2012 Annual Report
Delivering Smiles
P o s i t i v e T r e n d 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. 1-800-FLOWERS.COM’s
Mobile Flower & Gift Center was named winner of the Mobile Shopping Summit’s “Best Mobile Site of 2011.”
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. 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); incredible, carved fresh fruit arrangements from FruitBouquets.comsm
(www.fruitbouquets.com); wine gifts from Winetasting.com® (www.winetasting.com); top quality steaks and
chops from Stock Yards® (www.stockyards.com); as well as premium branded customizable invitations and
personal stationery from FineStationery.com® (www.finestationery.com). The Company’s Celebrations® brand
(www.celebrations.com) is a premier online destination for fabulous party ideas and planning tips.
1-800-FLOWERS.COM, Inc. is involved in a broad range of corporate social responsibility initiatives including
continuous expansion and enhancement of its environmentally-friendly “green” programs 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.
“Imagine The Smiles”
Throughout fiscal 2012 we expanded our industry leading position in Social and Mobile with innovative customer
engagement programs on Facebook, Twitter, Google+, Pinterest and with thousands of influential bloggers. These
programs enhanced the relevance of our brand messaging by reaching customers via their preferred modes of com-
munication – at the right time and with the right products to help them deliver smiles. Building on this concept, we
kicked off fiscal 2013 by launching our “Summer of A Million Smiles” campaign
– a community-based outreach program involving associates across all of our
brands, as well as our BloomNet Florists, participating in volunteer efforts in
their local neighborhoods and then sharing their smile stories with our custom-
ers via our growing social networks. The Summer of A Million Smiles program
illustrates our holistic approach to integrating Social and Mobile communica-
tions into all facets of our customer engagement. And, we’re happy to report,
we have significantly exceeded our goal of delivering one million smiles and
are looking forward to expanding our Imagine The Smiles initiative to deliver
many millions more in the years to come.
Years Ended
Financial Highlights
(From Continuing Operations(1))
Total Net Revenues
Gross Profit Margin
Operating Expense Ratio
EBITDA
Adjusted EBITDA, excluding stock based compensation
EPS
JULY 1,
2012
JULY 3, JUNE 27, JUNE 28, JUNE 29,
2011
2010
2009
2008
(in millions, except percentages and per share data)
$725.8
42.7%
36.9%
$ 58.5
$ 62.1
$ 0.36
$653.4 $ 703.5
39.6%
40.2%
38.9%(2) 37.1%(2)
($ 56.4)
$ 25.0
$ 43.8(3) $ 37.3 $ 32.7(3) $ 38.8(3)
($ 1.01)
$716.3
41.0%
38.3%
$ 42.8
$671.6
41.2%
39.2%
$ 33.4
$ 0.08 ($ 0.02)
$ 0.20
(1) On September 6, 2011, the Company, through the Winetasting Network subsidiary, completed the sale of certain assets of its wine fulfillment services busi-
ness. 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 this business.
Consequently, the Company has classified the results of operations of its Home & Children’s Gifts segment and its wine fulfillment services business as discontinued
operations for all periods presented. Refer to Note 16. Discontinued Operations, of the enclosed Financial Report Insert for further discussion.
(2) The Company’s fiscal 2010 and 2009 operating expenses include a number of non-recurring items which impact comparability. These items were excluded from
the calculation of the operating expense ratio in the table above and throughout the enclosed Financial Highlights.
(3) Fiscal 2012, 2010 and 2009 EBITDA is adjusted for non-recurring charges which impact comparability. Refer to the Company’s Annual Report on Form 10-K for a
reconciliation of net income (loss) from continuing operations to EBITDA, EBITDA excluding stock-based compensation and Adjusted EBITDA excluding stock-based
compensation. These items were excluded from the calculation of Adjusted EBITDA excluding stock-based compensation in the table above and throughout the
enclosed Financial Highlights.
Total Revenues
(From Continuing Operations(1))
(In Millions)
2012 % Revenues
by category
by Season
$725.8
$703.5
$716.3
$653.4
$671.6
12%
33%
55%
25%
25%
17%
33%
$62.1
$38.8
$37.3
$32.7
FY08
FY09
FY10
FY11
FY12
EBITDA(3)
Financial Report Insert
See inside rear cover pocket
$43.8
BloomNet® Wire Service
Jul-Sep (Fiscal 1st Quarter)
1800Flowers.com® Consumer Floral
Oct-Dec (Fiscal 2nd Quarter)
Gourmet Food & Gift Baskets
Jan-Mar (Fiscal 3rd Quarter)
Apr-Jun (Fiscal 4th Quarter)
Fiscal 2012 Achievements
• Grew revenues in all three business segments with total revenues up
6.6 percent to $716.3 million.
• Continued positive trends for Consumer Floral segment, including
7.9 percent revenue growth and double-digit growth in both gross
profit margin and contribution margin.
• Grew consolidated EBITDA (excluding stock-based compensation)
by $10.3 million, or 27.6 percent, to $47.6* million (adjusted EBITDA,
excluding stock-based compensation, was $43.8 million).
• Grew EPS 150 percent to $0.20* per share.
• Grew Free Cash Flow 65.9 percent, or $9.0 million, to $22.9* million.
(*EBITDA, EPS and Free Cash Flow for fiscal 2012 included a pre-tax gain of $3.8 million from
the sale of 17 Fannie May retail stores to a new franchisee during the year.)
To Our Shareholders
Fiscal 2012 was another very good year for our company. The strong top
and bottom line results we achieved, coming on top of fiscal 2011’s strong
results, reflect the positive trends in all three of our business segments that we
have been seeing for several years now.
These positive trends, including solid revenue growth, reflecting increases
in both average order value and unit sales, as well as enhanced operating
expense ratio and strong second-half improvement in gross profit margin,
enabled us to again deliver double digit EBITDA and EPS growth for the year.
We achieved these results by continuing
to focus on managing those aspects
of our business that we can control,
including our focus on:
n Growing order volumes with efficient
marketing spending across traditional
channels as well as the increasingly
important areas of Social and
Mobile where we have built a
leadership role through our early
investments and initiatives;
n Growing average order value
through product development
efforts focused on truly original
products that resonate with
our customers;
n Growing gross margins in
our Consumer Floral business
through a combination of
marketing messages that tell our
customers to “Wow” their recipients
and “Never Settle For Less,” along with disciplined
promotional activities and enhanced operational efficiencies, and
n Reducing our operating expense ratio by leveraging our operating
platform throughout the enterprise.
Strong Financial and customer Results
Total consolidated revenues grew 7.6 percent to $716.3 million in fiscal
2012 on a comparable, non-GAAP basis (excluding the 53rd week in fiscal
2011, compared with 52 weeks in fiscal 2012). Gross Profit Margin, which was
41.0 percent for the year, compared with 41.2 percent in the prior year, in-
creased 100 basis points during the second half of the fiscal year – a positive
trend that we expect to build on in fiscal 2013. And operating expense ratio
improved 90 basis points to 38.3 percent.
In addition to significant increases in EBITDA and EPS for fiscal 2012,
we also grew Free Cash Flow 65.9 percent, or $9.0 million, to $22.9 million.
Along with strong financial results, during fiscal 2012 we also achieved
a number of important strategic objectives:
investment in iFlorist in the UK, we are excited about the opportunities
we see internationally as our customers become increasingly global;
n We continued to evolve our 1-800-Baskets business where we see cus-
tomers increasingly embracing our expanded product offering for their
everyday gifting needs – and – where we’ve launched a new baskets
program for our BloomNet professional florists, enhancing their
same-day gifting offering;
n We made changes in man-
agement and our sourcing
and sales processes within our
wholesale baskets operations,
resulting in our outlook for a
return to positive growth in
sales and contribution margin
in fiscal 2013, and
n We continued to make
investments in our multi-
branded portal and our
industry leading Social and
Mobile programs to further
enhance customer
engagement and customer
experience.
consumer Floral:
Extending market Leadership
During fiscal 2012, we extended
our market leadership in our core
Consumer Floral business. For the year,
we grew revenues nearly eight percent, or $29
million to roughly $400 million. Gross margin and average order value in this
category increased again, with gross margin up 90 basis points on top of fis-
cal 2011’s significant gains and average order value up five percent to $71.00
for the year. These results illustrate the effectiveness of our marketing and
merchandising programs focused on engaging directly with our customers
to deepen our relationships and help them deliver smiles.
In Merchandising, our focus on new product development – working
directly with BloomNet professional florists in our Design Counsel – has
resulted in several hit products, including:
s Our expanded line of “A-Dog-Able” floral baskets – the irresistible floral
puppies that have grown into a tremendous hit with our customers,
s Our “new and improved” Happy Hour collection of handdesigned floral
cocktails that are perfect for toasting any celebration,
s Our new, exclusive Vase Expressions line of uniquely customizable
vases, including easy-to-use photo and graphics uploading capabilities
for truly personalized gifting, and
n We executed a 62-store deal with a leading national franchise operator for
our Fannie May Fine Chocolates business, significantly accelerating our
efforts to expand this iconic brand nationally;
s Our “store-within-a-store” collections featuring exclusive “artisanal”
offerings of orchids, sunflowers, roses and even one-of-a-kind bonsai
plants for the true gifting connoisseur.
n We expanded our floral franchising initiative where we continue to hear
from BloomNet florists who would like to elevate their relationship with
us by becoming 1-800-flowers franchisees;
n We sold a non-strategic asset in our winery services business,
providing $12 million in cash;
n We launched our FruitBouquets.com business – a new line of beautifully
hand-crafted, fresh fruit arrangements – that we believe represents a
significant growth opportunity for us and for our franchisees;
n We continued to plant seeds for international growth with an equity
investment in Flores Online in Brazil. Combined with our ongoing
Our mantra: Delivering Smiles
In Marketing, we continue to focus on deepening our relationships
with our customers through our messaging that emphasizes our “Deliver-
ing Smiles” mantra, as well as our floral heritage. Throughout the year we
expanded our industry leading position in Social and Mobile with innovative
customer engagement programs on Facebook, Twitter, Google+, Pinterest
and with thousands of influential bloggers. These programs enhanced the
relevance of our brand messaging by reaching customers via their preferred
modes of communication, at the right time and with the right products to
help them deliver smiles.
BloomNet Growing its market Position
Also within Floral, our BloomNet wire service achieved double-digit top
and bottom-line growth for fiscal 2012, representing a second consecutive
year of strong results. BloomNet has become the growth and innovation
leader in the wire service business by providing florists with exciting,
incremental sales opportunities, such as:
s our new Fruit Bouquets line,
s our same-day gift baskets program,
s our exclusive Essentials line of vases and glassware,
s our Floriology magazine, and
s our print and unique digital directories, with enhanced search and
advertising capabilities.
In addition, BloomNet offers industry-accredited educational and “com-
munity building” programs through our training center in Jacksonville,
Florida and in seminars across the country. These programs are designed to
help florists increase their customer traffic and enhance their profitability.
As a result of these efforts, BloomNet is growing its market position as it
deepens its relationships with professional florists throughout the country.
Ecommerce Leads the Way for Gourmet Food and Gift Baskets
During fiscal 2012, our Gourmet Food and Gift Baskets segment achieved
increased total revenues reflecting strong ecommerce growth in our Cheryl’s,
1-800-Baskets.com and The Popcorn Factory brands as well as wholesale
channel growth for our Fannie May Fine Chocolates business. This growth
more than offset the loss of revenues associated with the sale of 17 Fannie
May retail stores during the second quarter of the year.
The strategic sale of the stores was part of a 62-store franchise deal with a
leading national franchise operator that includes an additional 45 new stores
to be opened over three years. This deal significantly accelerated our Fannie
May franchising program and, in addition to other franchise agreements
already signed or in development, will provide multiple benefits to the iconic
Fannie May brand including enhanced growth opportunities across our
ecommerce, retail and wholesale channels.
The positive growth in this segment was achieved despite continued
headwinds associated with our wholesale baskets business during the
year. Both revenues and profitability were impacted again in fiscal 2012 by
reduced order volumes. Fortunately, for fiscal 2013, we will see a rebound
in this business in terms of revenue and contribution growth based on
increased orders received from key accounts.
Also in this category, during the first quarter of the year we completed the
sale of our winery services business – a non-strategic asset – receiving $12
million in cash and recording an after-tax gain of $4.5 million. This enabled
us to further strengthen our balance sheet and to focus on growing our
direct-to-consumer wine business under the Winetasting.com and Napa
Connection brands.
multi-channel/ multi-Brand Retail Strategy
We have a multi-channel business model that emphasizes ecommerce
while including wholesale and a local retail presence, both company-owned
and increasingly through franchising, as illustrated by our Fannie May
franchise store deal.
During fiscal 2012, we continued the evolution of our ecommerce
platform and expanded our cross-brand marketing and merchandising
capabilities via the launch of our multi-brand website, adding tabs for
Fannie May, Cheryl’s and The Popcorn Factory brands. This effort builds
on the success of our 1-800-Baskets.com brand by further leveraging the
significant web traffic and multi-million customer base of our core
1-800-FLOWERS.COM brand. Results from this initiative, while still early,
have been very encouraging in terms of increased cross-brand awareness
and positive trends in customer traffic and conversion rates for our
Gourmet Food gift brands.
On the Social front, we were very pleased to be cited in media reports
throughout the year as a leader in the use of social channels to enhance
engagement and deepen our customer relationships. We believe our
initiatives with Facebook, Google+, Twitter, Pinterest and other leaders
in the Social space, illustrate the strength of the 1-800-FLOWERS.COM
brand – and our family of great Gourmet Food gift brands – as well as
our relevance as a leading gift destination for the many millions of users
of these services.
On the Mobile front, during fiscal 2012, we continued to build on
the leadership position the 1-800-FLOWERS.COM brand has in Mobile
Commerce, adding new features and functionality to our award winning
mobile commerce site. We are using our experience in this area to expand
our mobile footprint, rolling out enhanced mobile sites for our Gourmet
Food and Gift Basket brands in fiscal 2013.
Solid Balance Sheet and Growing cash
Continuing our focus on further strengthening our balance sheet, we
finished fiscal 2012 virtually net-debt free with a year-end cash and invest-
ments position of $28.9 million, up from $21.4 million at the end of fiscal
2011, no borrowings under our revolving credit line and long-term debt
of approximately $29.3 million. During fiscal 2013, we expect to further
reduce our term debt by an additional $16 million through regularly
scheduled quarterly payments while growing our cash position.
Regarding Guidance
For fiscal 2013, we anticipate achieving revenue growth across all three
of our business segments resulting in consolidated revenue growth for the
year in the mid-single-digit range. In addition, we expect to achieve con-
tinued improvements in gross profit margin and operating leverage during
the year. As a result, we anticipate growing EBITDA and EPS on a compara-
tive basis (adjusted for the gain from the sale of 17 Fannie May stores) at a
double-digit pace in fiscal 2013. In terms of Free Cash Flow, we expect to
again exceed $20 million for the year.
Looking Ahead: Building on Positive Trends
As we enter fiscal 2013, we feel good about:
s the positive trends we are seeing across all three of our business
segments in terms of revenue growth, enhanced gross margins and
increasing contributions;
s our financial strength, including our balance sheet with essentially
zero net debt and an outlook for growing cash flows, which positions
us well to invest strategically for future growth;
s and the deepening relationships we have with our customers based
on our unique ability to help them deliver smiles.
We believe the positive trends and the initiatives we’ve described to
you across all of our brands and businesses will enable us to build value for
all of our stakeholders in fiscal 2013 and beyond. We thank you for your
continued support.
Jim McCann
Chairman and CEO
Chris McCann
President
2013
January
Continuing its focus on providing
customers with truly original new
products, 1-800-FLOWERS.COM®
has introduced Fannie May® Berries,
incredibly huge, fresh strawberries
dipped in REAL Fannie May fine
chocolate. Building on the iconic
stature of a brand consumers have
enjoyed since 1920, these indulgent
treats offer several flavor combina-
tions, including such Fannie May
favorites as Trinidad® White Chocolate
and Pixies® Milk Chocolate Caramel
and Nuts as well as soon to be favor-
ites: Sea Salt Milk Chocolate Caramel,
Pink & White Champagne and
Toasted Coconut. During fiscal 2013,
Fannie May Berries will be featured
across all 1-800-FLOWERS.COM brand
websites and marketing materials
to maximize customer awareness of
these great new gift treats.
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In fiscal 2012, BloomNet® enhanced its
position as the floral industry’s leading
wire service innovator. Thousands of
local, professional florists around the
country look to BloomNet for diverse
services, trend-forward products and
cutting edge technology. During the
past year, BloomNet continued to
deepen its relationships with profes-
sional florists, broadening incremental
sales opportunities for florists by
offering such new innovations as Fruit
Bouquets along with a same-day gift
baskets program and an expanded
line of exclusive “Essentials” vases and
glassware. Adding to the business
advantages for florists is the stringent
BloomNet Quality Care Program
that strives to assure total customer
satisfaction on all floral wire orders –
helping to drive repeat sales.
