted accounting principles in the United States.
SFAS No. 162 is effective for the Company’s interim
reporting period ending on September 27, 2009. The
Company does not anticipate the adoption of SFAS No.
168 will have a material impact on its financial position,
results of operations or cash flows.
In May 2009, the FASB issued SFAS No. 165, “Subse-
quent Events.” SFAS No. 165 is intended to establish
general standards of accounting for and disclosure of
events that occur after the balance sheet date but before
financial statements are issued or are available to be
issued. This SFAS requires the disclosure of the date
through which an entity has evaluated subsequent events
and the basis for that date. The disclosure requirement
under this SFAS is effective for the Company’s annual
reporting for the fiscal year ended on June 28, 2009.
In April 2009, the FASB issued FSP SFAS No. 141(R)-
1, “Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from
Contingencies.” FSP SFAS No. 141(R)-1 will amend the
provisions related to the initial recognition and measure-
ment, subsequent measurement and disclosure of assets
and liabilities arising from contingencies in a business
combination under SFAS No. 141(R), “Business Combi-
nations.” The FSP will carry forward the requirements in
SFAS No. 141, “Business Combinations,” for acquired
contingencies, thereby requiring that such contingencies
be recognized at fair value on the acquisition date if fair
value can be reasonably estimated during the allocation
period. Otherwise, entities would typically account for the
acquired contingencies in accordance with SFAS No. 5,
“Accounting for Contingencies.” The FSP will have the
same effective date as SFAS No. 141(R), and will
therefore be effective for the Company’s business
combinations for which the acquisition date is on or after
July 1, 2009. The Company is currently evaluating the
impact of the implementation of FSP SFAS No. 141(R)-1
on its consolidated financial position, results of opera-
tions and cash flows.
13
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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.
government securities, as well as from outstanding debt.
As of June 28, 2009, the Company’s outstanding debt,
including current maturities, approximated $92.9 million,
of which $87.4 million was variable rate debt. Each 25
basis point change in interest rates would have a
corresponding effect on our interest expense of approxi-
mately $0.2 million as of June 28, 2009. In July 2009
the Company entered into interest rate hedge contracts
totaling $45.0 million to manage its exposure to changes
in the fair value of debt due in fiscal 2010 through 2012.
The effect of these hedges is to change the variable rate
interest to a fixed rate.
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 agree-
ments; 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 proceed-
ings 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
anticipated, 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 a cautionary discussion of
risks, uncertainties and possibly inaccurate assumptions
relevant to our business under the item titled “Risk
Factors” in our 10-K. 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 such discussion to be a complete discussion of
all potential risks and uncertainties.
14
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
2009 and 2008. 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. 28, Mar. 28, Dec. 28, Sep. 28, Jun. 29, Mar. 30, Dec. 30, Sep. 30,
2009 2009 2008 2008 2008 2008 2007 2007
(in thousands, except per share data)
Net revenues:
E-commerce
(telephonic/online) $138,090 $115,449 $157,085 $ 87,896
47,542
34,372
Other
135,438
172,462
83,242
105,876
52,196
66,586
94,486
251,571
150,858
100,713
39,030
154,479
92,768
61,711
Total net revenues
Cost of revenues
Gross Profit
Operating expenses:
$154,284 $155,060 $181,817 $ 93,002
28,073
121,075
71,400
49,675
54,372
236,189
129,724
106,465
32,661
186,945
110,751
76,194
39,942
195,002
115,041
79,961
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
Goodwill and intangible
impairment
8,978
Total operating expenses
79,569
Operating income (loss) (12,983)
Other income (expense), net (*)
(4,810)
Income (loss) from
continuing operations
before income taxes (17,793)
(4,713)
Income tax expense (benefit)
Income (loss) from
45,776
5,951
13,582
5,282
43,429
5,205
11,886
5,559
54,560
4,781
10,929
5,094
32,074
5,063
14,054
5,075
45,953
4,925
12,646
4,871
48,985
4,985
11,745
4,365
57,042
4,886
13,877
4,333
31,450
4,815
13,839
4,253
76,460
––
142,539
75,364
25,349
(80,828)
(1,000) (2,420)
––
56,266
(4,070)
(1,065)
––
68,395
7,799
(541)
––
70,080
9,881
(741)
––
80,138
––
54,357
26,327 (4,682)
(1,400)
(1,488)
(81,828)
(17,569)
22,929
8,973
(5,135)
(2,017)
7,258
2,432
9,140
3,077
24,839
10,028
(6,082)
(2,411)
continuing operations
Loss from discontinued operations,
(13,080)
(64,259)
13,956
(3,118)
4,826
6,063
14,811
(3,672)
(3,488)
(18,559)
(14,269)
before income taxes
(1,369)
508
Income tax expense (benefit)
(5,122)
Loss from discontinued operations (9,147)
(2,119)
(19,067)
Net income (loss) $ (22,227) $ (65,775) $ (5,111) $ (5,304) $ 4,298 $ 3,290 $ 19,256 $ (5,790)
Net income (loss) per
(1,072)
(544)
(528)
(3,617)
(1,431)
(2,186)
(3,309)
(1,793)
(1,516)
(4,584)
(1,811)
(2,773)
7,359
2,914
4,445
common share (basic):
From continuing operations $ (0.21) $ (1.00) $ 0.22
(0.02) (0.30)
From discontinued operations
(0.14)
$ (0.05)
(0.03)
$ 0.08 $ 0.10 $ 0.24 $ (0.06)
(0.01) (0.04) 0.07 (0.03)
Net income (loss) per
common share (basic) $ (0.35) $ (1.03) $ (0.08) $ (0.08) $ 0.07 $ 0.05 $ 0.31 $ (0.09)
Net income (loss) per
common share (diluted):
From continuing operations $ (0.21) $ (1.00) $ 0.22
(0.02) (0.30)
From discontinued operations
(0.14)
Net income (loss) per
$ (0.05)
(0.03)
$ 0.07 $ 0.09 $ 0.22 $ (0.06)
(0.01) (0.04) $ 0.07 (0.03)
common share (diluted) $ (0.35) $ (1.03) $ (0.08) $ (0.08) $ 0.07 $ 0.05 $ 0.29 $ (0.09)
62,638
Basic
62,638
Diluted
63,646
63,646
63,466
63,466
63,631
63,631
63,518
63,518
63,386
65,462
63,261
65,413
63,020
66,050
(*) Other income (expense), net during the three months ended June 28, 2009 includes the write-off of deferred financing costs of
approximately $3.2 million related to the April 14, 2009 modification of the Company’s 2008 Credit Facility.
