The Gifting
Destination for
All Your Celebratory
Occasions
ABOUT 1-800-FLOWERS.COM, INC.
1-800-FLOWERS.COM, Inc. is the world’s leading florist and gift shop. For more than 38 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 was awarded the 2014 Silver Stevie Award, recogniz-
ing the organization’s outstanding Customer Service and commitment to our 100% Smile Guarantee. 1-800-FLOWERS.COM
received a Gold Award for Best User Experience on a Mobile Optimized Site for the 2013 Horizon Interactive Awards. 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 premium, gift-quality fruits and other gourmet items from Harry & David®
(1-877-322-1200 or www.harryanddavid.com); 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); signature English
muffins and other bakery gifts from Wolferman’s (1-800-999-1910 or www.wolfermans.com); gift baskets and towers from
1-800-Baskets.com® (www.1800baskets.com); incredible, carved fresh fruit arrangements from FruitBouquets.com
(www.fruitbouquets.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 source for creative party ideas, must-read articles, online invitations and e-cards, all created to
help people celebrate holidays and the everyday. Shares in 1-800-FLOWERS.COM, Inc. are traded on the NASDAQ Global Select
Market, ticker symbol: FLWS.
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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.
Harry & David Joins the 1-800-FLOWERS.COM, Inc. Family of Brands
1-800-FLOWERS.COM, Inc. kicked off Fiscal 2015 in a big way – closing on its acquisition of Harry & David, a leading specialty
retailer and producer of branded premium gift-quality fruit, gourmet food products and other gifts. The addition of the iconic
Harry & David name to the Company’s growing family of great gifting brands helps extend its position as a leading, omni-channel
provider of gifts that resonate with customers for their ability to deliver smiles for all of their celebratory occasions. This combina-
tion will propel the Company’s total annual revenues to more than $1.1 billion in fiscal 2015 and offers numerous
opportunities to accelerate its top and bottom-line growth going forward.
Harry & David strives to be the authority for all gifting and entertaining occasions. Since 1934, its focus
has been delivering expertly crafted products backed by an extraordinary experience and unparalleled
service. Harry & David has been rooted in innovation since its founding brothers – Harry and David, of
course! – first tended their Royal Riviera® Pears in the Bear Creek Orchards of Medford, Oregon. Their
exquisite pears were soon in high demand, and they became the inspiration for an array of innovative
gift ideas. Today, Harry & David creates nearly everything that goes into its gourmet gifts, baskets,
and towers, including signature pears and peaches from its own orchards to artisanal chocolate
truffles and unique cookies and cakes made in its own candy kitchen and bakery. Each expertly
crafted gift is shipped to arrive on time, in perfect condition.
Years Ended
FINANCIAL HIGHLIGHTS
(From Continuing Operations(1))
JUNE 29, JUNE 30, JULY 1, JULY 3, JUNE 27,
2012
2014
2013
2011
2010
(in millions, except percentages and per share data)
Total Net Revenues
Gross Profit Margin
Operating Expense Ratio
Adjusted EBITDA (excluding stock based compensation ) $ 48.2 $ 48.9 $ 44.3(2) $ 38.3 $ 33.2(2)
EPS
$756.3 $735.5 $707.5 $661.4 $644.9
41.5% 41.4% 41.6% 40.5%
41.7%
39.6%
38.0% 38.5% 39.5%
38.6%
$ 0.22 $ 0.24 $ 0.20 $ 0.10 ($ 0.01)
(1) During the fourth quarter of fiscal 2013, the Company made the strategic decision to divest its Winetasting.com business. Therefore, the operating
results of Winetasting.com have been classified as a discontinued operation for all periods presented. Refer to the Company’s Annual Reports on Form
10-K for the fiscal years included in the tables and charts on this page for further discussion of this change as well as changes made in prior year periods
herein included.
(2) Fiscal 2012 and 2010 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 exclud-
ing 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)
Revenue
$756.3
Adjusted EBITDA(2)
$735.5
$48.9
$48.2
$707.5
$44.3
$661.4
$38.3
$644.9
$33.2
2014 % REVENUES
by Category
by Season
25%
24%
35%
1800Flowers.com® Consumer Floral
Jul-Sep (Fiscal 1st Quarter)
BloomNet® Wire Service
Oct-Dec (Fiscal 2nd Quarter)
Gourmet Food & Gift Baskets
Jan-Mar (Fiscal 3rd Quarter)
FY10
FY11
FY12
FY13
FY14
Apr-Jun (Fiscal 4th Quarter)
F I N A N C I A L R E P O R T
I N S E R T
S e e i n s i d e r e a r c o v e r p o c k e t
FISCAL 2014 ACHIEVEMENTS
• Grew total revenues 2.8% to $756.3 million.
• Increased revenues across all three business segments:
Consumer Floral, Gourmet Food & Gift Baskets and
BloomNet Wire Service.
• Grew free cash flow 34.0% to $19.6 million.
During fiscal 2014, we grew total net revenues from
continuing operations 2.8 percent, representing
the fifth consecutive year of revenue growth
for our Company. Revenues increased across
all three of our business segments – with
Consumer Floral up 2.4 percent, BloomNet
increasing 2.9 percent and Gourmet Foods
and Gift Baskets rising 3.6 percent. These
increases were achieved despite the continued
uneven consumer economy and the impact of
unusually severe winter weather across most of
the country.
l Our exclusive partnerships with Real Simple,
Isaac Mizrahi and Sandra Magsamen – highly
relevant brands that resonate with our
customers, and
l Continued expansion of our specialty
and personalized gifts – from unique
vases featuring up-loadable photos, to
our hit “Message in a Bottle ” to exclusive
gifts from Waterford, Lenox, Gund and
Yankee Candle – all designed to give
customers the ability to express themselves
personally and perfectly,
In terms of our bottom line, we achieved a strong
improvement in contribution margin in our Gourmet Food
and Gift Baskets segment as well as a solid increase in contribution in
our BloomNet wire service business. These increases were offset by a lower
contribution margin in our Consumer Floral segment primarily attributable
to lower than anticipated returns on our marketing spending and higher
costs associated with the impact of the severe snow and ice storms across
much of the country during the Valentine holiday period. Adjusted for the
weather impact, consolidated EBITDA and net income would have been
up for the year.
In terms of our financial strength and flexibility, we finished fiscal 2014
with no debt on our balance sheet and growing cash. Free Cash Flow for
the year increased 34 percent to $19.6 million primarily reflecting our
continued focus on managing working capital, the positive effect of which
more than offset an additional $2.9 million in capital expenditures incurred
during fiscal 2014, compared with the prior year, for the expansion of our
Cheryl’s brand bakery facility where we have more than doubled produc-
tion capacity to accommodate continued strong ecommerce growth in the
Cheryl’s business. We also continued our stock buyback program during
fiscal 2014, using approximately $8.3 million to buy back approximately
1.8 million shares of our stock.
EXPANDING FLORAL MARKET LEADERSHIP
In our flagship 1-800-FLOWERS.COM brand we have launched a number
of marketing and merchandising initiatives designed to drive top and
bottom-line performance. Among these are:
l Our new Local Exclusive Program in which local florists have the oppor-
tunity to feature their truly original floral arrangements and gift designs
on the 1-800-FLOWERS.COM website – showcasing them for millions of
customers across the country while tapping into the growing national
trend for locally designed and sourced products;
l Expanded geographic coverage and an expanded offering for our fast
growing FruitBouquets.com product line. Again featuring locally-
crafted, same-day gifts, the FruitBouqets.com line of beautifully carved
fresh fruit includes new party-size arrangements, “milestone” birthday
designs and keepsake containers, all perfect, shareable gifts for a broad
range of celebratory occasions,
l Enhancements to our Mobile commerce platform,
including optimization of our site for tablets; expansion of our
Social commerce efforts, partnering with Instagram, Facebook, Google
and others to increase customer engagement; and enhancements to
our loyalty and reminder programs.
We believe these initiatives, among others, help set 1-800-FLOWERS.COM
apart from the commodity and discount focused competition and will
help us mitigate the expected impact of the Saturday placement of the
Valentine holiday in 2015. Early traction for these efforts was reflected in
our fiscal 2015 first quarter results with revenue increasing four percent
and strong category contribution margin growth of nearly 13 percent for
the period. 1-800-FLOWERS.COM continues to grow at a faster rate and
off of a larger base, thus extending our leadership position in this space.
