2011 Annual Report
D e l i v e r i n g S m i l e S
About 1-800-FLOWERS.cOm, Inc.
1-800-FLOWERS.COM, Inc. is the world’s leading florist and gift shop. For more than 35 years, 1-800-FLOWERS®
(1-800-356-9377 or www.1800flowers.com) has been helping deliver smiles for our customers with gifts for every
occasion, including fresh flowers and the finest selection of plants, gift baskets, gourmet foods, confections, candles,
balloons and plush stuffed animals. As always, our 100% Smile Guarantee backs every gift. The 1-800-FLOWERS.COM
Mobile Flower & Gift Center was named winner of the 2010 “Best Mobile App for E-commerce” by DPAC (Digiday’s
Publishing & Advertising Awards) and the 2010 Mobile App of the Year Award in the “Best Shopping” category by
RIS (Retail Info Systems). 1-800-FLOWERS.COM was also rated number one versus competitors for customer service by
STELLAService and named by the E-Tailing Group as one of only nine online retailers out of 100 benchmarked to meet
the criteria for Excellence in Online Customer Service. 1-800-FLOWERS.COM has been honored in Internet Retailer’s
“Hot 100: America’s Best Retail Web Sites” for 2011 and was one of only five retailers to receive the 2011 Customer
Innovation Award from Avaya for transforming the business through innovative use of business communications
and collaboration technologies. 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 “Gift Shop” also includes gourmet gifts such as popcorn
and specialty treats from The Popcorn Factory® (1-800-541-2676 or www.thepopcornfactory.com); cookies and
baked gifts from Cheryl’s® (1-800-443-8124 or www.cheryls.com); premium chocolates and confections from
Fannie May® confections brands (www.fanniemay.com and www.harrylondon.com); gift baskets and towers
from 1-800-Baskets.com® (www.1800baskets.com); and wine gifts from Winetasting.com® (www.winetasting.com).
The Company’s Celebrations® brand (www.celebrations.com) is a leading online destination for fabulous party ideas
and planning tips and FineStationery.com® (www.finestationery.com) is the premier site for unique, customizable
invitations, announcements and greeting cards. 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 as well as various philanthropic and charitable efforts. Shares in 1-800-FLOWERS.COM, Inc. are
traded on the NASDAQ Global Select Market, ticker symbol: FLWS.
The 1800Flowers.com® 100% Smile GuaranteeSm
Everyone at 1-800-FLOWERS.COM is passionate about delivering flowers and gifts that bring smiles.
If you OR the person who received your gift calls us with any sort of issue, it’s a big deal to us. All of us.
And we’ll jump to make it right – no matter what, no questions asked. We’re happy when you’re smiling.
Special Note Regarding Forward-Looking Statements
This annual report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements represent the Company’s expectations or beliefs at the time of this writing concerning future
events and can generally be identified by the use of statements that include words such as “estimate,” “expects,” “project,” “believe,”
“anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “target” or similar words or phrases. Forward-looking statements include, but are
not limited to, statements regarding the Company’s ability to build on positive trends in its business, its ability to leverage its multi-
brand website to enhance cross brand marketing efforts, its ability to achieve its guidance for consolidated revenue growth for the
full year in the low-to-mid-single digit range and its guidance for bottom-line growth in EBITDA, EPS and Free Cash Flow at rates
in excess of its anticipated revenue growth. These forward-looking statements are subject to risks, uncertainties and other factors,
many of which are outside of the Company’s control, which could cause actual results to differ materially from the results expressed
or implied in the forward-looking statements, including, among others: the Company’s ability to manage the seasonality of its busi-
nesses; its ability to cost effectively acquire and retain customers; the outcome of contingencies, including legal proceedings in the
normal course of business; its ability to compete against existing and new competitors; its ability to manage expenses associated with
sales and marketing and necessary general and administrative and technology investments; and general consumer sentiment and
economic conditions that may affect levels of discretionary customer purchases of the Company’s products. The Company under-
takes no obligation to publicly update any of the forward-looking statements, whether as a result of new information, future events
or otherwise, made in this annual report or in any of its SEC filings except as may be otherwise stated by the Company. For a more
detailed description of these and other risk factors, please refer to the Company’s SEC filings including the Company’s Annual Reports
on Form 10-K and its Quarterly Reports on Form 10-Q.
Financial Highlights(1)
(From Continuing Operations)
JuLy 3, JuNE 27,
2011
Years Ended
JuNE 28,
2009
2010
JuNE 29,
2008
JuLy 1,
2007
(in millions, except percentages and per share data)
Total Net Revenues
Gross Profit Margin
Operating Expense Ratio(2)
EBITDA
Adjusted EBITDA
EPS
Adjusted EPS
$667.7
39.8%
36.1%
$739.2
$714.0
$689.8
42.2%
39.4%
40.6%
34.4%
34.6%
35.7%
$ 34.1 $ 24.8
( $ 51.5) $ 57.1
$ 34.1 $ 28.6(3) $ 36.4(3) $ 57.1
($ 1.05) $ 0.34
$ 0.09 ($ 0.03)
$ 0.11(3) $ 0.34
$ 00.9 $ 0.01(3)
$725.7
42.2%
34.4%
$ 57.2
$ 57.2
$ 0.32
$ 0.32
(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 operations 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 2010 and 2009 EBITDA and EPS are adjusted for non-recurring charges which impact comparability. Refer to the Company’s 10-K filing for reconcilia-
tions of net income (loss) from continuing operations to adjusted EBITDA from continuing operations.
Total Revenues
(From Continuing Operations(1))
(in millions)
$725.7
$739.2
$714.0
$667.7
$689.8
$57.2
$57.1
$36.4
EBITDA(3)
$34.1
$28.6
FY07
FY08
FY09
FY10
FY11
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.
Financial Report Insert
See inside rear cover pocket
2011 % Revenues by category
Gourmet Food
& Gift Baskets
11%
BloomNet®
Wire Service
Swap Colors
36%
53%
1800Flowers.com®
consumer Floral
Fiscal 2011 Achievements
• Increased total revenue to $689.8 million with all three
business segments recording growth.
• Increased revenue, gross margin and contribution margin
in core Consumer Floral segment.
• Increased EBITDA to $34.1 million, up 37.5 percent.
• Increased EPS to $0.09 compared with a loss per share of
$0.03 in the prior year period.
To Our Shareholders
Fiscal 2011 proved to be a very strong year for our company, one in
which we significantly enhanced our top and bottom-line results in
a challenging overall economy. At the start of the year, we noted
that we did not expect the consumer economy to show signifi-
cant improvement. As such, we continued to focus on managing
those aspects of our business that we could control including:
our marketing programs, our merchandising plans, our operating
processes, and our balance sheet.
As a result of our initiatives in these areas we achieved solid
improvements in revenue, gross margin and operating
expense ratio throughout fiscal 2011 culminating in strong
full year results. During the year,
n We grew revenues with more efficient marketing spending;
n We increased average order value with effective merchandising
programs;
n We increased gross margins through enhanced operational
efficiencies and disciplined promotions; and
n We reduced our operating expense ratio by continuing to
leverage our business platform.
Consumer Floral Rebound
In our core 1-800-FLOWERS.COM consumer floral business we
achieved year-over-year improvements in both top and bottom-
line metrics through the successful implementation of enhanced
marketing and merchandising programs. Throughout the year we
saw progressive positive trends in both average order value and
gross margin. As a result, our consumer floral segment returned
to year-over-year revenue growth in our third quarter, one quarter
earlier than expected. Combined with strong fourth quarter
results, the category achieved positive year-over-year revenue
growth for the full year. Gross margin increased a total of 270
basis points, returning to the category’s historical level of 38
percent for the full year.
As a result, category contribution margin increased 47.6 percent,
or more than $10 million, to $32.7 million
for the year.
n In our Marketing programs, we made more efficient use of
promotions and repositioned our marketing messaging to
emphasize our florist heritage. We reminded our customers
to “Wow” their loved ones and send “Only the Best!” for
Valentine’s Day, for Mother’s Day and for every day occasions.
n We also improved the effectiveness and efficiency of our
marketing programs by focusing on our core “Delivering
Smiles” message and expanding on our industry leading
position in Social and Mobile marketing. In this area,
we launched innovative programs that partnered the
1-800-FLOWERS.COM brand with Facebook, Twitter, Google+
and hundreds of influential bloggers. As a result, we were able
to significantly enhance the relevance of our marketing efforts
and reach our customers at the right time, with the right prod-
ucts to help them deliver smiles.
Combined Growth: Effective Cross-Brand Marketing
On the subject of growth, we believe it is also important to look
at the combined performance of our 1-800-FLOWERS.COM and
1-800-Baskets.com brands. The consistently strong growth of
1-800-Baskets.com has been driven by our strategy of leveraging
the significant web traffic and multi-million customer base of our
flagship 1-800-FLOWERS.COM brand through a dual-branded
website. Throughout fiscal 2011, we achieved solid revenue
growth for the combined 1-800-Baskets and 1-800-Flowers.com
brands. In addition, we saw a growing number of customers
coming directly to the 1-800-Baskets.com website. This increas-
ing customer traffic positions 1-800-Baskets.com uniquely in the
gourmet gift space as an every-day gifting destination with the
ability to grow its business year-round.
Based on the success of 1-800-Baskets.com, we launched our new
multi-brand website in early fiscal 2012. The new site includes
tabs for our Fannie May, Cheryl’s and The Popcorn Factory brands,
effectively introducing our customers to an expanded offering of
gifts appropriate for every occasion and recipient.
Delivering Smiles
These results were accomplished
through a combination of initiatives:
n In Merchandising, we saw our
customers embrace our truly
original products, such
as our new line of
“A-Dog-Able” floral
baskets – a collec-
tion of irresistibly
cute floral puppies
that is already a
major hit. We also
launched our “new
and improved”
Happy Hour collec-
tion to enthusiastic
customer response.
Strong Growth in BloomNet
Our BloomNet business showed strong
revenue growth during fiscal 2011, as it has
throughout the recent recessionary period.
Its contribution margin also continued to
grow nicely, exceeding $20 million.
BloomNet’s consistently strong
growth and profitability,
despite the economy, is truly
exceptional and reflects
the investments we have
made in our expanded
suite of products and
services.
We’ve also continued
to invest in developing
educational and “com-
munity building”
programs with our Floriology Institute training center in
Jacksonville, Florida and Floriology Magazine, thereby filling
a void in the floral industry.
As a result of these efforts, BloomNet has consistently increased
its market penetration as a leader in the wire service industry as
evidenced by the substantial increases in
shop-to-shop order volume during fiscal
2011. These orders, combined with the
millions of orders generated by
1-800-FLOWERS.COM, enable us to provide
our 1-800-Flowers franchise and BloomNet
florists with an increasing flow of orders to
help make their businesses grow.
Gourmet Food and Gift Baskets:
Becoming a Leader
During fiscal 2011, we continued to see
strong returns on the investments we have
made over the past several years, both in
the brands that we have acquired and those
we have launched internally. Specifically,
our focus on multi-channel retailing – with
an emphasis on ecommerce – coupled with
our decision to be vertically integrated
where appropriate, is enabling us to fast
become a leading player in this $16 billion
gifting category.
Fiscal 2012 Guidance
Reflecting the continued uncertainty in the overall economy, we
do not anticipate significant improvements in consumer demand
for discretionary purchases during fiscal 2012. As a result, we will
continue to focus on the specific areas of our business where we
believe we can exert control and achieve enhanced results.
So-Lo-mo
Social-Local-Mobile: It’s the new business
paradigm encompassing the fast evolving
world of social networking, a growing inter-
est and emphasis on local business presence
and all things mobile, from smart phones to
iPads. In fiscal 2011, we became a recognized
leader in social commerce though pioneer-
ing applications that integrated Facebook,
Twitter, Google+ and hundreds of bloggers
in our marketing programs. We expanded
our local retail presence via new franchising
initiatives in 1-800-FLOWERS® and Fannie
May® Fine Chocolates. And we continued to
refine our award winning Mobile commerce
platform, garnering additional accolades
as the #1 mobile commerce site for 2011.
The consumer has voted, and So-Lo-Mo is
an integral part of our lives and therefore
an indispensable part of how we integrate
and develop
relationships between
our brands, our culture and our customers.
the
These include:
n our operating cost structure,
n our merchandising and marketing
initiatives – emphasizing truly
original product designs and product
line extensions,
n our marketing programs that provide
improved return on investment by
engaging directly with our customers
to deepen our relationship with them,
n our manufacturing and sourcing
enhancements designed to help
mitigate commodity and shipping
price increases and deliver
increased gross profit margins, and,
n our continuing investments for
the future, particularly in:
• our Social and Mobile marketing
and commerce initiatives,
• our fast growing 1-800-Baskets.com
business,
• our Celebrations.com content and
Revenue growth was particularly strong in our 1-800-Baskets.com
and Cheryl’s bakery gifts businesses along with solid ecommerce
and same-store growth in our Fannie May Chocolates business. We
also made significant strides in the roll out of our Fannie May fran-
chise program with several multi-store development agreements
expected to launch in fiscal 2012. This program leverages Fannie
May’s tremendous customer loyalty, brand recognition and history
of operation throughout the Midwest. Fannie May once had more
than 250 retail locations stretching from North Dakota to Florida.
The data we have on those stores provides an excellent blueprint
for our franchise expansion plans.
For the year, contribution margin in this category improved nicely,
reaching nearly $29 million. This was achieved despite continued
soft demand in wholesale baskets and having to absorb higher
commodity costs and shipping fuel-surcharges throughout the year.
Strengthening Our Balance Sheet:
During the past several years we have paid down more than $80
million in term debt, including approximately $16 million dur-
ing fiscal 2011. At year end, we had approximately $46 million
remaining in term debt and approximately $21 million in cash and
investments resulting in a net-debt position of approximately $25
million. We anticipate finishing fiscal 2012 with a net-debt balance
nearing zero after scheduled debt payments of approximately $16
million and anticipated positive cash generation during the year.
We believe our focus on maintaining and enhancing our financial
strength and flexibility enables us to invest in growing our busi-
ness through both internal and external initiatives.
media business,
• our new product launches, such as Fruit Bouquets.com,
• our “Agile” technology platform enhancements, and
• our initiatives to expand our local presence via franchising.
We believe these efforts will enable us to achieve consolidated
revenue growth for the full year in the low-to-mid-single
digits range. In terms of our bottom-line results, we expect to
grow EBITDA, EPS and Free Cash Flow at rates in excess of
revenue growth.
Looking ahead, we plan to build on the positive trends that we
saw throughout fiscal 2011. We are focused on seeking cost effi-
cient ways to stimulate consumer demand across all of our brands
and businesses, on improving gross profit margins, and on man-
aging our operating costs by leveraging our business platform.
As always, we thank all of our constituencies for their support
and hard work, including: our caring and dedicated associates;
our creative and talented franchisees and BloomNet professional
florists; our vendors and suppliers and, most of all, our customers
who engage with us every day and allow us to help them
deliver smiles.
Jim McCann
Chairman and CEO
Chris McCann
President
January
2012
S u n d a y
M o n d a y
T u e s d a y
1
New Year’s Day
8
15
22
29
During fiscal 2011, 1-800-FLOWERS.COM®
continued to focus on creating truly original
product designs. Among these are many
uniquely stunning floral arrangements, each
crafted to deliver a smile. In the Company’s
gourmet food gift category, the Cheryl’s®
line of baked goods was expanded with the
addition of Mrs. Beasley’s®, a beloved brand
known for its delectable bundt cakes and
its Miss Grace Lemon Cake, Co.®, cakes
and baskets. The Popcorn Factory®
widened its offering as well, adding several
new “Snack-Attack” graphic tins to join
the brand’s highly popular assortment
of tins featuring NFL and college team
logos. 1-800-Baskets.com® also introduced
many new designs in the past year, includ-
ing a collection of spa baskets, while
Wintasting.com® added a wide range of
varietals including a growing number of
new selections in its “extreme cabernet
offerings” from Napa Valley.