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, the
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.
15
Consolidated Balance Sheets
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands, except share data)
June 28, June 29,
2009 2008
Assets
Current assets:
Cash and equivalents
Receivables, net
Inventories
Deferred tax assets
Prepaid and other
Current assets of discontinued operations
Total current assets
Property, plant and equipment, net
Goodwill
Other intangibles, net
Deferred income taxes
Other assets
Non-current assets of discontinued operations
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
Current maturities of long-term debt and obligations under capital leases
Current liabilities of discontinued operations
Total current liabilities
Long-term debt and obligations under capital leases
Deferred tax liabilities
Other liabilities
Non-current liabilities of discontinued operations
Total liabilities
Stockholders’ equity:
$ 29,562
11,335
45,854
12,666
4,518
18,143
122,078
54,770
41,205
42,822
11,725
3,952
9,575
$286,127
$ 52,251
22,337
3,811
78,399
70,518
––
3,270
157
152,344
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued
Class A common stock, $.01 par value, 200,000,000 shares authorized,
31,730,404 and 31,368,241 shares issued in 2009 and 2008, respectively
Class B common stock, $.01 par value, 200,000,000 shares authorized,
––
317
$ 12,124
12,471
38,844
7,977
4,263
33,871
109,550
50,275
105,899
65,421
––
3,912
36,281
$371,338
$ 57,815
12,801
5,518
76,134
55,250
5,527
2,759
203
139,873
––
314
42,138,465 shares issued in 2009 and 2008
Additional paid-in capital
Retained deficit
Treasury stock, at cost, 5,122,225 and 4,724,326 Class A shares in 2009 and
2008, respectively, and 5,280,000 Class B shares
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes.
16
421
421
279,718
281,247
(116,256) (17,839)
(31,946) (31,149)
231,465
133,783
$286,127
$371,338
Consolidated Statements of Operations
1-800-FLOWERS.COM, Inc. and Subsidiaries
Years Ended
(in thousands, except per share data)
June 28, June 29, July 1,
2009 2008 2007
Net revenues
Cost of revenues
Gross profit
$739,211
426,916
312,295
$713,950
432,744
281,206
$725,650
419,083
306,567
Operating expenses:
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
Goodwill and intangible impairment
Total operating expenses
Operating income (loss)
175,839
21,000
50,451
21,010
85,438
353,738
(72,532)
183,430
19,611
52,107
17,822
––
272,970
39,325
180,238
18,871
50,236
15,353
––
264,698
41,869
Other income (expense):
Interest income
1,077
Interest expense (6,269) (5,039) (7,212)
––
Deferred financing write-off
2
Other, net
(6,133)
(3,245)
(95)
(9,295)
––
43
(4,170)
Total other income (expense), net
826
314
Income (loss) from continuing operations
before income taxes
Income tax expense (benefit) from continuing operations
Income (loss) from continuing operations
Operating income (loss) from discontinued operations
Impairment of discontinued business
Income tax expense (benefit) from
discontinued operations
Loss from discontinued operations
Net income (loss)
Net income (loss) per common share (basic):
From continuing operations
From discontinued operations
Net income (loss) per common share (basic)
Net income (loss) per common share (diluted):
From continuing operations
From discontinued operations
Net income (loss) per common share (diluted)
Weighted average shares used in the calculation of
net income (loss) per common share:
Basic
Diluted
See accompanying notes.
(81,827)
(15,326)
(66,501)
(4,996)
(34,758)
(7,838)
(31,916)
$ (98,417)
$ (1.05)
(0.50)
$ (1.55)
$ (1.05)
(0.50)
$ (1.55)
35,155
13,126
22,029
(1,785)
––
(810)
(975)
$ 21,054
$
0.35
(0.02)
$
0.33
$
0.34
(0.01)
$
0.32
35,736
14,755
20,981
(6,727)
––
(2,864)
(3,863)
$ 17,118
$
0.33
(0.06)
$
0.27
$
0.32
(0.06)
$
0.26
63,565
63,565
63,074
65,458
63,786
65,526
17
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Consolidated Statements of Cash Flows
1-800-FLOWERS.COM, Inc. and Subsidiaries
Years Ended
(in thousands)
June 28, June 29, July 1,
2009 2008 2007
Operating activities:
Net income (loss)
Reconciliation of net income (loss) to net cash
$ (98,417)
$ 21,054
$ 17,118
provided by operating activities, net of acquisitions:
Operating activities of discontinued operations
Depreciation and amortization
Amortization of deferred financing costs
Deferred income taxes
Stock-based compensation
Excess tax benefits from stock-based compensation
Bad debt expense
Goodwill and intangible asset impairment from
continuing operations
Impairment from discontinued operations
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:
Acquisitions, net of cash acquired
Capital expenditures
Proceeds from sale of business
Other, net
Investing activities of discontinued operations
Net cash used in investing activities
Financing activities:
Acquisition of treasury stock
Proceeds from employee stock options
Excess tax benefits from stock based compensation
Proceeds from bank borrowings
Repayment of notes payable and bank borrowings
Debt issuance cost
Repayment of capital lease obligations
Financing activities of discontinued operations
Net cash provided by (used in) financing activities
Net change in cash and equivalents
Cash and equivalents:
Beginning of year
End of year
7,210
21,010
3,751
(22,249)
1,724
––
2,264
85,426
34,758
(166)
516
(2,589)
(219)
(5,754)
412
511
28,188
(12,001)
(12,265)
25
215
(1,202)
(25,228)
(797)
114
––
120,000
(100,648)
(3,603)
(502)
(86)
14,478
17,438
12,124
29,562
$
3,009
17,624
198
8,582
3,534
(2,196)
2,094
––
––
809
848
(5,023)
505
8,639
(2,166)
391
57,902
893
15,353
––
12,622
4,600
––
1,713
––
––
(791)
(6,176)
(5,211)
(682)
(2,540)
(6,044)
1,486
32,341
(37,849)
(347)
(18,237)
(15,009)
463
1,463
(387)
242
(3,034)
(1,705)
(57,715) (16,685)
(1,079)
4,729
2,196
110,000
(118,487)
––
(28)
(1,481)
(4,150)
(3,963)
16,087
$ 12,124
(15,877)
2,007
––
110,000
(118,510)
––
(378)
(1,410)
(24,168)
(8,512)
24,599
$ 16,087
See accompanying notes.
Supplemental Cash Flow Information:
- Interest paid amounted to $5.8 million, $5.1 million, and $7.4 million for the years ended June 28, 2009, June 29, 2008 and
July 1, 2007, respectively.
July 1, 2007, respectively.