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1-800-FLOWERS.COM® is committed
to providing a superior gift buying
experience for every customer. This
commitment is embodied by the
Company’s 100%, no-questions-asked
“Smile Guarantee” backed by a caring
team of associates obsessed with
service. Only the freshest and most
beautiful flowers as well as the finest
gourmet foods are selected and
same-day delivery is always available.
Customers can also depend day
and night on a uniquely flexible and
responsive service platform that
includes hundreds of home agents
ready to assist with any customer
need, 24x7x365. All of the above is
underscored by the fact that in fiscal
2012, for the third year in a row,
1-800-FLOWERS.COM was rated
number one versus competitors
for customer satisfaction by
STELLAService.
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During fiscal 2012, the BloomNet®
wire service remained dedicated to
reinvigorating the sense of community
that was once a hallmark of the floral
industry. An important component
in this effort is BloomNet’s Floriology®
magazine. Each monthly issue of the
magazine is devoted to providing tech-
niques, tips and suggestions designed
to help florists grow their businesses.
Many articles are submitted by florists
themselves, sharing their successful
product designs and business insights.
Also providing valuable insights to
florists is the industry-accredited
BloomNet Floriology Institute, which
offers a diverse range of educational
courses that can help florists expand
design skills and enhance business
practices. Classes are taught at
BloomNet’s Jacksonville, Florida
Floriology Institute as well as in
seminars held across the nation
where florists get together, share
ideas and inspire each other.
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1-800-FLOWERS.COM® extended mar-
ket leadership in its core Consumer
Floral business during fiscal 2012 by
continuing to embrace its “floristness.”
The Company works directly with
professional BloomNet florists in its
Design Council – and with customer
panels – to develop truly original
products that resonate with gift givers
and “wow” their recipients. Among
these innovative products is the
exclusive new Vase Expressions line
that customers can customize with
personal photos and graphics.
Also introduced in fiscal 2012
was an expanded assortment of
a-DOG-ableTM arrangements featuring
irresistible floral puppies, as well as
new additions to the “Happy Hour
Collection”TM of floral cocktails,
and exclusive store-within-a-store
collections showcasing roses, orchids,
sunflowers and bonsai plants.
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1-800-FLOWERS.COM® increased its
social media initiatives in fiscal 2012
and carried the momentum into fiscal
2013 by launching the “Summer of A
Million Smiles” campaign, engaging
with local communities through volun-
teer efforts and sharing inspirational
stories via various social networks.
The Company also continued its strong
partnership with Facebook and has
leveraged that relationship to be part
of several major Facebook product
launches including the logout ad unit,
the new FBX ad exchange and news-
feed mobile ads. 1-800-FLOWERS.COM
was also recognized for its innovative
performance-based advertising on
Facebook and was selected to be
one of the few launch partners for
Facebook’s maiden foray into ecom-
merce as part of the Facebook Gifts
platform. 1-800-FLOWERS.COM also
amplified its engagement across other
social networks including Twitter,
Google+ and Pinterest. The Company
continues to win critical acclaim from
national publications for its advance-
ments in the social space.
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In fiscal 2012, 1-800-FLOWERS.COM®
expanded its floral franchising reach.
Adding to the Company’s growing
number of franchisees are many
BloomNet® florists who are seeking
to strengthen their sales opportuni-
ties by leveraging merchandising and
advertising capabilities. Franchisees
also benefit from strong national
brand awareness. Complement-
ing the growth of floral franchising,
1-800-FLOWERS.COM accelerated
the expansion of its Fannie May® Fine
Chocolates business during fiscal 2012
by completing a 62-store transaction
with a leading national franchise
operator. As a multi-channel gift
destination, 1-800-FLOWERS.COM
recognizes that franchised stores are a
key element in building brand visibility
across several channels, providing a
great way to connect with the local
community while increasing traffic
to the Company’s ecommerce sites.
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During fiscal 2012, 1-800-FLOWERS.COM®
enhanced its leadership position in
the rapidly growing mobile chan-
nel. The Company rolled out a new
tablet-optimized site for the Android
platform and also remained on the
forefront of next generation mobile
payment technologies. The Company’s
mobile innovations led to its selection
as the exclusive gifting launch partner
for both Google Wallet and Expedite.
1-800-FLOWERS.COM is increasing
its momentum in mobile marketing
with innovative programs such
as achievement rewards for mobile
games and “geo-fencing” to help
drive foot traffic to franchise stores.
The Company continues to grow its
mobile footprint across all its brands.
For example, three new sites have
been introduced to support mobile
commerce for Cheryl’s® baked goods,
The Popcorn Factory® and Fannie
May® Fine Chocolates.
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11
18
25
5
National Friendship
Week Begins
6
12
19
26
13
20
27
WE DNESDAY
THURSDAY
FRIDAY
SATU RDAY
1
8
15
22
29
7
14
21
28
2
9
16
23
30
3
10
17
24
31
2013
September
SUN DAY
mON DAY
TU ESDAY
1
2
Labor Day
3
In fiscal 2012, 1-800-FLOWERS.COM®
launched its multi-branded gifting
portal strategy, building upon the suc-
cessful launch of its 1-800-Baskets.com®
business as a dual-branded website.
The strategy leverages the high web
traffic and multi-million customer
base of the core 1800Flowers.com®
brand. The result is a comprehensive
new gifting portal that significantly
increases cross-brand awareness and
offers customers a broad range of
gift choices for all their celebratory
occasions – all from one convenient
destination. Featured on the new
multi-branded website are tabs
that take customers directly to the
1-800-Baskets.com site as well as to
Fruit Bouquets and iconic food gift
brands including Cheryl’s® baked
goods, Fannie May® Fine Chocolates
and The Popcorn Factory®.
8
Grandparents Day
9
15
16
22
First Day of Fall
23
29
30
10
17
24
WE DNESDAY
THURSDAY
FRIDAY
SATU RDAY
4
Rosh Hashanah Begins
at Sunset
5
6
7
11
Patriot Day
12
13
Yom Kippur Begins at Sunset
14
18
25
19
26
20
27
21
28
2013
October
As part of its good-better-best merchan-
dising strategy, 1-800-FLOWERS.COM®
continued to focus in fiscal 2012 on
creating various price points that
make it easy for customers to choose
the perfect gift for all the important
people in their lives. Building on the
tremendous success of its Cheryl’s®
$5 delivered “smile cookie,” the Com-
pany expanded this concept across
all of its brands – enabling customers
to connect more frequently with a
broader range of friends and family.
Besides being featured on the Cheryl’s
brand site, the extensive Cheryl’s $5
smile cookie offering is highlighted on
the 1-800-FLOWERS.COM Facebook
page where users have embraced
the concept as a thoughtful and
cost-effective way to send a tangible
(and edible!) smile to friends.
6
13
20
27
SUN DAY
mON DAY
TU ESDAY
1
7
8
National Children’s Day
14
Columbus Day (Observed)
15
22
29
21
28
31
WE DNESDAY
THURSDAY
FRIDAY
SATU RDAY
4
11
18
25
2
9
3
10
16
National Bosses Day
17
23
30
24
31
Halloween
5
12
19
Sweetest Day
26
2013
November
SUN DAY
mON DAY
TU ESDAY
The Business Gift Services division
of 1-800-FLOWERS.COM® offers the
widest possible spectrum of corporate
gifting ideas...including fresh flowers,
Fruit Bouquets and gourmet selections
from 1-800-Baskets.com®, Cheryl’s®
baked goods, Fannie May® Fine
Chocolates and Fannie May® Berries
as well as personalized popcorn tins
from The Popcorn Factory® featuring
corporate logos. During fiscal 2012,
the division further enhanced its com-
prehensive relationships with leading
companies nationwide, becoming an
integral part of their corporate com-
munications systems and intranets.
As a result, 1-800-FLOWERS.COM has
become the de-facto source for busi-
ness gifting for millions of corporate
customers – providing gift choices for
a myriad of occasions ranging from
sales forces showing appreciation to
clients, to employee milestones such
as service anniversaries.
3
10
17
24
4
5
Election Day
11
Veterans’ Day
12
18
25
19
26
WE DNESDAY
THURSDAY
FRIDAY
SATU RDAY
1
8
15
22
6
13
20
7
14
21
27
Hanukkah Begins at Sunset
28
Thanksgiving Day
29
2
9
16
23
30
2013
December
SUN DAY
mON DAY
TU ESDAY
Setting apart the 1-800-FLOWERS.COM®
gift offering in the gourmet category
is its distinct ability to combine food
items to satisfy a vast variety of
customer tastes and desires. For
instance, the Company offers exclusive
gift bundles including premium aged
steaks from its Stock Yards brand
paired with fine wines and tempting
desserts from Fannie May® as well as
Cheryl’s® baked goods. Customers also
receive suggestions about which wines
and desserts best complement their
steak selections, making it easy to
place orders. And customers can fin-
ish off their gourmet gift dinner with
decadent Fannie May Berries featuring
tremendous, fresh strawberries dipped
in REAL Fannie May Fine Chocolate.
1
8
15
22
29
2
9
16
23
30
31
3
10
17
24
31
WE DNESDAY
THURSDAY
FRIDAY
SATU RDAY
4
11
18
5
12
19
6
13
20
7
14
21
First Day of Winter
25
Christmas Day
26
First Day of Kwanzaa
27
28
Board of Directors
corporate Officers
James F. McCann
Chairman and Chief Executive Officer
1-800-FLOWERS.COM
Christopher G. McCann
President and President Floral Group
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,
General Counsel and
Corporate Secretary
1-800-FLOWERS.COM
Stephen Bozzo
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
Geralyn R. Breig
Former President
Avon North America
James A. Cannavino
IBM Company
Senior Vice President
Retired
Eugene F. DeMark
Area Managing Partner
KPMG LLP, Retired
BankUnited Director
Leonard J. Elmore
Network Television
Sports Analyst
Attorney at Law
John J. Conefry
Vice Chairman
Astoria Financial Corporation
Lawrence V. Calcano
Chief Executive Officer
i1 Biometrics, Inc.
Chairman, Bite Tech
Larry Zarin
Senior Vice President,
Chief Marketing Officer
Express Scripts, Inc.
Fiscal Year 2012
Financial Report
Selected Financial Data
1-800-FLOWERS.COM, Inc. and Subsidiaries
The selected consolidated statement of operations data for the years ended July 1, 2012, July 3, 2011 and
June 27, 2010 and the consolidated balance sheet data as of July 1, 2012 and July 3, 2011, 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 28, 2009 and June 29, 2008,
and the selected consolidated balance sheet data as of June 27, 2010, June 28, 2009, and June 29, 2008, 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 Flowerama in August 2011, selected assets of Fine Stationery, Inc. in May 2011 and
Mrs. Beasley’s Bakery LLC in March 2011. The following financial data reflects the results of operations of these
subsidiaries since their respective dates of acquisition. On September 6, 2011, the Company, through the Winetasting
Network subsidiary, completed the sale of certain assets of its non-strategic wine fulfillment services business in
order to focus on its core Direct-to-Consumer wine business. 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, and on January 25, 2010, completed
the sale of this business. Consequently, the Company has classified the results of operations of its Home & Children’s
Gifts segment and its wine fulfillment services business, which had previously been included within its Gourmet
Foods & Gift Baskets category, 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 1, July 3, June 27, June 28, June 29,
2012 2011 2010 2009(1) 2008
(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
Gain on sale of stores
Operating income (loss)
Interest expenses, net
Income (loss) from continuing operations
before income taxes
Income tax expense (benefit) from
$515,205
201,052
716,257
422,298
293,959
182,512
20,479
51,972
19,576
––
274,539
3,789
23,209
(2,312)
$485,378
186,227
671,605
395,161
276,444
173,531
20,168
49,360
20,271
––
263,330
––
13,114
(4,077)
$469,968
183,402
653,370
390,623
262,747
171,231
17,666
48,866
20,287
––
258,050
––
4,697
(5,752)
$498,519
205,004
703,523
425,074
278,449
174,525
20,655
48,690
19,748
90,940
354,558
––
(76,109)
(9,296)
20,897
9,037
(1,055)
(85,405)
continuing operations
Income (loss) from continuing operations
Income (loss) from discontinued operations,
7,771
13,126
net of tax
4,520
Net income (loss) $ 17,646
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
$ 0.20
$ 0.07
$ 0.27
$ 0.20
$ 0.07
$ 0.27
3,517
5,520
202
$ 5,722
$ 0.09
$ 0.00
$ 0.09
$ 0.08
$ 0.00
$ 0.09
199
(1,254)
(2,966)
$ (4,220)
$ (0.02)
$ (0.05)
$ (0.07)
$ (0.02)
$ (0.05)
$ (0.07)
(21,318)
(64,087)
(33,480)
$ (97,567)
$ (1.01)
$ (0.53)
$ (1.53)
$ (1.01)
$ (0.53)
$ (1.53)
$584,174
141,604
725,778
416,200
309,578
181,509
19,181
50,369
16,582
––
267,641
––
41,937
(4,164)
37,773
14,103
23,670
(2,616)
$ 21,054
$
0.38
$ (0.04)
$
0.33
$
0.36
$ (0.04)
0.32
$
64,697
66,239
64,001
65,153
63,635
63,635
63,565
63,565
63,074
65,458
2
Selected Financial Data (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
As of
July 1, July 3, June 27, June 28, June 29,
2012 2011(1) 2010(1) 2009(1) 2008
(in thousands)
Consolidated Balance Sheet Data:
Cash and equivalents
and short-term investments
Working capital
Total assets
Long-term liabilities
Total stockholders’ equity
$ 28,854
29,721
268,848
17,080
161,748
$ 21,442
17,303
259,075
32,242
142,511
$ 27,843
22,963
256,936
48,745
133,476
$ 29,562
43,679
286,977
73,945
134,633
$ 12,124
33,416
371,338
63,739
231,465
(1) The Company has revised its previously reported balance sheet data as of June 28, 2009, and for subsequent periods, as
presented herein, and its statement of operations, also presented herein, for the year ended June 28, 2009 in order to correct certain
previously reported amounts. The Company believes the effects of the prior period adjustments are qualitatively and quantitatively not
material to the respective balances adjusted and had no impact on the 2012, 2011 or 2010 statements of operations or cash flows.
The Company has concluded that the amounts, if corrected in fiscal 2012, would have been material to the consolidated financial
statements as of and for the year ended July 1, 2012. These errors primarily related to the accounting for deferred tax liabilities on
non-amortizable intangibles, including goodwill, arising from certain historical acquisitions prior to fiscal 2007. These errors in the
deferred tax accounts subsequently impacted the goodwill impairment charge recorded by the Company in fiscal 2009. The Company
also identified an issue related to the treatment of deferred tax liabilities on basis differences related to fixed assets which were
recorded in error during fiscal years 2009 and prior. The adjustment to correct the error resulted in a decrease to net loss, and
thus, a decrease in the Company’s retained deficit of approximately $0.8 million on the June 28, 2009 Consolidated Statements of
Stockholders’ Equity, with a corresponding adjustment to increase goodwill by approximately $6.6 million and increase deferred tax
liabilities by approximately $5.8 million. Correcting prior year financial statements for these immaterial errors will not require previously
filed reports to be amended and as such the Company has corrected the error by making adjustments to prior comparative financial
information presented herein.
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.
1-800-FLOWERS.COM’s Mobile Flower & Gift Center was
named winner of the Mobile Shopping Summit’s “Best
Mobile Site of 2011.” 1-800-FLOWERS.COM was also
rated number one vs. competitors for customer satisfac-
tion 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. 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);
delicious cut-fruit arrangements from FruitBouquets.com
(www.fruitbuquets.com); wine gifts from Winetasting.com®
(www.winetasting.com); ultra- premium meats from
Stockyards.com (www.stockyards.com); as well as
exquisite, customizable invitations and personal statio-
nery from FineStationery.com (www.finestationery.com).
The Company’s Celebrations® brand
(www.celebrations.com) is a new premier online
destination for fabulous party ideas and planning tips.
1-800-FLOWERS.COM, Inc. is involved in a broad
range of corporate social responsibility initiatives
including continuous expansion and enhancement of
its environmentally-friendly “green” programs as well as
various philanthropic and charitable efforts.