2
9
3
10
16
Martin Luther King Jr.’s Birthday
(observed)
17
23
30
24
31
W e d n e s d a y
T h u r s d a y
F r i d a y
S a t u r d a y
4
11
18
25
5
12
19
26
6
13
20
27
7
14
21
28
February
2012
S u n d a y
M o n d a y
T u e s d a y
In fiscal 2011, BloomNet® further solidified
its position as the floral industry’s pre-
ferred wire service provider and one-stop
destination for top quality products
and best-in-class services. Thousands of
professional retail florists look to BloomNet
for innovative ways to grow their busi-
nesses profitably. Among the advantages
BloomNet brings to florists is a leading edge
technology suite – including the industry’s
first digital directory, a state of the art busi-
ness management system and feature-rich
website hosting solutions. BloomNet has
also introduced a comprehensive Quality
Care Program developed with extensive
input from florists all over the country. The
Program has established and maintains
quality standards and guidelines with the
goal of 100% customer satisfaction for all
florist-to-florist transactions, helping to
ensure customer loyalty and generate
repeat business for florists.
5
12
19
26
6
13
7
14
Valentine’s Day
20
Presidents’ Day
21
27
28
W e d n e s d a y
T h u r s d a y
F r i d a y
S a t u r d a y
2
Groundhog Day
3
9
16
23
10
17
24
4
11
18
25
1
8
15
22
29
march
2012
S u n d a y
M o n d a y
T u e s d a y
4
11
18
25
1-800-FLOWERS.COM® became the largest
franchise organization in the floral industry
during fiscal 2011...building on its roots and
“Embracing Our FloristnessSM” to deliver
smiles to more and more customers on a
local level. An increasing number of florists
across the country have made the decision
to co-brand – joining their local market
knowledge and customer relationships with
1-800-FLOWERS’ industry’s leading brand
recognition and millions of customers. The
franchise initiative was further augmented
at the start of fiscal 2012 with the acquisi-
tion of Flowerama of America, Inc., an
Iowa-based franchise with nearly 80 flower
and garden centers.
5
12
19
26
6
13
20
First Day of Spring
27
W e d n e s d a y
T h u r s d a y
F r i d a y
S a t u r d a y
1
8
15
22
29
7
14
21
28
2
9
16
23
30
3
10
17
St. Patrick’s Day
24
31
April
2012
In fiscal 2011, the BloomNet® wire service
became one of the floral industry’s largest
order sending networks. Helping to fuel
its growth is BloomNet’s commitment to
deepening relationships with retail florists
around the country. Instrumental in this
effort has been the popularity of floriology®,
an informative monthly magazine intro-
duced by BloomNet two years ago. Florists
are encouraged to contribute their insights
to the publication, reinvigorating a sense
of community and a sharing of ideas that
were once hallmarks of the floral market-
place. Complementing the magazine is
the Floriology Institute, established by
BloomNet in Jacksonville, Florida as the
premier industry accredited floral education
center. The Institute offers courses
specifically created to help florists expand
artistic design skills, stay on top of trends
and enhance best business practices.
S u n d a y
M o n d a y
T u e s d a y
1
April Fools Day
8
Easter
15
22
29
2
9
16
3
10
17
23
Administrative Professionals’
Week Begins
24
30
W e d n e s d a y
T h u r s d a y
F r i d a y
S a t u r d a y
4
11
18
5
12
19
25
Administrative Professionals’ Day
26
6
Passover Begins at Sunset
7
13
20
27
14
21
28
may
2012
S u n d a y
M o n d a y
T u e s d a y
1
8
15
22
6
7
13
Mother’s Day
14
21
1-800-FLOWERS.COM® broadened its local
footprint during fiscal 2011 in both the
floral and gourmet food gift categories.
Illustrating the latter was expansion of the
Fannie May® franchising program. Founded
by H. Teller Archibald in 1920, Fannie May
is an iconic brand that has grown from a
single retail store on Chicago’s North LaSalle
Street to become a maker of gourmet choc-
olates and other fine confections enjoyed
by millions. Through its growing number
of franchised and company-owned stores
located in neighborhoods and shopping
malls, Fannie May is significantly expanding
its brand awareness, increasing its customer
base and its share of the multi-billion dollar
chocolate confections market.
20
27
28
Memorial Day (observed)
29
W e d n e s d a y
T h u r s d a y
F r i d a y
S a t u r d a y
4
National Bring Your Mom
to Work Day
5
Cinco de Mayo
11
18
25
12
19
26
2
9
16
23
30
3
10
17
24
31
June
2012
Social networks including Facebook, Twitter
and Google+ are an indispensable part
of how 1-800-FLOWERS.COM® integrates
and develops the relationships between its
brands, its culture and its customers. In fis-
cal 2011, the Company amplified its social
initiatives, running groundbreaking market-
ing programs utilizing Facebook holistically...
from the deployment of “Sponsored
Stories” to the use of Facebook credits
targeted at social gamers. These efforts
earned national media coverage and won
the following of tens of thousands of users.
1-800-FLOWERS.COM® also built “social
graph” integration directly into its website
platform, allowing customers to engage
outside of traditional paths of browsing
and buying. For example, customers can
find out about upcoming Facebook friends’
birthdays while browsing the site or send
gift ideas directly from a product page to
another Facebook connection.
3
10
S u n d a y
M o n d a y
T u e s d a y
4
11
17
Father’s Day
18
24
25
5
12
19
26
W e d n e s d a y
T h u r s d a y
F r i d a y
S a t u r d a y
1
8
7
14
Flag Day
15
6
13
20
First Day of Summer
21
27
28
22
29
2
9
16
23
30
July
2012
S u n d a y
M o n d a y
T u e s d a y
1
8
15
2
9
16
22
Parents’ Day
23
29
30
Created in fiscal 2011 and launched in
fiscal 2012, FruitBouquets.comSM is one
of 1-800-FLOWERS.COM’s most exciting
new brands and product lines. Offering
a uniquely taste-tempting assortment
of fruit varieties and different designs at
several price points, Fruit Bouquets by
1800Flowers.comSM are set to become a
favorite choice of local florists and consum-
ers alike. To help build toward national
coverage and stimulate sales for florists,
1-800-FLOWERS.COM® is offering extensive
training in confecting the new fruit arrange-
ments and in marketing them in their
local communities. The Fruit BouquetsSM
line will also be available through the
Company’s Fannie May® retail stores.
3
10
17
24
31
W e d n e s d a y
T h u r s d a y
F r i d a y
S a t u r d a y
4
Independence Day
5
11
18
25
12
19
26
6
13
20
27
7
14
Bastille Day
21
28
August
2012
S u n d a y
M o n d a y
T u e s d a y
A key element in 1-800-FLOWERS.COM’s
more than 35 years of helping custom-
ers deliver smiles is the Company’s caring
team obsessed with service. That obsession
involves working with the best florists, using
the best flowers with guaranteed freshness,
the highest quality ingredients in its gour-
met food gifts, and working tirelessly to re-
solve any customer issue...guaranteeing 100
percent customer satisfaction. Illustrating
its dedication to caring for customer needs,
1-800-FLOWERS.COM® was rated number
one versus competitors for customer service
by STELLAService. The Company was also
named by the E-Tailing Group as one of only
nine online retailers out of 100 bench-
marked to meet the criteria for Excellence
in Online Customer Service.
5
12
19
26
6
National Friendship Week Begins
7
13
20
27
14
21
28
W e d n e s d a y
T h u r s d a y
F r i d a y
S a t u r d a y
1
8
15
22
29
2
9
16
23
30
3
10
17
24
31
4
11
18
25
September
2012
S u n d a y
M o n d a y
T u e s d a y
2
3
Labor Day
4
9
Grandparents’ Day
10
11
Patriot Day
16
Rosh Hashanah Begins
at Sunset
17
18
23
24
25
Yom Kippur Begins at Sunset
30
As part of its strategic priority to
innovate and invest for the future,
1-800-FLOWERS.COM® continued in fiscal
2011 to increase its presence in the still
emerging mobile marketplace. When it
comes to leveraging new technologies, the
Company has always been at the fore-
front – as the first to use its 800 number as
its name, the first merchant on AOL and
the first to open a transactional store on
Facebook. With mobile commerce growing
at a pace reminiscent of the early Internet,
1-800-FLOWERS.COM® is constantly rede-
signing its mobile site and developing new
apps for smartphones, tablets and other
devices. Highlighting its mobile commerce
leadership, the Company was recognized
with the “Mobile App of the Year” in the
Best Shopping category by Retail Info
Systems and named “Best Mobile App for
E-commerce” by Digiday’s Publishing &
Advertising Awards.
W e d n e s d a y
T h u r s d a y
F r i d a y
S a t u r d a y
5
12
19
26
6
13
20
27
7
14
21
28
1
8
15
22
First Day of Fall
29
October
2012
S u n d a y
M o n d a y
T u e s d a y
1
2
Customer engagement remained an integral
component in 1-800-FLOWERS.COM’s
growth strategy during fiscal 2011. Promi-
nent in this strategy is Celebrations.comSM,
the leading online destination for fabulous
party ideas and planning tips. In addition to
its highly-trafficked website, Celebrations®
has expanded its media initiatives including
its keepsake book series featuring such
titles as Celebrating Mom, Celebrating
Love, Celebrating Friendship and Celebrat-
ing Weddings. On the wedding scene,
Celebrations’® latest media efforts include
a starring role for founder and CEO Jim
McCann in a new reality TV show entitled
“I Do Over.” The program, which airs on WE
tv and also stars celebrity event designer
Diann Valentine, offers a second chance
for couples who have experienced a bridal
disaster...a wedding destroyed by a tsunami,
a fire at the reception hall, a groom’s heart
attack at the altar!
7
14
21
28
8
Columbus Day (Observed)
National Children’s Day
9
15
22
29
16
National Bosses Day
23
30
W e d n e s d a y
T h u r s d a y
F r i d a y
S a t u r d a y
5
12
19
26
6
13
20
Sweetest Day
27
3
4
11
18
25
10
17
24
31
Halloween
November
2012
S u n d a y
M o n d a y
T u e s d a y
D
eliveri n g S m iles
4
5
6
Election Day
As a thoughtful gift company with a multi-
channel approach, 1-800-FLOWERS.COM®
makes it easy for customers to deliver smiles
to the important people in their lives. This
is accomplished online, through local stores,
via telephonic sales and increasingly on
mobile devices. Building on the double-digit
sales growth of 1-800-Baskets.com® and its
dual-tabbed website which leverages the
brand recognition and customer traffic of
the 1-800-FLOWERS.COM® flagship website,
the Company has introduced a new multi-
branded site featuring its family of gourmet
food and gift baskets brands: Fannie May®
Fine Chocolates; Cheryl’s® bakery gifts; and
The Popcorn Factory®. The multi-brand site
format offers the convenience of a shared
shopping cart and shared checkout as well
as an expanded range of great gifts for all
recipients and occasions.
11
Veterans’ Day
12
18
25
19
26
13
20
27
W e d n e s d a y
T h u r s d a y
F r i d a y
S a t u r d a y
1
8
2
9
15
16
22
Thanksgiving Day
23
29
30
7
14
21
28
3
10
17
24
December
2012
S u n d a y
M o n d a y
T u e s d a y
Key to the positive trends
1-800-FLOWERS.COM® experienced in its
consumer floral business during fiscal 2011
has been an emphasis on truly original de-
signs. Collaborating with florists through its
BloomNet Design Council as well as through
various Floriology® training programs, the
Company has developed many imaginative
hand-arranged fresh floral products that
have been embraced by customers. These
include the exclusive a-DOG-ableTM floral
collection along with a new and completely
redesigned assortment of the already highly
successful “Happy Hour CollectionTM” of
whimsical floral “cocktail” bouquets. In
addition, the Company further extended
its authority position in floral design with
the introduction of its “store-within-a-store”
boutiques featuring unique and exclusive
Bonsai plants, Orchids and Sunflowers.
2
9
16
23
3
10
17
4
11
18
24
25
Christmas Day
30
31
W e d n e s d a y
T h u r s d a y
F r i d a y
S a t u r d a y
1
5
12
19
6
13
20
7
14
8
Hanukkah Begins at Sunset
15
21
First Day of Winter
22
Christmas Day
26
First Day of Kwanzaa
27
28
29
Board of Directors
corporate Officers
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
Gerard M. Gallagher
Senior Vice President of Business Affairs,
General Counsel and Corporate Secretary
1-800-FLOWERS.COM
Stephen Bozzo
Senior Vice President,
Chief Information Officer
1-800-FLOWERS.COM
David Taiclet
President
Gourmet Food & Gift Baskets
1-800-FLOWERS.COM
Mark Nance
President
BloomNet
1-800-FLOWERS.COM
James F. McCann
Chairman and
Chief Executive Officer
1-800-FLOWERS.COM
Christopher G. McCann
President
1-800-FLOWERS.COM
Jeffrey C. Walker
Executive in Residence
Harvard Business School
James A. Cannavino
Chairman & CEO
Direct Insite, Inc.
Leonard J. Elmore
Chief Executive Officer
iHoops
John J. Conefry
Vice Chairman
Astoria Financial Corporation
Lawrence V. Calcano
Chairman and
Chief Executive Officer
Bite Tech, Inc.
Larry Zarin
Senior Vice President and
Chief Marketing Officer
Express Scripts, Inc.
Fiscal Year 2011
Financial Report
Selected Financial Data
1-800-FLOWERS.COM, Inc. and Subsidiaries
The selected consolidated statement of operations data for the years ended July 3, 2011, June 27, 2010
and June 28, 2009 and the consolidated balance sheet data as of July 3, 2011 and June 27, 2010, 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 June 29, 2008 and July 1, 2007, and
the selected consolidated balance sheet data as of June 28, 2009, June 28, 2008, and July 1, 2007, 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 Fine Stationery, Inc. in May 2011, Mrs. Beasley’s Bakery LLC in March 2011,
Geerlings & Wade, Inc. in March 2009, Napco Marketing Corp. in July 2008 and DesignPac Gifts, LLC in April 2008.