- Capital expenditures excludes capital lease financing of $6.0 million $-, and $- for the years ended June 28, 2009, June 29, 2008 and
- The Company paid income taxes of approximately $3.0 million, $2.1 million and $1.4 million, net of tax refunds received, for the years ended
June 28, 2009, June 29, 2008, and July 1, 2007, respectively.
19
Notes to Consolidated Financial Statements
1-800-FLOWERS.COM, Inc. and Subsidiaries
June 28, 2009
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 or
www.Geerwade.com); and gift baskets from 1-800-
BASKETS.COM® (www.1800baskets.com) and
DesignPac GiftsSM (www.designpac.com).
During the fourth quarter of fiscal 2009, the Company
made the strategic decision to divest its Home &
Children’s Gifts business segment to focus on its core
Consumer Floral, BloomNet Wire Service and Gourmet
Foods & Gift Baskets categories. The Company has
classified the results of operations of its Home &
Children’s Gifts segment, which includes 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), as discontinued operations
for all periods presented.
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
2009, 2008 and 2007, which ended on June 28, 2009,
June 29, 2008 and July 1, 2007, 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. The Company
has classified the results of operations of its Home &
Children’s Gifts segment as discontinued operations for
all periods presented.
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 depreci-
ated 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 in 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 assess-
ing the recoverability of goodwill, the Company reviews
both quantitative as well as qualitative factors to support
its assumptions with regard to fair value.
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.
During fiscal 2009, the Company conducted its
evaluation of impairment for goodwill and intangible
assets and concluded that the carrying value of these
assets exceeded their estimated fair value. Refer to Note
6, “Goodwill and Intangible Assets” for further description.
20
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 $0.4 million
and $0.5 million at June 28, 2009 June 29, 2008,
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-
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 28, 2009, June 29, 2008 and July 1, 2007, 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 28, 2009 and June 29, 2008.
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
($1.8 million and $1.4 million at June 28, 2009 and June
29, 2008, respectively) have been recorded based upon
previous experience 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
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 $70.8 million, $78.9 million and
$75.5 million for the years ended June 28, 2009, June 29,
2008 and July 1, 2007, 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 28, 2009, June 29, 2008 and July 1, 2007, 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
21
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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
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 28, 2009, June 29, 2008
and July 1, 2007, the Company’s comprehensive income
(loss) was equal to the respective net income (loss) for
each of the periods presented.
Fair Value Measurements
Effective June 30, 2008, the Company adopted
Statement of Financial Accounting Standard No. 157,
“Fair Value Measurements” (“SFAS 157”) for certain
financial assets and liabilities. This standard establishes
a framework for measuring fair value and requires
enhanced disclosures about fair value measurements.
SFAS 157 clarifies that fair value is an exit price,
representing the amount that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants. SFAS 157 also
establishes a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value.
The statement requires that assets and liabilities carried
at fair value be classified and disclosed in one of the
following three categories:
Level 1: Quoted market prices in active markets for identical
assets or liabilities.
Level 2: Quoted prices in active markets for similar assets and
liabilities, quoted prices for identically similar assets or liabili-
ties in markets that are not active and models for which all
significant inputs are observable either directly or indirectly.
Level 3: Unobservable inputs reflecting the reporting entity’s
own assumptions or external inputs for inactive markets.
The determination of where assets and liabilities fall
within this hierarchy is based upon the lowest level of
input that is significant to the fair value measurement.
While the Company has previously invested in certain
assets that would be classified as “level 1”, as of June 28,
2009, the Company does not hold any “level 1” cash
equivalents that are measured at fair value on a recurring
basis, nor does the Company have any assets or
liabilities that are based on “level 2” or “level 3” inputs.
Net Income (Loss) Per Share
Basic net income (loss) per common share is com-
puted 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 unvested restricted stock awards) outstanding during
the period. Diluted net loss per share is computed using
the weighted-average number of common shares
outstanding during the period, and excludes the effect of
dilutive potential common shares (consisting primarily of
employee stock options and unvested restricted stock
awards) as their inclusion would be antidilutive.
Recent Accounting Pronouncements
In June 2009, the FASB issued SFAS No. 168, “The
FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles –
a replacement of FASB Statement No. 162.” SFAS No.
168 establishes the FASB Accounting Standards Codifi-
cation as the source of authoritative accounting principles
and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental
entities that are presented in conformity with generally
accepted accounting principles in the United States.
SFAS No. 162 is effective for the Company’s interim
reporting period ending on September 27, 2009. The
Company does not anticipate the adoption of SFAS No.
168 will have a material impact on its financial position,
results of operations or cash flows.
In May 2009, the FASB issued SFAS No. 165, “Subse-
quent Events.” SFAS No. 165 is intended to establish
general standards of accounting for and disclosure of
events that occur after the balance sheet date but before
financial statements are issued or are available to be
issued. This SFAS requires the disclosure of the date
through which an entity has evaluated subsequent events
and the basis for that date. The disclosure requirement
under this SFAS is effective for the Company’s annual
reporting for the fiscal year ended on June 28, 2009.
In April 2009, the FASB issued FSP SFAS No. 141
(R)-1, “Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from
Contingencies.” FSP SFAS No. 141(R)-1 will amend the
provisions related to the initial recognition and measure-
ment, subsequent measurement and disclosure of assets
and liabilities arising from contingencies in a business
combination under SFAS No. 141(R), “Business Combi-
nations.” The FSP will carry forward the requirements in
SFAS No. 141, “Business Combinations,” for acquired
contingencies, thereby requiring that such contingencies
be recognized at fair value on the acquisition date if fair
value can be reasonably estimated during the allocation
period. Otherwise, entities would typically account for the
acquired contingencies in accordance with SFAS No. 5,
“Accounting for Contingencies.” The FSP will have the
same effective date as SFAS No. 141(R), and will
therefore be effective for the Company’s business
22
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Reclassifications
Certain balances in the prior fiscal years have been
reclassified to conform with the presentation in the current
fiscal year. As a result of the Company’s decision to
dispose of its Home & Children’s Gifts businesses, this
segment has been accounted for as a discontinued
operation and the prior periods have been reclassified to
conform to the current period presentation. (Refer to Note
15. Discontinued Operations)
Note 3. Net Income Per Common Share
The following table sets forth the computation of basic
and diluted net income (loss) per common share:
Years Ended
June 28, June 29, July 1,
2009 2008 2007
(in thousands, except per share data)
Numerator:
Net income (loss)
$(98,417)
$21,054
$ 17,118
Denominator:
Weighted average
shares outstanding
Effect of dilutive securities:
63,565
63,074
63,786
Employee stock
options (1)
Employee restricted
stock awards
––
––
––
1,808
1,282
576
2,384
458
1,740
Adjusted weighted-average
shares and assumed
conversions
63,565
65,458
65,526
Net income per common share:
Basic
Diluted
$ (1.55)
$ (1.55)
$
$
0.33
0.32
$ 0.27
$ 0.26
Note (1): The effect of options to purchase 8.9 million, 3.2 million
and 5.8 million shares for the years ended June 28, 2009, June
29, 2008, and July 1, 2007, respectively, were excluded from the
calculation of net income per share on a diluted basis as their
effect is anti-dilutive.
combinations for which the acquisition date is on or after
July 1, 2009. The Company is currently evaluating the
impact of the implementation of FSP SFAS No. 141(R)-1
on its consolidated financial position, results of opera-
tions and cash flows.