On September 6, 2011, the Company, through the
Winetasting Network subsidiary, completed the sale of
certain assets of its non-strategic wine fulfillment services
business in order to focus on its core Direct-to-Consumer
wine business. 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, and on Janu-
3
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
ary 25, 2010, completed the sale of this business. Conse-
quently, the Company has classified the results of opera-
tions of its Home & Children’s Gifts segment and its wine
fulfillment services business, which had previously been
included within its Gourmet Foods & Gift Baskets category,
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,
the demand for our products, and accordingly our
financial results, compared to pre-recessionary levels,
has been adversely affected by the reduction in con-
sumer spending.
During fiscal 2012 the Company continued to recover
from the effects of the recession which began in fiscal
2009, building on last year’s improved financial perfor-
mance. As a result of cost reductions and productivity
improvements, marketing efficiency and merchandising
innovation, the Company has been able to make signifi-
cant annual improvements in EBITDA compared to the
low point of the recession during fiscal 2010. A key tenet
of the Company’s strategy during this period was to
stabilize the Consumer Floral operations and minimize
business risk during the current recessionary period. In
order to improve earnings during this recessionary
period, the Company took a more conservative view of
the economy, and its expectations of demand, in order
to minimize the risk of investing marketing and operating
spend for revenue growth too early in the economic
recovery cycle. This strategy was designed to protect
earnings growth that was expected to be achieved
through operational improvements and business
resizing programs, including a rationalization of market-
ing spending, but driven by more effective campaigns,
that focused on the Company’s ability to “wow” our
customers with differentiated, non-commoditized higher
value products. While the economic recovery continues
at a slow pace, with the possibility of a “double-dip”
recession looming as a result of continued high
un-employment, energy and commodity prices, the
Company believes that its sales “bottomed-out” in
the first half of fiscal 2011, as it then began to
experience modest year-over-year revenue growth.
Tempered by the continued economic uncertainty,
during fiscal 2013, the Company expects to grow
revenues across all three of its business segments with
consolidated revenue growth for the year anticipated to
be in the mid-single-digit range. Also, based on continued
improvements in gross profit margin and operating
leverage, the Company anticipates achieving double-
digit year-over-year increases in EBITDA and EPS.
4
The Company’s fiscal 2013 guidance is based on the
positive trends—both top and bottom-line—that the
Company has seen over the past two years, balanced by
the continued uncertainty in the global economy. The
Company plans to continue to focus on managing those
aspects of the business where it can drive growth and
enhanced results, including:
• merchandising and marketing initiatives
featuring truly original products that have
helped drive increased average order value
and gross profit margins,
• efforts in manufacturing, sourcing and shipping
that have helped absorb rising commodity and
fuel costs and enhanced operating cost leverage, and
• investments in innovation for the future, including its
industry leading efforts in Social and Mobile arenas,
BloomNet and franchising programs in Consumer
Floral and Fannie May.
The Company believes these efforts, and others
underway, will help continue the positive trends seen in
the business as the Company deepens its relationships
with its customers, helping them deliver smiles, and build
shareholder value.
Category Information
The following table presents the contribution of net
revenues, gross profit and category contribution margin
from each of the Company’s business segments, as well
as consolidated EBITDA and Adjusted EBITDA. As noted
previously, the Company’s wine fulfillment services
business, which had previously been included within its
Gourmet Foods & Gift Baskets category, as well as the
Home & Children’s Gifts category has been classified as
discontinued operations and therefore excluded from
category information below.
Net Revenues from Continuing Operations:
Years Ended
July 1, July 3, June 27,
2012 % Change 2011 % Change 2010
(dollars in thousands)
Net revenues from continuing operations:
Consumer
Floral
BloomNet
Wire Service
Gourmet Food &
Gift Baskets
Corporate(*)
Intercompany
eliminations
$398,184
7.9% $369,199
0.7% $366,516
82,582 12.7% 73,282
18.4%
61,883
236,742 3.2% 229,390
1,150
773 (32.8%)
1.7%
7.4%
225,602
1,071
(2,024) (42.9%)
(1,416) 16.8%
(1,702)
Total net revenues
from continuing
operations
$716,257
6.6% $671,605
2.8% $653,370
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Gross Profit from Continuing Operations:
Years Ended
Discontinued Operations:
Years Ended
July 1, July 3, June 27,
2012 % Change 2011 % Change 2010
July 1, July 3, June 27,
2012 2011 2010
(dollars in thousands)
(dollars in thousands)
Gross profit:
Consumer
Floral
BloomNet
Wire Service
Gourmet Food &
Gift Baskets
Corporate(*)
Intercompany
eliminations
Total gross profit
from continuing
operations
$154,892
38.9%
10.5% $140,163
38.0%
8.5% $129,239
35.3%
38,737
46.9%
99,764
42.1%
566
––
5.0%
0.9%
36,877
50.3%
98,831
43.1%
5.7%
0.9%
(1.3%)
573 (16.1%)
––
34,890
56.4%
97,935
43.4%
683
––
$293,959
6.3% $276,444
5.2% $262,747
41.0%
41.2%
40.2%
Adjusted EBITDA(**) from Continuing Operations:
Years Ended
July 1, July 3, June 27,
2012 % Change 2011 % Change 2010
(dollars in thousands)
Segment Contribution Margin(**):
Consumer
Floral
BloomNet
Wire Service
Gourmet Food &
$ 39,147
19.8% $ 32,669
47.6% $ 22,141
22,339
10.6%
20,195
6.0%
19,051
Gift Baskets(***) 29,789
7.2%
27,776
2.3%
27,145
Segment Contribution
Margin Subtotal 91,275
(48,490)
13.2%
(2.6%)
80,640
(47,255)
18.0%
68,337
(9.0%) (43,353)
Corporate(*)
EBITDA from
continuing
operations
Add: Stock-based
compensation
EBITDA from
42,785
28.2%
33,385
33.6%
24,984
4,850
22.4%
3,961
20.1%
3,883
continuing operations,
excluding stock-based
compensation
47,635
Adjusted for:
Gain on sale
27.6%
37,346
29.4%
28,867
of stores(***)
(3,789) ––
–– ––
–– ––
–– ––
––
898
Litigation
settlement
Termination of
Martha Stewart
marketing
agreement
Termination of post sale
3rd party marketing
agreement
Adjusted EBITDA
–– ––
–– ––
1,931
–– ––
–– ––
1,039
from continuing operations,
excluding stock-based
compensation $ 43,846 17.4% $37,346 14.1% $ 32,735
5
Net revenues
from discontinued
operations $ 2,003
Gross profit
from discontinued
operations
405
EBITDA
from discontinued
operations
(190)
$ 18,184
$102,192
3,641
43,960
743
4,416
(*) Corporate expenses consist of the Company’s enterprise shared service
cost centers, and include, among other items, Information Technology,
Human Resources, Accounting and Finance, Legal, Executive and
Customer Service Center functions, as well as Stock-Based Compensation.
In order to leverage the Company’s infrastructure, these functions are
operated under a centralized management platform, providing support
services throughout the organization. The costs of these functions, other
than those of the Customer Service Center, which are allocated directly to
the above categories based upon usage, are included within corporate
expenses as they are not directly allocable to a specific category.
(**)Performance is measured based on category contribution margin or
category Adjusted EBITDA, reflecting only the direct controllable revenue
and operating expenses of the segment. As such, management’s measure
of profitability for these segments 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.
(***)Gourmet Food & Gift Baskets category contribution margin during the
fiscal year ended July 1, 2012, includes a $3.8 million gain on the sale of
17 Fannie May retail stores, which are currently being operated as
franchised locations.
Due to certain one-time charges, the following
Non-GAAP reconciliation table has been included within
MD&A.
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 1, July 3, June 27,
2012 2011 2010
(in thousands)
Net income (loss)
from continuing
operations
$ 13,126
Add:
Interest
expense, net
Depreciation and
amortization
Income tax
expense
EBITDA from
continuing
operations
Add: Stock-based
compensation
EBITDA from
2,312
19,576
7,771
42,785
4,850
continuing operations,
excluding stock-based
compensation
47,635
Adjusted for:
Gain on sale
of stores(***)
(3,789)
Litigation
settlement
Termination of
––
Martha Stewart
marketing
agreement
––
––
Termination of post sale
3rd party marketing
agreement
Adjusted EBITDA
from continuing
operations,
excluding
stock-based
compensation $ 43,846
$ 5,520
$ (1,254)
4,077
20,271
3,517
33,385
3,961
5,752
20,287
199
24,984
3,883
37,346
28,867
––
––
––
––
––
898
1,931
1,039
$ 37,346
$ 32,735
Results of Operations
The Company’s fiscal year is a 52- or 53-week period
ending on the Sunday nearest to June 30. Fiscal years
2012 and 2010 consisted of 52 weeks which ended on
July 1, 2012 and June 27, 2010, respectively, whereas
fiscal year 2011 consisted of 53 weeks, which ended on
July 3, 2011.
Net Revenues
Years Ended
July 1, July 3, June 27,
2012 % Change 2011 % Change 2010
(dollars in thousands)
Net revenues:
E-Commerce $ 515,205
201,052
Other
$ 716,257
6.1%
8.0%
6.6%
$485,378
186,227
$671,605
3.3% $469,968
1.5%
183,402
2.8% $653,370
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 1, 2012, revenues
increased by 6.6% in comparison to the prior year as a
result of growth across all segments. These improve-
ments were due to growth within the Consumer Floral
category, which increased 7.9% as a result of strong year
over year growth during the Company’s key floral
holidays, including Valentines’ Day, which benefited from
the better date placement which fell on Tuesday in fiscal
2012 compared to Monday in fiscal 2011, and Mother’s
Day, driven by a higher average order value, as well as
contributions from several small acquisitions, including
Fine Stationery in May 2011 and Flowerama in August
2011. Further contributing to the revenue growth were:
(i) an increase in shop-to-shop order volume and
wholesale product sales within the BloomNet Wire
Service category, (ii) higher sales from the Gourmet
Food & Gift Baskets category, including contributions
from Mrs. Beasley’s, which was acquired in March 2011,
and Stockyards.com, whose brandname the Company
licensed in late November 2011, offset in part by the
impact of the 53 rd week in fiscal 2011, and the sale of 17
Fannie May stores which are currently being operated as
franchised locations. Excluding the impact of the acquisi-
tions and new license agreements noted above, net of
the impact of the Fannie May store sales, and adjusting
for the 53 rd week in fiscal 2011, the Company’s rev-
enues increased by 5.2% during the fiscal year ended
July 1, 2012.
During the fiscal year ended July 3, 2011 revenues
increased by 2.8% over the prior year period, as a
result of growth across all categories, including the
Consumer Floral category, reversing the trend after two
years of revenue declines.
E-commerce revenues (combined online and
telephonic) increased by 6.1% and 3.3% during the
years ended July 1, 2012 and July 3, 2011, respectively.
The Company fulfilled approximately 8.3 million,
8.1 million and 8.4 million e-commerce orders during
fiscal 2012, 2011 and 2010, respectively, while increas-
ing the average order value to $62.45 in fiscal 2012
compared to $59.58 in fiscal 2011 and $55.71 in fiscal
2010. Revenue growth was attributed to improved
merchandising programs, including the development of
innovative and original products such as the expanded
line of a-DOG-ables, designed to “wow” our customers’
gift recipients and our “Never Settle For Less” marketing
campaigns, which also enabled the Company to reduce
its promotional activities.
Other revenues, comprised of the Company’s
BloomNet Wire Service category, as well as the
wholesale and retail channels of its Consumer Floral
and Gourmet Food and Gift Baskets categories,
increased by 8.0% and 1.5% during fiscal 2012 and
fiscal 2011, respectively, in comparison to the prior year
periods primarily as a result of the aforementioned
sales growth in the BloomNet Wire Service business,
as well as the contributions from Flowerama, a floral
franchise operation purchased in August 2011.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Additionally, during the second quarter of fiscal 2012,
the Company completed a 62-store franchise agreement
between Fannie May and GB Chocolates. The agreement
includes development rights for 45 new stores to be
opened over the next three years in several mid-west
states as well as specific cities in Florida and Ohio, as
well as the sale of 17 existing Fannie May retail stores
located in areas outside of its core Chicago market.
While the sale of these stores reduced our revenues in
comparison to prior year periods, it provides a platform
for our franchisor to successfully complete its Fannie May
development plan, while providing the Company with
future revenue streams through franchise and area
development fees and product sales.
The Consumer Floral category includes the opera-
tions 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 royalties from its franchise operations, as well as the
operations of Fine Stationery, an e-commerce retailer of
personalized stationery, invitations and announcements.
Net revenues during the fiscal years ended July 1, 2012
and July 3, 2011 increased by 7.9% and 0.7% over the
respective prior year periods, due to a combination of
increased order volumes and a higher average order
value, driven by enhanced marketing and merchandising
programs that encourage our customers to “wow” their gift
recipients and “Never Settle For Less.” Fiscal 2012 also
benefited from the better Tuesday date placement of the
Valentine’s Day holiday, compared to Monday in fiscal
2011, and Sunday in fiscal 2010, as well as the revenue
contributions of several small acquisitions, including Fine
Stationery in May 2011 and Flowerama in August 2011,
offset in part by the impact of the 53 rd week in fiscal 2011.
For the fiscal year ended July 1, 2012, revenue growth for
the Consumer Floral category, excluding the impact of the
above acquisitions and the 53 rd week in fiscal 2011, was
approximately 5.6%.
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 years ended July 1, 2012 and July 3,
2011 increased by 12.7% and 18.4% over the respective
prior years, primarily as a result of increased shop-to-
shop order volume and wholesale product sales. 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 has begun to monetize this
increased order volume through increasing membership,
technology, services and product fees.
The Gourmet Food & Gift Baskets category includes
the operations of 1-800-Baskets, Cheryl’s (which includes
Mrs. Beasley’s), Fannie May Confections, The Popcorn
Factory, Winetasting.com, Stockyards.com and
DesignPac businesses. Revenue is derived from the sale
of gift baskets, cookies, baked gifts, premium chocolates
and confections, gourmet popcorn, wine gifts and prime
steaks and chops through its e-commerce sales channels
(telephonic and online sales) and company-owned and
operated retail stores under the Cheryl’s and Fannie May
brand names, royalties from Fannie May franchise
operations, as well as wholesale operations. Net revenue
during the fiscal year ended July 1, 2012 and July 3,
2011, increased by 3.2% and 1.7%, respectively, in
comparison to the prior years. Growth during the fiscal
year ended July 1, 2012 was primarily due to: (i) e-
commerce growth from 1-800-Baskets.com, Cheryl’s and
The Popcorn Factory brands, (ii) increased wholesale
revenue from the Fannie May brand, and (iii) revenue
contributions from the acquisitions of Mrs. Beasley’s, a
baker and marketer of cakes, muffins and gourmet gift
baskets, acquired in March 2011, and Stockyards.com, a
purveyor of USDA prime and choice meats, poultry and
seafood, whose brandname the Company licensed in
late November 2011. This growth was largely offset by
reduced DesignPac wholesale basket volume during the
December holiday season, and the impact of the conver-
sion of 17 Fannie May retail stores into franchised
operations. During the fiscal year ended July 1, 2012,
revenue growth for the Gourmet Food & Gift Baskets
category, excluding the impact of above acquisitions, the
net effect of the sale of the Fannie May retail stores noted
above, and the impact of the 53 rd week in fiscal 2011,
was approximately 2.5%. Net revenue during the fiscal
year ended July 3, 2011 increased by 1.7% compared to
the prior year period, primarily as a result of e-commerce
sales growth from 1-800-Baskets.com and Cheryl’s
brands, partially offset by reduced wholesale volume
from DesignPac.
For fiscal 2013, the Company expects to grow
revenues across all three of its business segments with
consolidated revenue growth for the year anticipated to
be in the mid-single-digit range.
Gross Profit
Years Ended
July 1, July 3, June 27,
2012 % Change 2011 % Change 2010
(dollars in thousands)
Gross profit $293,959
Gross margin % 41.0%
$276,444
41.2%
6.3%
5.2% $262,747
40.2%
Gross profit consists of net revenues less cost of
revenues, which is comprised primarily of florist
fulfillment costs (primarily fees paid directly to florists),
the cost of floral and non-floral merchandise sold from
inventory or through third parties, and associated costs
including inbound and outbound shipping charges.
Additionally, cost of revenues include labor and facility
costs related to direct-to-consumer and wholesale
production operations.
Gross profit increased during the fiscal years ended
July 1, 2012 and July 3, 2011, compared to the respec-
tive prior years, due to the above mentioned revenue
growth across all categories. During fiscal 2012, the
Company’s gross margin percentage decreased 20
basis points, reflecting the impact of product mix and
lower gross margins from the Company’s BloomNet
operations and wholesale baskets business within the
Gourmet Food and Gift Basket category, partially offset
7
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
by improvements within the Consumer Floral segment.