The following financial data reflects the results of operations of these subsidiaries 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. On January 25, 2010, the Company completed the sale of these businesses; refer to the
Consolidated Financial Statements “Discontinued Operations” for a further discussion. Consequently, 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
July 3, June 27, June 28, June 29 , July 1,
2011 2010 2009 2008 2007
(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
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
$485,377
204,410
689,787
409,703
280,084
174,758
20,424
50,774
20,715
––
266,671
13,413
(4,077)
$469,974
197,736
667,710
401,908
265,802
172,640
17,952
50,450
21,378
––
262,420
3,382
(5,752)
$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)
9,336
(2,370)
(81,827)
3,614
5,722
(282)
(2,088)
(15,326)
(66,501)
$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
$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
––
(1,723)
(39,754)
(1,785)
(6,727)
Income tax expense (benefit) from
discontinued operations
––
––
Income (loss) from discontinued operations
Net income (loss) $ 5,722
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
$ 0.09
––
$ 0.09
$ 0.09
––
$ 0.09
410
(2,133)
$ (4,221)
$ (0.03)
$ (0.03)
$ (0.07)
$ (0.03)
(0.03)
(0.07)
(7,838)
(31,916)
$ (98,417)
$ (1.05)
$ (0.50)
$ (1.55)
$ (1.05)
(0.50)
(1.55)
(810)
(975)
$ 21,054
$
0.35
$ (0.02)
$
0.33
$
0.34
(0.01)
0.32
(2,864)
(3,863)
$ 17,118
$
0.33
$ (0.06)
$
0.27
$
0.32
(0.06)
0.26
64,001
65,153
63,635
63,635
63,565
63,565
63,074
65,458
63,786
65,526
2
Selected Financial Data (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
As of
July 3, June 27, June 28, June 29 , July 1,
2011 2010 2009 2008 2007
(in thousands)
Consolidated Balance Sheet Data:
Cash and equivalents
and short-term investments
Working capital
Total assets
Long-term liabilities
Total stockholders’ equity
$ 21,442
17,778
256,951
32,243
141,661
$ 27,843
22,963
256,086
48,745
132,626
$ 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
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
1-800-FLOWERS.COM, Inc. and Subsidiaries
Description of Business
1-800-FLOWERS.COM, Inc. is the world’s leading
florist and gift shop. For more than 35 years, 1-800-
FLOWERS® (1-800-356-9377 or www.1800flowers.com)
has been helping deliver smiles for our customers with
gifts for every occasion, including fresh flowers and the
finest selection of plants, gift baskets, gourmet foods,
confections, candles, balloons and plush stuffed animals.
As always, our 100% Smile Guarantee backs every gift.
The 1-800-FLOWERS.COM Mobile Flower & Gift Center
was named winner of the 2010 “Best Mobile App for
E-commerce” by DPAC (Digiday’s Publishing & Advertis-
ing Awards) and the 2010 Mobile App of the Year Award
in the “Best Shopping” category by RIS (Retail Info
Systems). 1-800-FLOWERS.COM was also rated number
one vs. competitors for customer service by
STELLAService and named by the E-Tailing Group as
one of only nine online retailers out of 100 benchmarked
to meet the criteria for Excellence in Online Customer
Service. 1-800-FLOWERS.COM has been honored in
Internet Retailer’s “Hot 100: America’s Best Retail Web
Sites” for 2011 and was one of only five retailers to
receive the 2011 Customer Innovation Award from Avaya
for transforming the business through innovative use of
business communications and collaboration technolo-
gies. 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 “Gift Shop” also includes
gourmet gifts such as popcorn and specialty treats from
The Popcorn Factory® (1-800-541-2676 or
www.thepopcornfactory.com); cookies and baked gifts
from Cheryl’s (1-800-443-8124 or www.cheryls.com);
premium chocolates and confections from Fannie May®
confections brands (www.fanniemay.com and
3
www.harrylondon.com); gift baskets and towers from
1-800-Baskets.com® (www.1800baskets.com); and wine
gifts from Winetasting.com® (www.winetasting.com). The
Company’s Celebrations® brand (www.celebrations.com)
is a leading online destination for fabulous party ideas
and planning tips and FineStationery.com®
(www.finestationery.com) is the premier site for unique,
customizable invitations, announcements and greeting
cards. 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 as well as
various philanthropic and charitable efforts.
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. On January 25, 2010,
the Company completed the sale of these businesses;
refer to the Consolidated Financial Statements “Discon-
tinued Operations” for a further discussion. Conse-
quently, the Company has classified the results of
operations of its Home & Children’s Gifts segment as
discontinued operations for all periods presented.
Shares in 1-800-FLOWERS.COM, Inc. are traded on
the NASDAQ Global Select Market, 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. 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,
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
the demand for our products, compared to pre-
recessionary levels, has been adversely affected by
the reduction in consumer spending.
Anticipating continued economic pressure, during
fiscal 2011, the Company took a more conservative view
of the economy, and focused on achieving growth and
enhancing its results through areas of the business over
which it had more control. Throughout the year, the
Company saw improving trends in terms of revenue
growth, gross margin and contribution margin. Revenue
returned to growth in our fiscal third quarter, and contin-
ued into our fiscal fourth quarter, resulting in annual
year-over-year growth. This was achieved in a challeng-
ing environment through a merchandising strategy that
focused on providing our customers with truly original
products, the success of which can be seen in increased
average order value and improved return on investment
in marketing programs. All of the above factors resulted
in improved operating results.
Reflecting the continued uncertainty in the consumer
economy, the Company does not anticipate significant
improvements in consumer demand for discretionary
purchases during fiscal 2012. With this in mind, the
Company plans to continue its strategy of focusing on
areas of its business where it believes it can exert control
and thereby affect enhanced results, including:
• leveraging the Company’s operating cost structure;
• merchandising initiatives that emphasize truly
original product designs and product line
extensions;
• marketing programs that provide improved return on
investment by engaging directly with customers to
deepen our relationship with them;
• manufacturing and sourcing enhancements that
can help mitigate commodity and shipping price
increases and deliver increased gross profit
margins, and;
• continuing investments for the future, particularly in
social and mobile commerce initiatives, growing the
1-800-Baskets.com business and expanded
franchising opportunities in its Fannie May and
1-800-Flowers brands.
For fiscal 2012, the Company expects to build on
the positive trends that it has shown during fiscal 2011,
including increases in revenue, gross margin and
contribution margin in its Consumer Floral business as
well as continued top and bottom line growth in its
BloomNet and Gourmet Food and Gift Baskets categories.
As a result, the Company anticipates consolidated
revenue growth for the full year in the low-to-mid-single
digit range as well as year-over-year increases in
EBITDA, EPS and Free Cash Flow.
4
Category Information
The following table presents the contribution of net
revenues, gross profit and category contribution margin
from each of the Company’s business categories, as well
as consolidated EBITDA (and for fiscal 2010 and 2009,
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). 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 from Continuing Operations:
Years Ended
July 3, June 27, June 28,
2011 % Change 2010 % Change 2009
(in thousands)
Net revenues from continuing operations:
1-800-Flowers.com
Consumer
Floral (*)
BloomNet
Wire Service
Gourmet Food &
Gift Baskets
Corporate(**)
Intercompany
eliminations
$369,198
0.7% $366,516
(7.2%) $394,782
73,281 18.4% 61,883
(2.6%)
63,515
247,574 3.2% 239,942
1,150 7.4% 1,071
(7.3%)
(4.3%)
258,710
1,119
(1,416) (16.8%)
(1,702) 59.2%
(4,176)
Total net revenues
from continuing
operations
$689,787
3.3% $667,710
(6.5%) $713,950
Gross Profit from Continuing Operations:
Years Ended
July 3, June 27, June 28,
2011 % Change 2010 % Change 2009
(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
$140,162
38.0%
8.5% $129,239 (11.4%) $145,881
37.0%
35.3%
36,877
50.3%
5.7%
34,890
56.4%
(1.4%)
35,374
55.7%
1.5%
102,472
41.4%
573 (16.1%)
100,990
42.1%
0.8%
683 136.3%
100,187
38.7%
289
––
––
(525)
$280,084
5.4% $265,802
(5.5%) $281,206
40.6%
39.8%
39.4%
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Adjusted EBITDA (***) from Continuing Operations:
Years Ended
July 3, June 27, June 28,
2011 % Change 2010 % Change 2009
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
consolidated EBITDA (and for fiscal 2010 and 2009, Adjusted EBITDA),
reflecting only the direct controllable revenue and operating expenses of
the categories. As such, management’s measure of profitability for these
categories does not include the effect of corporate overhead, described
above, depreciation and amortization, other income (net), nor does it
include one-time charges. 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 it as
Discontinued Operations, as well as other one-time
charges incurred during fiscal 2010 and 2009 (Goodwill
and intangible impairment; Deferred financing cost
write-off; Severance and other restructuring costs;
Litigation settlement; and Termination of marketing
agreements), the following Non-GAAP reconciliation
table has been included within MD&A.
(in thousands)
Category Contribution Margin(***):
1-800-Flowers.com
Consumer
Floral (*)
BloomNet
Wire Service
Gourmet Food &
Gift Baskets
$ 32,669
47.6% $ 22,141 (43.0%) $ 38,830
20,195
6.0%
19,051
1.5%
18,764
28,833
5.6%
27,303
11.0%
24,606
Category Contribution
Margin Subtotal 81,697
(47,569)
19.3%
(8.8%)
68,495 (16.7%)
82,200
9.4% (48,284)
(43,735)
–– ––
37.8%
34,128
–– –– (85,438)
24,760 148.1% (51,522)
Corporate (**)
Goodwill and
intangible
impairment
EBITDA
Goodwill and
intangible
impairment
Severance and other
restructuring
costs
Litigation
settlement
Termination of
Martha Stewart
marketing
agreement
Termination of post sale
3rd party marketing
agreement
–– ––
–– ––
85,438
–– ––
–– ––
2,543
–– ––
898 –– ––
–– ––
1,931 –– ––
–– ––
1,039 –– ––
Adjusted EBITDA
from continuing
operations
$ 34,128 19.2% $ 28,628 (21.5%) $ 36,459
Discontinued Operations:
Years Ended
July 3, June 27, June 28,
2011 % Change 2010 % Change 2009
(in thousands)
Net revenues
from discontinued
operations
Gross profit
from discontinued
operations
Adjusted EBITDA
from discontinued
operations
–– ––
$ 87,852 (38.9%) $143,746
–– ––
40,905 (39.3%)
67,439
–– ––
$
4,640 280.6% $ (2,569)
(*) During the second quarter of fiscal 2010 the Company launched the
1-800-Baskets.com brand which is included within the results of the
Gourmet Food & Gift Baskets category. Prior period results, which had
previously been included within the 1-800-Flowers Consumer Floral
category, have been reclassified accordingly.
(**) 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 Share-Based
Compensation. In order to leverage the Company’s infrastructure, these
5
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Reconciliation of Net Income (Loss) from
Continuing Operations to EBITDA and
Adjusted EBITDA from Continuing Operations:
Years Ended
July 3, June 27, June 28,
2011 2010 2009
Net income (loss)
from continuing
operations
$ 5,722
Add:
Interest
expense
Depreciation and
amortization
4,200
20,715
Deferred financing cost
––
3,614
123
––
34,128
write-off
Income tax
expense
Less:
Interest
income
Income tax
benefit
EBITDA
Goodwill and
intangible
impairment
Severance and other
restructuring
costs
Litigation
settlement
Termination of
––
––
––
Martha Stewart
marketing
agreement
––
Termination of post sale
3rd party marketing
agreement
Adjusted EBITDA
from continuing
operations
$ 34,128
––
$ (2,088)
$ (66,501)
5,571
21,378
340
––
159
282
24,760
––
––
898
1,931
1,039
6,364
21,010
3,245
––
314
15,326
(51,522)
85,438
2,543
––
––
––
$ 28,628
$ 36,459
Results of Operations
The Company’s fiscal year is a 52- or 53-week period
ending on the Sunday nearest to June 30. Fiscal year
2011 which ended on July 3, 2011 consisted of 53
weeks, whereas fiscal years 2010 and 2009 which
ended on June 27, 2010, and June 28, 2009 respectively,
consisted of 52 weeks.
Net Revenues
Years Ended
July 3, June 27, June 28,
2011 % Change 2010 % Change 2009
(in thousands)
Net revenues:
E-Commerce $ 485,377
204,410
Other
$ 689,787
3.3%
3.4%
3.3%
$469,974 (5.7%) $498,519
197,736 (8.2%)
215,431
$667,710 (6.5%) $ 713,950
6
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 July 3, 2011 revenues
increased by 3.3% over the prior year period, as a result
of growth across all categories, including almost 1.0%
growth within the Consumer Floral category, reversing the
trend after two years of revenue declines, as well as
continued growth in its BloomNet wire service and
Gourmet Food and Gift Baskets categories.
During the fiscal year ended June 27, 2010, revenues
decreased 6.5% compared to the prior year period,
primarily as a result of weakness in the retail economy
which resulted in lower wholesale order volumes from
DesignPac Gifts, which is included within the Company’s
Gourmet Food & Gift Baskets category, combined with
lower demand within the 1-800-Flowers Consumer Floral
business, and from weakness in wholesale product sales
within the BloomNet WireService business. Fiscal 2010
was further impacted by the termination of the Company’s
third-party marketing program during the second quarter
of fiscal 2010.
The Company fulfilled approximately 8.1 million, 8.4
million and 8.6 million orders through its e-commerce
(combined online and telephonic) sales channel during
fiscal 2011, 2010 and 2009, respectively, while average
order value increased to $59.58 in fiscal 2011, compared
to $55.71 in fiscal 2010 and $57.65 in fiscal 2009. This
shift reflects the change in the Company’s marketing and
merchandising strategy which focused on innovative and
original products designed to “wow” our customers’ gift
recipients. In comparison, during fiscal 2010, the
Company relied more heavily on promotional pricing and
markdowns, and free shipping offers promoted by the
1-800-Flowers brand during the fiscal 2010 key floral
holidays in an effort to increase demand, in response to
consumers’ preference for lower price-point products.
Other revenues increased 3.4% during fiscal 2011,
in comparison to the prior year period primarily as a result
of the aforementioned sales growth in the BloomNet Wire
Service business, whereas other revenues during fiscal
2010 decreased in comparison to the prior year, primarily
as a result of the decline in DesignPac and Napco’s
wholesale order volume.
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. In addition, during May 2011, the Company
acquired selected assets of Fine Stationery, an e-
commerce retailer of personalized stationery, invitations
and announcements. While included in the operating
results of the Consumer Floral category during fiscal
2011, the operation of this acquisition did not have a
material impact on results during fiscal 2011. Net rev-
enues for the Consumer Floral category during the fiscal
year ended July 3, 2011 increased by 0.7% over the prior
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
year period as a result of continued strategic focus on:
(i) upgrading merchandising programs, (ii) re-focusing
the brand’s marketing message, and (iii) enhancing the
efficiency of its advertising spending. These efforts
resulted in improvements in revenues, gross margin and
contribution margin.
During fiscal 2010, net revenues decreased by
7.2% over the prior year period as a result of lower order
volumes due to soft consumer demand caused by the
weakened economy. Fiscal 2010 revenue was negatively
impacted by a combination of the Sunday day-placement
and severe snow storms across much of the country
during the Valentine’s Day holiday, as well as the termina-
tion of the Company’s third-party marketing program
during the second quarter of fiscal 2010. After seeing
improving revenue trends leading up to the fiscal 2010
Valentine’s Day holiday, the Company made the strategic
decision to increase its marketing spending and offered
customers a free shipping/no service charge promotion
in order to spur demand and accelerate the anticipated
return to revenue growth with the brand. Although these
programs resulted in an increase in order count and new
customer acquisition, the lift in orders was insufficient to
offset the associated decline in average order and gross
margin, and combined with the increase in advertising
spending required to support the promotion, resulted in
significantly lower category contribution margin. These
negative trends continued, at a less dramatic rate, for
Mother’s Day and through the end of fiscal 2010.
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 July 3, 2011 increased by 18.4% over
the prior year period, primarily as a result of growing
revenues associated with increased shop-to-shop order
volume. While this order volume positively impacts
revenues, at the present time, the impact on gross margin
and contribution margin is significantly less than
BloomNet’s normal margin. However, BloomNet expects
to continue to monetize this increased order volume
through increasing membership, technology, services
and product fees. Net revenues during the fiscal year
ended June 27, 2010 decreased by 2.6% over the prior
year period, primarily due to lower wholesale product
sales from Napco, as florists scaled back purchases as
a result of the weakness in the retail economy.
The Gourmet Food & Gift Basket category includes
the operations of 1-800-Baskets, Cheryl’s Cookies &
Brownies, Fannie May Chocolates, The Popcorn Factory,
The Winetasting Network and DesignPac businesses.
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’s and
Fannie May brands, as well as wholesale operations.