In April 2009, the FASB issued FSP SFAS No. 107-1
and APB 28-1, “Interim Disclosures about Fair Value of
Financial Instruments.” FSP SFAS No. 107-1 and APB 28-
1 enhances consistency in financial reporting by increas-
ing the frequency of fair value disclosures. The FSP
relates to fair value disclosures for any financial instru-
ments that are not currently reflected on a company’s
balance sheet at fair value. Prior to the effective date of
this FSP, fair values for these assets and liabilities have
only been disclosed once a year. The FSP will now
require these disclosures on a quarterly basis, providing
qualitative and quantitative information about fair value
estimates for all those financial instruments not measured
on the balance sheet at fair value. The disclosure
requirement under this FSP is effective for the Company’s
interim reporting period ending on September 27, 2009.
In April 2008, the FASB issued FASB Staff Position
(FSP) FAS 142-3, “Determination of the Useful Life of
Intangible Assets.” This FSP 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 SFAS No. 142,
“Goodwill and Other Intangible Assets,” or SFAS 142. The
intent of this FSP is to improve the consistency between
the useful life of a recognized intangible asset under
SFAS 142 and the period of expected cash flows used to
measure the fair value of the asset under SFAS 141R and
other generally accepted accounting principles. This FSP
is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods
within those fiscal years. Early adoption is prohibited.
The Company is currently evaluating the impact, if any,
that this FSP will have on its results of operations,
financial position or cash flows.
In December 2007, the FASB issued Statement No.
141 (Revised), “Business Combinations” (“SFAS No.
141R”) and SFAS 160, “Noncontrolling Interests in
Consolidated Financial Statements (“SFAS 160”). SFAS
No. 141R and SFAS 160 revise the method of accounting
for a number of aspects of business combinations and
non-controlling interests, including acquisition costs,
contingencies (including contingent assets, contingent
liabilities and contingent purchase price), the impacts of
partial and step-acquisitions (including the valuation of
net assets attributable to non-acquired minority interests),
and post acquisition exit activities of acquired businesses.
SFAS 141R and SFAS 160 will be effective for the
Company during the fiscal year beginning 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.
23
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 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 $9.4 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 approximately $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. The
purchase price includes an up-front cash payment of $9.3
million, net of cash acquired, and the expected portion of
“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. As of June
28, 2009, the Company does not expect that any of the
specified performance targets will be achieved.
The following table summarizes the preliminary
allocation of purchase price to the estimated fair values of
assets acquired and liabilities assumed at the date of the
acquisition of Napco:
Napco 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
$ 5,119
3,929
397
––
74
9,519
162
162
$ 9,357
Acquisition of Geerlings & Wade
On March 25, 2009, the Company acquired selected
assets of Geerlings & Wade, Inc., a retailer of wine and
related products. The purchase price of approximately
$2.6 million included the acquisition of inventory, and
certain other assets (approximately $1.4 million of
goodwill is deductible for tax purposes), as well as the
assumption of certain related liabilities. The acquisition
was financed utilizing available cash on hand.
The following table summarizes the preliminary
allocation of purchase price to the estimated fair values of
assets acquired and liabilities assumed at the date of the
acquisition of Geerlings & Wade:
Geerlings & Wade Purchase Price Allocation
(in thousands)
Current assets
Intangible assets
Goodwill
Total assets acquired
Current liabilities
Total liabilities assumed
Net assets acquired
$
990
253
1,438
2,681
77
77
$ 2,604
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 $33.4 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
year ending June 27, 2010, upon achievement of
specified performance targets. As of June 28, 2009, the
Company does not expect that any of the specified
performance targets will be achieved.
The following table summarizes the allocation 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
18,753
12,332
82
33,626
184
184
$33,442
Of the $18.8 million of acquired intangible assets
related to the DesignPac acquisition, $6.7 million was
assigned to trademarks that are not subject to amortiza-
24
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 28, June 29,
2009 2008
(in thousands)
Finished goods
Work-in-process
Raw materials
$23,759
16,619
5,476
$45,854
$20,819
14,583
3,442
$38,844
tion, while the remaining acquired intangibles of $12.2
million were allocated primarily to customer related
intangibles which are being amortized over the assets’
estimated useful life of 10 years. Approximately $12.3
million of goodwill is deductible for tax purposes. As
described further in Note 6, during the year ended June
28, 2009, the Company recorded an impairment charge
of $85.4 million for the write-down of goodwill and
intangibles associated with its Gourmet Food and Gift
Basket category to which DesignPac is categorized.