BLOOMNET INCREASING PENETRATION
Similarly, our BloomNet business has continued to expand its market
position versus the legacy wire service competitors through increased
penetration for its expanded suite of products and services. During fiscal
2014, BloomNet grew revenues 2.9 percent to more than $84 million while
concurrently increasing gross profit margin 240 basis points to more
than 53 percent. As a result, BloomNet delivered nearly $27 million in
contribution margin for the year. Importantly, BloomNet has established
itself as the “go-to” wire service for innovative products and services for
professional florists. These include such offerings as our:
l Unique, cloud-based BMS store management system,
l Floriology’s partnership with Udemy’s state-of-the art online educa-
tional network for florist training,
l The new digital version of Floriology magazine, a leading content
platform offering forward-looking articles and analysis of the latest
trends affecting florists, and
l Our new iPad and tablet in-store sales app – another industry first –
designed to help florists engage with their customers and drive sales.
We believe BloomNet is poised to grow both its revenues and bottom-
line contribution during fiscal 2015 as it deepens its relationships with
professional florists across the country and continues to expand its suite
of innovative products and services.
DELICIOUS GROWTH IN GOURMET FOODS AND GIFT BASKETS
In our Gourmet Foods and Gift Baskets segment we achieved strong
bottom-line results in fiscal 2014, primarily reflecting the effectiveness
of the measures we implemented to enhance operations at our
Fannie May Fine Chocolates business. Importantly, the changes we made
have positioned Fannie May to increase its focus on accelerating revenue
growth as it rolls out innovative marketing and merchandising programs
online, in the Mobile and Social arenas, in its retail stores and for its whole-
sale customers. As mentioned earlier, during fiscal 2014 we also invested
to expand our Cheryl’s bakery facility in Westerville, Ohio where we have
doubled the physical space and more than doubled our production
capacity in response to continued strong ecommerce demand for Cheryl’s
unique frosted cookies and brownies.
HARRY & DAVID JOINS OUR FAMILY OF BRANDS
At the end of our fiscal 2015 first quarter, we were very excited to an-
nounce the acquisition of Harry & David. The signature Harry & David
product offering includes its flagship Royal Riviera® pears, Fruit-of-the-
Month Club® products, Tower of Treats® gifts, Moose Munch® caramel and
chocolate popcorn snacks and Wolferman’s® specialty English muffins,
among other gift products. Combined with our existing family of great
gourmet gift brands, including Fannie May, Cheryl’s, The Popcorn Factory,
FruitBouquets.com, 1-800Baskets.com and Stockyards, Harry & David posi-
tions us as a leader in the growing, multi-billion dollar gourmet food and
gift basket space.
The acquisition will increase our total annual revenues to more than $1.1
billion in fiscal 2015 and includes Harry & David’s brands and websites, its
headquarters, orchards and manufacturing and distribution facilities in
Medford, Oregon, a warehouse and distribution facility in Hebron, Ohio
and 48 retail stores located throughout the country. Importantly, one of
the most valuable assets that came with the Harry & David acquisition is
its talented and passionate management team and associates located in
Medford, Oregon and around the country. This team has done a remark-
able job over the past several years of rebuilding the iconic Harry & David
brand and driving both top and bottom-line growth in a challenging
consumer environment.
We funded the all-cash acquisition through a new credit facility consisting
of a $142.5 million five-year term loan and a $200 million revolving credit
line to be used for working capital and other business needs. In addition
to its tremendous strategic value, the acquisition of Harry & David is signifi-
cantly accretive to our bottom line results before including any potential
additional benefits from operating or revenue generating synergies. We
believe there are a number of complimentary and highly leveragable as-
sets resulting from this acquisition that will provide opportunities for both
revenue growth and operational efficiencies going forward.
MULTI-BRAND WEBSITE LAUNCH
During fiscal 2014 we continued to invest and made significant progress in
the development of our new, multi-branded website. This unique gifting
website unites our growing family of great gift brands on one, unified plat-
form – with a shared shopping cart, shared address book, shared rewards
program and much more – and provides our customers with a single des-
tination where they can find truly original gifts for all of their celebratory
occasions. We believe the multi-brand website is a true game changer in
terms of enhancing our cross-brand marketing and merchandising efforts
and expanding national awareness for all of our great gifting brands. In
addition, we believe this strategy will help enhance the effectiveness and
efficiency of our marketing investments, across all brands and channels,
by driving customer traffic to our one-stop gift shop; creating a network
effect that will benefit all of our brands.
As we roll out the multi-branded site during fiscal 2015, we expect to gain
valuable learnings about what works and what, perhaps, doesn’t work
as well, and we will make adjustments accordingly along the way. We
are also looking forward to gaining valuable insights into our custom-
ers’ behaviors and interests, which will help us tailor our marketing and
merchandising programs going forward.
TOP AND BOTTOM-LINE GROWTH GUIDANCE
ACROSS ALL BUSINESS SEGMENTS
Fiscal 2015 guidance, including the anticipated contributions from
Harry & David, calls for total net revenues in excess of $1.1 billion. Reflect-
ing the highly seasonal nature of the Harry & David business (which has
historically generated the majority of its revenues and all of its profits
during the key, calendar-year-end holiday season) we anticipate that our
fiscal second quarter, ending December 28, 2014, will represent approxi-
mately 46-to-50 percent of total revenues for the fiscal year. In terms of
our bottom-line, we expect to generate:
l Adjusted EBITDA of approximately $90 million for fiscal 2015 (exclud-
ing transaction costs and purchase accounting adjustments related
to the Harry & David acquisition and the impact of stock-based
compensation) and
l Adjusted EPS in a range of $0.45-to-$0.50 per fully-diluted share
(excluding the aforementioned transaction-related costs and purchase
accounting adjustments, but including the impact of stock-based
compensation).
It is important to note that our top and bottom-line guidance for the full
fiscal 2015 year does not include Harry & David’s results for the fiscal first
quarter of the year which is typically their lowest in terms of revenues and
includes a substantial bottom-line loss. This reflects the seasonality of the
Harry & David business and the timing of the close of the acquisition at
the start of our fiscal 2015 second quarter.
EXCITING OPPORTUNITIES
Looking ahead, we are excited about the significant opportunities we see in our
business to accelerate top and bottom-line growth going forward, including:
l The addition of the iconic Harry & David brand,
l The new marketing and merchandising initiatives in our
1-800-FLOWERS.COM business,
l Our growing market position for BloomNet and
l Our new Multi-Brand Website.
While we remain cognizant of the continued challenges in the consumer
economy, we believe we are well positioned, with our growing family of
great gift brands, as a leading destination for our customer’s gifting and
celebratory occasions. As always, we are focused on building value for
all of our stakeholders and we thank you for your continued support.
Jim McCann
Chairman and CEO
Chris McCann
President
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On September 30, 2014,
1-800-FLOWERS.COM® acquired Harry
& David Holdings, Inc., combining the
world’s leading florist and gift shop
and its family of gourmet food brands
with the iconic Harry & David® line of
gift baskets, signature fruits and other
gourmet products. In addition to fur-
ther extending 1-800-FLOWERS.COM’s
position as the leading gifting destina-
tion for all its customers’ celebratory
occasions, the acquisition created an
omni-channel gift retailer with more
than $1.1 billion in annual sales.
The Harry & David® product offer-
ing includes such favorites as Royal
Riviera® pears, Fruit-of-the-Month
Club® products, Tower of Treats® gifts,
Moose Munch® snacks and Wolferman’s®
English muffins. The addition of Harry
& David to 1-800-FLOWERS.COM’s
great family of gourmet brands
including Fannie May®, Cheryl’s®, The
Popcorn Factory®, Fruit Bouquets®,
1-800-Baskets.com® and Stockyards.com®
makes the Company a leading player
in the gourmet food gift space and
offers many opportunities for cross
merchandising and marketing.