During the second quarter of fiscal 2010, the Company
launched a new co-branded website which featured the
1-800-BASKETS.COM® brand, a re-merchandised
collection of gourmet gift baskets confected by
DesignPac. Fiscal 2009 revenues from gourmet gift
baskets, which were previously included within the
1-800-Flowers.com Consumer Floral category, have been
reclassified to conform to current year presentation.
Net revenue during the fiscal year ended July 3, 2011
increased by 3.2% compared to the prior year period,
primarily as a result of e-commerce sales growth from
1-800-Baskets.com and Cheryl’s brands, as well as sales
volume through the Winetasting Network, partially offset
by reduced wholesale volume from DesignPac. Net
revenues during the fiscal year ended June 27, 2010
decreased by 7.3% over the prior year period as a result
of lower revenue from DesignPac, due to significant
reductions in wholesale orders.
For fiscal 2012, the Company expects to build on
the positive trends that it has shown in recent quarters,
including increases in revenue in its Consumer Floral
business as well as continued top and bottom line
growth in its BloomNet and Gourmet Food and Gift
Baskets categories. As a result, the Company anticipates
consolidated revenue growth for the full year in the
low-to-mid-single digit range.
Gross Profit
Years Ended
July 3, June 27, June 28,
2011 % Change 2010 % Change 2009
(in thousands)
Gross profit $280,084
Gross margin % 40.6%
$265,802 (5.5%)
39.8%
5.4%
$281,206
39.4%
Gross profit consists of net revenues less cost of
revenues, which is comprised primarily of florist fulfillment
costs (primarily fees paid directly to florists), the cost of
floral and non-floral merchandise sold from inventory or
through third parties, and associated costs including
inbound and outbound shipping charges. Additionally,
cost of revenues include labor and facility costs related to
direct-to-consumer and wholesale production operations.
Gross profit increased during the fiscal year ended
July 3, 2011, compared to the prior year, due to the
combination of increased revenues across all categories
as described above, as well as an 80 basis point im-
provement in gross margin percentage, resulting from
improved merchandising programs and reduced promo-
tional activities within the Company’s 1-800-Flowers.com
Consumer Floral category, more than offsetting fuel and
commodity cost increases, and the margin impact of the
third-party marketing program which was discontinued in
December 2009. Gross profit decreased during the fiscal
year ended June 27, 2010, as a result of the decline in
revenues in comparison to the prior year period, while
gross margin percentage increased 40 basis points as
a result of product mix associated with the impact of
lower wholesale revenues from DesignPac, as well as
improved manufacturing and supply chain operating
efficiencies, offset in part by continued reliance on
promotional pricing and the termination of the Company’s
high margin post sale third-party marketing program.
The 1-800-Flowers.com Consumer Floral category
7
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
gross profit and gross profit margin percentage increased
by 8.5% and 270 basis points, respectively, during the
fiscal year ended July 3, 2011, compared to the prior year
period, due to the higher revenue, as described above,
and gross margin improvements due to the aforemen-
tioned improvements in merchandising programs and
reductions in promotional activity, as well as the impact
of the termination of the Martha Stewart marketing
agreement during the fourth quarter of fiscal 2010.
During the fiscal year ended June 27, 2010, gross profit
and gross profit margin percentage decreased by 11.4%
and 170 basis points, respectively, over the prior year
period, as a result of decreased sales volume and
promotional pricing, partially offset by supply chain
improvements. Fiscal 2010 gross margin percentage
was also negatively impacted by the aforementioned
termination of the Company’s third-party marketing
program, the early termination charge associated with
the Martha Stewart marketing agreement, and the free-
shipping/no-service charge promoted for the fiscal 2010
Valentine’s Day holiday in order to improve consumer
demand. Although order volume increased as a result of
the Valentine’s Day promotion, the improvement was
insufficient to offset the decrease in average order value
and the impact on gross margin percentage, ultimately
resulting in a decline in gross profit.
The BloomNet Wire Service category gross profit
increased by 5.7% during the fiscal year ended July 3,
2011, compared to the prior year period, as a result of the
above mentioned increase in shop-to-shop order volume.
While the cost of these orders negatively affected gross
margin percentage, these orders generated increased
net revenues and gross margin dollars. BloomNet
expects to continue to monetize this increased order
volume and thereby improve gross margin over time.
During fiscal 2010, gross profit from the BloomNet Wire
Service category decreased by 1.4% compared to the
prior year period, while gross margin percentage
increased 70 basis points, as a result of sales mix due
to the aforementioned decrease in lower margin floral
wholesale product revenue.
The Gourmet Food & Gift Baskets category gross
profit increased by 1.5% and 0.8% during the fiscal years
ended July 3, 2011 and June 27, 2010, respectively. The
increased gross profit during fiscal 2011 was attributable
to sales mix, whereby higher margin e-commerce sales
growth within the 1-800-Baskets and Cheryl’s brands and
retail store revenue growth by the Fannie May brand,
more than offset the impact of the loss of lower margin
wholesale order volume from DesignPac, whereas the
gross profit increase during fiscal 2010 was a result of
improved gross margin performance, which offset the
revenue decline primarily attributable to DesignPac.
During the fiscal year ended July 3, 2011, the gross
margin percentage decreased by 70 basis points,
reflecting the above mentioned change in sales mix,
as well as increased fuel and commodity prices, whereas,
the gross margin percentage in fiscal 2010 increased
340 basis points due to the reduction in lower margin
DesignPac sales volume, as well as improved gross
margins resulting from manufacturing efficiencies and
reduced promotional pricing across all other businesses
within the category.
For fiscal 2012, the Company expects its gross margin
percentage will improve in comparison to fiscal 2011 as
a result of a reduction in promotional activity, as well as
improvements in product sourcing, supply chain and
manufacturing efficiencies.
Marketing and Sales Expense
Years Ended
July 3, June 27, June 28,
2011 % Change 2010 % Change 2009
(in thousands)
Marketing and
sales $174,758 1.2%
$172,640 (1.8%)
$175,839
Percentage of
sales
25.3%
25.9%
24.6%
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 July 3, 2011, marketing
and sales expense increased by 1.2%, compared to the
prior year period, as a result of: (i) an increase in compen-
sation expense, due to incentive compensation, reflecting
the improved operating results during the current year, as
well as new initiatives for franchising and store growth,
and (ii) variable costs associated with the increase in
revenue, offset by reductions in advertising spending,
reflecting the Company’s continued focus on improving
its merchandising programs, re-focusing the marketing
messages, and enhancing the efficiency of the advertis-
ing efforts. As a result, marketing and sales expenses as
a percentage of net revenues decreased from 25.9% in
fiscal 2010 to 25.3% in fiscal 2011. During the fiscal year
ended June 27, 2010, marketing and sales expense
decreased by 1.8% as a result of a number of cost-
reduction initiatives, including: (i) savings in catalog
printing and co-mailing costs and planned reductions in
customer prospecting, (ii) reductions in variable costs
associated with the decline in revenue, and (iii) the
impact of severance incurred in the prior year. Marketing
and sales expense increased as a percentage of sales
during the fiscal year ended June 27, 2010, as a result of:
(i) sales mix caused by the reduction of wholesale basket
products by DesignPac, which operate with a low level of
marketing and sales expense, and (ii) the Valentine’s Day
holiday promotions implemented by the 1-800-Flowers
Consumer Floral brand which did not generate sufficient
revenue to support the level of advertising spend.
During each of the fiscal years ended July 3, 2011
and June 27, 2010, the Company added approximately
2.3 million new e-commerce customers, compared to 2.4
million in fiscal 2009. Of the 4.8 million total customers
who placed e-commerce orders during fiscal 2011,
8
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
approximately 52% were repeat customers, consistent
with fiscal 2010 and 2009, reflecting the Company’s focus
on deepening the relationship with its existing customers
as their trusted source for gifts and services for all of their
celebratory occasions.
Technology and Development Expense
Years Ended
July 3, June 27, June 28,
2011 % Change 2010 % Change 2009
(in thousands)
Technology and
development
Percentage of
$ 20,424
13.8% $17,952 (14.5%) $ 21,000
sales
3.0%
2.7%
2.9%
Technology and development expense consists
primarily of payroll and operating expenses of the
Company’s information technology group, costs
associated 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 July 3, 2011, technology
and development expense increased by 13.8% over the
prior year period, as a result of increased labor costs
required to support and implement recent website
improvements, as well as from higher incentive compen-
sation expense in comparison to the prior year, partially
offset by reductions in the cost of hosting the Company’s
technology platforms, as a result of footprint reductions
and sourcing savings. During the fiscal year ended
June 27, 2010, technology and development expense
decreased by 14.5% over the prior year as a result of
decreased labor/consulting costs due to re-sizing
initiatives, as well as a reduction in the number and
size of hosting sites.
During the fiscal years ended July 3, 2011, June 27,
2010, and June 28, 2009 the Company expended $32.6
million, $29.3 million, and $35.7 million, respectively,
on technology and development, of which $12.2 million,
$11.4 million, and $14.7 million, respectively, has
been capitalized.
General and Administrative Expense
Years Ended
July 3, June 27, June 28,
2011 % Change 2010 % Change 2009
(in thousands)
General and
administrative
$ 50,744
0.6% $50,450 0.1% $ 50,451
Percentage of
sales
7.4%
7.6%
7.1%
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.
9
General and administrative expense was relatively
consistent with the prior year, but decreased as a
percentage of net revenues from 7.6% in fiscal 2010
to 7.4% in fiscal 2011, as a result of reduced health
insurance costs due to plan redesign and reductions
in legal fees associated with litigation which was settled
in the prior year, offset by higher incentive compensation
expense due to improved financial performance. During
fiscal 2010, general and administrative expense was
consistent with the prior year period, but increased as a
percentage of sales, as a result of a litigation settlement
of approximately $0.9 million, offset by reduced labor
and operating costs related to the Company’s re-sizing
initiatives implemented during fiscal 2009.
Depreciation and Amortization
Years Ended
July 3, June 27, June 28,
2011 % Change 2010 % Change 2009
(in thousands)
Depreciation and
amortization
Percentage of
$ 20,715
(3.0%)
$21,378 1.8% $ 21,010
sales
3.0%
3.2%
2.9%
Depreciation and amortization expense decreased
by 3.0% during the fiscal year ended July 3, 2011 in
comparison to the prior year period as a result of the
Company’s efforts over the last three years to reduce
capital expenditures. During the fiscal year ended
June 27, 2010 depreciation and amortization expense
increased by 1.8% in comparison to the prior year period,
primarily as a result of the incremental amortization
related to the intangibles established as a result of the
acquisition of DesignPac in April 2008, as well as
capital additions for technology platform improvements.
Goodwill and Intangible Impairment
The Company performs an annual impairment test
during its fiscal fourth quarter, or earlier, if indicators of
potential impairment exist, to evaluate its goodwill and
intangible assets. While the Company determined that
there was no impairment during fiscal 2011 or 2010,
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, during the year ended June
28, 2009, the Company recorded goodwill and intangible
impairment charges of $85.4 million. Of the total impair-
ment charge, approximately $65.6 million was related to
goodwill and $19.8 million was related to intangibles.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Other Income (Expense)
Years Ended
July 3, June 27, June 28,
2011 % Change 2010 % Change 2009
(in thousands)
Interest income
$ 123
Interest expense (4,200)
Deferred financing
(22.6%)
$ 159 (49.4%) $ 314
24.6% (5,571) 12.5% (6,364)
write-off
–– 100% (340) 89.5% (3,245)
29.1% $ (5,752) 38.1% $ (9,295)
$ (4,077)
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
July 3, June 27, June 28,
2011 % Change 2010 % Change 2009
(in thousands)
Net revenues
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 decreased during the fiscal
years ended July 3, 2011 and June 27, 2010, in compari-
son to the respective prior year periods, due to scheduled
paydowns and prepayments of amounts outstanding
under the Company’s term loans, as well as reduced
working capital borrowings. During fiscal 2009, the impact
of the reduction in outstanding borrowings was partially
offset by increases in interest rates, in part due to the
interest rate swap that the Company entered into during
July 2009, in accordance with its credit facility agreement.
Income Taxes
During the fiscal year ended July 3, 2011, the
Company recorded income tax expense of $3.6 million,
resulting in an effective tax rate of 38.7%. During the
fiscal years ended June 27, 2010 and June 28, 2009,
the Company recorded an income tax benefit of $0.3
million and $15.3 million, respectively, resulting in an
effective tax rate of 11.9% and 18.7%, respectively.
The Company’s effective tax rate for the fiscal years
ended July 3, 2011 and June 27, 2010, differed from
the U.S. federal statutory rate of 35% primarily due to the
impact of state income taxes and non-deductible stock-
based compensation, partially offset by various tax
credits, whereas the 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.
At July 3, 2011, the Company’s federal net operating
loss carryforwards were approximately $19.7 million,
which, if not utilized, will begin to expire in fiscal year 2025.
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. On January 25, 2010,
the Company completed the sale of these businesses;
refer to the Consolidated Financial Statements
“Discontinued Operations” for a further discussion.
10
from discontinued
operations
Gross profit
––
from discontinued
operations
Operating loss
––
from discontinued
operations (1)
––
Loss from discontinued
––
operations
––
$87,852
(38.9%) $ 143,746
––
––
––
40,905
(39.3%) 67,439
(1,723)
95.7% (39,754)
(2,133)
93.3% (31,916)
(1) including losses on disposal of $5.2 million and $14.7 million during
the years ended June 27, 2010 and June 28, 2009, respectively, and
impairment charges of $20.0 million during the year ended June 27, 2009
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 year ended June 27, 2010, net
revenues from discontinued operations decreased by
38.9% over the prior year period as a result of lower
E-commerce sales volume due to the sale of the business
on January 25, 2010, and therefore fiscal 2010 results
only include sales through the date of disposition.
Further contributing to the revenue decline was
reduced consumer spending, particularly in the home
décor product category, and a planned reduction in
catalog circulation, as well as lower retail store sales
due to a store closure and a decline in customer traffic.
During the fiscal year ended June 28, 2009, net
revenues from discontinued operations decreased by
20.2% over the prior year period 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 27, 2010 and June 28, 2009,
decreased by 39.3% and 17.2%, respectively, compared
to the prior year periods as a result of the aforementioned
revenue declines. Gross margin percentage during fiscal
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
2010 decreased 30 basis points to 46.6% due to
promotional activity, while during fiscal 2009, the
gross margin percentage increased 170 basis points
to 46.9%, benefiting from enhanced product sourcing
and shipping initiatives.
Despite the aforementioned decline in revenues,
operating income (loss) from discontinued operations
during the fiscal year ended June 27, 2010, excluding
the impact of goodwill and intangible impairment and
loss on sale, increased by approximately $8.5 million
over the prior year period driven by significant reduction
in operating expenses, primarily related to reduced
catalog circulation costs and other operating cost
reduction initiatives. Fiscal 2009 operating income (loss)
includes approximately $0.4 million of restructuring costs
associated 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 comple-
tion 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 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 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.
On January 25, 2010, the Company completed the
sale of the assets and certain related liabilities of its
Home & Children’s Gifts business. The sales price of the
assets was $17.0 million, subject to adjustments for
changes in working capital (net proceeds amounted to
$10.5 million). Based upon the carrying value of the
assets held for sale, the Company recorded a loss of
$5.3 million during the fiscal year ended June 27, 2010,
including transaction, severance and transition obligations.
Liquidity and Capital Resources
At July 3, 2011, the Company had working capital
of $17.8 million, including cash and equivalents of
$21.4 million, compared to working capital of $23.0
million, including cash and equivalents of $27.8 million,
at June 27, 2010.