Pro forma Results of Operation
The following unaudited pro forma consolidated
financial information has been prepared as if the acquisi-
tions of DesignPac, Napco and Geerlings & Wade had
taken place at the beginning of fiscal year 2007. 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 28, June 29, July 1,
2009 2008 2007
(in thousands, except per share data)
Net revenues
from continuing
operations
Operating income (loss)
from continuing
operations
Net income (loss)
from continuing
operations
Net income (loss)
Net income (loss) per
common share from
$718,419
$814,373
$803,313
$ (71,838)
$ 48,670
$ 48,227
$ (65,913)
$ (97,829)
$ 26,481
$ 25,506
$ 26,957
$ 20,094
continuing operations
Basic
Diluted
$ (1.04)
$ (1.04)
Net income (loss) per
common share
Basic
Diluted
$ (1.54)
$ (1.54)
$
$
$
$
0.42
0.40
$ 0.38
$ 0.37
0.40
0.39
$ 0.32
$ 0.31
25
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:
1-800-Flowers.com BloomNet Gourmet
Consumer Wire Food and
Floral Service Gift Baskets Total
Balance at July 1, 2007
Acquisition of DesignPac Gifts
Other
Balance at June 29, 2008
Acquisition of Geerlings & Wade
Goodwill impairment
Other
$ 6,352
––
(187)
6,165
––
––
(437)
Balance at June 28, 2009 $ 5,728
$
$
––
––
––
––
––
––
––
––
$
87,279
12,085
370
99,734
1,438
(65,644)
(51)
$
35,477
$ 93,631
12,085
183
105,899
1,438
(65,644)
(488)
$ 41,205
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intan-
gible assets acquired in each business combination. The carrying value of the Company’s goodwill was allocated to its
reporting units pursuant to SFAS No. 142, “Goodwill and Other Intangible Assets.” In accordance with SFAS No. 142,
goodwill and other indefinite lived intangibles are subject to an assessment for impairment, which must be performed
annually, or more frequently if events or circumstances indicate that goodwill or other indefinite lived intangibles might
be impaired. Goodwill impairment testing involves a two-step process. Step 1 compares the fair value of the Company’s
reporting units to their carrying values. If the fair value of the reporting unit exceeds its carrying value, no further
analysis is necessary. If the carrying amount of the reporting unit exceeds its fair value, Step 2 must be completed to
quantify the amount of impairment. Step 2 calculates the implied fair value of goodwill by deducting the fair value of all
tangible and intangible assets, excluding goodwill, of the reporting unit, from the fair value of the reporting unit as
determined in Step 1. The implied fair value of goodwill determined in this step is compared to the carrying value of
goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss, equal to the
difference, is recognized.
During the year ended June 28, 2009 the Gourmet Food & Gift Basket segment experienced declines in revenue and
operating performance when compared to prior years and their strategic outlook. The Company believes that this weak
performance was attributable to reduced consumer spending due to the overall weakness in the economy. Based upon the
expectation of a continuation of the current economic downturn, supported by lower order quantities received for the
upcoming holiday season by certain wholesale customers, coupled with a decline of the Company’s market capitalization
and contraction of public company multiples, the Company recorded a goodwill and intangible impairment charges of $85.4
million during the year ended June 28, 2009. Of the total impairment charge, approximately $65.6 million was related to
goodwill and $19.8 million was related to intangibles.
Fair value was determined by using a combination of a market-based and an income-based approach, weighting
both approaches equally. Under the market-based approach, the Company utilized information regarding the Company
as well as publicly available industry information to determine earnings and revenue multiples that are used to value
the Company’s reporting units. Under the income-based approach, the Company determined fair value based upon
estimated future cash flows of the reporting unit, discounted by an estimated weighted-average cost of capital, which
reflected the overall level of inherent risk of the reporting unit and the rate of return that an outside investor would
expect to earn. The Company reconciled the value of its reporting units to its current market capitalization (based upon
the Company’s stock price) to determine that its assumptions were consistent with that of an outside investor.
26
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
The Company’s other intangible assets consist of the following:
June 28, June 29,
2009 2008
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
$ 5,314 $ 4,823
4,673
960
10,456
15,695
2,388
27,397
––
29,881
$57,278
––
$10,456
$
491
11,022
1,428
12,941
29,881
$42,822
$ 4,927
24,910
2,376
32,213
43,857
$76,070
$ 4,408
5,690
551
10,649
––
$10,649
$
519
19,220
1,825
21,564
43,857
$65,421
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset or asset group may not be recoverable. As part of the aforementioned impairment analysis performed
for the Gourmet Food and Gift Basket segments, the Company recorded an impairment charge of $19.8 million related to
the trade names and customer lists, which were determined to be impaired due to changes in the business environment
and adverse economic conditions currently being experienced due to decreased consumer spending.
The amortization of intangible assets for the years ended June 28, 2009, June 29, 2008 and July 1, 2007 was $3.7
million, $2.8 million, and $2.3 million, respectively. Future estimated amortization expense is as follows: 2010 - $3.0
million, 2011 - $2.3 million, 2012 - $1.6 million, and 2013 - $1.5 million, and thereafter - $4.5 million.
Note 7. Property, Plant and Equipment
Note 8. Long-Term Debt
June 28, June 29,
2009 2008
(in thousands)
June 28, June 29,
2009 2008
(in thousands)
Land
Building and building improvements
Leasehold improvements
Furniture and fixtures
Equipment
Computer equipment
Telecommunication equipment
Software
$
2,907
9,659
15,039
3,965
20,795
55,541
8,536
73,445
189,887
$
1,850
7,069
15,023
4,431
19,189
52,847
9,152
62,281
171,842
Accumulated depreciation and
amortization
135,117
$ 54,770
121,567
$ 50,275
Term loan and revolving
credit line (1)
Revolving credit line (1)
Obligations under capital
leases (2)
Less current maturities of
long-term debt and obligations
under capital leases
$87,351
––
$68,000
––
5,504
92,855
51
68,051
22,337
$70,518
12,801
$55,250
(1) In order to fund the increase in working capital
requirements associated with DesignPac, 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 provided 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.
On April 14, 2009, the Company entered into an
27
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
amendment to the 2008 Credit Facility (the “Amended
2008 Credit Facility”). The Amended 2008 Credit Facility
included a prepayment of $20.0 million, reducing the
Company’s outstanding term loans under the facility to
$92.4 million upon closing. In addition, the amendment
reduced the Company’s revolving credit line from $165.0
million to a seasonally adjusted line ranging from $75.0
to $125.0 million. The Amended 2008 Credit Facility,
effective March 29, 2009, also revises certain financial
and non-financial covenants, including maintenance of
certain financial ratios and eliminates the consolidated
net worth covenant that had been included in the
previous agreement. Outstanding amounts under the
Amended 2008 Credit Facility will bear interest at the
Company’s option at either: (i) LIBOR plus a defined
margin, or (ii) the agent bank’s prime rate plus a margin.
The applicable margins for the Company’s term loans
and revolving credit facility will range from 3.00% to
4.50% for LIBOR loans and 2.00% to 3.50% for ABR
loans with pricing based upon the Company’s leverage
ratio. The repayment terms of the existing term loans were
reduced, on a pro-rata basis, for the $20.0 million
prepayment. The obligations of the Company and its
subsidiaries under the Amended 2008 Credit Facility are
secured by liens on all personal property of the Company
and its subsidiaries.
As a result of the modifications of its credit agree-
ments, during the quarter ended June 28, 2009, the
Company wrote-off $3.2 million of financing costs
associated with the term debt related to both the 2008
Credit Facility and the Amended 2008 Credit Facility.