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The days leading up to the Valentine’s
holiday typically involve order
volumes as much as ten times normal
daily levels for 1-800-FLOWERS.COM®
as customers race to express their
love through the Company’s truly
original products. Key in meeting
the demand and helping millions of
customers “wow” their recipients for
Valentine’s Day and throughout the
year are BloomNet® Florists. As the
floral industry’s leading wire service
innovator, BloomNet offers an exten-
sive array of products and services
to thousands of local, professional
florists across the country. During
fiscal 2014 and continuing in fiscal
2015, BloomNet deepened its relation-
ships with professional florists and
enhanced its florist-to-florist order
sending opportunities through several
highly popular programs including
the “I Heart FLORISTS” sweepstakes –
asking BloomNet Florists to share their
thoughts about why they love being
a florist while providing diverse ways
for them to win valuable prizes by
increasing the orders they send.
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During fiscal 2014, 1-800-FLOWERS.COM®
furthered its commitment to providing
engaging mobile experiences that
make gifting quick and simple no
matter the device, time or location of
a purchase. The Company continued
to remain at the forefront of mobile
commerce by launching the floral
industry’s first tablet-optimized
experience. The site provides a superior
user interface by integrating tablet
specific features and content formatted
specifically for the mid-sized screen.
Additionally, the Company expanded
the number of one-click payment op-
tions offered across its mobile platforms
by implementing Google Wallet and
Visa Checkout. To further engage with
its customers, 1-800-FLOWERS.COM
also launched a partnership with
Kahuna, enabling the Company to
send tailored offers and messages to
its mobile app users.
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In fiscal 2014, 1-800-FLOWERS.COM®
continued to focus on social media
as a vital tool to engage customers.
The Company’s social-by-design
#JustBecause campaign, introduced
in fiscal 2013, continued to be highly
popular throughout fiscal 2014, as
customers engaged through the
Company’s social channels to share all
their “just because” reasons for giving.
Customers can also express their
thoughtfulness by choosing from
many “just because” gifts available
for as little as $5-delivered, including
delicious possibilities from Cheryl’s®
baked goods, Fannie May® Fine
Chocolates, The Popcorn
Factory® and 1-800-Baskets.com®.
1-800-FLOWERS.COM is also utilizing
social networks to enhance customer
service. This is exemplified by the Com-
pany’s dedicated Twitter team that,
on-average, responds to customer
inquiries and assists in resolving issues
within five minutes or less – among
the fastest in ecommerce, helping to
generate greater customer satisfac-
tion and loyalty and, most important,
deliver smiles.
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During fiscal 2014,
1-800-FLOWERS.COM® and its
BloomNet® wire service expanded their
commitment to local florists with the
introduction of the Local Exclusive
Florist Designed Program. The program
provides florists across the nation with
the unique opportunity to feature
their truly original product designs
on the 1-800-Flowers.com website,
showcasing their talents to millions of
consumers and creating widespread
sales possibilities. BloomNet also con-
tinued to solidify its relationships with
professional florists in several other
ways, including the monthly Floriology®
magazine filled with inspirational
ideas to help increase florists’ revenues.
In addition, florists can expand their
design skills at the Floriology Institute
in Jacksonville, Florida and BloomNet
is also collaborating with Udemy...
the world’s leading online learning
source...to provide a wide range of
profit-enhancing courses for florists
through Floriology Institute Online.
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(observed)
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1-800-FLOWERS.COM® continued to
underscore its dedication to local
communities in fiscal 2014 through
the “Summer of a Million Smiles” pro-
gram. For the third straight summer,
associates from each of the Com-
pany’s brands, along with BloomNet
Florists, volunteered their time and
shared their energy in local neighbor-
hoods – delivering smiles and posting
their stories on social networks.
Among the many heartwarming
stories were the numerous visits of
1-800-FLOWERS.COM associates to
veterans hospitals, cancer centers
and nursing homes to give out floral
bouquets and gourmet treats as well
as teaching surfing and crewing to
developmentally disabled children
and adults and contributing to the
World T.E.A.M. Sports 2014 Coastal
Team Challenge where teams of
disabled and able-bodied athletes
worked together to overcome
challenges and provide inspiration
for all involved.
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Consumers are increasingly look-
ing for uniquely personal ways to
express their thoughtfulness, and
1-800-FLOWERS.COM® has steadily
expanded its offerings of personalize-
able products across all of its brands.
For instance, customers can convey
birthday greetings and other senti-
ments from the heart with Message
in a Bottle® featuring a choice of pre-
printed poems or custom-created
messages. Another example includes
tins from The Popcorn Factory®
brimming with delectable treats
and personalized with customer-
uploaded photos. At the beginning
of fiscal 2015, 1-800-FLOWERS.COM
broadened the possibilities even
further through the launch of
PersonalizationUniverse.com – offering
customers the ability to create the
perfect, personal gift by placing their
favorite photos on everything from
coffee cups and T-shirts to smartphone
cases and wall art.
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1-800-FLOWERS.COM® continued to
widen the geographic footprint of its
Fruit Bouquets® brand during fiscal
2014, gaining increased national
coverage by leveraging the unique
design, confection and delivery capa-
bilities of florists around the country.
Consumers love these carved fresh
fruit arrangements boasting succulent
strawberries, delicious melons, juicy
grapes, sweet pineapples and sumptuous
oranges...each expertly crafted in gift
baskets and customized containers.
For many flower shops, Fruit Bouquets
provide an ideal extension to their
floral offering, creating exciting
gift alternatives for their customers
and generating increased revenues
for their businesses. Adding to the
momentum in fiscal 2014,
1-800-FLOWERS.COM further broad-
ened its growing number of Fruit
Bouquets fulfillers by signing up many
local gourmet shops and caterers.
SU NDAY
MO N DAY
TUES DAY
2
9
16
23
3
National Friendship
Week Begins
4
10
17
24
11
18
25
30
31
WE DNESDAY
THURSDAY
FRI DAY
SATURDAY
0
5
12
19
26
6
13
20
27
7
14
21
28
1
8
15
22
29
r
e
e
S
t
p
e m b
2 0 1 5
SU NDAY
MO N DAY
TUES DAY
Every 1-800-FLOWERS.COM® customer,
across all the Company’s brands, can
be confident that their gift buying
experience will be an exceptional one.
Embodying that commitment is a
caring team of associates obsessed
with service, backed by a 100% “Smile
Guarantee” that assures only the fresh-
est flowers and the very best gourmet
foods. In 2014, 1-800-FLOWERS.COM
was honored with the prestigious
Silver Stevie Award recognizing
customer service excellence. Further
illustrating the Company’s dedication
to providing a superior customer
experience, 1-800-FLOWERS.COM
Founder and CEO Jim McCann was
named a 2014 Customer Champion
by 1to1 Media, a leading multimedia
resource for customer service insight
and best practices.
6
7
Labor Day
13
Grandparents Day
Rosh Hashanah
Begins at Sunset
14
20
27
21
28
1
8
15
22
Yom Kippur
Begins at Sunset
29
WE DNESDAY
2
3
THURSDAY
FRI DAY
SATURDAY
4
5
11
Patriot Day
12
18
25
19
26
9
16
10
17
23
First Day of Fall
24
30
r
e
b
o
t
O c
2 0 1 5
1
SU NDAY
MO N DAY
TUES DAY
During the 2014 holiday season
1-800-FLOWERS.COM® unveiled its
new multi-brand website, enhancing
the shopping experience and reinforc-
ing the Company’s position as the
world’s leading gifting destination
for all its customers’ celebratory oc-
casions. Regardless of which “brand
door” customers enter, they now find
themselves in a unified gift shop pro-
viding a vast array of gifting options.
Customers can also benefit from many
features and functions that make it
more convenient than ever to act on
their thoughtfulness...such as one
shopping cart, one customer sign-in
and one recipient address book. Other
key enhancements include the unique,
points-based 1-800-FLOWERS.COM
“Celebrations Rewards” program and
the “Celebrations Passport” service
that provides free, year-round shipping
across all the Company’s brands.