Net cash provided by operating activities of $30.8
million for the fiscal year ended July 3, 2011 was attribut-
able to operating income, adjusting for non-cash items
related to depreciation and amortization, stock-based
compensation and deferred income taxes, as well as
increases in accounts payable and accrued expenses
due to cash management initiatives, offset in part by
increases in inventory, accounts receivable and prepaid
expenses due to a combination of expanded wholesale
activities and pre-positioning of inventory for production
of Holiday 2011 merchandise.
Net cash used in investing activities of $22.0 million
for the fiscal year ended July 3, 2011 was attributable to
capital expenditures, primarily related to the Company’s
technology and distribution infrastructure, and the
acquisitions of Mrs. Beasley’s in March 2011 and
Fine Stationery in May 2011.
Net cash used in financing activities of $15.2 million
for the fiscal year ended July 3, 2011 was primarily for
the repayment of bank borrowings on outstanding debt
and long-term capital lease obligations. There were no
borrowings outstanding under the Company’s revolving
credit facility as of July 3, 2011.
On April 14, 2009, the Company amended its 2008
Credit Facility with JPMorgan Chase Bank N.A., as
administrative agent, and a group of lenders (the
“Amended 2008 Credit Facility”). The Amended 2008
Credit Facility provided for term loan debt of $92.4 million
and a seasonally adjusted revolving credit line ranging
from $75.0 to $125.0 million.
On April 16, 2010, the Company entered into a
Second Amended and Restated Credit Agreement (the
“2010 Credit Facility”). The 2010 Credit Facility included
a prepayment of approximately $12.1 million, comprised
primarily of the proceeds from the sale of the Home &
Children’s Gifts segment in January 2010, and thereby
reducing the Company’s outstanding term loan under the
facility to $60 million upon closing. The term loan, which
matures on March 30, 2014, is payable in sixteen
quarterly installments of principal and interest beginning
in June 2010, with escalating principal payments at the
rate of 20% in year one, 25% in years two and three and
30% in year four.
In addition, the 2010 Credit Facility extended the
Company’s revolving credit line through April 16, 2014,
and reduced available borrowings from a seasonally
adjusted limit which ranged from $75.0 million to $125.0
million to a seasonally adjusted limit ranging from
$40.0 to $75.0 million.
Outstanding amounts under the 2010 Credit Facility
will bear interest at the Company’s option of 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 3.75% for LIBOR loans and 2.00%
to 2.75% for ABR loans with pricing based upon the
Company’s leverage ratio.
The Company does not enter into derivative transac-
tions for trading purposes, but rather to hedge its expo-
sure to interest rate fluctuations. The Company manages
its floating rate debt using interest rate swaps in order to
reduce its exposure to the impact of changing interest
rates on its consolidated results of operations and future
cash outflows for interest.
11
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
In July 2009, the Company entered into a $45.0
million notional amount swap agreement that exchanges
a variable interest rate (LIBOR) for a 1.92% fixed rate of
interest over the term of the agreement. This swap
matures on July 25, 2012.
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.
Despite the current challenging economic environ-
ment, the Company believes that cash flows from
operations along with available borrowings from its
existing revolving credit facility will be a sufficient source
of liquidity. The Company anticipates borrowing against
the facility prior to the end of the first fiscal quarter to fund
working capital requirements related to pre-holiday
manufacturing and inventory purchases. The Company
anticipates that such borrowings will peak during its fiscal
second quarter before being repaid prior to the end of
that quarter. At July 3, 2011, the Company had no
outstanding amounts under its revolving credit facility and
the Company has no off-balance sheet arrangements.
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
to 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 $0.5 million of common stock during the
fiscal year ended July 3, 2011. As of July 3, 2011, $11.8
million remains authorized.
Under this program, as of July 3, 2011, the Company
had repurchased 2,569,713 shares of common stock
for $14.5 million, of which $0.5 million (168,207 shares),
$0.9 million (342,821 shares) and $0.8 million (397,899
shares) were repurchased during the fiscal years
ending July 3, 2011, June 27, 2010 and June, 28, 2009,
respectively.
At July 3, 2011, 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
$ 48,077
$ 17,145
$ 30,932
$
––
$
––
Capital lease obligations,
including interest
Operating lease obligations
Sublease obligations
Purchase commitments (*)
1,647
68,486
3,917
41,841
1,641
12,724
1,667
41,841
6
22,334
1,617
––
––
14,255
490
––
––
19,173
143
––
Total
$163,968
$ 75,018
$ 54,889
$
14,745
$ 19,316
(*) Purchase commitments consist primarily of inventory and equipment purchase orders made in the ordinary course of business.
12
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.
Membership fees are recognized monthly in the period
earned, and products sales are recognized upon product
shipment with shipping terms of FOB shipping point.
Accounts Receivable
The Company maintains allowances for doubtful
accounts for estimated losses resulting from the
inability of its customers or franchisees to make required
payments. If the financial condition of the Company’s
customers or franchisees were to deteriorate, resulting
in an impairment of their ability to make payments,
additional 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
requirements 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 during 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 indicators is based on market conditions
and operational performance of the Company.
Based on its impairment test, the Company’s reporting
units had significant safety margins, representing the
excess of the estimated fair value of each reporting unit
less its respective carrying value (including goodwill
allocated to each respective reporting unit). Future
events could cause the Company to conclude that
impairment indicators exist and that goodwill and other
intangible assets associated with our acquired busi-
nesses is impaired.
13
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Recent Accounting Pronouncements
In April 2011, the Company adopted ASU 2010-29,
“Business Combinations (Topic 805): Disclosure of
Supplementary Pro Forma Information for Business
Combinations.” ASU 2010-29 requires an entity to
disclose revenue and earnings of the combined entity as
though the business combination(s) that occurred during
the current year had occurred as of the beginning of the
comparable prior annual reporting period. ASU 2010-29
is effective prospectively for business combinations that
occur on or after the beginning of the first annual report-
ing period beginning after December 15, 2010. As
permitted, the Company early adopted this standard. The
adoption of ASU 2010-29 did not have an impact on the
Company’s consolidated financial statements.
In May 2011, the FASB issued ASU 2011-04, “Fair
Value Measurement (Topic 820): Amendments to Achieve
Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs.” This standard
results in a common requirement between the FASB and
the International Accounting Standards Board (IASB) for
measuring fair value and for disclosing information about
fair value measurements. ASU 2011-04 is effective for
fiscal years and interim periods beginning after Decem-
ber 15, 2011. The Company does not expect the adoption
of ASU 2011-04 to have a material impact on its consoli-
dated financial statements.
In June 2011, the FASB issued ASU 2011-05,
“Comprehensive Income (Topic 220): Presentation of
Comprehensive Income.” ASU 2011-05 requires entities
to present net income and other comprehensive income
in either a single continuous statement or in two separate,
but consecutive, statements of net income and other
comprehensive income. ASU 2011-05 is effective for
fiscal years and interim periods beginning after Decem-
ber 15, 2011. The adoption of ASU 2011-05 is not
expected to have a material impact on the Company’s
consolidated financial statements.
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
The measurement of stock-based compensation
expense is based on the fair value of the award on the
date of grant. The Company determines the fair value of
stock options issued by using the Black-Scholes option-
pricing model. The Black-Scholes option-pricing model
considers a range of assumptions related to volatility,
dividend yield, risk-free interest rate and employee
exercise behavior. Expected volatilities are based on
historical volatility of the Company’s stock price. The
dividend yield is based on historical experience and
future expectations. The risk-free interest rate is derived
from the US Treasury yield curve in effect at the time of
grant. The Black-Scholes model also incorporates
expected forfeiture rates, based on historical behavior.
Determining these assumptions are subjective and
complex, and therefore, a change in the assumptions
utilized could impact the calculation of the fair value of
the Company’s stock options.
Income Taxes
The Company has established deferred income tax
assets and liabilities for temporary differences between
the financial reporting bases and the income tax bases
of its assets and liabilities at enacted tax rates expected
to be in effect when such assets or liabilities are realized
or settled. The Company has recognized as a deferred tax
asset the tax benefits associated with losses related to
operations, which are expected to result in a future tax
benefit. Realization of this deferred tax asset assumes
that we will be able to generate sufficient future taxable
income so that these assets will be realized. The factors
that we consider in assessing the likelihood of realization
include the forecast of future taxable income and avail-
able tax planning strategies that could be implemented
to realize the deferred tax assets.
It is the Company’s policy to provide for uncertain
tax positions and the related interest and penalties based
upon management’s assessment of whether a tax benefit
is more-likely-than-not to be sustained upon examination
by taxing authorities. To the extent that the Company
prevails in matters for which a liability for an unrecog-
nized 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.
14
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Quantitative and Qualitative Disclosures
About Market Risk
Special Note Regarding Forward-Looking
Statements
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 July 3, 2011, the Company’s outstanding debt,
including current maturities, approximated $45.7 million.
The Company does not enter into derivative transac-
tions for trading purposes, but rather to hedge its expo-
sure to interest rate fluctuations. The Company manages
its floating rate debt using interest rate swaps in order to
reduce its exposure to the impact of changing interest
rates on its consolidated results of operations and future
cash outflows for interest.
In July 2009, the Company entered into a $45.0
million notional amount swap agreement that exchanges
a variable interest rate (LIBOR) for a 1.92% fixed rate of
interest over the term of the agreement. This swap
matures on July 25, 2012. The Company has designated
this swap as a cash flow hedge of the interest rate risk
attributable to forecasted variable interest (LIBOR)
payments. The effective portion of the after tax fair value
gains or losses on these swaps is included as a compo-
nent of accumulated other comprehensive loss. If in the
future the interest rate swap agreements were deter-
mined to be ineffective or were terminated before the
contractual termination dates, or if it became probable
that the hedged variable cash flows associated with the
variable-rate borrowings would stop, the Company would
be required to reclassify into earnings all or a portion of
the unrealized losses on cash flow hedges included in
accumulated other comprehensive income (loss).
Exclusive of the impact of the Company’s interest rate
swap agreement, each 50 basis point change in interest
rates would have had a corresponding effect on our
interest expense of approximately $0.3 million on an
annual basis.
This annual report contains forward-looking state-
ments within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking
statements represent the Company’s expectations or
beliefs at the time of this writing concerning future events
and can generally be identified by the use of statements
that include words such as “estimate,” “expects,” “project,”
“believe,” “anticipate,” “intend,” “plan,” “foresee,” “likely,”
“will,” “target” or similar words or phrases. Forward-
looking statements include, but are not limited to,
statements regarding the Company’s ability to build on
positive trends in its business, its ability to leverage its
multi-brand website to enhance cross brand marketing
efforts, its ability to achieve its guidance for consolidated
revenue growth for the full year in the low-to-mid-single
digit range and its guidance for bottom-line growth in
EBITDA, EPS and Free Cash Flow at rates in excess of
its anticipated revenue growth. These forward-looking
statements are subject to risks, uncertainties and other
factors, many of which are outside of the Company’s
control, which could cause actual results to differ
materially from the results expressed or implied in the
forward-looking statements, including, among others:
the Company’s ability to manage the seasonality of its
businesses; its ability to cost effectively acquire and retain
customers; the outcome of contingencies, including legal
proceedings in the normal course of business; its ability
to compete against existing and new competitors; its
ability to manage expenses associated with sales and
marketing and necessary general and administrative and
technology investments; and general consumer sentiment
and economic conditions that may affect levels of
discretionary customer purchases of the Company’s
products. The Company undertakes no obligation to
publicly update any of the forward-looking statements,
whether as a result of new information, future events or
otherwise, made in this annual report or in any of its
SEC filings except as may be otherwise stated by the
Company. For a more detailed description of these and
other risk factors, please refer to the Company’s SEC
filings including the Company’s Annual Reports on Form
10-K and its Quarterly Reports on Form 10-Q.
15
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
Total operating expenses
Operating income (loss)
Other income (expense), net
Income (loss) from continuing
operations before income taxes
Income tax expense (benefit)
Income (loss) from continuing
operations
Loss from discontinued operations,
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 2011 and 2010. 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
Jul. 3, Mar. 27, Dec. 26, Sep. 26, Jun. 27, Mar. 28, Dec. 27, Sep. 27,
2011 2011 2010 2010 2010 2010 2009 2009
(in thousands, except per share data)
Net revenues:
E-commerce
Other
(telephonic/online) $142,059 $117,506 $154,599
80,803
235,402
136,570
98,832
45,026
187,085
112,619
74,466
45,273
162,779
99,574
63,205
Total net revenues
Cost of revenues
Gross Profit
Operating expenses:
$ 71,213
33,308
104,521
60,940
43,581
29,918
4,881
11,880
5,135
51,814
(8,233)
(1,169)
$130,444 $113,030 $151,660 $ 74,840
33,476
108,316
64,562
43,754
34,983
165,427
102,455
62,972
86,794
238,454
138,791
99,663
42,483
155,513
96,100
59,413
44,459
4,688
11,946
5,607
66,700
46,729
4,183
11,297
5,482
67,691
(3,728) (8,278)
(1,119)
(1,142)
51,976
4,525
14,673
5,343
76,517
29,476
4,556
12,534
4,946
51,512
23,146 (7,758)
(1,530)
(1,961)
50,180
5,578
13,133
5,064
73,955
511
(756)
50,848
43,812
4,786
5,179
12,831
12,930
5,286
5,230
73,751
67,151
(3,946)
25,081
(854) (1,298)
(245)
(237)
(4,800)
(2,124)
23,783
10,253
(9,402)
(4,278)
(4,870)
(1,644)
(9,397)
(3,468)
21,185
8,452
(9,288)
(3,622)
(8)
(2,676)
13,530
(5,124)
(3,226)
(5,929)
12,733
(5,666)
before income taxes
––
––
Income tax expense (benefit)
Loss from discontinued operations
––
Net income (loss) $ (8) $ (2,676) $ 13,530
Basic and diluted net income (loss)
––
––
––
––
––
––
––
––
––
$ (5,124)
(2,638)
(1,168)
(1,030)
560
(1,728)
(1,608)
$ (4,954) $ (7,296) $ 15,303 $ (7,274)
(1,712)
(345)
(1,367)
3,795
1,225
2,570
per common share:
From continuing operations $ 0.00 $ (0.04) $ 0.21
–– ––
From discontinued operations
––
$ (0.08)
––
$ (0.05) $ (0.09) $ 0.20 $ (0.09)
(0.03) (0.02) 0.04 (0.03)
Net income (loss) per
common share $ 0.00 $ (0.04) $ 0.21 $ (0.08) $ (0.08) $ (0.11) $ 0.24 $ (0.11)
Weighted average shares used in
the calculation of net income (loss)
per common share:
Basic
Diluted
64,135
64,135
63,999
63,999
63,966
64,801
63,894
63,894
63,828
63,828
63,687
63,687
63,555
64,070
63,472
63,472
The Company’s quarterly results may experience seasonal fluctuations. Due to the Company’s expansion into
non-floral products, 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.
16
Consolidated Balance Sheets
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands, except share data)
July 3, June 27,
2011 2010
Assets
Current assets:
Cash and equivalents
Receivables, net
Inventories
Deferred tax assets
Prepaid and other
Total current assets
Property, plant and equipment, net
Goodwill
Other intangibles, net
Deferred tax assets
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
Current maturities of long-term debt and obligations under capital leases
Total current liabilities
Long-term debt and obligations under capital leases
Other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued
Class A common stock, $.01 par value, 200,000,000 shares authorized,
32,987,313 and 32,492,266 shares issued in 2011 and 2010, respectively
Class B common stock, $.01 par value, 200,000,000 shares authorized,
42,138,465 shares issued in 2011 and 2010
Accumulated other comprehensive loss
Additional paid-in capital
Retained deficit
Treasury stock, at cost, 5,633,253 and 5,465,046 Class A shares in 2011 and
2010, respectively, and 5,280,000 Class B shares
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes.