During fiscal 2011, gross margins improved 100 basis
points, resulting from improved merchandising pro-
grams and reduced promotional activities within the
Company’s Consumer Floral segment, which more than
offset fuel and commodity cost increases, and the
margin impact of the third-party marketing program
which was discontinued in December 2009.
The Consumer Floral category gross profit increased
by 10.5% and 8.5% during the fiscal years ended July 1,
2012 and July 3, 2011, respectively, as compared to the
prior year periods, due to the higher revenue, as de-
scribed above, as well as gross margin improvements,
which increased 90 basis points and 270 basis points
over the respectively prior year periods, due to the
aforementioned improvements in merchandising and
marketing programs and reductions in promotional
activity. Additionally, gross profit during fiscal 2012
was favorably impacted by the incremental gross profit
generated by the acquisitions of Fine Stationery and
Flowerama, whereas, the fiscal 2011 improvement
reflects the impact of the termination of the Martha
Stewart marketing agreement during the fourth quarter
of fiscal 2010.
The BloomNet Wire Service category gross profit
increased by 5.0% and 5.7% during the fiscal years
ended July 1, 2012 and July 3, 2011, respectively,
in comparison to the prior years, due to the above
mentioned revenue growth, while the gross margin
percentage decreases reflect product mix, consisting of
increased sales of lower margin wholesale orders and
an increase in the proportion of shop-to-shop order
volume. Although the shop-to-shop orders carry a lower
gross margin percentage, the significant increase in
order volume helps drive revenue and gross margin
dollar growth, while the added orders provide increased
leverage for sales of products and services. BloomNet
expects to continue to monetize this increased order
volume through increased membership, technology,
services and product fees.
The Gourmet Food & Gift Baskets category gross
profit increased by 0.9% during both the fiscal years
ended July 1, 2012 and July 3, 2011, in comparison to
the prior years, due to the above mentioned revenue
increases, while the gross margin percentage decreased
by 100 basis points and 30 basis points, respectively.
The decrease in gross margin percentage during fiscal
2012 was driven primarily by lower gross margins from
the wholesale basket business, as well as the impact of
the sale of the Fannie May stores and increases in
commodity and shipping costs. During fiscal 2011, the
gross margin percentage decrease was a result of a
change in sales mix, as well as increased fuel and
commodity prices.
For fiscal 2013, the Company expects its gross margin
percentage will improve in comparison to fiscal 2012 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 1, July 3, June 27,
2012 % Change 2011 % Change 2010
(dollars in thousands)
Marketing and
sales $182,512 5.2%
$173,531
1.3% $171,231
Percentage of
sales
25.5%
25.8%
26.2%
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 1, 2012, marketing
and sales expense increased by 5.2% compared to
the prior year, as a result of: (i) increased advertising,
primarily related to the 1-800-Flowers.com Consumer
Floral brand during the key floral holidays, which
helped to drive the improving revenue trends,
(ii) increased labor due to several growth initiatives
for franchising, BloomNet and the Mobile and Social
commerce area, and incremental labor associated with
the acquisitions of Mrs. Beasley’s, Fine Stationery and
Flowerama, as well as the operation of the Stockyards
direct-to-consumer business, offset in part by the
franchise conversion of 17 Fannie May retail stores,
and (iii) higher facility costs, due to the aforementioned
acquisitions and licensing arrangement. However, as a
result of the Company’s continued focus on improving
its merchandising programs, refocusing marketing
messages, and enhancing the efficiency of advertising
efforts, marketing and sales expense, as a percentage
of net revenues, decreased from 25.8% in fiscal 2011
to 25.5% in fiscal 2012.
During the fiscal year ended July 3, 2011, marketing
and sales expense increased by 1.3% compared to the
prior year period, as a result of: (i) an increase in
compensation expense, due to performance based
incentive compensation, reflecting the improved
operating results, as well as new initiatives for franchis-
ing and store growth, and (ii) variable costs associated
with the increase in revenue, offset by reductions in
advertising spending. As a result of spending efficien-
cies achieved during the year, marketing and sales
expense, as a percentage of net revenues, decreased
from 26.2% in fiscal 2010 to 25.8% in fiscal 2011.
During the fiscal year ended July 1, 2012, the
Company added approximately 2.0 million new e-
commerce customers, compared to 2.3 million in each
of the fiscal years in 2011 and 2010. Of the 4.6 million
total customers who placed e-commerce orders during
fiscal 2012, approximately 56% were repeat customers,
8
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
compared to 52% in fiscal 2011 and 2010, reflecting the
Company’s effectiveness 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 1, July 3, June 27,
2012 % Change 2011 % Change 2010
(dollars in thousands)
Technology and
development
Percentage of
$ 20,479
1.5% $ 20,168 14.2% $ 17,666
sales
2.9%
3.0%
2.7%
Technology and development expense consists
primarily of payroll and operating expenses of the
Company’s information technology group, costs associ-
ated with its web sites, including hosting, design, content
development and maintenance and support costs related
to the Company’s order entry, customer service, fulfillment
and database systems.
During the fiscal year ended July 1, 2012, technology
and development expense increased by 1.5% over the
prior year, as a result of the incremental costs associated
with the recent acquisitions of Mrs. Beasley’s, Fine
Stationery and Flowerama; however, technology and
development expense as a percentage of net revenue
decreased 10 basis points during fiscal 2012, reflecting
the Company’s ability to leverage its technology platform.
During the fiscal year ended July 3, 2011, technology
and development expense increased by 14.2% over the
prior year, as a result of increased labor costs required
to support and implement new website improvements,
as well as from higher performance based incentive
compensation 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 years ended July 1, 2012, July 3,
2011, and June 27, 2010 the Company expended
$32.8 million, $32.4 million, and $29.1 million,
respectively, on technology and development, of
which $12.3 million, $12.2 million, and $11.4 million,
respectively, has been capitalized.
General and Administrative Expense
Years Ended
July 1, July 3, June 27,
2012 % Change 2011 % Change 2010
(dollars in thousands)
General and
administrative
$ 51,972
5.3% $49,360 1.0% $ 48,866
Percentage of
sales
7.3%
7.3%
7.5%
General and administrative expense consists of
payroll and other expenses in support of the Company’s
executive, finance and accounting, legal, human
resources and other administrative functions, as well as
professional fees and other general corporate expenses.
General and administrative expense increased by
5.3% during the fiscal year ended July 1, 2012, over
the prior year period, due to: (i) incremental costs
associated with the acquisitions of Mrs. Beasley’s,
Fine Stationery and Flowerama, (ii) annual compensa-
tion rate increases, and (iii) an increase in expenses
associated with franchise expansion plans, partially
offset by reductions in bad debt expense.
During the fiscal year ended July 3, 2011, general
and administrative expense increased by 1.0% over
the prior year period, but decreased as a percentage
of net revenues from 7.5% in fiscal 2010 to 7.3% 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.
Depreciation and Amortization
Years Ended
July 1, July 3, June 27,
2012 % Change 2011 % Change 2010
(dollars in thousands)
Depreciation and
amortization
Percentage of
$ 19,576
$20,271 (0.1%)
(3.4%)
$ 20,287
sales
2.7%
3.0%
3.1%
Depreciation and amortization expense decreased
by 3.4% and 0.1% during the fiscal years ended July 1,
2012 and July 3, 2011, respectively, over the prior year
periods, a result of the Company’s efforts over the last
three years to reduce capital expenditures, as the
Company continues to leverage its technology platform.
Gain on Sale of Stores
On November 21, 2011, the Company and GB
Chocolates LLC (GB Chocolates) entered into an
agreement whereby the Company sold 17 existing
Fannie May stores, to be operated as franchised locations
by GB Chocolates, for $5.6 million, recognizing a gain on
the sale of $3.8 million. Upon completion of the sale, the
Company also recognized initial franchise fees associ-
ated with these 17 stores in the amount of $0.5 million.
In conjunction with the sale of stores, the Company and
GB Chocolates entered into an area development
agreement whereby GB Chocolates will open a minimum
of 45 new Fannie May franchise stores by December
2014. The agreement provides exclusive development
rights for several Midwestern states, as well as specific
cities in Florida and Ohio. The terms of the agreement
include a non-refundable area development fee of
$0.9 million, store opening fees of $0.5 million, assuming
successful opening of 45 stores, and a non-performance
promissory note in the amount of $1.2 million, which
becomes due and payable only if GB Chocolates does
not open all 45 stores as set forth in the development
agreement. The Company has deferred the recognition of
the $0.9 million area development fee associated with the
9
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
45 store area development agreement, and will recog-
nize such fees in income on a pro-rata basis, when the
conditions for revenue recognition under the area
development agreement are met. Both store opening
fees and area development fees are generally recog-
nized upon the opening of a franchise store, or upon
termination of the agreement between the Company and
the franchisee. The Company recognized approximately
$0.2 million, of the $1.2 million promissory note, based
upon its assessment of the likelihood that the perfor-
mance criteria under the agreement will be achieved.
Interest Expense, net
Years Ended
July 1, July 3, June 27,
2012 % Change 2011 % Change 2010
(dollars in thousands)
Interest
expense, net
$ (2,312)
43.3% $ (4,077) 29.1% $ (5,752)
Interest expense, net consists primarily of interest
expense and amortization of deferred financing costs
attributable to the Company’s long-term debt and
revolving line of credit, net of income earned on the
Company’s available cash balances.
Net borrowing costs decreased during the fiscal years
ended July 1, 2012 and July 3, 2011, in comparison to
the respective prior years, due to paydowns of amounts
outstanding under the Company’s term loans, as well as
reduced borrowing rates. Additionally, the decrease in
fiscal 2011 reflects the impact of the Company’s write-off
of $0.3 million in deferred financing cost during the fourth
quarter of fiscal 2010, as a result of the amending the
Company’s credit facility.
Income Taxes
During the fiscal years ended July 1, 2012, July 3,
2011 and June 27, 2010, the Company recorded income
tax expense of $7.8 million, $3.5 million and $0.2 million,
respectively, resulting in an effective tax rate of 37.2%,
38.9% and 18.9%, respectively. The Company’s effective
tax rate for the fiscal years ended July 1, 2012 and
June 27, 2010, differed from the U.S. federal statutory
rate of 35% primarily due to the impact of state income
taxes, non-deductible stock-based compensation, and
goodwill amortization, partially offset by various tax
credits. The Company’s effective tax rate for the fiscal year
ended July 3, 2011 differs 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 tax settlements and various tax credits.
At July 1, 2012, the Company’s federal net operating
loss carryforwards were approximately $3.3 million, which,
if not utilized, will begin to expire in fiscal year 2025.
Discontinued Operations
On September 6, 2011, the Company, through the
Winetasting Network subsidiary, completed the sale of
certain assets of its non-strategic wine fulfillment services
business in order to focus on its core Direct-to-Consumer
wine business. 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, and on Janu-
ary 25, 2010, completed the sale of this business. Conse-
quently, the Company has classified the results of opera-
tions of its Home & Children’s Gifts segment and its wine
fulfillment services business, which had previously been
included within its Gourmet Foods & Gift Baskets category,
as discontinued operations for all periods presented.
Results for discontinued operations are as follows:
Years Ended
July 1, July 3, June 27,
2012 2011 2010
(dollars in thousands)
Net revenues
from discontinued
operations
Gross profit
$ 2,003
$18,184
$102,192
from discontinued
operations
$
Income (loss)
405
$ 3,641
$ 43,960
from discontinued
operations,
net of tax
Gain (losses)
on sale of
discontinued
operations,
net of tax
Income (loss)
$ (22)
$ 4,542
$ 202
$ 2,096
$ ––
$ (5,062)
from discontinued
operations
$ 4,520
$ 202
$ (2,966)
The Company’s wine fulfillment services business
derived its revenue from the warehousing and fulfillment
of wine and wine related products, primarily on behalf of
California wineries. The Home & Children’s Gifts category
included revenue from the sale of home decor and
children’s gifts.
On September 6, 2011, the Company completed
the sale of certain assets of its non-strategic
WinetastingNetwork wine fulfillment services business
for $12.0 million, in order to focus on its core Direct-to-
Consumer wine business, recognizing a gain on the
sale of $4.5 million, net of taxes. 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 $5.1 million, net of tax during the fiscal
year ended June 27, 2010.
10
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Liquidity and Capital Resources
At July 1, 2012, the Company had working capital
of $29.7 million, including cash and equivalents of
$28.9 million, compared to working capital of $17.3
million, including cash and equivalents of $21.4 million,
at July 3, 2011.
Net cash provided by operating activities of $40.2
million for the fiscal year ended July 1, 2012 was prima-
rily related to net income, adjusted for the gain on the
sale of the Company’s wine fulfillment services business
in September 2011, non-cash charges for depreciation
and amortization, deferred income taxes, and stock-based
compensation, offset in part by increases in working
capital, including inventory, accounts receivable and
prepaid expenses due to expanded wholesale activities.
Net cash used in investing activities of $12.9 million
for the fiscal year ended July 1, 2012 was primarily
attributable to the Company’s equity investment in Flores
Online, Ltda., a Brazilian based e-commerce consumer
floral retailer, the acquisition of Flowerama in August
2011, and capital expenditures, primarily related to the
Company’s technology infrastructure, offset in part by the
proceeds from the sale of the Company’s wine fulfillment
services business in September 2011.
Net cash used in financing activities of $19.9 million
for the fiscal year ended July 1, 2012 was primarily due
to the repayment of bank borrowings on outstanding
term-loan debt and long-term capital lease obligations,
as well as the acquisition of $3.3 million of treasury stock
under the Company’s stock repurchase plan. There were
no borrowings outstanding under the Company’s
revolving credit facility as of July 1, 2012.
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.
11
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 year ended June 27, 2010, the Company
wrote-off deferred financing costs in the amount of
$0.3 million.
The Company does not enter into derivative
transactions for trading purposes, but rather to hedge
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.
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
matured 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 came due
in April 2012, ranged from 2.99% to 7.48%. Both of the
lines of credit are currently closed.
Despite the current challenging economic environ-
ment, the Company believes that cash flows from
operations along with available borrowings from its
2010 Credit Facility will be a sufficient source of liquidity.
The Company typically borrows against the facility to
fund working capital requirements related to pre-holiday
manufacturing and inventory purchases which peak
during its fiscal second quarter before being repaid
prior to the end of that quarter.
On January 21, 2008, the Company’s Board of
Directors authorized an increase to its stock repurchase
plan, which when added to the $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 1, 2012,
$8.5 million remains authorized but unused.
Under this program, as of July 1, 2012, the Company
had repurchased 3,703,626, shares of common stock for
$17.8 million, of which $3.3 million (1,133,913 shares),
$0.5 million (168,207 shares), and $0.9 million (342,821
shares) were repurchased during the fiscal years ending
July 1, 2012, July 3, 2011 and June, 27, 2010, respectively.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
At July 1, 2012, 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
(dollars in thousands)
Long-term debt,
including interest
$ 30,933
$ 17,059
$ 13,874
$
––
$
––
Capital lease obligations,
including interest
Operating lease obligations
Sublease obligations
Purchase commitments(*)
6
57,562
4,534
46,679
6
12,463
1,972
46,679
––
18,810
1,892
––
––
12,999
670
––
––
13,290
––
––
Total
$139,714
$ 78,179
$ 34,576
$
13,669
$ 13,290
(*) Purchase commitments consist primarily of inventory and equipment purchase orders made in the ordinary course of business.
Critical Accounting Policies and Estimates
The Company’s discussion and analysis of its
financial position and results of operations are
based upon the consolidated financial statements of
1-800-FLOWERS.COM, Inc., which have been prepared
in accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements
requires management to make estimates and assump-
tions that affect the reported amount of assets, liabilities,
revenue and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis,
management evaluates its estimates, including those
related to revenue recognition, inventory and long-lived
assets, including goodwill and other intangible assets
related to acquisitions. Management bases its estimates
and judgments on historical experience and on various
other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for
making judgments about the carrying values of assets
and liabilities. Actual results may differ from these
estimates under different assumptions or conditions.
Management believes the following critical accounting
policies, among others, affect its more significant judg-
ments and estimates used in preparation of its consoli-
dated financial statements.
Revenue Recognition
Net revenues are generated by E-commerce opera-
tions from the Company’s online and telephonic sales
channels as well as other operations (retail/wholesale)
and primarily consist of the selling price of merchandise,
service or outbound shipping charges, less discounts,
returns and credits. Net revenues are recognized upon
product shipment 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.
Initial franchise fees are recognized in income when
the Company has substantially performed or satisfied all
material services or conditions relating to the sale of the
franchise and the fees are nonrefundable. Area develop-
ment fees are nonrefundable and are recognized in
income on a pro-rata basis when the conditions for
revenue recognition under the individual area develop-
ment agreements are met. Both initial franchise fees and
area development fees are generally recognized upon
the opening of a franchise store or upon termination of
the agreement between the Company and the franchisee.