4
11
18
25
5
6
12
Columbus Day
(observed)
13
19
26
20
27
1
WE DNESDAY
THURSDAY
FRI DAY
SATURDAY
1 2
2
8
National Children’s Day
9
3
10
15
22
29
16
National Boss’s Day
17
Sweetest Day
23
30
24
31
Halloween
7
14
21
28
r
e
v
e m b
N o
2 0 1 5
In fiscal 2014, the Business Gift Services
division of 1-800-FLOWERS.COM®
launched several programs designed
to expand the Company’s gifting ser-
vices for corporate accounts. Among
these were loyalty programs with
JetBlue, AARP, Caesars Entertainment,
and Visa Checkout. Additional key
initiatives included: continued growth
of employee soft benefits programs
for corporate customers through the
Company’s Business-2-Employee
marketplace supported by Nextjump,
Working Advantage, Perkspot,
Beneplace and others; and growth
in the gift card channel through
relationships with Discover, Martiz,
Gift Card Partners, Gift Tango, InComm
and others. The BGS division is
expecting a significant boost in fiscal
2015 from the addition of the Harry
& David brand and its iconic line of
gift products.
2
1
8
15
22
29
SU NDAY
MO N DAY
TUES DAY
3
Election Day
10
17
24
2
9
16
23
30
2
WE DNESDAY
4 1
5
11
Veterans Day
12
THURSDAY
FRI DAY
SATURDAY
6
13
20
7
14
21
28
19
18
25
26
Thanksgiving Day
27
r
e
c
e m b
D e
2 0 1 5
SU NDAY
MO N DAY
TUES DAY
The holidays simply wouldn’t be the
holidays without delicious treats for
family and friends to enjoy. Early in
fiscal 2015, 1-800-FLOWERS.COM®
acquired the beloved Harry & David®
brand and its diverse line of excep-
tional fruits, muffins, baskets and
other gifts. These favorites joined the
extensive assortment of scrumptious
choices from the 1-800-FLOWERS.COM
family of gourmet brands including
artisanal chocolates and chocolate-
dipped strawberries from Fannie
May®, enticing baked goods from
Cheryl’s®, irresistible snacks from The
Popcorn Factory®, and overflowing
gift baskets from 1-800-Baskets.com®.
Altogether, it adds up to the ultimate
array of thoughtful gifts, at virtually
every price point, to deliver a smile
to all the special people on every
customer’s holiday list.
6
Hanukkah Begins
at Sunset
7
13
20
27
14
21
28
1
8
15
22
First Day of Winter
29
WE DNESDAY
THURSDAY
FRI DAY
SATURDAY
4
11
18
5
12
19
25
Christmas Day
26
First Day of Kwanzaa
0 2
9
16
23
30
3
10
17
24
31
BOARD OF DIRECTORS
James F. McCann
Chairman and
Chief Executive Officer
1-800-FLOWERS.COM, Inc.
Christopher G. McCann
President
1-800-FLOWERS.COM, Inc.
Geralyn R. Breig
President
Clarks, Americas
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
Lawrence V. Calcano
President
iCapital Network, Inc.
Larry Zarin
Express Scripts, Inc.
Senior Vice President,
Chief Marketing Officer
Retired
Sean P. Hegarty
Managing Partner
Hegarty & Company
Fiscal Year 2014
Financial Report
Selected Financial Data
1-800-FLOWERS.COM, Inc. and Subsidiaries
The selected consolidated statement of operations data for the years ended June 29, 2014, June 30, 2013,
and July 1, 2012 and the consolidated balance sheet data as of June 29, 2014 and June 30, 2013, have been
derived from the Company’s audited consolidated financial statements included elsewhere in this Annual Report.
The selected consolidated statement of operations data for the years ended July 3, 2011 and June 27, 2010, and
the selected consolidated balance sheet data as of July 1, 2012, July 3, 2011 and June 27, 2010, 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 16 franchised stores from GB Chocolates on June 27, 2014, iFlorist in December 2013,
Pingg Corp in May 2013, Flowerama in August 2011, 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 completed the sale of certain assets of its wine
fulfillment services business operated by its Winetasting Network subsidiary. During the fourth quarter of fiscal 2013,
the Company made the strategic decision to divest the e-commerce and procurement businesses of The Winetasting
Network in order to focus on growth opportunities in its Gourmet Foods and Gift Baskets business segment. The
Company closed on the sale of its Winetasting Network business on December 31, 2013. As a result, the Company
has classified the results of its wine fulfillment services business as a discontinued operation for fiscal 2012, 2011
and 2010, and the results of the e-commerce and procurement businesses 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
June 29, June 30, July 1, July 3, June 27,
2014 2013 2012 2011 2010
(in thousands, except per share data)
Consolidated Statement of Operations Data:
Net revenues
Cost of revenues
Gross profit
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 and other, 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
Net income (loss)
Less: Net loss attributable to
noncontrolling interest
Net income attributable to
$756,345
440,672
315,673
194,847
22,518
54,754
19,848
291,967
––
23,706
(1,357)
22,349
8,403
13,946
$735,497
430,305
305,192
186,720
21,700
52,188
18,798
279,406
––
25,786
(991)
$707,517
414,940
292,577
181,199
20,426
51,474
19,540
272,639
3,789
23,727
(2,635)
$661,389
386,296
275,093
171,960
20,109
48,701
20,237
261,007
––
14,086
(3,993)
$644,913
383,981
260,932
169,396
17,581
48,468
20,257
255,702
––
5,230
(5,548)
24,795
21,092
10,093
(318)
9,073
15,722
7,771
13,321
4,325
$ 17,646
3,903
6,190
(468)
$ 5,722
465
(783)
(3,437)
$ (4,220)
729
$ 14,675
(3,401)
$ 12,321
$ (697)
$
––
$
––
1-800-FLOWERS.COM, Inc.
$ 15,372
$ 12,321
$ 17,646
Basic net income (loss) per common share
attributable to 1-800-FLOWERS.COM, Inc.
From continuing operations
From discontinued operations
Basic net income per common share
Diluted net income (loss) per common share
attributable to 1-800-FLOWERS.COM, Inc.
From continuing operations
From discontinued operations
Diluted net income per common share
Weighted average shares used in the calculation
of net income (loss) per common share:
Basic
Diluted
$
$
$
$
$
$
0.23
0.01
0.24
0.22
0.01
0.23
$ 0.24
$ (0.05)
$ 0.19
$ 0.21
$ 0.07
$ 0.27
$ 0.24
$ (0.05)
$ 0.19
$ 0.20
$ 0.07
$ 0.27
64,035
66,460
64,369
66,792
64,697
66,239
64,001
65,153
63,635
63,635
2
$
$
––
$
––
5,722
$ (4,220)
$
0.10
$ (0.01)
$ 0.09
$ 0.10
$ (0.01)
$ 0.09
$ (0.01)
$ (0.05)
$ (0.07)
$ (0.01)
$ (0.05)
$ (0.07)
Selected Financial Data (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
As of
June 29, June 30, July 1, July 3, June 27,
2014 2013 2012 2011 2010
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents
Working capital
Total assets
Long-term liabilities
Total 1-800-FLOWERS.COM, Inc.
$ 28,854
29,721
262,213
17,080
$ 5,203
17,511
267,569
7,144
154
16,886
250,073
5,039
$
$ 21,442
17,303
259,075
32,242
$ 27,843
22,963
256,936
48,745
stockholders’ equity
183,199
169,271
161,748
142,511
133,476
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 was awarded the 2014 Silver
Stevie Award, recognizing the organization’s outstanding
Customer Service and commitment to our 100% Smile
Guarantee. 1-800-FLOWERS.COM has been honored
in Internet Retailer’s “Top 500 Guide” for 2014.
Of Internet Retailer’s “2013 Top 100 E-Retailers,”
1-800-FLOWERS.COM was named one of 12 e-retailers
that LightningBuy mobile analysts deemed “exceptional
user interface for consumers using guest checkout.”
1-800-FLOWERS.COM received a Gold Award
for Best User Experience on a Mobile Optimized
Site for the 2013 Horizon Interactive Awards.
1-800-FLOWERS.COM is rated EXCELLENT by
StellaService which represents a general high quality
of service for its customer service performance.
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);
top quality steaks and chops from Stock Yards®
(www.stockyards.com); as well as premium branded
customizable invitations and personal stationery from
3
FineStationery.com® (www.finestationery.com). The
Company’s Celebrations® brand (www.celebrations.com)
is a source for creative party ideas, must-read articles,
online invitations and ecards, all created to help people
celebrate holidays and the everyday.