(2) During March 2009, the Company obtained a
$5.0 million equipment lease line of credit with a bank
and a $5.0 million equipment lease line of credit with a
vendor. Interest under these lines, which both mature in
April 2012, range from 2.99% to 7.48%. Borrowings under
the bank line are collateralized by the underlying
equipment purchased, while the equipment lease line
with the vendor is unsecured. The borrowings are
payable in 36 monthly installments of principal and
interest commencing in April 2009.
As of June 28, 2009 long-term debt maturities,
excluding amounts relating to capital leases (refer to Note
16. Commitments and Contingencies), are as follows:
Year Debt Maturities
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
Company is currently under examination by the Internal
Revenue Service for its fiscal 2007 tax year, however,
fiscal 2006 through fiscal 2008 remain subject to
examination, with the exception of certain states where
the statute remains open from fiscal 2004, due to non-
conformity with the federal statute of limitations for
assessment. The Company does not believe there will
be any material changes in its unrecognized tax
positions over the next twelve months.
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
from continuing operations are as follows:
Years Ended
June 28, June 29, July 1,
2009 2008 2007
(in thousands)
Current provision:
Federal
State
Deferred provision:
Federal
State
$
1,254
54
1,308
$ 3,008
1,751
4,759
$ (275)
2,136
1,861
(15,089)
(1,545)
(16,634)
8,558
(191)
8,367
11,746
1,148
12,894
(in thousands)
Income tax (benefit)
expense
$ (15,326)
$ 13,126
$ 14,755
2010
2011
2012
2013
2014
$20,348
23,842
30,830
9,865
2,466
$87,351
28
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 10. Capital 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.
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 28, 2009, $13.2 remains authorized but unused.
Under this program, as of June 28, 2009, the
Company had repurchased 2,058,685 shares of
common stock for $13.1 million, of which $0.8 million
(397,899 shares), $1.1 million (133,609 shares) and
$0.2 million (24,627 shares) were repurchased during
the fiscal years ending June 28, 2009, June 29, 2008
and July, 1 2007, respectively. In a separate transac-
tion, 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.
A reconciliation of the U.S. federal statutory tax rate to
the Company’s effective tax rate is as follows:
Years Ended
June 28, June 29, July 1,
2009 2008 2007
Tax at U.S. statutory rates
State income taxes, net
of federal tax benefit
35.0%
35.0%
3.5
2.4
7.1
35.0%
Non-deductible stock-based
compensation
(0.2) 0.1
1.4
Non-deductible goodwill
(17.7)
amortization
0.3
0.3
(1.4) –– ––
Rate change
(0.7)
Tax credits
(0.3)
(0.1)
(0.4) (2.5)
Tax settlements ––
0.3
(0.5)
0.7
Other, net
41.3%
37.3%
18.7%
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. The signifi-
cant components of the Company’s deferred income tax
assets (liabilities) are as follows:
Years Ended
June 28, June 29, July 1,
2009 2008 2007
(in thousands)
Deferred income tax assets:
Net operating loss and
credit carryforwards
Accrued expenses
and reserves
Stock-based
compensation
Other intangibles
$ 4,031
$ 3,483
$12,944
12,142
5,876
6,318
2,871
8,370
3,407
––
2,529
––
Deferred income tax liabilities:
Other intangibles
Tax in excess of
––
(8,834)
(9,112)
book depreciation (3,023) (1,482) (1,649)
Net deferred
income tax assets
$24,391
$ 2,450
$11,030
At June 28, 2009, the Company’s federal net operating
loss carryforwards were approximately $4.2 million, which
if not utilized, will begin to expire in fiscal year 2025.
29
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Stock based compensation expense is recorded
within the following line items of operating expenses:
Years Ended
June 28, June 29, July 1,
2009 2008 2007
(in thousands)
Marketing and sales
Technology and
development
General and administrative
Total
$ 465
$1,051
$1,605
583
676
$1,724
546
1,937
$3,534
690
2,305
$4,600
Stock-based compensation expense has not been
allocated between business segments, but is reflected in
Corporate. (Refer to Note 14 – 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 28, June 29, July 1,
2009 2008 2007
Weighted average fair
value of options granted
Expected volatility
Expected life (in years)
Risk-free interest rate
Expected dividend yield
$1.83
56%
5.8
2.2%
0.0%
$4.36
45%
5.3
4.1%
0.0%
$3.29
46%
5.3
4.6%
0.0%
Note 11. Stock Based Compensation
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 Commit-
tee or such other Board committee (or the entire Board) as
may be designated by the Board (the “Committee”). 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 28, 2009, the Company has reserved approxi-
mately 12.6 million shares of common stock for issuance,
including options previously authorized for issuance
under the 1999 Stock Incentive Plan.
The amounts of stock-based compensation expense
recognized in the periods presented are as follows:
Years Ended
June 28, June 29, July 1,
2009 2008 2007
(in thousands, except per share data)
Stock options
Restricted stock awards
Total
Deferred income tax benefit
Stock-based compensation
$1,383
341
1,724
444
$1,416
2,118
3,534
1,333
$2,736
1,864
4,600
1,353
expense, net
$1,280
$2,201
$3,247
30
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 based upon the historical weighted average. 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 28, 2009:
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Options Price Term Value (000s)
7,872,344
Outstanding – beginning of period
Granted
1,695,868
Exercised (24,843)
Forfeited/Expired (626,697)
Outstanding – end of period
8,916,672
Options vested or expected to
vest at end of period
Exercisable at end of period
8,619,968
6,714,378
$8.47
$3.54
$4.60
$8.84
$7.52
$8.49
$8.63
3.9 years
3.7 years
2.8 years
$ ––
$ ––
$ ––
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 2009 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 28, 2009. 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 28, 2009, June 29, 2008 and July 1, 2007 was $0.0
million, $5.9 million, and $1.0 million, respectively.
The following table summarizes information about stock options outstanding at June 28, 2009:
Options Outstanding Options Exercisable
Weighted- Weighted- Weighted-
Average Average Average
Options Remaining Exercise Options Exercise
Exercise Price Outstanding Contractual Life Price Exercisable Price
2.44 - 3.65
$
$
4.50 - 6.42
$ 6.45 - 8.16
$ 8.21 - 12.87
$ 13.05 - 21.00
2,377,248
2,105,224
1,833,200
2,077,504
523,496
8,916,672
4.9 years
2.8 years
5.7 years
3.1 years
0.2 years
3.9 years
$ 3.29
$ 5.68
$ 6.91
$11.51
$20.34
$ 7.52
982,380
1,991,724
1,283,700
1,933,078
523,496
6,714,378
$ 3.63
$ 5.70
$ 6.90
$11.69
$20.34
$ 8.49
As of June 28, 2009, the total future compensation
cost related to nonvested options not yet recognized in
the statement of operations was $3.5 million and the
weighted average period over which these awards are
expected to be recognized was 2.7 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 (Re-
stricted Stock).