Accounts Receivable
The Company maintains allowances for doubtful
accounts for estimated losses resulting from the inability
of its customers or franchisees to make required pay-
ments. If the financial condition of the Company’s custom-
ers 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 assess-
12
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
ing 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 businesses
is impaired.
Capitalized Software
The carrying value of capitalized software, both
purchased and internally developed, is periodically
reviewed for potential impairment indicators. Future
events could cause the Company to conclude that
impairment indicators exist and that capitalized software
is impaired.
Stock-based Compensation
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 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.
Newly Adopted Accounting Pronouncements
In the first quarter of fiscal 2012, the Company
adopted new accounting guidance included in Account-
ing Standards Update (“ASU”) No. 2010-29, Disclosure
of Supplementary Pro Forma Information for Business
Combinations . The amendments in this standard specify
that if a public entity presents comparative financial
statements, the entity should disclose revenue and
earnings of the combined entity as though business
combination(s) that occurred during the current year had
occurred as of the beginning of the comparable prior
annual reporting period only. This standard also expands
the supplemental pro forma disclosures under Account-
ing Standards Codification (“ASC”) Topic 805 to include
a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable
to the business combination included in the reported pro
forma revenue and earnings. The adoption of this
standard did not have a material impact on the
Company’s consolidated financial statements.
In the third quarter of fiscal 2012, the Company
adopted new accounting guidance included in ASU
No. 2011-04, Fair Value Measurement (Topic 820):
Amendments to Achieve Common Fair Value Measure-
ment and Disclosure Requirements in U.S. GAAP and
IFRSs . The amendments in this standard generally
represent clarification of Topic 820, but also include
instances where a particular principle or requirement
for measuring fair value or disclosing information about
fair value measurements has changed. This update
results in common principles and requirements for
measuring fair value and for disclosing information about
fair value measurements in accordance with U.S. GAAP
and International Financial Reporting Standards. The
adoption of this standard did not have a material impact
on the Company’s consolidated financial statements.
Recent Accounting Pronouncements
In July 2012, the FASB issued ASU 2012-02, “Intan-
gibles—Goodwill and Other (Topic 350): Testing Indefi-
nite-Lived Intangible Assets for Impairment” (“ASU 2012-
02”), which permits an entity to make a qualitative
assessment of whether it is more likely than not that the
13
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
fair value of a reporting unit’s indefinite-lived intangible
asset is less than the asset’s carrying value before
applying the two-step goodwill impairment model that is
currently in place. If it is determined through the qualita-
tive assessment that the fair value of a reporting unit’s
indefinite-lived intangible asset is more likely than not
greater than the asset’s carrying value, the remaining
impairment steps would be unnecessary. The qualitative
assessment is optional, allowing companies to go directly
to the quantitative assessment. ASU 2012-02 is effective
for the Company for annual and interim indefinite-lived
intangible asset impairment tests performed beginning
July 1, 2013, however, early adoption is permitted. The
Company is currently evaluating the impact ASU 2012-02
will have on its consolidated financial statements.
In September 2011, the FASB issued Accounting
Standards Update No. 2011-08 “Testing Goodwill for
Impairment” (ASU No. 2011-08) which is intended to
reduce the complexity and costs to test goodwill for
impairment. The amendment allows an entity the option
to make a qualitative evaluation about the likelihood of
goodwill impairment to determine whether it is necessary
to perform the two-step quantitative goodwill impairment
test. An entity will no longer be required to calculate the
fair value of a reporting unit unless the entity determines,
based on its qualitative assessment, that it is more likely
than not that the fair value of the reporting unit is less
than its carrying amount. The ASU also expands upon
the examples of events and circumstances that an entity
should consider between annual impairment tests in
determining whether it is more likely than not that the fair
value of a reporting unit is less than its carrying amount.
The amendment becomes effective for annual and interim
goodwill impairment tests performed for the Company’s
fiscal year ending June 30, 2013. Early adoption is
permitted. 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 Accounting Standards
Update No. 2011-05, “Presentation of Comprehensive
Income” (ASU No. 2011-05), which improves the compa-
rability, consistency, and transparency of financial
reporting and increases the prominence of items reported
in other comprehensive income (OCI) by eliminating the
option to present components of OCI as part of the
statement of changes in stockholders’ equity. The amend-
ments in this standard require that all nonowner changes
in stockholders’ equity be presented either in a single
continuous statement of comprehensive income or in
two separate but consecutive statements. Subsequently
in December 2011, the FASB issued Accounting Stan-
dards Update No. 2011-12, “Deferral of the Effective Date
for Amendments to the Presentation of Reclassifications
of Items Out of Accumulated Other Comprehensive
Income” (“ASU No. 2011-12”), which indefinitely defers
the requirement in ASU No. 2011-05 to present on the
face of the financial statements reclassification adjust-
ments for items that are reclassified from OCI to net
income in the statement(s) where the components of net
income and the components of OCI are presented. The
amendments in these standards do not change the items
that must be reported in OCI, when an item of OCI must
be reclassified to net income, or change the option for an
entity to present components of OCI gross or net of the
effect of income taxes. The amendments in ASU
No. 2011-05 and ASU No. 2011-12 are effective for
interim and annual periods beginning with the first
quarter of the Company’s fiscal year ending on June 30,
2013 and are to be applied retrospectively. The adoption
of the provisions of ASU No. 2011-05 and ASU No. 2011-
12 will not have a material impact on the company’s
consolidated financial position or results of operations.
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 1, 2012, the Company’s outstanding debt,
including current maturities, approximated $29.3 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
matured 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 this swap is included as a component
of accumulated other comprehensive 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 $0.2 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
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 2012 and 2011. 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. 1, Apr. 1, Jan. 1, Oct. 2, Jul. 3, Mar. 27, Dec. 26, Sep. 26,
2012 2012 2012 2011 2011 2011 2010 2010
(in thousands, except per share data)
Net revenues:
E-commerce
Other
(telephonic/online) $139,095 $132,190 $165,130
74,715
239,845
139,519
100,326
47,469
179,659
106,620
73,039
40,462
179,557
105,525
74,032
Total net revenues
Cost of revenues
Gross Profit
Operating expenses:
48,612
5,227
12,915
4,871
71,625
48,598
5,646
13,766
4,874
72,884
53,020
4,854
12,932
4,929
75,735
$ 78,790
38,406
117,196
70,634
46,562
32,282
4,752
12,359
4,902
54,295
$142,060 $117,506 $154,599 $ 71,213
30,527
101,740
58,734
43,006
74,274
228,873
131,779
97,094
40,093
182,153
108,920
73,233
41,333
158,839
95,728
63,111
49,915
5,529
12,807
4,999
73,250
43,513
5,119
12,659
5,069
66,360
50,476
4,721
12,443
5,189
72,829
29,627
4,799
11,451
5,014
50,891
––
2,407
(322)
––
155
3,789
28,380
(319) (849)
––
(7,733)
(822)
––
––
(17) (3,249)
(854)
(756)
––
––
24,265 (7,885)
(1,161)
(1,306)
2,085
453
(164)
(215)
27,531
10,955
(8,555)
(3,422)
(773)
(413)
(4,103)
(1,859)
22,959
9,887
(9,046)
(4,098)
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
Total operating expenses
Gain on sale of stores
Operating income (loss)
Interest expense, net
Income (loss) from continuing
operations before income taxes
Income tax expense (benefit)
Income (loss) from continuing
operations
1,632
51
16,576
(5,133)
(360)
(2,244)
13,072
(4,948)
Income (loss) from discontinued
operations, net of tax
Gain (loss) on sale of discontinued
operations, net of tax
Income (Ioss) from discontinued
––
––
63
(85)
352
(432)
458
(176)
200
(136)
––
4,478
––
––
––
––
operations
63
Net income (loss) $ 1,832 $ (85) $ 16,639
Basic net income (loss) per
(136)
200
4,393
$ (740)
352
(176)
$ (8) $ (2,676) $ 13,530 $ (5,124)
(432)
458
common share:
From continuing operations $ 0.03 $ 0.00 $ 0.26 $ (0.08)
0.07
From discontinued operations
–– ––
––
$ (0.01) $ (0.04) $ 0.20 $ (0.08)
0.01 (0.01) 0.01 0.00
Net income (loss) per
common share $ 0.03 $ 0.00 $ 0.26 $ (0.01)
$ 0.00 $ (0.04) $ 0.21 $ (0.08)
Diluted net income (loss) per
common share:
From continuing operations $ 0.02 $ 0.00 $ 0.25 $ (0.08)
0.07
From discontinued operations
–– ––
––
$ (0.01) $ (0.04) $ 0.20 $ (0.08)
0.01 (0.01) 0.01 0.00
Net income (loss) per
common share $ 0.03 $ 0.00 $ 0.25 $ (0.01)
$ 0.00 $ (0.04) $ 0.21 $ (0.08)
Weighted average shares used in
the calculation of net income (loss)
per common share:
Basic
Diluted
64,741
66,381
64,988
66,299
64,841
66,050
64,218
64,218
64,135
64,135
63,999
63,999
63,966
64,801
63,894
63,894
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 and Administrative Professionals Week, revenues
also rise during the Company’s fiscal fourth quarter. The Easter Holiday was in the Company’s fourth quarter during
fiscal 2011 and 2012, but will fall in the third quarter of fiscal 2013.
16
Consolidated Balance Sheets
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands, except share data)
July 1, July 3,
2012 2011
Assets
Current assets:
Cash and equivalents
Receivables, net
Inventories
Deferred tax assets
Prepaid and other
Current assets of discontinued operations
Total current assets
Property, plant and equipment, net
Goodwill
Other intangibles, net
Deferred tax assets
Other assets
Non-current assets of discontinued operations
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses
Current maturities of long-term debt and obligations under capital leases
Current liabilities of discontinued operations
Total current liabilities
Long-term debt and obligations under capital leases
Other liabilities
Non-current liabilities of discontinued operations
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,
34,465,207 and 32,987,313 shares issued in 2012 and 2011, respectively
Class B common stock, $.01 par value, 200,000,000 shares authorized,
42,138,465 shares issued in 2012 and 2011
Accumulated other comprehensive loss
Additional paid-in capital
Retained deficit
Treasury stock, at cost, 6,767,166 and 5,633,253 Class A shares in 2012 and
2011, respectively, and 5,280,000 Class B shares in 2012 and 2011
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes.
17
$ 28,854
14,968
55,744
4,993
11,082
100
115,741
48,669
47,901
41,838
2,824
7,875
––
$264,848
$ 17,619
52,535
15,756
110
86,020
13,500
3,580
––
103,100
––
344
$ 21,442
11,916
51,185
4,945
8,631
3,506
101,625
49,908
45,972
41,748
11,880
5,204
2,738
$259,075
$ 24,186
42,692
16,488
956
84,322
29,250
2,883
109
116,564
––
330
421
421
(17) (158)
293,814
289,101
(96,258) (113,904)
(36,556) (33,279)
142,511
161,748
$264,848
$259,075
Consolidated Statements of Operations
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands, except per share data)
Years Ended
July 1, July 3, June 27,
2012 2011 2010
Net revenues
Cost of revenues
Gross profit
$716,257
422,298
293,959
$671,605
395,161
276,444
$653,370
390,623
262,747
Operating expenses:
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
Total operating expenses
Gain on sale of stores
Operating income
Interest expense, net
Income (loss) from continuing operations
before income taxes
Income tax expense from continuing operations
Income (loss) from continuing operations
Income (loss) from discontinued operations,
net of tax
Gain (loss) on sale of discontinued operations,
net of tax
Income (loss) from discontinued operations
Net income (loss)
Basic net income (loss) per common share:
From continuing operations
From discontinued operations
Basic net income (loss) per common share
Diluted net income (loss) per common share:
From continuing operations
From discontinued operations
Diluted 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.
182,512
20,479
51,972
19,576
274,539
3,789
23,209
173,531
20,168
49,360
20,271
263,330
––
13,114
171,231
17,666
48,866
20,287
258,050
––
4,697
(2,312)
(4,077) (5,752)
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7,771
13,126
(22)
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4,520
$ 17,646
$
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3,517
5,520
202
––
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$ 5,722
$ 0.09
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$ 0.09
$ 0.08
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$ 0.09
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$ (0.02)
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$ (0.07)
$ (0.02)
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$ (0.07)
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66,239
64,001
65,153
63,635
63,635
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Consolidated Statements of Cash Flows
1-800-FLOWERS.COM, Inc. and Subsidiaries
Years Ended
(in thousands)
July 1, July 3, June 27,
2012 2011 2010
Operating activities:
Net income (loss)
Reconciliation of net income (loss) to net cash
$ 5,722
17,646
$ (4,220)
$
provided by operating activities, net of acquisitions:
Operating activities of discontinued operations
(Gain)/loss on sale of discontinued operations
Depreciation and amortization
Amortization of deferred financing costs
Deferred income taxes
Bad debt expense
Stock-based compensation
Excess tax expense 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 investments
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
Excess tax expense from stock based compensation
Proceeds from bank borrowings
Repayment of bank borrowings
Debt issuance cost
Repayment of capital lease obligations
Net cash used in financing activities
Net change in cash and equivalents
Cash and equivalents:
Beginning of year
End of year
1,881
(8,683)
19,576
457
7,790
879
4,850
123
42
(3,387)
(4,041)
(2,190)
2,656
1,629
947
40,175
(4,336)
12,823
(17,304)
(3,945)
(119)
––
(12,881)
(3,277)
––
(123)
56,000
(71,000)
––
(1,482)
(19,882)
7,412
21,442
28,854
$
(814)
––
20,271
474
2,262
1,537
3,961
419
27
(1,174)
(5,443)
(1,868)
6,334
(748)
(235)
30,725
(4,310)
––
(16,890)
(268)
100
(127)
(21,495)
(454)
49
(419)
40,000
(52,750)
(17)
(2,040)
(15,631)
(6,401)
27,843
$ 21,442
9,666
6,035
20,287
763
(127)
1,738
3,883
275
77
(4,569)
654
(1,082)
6,405
(124)
368
40,029
––
10,468
(14,844)
(2,192)
325
(275)
(6,518)
(879)
––
(367)
49,000
(79,352)
(1,637)
(1,995)
(35,230)
(1,719)
29,562
$ 27,843
Supplemental Cash Flow Information:
- Interest paid amounted to $2.7 million, $4.2 million, and $5.4 million for the years ended July 1, 2012, July 3, 2011
and June 27, 2010, respectively.
- The Company paid income taxes of approximately $5.0 million, $1.4 million and $1.4 million, net of tax refunds received,
for the years ended July 1, 2012, July 3, 2011 and June 27, 2010, 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 35 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.
Note 2. Significant Accounting Policies
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.
On September 6, 2011, the Company, through the
Winetasting Network subsidiary, completed the sale of
certain assets of its wine fulfillment services business.
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 this business.
Consequently, the Company has classified the results
of operations of its Home & Children’s Gifts segment as
discontinued operations for fiscal 2010, and its wine
fulfillment services business as discontinued operations
for all periods presented. Refer to Note 16. Discontinued
Operations, for further discussion.
Revision to Previously Reported Financial Information
The Company revised its previously reported consoli-
dated balance sheet at July 3, 2011, and the opening
shareholders’ equity balance as of June 28, 2009,
presented herein, in order to correct certain previously
reported amounts. The Company believes this prior
period adjustment is qualitatively and quantitatively
immaterial to the respective balances adjusted and
had no impact on the 2012, 2011 or 2010 statements of
operations or cash flows. The Company concluded that
the amounts, if corrected in fiscal 2012, would have been
material to the consolidated financial statements as of
and for the year ended July 1, 2012.
During the first quarter of fiscal 2013, prior to an-
nouncing the Company’s financial results for its fiscal
2012 fourth quarter and year ended July 1, 2012, certain
errors primarily related to the accounting for deferred tax
liabilities on non-amortizable intangibles, including
goodwill, arising from historical acquisitions prior to fiscal
2007 were identified. These errors in the deferred tax
accounts subsequently impacted the goodwill impairment
charge recorded by the Company in fiscal 2009. The
Company also identified an issue related to the treatment
of deferred tax liabilities on basis differences related to
fixed assets which were recorded in error during fiscal
years 2009 and prior.
The review resulted in a decrease to net loss, and
thus, a decrease in the Company’s retained deficit of
approximately $0.8 million on the June 28, 2009
Consolidated Statements of Stockholders’ Equity,
with a corresponding adjustment to increase goodwill
by approximately $6.6 million and increase deferred
tax liabilities by approximately $5.8 million.