17
$ 21,442
15,278
51,314
5,416
7,375
100,825
50,354
41,547
41,808
17,181
5,236
$256,951
$ 66,559
16,488
83,047
29,250
2,993
115,290
––
330
$ 27,843
13,943
45,121
5,109
5,662
97,678
51,324
41,211
41,042
19,265
5,566
$256,086
$ 59,914
14,801
74,715
45,707
3,038
123,460
––
325
421
421
(158) (334)
289,101
285,515
(114,755) (120,477)
(33,278) (32,824)
132,626
141,661
$256,951
$ 256,086
Consolidated Statements of Operations
1-800-FLOWERS.COM, Inc. and Subsidiaries
Years Ended
(in thousands, except per share data)
July 3, June 27, June 28,
2011 2010 2009
Net revenues
Cost of revenues
Gross profit
$689,787
409,703
280,084
$667,710
401,908
265,802
$713,950
432,744
281,206
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):
Interest income
Interest expense
Deferred financing cost write-off
Total other income (expense), net
Income (loss) from continuing operations
before income taxes
Income tax expense (benefit) from continuing operations
Income (loss) from continuing operations
Loss from discontinued operations
before income taxes (including losses on
disposal of $5.2 million and $14.7 million
during the years ended June 27, 2010 and
June 28, 2009, respectively, and impairment
charges of $20.0 million during the year
ended June 27, 2009)
Income tax expense (benefit) from
discontinued operations
Loss from discontinued operations
Net income (loss)
Basic and diluted net income (loss) per common share:
From continuing operations
From discontinued operations
Net income (loss) per common share
Weighted average shares used in the calculation of
net income (loss) per common share:
Basic
Diluted
See accompanying notes.
174,758
20,424
50,774
20,715
––
266,671
13,413
123
(4,200)
––
(4,077)
9,336
3,614
5,722
––
––
––
$ 5,722
$
$
0.09
––
0.09
64,001
65,153
18
172,640
17,952
50,450
21,378
––
262,420
3,382
175,839
21,000
50,451
21,010
85,438
353,738
(72,532)
159
314
(5,571) (6,364)
(3,245)
(340)
(9,295)
(5,752)
(2,370)
(282)
(2,088)
(81,827)
(15,326)
(66,501)
(1,723)
410
(2,133)
$ (4,221)
$ (0.03)
(0.03)
$ (0.07)
(39,754)
(7,838)
(31,916)
$ (98,417)
$ (1.05)
(0.50)
$ (1.55)
63,635
63,635
63,565
63,565
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Consolidated Statements of Cash Flows
1-800-FLOWERS.COM, Inc. and Subsidiaries
Years Ended
(in thousands)
July 3, June 27, June 28,
2011 2010 2009
Operating activities:
Net income (loss)
Reconciliation of net income (loss) to net cash
$ (4,221)
5,722
$
$ (98,417)
provided by operating activities, net of acquisitions:
Operating activities of discontinued operations
Loss on sale/impairment from discontinued operations
Goodwill and intangible asset impairment from
continuing operations
Depreciation and amortization
Amortization of deferred financing costs
Deferred income taxes
Bad debt expense
Stock-based compensation
Tax benefits from stock-based compensation
Other non-cash items
Changes in operating items, excluding the effects of
acquisitions:
Receivables
Inventories
Prepaid and other
Accounts payable and accrued expenses
Other assets
Other liabilities
Net cash provided by operating activities
Investing activities:
Acquisitions, net of cash acquired
Proceeds from sale of business
Capital expenditures
Purchase of investment
Other, net
Investing activities of discontinued operations
Net cash used in investing activities
Financing activities:
Acquisition of treasury stock
Proceeds from exercise of employee stock options
Tax benefits from stock based compensation
Proceeds from bank borrowings
Repayment of bank borrowings
Debt issuance cost
Repayment of capital lease obligations
Financing activities of discontinued operations
Net cash (used in) provided by financing activities
Net change in cash and equivalents
Cash and equivalents:
Beginning of year
End of year
––
––
––
20,715
474
2,262
1,546
3,961
419
27
(2,881)
(5,491)
(1,703)
6,647
(748)
(225)
30,725
(4,310)
––
(17,017)
(268)
100
––
(21,495)
(454)
49
(419)
40,000
(52,750)
(17)
(2,040)
––
(15,631)
(6,401)
27,843
21,442
$
8,204
5,275
––
21,378
763
(127)
1,908
4,643
275
77
(4,516)
733
(1,082)
6,453
(124)
389
40,028
––
10,468
(15,041)
(2,192)
325
(78)
(6,518)
(878)
––
(367)
49,000
(79,352)
(1,637)
(1,995)
––
(35,229)
(1,719)
29,562
$ 27,843
7,210
34,758
85,438
21,010
3,751
(22,249)
2,264
1,724
306
(178)
516
(2,589)
(219)
(5,754)
412
511
28,494
(12,001)
25
(12,265)
––
215
(1,202)
(25,228)
(797)
114
(306)
120,000
(100,648)
(3,603)
(502)
(86)
14,172
17,438
12,124
$ 29,562
Supplemental Cash Flow Information:
- Interest paid amounted to $4.2 million, $5.4 million, and $5.8 million for the years ended July 3, 2011, June 27, 2010 and June 28, 2009, respectively.
- Capital expenditures excludes capital lease financing of $-, $- and $6.0 million for the years ended July 3, 2011, June 27, 2010 and
June 28, 2009, respectively.
- The Company paid income taxes of approximately $1.4 million, $1.4 million and $3.0 million, net of tax refunds received, for the years ended
July 3, 2011, June 27, 2010 and June 28, 2009, respectively.
See accompanying notes.
20
Notes to Consolidated Financial Statements
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 1. Description of Business
For more than 30 years, 1-800-FLOWERS.COM, Inc.
has been providing customers with gifts for every
occasion, including fresh flowers and the finest selection
of plants, gift baskets, gourmet foods, confections,
candles, balloons and plush stuffed animals. As always,
100 percent satisfaction is guaranteed. The Company’s
BloomNet® 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 ®;
cookies and baked gifts from Cheryl’s ®; premium
chocolates and confections from Fannie May ®
Confections Brands; gift baskets and towers from
1-800-BASKETS.COM ®; and wine gifts from
The Winetasting Network SM. The Company’s
Celebrations ® brand is a new premier online
destination for fabulous party ideas and planning tips.
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. On January 25, 2010,
the Company completed the sale of these businesses;
refer to Note 16. Discontinued Operations, for further
discussion. Consequently, 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 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 year
2011, which ended on July 3, 2011, consisted of 53
weeks, while fiscal 2010 and 2009, which ended on
June 27, 2010 and June 28, 2009, 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
depreciated using the following estimated lives:
Buildings
Leasehold Improvements
Furniture, Fixtures and Equipment
Software
40 years
3 - 10 years
3 - 10 years
3 - 5 years
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived intangibles are not
amortized, but are evaluated annually for impairment. The
Company performs its annual impairment test in its fiscal
fourth quarter, or earlier if indicators of potential impair-
ment exist, to evaluate goodwill. Goodwill is considered
impaired if the carrying amount of the reporting unit
exceeds its estimated fair value. In assessing the recover-
ability 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.
Deferred Catalog Costs
The Company capitalizes the costs of producing and
distributing its catalogs. These costs are amortized in
direct proportion to 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
at July 3, 2011 and June 27, 2010, relating to prepaid
catalog expenses.
21
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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.
Available-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
July 3, 2011, June 27, 2010 and June 28, 2009, 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 July 3, 2011 and June 27, 2010.
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 quality
financial institutions. Concentration of credit risk with
respect to accounts receivable is 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 ($1.0 million and $1.5 million at July 3, 2011
and June 27, 2010, 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
merchandising 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 $67.9 million, $70.4 million and
$70.8 million for the years ended July 3, 2011, June 27,
2010 and June 28, 2009, 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 based upon the fair value of stock-based
awards as measured at the grant date. The expense is
recorded by amortizing the fair values on a straight-line
basis over the vesting period, adjusted for estimated
forfeitures.
Derivatives and hedging
The Company does not enter into derivative transac-
tions for trading purposes, but rather to manage its
exposure to interest rate fluctuations. The Company
manages its floating rate debt using interest rate swaps in
order to reduce its exposure to the impact of changing
interest rates on its consolidated results of operations and
future cash outflows for interest.
Income Taxes
The Company uses the asset and liability method to
account for income taxes. Deferred tax assets and
liabilities are recognized for the anticipated future tax
consequences attributable to differences between
22
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
financial statement amounts and their respective tax
bases. Management reviews the Company’s deferred
tax assets to determine whether their value can be
realized based upon available evidence. Amounts for
uncertain tax positions are adjusted in quarters when
new information becomes available or when positions
are effectively settled.
There is a financial statement recognition threshold
and measurement attribute for tax positions taken or
expected to be taken in a tax return. Specifically, it
clarifies that an entity’s tax benefits must be “more
likely than not” of being sustained, assuming that these
positions will be examined by taxing authorities with full
knowledge of all relevant information prior to recording
the related tax benefit in the financial statements. If a
tax position drops below the “more likely than not”
standard, the benefit can no longer be recognized.
Assumptions, judgment and the use of estimates are
required in determining if the “more likely than not”
standard has been met when developing the provision
for 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.
The Company recognizes the tax benefit from an
uncertain tax position only if it is more likely than not that
the tax position will be sustained on examination by the
taxing authorities based on the technical merits of the
position. The tax benefits recognized in the financial
statements on a particular tax position are measured
based on the largest benefit that has a greater than a
50% likelihood of being realized upon settlement. The
amount of unrecognized tax benefits (“UTBs”) is adjusted
as appropriate for changes in facts and circumstances,
such as significant amendments to existing tax law, new
regulations or interpretations by the taxing authorities,
new information obtained during a tax examination, or
resolution of an examination. We recognize both accrued
interest and penalties, where appropriate, related to
UTBs in income tax expense.
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 excludes the effect
of potential common shares (consisting primarily of
employee stock options and unvested restricted stock
awards) as their inclusion would be antidilutive.
Recent Accounting Pronouncements
In April 2011, the Company adopted ASU 2010-29,
“Business Combinations (Topic 805): Disclosure of
Supplementary Pro Forma Information for Business
Combinations.” ASU 2010-29 requires an entity to
disclose revenue and earnings of the combined entity as
though the business combination(s) that occurred during
the current year had occurred as of the beginning of the
comparable prior annual reporting period. ASU 2010-29
is effective prospectively for business combinations that
occur on or after the beginning of the first annual report-
ing period beginning after December 15, 2010. As
permitted, the Company early adopted this standard.
The adoption of ASU 2010-29 did not have an impact
on the Company’s consolidated financial statements.
In May 2011, the FASB issued ASU 2011-04, “Fair
Value Measurement (Topic 820): Amendments to Achieve
Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs.” This standard
results in a common requirement between the FASB and
the International Accounting Standards Board (IASB) for
measuring fair value and for disclosing information about
fair value measurements. ASU 2011-04 is effective for
fiscal years and interim periods beginning after Decem-
ber 15, 2011. The Company does not expect the adoption
of ASU 2011-04 to have a material impact on its consoli-
dated financial statements.
In June 2011, the FASB issued ASU 2011-05,
“Comprehensive Income (Topic 220): Presentation of
Comprehensive Income.” ASU 2011-05 requires entities
to present net income and other comprehensive income
in either a single continuous statement or in two separate,
but consecutive, statements of net income and other
comprehensive income. ASU 2011-05 is effective for
fiscal years and interim periods beginning after Decem-
ber 15, 2011. The adoption of ASU 2011-05 is not
expected to have a material impact on the Company’s
consolidated financial statements.
Reclassifications
Certain balances in the prior fiscal years have been
reclassified to conform to the presentation in the current
fiscal year. During the second quarter of fiscal 2010, the
Company launched its 1-800-Baskets brand. Products
within this business are now being managed within the
Gourmet Food & Gift Baskets segment, resulting in a
change to our reportable segment structure. Gift basket
products, formerly included in the Consumer Floral
reportable segment are now included in the Gourmet
Food & Gift Baskets segment. These changes have been
reflected in the Company’s segment reporting for all
periods presented.
23
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 3 – Net Income (Loss) Per Common Share
The following table sets forth the computation of basic
and diluted net income (loss) per common share:
Years Ended
July 3, June 27, June 28,
2011 2010 2009
(in thousands, except per share data)
Numerator:
Net income (loss)
$ 5,722
$ (4,221)
$(98,417)
Denominator:
Weighted average
shares outstanding
Effect of dilutive securities:
64,001
63,635
63,565
Employee stock
options (1)
Employee restricted
stock awards
16
1,136
––
––
––
––
––
––
––
Adjusted weighted-average
shares and assumed
conversions
65,153
63,635
63,565
Net income (loss) per common share:
Basic
Diluted
$
$
0.09
0.09
$ (0.07)
$ (0.07)
$ (1.55)
$ (1.55)
Note (1): The effect of options to purchase 7.0 million, 8.1 million and 8.9
million shares for the years ended July 3, 2011, June 27, 2010, and June
28, 2009, respectively, were excluded from the calculation of net income
(loss) per share on a diluted basis as their effect is anti-dilutive.
Note 4. Acquisitions
Effective June 29, 2009, the Company began
accounting for business combinations under ASC Topic
805 which requires, among other things, the acquiring
entity in a business combination to recognize the fair
value of all the assets acquired and liabilities assumed;
the recognition of acquisition-related costs in the consoli-
dated results of operations; the recognition of restructur-
ing costs in the consolidated results of operations for
which the acquirer becomes obligated after the acquisi-
tion date; and contingent purchase consideration to be
recognized at their fair values on the acquisition date with
subsequent adjustments recognized in the consolidated
results of operations. The accounting prescribed by ASC
Topic 805 is applicable for all business combinations
entered into by the Company after June 29, 2009.
Operating results of the acquired entity is reflected
in the Company’s consolidated financial statements
from date of acquisition.
Acquisition of Mrs. Beasley’s
On March 9, 2011, the Company acquired selected
assets of Mrs. Beasley’s Bakery, LLC (Mrs. Beasley’s), a
baker and marketer of cakes, muffins and gourmet gift
baskets for cash consideration of approximately $1.5
million. The acquisition included inventory and certain
manufacturing equipment, which was consolidated
within the Company’s baked goods manufacturing
facilities. Approximately $0.6 million of the purchase
price was assigned to tradenames that are not subject to
amortization, while $0.3 million was assigned to goodwill
which is expected to be deductible for tax purposes.
Acquisition of Fine Stationery
On May 10, 2011, the Company acquired selected
assets of Fine Stationery Solutions, Inc. (Fine Stationery),
a retailer of personalized stationery, invitations and
announcements. The purchase price, which included the
acquisition of inventory, production equipment and certain
other assets, was approximately $3.3 million, including
cash consideration of $2.8 million, plus additional consid-
eration based upon achieving specified operating results
during fiscal 2012 through 2014, of which the Company
recorded $0.5 million, and which is included in other
liabilities in the Company’s consolidated balance sheet.
The acquisition was financed utilizing available cash
balances. Of the $1.7 million of acquired intangible assets,
$1.6 million was assigned to trademarks that are not
subject to amortization, while the remaining acquired
intangibles of $0.1 million were allocated to customer
related intangibles which are being amortized over the
estimated useful life of 3 years. Approximately $1.1 million
of goodwill is deductible for tax purposes.