On August 30, 2014, the Company entered into a
definitive agreement to acquire Harry & David Holdings,
Inc (Harry & David), a leading multi-channel specialty
retailer and producer of branded premium gift-quality fruit,
gourmet food products and other gifts marketed under the
Harry & David®, Wolferman’s® and Cushman’s® brands.
The anticipated transaction, at a purchase price of $142.5
million, includes the Harry & David’s brands and websites
as well as its headquarters, manufacturing and distribution
facilities and orchards in Medford, Oregon, a warehouse
and distribution facility in Hebron, Ohio and 47 Harry &
David retail stores located throughout the country.
Harry & David’s revenues were approximately $380 million
in its fiscal 2013. 1-800-FLOWERS.COM, Inc. has secured
committed funding for the acquisition from JP Morgan
Chase and Wells Fargo Bank. The acquisition is expected to
close in October 2014, subject to the satisfaction of custom-
ary closing conditions, including regulatory approval. Unless
otherwise specified, the information contained in the Annual
Report of Form 10-K excludes Harry & David.
On September 6, 2011, the Company completed the
sale of certain assets of its wine fulfillment services
business operated by its Winetasting Network subsidiary.
During the fourth quarter of fiscal 2013, the Company
made the strategic decision to divest the e-commerce and
procurement businesses of The Winetasting Network in
order to focus on growth opportunities in its Gourmet
Foods and Gift Baskets business segment. The Company
closed on the sale of its Winetasting Network business on
December 31, 2013. The Company has classified the
results of its wine fulfillment services business as a
discontinued operation for fiscal 2012, and the results
of the e-commerce and procurement business of
Winetasting Network as discontinued operations for
all periods presented.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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,
trends in the housing market and availability 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 consumer spending.
Fiscal 2014 was a challenging year for the Company.
While the Company made significant strides to improve
the operating results of its Gourmet Food & Gift Baskets
segment, and continued to grow both the revenues and
contribution margin of BloomNet, these gains were
largely offset by the year-over-year decline within the
Consumer Floral segment. Subsequent to fiscal 2010, as
a result of operating expense reductions, productivity
improvements, and marketing efficiency and merchandis-
ing innovations, which drove cost effective revenue
growth, EBITDA steadily climbed through fiscal 2013. In
fiscal 2014, EBITDA declined for the first time since fiscal
2010, the low point of the recession for the Company.
During fiscal 2014, as the Company recognized some
improvement in the economy, it moved forward with plans
to increase marketing spend to spur demand. Although
the Company was able to increase revenue from $735.5
million in fiscal 2013 to $756.3 million in fiscal 2014,
generating revenue growth across all of its segments, as
a result of the negative effects of the severe weather
across much of the country during the Company’s fiscal 3rd
quarter, culminating with the Valentine’s Day blizzard,
combined with competitive pricing pressures and lacklus-
ter consumer demand, the increase in revenue was
insufficient to support the incremental operating spend.
Recognizing the need to balance the Company’s short
and long-term operating and financial objectives, the
primary objectives during fiscal 2015 is to return the
Consumer Floral segment to profitable growth, as well as
build on the revenue and earnings momentum generated
within the BloomNet and Gourmet Food & Gift Baskets
segments. Tempered by the current economic climate,
during fiscal 2015, the Company expects to grow EBITDA
and EPS at rates in excess of its revenue growth, reflecting
anticipated improvements in gross profit margin and
operating leverage. These expectations exclude the impact
of the planned acquisition of Harry & David Holdings, Inc.,
which is not scheduled to close until October 2014.
For fiscal 2015, the Company has planned a number
of initiatives that will enable it to drive enhanced top and
bottom-line growth, including:
•
launching the new consolidated customer database
and multi-brand website which should benefit all
brands by further enhancing the Company’s position
as the leading, one-stop destination for all of our
customers’ gifting and celebratory needs;
• growing the Fruitbouquets.com business, building
•
momentum toward national coverage;
stabilizing the Consumer Floral operations,
minimizing operational risk in order to return the
segment to EBITDA growth;
• growing BloomNet’s market position through its
innovative products, services and technology offerings
that continue to outpace the competition,
•
• expand production capacity at Cheryl’s to build on what
is already strong growth and customer loyalty, and
reinvigorate the Fannie May brand, where the new
management team is now turning their focus to driving
accelerated revenue growth.
The Company believes that these initiatives and its
continued focus on the following core values will drive
long-term profitable growth:
• Know and Take Care of Our Customer – by providing
the right products and the best services with consis-
tent, excellent quality and value to help them express
themselves and deliver smiles. 1-800-FLOWERS.COM
was awarded the 2014 Silver Stevie Award, recogniz-
ing the organization’s outstanding Customer Service
and commitment to our 100% Smile Guarantee.
1-800-FLOWERS.COM is rated “EXCELLENT” by
StellaService.
• Maintain and enhance our Financial Strength and
Flexibility - by seeking ways to reduce our operating
costs while strengthening our balance sheet and
adding flexibility to our capital structure. During
fiscal 2010, the Company completed the sale of its
non-strategic Home and Children’s Gifts business
and used the proceeds to further pay down term debt,
strengthening its balance sheet and revising its bank
credit facility to provide additional flexibility; in the
fourth quarter of fiscal 2013, the Company paid off all
of its long-term debt and closed on a new, cost
efficient bank credit facility; and in the second quarter
of fiscal 2014, the Company completed the sale of
the Winetasting Network.
• Continue to Innovate and Invest for the Future –
by investing in technology and new growth opportuni-
ties 1-800-FLOWERS.COM has been honored in
Internet Retailer’s “Top 500 Guide” for 2014. Of
Internet Retailer’s “2013 Top 100 E-Retailers,”
1-800-FLOWERS.COM was named one of 12
e-retailers that LightningBuy mobile analysts
deemed “exceptional user interface for consumers
using guest checkout.” 1-800-FLOWERS.COM received
a Gold Award for Best User Experience on a Mobile
Optimized Site for the 2013 Horizon Interactive Awards.
Faced with a still challenging economic climate, these
strategic investments, coupled with improved manufactur-
ing and labor efficiency plans and more targeted and
efficient advertising spend, will not only generate revenue
growth and consumer loyalty but position the Company to
achieve its strategic, financial and operational objectives in
the coming year, which in turn will build shareholder value.
4
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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, as well as its e-commerce and procurement
businesses of The Winetasting Network, which had
previously been included within its Gourmet Foods & Gift
Baskets category, have been classified as discontinued
operations and therefore excluded from category
information below.
Net Revenues from Continuing Operations:
Years Ended
June 29, June 30, July 1,
2014 % Change 2013 % Change 2012
(dollars in thousands)
Net revenues from continuing operations:
Adjusted EBITDA from continuing operations,
excluding stock-based compensation:
Years Ended
June 29, June 30, July 1,
2014 % Change 2013 % Change 2012
(dollars in thousands)
Category Contribution Margin(**)
1-800-Flowers.com
Consumer
Floral
BloomNet
Wire Service
Gourmet Food &
$ 40,252
(14.7%)
$ 47,193
20.6% $ 39,147
26,715
4.3%
25,611
14.6%
22,339
Gift Baskets(***) 27,122
33.3%
20,345 (32.6%)
30,193
Segment Contribution
Margin Subtotal 94,089
(50,535)
1.0%
(4.1%)
93,149
(48,565)
1.6%
91,679
(0.3%) (48,412)
43,554
(2.3%)
44,584
3.0%
43,267
4,664
8.9%
4,283 (11.7%)
4,850
Corporate(*)
EBITDA from
continuing
operations
Add: Stock-based
compensation
EBITDA from
1-800-Flowers.com
Consumer
Floral
BloomNet
Wire Service
Gourmet Food &
Gift Baskets
Corporate
Intercompany
eliminations
$421,336
2.4% $411,526
3.4% $398,184
84,199
2.9%
81,822 (0.9%)
82,582
continuing operations,
excluding stock-based
compensation
48,218
(1.3%)
48,867
1.6%
48,117
251,990
797 1.0%
3.6% 243,225 6.7%
2.1%
789
228,002
773
Adjusted for:
Gain on sale
of stores(***)
Adjusted EBITDA
–– ––
–– ––
(3,789)
(1,977) (6.0%)
(1,865)
7.9%
(2,024)
Total net revenues
from continuing
operations
$756,345
2.8% $735,497
4.0% $707,517
Gross Profit from Continuing Operations:
Years Ended
June 29, June 30, July 1,
2014 % Change 2013 % Change 2012
(dollars in thousands)
Gross profit:
1-800-Flowers.com
Consumer
Floral
BloomNet
Wire Service
Gourmet Food &
Gift Baskets
Corporate
Intercompany
eliminations
Total gross profit
from continuing
operations
$164,792
39.1%
0.7% $ 163,726
39.8%
5.7% $154,892
38.9%
44,900
53.3%
7.7%
105,092 6.3%
41.7%
889
(6.7%)
––
7.6%
0.5%
68.4%
41,674
50.9%
98,839
40.6%
953
––
38,737
46.9%
98,382
43.1%
566
––
$315,673
3.4% $ 305,192
4.3% $292,577
41.7%
41.5%
41.4%
from continuing operations,
excluding stock-based
compensation $ 48,218 (1.3%)
$ 48,867 10.2% $ 44,328
Reconciliation of income from continuing operations
to income from continuing operations attributable to
1-800-FLOWERS.COM, Inc.