The following table sets forth the correction to each
of the individual affected line items in the consolidated
balance sheets of July 3, 2011, and the stockholders’
equity section of the consolidated balance sheet as of
June 28, 2009. “As Presented Herein” amounts presented
below reflect the impact of these revisions, as well as the
reclassification of the Company’s wine fulfillment services
business as a discontinued operation (see Note 16.
Discontinued Operations).
21
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Balance sheet data for 2011:
As of July 3, 2011
Reclassifications/
As Previously Discontinued As Presented
Reported Operations Correction Herein
Assets
Current Assets:
Cash and equivalents
Receivables, net
Inventories
Deferred tax assets
Prepaid and other
Current assets of
discontinued operations
Total current assets
Property, plant and equipment, net
Goodwill
Other intangibles, net
Deferred tax assets
Other assets
Non-current assets of
discontinued operations
Total assets
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and
accrued expenses
Current maturities of long-term
debt and obligations under
capital leases
Current liabilities of
discontinued operations
Total current liabilities
Long-term debt and obligations
under capital leases
Other liabilities
Non-current liabilities of
discontinued operations
Total liabilities
Total stockholders’ equity
Total liabilities and
stockholders’ equity
$ 21,442
15,278
51,314
5,416
7,375
––
100,825
50,354
41,547
41,808
17,181
5,236
––
$256,951
$
––
(3,362)
(129)
(471)
1,256
3,506
800
(446)
(2,199)
(60)
473
(32)
2,738
$
1,274
$ 66,559
$
319
16,488
––
83,047
29,250
2,993
––
115,290
141,661
––
956
1,275
––
(110)
109
1,274
––
$
––
––
––
––
––
––
––
––
6,624
––
(5,774)
––
$
$
––
850
––
––
––
––
––
––
––
––
850
$ 21,442
11,916
51,185
4,945
8,631
3,506
101,625
49,908
45,972
41,748
11,880
5,204
2,738
$259,075
$ 66,878
16,488
956
84,322
29,250
2,883
109
116,564
142,511
$256,951
$
1,274
$
850
$259,075
Shareholder’s equity data for 2009:
As of June 28, 2009
Reclassifications/
As Previously Discontinued As Presented
Reported Operations Correction Herein
Retained deficit
Total stockholders’ equity
$(116,256)
$ 133,783
$
$
––
––
$
$
850
850
$ (115,406)
$ 134,633
Financial information included in the accompanying financial statements and the notes thereto reflect the effects of
the corrections described in the preceding discussion and table where applicable.
22
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Fiscal Year
The Company’s fiscal year is a 52- or 53-week period
ending on the Sunday nearest to June 30. Fiscal years
2012 and 2010 consisted of 52 weeks which ended on
July 1, 2012 and June 27, 2010, respectively, whereas
fiscal year 2011 consisted of 53 weeks, which ended on
July 3, 2011.
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 initial lease
terms, or estimated useful lives of the improvements.
Estimated useful lives are periodically reviewed, and
where appropriate, changes are made prospectively.
Long-lived assets are reviewed for impairment whenever
changes in circumstances or events may indicate that
the carrying amounts are not recoverable. The company
capitalizes certain internal and external costs incurred
to acquire or create internal-use software. Capitalized
software costs are amortized on a straight-line basis over
the estimated useful life of the software. 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
Goodwill represents the excess of the cost of an
acquisition over the fair value of the assets acquired. The
company tests goodwill for impairment annually during
the fourth quarter, and when an event occurs or circum-
stances change such that it is more likely than not that an
impairment may exist, such as (i) a significant adverse
change in legal factors or in business climate, (ii) an
adverse action or assessment by a regulator,
(iii) unanticipated competition, (iv) a loss of key person-
nel, (v) a more-likelythan-not sale or disposal of all or a
significant portion of a reporting unit, (vi) the testing for
recoverability of a significant asset group within a
reporting unit, or (vii) the recognition of a goodwill
impairment loss of a subsidiary that is a component of
the reporting unit.
Goodwill is reviewed for impairment utilizing a two-step
process. The first step of the impairment test requires the
identification of the reporting units and comparison of the
fair value of each of these reporting units to the respective
carrying value. If the carrying value of the reporting unit is
less than its fair value, no impairment exists and the
second step is not performed. If the carrying value of the
reporting unit is higher than its fair value, the second step
must be performed to compute the amount of the goodwill
impairment, if any. In the second step, the impairment is
computed by comparing the implied fair value of the
reporting unit goodwill with the carrying amount of that
goodwill. If the carrying amount of the reporting unit
goodwill exceeds the implied fair value of that goodwill,
an impairment loss is recognized for the excess.
The company generally estimates the fair value of a
reporting unit using a discounted cash flow methodology
included forecasted revenues, gross profit margins,
operating income margins, working capital cash flow,
perpetual growth rates, and long-term discount rates,
among others, all of which require significant judgments
by management. The company also reconciles its
discounted cash flow analysis to its current market
capitalization allowing for areasonable control premium.
Other Intangibles, net
Amortization of definite-lived intangible assets is
computed on the straight-line method over the estimated
useful lives of the assets, while indefinite-lived intangible
assets are not amortized. Identifiable intangible assets
are reviewed for impairment whenever changes in
circumstances or events may indicate that the carrying
amounts are not recoverable. The company also tests
indefinite-lived intangible assets, consisting of acquired
trade names, for impairment at least annually during the
fourth quarter. If the fair value is less than the carrying
amount of the asset, a loss is recognized for the differ-
ence. Goodwill and indefinite-lived intangibles are not
amortized, but are evaluated annually for impairment.
The Company performs its annual impairment test
in its fiscal fourth quarter, or earlier if indicators of
potential impairment exist, to evaluate goodwill.
Goodwill is considered impaired if the carrying amount
of the reporting unit exceeds its estimated fair value.
In assessing the recoverability of goodwill, the Company
reviews both quantitative as well as qualitative factors to
support its assumptions with regard to fair value.
The cost of intangible assets with determinable lives is
amortized to reflect the pattern of economic benefits
consumed, on a straight-line basis, over the estimated
periods benefited, ranging from 3 to 16 years.
23
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Deferred Catalog Costs
The Company capitalizes the costs of producing and
distributing its catalogs. These costs are amortized in
direct proportion to actual sales from the corresponding
catalog over a period not to exceed 26-weeks. Included
within prepaid and other current assets was $0.3 and
$0.4 million at July 1, 2012 and July 3, 2011, relating to
prepaid catalog expenses.
Investments
Investments are accounted for using the equity
method if the investment provides the Company the
ability to exercise significant influence, but not control,
over the investee. Significant influence is generally
deemed to exist if the Company has an owenership
interest in the voting stock of the investee between 20%
and 50%, although other factors, such as representation
on the investee’s Board of Directors, are considered in
determining whether the equity method is appropriate.
The Company records these investments initially at cost,
and adjusts the carrying amount to reflect the Company’s
share of the earnings or losses of the investee, including
all adjustments similar to those made in preparing
consolidated financial statements. The book value of
investments that the Company accounted for under
the equity method of accounting was $3.6 million as of
July 1, 2012 and $0.0 million as of July 3, 2011. This
amount is comprised of the Company’s 32% interest in
Flores Online, a Sao Paulo, Brazil based internet floral
and gift retailer, that the Company made an investment
in on May 31, 2012, and is included in Other assets
within the Consolidated Balance Sheet. Operating results
of Flores Online for the period subsequent to investment
through July 1, 2012 were immaterial.
All other equity investments, which consist of invest-
ments for which the Company does not possess the
ability to exercise significant influence, are accounted
for under the cost method as they are privately held.
Cost method investments are originally recorded at cost,
and are included within Other Assets in the Company’s
Consolidated Balance Sheets. The aggregate carrying
amount of the Company’s cost method investments was
$1.7 million as of July 1, 2012 and $0.2 million as of
July 3, 2011. In addition, the Company had notes
receivable from a company it maintains an investment
in of $0.9 million as of July 1, 2012 and $1.1 million as
of July 3, 2011.
The Company holds certain trading securities
associated with its Non-Qualified Deferred Compensation
Plan (“NQDC Plan”) whose fair values can be readily
determined.
Each reporting period, the Company uses available
qualitative and quantitative information to evaluate its
investments for impairment.
Fair Values of Financial Instruments
The recorded amounts of the Company’s cash and
equivalents, receivables, accounts payable, and accrued
liabilities approximate their fair values principally
because of the short-term nature of these items. The fair
value of the Company’s long-term obligations, the
24
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 1, 2012 and July 3, 2011.
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 (money markets) 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
dispersion throughout the United States, and the fact
that a substantial portion of receivables are related to
balances owed by major credit card companies. Allow-
ances relating to consumer, corporate and franchise
accounts receivable ($2.4 million and $2.5 million at
July 1, 2012 and July 3, 2011, 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, net of discounts,
returns and credits. Net revenues are recognized upon
product shipment and do not include sales tax. Shipping
terms are primarily 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 primarily FOB shipping point.
Initial franchise fees are recognized in income when
the Company has substantially performed or satisfied all
material services or conditions relating to the sale of the
franchise and the fees are nonrefundable. Area develop-
ment fees are nonrefundable and are recognized in
income on a pro-rata basis when the conditions for
revenue recognition under the individual area develop-
ment agreements are met. Both initial franchise fees and
area development fees are generally recognized upon
the opening of a franchise store or upon termination of
the agreement between the Company and the franchisee.
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.
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 $75.4 million, $67.9 million and
$70.4 million for the years ended July 1, 2012, July 3,
2011 and June 27, 2010, 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. The Company has established
deferred tax assets and liabilities for temporary differ-
ences 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
these deferred tax assets assumes that we will be able to
generate sufficient future taxable income so that these
assets will be realized. The factors that we consider
25
in assessing the likelihood of realization include the
forecast of future taxable income and available 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. 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.
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
(loss) 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) that would be antidilutive.
Newly Adopted Accounting Pronouncements
In the first quarter of fiscal 2012, the Company
adopted new accounting guidance included in Account-
ing Standards Update (“ASU”) No. 2010-29, Disclosure
of Supplementary Pro Forma Information for Business
Combinations . The amendments in this standard
specify that if a public entity presents comparative
financial statements, the entity should disclose revenue
and earnings of the combined entity as though busi-
ness combination(s) that occurred during the current
year had occurred as of the beginning of the compa-
rable prior annual reporting period only. This standard
also expands the supplemental pro forma disclosures
under Accounting Standards Codification (“ASC”) Topic
805 to include a description of the nature and amount of
material, nonrecurring pro forma adjustments directly
attributable to the business combination included in the
reported pro forma revenue and earnings. The adoption
of this standard did not have a material impact on the
Company’s consolidated financial statements.
In the third quarter of fiscal 2012, the Company
adopted new accounting guidance included in ASU
No. 2011-04, Fair Value Measurement (Topic 820):
Amendments to Achieve Common Fair Value Measure-
ment and Disclosure Requirements in U.S. GAAP and
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
IFRSs. The amendments in this standard generally
represent clarification of Topic 820, but also include
instances where a particular principle or requirement
for measuring fair value or disclosing information about
fair value measurements has changed. This update
results in common principles and requirements for
measuring fair value and for disclosing information
about fair value measurements in accordance with
U.S. GAAP and International Financial Reporting
Standards. The adoption of this standard did not have
a material impact on the Company’s consolidated
financial statements.
Recent Accounting Pronouncements
In July 2012, the FASB issued ASU 2012-02,
“Intangibles—Goodwill and Other (Topic 350): Testing
Indefinite-Lived Intangible Assets for Impairment” (“ASU
2012-02”), which permits an entity to make a qualitative
assessment of whether it is more likely than not that the
fair value of a reporting unit’s indefinite-lived intangible
asset is less than the asset’s carrying value before
applying the two-step goodwill impairment model that
is currently in place. If it is determined through the
qualitative assessment that the fair value of a reporting
unit’s indefinite-lived intangible asset is more likely than
not greater than the asset’s carrying value, the remain-
ing impairment steps would be unnecessary. The
qualitative assessment is optional, allowing companies
to go directly to the quantitative assessment. ASU 2012-
02 is effective for the Company for annual and interim
indefinite-lived intangible asset impairment tests
performed beginning July 1, 2013, however, early
adoption is permitted. The Company is currently
evaluating the impact ASU 2012-02 will have on its
consolidated financial statements.
In September 2011, the FASB issued Accounting
Standards Update No. 2011-08 “Testing Goodwill for
Impairment” (ASU No. 2011-08) which is intended to
reduce the complexity and costs to test goodwill for
impairment. The amendment allows an entity the option
to make a qualitative evaluation about the likelihood of
goodwill impairment to determine whether it is neces-
sary to perform the two-step quantitative goodwill
impairment test. An entity will no longer be required to
calculate the fair value of a reporting unit unless the
entity determines, based on its qualitative assessment,
that it is more likely than not that the fair value of the
reporting unit is less than its carrying amount.
The ASU also expands upon the examples of events
and circumstances that an entity should consider
between annual impairment tests in determining
whether it is more likely than not that the fair value
of a reporting unit is less than its carrying amount.
The amendment becomes effective for annual and
interim goodwill impairment tests performed for the
Company’s fiscal year ending June 30, 2013. Early
adoption is permitted. The Company does not expect
the adoption of ASU 2011-04 to have a material impact
on its consolidated financial statements.
In June 2011, the FASB issued Accounting Stan-
dards Update No. 2011-05, “Presentation of Compre-
hensive Income” (ASU No. 2011-05), which improves
the comparability, consistency, and transparency of
financial reporting and increases the prominence of
items reported in other comprehensive income (OCI) by
eliminating the option to present components of OCI as
part of the statement of changes in stockholders’ equity.
The amendments in this standard require that all
nonowner changes in stockholders’ equity be
presented either in a single continuous statement
of comprehensive income or in two separate but
consecutive statements. Subsequently in December
2011, the FASB issued Accounting Standards Update
No. 2011-12, “Deferral of the Effective Date for Amend-
ments to the Presentation of Reclassifications of Items
Out of Accumulated Other Comprehensive Income”
(“ASU No. 2011-12”), which indefinitely defers the
requirement in ASU No. 2011-05 to present on the face
of the financial statements reclassification adjustments
for items that are reclassified from OCI to net income in
the statement(s) where the components of net income
and the components of OCI are presented. The amend-
ments in these standards do not change the items that
must be reported in OCI, when an item of OCI must be
reclassified to net income, or change the option for an
entity to present components of OCI gross or net of
the effect of income taxes. The amendments in ASU
No. 2011-05 and ASU No. 2011-12 are effective
for interim and annual periods beginning with the
first quarter of the Company’s fiscal year ending on
June 30, 2013 and are to be applied retrospectively.
The adoption of the provisions of ASU No. 2011-05
and ASU No. 2011-12 will not have a material impact
on the company’s consolidated financial position or
results of operations.
Reclassifications
Certain balances in the prior fiscal years have been
reclassified to conform to the presentation in the current
fiscal year.
26
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 3 — Net Income (Loss) Per Common Share
from Continuing Operations
The following table sets forth the computation of
basic and diluted net income (loss) per common share
from continuing operations:
Years Ended
July 1, July 3, June 27,
2012 2011 2010
(in thousands, except per share data)
Numerator:
Net income (loss)
from continuing
operations
Denominator:
Weighted average
$ 13,126
$ 5,520
$ (1,254)
shares outstanding
64,697
64,001
63,635
Effect of dilutive securities:
Employee stock
options(1)
Employee restricted
stock awards
Adjusted weighted-average
40
16
––
1,502
1,542
1,136
1,152
––
––
shares and assumed
conversions
Net income (loss) per
common share from
continuing operations:
$
Basic
$
Diluted
66,239
65,153
63,635
0.20
0.20
$ 0.09
$ 0.08
$ (0.02)
$ (0.02)
Note (1): The effect of options to purchase 5.5 million, 7.0 million and
8.1 million shares for the years ended July 1, 2012, July 3, 2011, and
June 27, 2010, respectively, were excluded from the calculation of net
income per share on a diluted basis as their effect is anti-dilutive.
Note 4. Acquisitions and Dispositions
The Company accounts for business combinations in
accordance with ASC Topic 805 which requires, among
other things, the acquiring entity in a business combina-
tion to recognize the fair value of all the assets acquired
and liabilities assumed; the recognition of acquisition-
related costs in the consolidated results of operations;
the recognition of restructuring costs in the consolidated
results of operations for which the acquirer becomes
obligated after the acquisition date; and contingent
purchase consideration to be recognized at their fair
values on the acquisition date with subsequent adjust-
ments recognized in the consolidated results of opera-
tions. The fair values assigned to identifiable intangible
assets acquired were determined primarily by using an
income approach which was based on assumptions and
estimates made by management. Significant assumptions
utilized in the income approach were based on company
specific information and projections which are not
observable in the market and are therefore considered
Level 3 measurements. The excess of the purchase price
over the fair value of the identified assets and liabilities
has been recorded as goodwill. Operating results of the
acquired entity is reflected in the Company’s consolidated
financial statements from date of acquisition.