The following table summarizes the activity of non-vested
restricted stock during the year ended June 28, 2009:
Weighted
Average
Grant Date
Shares Fair Value
Non-vested – beginning of period 1,275,153 $ 7.58
Granted 1,593,319 $ 3.43
Vested (337,320) $ 3.34
Forfeited (830,240) $ 7.41
Non-vested – end of period 1,700,912 $ 4.62
The fair value of nonvested shares is determined based
on the closing stock price on the grant date. As of June 28,
31
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
2009, there was $4.3 million of total unrecognized com-
pensation cost related to non-vested restricted stock-based
compensation to be recognized over a weighted-average
period of 2.2 years.
Note 14. Business Segments
The Company’s management reviews the results of
the Company’s operations by the following three busi-
ness categories:
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
contributions to the 401(k) plan in amounts not exceed-
ing 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 $1.1 million, $0.7
million, and $0.5 million, for the years ended June 28,
2009, June 29, 2008 and July 1, 2007, 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. Employees 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. Company contribu-
tions during the years ended June 28, 2009 and June
29, 2008 were less than $0.1 million.
Note 13. Restructuring
During the third and fourth quarters of fiscal 2009 the
Company implemented expense reduction initiatives in
order to reduce its cost structure. The initiatives primarily
involved the termination of employees and facility site
consolidation and closures. The Company recorded
restructuring charges of $2.5 million, which are included
within the following line items of the Company’s
consolidated statement of operations: cost of revenues
($0.2 million), marketing and sales ($1.7 million),
technology and development ($0.4 million) and general
and administrative ($0.2 million). Approximately $1.0
million of severance costs associated with the fourth
quarter restructuring is included within accounts
payable and accrued expenses and is expected to be
paid out during the first quarter of fiscal 2010.
(cid:127) 1-800-Flowers.com Consumer Floral;
(cid:127) BloomNet Wire Service; and
(cid:127) Gourmet Food and Gift Baskets; and
During the fourth quarter of fiscal 2009, the Company
made the strategic decision to divest its Home &
Children’s Gifts business segment to focus on its core
Consumer Floral, BloomNet Wire Service and Gourmet
Foods & Gift Baskets categories. The Company has
classified the results of operations of its Home &
Children’s Gifts segment, which includes Home Decor
and Children’s Gifts from Plow & Hearth®, Wind &
Weather®, HearthSong® and Magic Cabin®, as discon-
tinued operations for all periods presented.
Category performance is measured based on contribu-
tion margin, which includes 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 (see * below), which are operated under a
centralized management platform, providing services
throughout the organization, nor does it include stock-
based compensation, depreciation and amortization, 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 28, June 29, July 1,
2009 2008 2007
(in thousands)
Net revenues:
1-800-Flowers.com
Consumer Floral
BloomNet Wire
Service
Gourmet Food &
Gift Baskets
Corporate (*)
Intercompany
$414,897
$491,696
$491,404
63,933
53,488
44,379
240,200
1,119
196,298
2,431
192,698
1,652
eliminations (6,199) (4,702) (4,483)
Total net revenues
$713,950
$739,211
$725,650
32
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Operating Income
Years Ended
June 28, June 29, July 1,
2009 2008 2007
(in thousands)
Category Contribution Margin:
1-800-Flowers.com
Consumer Floral
BloomNet Wire
$ 40,882
$ 62,967
$ 65,166
Service
19,093
18,509
14,162
Gourmet Food &
Gift Baskets
Category Contribution
23,433
24,593
26,377
Margin Subtotal
105,705
83,408
Corporate (*) (49,492) (48,923) (48,483)
106,069
Depreciation and
amortization (21,010) (17,822) (15,353)
Goodwill and intangible
impairment (85,438)
––
––
Operating income (loss) $ (72,532)
$ 39,324 $ 41,869
(*) Corporate expenses consist of the Company’s enterprise
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 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.
Note 15. Discontinued Operations
During the fourth quarter of fiscal 2009, the Company
made the strategic decision to divest its Home &
Children’s Gifts business segment to focus on its core
Consumer Floral, BloomNet Wire Service and Gourmet
Foods & Gift Baskets categories. Consequently, the
Company has classified the results of operations of its
Home & Children’s Gifts segment as discontinued
operations for all periods presented.
Results for discontinued operations are as follows:
Years Ended
June 28, June 29, July 1,
2009 2008 2007
(in thousands, except per share data)
Net revenues from
discontinued
operations
Operating income (loss)
from discontinued
$143,786
$180,181
$186,948
operations (1) $ (4,996) $ (1,785) $ (6,727)
Impairment of
discontinued
operations (2) $ (34,758)
––
––
Income tax expense
(benefit) from
discontinued
operations $ (7,838) $ (810) $ (2,864)
Income (loss) from
discontinued
operations $ (31,916) $ (975) $ (3,863)
(1) Operating income (loss) from discontinued operations during
the year ended June 28, 2009 includes approximately $0.4
million of restructuring costs associated with the Company’s
cost reduction initiatives implemented during the third quarter.
Refer to Note 13. Restructuring Charges.
(2) During the three months ended December 28, 2008, the
Home and Children’s Gift segment experienced significant
declines in revenue and operating performance when compared
to prior years and their strategic outlook. The Company believes
that this weak performance was attributable to reduced
consumer spending due to the overall weakness in the
economy, and in particular, as a result of the continued decline in
demand for home décor products. As a result of these factors,
as well as the Company’s plans to resize this category based on
the expectation of continued weakness in the home décor retail
sector, upon completion of the impairment analysis described
above, the goodwill and intangibles related to this reporting unit
was deemed to be fully impaired. Therefore, during the three
months ended December 28, 2008, the Company recorded a
goodwill and intangible impairment charge of $20.0 million related
to this business segment. In the fourth quarter ended June 28,
2009, the Company made the strategic decision to divest its
Home & Children’s Gifts business segment. Consequently, the
Company has classified the results of its Home & Children’s
Gifts segment as a discontinued operation, and recorded a
charge of $14.7 million to write-down the assets of the discontin-
ued business to management’s estimate of their fair value.