Years Ended
June 29, June 30, July 1,
2014 2013 2012
Income from
continuing
operations
Less:
Net loss
attributable to
noncontrolling
interest
Income from
continuing
operations
attributable to
1-800-FLOWERS.COM, Inc.
Net income
per common share
from continuing operations
attributable to
1-800-FLOWERS.COM, Inc.
Basic
Diluted
5
$ 13,946
$ 15,722
$ 13,321
(697)
––
––
14,643
15,722
13,321
$
$
0.23
0.22
$
$
0.24
0.24
$
$
0.21
0.20
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Discontinued Operations:
Years Ended
June 29, June 30, July 1,
2014 2013 2012
(dollars in thousands)
Net revenues
from discontinued
operations $ 1,669
Gross profit
from discontinued
operations
EBITDA from
429
$ 5,154
$ 10,743
149
1,787
discontinued
operations
$ (868)
$ (2,769)
$ (672)
Due to certain one-time items, the following Non-GAAP
reconciliation table has been included within MD&A.
Reconciliation of Income from continuing operations
attributable to 1-800-FLOWERS.COM, Inc. to
adjusted EBITDA from continuing operations,
excluding stock-based compensation (**):
Years Ended
June 29, June 30, July 1,
2014 2013 2012
Income from
continuing
operations
attributable to
1-800-FLOWERS.COM, Inc.
Add:
$ 14,643
$ 15,722
$ 13,321
Interest expense and other, net
Depreciation and amortization
Income tax expense
1,357
19,848
8,403
991
18,798
9,073
2,635
19,540
7,771
Less:
Net loss
attributable to
noncontrolling
interest
697
EBITDA from continuing operations 43,554
4,664
Add: Stock-based compensation
EBITDA from continuing operations,
––
44,584
4,283
––
43,267
4,850
excluding stock-based
compensation
Less:
48,218
48,867
48,117
Gain on sale of stores (***)
––
––
3,789
Adjusted EBITDA from
continuing operations,
excluding stock-based
compensation
$ 48,218
$ 48,867
$ 44,328
(*) 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 segment.
(**) Performance is measured based on segment contribution margin or
segment 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 gains or 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 segment contribution margin during the
fiscal year ended July 1, 2012, includes a $3.8 million gain ($2.4 million,
net of tax) on the sale of 17 Fannie May retail stores.
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
2014, 2013 and 2012 consisted of 52 weeks which
ended on June 29, 2014, June 30, 2013 and July 1,
2012, respectively.
Net Revenues
Years Ended
June 29, June 30, July 1,
2014 % Change 2013 % Change 2012
(dollars in thousands)
Net revenues:
E-Commerce $ 548,976
207,369
Other
$ 756,345
2.3%
4.2%
2.8%
$536,550
198,947
$735,497
4.7% $512,247
1.9%
195,270
4.0% $707,517
Net revenues consist primarily of the selling price of
the merchandise, service or outbound shipping charges,
less discounts, returns and credits.
During the fiscal year ended June 29, 2014, revenues
increased by 2.8% in comparison to the prior year as a
result of revenue growth across all business segments.
This growth was driven by: i) a combination of new
product initiatives and increased marketing efforts
focusing on the Company’s “everyday” and “Just Be-
cause” campaigns, ii) incremental revenues generated by
the Company’s acquisition of a majority interest in iFlorist
on December 3, 2013, iii) continued improvements within
the BloomNet segment as a result of additional market
6
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
penetration, and iv) improvements within the Gourmet
Food & Gift Baskets segment as a result of the continued
rebound of DesignPac’s wholesale gift basket products,
and solid ecommerce growth within Cheryl’s bakery gifts
product line. These growth drivers were partially offset by:
i) the impact of severe winter weather beginning in
January, culminating with the winter storm that affected
much of the country during the key Valentine holiday, ii)
the calendar shift that resulted in six fewer shopping days
between Thanksgiving and Christmas, and by, iii) the
continuation of a difficult macro-economic climate,
especially for the sellers of discretionary products.
Adjusting for the pro-forma impact of the revenue
associated with the acquisition of a majority interest of
iFlorist, revenue increased approximately 1.8% during
the year ended June 29, 2014.
During the fiscal year ended June 30, 2013, revenues
increased by 4.0% in comparison to the prior year as a
result of: (i) continued growth within the Consumer Floral
segment, specifically due to strong 1-800-Flowers brand
sales during the key floral holidays, and (ii) growth within
the Gourmet Food & Gift Baskets segment, attributable
to strong e-commerce growth from Cheryl’s and The
Popcorn Factory brands, as well as by DesignPac’s
wholesale gift baskets business, which rebounded
after several years of declines, (iii) partially offset by
a decline within the BloomNet segment.
E-commerce revenues (combined online and tele-
phonic) increased by 2.3% during the year ended June
29, 2014 and 4.7% during the year ended June 30, 2013.
Revenue growth was attributable to: i) improved mer-
chandising programs (including the development of
innovative and original products such as the expanded
line of a-DOG-ables, Cheryl’s cookie cards and Fannie
May Berries), designed to “wow” our customers’ gift
recipients, ii) our “Just Because” and “Never Settle For
Less” marketing campaigns, and iii) the impact of the
acquisition of iFlorist in December 2013. During fiscal
2014, these efforts were partially offset by the severe
weather which impacted all of the Company’s brands,
especially during the 2014 Valentine holiday. The
Company fulfilled approximately 9.1 million, 8.9 million
and 8.2 million e-commerce orders during fiscal 2014,
2013 and 2012, respectively, while average order value
was $60.09 in fiscal 2014 compared to $60.59 in fiscal
2013 and $62.26 in fiscal 2012.
Other revenues, comprised of the Company’s
BloomNet Wire Service segment, as well as the whole-
sale and retail sales channels of its 1-800-Flowers.com
Consumer Floral and Gourmet Food and Gift Baskets
segments, increased by 4.2% and 1.9% during fiscal
2014 and fiscal 2013, respectively. The increased
revenue in fiscal 2014 and 2013 was primarily due to
growth in sales of DesignPac’s wholesale gift baskets,
partially offset by declines in Fannie May wholesale
volume as a result of prior years’ operational issues.
Fiscal 2014 also benefitted from growth within the
BloomNet WireService segment.
The 1-800-Flowers.com Consumer Floral segment
includes the operations of the 1-800-Flowers and iFlorist
7
brands, and derives revenue from the sale of consumer
floral products through its e-commerce sales channels
(telephonic and online sales), 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 June 29, 2014 and June 30, 2013
increased by 2.4% and 3.4% over the respective prior
year periods, due to increased order volumes, driven by
enhanced marketing and merchandising programs that
encourage our customers to “wow” their gift recipients
and “Never Settle For Less.” Excluding the impact of
the acquisition of iFlorist in December 2013, fiscal 2014
revenue growth within the 1-800-Flowers.com Consumer
Floral segment was 0.6%.