Sale and franchise of Fannie May retail stores
On November 21, 2011, the Company and GB
Chocolates LLC (GB Chocolates) entered into an
agreement whereby, the Company sold 17 existing
Fannie May stores, to be operated as franchised locations
by GB Chocolates, for $5.6 million, recognizing a gain on
the sale of $3.8 million. Upon completion of the sale, the
Company also recognized initial franchise fees associ-
ated with these 17 stores in the amount of $0.5 million. In
conjunction with the sale of stores, the Company and GB
Chocolates entered into an area development agreement
whereby GB Chocolates will open a minimum of 45 new
Fannie May franchise stores by December 2014. The
agreement provides exclusive development rights for
several Midwestern states, as well as specific cities in
Florida and Ohio. The terms of the agreement include a
non-refundable area development fee of $0.9 million,
store opening fees of $0.5 million, assuming successful
opening of 45 stores, and a non-performance promissory
note in the amount of $1.2 million, which becomes due
and payable only if GB Chocolates does not open all 45
stores as set forth in the development agreement.
The Company has deferred the $0.9 million area devel-
opment fee associated with the 45 store area develop-
ment agreement, and will recognize such fees in income
on a pro-rata basis, when the conditions for revenue
recognition under the area development agreement is
met. Both store opening fees and area development fees
are generally recognized upon the opening of a franchise
store, or upon termination of the agreement between the
Company and the franchisee. The Company recognized
approximately $0.2 million, of the $1.2 million promissory
note, based upon its assessment of the likelihood that
27
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
the performance criteria under the agreement will be
achieved. The fair value is impacted by estimates around
the possibility of GB Chocolates opening 45 stores,
discounted for present value, and the risk associated
with counterparty payment. Changes in these assump-
tions could result in an increase or decrease in fair value
which would impact the income statement. There were
no significant changes in these estimates during 2012.
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, with annual revenue of
approximately $6.1 million and annual operating
income of $0.1 million in its most recent year end prior
to acquisition. The purchase price, which included the
acquisition of receivables, inventory, eight retail store
locations and certain other assets and related liabilities,
was approximately $4.3 million. Of the acquired
intangible assets, $2.1 million was assigned to amortiz-
able investment in licenses, which is being amortized
over the estimated useful life of 20 years, based upon
the estimated remaining life of the franchise agree-
ments. Approximately $2.4 million of purchase price
was assigned to goodwill which is not deductible for
tax purposes. The acquisition was financed utilizing
available cash balances. Since the date of acquisition,
Flowerama’s net revenues and income before income
taxes of $5.9 million and $0.5 million, respectively, were
included in the Company’s Consolidated Statement of
Operations for the fiscal year ended July 1, 2012.
Acquisition of FineStationery
On May 10, 2011, the Company acquired selected
assets of FineStationery Solutions, Inc. (Fine Statio-
nery), a retailer of personalized stationery, invitations
and announcements, with annual revenue of approxi-
mately $10.1 million in its most recent year end prior to
acquisition. 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 consideration of $0.5 million based upon
achieving specified operating results during fiscal 2012
through 2014, which is included in other liabilities in the
Company’s consolidated balance sheet. Of the $1.2
million of acquired intangible assets, $1.1 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. In addition, approxi-
mately $1.5 million of the purchase price was assigned
to goodwill, which is expected to be deductible for tax
purposes. The acquisition was financed utilizing
available cash balances. Fine Stationery’s net revenues
and loss before income taxes of $8.3 million and ($1.1)
million, respectively, were included in the Company’s
Consolidated Statement of Operations for the fiscal
year ended July 1, 2012. Based upon the financial
performance of Fine Stationery during fiscal 2012,
the earn-out for fiscal 2012 was not achieved, and the
Company reduced its associated earn-out liability by
approximately $0.2 million.
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 consoli-
dated within the Company’s baked goods manufactur-
ing 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. The amounts of net revenues and income
28
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Pro forma Results of Continuing Operations
The following unaudited pro forma results of continuing
operations has been prepared as if the acquisitions of
Flowerama, Fine Stationery and Mrs. Beasley’s had taken
place at the beginning of fiscal year 2010. 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 1, July 3, June 27,
2012 2011 2010
(pro forma) (pro forma) (pro forma)
(in thousands, except per share data)
Net revenues
from continuing
operations
Operating income
from continuing
operations
Net income (loss)
from continuing
operations
Net income (loss) per
common share from
$716,730
$689,010
$674,419
$ 23,010
$ 14,283
$
4,707
$ 13,007
$ 6,388
$ (1,066)
continuing operations
Basic
Diluted
$ 0.20
$ 0.20
$ 0.10
$ 0.10
$ (0.02)
$ (0.02)
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 1, July 3,
2012 2011
(in thousands)
Finished goods
Work-in-process
Raw materials
$26,557
10,466
18,721
$55,744
$26,629
9,243
15,313
$51,185
before income taxes from the Mrs. Beasley’s acquisition
included in the Company’s fiscal 2012 operating results
were not significant.
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
acquisition of Flowerama. This may result in potential
adjustments to the carrying value of its 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 Flowerama,
Mrs. Beasley’s and Fine Stationery:
Flowerama Fine Stationery Mrs. Beasley’s
Purchase Purchase Purchase
Price Price Price
Allocation Allocation Allocation
(in thousands)
Current assets
Intangible assets
Goodwill
Property, plant
$1,090
2,106
2,440
$ 360
1,184
1,541
and equipment
Total assets acquired
Current liabilities
Other liabilities assumed
Net assets acquired
76
5,712
620
756
1,376
$4,336
269
3,354
20
––
20
$3,334
$ 353
585
308
204
1,450
––
––
––
$1,450
29
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:
BloomNet Gourmet
Consumer Wire Food and
Floral Service Gift Baskets(1) Total
Acquisition of Fine Stationery
Acquisition of Mrs. Beasley’s
Acquisition related adjustments
(in thousands)
$ 5,728
Balance at June 27, 2010
1,051
––
––
$ 6,779
2,440
490
––
$ 9,709
Acquisition of Flowerama
Acquisition related adjustments
Sale of Fannie May stores
Balance at July 1, 2012
––
––
––
––
––
––
––
––
––
Balance at July 3, 2011
$
$
$
$
39,908
––
308
(1,023)
39,193
$
––
––
(1,001)
38,192
$
$ 45,636
1,051
308
(1,023)
$ 45,972
2,440
490
(1,001)
$ 47,901
(1) The total carrying amount of goodwill for all periods in the table above is reflected net of $71.1 million of accumulated impairment charges, which were
recorded in the GFGB segment.
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.
The Company’s other intangible assets consist of the following:
July 1, July 3,
2012 2011
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
$ 7,420 $ 5,401
9,961
2,173
17,535
16,019
2,538
25,977
––
33,396
$ 59,373
––
$17,535
$ 2,019
6,058
365
8,442
33,396
$41,838
$ 5,314
15,804
2,538
23,656
33,795
$57,451
$ 5,314
8,619
1,770
15,703
––
$15,703
$
––
7,185
768
7,953
33,795
$41,748
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. There were no impairments of intangible assets
during the years ended July 1, 2012, and July 3, 2011.
The amortization of intangible assets for the years ended July 1, 2012, July 3, 2011 and June 27, 2010 was
$1.8 million, $2.3 million, and $3.0 million, respectively. Future estimated amortization expense is as follows: 2013 —
$1.8 million, 2014 — $1.4 million, 2015 — $1.3 million, and 2016 — $1.2 million, and thereafter — $2.7 million.
30
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 7. Property, Plant and Equipment
July 1, July 3,
2012 2011
(in thousands)
Land
Building and building improvements
Leasehold improvements
Furniture and fixtures
Production equipment
Computer equipment
Telecommunication equipment
Software
$
2,907
9,807
16,638
4,814
28,582
56,939
8,196
106,774
234,657
$
2,907
9,807
16,945
4,362
25,925
56,413
8,328
96,132
220,819
Accumulated depreciation and
amortization
185,988
$ 48,669
170,911
$ 49,908
Note 8. Accrued Expenses
Accrued expenses consisted of the following:
July 1, July 3,
2012 2011
(in thousands)
Payroll and employee benefits
Advertising and marketing
Other
$ 17,086 $ 19,403
3,270
20,019
$ 42,692
12,813
22,636
$ 52,535
Note 9. Long-Term Debt
July 1, July 3,
2012 2011
(in thousands)
Term loan(1) $ 29,250 $ 44,250
Revolving line
of credit(1)
–– ––
Obligations under capital
leases(2)
Less current maturities of
6 1,488
29,256 45,738
long-term debt obligations
15,756 16,488
under capital leases
$ 13,500 $ 29,250
(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
31
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 year ended June 27, 2010, the Company
wrote-off deferred financing costs in the amount of
$0.3 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 mil-
lion 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 designated
this swap as a cash flow hedge of the interest rate risk
attributable to forecasted variable interest (LIBOR)
payments at inception. 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
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
$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 came due
in April 2012, ranged from 2.99% to 7.48%. Both lines of
credit are currently closed, however, the Company also
has minimal equipment leases directly with certain
manufacturing equipment vendors.
As of July 1, 2012 long-term debt maturities are
as follows:
Year Debt Maturities
(in thousands)
2013
2014
15,750
13,500
$29,250
Note 10. 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.
The following table presents by level, within the fair
value hierarchy, assets and liabilities measured at fair
value on a recurring basis as of July 1, 2012:
Fair Value Measurements
Assets (Liabilities)
Total Level 1 Level 2 Level 3
(in thousands)
––
––
$205
––
$205
Assets (liabilities):
Cash equivalents
(money market
accounts)
Trading securities
held in a
“rabbi trust”(1)
Fair value of
non-performance
promissory note(2)
$27,276
$27,276
––
1,143
1,143
––
Interest rate swap(3) (7)
205
––
––
–– (7)
$28,617
$28,419 (7)
(1) Trading securities held in a rabbi trust are included in Other assets-long
term in the consolidated balance sheets (Note 13—Employee Retirement
Plans). The Company established a Non-qualified Deferred Compensation
Plan for certain members of senior management in fiscal 2009 (Employee
contributions were not material until fiscal 2012). Deferred compensation is
invested in mutual funds held in a “rabbi trust” and are restricted for
payment to participants of the NQDC Plan.
(2) Refer to Note 4. Acquisitions and dispositions— Sale and franchise of
Fannie May retail stores. Included in other assets long-term on the
consolidated balance sheet.
(3) Included in other long-term liabilities on the consolidated balance sheet.
The following table presents by level, within the fair
value hierarchy, assets and liabilities measured at fair
value on a recurring basis as of July 3, 2011:
Fair Value Measurements
Assets (Liabilities)
Total Level 1 Level 2 Level 3
(in thousands)
Assets (liabilities):
Cash equivalents
(money market
accounts)
Trading securities
held in a
“rabbi trust”
$20,775
$20,775
––
281
281
––
Interest rate swap (263)
–– (263)
$20,793
$21,056 $(263)
––
––
––
––
32
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 11. 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 2008.
The Company’s policy is to recognize interest and
penalties accrued on any unrecognized tax benefits as
a component of income tax expense. At July 1, 2012,
the Company has an unrecognized tax position of
approximately $0.5 million, including accrued interest
and penalties of $0.1 million. The Company does not
believe there will be any material changes in its unrecog-
nized tax positions over the next twelve months.
Significant components of the income tax provision
from continuing operations are as follows:
Years Ended
July 1, July 3, June 27,
2012 2011 2010
(in thousands)
Current provision (benefit):
Federal
State
$ (1,643)
1,155
(488)
$ 526
805
1,331
$ (213)
502
289
Deferred provision (benefit):
Federal
State
8,479
(220)
8,259
2,080
106
2,186
(25)
(65)
(90)
Income tax expense
$ 7,771
$ 3,517
$
199
A reconciliation of the U.S. federal statutory tax rate to
the Company’s effective tax rate is as follows:
Years Ended
July 1, July 3, June 27,
2012 2011 2010
35.0%
Tax at U.S. statutory rates
State income taxes, net
of federal tax benefit
(31.2)
35.0%
35.0%
4.0
6.8
Non-deductible stock-based
compensation
0.6
1.9 (25.5)
Non-deductible goodwill
amortization 1.7 ––
(8.9)
(1.1) 0.1 ––
Rate change
Tax credits (2.9) (2.9)
9.5
Tax settlements –– (1.6) ––
2.2
Other, net
(18.9%)
(0.4)
38.9%
(0.1)
37.2%
Deferred 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 significant
components of the Company’s deferred tax assets
(liabilities) are as follows:
Years Ended
July 1, July 3,
2012 2011
(in thousands)
Deferred tax assets:
Net operating loss and
credit carryforwards
Accrued expenses
and reserves
Stock-based
$3,569
$ 11,648
5,680
5,159
compensation
Gross deferred tax assets
3,452
20,259
Less: Valuation allowance (1,578) (1,776)
18,483
3,494
12,743
11,165
Deferred tax liabilities:
Other intangibles (3,036) (1,154)
Tax in excess of
book depreciation (312) (504)
(3,348) (1,658)
Net deferred tax assets
$7,817
$16,825
A valuation allowance is provided when it is more
likely than not that some portion, or all, of the deferred tax
assets will not be realized. The Company has established
valuation allowances primarily for net operating loss
carryforwards in certain states. At July 1, 2012, the
Company’s federal net operating loss carryforwards were
approximately $3.3 million, which if not utilized, will begin
to expire in fiscal year 2025.
Note 12. 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
33
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 1, 2012,
$8.5 million remains authorized.
Under this program, as of July 1, 2012, the Company
had repurchased 3,703,626 shares of common stock for
$17.8 million, of which $3.3 million (1,133,913 shares),
$0.5 million (168,207 shares), and $0.9 million (342,821
shares) were repurchased during the fiscal years ended
July 1, 2012, July 3, 2011 and June 27, 2010, 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 there-
fore 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 13. Stock Based Compensation
The Plan is administered by the Compensation
Committee or such other Board committee (or the
entire Board) as may be designated by the Board (the
“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 1, 2012, the Company has reserved approxi-
mately $14.8 million shares of common stock for issu-
ance, including options previously authorized for issu-
ance under the 1999 Stock Incentive Plan.
The amounts of stock-based compensation expense
recognized in the periods presented are as follows:
Years Ended
July 1, July 3, June 27,
2012 2011 2010
(in thousands, except per share data)
Stock options
Restricted stock awards
Total
Deferred income tax benefit
Stock-based compensation
$1,073
3,777
4,850
1,796
$1,181
2,780
3,961
1,381
$1,460
2,423
3,883
1,245
expense, net
$3,054 $2,580
$2,638
Stock based compensation expense is recorded
within the following line items of operating expenses:
Years Ended
July 1, July 3, June 27,
2012 2011 2010
(in thousands)
Marketing and sales
Technology and
development
General and administrative
Total
$1,755
$1,587
$1,590
600
2,495
791
1,583
$4,850 $3,961
795
1,498
$3,883
Stock-based compensation expense has not been
allocated between business segments, but is reflected
as part of Corporate overhead. (Refer to Note 14 —
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 1, July 3, June 27,
2012 2011 2010
Weighted average fair
value of options granted
Expected volatility
Expected life (in years)
Risk-free interest rate
Expected dividend yield
$1.84
72%
7.95
0.9%
0.0%
$1.23
68%
7.5
1.3%
0.0%
$1.71
63%
5.6
2.4%
0.0%
34
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 1, 2012:
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Options Price Term Value (000s)
6,915,535 $ 6.08
Outstanding beginning of period
1,027,500 $ 2.63
Granted
–– $ ––
Exercised
Forfeited/Expired (1,231,755) $11.91
Outstanding end of period
6,711,280 $ 4.48
Options vested or expected to
4.7 years $3,631
vest at end of period
Exercisable at July 1, 2012
6,374,809 $ 4.60
$3,220
4,417,280 $ 5.63 2.7 years $ 781
4.5 years
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference
between the Company’s closing stock price on the last trading day of fiscal 2012 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 1, 2012. 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 1, 2012, July 3, 2011 and June 27, 2010 was
$0.0 million, $0.0 million, and $0.0 million, respectively.