The Company is in the process of finalizing its
allocation of the purchase prices to individual assets
acquired and liabilities assumed as a result of the
acquisitions of Mrs. Beasley’s and Fine Stationery.
This will result in potential adjustments to the carrying
value of their respective recorded assets and liabilities,
the establishment of certain additional intangible assets,
revisions of useful lives of intangible assets, some of
which will have indefinite lives not subject to amortization,
and the determination of any residual amount that will be
allocated to goodwill. The preliminary allocation of the
purchase price included in the current period balance
sheet is based on the best estimates of management and
is subject to revision based on final determination of
asset fair values and useful lives. The following table
summarizes the allocation of purchase price to the
estimated fair values of assets acquired and liabilities
assumed at the date of the acquisition of Mrs. Beasley’s
and Fine Stationery:
Mrs. Beasley’s Fine Stationery
Purchase Price Purchase Price
Allocation Allocation
(in thousands)
Current assets
Intangible assets
Goodwill
Property, plant and equipment
Total assets acquired
Current liabilities
Total liabilities assumed
Net assets acquired
$
353
585
308
204
1,450
––
––
$ 1,450
24
$
360
1,674
1,051
269
3,354
20
20
$ 3,334
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Acquisition of Napco Marketing Corp.
Pro forma Results of Operation
The following unaudited pro forma consolidated
financial information has been prepared as if the
acquisitions of Mrs. Beasley’s, Fine Stationery, Napco
and Geerlings & Wade had taken place at the beginning
of fiscal year 2009. 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
July 3, June 27, June 28,
2011 2010 2009
(pro forma) (pro forma) (pro forma)
(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) per
common share from
$702,168
$683,182
$736,381
$ 16,104
$ 5,389
$(70,309)
$ 6,625
$ (3,504)
$(68,095)
continuing operations
Basic
Diluted
$ 0.10
$ 0.10
$ (0.06)
$ (0.06)
$ (1.07)
$ (1.07)
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
July 3, June 27,
2011 2010
(in thousands)
Finished goods
Work-in-process
Raw materials
$26,629
15,442
9,243
$51,314
$23,611
13,390
8,120
$45,121
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 approxi-
mately $4.0 million. The acquisition was financed utilizing
a combination of available cash on hand and through
borrowings under 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 July 3, 2011, 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 Napco:
Napco Purchase Price Allocation
(in thousands)
Current assets
Property, plant and equipment
Intangible assets
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 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
1,440
2,683
77
77
$ 2,606
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
(in thousands)
$ 6,165
Balance at June 29, 2008
––
––
$
Acquisition
Goodwill impairment
Acquisition related adjustments
Balance at June 28, 2009
Acquisition related adjustments
Balance at June 27, 2010
Acquisitions
Acquisition related adjustments
Balance at July 3, 2011
(437)
$ 5,728
––
$ 5,728
1,051
––
$ 6,779
$
$
$
––
––
––
––
––
––
––
––
––
––
$
99,734
1,438
(65,644)
(51)
35,477
$
6
35,483
308
(1,023)
34,768
$
$
$105,899
1,438
(65,644)
(488)
$ 41,205
6
$ 41,211
1,359
(1,023)
$ 41,547
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable
intangible assets acquired in each business combination, with the carrying value of the Company’s goodwill allocated
to its reporting units.
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.
While the Company determined that there was no impairment during either fiscal 2011 or fiscal 2010, 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.
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.
The Company’s other intangible assets consist of the following:
July 3, June 27,
2011 2010
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 $ 5,314
8,619
1,770
15,703
15,804
2,538
23,656
––
33,855
$57,511
––
$15,703
$
––
7,185
768
7,953
33,855
$41,808
$ 5,314
15,695
2,388
23,397
31,068
$54,465
$ 5,314
6,758
1,351
13,423
––
$13,423
$
––
8,937
1,037
9,974
31,068
$41,042
26
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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, during the year ended June
28, 2009, 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 July 3, 2011, June 27, 2010 and June 28, 2009
was $2.3 million, $3.0 million, and $3.7 million, respec-
tively. Future estimated amortization expense is as
follows: 2012 - $1.7 million, 2013 - $1.6 million, 2014 -
$1.3 million, and 2015 - $1.2 million, and thereafter -
$2.2 million.
Note 7. Property, Plant and Equipment
July 3, June 27,
2011 2010
(in thousands)
Land
Building and building improvements
Leasehold improvements
Furniture and fixtures
Production equipment
Computer equipment
Telecommunication equipment
Software
$
2,907
9,807
17,193
4,471
26,192
57,090
8,355
99,819
225,834
$
2,907
9,659
16,722
3,966
22,462
57,036
8,523
82,895
204,170
Accumulated depreciation and
amortization
175,480
$ 50,354
152,846
$ 51,324
Note 8. Long-Term Debt
July 3, June 27,
2011 2010
(in thousands)
Term loan and revolving
credit line (1) $ 44,250 $ 57,000
Obligations under capital
leases (2)
Less current maturities of
1,488 3,508
45,738 60,508
long-term debt obligations
16,488 14,801
under capital leases
$ 29,250 $ 45,707
(1) On April 14, 2009, the Company amended its
2008 Credit Facility with JPMorgan Chase Bank N.A.,
as administrative agent, and a group of lenders (the
“Amended 2008 Credit Facility”). The Amended 2008
Credit Facility provided for term loan debt of $92.4 million
and a seasonally adjusted revolving credit line ranging
from $75.0 to $125.0 million. The Amended 2008 Credit
Facility, effective March 28, 2009, also revised certain
financial and non-financial covenants.
On April 16, 2010, the Company entered into a
Second Amended and Restated Credit Agreement (the
“2010 Credit Facility”). The 2010 Credit Facility included
a prepayment of approximately $12.1 million, comprised
primarily of the proceeds from the sale of the Home &
Children’s Gifts segment in January 2010, and thereby
reducing the Company’s outstanding term loan under
the facility to $60 million upon closing. The term loan,
which matures on March 30, 2014, is payable in sixteen
quarterly installments of principal and interest beginning
in June 2010, with escalating principal payments at the
rate of 20% in year one, 25% in years two and three and
30% in year four.
In addition, the 2010 Credit Facility extended the
Company’s revolving credit line through April 16, 2014,
and reduced available borrowings from a seasonally
adjusted limit which ranged from $75.0 million to $125.0
million to a seasonally adjusted limit ranging from $40.0
to $75.0 million. The 2010 Credit Facility also revised
certain financial and non-financial covenants, including
maintenance of certain financial ratios. The obligations of
the Company and its subsidiaries under the 2010 Credit
Facility are secured by liens on all personal property of
the Company and its domestic subsidiaries.
Outstanding amounts under the 2010 Credit Facility
will bear interest at the Company’s option of 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 3.75% for LIBOR loans and 2.00%
to 2.75% for ABR loans with pricing based upon the
Company’s leverage ratio.
As a result of the modifications of its credit facilities,
during the years ended June 27, 2010 and June 28,
2009, the Company wrote-off deferred financing costs in
the amount of $0.3 million and $3.2 million, respectively.
The Company does not enter into derivative transac-
tions for trading purposes, but rather to hedge its expo-
sure to interest rate fluctuations. The Company manages
its floating rate debt using interest rate swaps in order to
reduce its exposure to the impact of changing interest
rates on its consolidated results of operations and future
cash outflows for interest.
In July 2009, the Company entered into a $45.0
million notional amount swap agreement that exchanges
a variable interest rate (LIBOR) for a 1.92% fixed rate of
interest over the term of the agreement. This swap
matures on July 25, 2012. The Company has designated
this swap as a cash flow hedge of the interest rate risk
27
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
attributable to forecasted variable interest (LIBOR)
payments. The effective portion of the after tax fair value
gains or losses on this swap is included as a component
of accumulated other comprehensive loss. The ineffective
portion, if any, is recorded within interest expense in the
consolidated statement of operations.
(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 July 3, 2011 long-term debt maturities,
excluding amounts relating to capital leases (refer to Note
17. Commitments and Contingencies), are as follows:
Year Debt Maturities
(in thousands)
2012
2013
2014
15,000
15,750
13,500
$44,250
Note 9. Fair Value Measurements
On June 29, 2009, the Company adopted the newly
issued accounting standard for fair value measurements
of all non-financial assets and liabilities not recognized or
disclosed at fair value in the financial statements on a
recurring basis. The Company’s non-financial assets,
such as goodwill, intangible assets, and property, plant
and equipment, are recorded at cost and are assessed
for impairment when an event or circumstance indicates
that an other-than-temporary decline in value may have
occurred. Goodwill and indefinite lived intangibles are
also tested for impairment annually, as required under
the accounting standards.
Cash and cash equivalents, receivables, accounts
payable and accrued expenses are reflected in the
consolidated balance sheets at carrying value, which
approximates fair value due to the short-term nature of
these instruments. Although no trading market exists, the
Company believes that the carrying amount of its debt
approximates fair value due to its variable nature.
The authoritative guidance for fair value measure-
ments establishes a fair value hierarchy that prioritizes
the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unad-
justed quoted prices in active markets for identical assets
or liabilities (level 1 measurements) and the lowest
priority to unobservable inputs (level 3 measurements).
The three levels of the fair value hierarchy under the
guidance are described below:
Level 1 Valuations based on quoted prices in active
markets for identical assets or liabilities that the
entity has the ability to access.
Level 2 Valuations based on quoted prices for similar
assets or liabilities, quoted prices in markets
that are not active, or other inputs that are
observable or can be corroborated by
observable data for substantially the full term
of the assets or liabilities.
Level 3 Valuations based on inputs that are supported
by little or no market activity and that are
significant to the fair value of the assets
or liabilities.
In accordance with the fair value hierarchy described
above, the following table shows the fair value of the
Company’s interest rate swap, which is included in other
liabilities in the consolidated balance sheet. The fair
value is based on forward looking interest rate curves:
Fair Value Measurements
Assets (Liabilities)
Balance Level 1 Level 2 Level 3
(in thousands)
Interest
rate swap (1) –
July 3, 2011
Interest
rate swap (1) –
June 27, 2010
$(263)
––
$(263)
$(557)
––
$(557)
––
––
(1) Included in other long-term liabilities on the consolidated
balance sheet.
28
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 10. Income Taxes
The Company files income tax returns in the U.S.
federal jurisdiction and various state jurisdictions.
The Company has concluded its federal examination
by the Internal Revenue Service for its fiscal years 2007
through 2009. Fiscal 2010 and fiscal 2011 remain subject
to federal examination. Due to non-conformity with the
federal statute of limitations for assessment, certain states
remain open from fiscal 2006. 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. The Company
does 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
July 3, June 27, June 28,
2011 2010 2009
(in thousands)
Current provision (benefit):
$
Federal
State
Deferred provision (benefit):
Federal
State
Income tax
543
809
1,352
2,152
110
2,262
$ (213)
482
269
$ 1,254
54
1,308
(522)
(29)
(551)
(15,089)
(1,545)
(16,634)
expense (benefit)
$ 3,614
$ (282) $ (15,326)
A reconciliation of the U.S. federal statutory tax rate to
the Company’s effective tax rate is as follows:
Years Ended
July 3, June 27, June 28,
2011 2010 2009
Tax at U.S. statutory rates
35.0%
State income taxes, net
of federal tax benefit
35.0%
35.0%
(14.0)
6.6
2.4
Non-deductible stock-based
compensation
1.9
(11.4) (0.2)
Non-deductible goodwill
amortization ––
(17.7)
(1.4)
Rate change
Tax credits
(0.1)
Tax settlements (1.6) –– ––
0.7
Other, net
18.7%
(4.0)
0.1 ––
4.3
(2.9)
(0.4)
38.7%
2.0
11.9%
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
July 3, June 27, June 28,
2011 2010 2009
(in thousands)
Deferred income tax assets:
Net operating loss and
credit carryforwards
Accrued expenses
and reserves
Stock-based
compensation
Other intangibles
$ 9,872
$11,284
$ 4,031
5,159
5,035
12,142
3,452
6,257
3,116
7,293
2,871
8,370
Deferred income tax liabilities:
Tax in excess of
book depreciation (2,143) (2,354) (3,023)
Net deferred
income tax assets
$22,597
$24,374
$ 24,391
At July 3, 2011, the Company’s federal net operating
loss carryforwards were approximately $19.7 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
Note 11. 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 to 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
July 3, 2011, $11.8 remains authorized.
Under this program, as of July 3, 2011, the Company
had repurchased 2,569,713 shares of common stock for
$14.5 million, of which $0.5 million (168,207 shares), $0.9
million (342,821 shares) and $0.8 million (397,899 shares)
were repurchased during the fiscal years ended July 3,
2011, June 27, 2010 and June 28, 2009, respectively.
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, perfor-
mance shares, performance units, dividend equivalents,
and other share-based awards (collectively “Awards”).
Note 12. Stock Based Compensation
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 July 3, 2011, the Company has reserved approxi-
mately 13.6 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
July 3, June 27, June 28,
2011 2010 2009
(in thousands, except per share data)
Stock options
Restricted stock awards
Total
Deferred income tax benefit
Stock-based compensation
$1,181
2,780
3,961
1,381
$1,460
2,423
3,883
1,245
$1,383
341
1,724
444
expense, net
$2,580 $2,638
$1,280
Stock based compensation expense is recorded
within the following line items of operating expenses:
Years Ended
July 3, June 27, June 28,
2011 2010 2009
(in thousands)
Marketing and sales
Technology and
development
General and administrative
Total
$1,587
$1,590
$ 465
791
1,583
795
1,498
$3,961 $3,883
583
676
$1,724
Stock-based compensation expense has not been
allocated between business segments, but is reflected
in Corporate. (Refer to Note 15 – Business Segments.)
Stock Option 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
July 3, June 27, June 28,
2011 2010 2009
Weighted average fair
value of options granted
Expected volatility
Expected life (in years)
Risk-free interest rate
Expected dividend yield
$1.23
68%
7.5
1.3%
0.0%
$1.71
63%
5.6
2.4%
0.0%
$1.83
56%
5.8
2.2%
0.0%
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 July 3, 2011:
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Options Price Term Value (000s)
6,890,089
Outstanding beginning of period
Granted
1,329,500
Exercised (20,000)
Forfeited/Expired (1,284,054)
Outstanding end of period
6,915,535
Options vested or expected to
vest at end of period
Exercisable at July 3, 2011
6,576,081
5,044,561
$6.50
$1.86
$2.44
$4.00
$6.08
4.2 years $1,827
$6.29
$7.47 2.6 years $
3.9 years
$1,409
74
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 2011 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 July 3, 2011. 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 July 3, 2011, June 27, 2010 and June 28, 2009 was $0.0
million, $0.0 million, and $0.0 million, respectively.
The following table summarizes information about stock options outstanding at July 3, 2011:
Options Outstanding Options Exercisable
Weighted- Weighted- Weighted-
Average Average Average
Options Remaining Exercise Options Exercise
Exercise Price Outstanding Contractual Life Price Exercisable Price
1.69 - 2.87
$
$
3.11 - 6.42
$ 6.52 - 8.40
$ 8.45 - 12.87
$ 13.05 - 15.77
1,467,500
2,465,217
1,420,980
1,539,038
22,800
6,915,535
9.2 years
3.4 years
3.2 years
1.5 years
0.7 years
4.2 years
$ 1.92
$ 4.70
$ 6.81
$11.46
$14.13
$ 6.08
90,000
1,997,243
1,418,980
1,515,538
22,800
5,044,561
$ 2.57
$ 5.03
$ 6.81
$11.49
$14.13
$ 7.47
As of July 3, 2011, the total future compensation cost
related to nonvested options not yet recognized in the
statement of operations was $1.8 million and the
weighted average period over which these awards are
expected to be recognized was 5.0 years.