The BloomNet Wire Service segment includes
revenues from membership fees as well as other product
and service offerings to florists. Net revenues during
the fiscal year ended June 29, 2014 increased 2.9%,
as a result of higher membership fees and transaction
revenues, driven in part by pricing initiatives and in-
creases in order volume from 1-800-Flowers.com and
other BloomNet members, reflecting continued increases
in market penetration for the Company’s expanded suite
of products and services. Net revenues during the fiscal
year ended June 30, 2013 decreased by 0.9%, compared
to the prior year, as a result of a decline in lower margin
shop-to-shop order volume and a decline in wholesale
product sales, partially offset by growth in high margin
services, including web marketing, directory advertising
and the florist selection guide.
The Gourmet Food & Gift Baskets segment
includes the operations of Cheryl’s (which includes Mrs.
Beasley’s), Fannie May Confections, The Popcorn Factory,
1-800-Baskets/DesignPac, and Stockyards.com busi-
nesses. Revenue is derived from the sale of cookies,
baked gifts, premium chocolates and confections,
gourmet popcorn, gift baskets, and prime steaks and
chops through its e-commerce sales channels (tele-
phonic 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 (see below), as well as wholesale operations.
Net revenue during the fiscal year ended June 29, 2014
and June 30, 2013, increased by 3.6% and 6.7%,
respectively, in comparison to the prior years. The growth
for fiscal year ended June 29, 2014 was primarily due to
Cheryl’s e-commerce growth and the continued rebound
in DesignPac wholesale gift basket sales, partially offset
by the impact of the severe weather during the year.
Growth during the fiscal year ended June 30, 2013
was primarily due to e-commerce growth from Cheryl’s
and The Popcorn Factory brands due to new product
introductions, including items such as, “cookie bouquets”
and “cookie cards”, and the recovery of DesignPac’s
wholesale gift basket sales, which rebounded after
several years of declines, partially offset by a decline
in Fannie May wholesale volume.
For fiscal 2015, the Company expects to grow
revenues across all three of its business segments with
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
consolidated revenue growth for the year anticipated to be
in the mid-single-digit range. In June 2014, the Company
terminated its franchise agreement with GB Chocolates
and acquired 16 Fannie May stores GB had been operat-
ing under the agreement (as such, in fiscal 2015, retail
store sales growth will replace franchise revenues).
Gross Profit
Years Ended
June 29, June 30, July 1,
2014 % Change 2013 % Change 2012
(dollars in thousands)
Gross profit $315,673
Gross margin % 41.7%
$305,192
41.5%
3.4%
4.3% $292,577
41.4%
Gross profit consists of net revenues less cost of
revenues, which is comprised primarily of florist fulfillment
costs (primarily fees paid directly to florists), the cost of
floral and non-floral merchandise sold from inventory or
through third parties, and associated costs including
inbound and outbound shipping charges. Additionally,
cost of revenues include labor and facility costs related to
direct-to-consumer and wholesale production operations.
Gross profit increased 3.4% during the fiscal year
ended June 29, 2014, in comparison to the prior year
period, due to the aforementioned revenue growth,
including the acquisition of a majority interest in iFlorist,
combined with a 20 basis point expansion of gross
margin percentage, primarily attributable to improve-
ments within the Gourmet Food & Gift Basket and
BloomNet WireService segments, partially offset by the
impact of higher customer credits associated with the
severe weather experienced during the Valentine holiday.
Gross profit increased during the fiscal year ended June
30, 2013, in comparison to the prior year period, due to
the aforementioned revenue growth, combined with
gross margin expansion. The Company’s gross margin
percentage increased 10 basis points as a result of
improvements within the Consumer Floral segment, as
well as BloomNet, partially related to sales mix, offset
in part by an overall decrease in the gross margin
percentage achieved by the Gourmet Food & Gift
Baskets segment, resulting from operational difficulties
experienced by the Fannie May brand.
The 1-800-Flowers.com Consumer Floral segment
gross profit increased by 0.7% and 5.7% during the fiscal
years ended June 29, 2014 and June 30, 2013, respec-
tively, in comparison to the respective prior year periods,
due to the higher revenue, as described above. During
fiscal 2014, the Company experienced a decline in the
gross margin percentage of 70 basis points as a result of
lower margins associated with the newly acquired iFlorist
business, as well as higher customer credits issued
during the period due to the severe weather during the
Valentine holiday. Excluding the impact of the iFlorist
acquisition, gross margin percentage decreased 40 basis
points. During fiscal 2013 the Company’s gross margin
improved 90 basis points due to merchandising sourcing
and logistics initiatives, combined with reductions in
promotional activity.
8
The BloomNet Wire Service segment gross profit
increased by 7.7% and 7.6% during the fiscal years
ended June 29, 2014 and June 30, 2013, respectively.
The gross profit increases are primarily the result of an
increase in higher margin service offerings, including
membership/transaction fees, web-marketing and
directory advertising programs. The higher revenue
growth and mix of these fees, in comparison to sales of
lower margin product sales, such as vases, resulted in
margin expansion from 46.9% in fiscal 2012 to 50.9%
in fiscal 2013 and 53.3% in fiscal 2014.
The Gourmet Food & Gift Baskets segment gross profit
increased by 6.3% during the fiscal year ended June 29,
2014, in comparison to the prior year, due to the afore-
mentioned revenue increases, as well as through gross
margin expansion of 110 basis points due to the opera-
tional improvements implemented at Fannie May, as well
as manufacturing and production efficiencies, partially
offset by promotional offers and customer service issues
resulting from the inclement weather during the year.
Gross profit increased by 0.5% during the fiscal year
ended June 30, 2013, in comparison to the prior year,
due to the above mentioned revenue increases, partially
offset by a decrease in gross margin percentage of 250
basis points. This decrease in gross margin percentage
was primarily attributable to production/distribution issues
at Fannie May, combined with the impact of product mix
which reflected an increase in lower margin DesignPac
wholesale gift baskets, and a decrease in higher margin
Fannie May retail volume due to the prior year sale of 17
Fannie May stores.
For fiscal 2015, the Company expects its gross margin
percentage will improve in comparison to fiscal 2014 as a
result of expected changes in sales mix, and additional
improvements in product sourcing, supply chain and
manufacturing efficiencies.
Marketing and Sales Expense
Years Ended
June 29, June 30, July 1,
2014 % Change 2013 % Change 2012
(dollars in thousands)
Marketing and
sales $194,847 4.4%
$186,720
3.0% $181,199
Percentage of
sales
25.8%
25.4%
25.6%
Marketing and sales expense consists primarily
of advertising and promotional expenditures, catalog
costs, online portal and search costs, retail store and
fulfillment operations (other than costs included in cost
of revenues) and customer service center expenses,
as well as the operating expenses of the Company’s
departments engaged in marketing, selling and
merchandising activities.
During the fiscal year ended June 29, 2014, marketing
and sales expenses increased 4.4%, compared to the
prior year, as a result of: (i) increased advertising pro-
grams implemented by the 1-800-Flowers.com brand in
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
order to spur demand, (ii) the impact of the acquisition of
iFlorist, and (iii) higher labor due to increase in service
center costs in order to improve service levels and handle
increased service calls caused by the severe weather
during the year. Although this increase in advertising
drove incremental volume, as a result of the severe winter
weather, culminating with the Valentine blizzard, as well
as lackluster consumer demand, marketing and sales
expense, as a percentage of net revenues, increased
from 25.4% in fiscal 2013 to 25.8% in fiscal 2014.
During the fiscal year ended June 30 2013, marketing
and sales expense increased by 3.0%, compared to the
prior year, as a result of: (i) higher advertising costs
incurred by the 1-800-Flowers brand, which drove cost
efficient revenue growth, and for the successful launch
of Fannie May Berries, (ii) increased labor due to growth
initiatives within the 1-800-Flowers brand, and incremen-
tal labor required to support the growth achieved by the
DesignPac wholesale business. However, as a result
of the Company’s continued focus on improving its
merchandising programs, refocusing marketing mes-
sages, and enhancing the efficiency of advertising
efforts, marketing and sales expense, as a percentage
of net revenues, decreased from 25.6% in fiscal 2012
to 25.4% in fiscal 2013.
During the fiscal year ended June 29, 2014, the
Company added approximately 2.4 million new e-
commerce customers, compared to 2.3 million in fiscal
2013 and 2.0 million in fiscal 2012. Of the 4.9 million total
customers who placed e-commerce orders during fiscal
2014, approximately 52% were repeat customers, (52%
in fiscal 2013).