The following table summarizes information about stock options outstanding at July 1, 2012:
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 - 2.63
$
$
2.77 - 3.59
$ 4.56 - 6.52
$ 6.58 - 10.46
$ 11.81 - 11.81
2,353,500
1,381,334
1,637,793
1,323,653
15,000
6,711,280
8.7 years
4.4 years
1.4 years
2.1 years
1.4 years
4.7 years
$ 2.17
$ 3.11
$ 6.39
$ 7.58
$11.81
$ 4.48
198,400
1,260,934
1,620,793
1,322,153
15,000
4,417,280
$ 2.00
$ 3.11
$ 6.41
$ 7.57
$11.81
$ 5.63
As of July 1, 2012, the total future compensation cost
related to nonvested options not yet recognized in the
statement of operations was $2.6 million and the
weighted average period over which these awards are
expected to be recognized was 6.2 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 1, 2012:
Weighted
Average
Grant Date
Shares Fair Value
Non-vested – beginning of period 3,395,261 $ 2.49
Granted 2,052,486 $ 2.61
Vested (1,477,894) $ 2.96
Forfeited (114,533) $ 2.58
Non-vested at July 1, 2012 3,855,320 $ 2.37
The fair value of nonvested shares is determined
based on the closing stock price on the grant date. As of
35
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 segments. On January 25, 2010, the Company
completed the sale of these businesses. Consequently,
the Company has classified the results of operations of its
Home & Children’s Gifts segment, and its wine fulfillment
services business as discontinued operations for all
periods presented.
Segment performance is measured based on contri-
bution margin, which includes only the direct controllable
revenue and operating expenses of the segments.
As such, management’s measure of profitability for
these segments 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 deprecia-
tion and amortization, 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 segment.
Net Revenues
Years Ended
July 1, July 3, June 27,
2012 2011 2010
(in thousands)
Net revenues:
Consumer Floral
$398,184
$369,199
$366,516
BloomNet Wire
Service
Gourmet Food &
Gift Baskets
Corporate(1)
Intercompany
82,582
73,282
61,883
236,742
229,390
225,602
773
1,150
1,071
eliminations (2,024) (1,416) (1,702)
Total net revenues
$716,257
$671,605
$653,370
July 1, 2012, there was $5.7 million of total unrecognized
compensation cost related to non-vested restricted stock-
based compensation to be recognized over a weighted-
average period of 2.1 years.
Note 14. Employee Retirement Plans
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 contri-
butions to the 401(k) plan in amounts not exceeding
federal guidelines. On an annual basis the Company, as
determined by its board of directors, may make certain
discretionary contributions. Employees are vested in the
Company’s contributions based upon years of service.
The Company suspended all contributions during fiscal
years 2012, 2011 and 2010.
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. As of July 1, 2012 and
July 3, 2011, these plan liabilities, which are included in
Other liabilities-long term within the Company’s Consoli-
dated Balance Sheet, totaled $1.1mm and $0.3mm,
respectively. The associated plan assets, which are
subject to the claims of the creditors, are primarily invested
in mutual funds and are included in Other assets-long term.
Company contributions during the years ended July 1,
2012, July 3, 2011 and June 27, 2010 were less than
$0.1 million. Gains and losses on these investments,
which were immaterial during fiscal years 2012, 2011
and 2010, are included in Interest expense, net, within
the Company’s Consolidated Statements of Operations.
Note 15. Business Segments
The Company’s management reviews the results
of the Company’s operations by the following three
business segments:
• Consumer Floral;
• BloomNet Wire Service; and
• Gourmet Food and Gift Baskets; and
On September 6, 2011, the Company, through its
Winetasting Network subsidiary, completed the sale of
certain assets of its wine fulfillment services business,
which was previously included within its Gourmet
Foods & Gift Baskets segment. During the first quarter
fourth quarter of fiscal 2009, the Company made the
36
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Operating Income
Years Ended
July 1, July 3, June 27,
2012 2011 2010
(in thousands)
Segment Contribution Margin:
Consumer Floral
$ 39,147 $ 32,669 $ 22,141
BloomNet Wire
Service
Gourmet Food &
Gift Baskets(2)
Segment Contribution
Margin Subtotal
22,339
20,195
19,051
29,789
27,776
27,145
91,275
80,640
68,337
Corporate(1) (48,490) (47,255) (43,353)
Depreciation and
business. The sales 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.
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 segments. 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.)
As a result of the transactions above, the Company has
classified the results of operations of its Home & Children’s
Gifts segment, and its wine fulfillment services business as
discontinued operations for all periods presented.
Results for discontinued operations are as follows:
amortization (19,576) (20,271) (20,287)
Years Ended
Operating income (loss) $ 23,209
$ 13,114
$ 4,697
(1) Corporate expenses consist of the Company’s enterprise shared service
cost centers, and include, among other items, Information Technology,
Human Resources, Accounting and Finance, Legal, Executive and
Customer Service Center functions, as well as Stock-Based Compensation.
In order to leverage the Company’s infrastructure, these functions are
operated under a centralized management platform, providing support
services throughout the organization. The costs of these functions, other
than those of the Customer Service Center, which are allocated directly to
the above segments based upon usage, are included within corporate
expenses, as they are not directly allocable to a specific segment.
(2) Segment contribution margin, during the year ended July 1, 2012,
includes a $3.8 million gain on the sale of 17 Fannie May retail stores,
which are being operated as franchised locations post-sale.
Note 16. Discontinued Operations
On September 6, 2011, the Company, through its
Winetasting Network subsidiary, completed the sale of
certain assets of its wine fulfillment services business
in order to focus on its core Direct-to-Consumer wine
July 1, July 3, June 27,
2012 2011 2010
(in thousands, except per share data)
Net revenues from
discontinued
operations $ 2,003 $18,184 $102,192
Income (loss) from
discontinued
operations,
net of tax $ (22) $ 202 $ 2,096
Income (loss) from
sale of discontinued
operations,
net of tax $ 4,542 $ –– $ (5,062)
Income (loss) from
discontinued
operations $ 4,520 $ 202 $ (4,220)
37
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 17. Commitments and Contingencies
Leases
The Company currently leases office, store facilities,
and equipment under various leases through fiscal 2019.
As these leases expire, it can be expected that in the
normal course of business they will be renewed or
replaced. Most lease agreements contain renewal
options and rent escalation clauses and require the
Company to pay real estate taxes, insurance, common
area maintenance and operating expenses applicable
to the leased properties. The Company has also entered
into leases that are on a month-to-month basis. These
leases are classified as either capital leases, operating
leases or subleases, as appropriate.
As of July 1, 2012 future minimum payments under
non-cancelable operating leases with initial terms of
one year or more consist of the following:
Operating
Leases
(in thousands)
2013
2014
2015
2016
2017
Thereafter
Total minimum lease payments
Less amounts representing interest
$12,463
11,450
7,359
6,879
6,120
13,290
$57,561
At July 1, 2012, 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)
2013
2014
2015
2016
2017
Thereafter
$1,972
1,234
657
439
231
$1,972
1,234
657
439
231
–– ––
$4,533 $4,533
Rent expense was approximately $17.4 million,
$17.7 million, and $18.1 million for the years ended July 1,
2012, July 3, 2011 and June 27, 2010, respectively.
Litigation
From time to time, the Company is subject to legal
proceedings and claims arising in the ordinary course
of business.
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. On March 6, 2012 and March 15, 2012,
two additional purported class action complaints were
filed in the United States District Court for the District of
Connecticut naming the Company and numerous other
parties as defendants in actions purporting to assert
claims substantially similar to those asserted in the
lawsuit filed on November 10, 2010. In each case,
plaintiffs seek to have the respective case certified as
a class action and seek restitution and other damages,
each in an amount in excess of $5.0 million. On April 26,
2012, the two Connecticut cases were consolidated with
a third case previously pending in the United States
District Court for the District of Connecticut in which the
Company is not a party. The Company intends to defend
each of these actions vigorously.
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. At this time, we are
unable to estimate a possible loss or range of possible
loss for the aforementioned actions for various reasons,
including, among others: (i) the damages sought are
indeterminate, (ii) the proceedings are in the very early
stages and the court has not yet ruled as to whether
the classes will be certified , and (iii) there is uncertainty
as to the outcome of pending motions. As a result of
the foregoing, we have determined that the amount
of possible loss or range of loss is not reasonably
estimable. However, legal matters are inherently
unpredictable and subject to significant uncertainties,
some of which may be beyond our control.
38
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 1, 2012 and
July 3, 2011, and the related consolidated statements
of operations, stockholders’ equity, and cash flows for
each of the three years in the period ended July 1, 2012.
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 disclo-
sures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the consoli-
dated financial position of 1-800-FLOWERS.COM, Inc.
and Subsidiaries at July 1, 2012 and July 3, 2011, and
the consolidated results of their operations and their
cash flows for each of the three years in the period
ended July 1, 2012, in conformity with U.S. generally
accepted accounting principles.
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 1, 2012, based on criteria established in Internal
Control—Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commis-
sion and our report dated September 14, 2012 expressed
an adverse opinion thereon.
Jericho, New York
September 14, 2012
39
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and
maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined
in Rules 13a-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 effectuated by the Company’s board of
directors, management and other personnel to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with U.S. generally
accepted accounting principles (“U.S. GAAP”), and
includes those policies and procedures that:
• pertain to the maintenance of records that, in reason-
able detail, accurately and fairly reflect the transactions
and dispositions of the assets of the Company;
• provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with U.S. GAAP, and that
receipts and expenditures of the Company are being
made in accordance with authorization of management
and directors of the Company; and
• 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. Projections of any evaluation of effective-
ness to future periods are subject to the risk that controls
may become inadequate because of changes in condi-
tions, or that the degree of compliance with the policies or
procedures may deteriorate.
Management, including the Company’s Chief Execu-
tive Officer and Chief Financial Officer, assessed the
effectiveness of the Company’s internal control over
financial reporting based on the framework established in
“Internal Control—Integrated Framework,” issued by the
Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this evaluation, manage-
ment concluded that the Company’s internal control over
financial reporting was not effective as of July 1, 2012 as
a result of a material weakness in the accounting and
disclosure for deferred income taxes as described below.
A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material
misstatement of the Company’s annual or interim
financial statements will not be prevented or detected
on a timely basis. The following material weakness was
identified as of July 1, 2012.
As of July 1, 2012, the Company did not maintain
effective controls over financial reporting for deferred
income taxes. Specifically, our processes and procedures
did not provide for adequate and timely identification of
deferred tax liabilities on non-amortizable intangibles
arising from historical acquisitions prior to fiscal 2007.
These errors in purchase price allocation subsequently
impacted the goodwill impairment charges recorded by
the Company in fiscal 2009. In connection with this
review, the Company also identified an issue related to
the treatment of deferred tax liabilities on basis differ-
ences related to fixed assets which were recorded in
error during fiscal years 2009 and prior.
As a result of the material weakness in our internal
control over financial reporting described above, man-
agement concluded that, as of July 1, 2012, its internal
control over financial reporting was not effective.
The Company’s independent registered public
accounting firm, Ernst & Young LLP, audited the effective-
ness of the Company’s internal control over financial
reporting as of July 1, 2012. Ernst & Young LLP’s report on
the effectiveness of the Company’s internal control over
financial reporting as of July 1, 2012 is set forth 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)
Remediation Plans for Material Weakness in Internal Control over Financial Reporting
Subsequent to year-end, the Company believes that it has implemented enhanced internal control procedures
to address the material weakness discussed above. In response to the identified material weakness in deferred
income taxes, management, with oversight from the Company’s Audit Committee, has dedicated significant in-house
and external resources to implement enhancements to the Company’s internal control over financial reporting so
as to remediate the material weakness described above. These ongoing efforts are focused on: (i) expanding our
organizational capabilities to improve our monitoring and governance processes over deferred income taxes,
(ii) implementing process improvements to strengthen our internal control and monitoring activities over deferred
taxes, and (iii) adding resources to the review and oversight process.
Changes in Internal Control over Financial Reporting
The Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer,
identified no changes in our internal control over financial reporting that occurred during the fiscal quarter ended
July 1, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
40
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’s) internal control over
financial reporting as of July 1, 2012, 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 maintain-
ing 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 assurance
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 evaluating the design and
operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as
we considered necessary in the 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 reason-
able 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
principles, 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 regard-
ing prevention or timely detection of unauthorized acquisi-
tion, 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.
A material weakness is a deficiency, or combination
of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material
misstatement of the Company’s annual or interim
financial statements will not be prevented or detected on
a timely basis. The following material weakness has been
identified and included in management’s assessment.
Management has identified a material weakness in
controls related to the Company’s process for deferred
income taxes. 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 1, 2012 and July 3, 2011 and the
related consolidated statements of operations, stockhold-
ers’ equity and cash flows for each of the three years in
the period ended July 1, 2012. This material weakness
was considered in determining the nature, timing and
extent of audit tests applied in our audit of the 2012
financial statements and this report does not affect our
report dated September 14, 2012, which expressed an
unqualified opinion on those financial statements.
In our opinion, because of the effect of the material
weakness described above on the achievement of the
objectives of the control criteria, 1-800-FLOWERS.COM, Inc.
and Subsidiaries has not maintained effective internal
control over financial reporting as of July 1, 2012, based
on the COSO criteria.
Jericho, New York
September 14, 2012
41
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 1, 2012 and July 3, 2011.
High Low
Year ended July 1, 2012
July 4, 2011 – October 2, 2011
October 3, 2011 – January 1, 2012
January 2, 2012 – April 1, 2012
April 2, 2012 – July 1, 2012
$ 3.42
$ 2.95
$ 3.13
$ 3.63
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
$ 2.10
$ 2.08
$ 2.20
$ 2.76
$ 1.52
$ 1.67
$ 2.18
$ 2.26
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
is a significantly larger number of beneficial owners. As of
September 1, 2012, there were approximately 14 stock-
holders of record of the Company’s Class B common stock.
Dividend Policy
Although the Company has never declared or paid
any cash dividends on its Class A or Class B common
stock, the Company anticipates that it will generate
increasing free cash flow in excess of its capital invest-
ment requirements. Although the Company has no
current intent to do so, the Company may choose, at
some future date, to use some portion of its cash for
the purpose of cash dividends.
Resales of Securities
36,838,802 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, 2012, 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 1, 2012, $8.5 million remains authorized but unused.
As of September 1, 2012, there were approximately
308 stockholders of record of the Company’s Class A
common stock, although the Company believes that there
Under this program, as of July 1, 2012, the Company
had repurchased 3,703,626, shares of common stock for
$17.8 million, of which $3.3 million (1,133,913 shares),
42
Market for Common Equity and Related Stockholder Matters (continued)
$0.5 million (168,207 shares), and $0.9 million (342,821 shares) were repurchased during the fiscal years ending
July 1, 2012, July 3, 2011 and June, 27, 2010, respectively.
The following table sets forth, for the months indicated, the Company’s purchase of common stock during the
fiscal year ended July 1, 2012, which includes the period July 4, 2011 through July 1, 2012:
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)
7/4/11 - 7/31/11
8/1/11 - 8/28/11
8/29/11 - 10/2/11
10/3/11 - 10/30/11
10/31/11 - 11/27/11
11/28/11 - 1/1/12
1/2/12 - 1/29/12
1/30/12 - 2/26/12
2/27/12 - 4/1/12
4/2/12 - 4/29/12
4/30/12 - 5/27/12
5/28/12 - 7/1/12
––
7.6
––
399.5
––
––
0.9
––
281.8
2.6
228.5
212.9
$ ––
$2.43
$ ––
$2.73
$ ––
$ ––
$2.92
$ ––
$2.88
$2.97
$3.01
$3.07
––
7.6
––
399.5
––
––
0.9
––
281.8
2.6
228.5
212.9
Total
1,133.9
$2.89 1,133.9
$11,825
$11,807
$11,807
$10,715
$10,715
$10,715
$10,712
$10,712
$ 9,900
$ 9,892
$ 9,203
$ 8,548
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 6/30/07 in stock or index, including reinvestment of dividends. Fiscal year ending June 30.
43
One Old Country Road, Suite 500
Carle Place, NY 11514
(516) 237-6000
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 multibrand website to enhance cross brand marketing
efforts, its ability to achieve its guidance for EBITDA and EPS
on a comparitive basis (adjusted for the gain from the sale
of 17 Fannie May stores) to grow at a double-digit pace in
fiscal 2013, and its expectation for Free Cash Flow to again
exceed $20 million for the year. These forward-looking state-
ments 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 discretion-
ary 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.
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 and Reindel LLP
80 Pine Street
New York, NY 10005
(212) 701-3000
Shareholder Inquiries
Copies of the Company’s reports on Forms
10-K and 10-Q as filed with the Securities
and Exchange Commission and additional
information about 1-800-FLOWERS.COM, Inc.
may be obtained by visiting the Investor
Relations section at www.1800flowersinc.com,
by calling 516-237-6113, or by writing to:
Investor Relations
1-800-FLOWERS.COM, Inc.
One Old Country Road, Suite 500
Carle Place, NY 11514
One Old Country Road, Suite 500, Carle Place, NY 11514
(516) 237-6000 • www.1800flowers.com