The Company grants shares of Common Stock to its
employees that are subject to restrictions on transfer and
risk of forfeiture until fulfillment of applicable service
conditions and, in certain cases, holding periods
(Restricted Stock).
The following table summarizes the activity of non-
vested restricted stock during the year ended July 3, 2011:
Weighted
Average
Grant Date
Shares Fair Value
Non-vested – beginning of period 1,661,811 $ 4.35
Granted 2,551,568 $ 1.82
Vested (475,047) $ 4.72
Forfeited (343,071) $ 3.41
Non-vested at July 3, 2011 3,395,261 $ 2.49
The fair value of nonvested shares is determined
based on the closing stock price on the grant date. As of
31
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
July 3, 2011, there was $4.0 million of total unrecognized
compensation cost related to non-vested restricted stock-
based compensation to be recognized over a weighted-
average period of 2.3 years.
Note 13. Profit Sharing Plan
The Company has a 401(k) Profit Sharing Plan
covering substantially all of its eligible employees. All
employees who have attained the age of 21 are eligible
to participate upon completion of one month of service.
Participants may elect to make voluntary contributions to
the 401(k) plan in amounts not exceeding federal guide-
lines. 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
suspended all contributions during fiscal years 2011 and
2010. The Company made contributions of $1.1 million,
during the fiscal year ended June 28, 2009.
The Company also has 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 participa-
tion in the plan. Distributions will be made to participants
upon termination of employment or death in a lump sum,
unless installments are selected. Company contributions
during the years ended July 3, 2011, June 27, 2010 and
June 28, 2009 were less than $0.1 million.
Note 14. 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 consoli-
dated 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).
Note 15. Business Segments
The Company’s management reviews the results
of the Company’s operations by the following three
business categories:
(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. On January 25, 2010,
the Company completed the sale of these businesses;
refer to “Discontinued Operations” below for a further
discussion. Consequently, the Company has classified
the results of operations of its Home & Children’s Gifts
segment, which includes home decor and children’s gift
products from Plow & Hearth®, Wind & Weather®,
HearthSong® and Magic Cabin®, as discontinued
operations for all periods presented.
Category performance is measured based on
contribution margin, which includes only the direct
controllable revenue and operating expenses of the
categories. As such, management’s measure of profitabil-
ity for these categories does not include the effect of
corporate overhead (see (1) below), which are operated
under a centralized management platform, providing
services throughout the organization, nor does it include
depreciation and amortization, goodwill and intangible
impairment, other income, and income taxes, or stock-
based compensation and severance and restructuring
costs, both of which are included within corporate
overhead. Assets and liabilities are reviewed at the
consolidated level by management and not accounted
for by category.
Net Revenues
Years Ended
July 3, June 27, June 28,
2011 2010 2009
(in thousands)
Net revenues (2):
1-800-Flowers.com
Consumer Floral
BloomNet Wire
Service
Gourmet Food &
Gift Baskets
Corporate (1)
Intercompany
$369,198
$366,516
$394,782
73,281
61,883
63,515
247,574
239,942
258,710
1,150
1,071
1,119
eliminations (1,416) (1,702) (4,176)
Total net revenues
$689,787
$667,710
$713,950
32
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Operating Income
Years Ended
July 3, June 27, June 28,
2011 2010 2009
(in thousands)
Category Contribution Margin (2):
1-800-Flowers.com
Consumer Floral
BloomNet Wire
Service
Gourmet Food &
Gift Baskets
Category Contribution
Margin Subtotal
$ 32,669 $ 22,141 $ 38,830
20,195
19,051
18,764
28,833
27,303
24,606
81,697
68,495
82,200
Corporate (1) (47,569) (43,735) (48,284)
Depreciation and
amortization (20,715) (21,378) (21,010)
Note 16. 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. On January 25, 2010,
the Company completed the sale of the assets and
certain related liabilities of its Home & Children’s Gifts
business. The sales price of the assets was $17.0 million,
subject to adjustments for changes in working capital.
(Net proceeds amounted to $10.5 million.) During the
years ended June 27, 2010 and June 28, 2009, the
Company recorded losses related to the sale in the
amounts of $5.3 million and $14.7 million, respectively,
which is in addition to a goodwill and intangible asset
impairment charge of $20.0 million during the year ended
June 28, 2009. 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
Goodwill and intangible
impairment
––
–– (85,438)
July 3, June 27, June 28,
2011 2010 2009
Operating income (loss) $ 13,413
$ 3,382 $ (72,532)
(in thousands, except per share data)
(1) 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.
(2) Certain balances in the prior fiscal years have been
reclassified to conform to the presentation in the current fiscal
year. During the second quarter of fiscal 2010, the Company
launched its 1-800-Baskets brand. Products within this business
are now being managed within the Gourmet Food & Gift Baskets
segment, resulting in a change to our reportable segment
structure. Gift basket products, formerly included in the
Consumer Floral reportable segment are now included in
the Gourmet Food & Gift Baskets segment. These changes
have been reflected in the Company’s segment reporting for
all periods presented.
Net revenues from
discontinued
operations $ –– $87,852 $ 143,786
Operating loss
from discontinued
operations (1) (2)
(including losses on
disposal of $5.2 million and
$14.7 million during the
years ended June 27, 2010
and June 28, 2009, respectively,
and impairment charges of
$20.0 million during the year
ended June 27, 2009) $ –– $ (1,723) $ (39,754)
Income tax expense
(benefit) from
discontinued
operations $ –– $ 410 $ (7,838)
Loss from
discontinued
operations $ –– $ (2,133) $ (31,916)
(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 14. Restructuring.
(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
33
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 losses on disposal of $14.7 million and $5.2 million
to write-down the assets of the discontinued business to
management’s estimate of their fair value.
Note 17. 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,
aggregating $6.0 million, are payable in 36 monthly
installments of principal and interest commencing in April
2009. These leases are classified as either capital leases,
operating leases or subleases, as appropriate.
As of July 3, 2011 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)
$1,641
2012
6
2013
2014
––
2015 ––
2016 ––
Thereafter ––
$1,647
Total minimum lease payments
159
Less amounts representing interest
$1,488
$12,724
11,710
10,624
7,391
6,863
19,174
$68,486
34
At July 3, 2011, the aggregate future sublease rental
income under long-term operating sub-leases for land
and buildings and corresponding rental expense under
long-term operating leases were as follows:
Sublease Sublease
Income Expense
(in thousands)
2012
2013
2014
2015
2016
Thereafter
$1,666
1,082
535
265
226
143
$1,666
1,082
535
265
226
143
$3,917 $3,917
Rent expense was approximately $18.4 million,
$18.9 million, and $19.9 million for the years ended July
3, 2011, June 27, 2010 and June 28, 2009, respectively.
Litigation
From time to time, the Company is subject to legal
proceedings and claims arising in the ordinary course of
business.
On December 21, 2007, Plaintiff, Thomas Molnar, on
behalf of himself and a putative class, filed suit against
the Company claiming false advertising, unfair business
practices, and unjust enrichment seeking unspecified
monetary damages. The Company admitted to no
wrongdoing with respect to this matter, but entered into
a settlement agreement with the parties to this matter in
order to avoid protracted litigation. The presiding trial
Judge’s Order Granting Final Approval of the Class Action
Settlement and Entry of Judgment was issued May 17,
2010. The Company has sent out the applicable notices
to the class members, and the Company accrued for the
estimated cost of the settlement of approximately $0.9
million within its general and administrative expenses.
On November 10, 2010, a purported class action
complaint was filed in the United States District Court for
the Eastern District of New York naming the Company
(along with Trilegiant Corporation, Inc., Affinion, Inc. and
Chase Bank USA, N.A.) as defendants in an action
purporting to assert claims against the Company alleging
violations arising under the Connecticut Unfair Trade
Practices Act among other statutes, and for breach of
contract and unjust enrichment in connection with certain
post-transaction marketing practices in which certain of
the Company’s subsidiaries previously engaged in with
certain third-party vendors. Plaintiffs seek to have this
case certified as a class action and seek restitution and
other damages, all in an amount in excess of $5 million.
The Company intends to defend this action vigorously.
In 2009, the United States Senate Committee on
Commerce, Science and Transportation commenced an
investigation of post-transaction marketing practices and
the Company was one of many involved in that investiga-
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
tion. The Company fully complied with all requests from
the committee. In addition, the Company received a civil
investigative demand from the Attorney General of the
State of New York regarding the same activities. The
Company fully complied with that investigation, supplied
the information sought and voluntarily entered into an
Assurance of Discontinuance with the Attorney General’s
Office in December 2010. As part of the resolution of that
matter, the Company paid the sum of $325,000 to a fund
to be used for consumer education, consumer redress
and costs and fees of the investigation.
There are no assurances that additional legal actions
will not be instituted in connection with the Company’s
former post-transaction marketing practices involving
third party vendors nor can we predict the outcome of
any such legal action.
Note 18. Subsequent Events
Acquisition of Flowerama
On August 1, 2011, the Company completed the
acquisition of Flowerama of America, Inc. (Flowerama),
a franchisor and operator of retail flower shops under
the Flowerama trademark for cash consideration of
approximately $5.0 million. Revenues for the most
recently completed fiscal year associated with the
acquired business were approximately $4.0 million.
Disposition of the Winetasting Network Fulfillment
Operations
On September 6, 2011, the Company completed the
sale of certain assets of its WinetastingNetwork wine
fulfillment services business. The sale price consisted of
$12.0 million of cash proceeds at closing, with the
potential for an additional $1.5 million upon achieving
specified revenue targets during the two year period
following the closing date. Revenues for the most recently
completed fiscal year associated with the discontinued
business were approximately $18.2 million.
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 July 3, 2011 and
June 27, 2010, and the related consolidated statements
of operations, stockholders’ equity, and cash flows for
each of the three years in the period ended July 3, 2011.
These financial statements are the responsibility of
the Company’s management. Our responsibility is
to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable 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
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis
for our opinion.
and Subsidiaries at July 3, 2011 and June 27, 2010,
and the consolidated results of their operations and
their cash flows for each of the three years in the period
ended July 3, 2011, in conformity with U.S. generally
accepted accounting principles.
As discussed in Note 4 to the consolidated financial
statements, the Company adopted the guidance issued
in Financial Accounting Standards Board (“FASB”)
Statement No. 141(R), “Business Combinations”
(codified in FASB Accounting Standards Codification
Topic 805, “Business Combinations”) on June 29, 2009.
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 July 3, 2011, 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 16, 2011 expressed an
unqualified opinion thereon.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the consoli-
dated financial position of 1-800-FLOWERS.COM, Inc.
Jericho, New York
September 16, 2011
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
transactions and dispositions of the assets of the
Company;
(cid:127) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of
financial statements in accordance with generally
accepted 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
July 3, 2011. In making this assessment, management
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 concluded
that, as of July 3, 2011 the Company’s internal control
over financial reporting is effective.
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 July 3, 2011; their report
is included below.
James F. McCann
Chief Executive Officer
Chairman of the Board of Directors
(Principal Executive Officer)
William E. Shea
Senior Vice President,
Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended July 3,
2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
36
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
1-800-FLOWERS.COM, Inc. and Subsidiaries
We have audited 1-800-FLOWERS.COM, Inc. and
Subsidiaries’ (the “Company”) internal control over
financial reporting as of July 3, 2011, 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
respects. Our audit included obtaining an understanding
of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluat-
ing the design and operating effectiveness of internal
control based on the assessed risk, and performing such
other procedures as we considered necessary in the
circumstances. 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.
In our opinion, 1-800-FLOWERS.COM, Inc. and
Subsidiaries maintained, in all material respects, effective
internal control over financial reporting as of July 3, 2011,
based on the COSO criteria.
We also have 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 July 3,
2011 and June 27, 2010, and the related consolidated
statements of operations, stockholders’ equity, and cash
flows for each of the three years in the period ended July
3, 2011 and our report dated September 16, 2011
expressed an unqualified opinion thereon.
Jericho, New York
September 16, 2011
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 July 3, 2011 and June 27, 2010.
High Low
Year ended July 3, 2011
June 28, 2010 – September 26, 2010
$ 2.56
September 27, 2010 – December 26, 2010 $ 2.75
$ 3.22
December 27, 2010 – March 27, 2011
$ 3.84
March 28, 2011 – July 3, 2011
Year ended June 27, 2010
June 29, 2009 – September 27, 2009
$ 3.52
September 28, 2009 – December 27, 2009 $ 4.88
$ 2.75
December 28, 2009 – March 28, 2010
$ 3.66
March 29, 2010 – June 27, 2010
$ 1.52
$ 1.67
$ 2.18
$ 2.26
$ 1.73
$ 2.05
$ 1.78
$ 2.17
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
there is a significantly larger number of beneficial
owners. As of September 1, 2011, there were approxi-
mately 14 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
36,868,450 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 1, 2011, 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 to 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 July 3, 2011, $11.8 million
remains authorized but unused.
As of September 1, 2011, there were approximately
302 stockholders of record of the Company’s Class A
common stock, although the Company believes that
Under this program, as of July 3, 2011, the Com-
pany had repurchased 2,569,713, shares of common
stock for $14.5 million, of which $0.5 million (168,207
38
Market for Common Equity and Related Stockholder Matters (continued)
shares), $0.9 million (342,821 shares) and $0.8 million (397,899 shares) were repurchased during the fiscal years
ending July 3, 2011, June 27, 2010 and June, 28, 2009, respectively.
The following table sets forth, for the months indicated, the Company’s purchase of common stock during the
fiscal year ended July 3, 2011, which includes the period June 28, 2010 through July 3, 2011:
Total Number of Dollar Value of
Shares Purchased as Shares that May Yet
Part of Publicly Be Purchased Under
Total Number of Average Price Announced Plans or the Plans or
Period Shares Purchased Paid Per Share Programs Programs
(in thousands, except average price paid per share)
6/28/10 - 7/25/10
7/26/10 - 8/22/10
8/23/10 - 9/26/10
9/27/10 - 10/24/10
10/25/10 - 11/21/10
11/22/10 - 12/26/10
12/27/10 - 1/23/11
1/24/11 - 2/20/11
2/21/11 - 3/27/11
03/28/11 - 04/24/11
04/25/11 - 05/22/11
05/23/11 - 07/3/11
Total
––
7.7
1.7
19.0
26.9
––
––
0.8
––
––
112.1
––
168.2
$ ––
$1.69
$2.35
$1.76
$1.78
$ ––
$ ––
$2.74
$ ––
$ ––
$3.15
$ ––
––
7.7
1.7
19.0
26.9
––
––
0.8
––
––
112.1
––
$2.70 168.2
$12,278
$12,265
$12,261
$12,228
$12,180
$12,180
$12,180
$12,178
$12,178
$12,178
$11,825
$11,825
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 6/30/06 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
Corporate Officers
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
One Jericho Plaza
Suite 105
Jericho, New York 11753
(516) 336-0100
SEC COUNSEL
Cahill Gordon & Reindel LLP
80 Pine Street
New York, NY 10005
(212) 701-3000
SHAREHOLDER INQUIRIES
Copies of the Company’s reports on Forms
10-K and 10-Q as filed with the Securities
and Exchange Commission and additional
information about 1-800-FLOWERS.COM
may be obtained by visiting the Investor
Relations section at www.1800flowers.com,
by calling 516-237-6113,
or by writing to:
Investor Relations
1-800-FLOWERS.COM, Inc.
One Old Country Road, Suite 500
Carle Place, NY 11514
One Old Country Road, Suite 500, Carle Place, NY 11514
(516) 237-6000 • www.1800flowers.com