33
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
June 28, June 29,
2009 2008
Assets of discontinued operations
Receivables, net
Inventories
Prepaid and other
Current assets of
discontinued operations
$
692
15,511
1,940
$
972
28,439
4,460
18,143
33,871
Property, plant and
equipment, net
Goodwill
Other intangibles, net
Other assets
Non-current assets of
discontined operations
Total assets of discontinued
8,861
––
714
––
15,462
18,265
2,507
47
9,575
36,281
operations
$ 27,718
$ 70,152
Liabilities of discontinued operations
Accounts payable and
accrued expenses
Current maturities of long-term
debt and obligations under
capital leases
Current liabilities of
$
3,811
$
5,433
––
85
discontinued operations
3,811
5,518
Non-current liabilities of
discontinued operations
Total liabilities of discontinued
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 28, 2009 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)
2,264
2010
2,264
2011
2012
1,680
2013 7
2014 ––
Thereafter ––
$6,215
Total minimum lease payments
Less amounts representing interest
711
Present value of net minimum
lease payments
$5,504
$11,441
10,233
8,845
7,942
5,931
5,715
$50,107
At June 28, 2009, 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:
157
203
Sublease Sublease
Income Expense
operations
$
3,968
$
5,721
(in thousands)
Note 16. Commitments and Contingencies
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 re-
newed or replaced. Most lease agreements contain
renewal options and rent escalation clauses and require
the Company to pay real estate taxes, insurance,
common area maintenance and operating expenses
applicable to the leased properties. The Company has
also entered into leases that are on a month-to-month
basis. In addition, the Company has a $5.0 million
equipment lease line of credit with a bank and a $5.0
million equipment lease line of credit with a vendor.
Interest under these lines, which both mature in April
2012, range from 2.99% to 7.48%. The borrowings are
payable in 36 monthly installments of principal and
interest commencing in April 2009. All leases and
subleases with an initial term of greater than one year
2010
2011
2012
2013
2014
Thereafter
$2,455
1,918
1,488
999
470
392
$7,722
$2,455
1,918
1,488
999
470
392
$7,722
Rent expense was approximately $19.9 million, $17.1
million, and $16.1 million for the years ended June 28,
2009, June 29, 2008 and July 1, 2007, 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.
34
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 17. Subsequent Event
The Company has evaluated subsequent events
through September 11, 2009, which is the date the
Company filed its Annual Report on Form 10-K for fiscal
2009 with the Securities and Exchange Commission. With
the exception of the item listed below, there are no further
subsequent events for disclosure.
In July 2009 the Company entered into interest rate
hedge contracts totaling $45.0 million to manage its
exposure to changes in the fair value of debt due in fiscal
2010 through 2012. The effect of these hedges is to
change the variable rate interest to a fixed rate.
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 28, 2009 and
June 29, 2008, and the related consolidated statements of
operations, stockholders’ equity, and cash flows for each of
the three years in the period ended June 28, 2009. These
financial statements and schedule 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 assur-
ance about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclo-
sures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the consoli-
dated financial position of 1-800-FLOWERS.COM, Inc.
and Subsidiaries at June 28, 2009 and June 29, 2008,
and the consolidated results of their operations and their
cash flows for each of the three years in the period ended
June 28, 2009, in conformity with U.S. generally accepted
accounting principles.
As discussed in Note 2 to the consolidated financial
statements the Company adopted FASB Statement No.
165, Subsequent Events, effective for annual periods
ending after June 15, 2009. 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 28, 2009, 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 11, 2009 expressed an
unqualified opinion thereon.
Melville, New York
September 11, 2009
35
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
executive and principal financial officers and effectu-
ated 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 pur-
poses 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
reasonable detail, accurately and fairly reflect the transac-
tions 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 accounting principles, and that receipts and
expenditures of the Company are being made only in
accordance with authorization of management and
directors of the Company; and
(cid:127) provide reasonable assurance regarding preven-
tion 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 28, 2009. In making this assessment, manage-
ment used the criteria established in “Internal Control-
Integrated Framework,” issued by the Committee of
Sponsoring Organizations of the Treadway Commission
(COSO).
Based on this assessment, management believes
that, as of June 28, 2009 the Company’s internal control
over financial reporting is effective.
The Company acquired Napco Marketing Corp. on
July 21, 2008, and has excluded the acquired company
from its assessment of and conclusion on the effective-
ness of internal control over financial reporting. The
acquired business constituted approximately 3% of total
assets as of June 28, 2009, and less than two percent
of net 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 28, 2009; 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)
36
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 28, 2009, 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 Napco Marketing
Corp., which is included in the fiscal 2009 consolidated
financial statements of the Company and constituted
approximately 3% of total assets as of June 28, 2009 and
2% of net 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 Napco
Marketing Corp.
In our opinion, 1-800-FLOWERS.COM, Inc. and
Subsidiaries maintained, in all material respects, effective
internal control over financial reporting as of June 28,
2009, 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
28, 2009 and June 29, 2008, and the related consoli-
dated statements of operations, stockholders’ equity, and
cash flows for each of the three years in the period ended
June 28, 2009 and our report dated September 11, 2009
expressed an unqualified opinion thereon.
Melville, New York
September 11, 2009
37
Market for Common Equity and Related Stockholder Matters
Market Information
1-800-FLOWERS.COM’s Class A common stock
trades on the NASDAQ Global Select 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 28, 2009 and June 29, 2008.
High Low
Year ended June 28, 2009
June 30, 2008 – September 28, 2008
$ 7.26
September 29, 2008 – December 28, 2008 $ 6.18
$ 4.18
December 29, 2008 – March 29, 2009
$ 3.99
March 30, 2009 – June 28, 2009
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
$12.38
$13.42
$ 9.00
$ 9.26
$ 4.77
$ 2.50
$ 0.85
$ 1.80
$ 8.47
$ 8.66
$ 6.35
$ 6.51
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, 2009, there were approximately
273 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, 2009, there were approxi-
mately 20 stockholders 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
investment 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
36,922,990 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, 2009, 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 28, 2009, $13.2 million remains authorized
but unused.
Under this program, as of June 28, 2009, the
Company had repurchased 2,058,685 shares of
common stock for $13.1 million, of which $0.8 million
(397,899 shares), $1.1 million (133,609 shares) and
$0.2 million (24,627 shares) were repurchased during
the fiscal years ending June 28, 2009, June 29, 2008
and July 1, 2007, respectively. In a separate transac-
tion, 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.
38
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 6/30/04 in stock or index, including reinvestment of dividends. Fiscal year ending June 30.
39
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, inc.
may be obtained by visiting the
investor Relations section at
www.1800flowersinc.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 Food & Gift Baskets
1-800-FloWeRS.coM
Mark l. nance
president
Bloomnet
1-800-FloWeRS.coM
One Old Country Road, Suite 500, Carle Place, NY 11514
(516) 237-6000 • www.1800flowers.com