Technology and Development Expense
Years Ended
compared to the prior year, as a result of increased labor
costs required to support and implement new strategic
architecture programs, including website and supply
chain improvement initiatives.
During the fiscal years ended June 29, 2014,
June 30, 2013 and July 1, 2012, the Company
expended $36.6 million, $37.3 million and $32.7
million, respectively, on technology and development,
of which $14.1 million, $15.6 million, and $12.3 million,
respectively, has been capitalized.
General and Administrative Expense
Years Ended
June 29, June 30, July 1,
2014 % Change 2013 % Change 2012
(dollars in thousands)
General and
administrative
$ 54,754
4.9% $52,188 1.4% $ 51,474
Percentage of
sales
7.2%
7.1%
7.3%
General and administrative expense consists of
payroll and other expenses in support of the Company’s
executive, finance and accounting, legal, human re-
sources and other administrative functions, as well as
professional fees and other general corporate expenses.
General and administrative expense increased by
4.9% and 1.4% during fiscal 2014 and fiscal 2013,
compared to their respective prior years, as a result of
increased health care costs and worker’s compensation
claims, bad debt expense, and annual compensation rate
increases, partially offset by decreases in performance
based bonuses.
June 29, June 30, July 1,
2014 % Change 2013 % Change 2012
Depreciation and Amortization
Years Ended
(dollars in thousands)
Technology and
development
Percentage of
$ 22,518
3.8% $ 21,700 6.2% $ 20,426
sales
3.0%
3.0%
2.9%
Technology and development expense consists
primarily of payroll and operating expenses of the
Company’s information technology group, costs associ-
ated with its websites, including hosting, design, content
development and maintenance and support costs related
to the Company’s order entry, customer service, fulfillment
and database systems.
During the fiscal year ended June 29, 2014, technol-
ogy and development expense increased by 3.8%,
compared to the prior year, as a result of increased
license/maintenance costs to support the Company’s IT
infrastructure, as well as restructuring costs incurred to
realign personnel to accommodate the launch of the
Company’s new multi-branded portal during fiscal 2015.
During the fiscal year ended June 30, 2013, technol-
ogy and development expense increased by 6.2%,
9
June 29, June 30, July 1,
2014 % Change 2013 % Change 2012
(dollars in thousands)
Depreciation and
amortization
Percentage of
5.6% $18,798 (3.8%)
$ 19,848
$ 19,540
sales
2.6%
2.6%
2.8%
Depreciation and amortization expense increased by
5.6% during the fiscal year ended June 29, 2014 compared
to the prior year period, as a result of incremental expenses
associated with the acquisition of iFlorist, as well as
increased capital spending, including technology upgrades.
Depreciation and amortization expense decreased
by 3.8% during the fiscal year ended June 30, 2013,
compared to the prior year periods, as a result of the
Company’s efforts in prior years to reduce capital
expenditures as the Company was leveraging its
existing technology platform.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Interest Expense and other, net
Years Ended
June 29, June 30, July 1,
2014 % Change 2013 % Change 2012
(dollars in thousands)
Interest expense
and other, net
$ (1,357)
(36.9%)
$ (991) 62.4% $ (2,635)
Interest expense and other, net consists primarily of
interest expense and amortization of deferred financing
costs attributable to the Company’s credit facility, net of
income earned on the Company’s available cash
balances, as well as investment income by the
Company’s Non-Qualified Deferred Compensation
Plan, and its equity interest in Flores Online.
Interest expense and other, net increased during the
fiscal year ended June 29, 2014, in comparison to the
prior year, due to losses from its equity interest in Flores
Online, partially offset by decreases in interest expense
on the Company’s credit facility as a result of net reduc-
tion in borrowings outstanding during the period, and
increases in investment income in the Company’s Non-
Qualified Deferred Compensation Plan.
Interest expense and other, net decreased during the
fiscal year ended June 30, 2013, in comparison to the
respective prior year, due to repayments of amounts
outstanding under the Company’s previous term loan,
combined with reduced borrowing rates.
Income Taxes
During the fiscal years ended June 29, 2014, June 30,
2013 and July 1, 2012, the Company recorded income
tax expense of $8.4 million, $9.1 million and $7.8 million,
respectively, resulting in an effective tax rate of 37.6%,
36.6% and 36.8%, respectively. The Company’s effective
tax rate differed from the U.S. federal statutory rate of
35% primarily due to the impact of state income taxes,
rate changes, various tax credits/settlements as well
as non-deductible stock-based compensation and
goodwill amortization.
At June 29, 2014 the Company’s federal and foreign
net operating loss carryforwards were $2.8 million and
$5.1 million respectively, while the tax effected state net
operating loss was $3.3 million, before federal benefit,
which if not utilized, will begin to expire in fiscal year
2025, indefinitely, and 2015, respectively.
Discontinued Operations
On September 6, 2011, the Company completed the
sale of certain assets of its wine fulfillment services
business operated by its Winetasting Network subsidiary.
The sales price consisted of $12.0 million of cash
proceeds at closing, resulting in a gain on sale of $8.7
million ($4.5 million, net of tax). During the fourth quarter
of fiscal 2013, the Company made the strategic decision
to divest the e-commerce and procurement businesses of
The Winetasting Network in order to focus on growth
opportunities in its Gourmet Foods and Gift Baskets
business segment. The Company closed on the sale of its
10
e-commerce and procurement businesses on December
31, 2013. The Company had originally estimated a loss of
$2.3 million ($1.5 million, net of tax), which was provided
for during the fourth quarter of fiscal 2013, but the loss
was reduced to $1.0 million, upon finalization of terms
and closing on the sale. As a result, the Company
reversed $1.3 million ($0.8 million, net of tax) of its
accrual for the estimated loss during the fiscal year ended
June 29, 2014. The Company has classified the results of
its wine fulfillment services business as a discontinued
operation for fiscal 2012 and 2011, and the e-commerce
and procurement business of Winetasting Network as a
discontinued operation for all periods presented.
Results for discontinued operations are as follows:
Years Ended
June 29, June 30, July 1,
2014 2013 2012
(dollars in thousands)
Net revenues
from discontinued
operations
Gross profit
$ 1,669
from discontinued
$
operations
429
$ 5,154
$ 10,743
$ 149
$ 1,787
Loss from
discontinued
operations,
net of tax
Gain (loss)
on sale of
discontinued
operations,
net of tax
Income (loss)
$ (86)
$ (1,889)
$ (217)
$ 815
$ (1,512)
$ 4,542
from discontinued
operations
$ 729
$ (3,401)
$ 4,325
Liquidity and Capital Resources
Cash Flows
At June 29, 2014, the Company had working capital
of $17.5 million, including cash and cash equivalents of
$5.2 million, compared to working capital of $16.9 million,
including cash and cash equivalents of $0.2 million, at
June 30, 2013.
Net cash provided by operating activities of $42.5
million for the fiscal year ended June 29, 2014 was
primarily related to net income, adjusted for non-cash
charges for depreciation and amortization and stock-
based compensation, offset by a slight increase in
working capital. Increases in inventory primarily relate
to prepositioning of product, resulting from known
increases in holiday commitments from customers.
Net cash used in investing activities of $31.5 million
for the fiscal year ended June 29, 2014 was primarily
attributable to capital expenditures related to the
Company’s technology infrastructure, and the expansion
of the Cheryl’s manufacturing facility, as well as the
increased investment to a majority ownership interest in
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
iFlorist, a UK based online floral gift provider, and the
purchase of Fannie May stores previously franchised to
GB Chocolates.
Net cash used in financing activities of $6.0 million for
the fiscal year ended June 29, 2014 was primarily
attributable to the acquisition of $8.3 million of treasury
stock, partially offset by proceeds from exercise of
employee stock options and excess tax benefits from
stock based compensation. All working capital borrow-
ings under the Company’s revolving credit facility were
repaid by the end of the fiscal year.
Credit Facility
On April 10, 2013, the Company repaid all amounts
outstanding under its 2010 Credit Facility, and entered
into a Third Amended and Restated Credit Agreement
(the “2013 Credit Facility”). The 2013 Credit Facility
consists of a revolving line of credit with a seasonally
adjusted limit ranging from $150.0 to $200.0 million and a
working capital sublimit ranging from $25.0 to $75.0
million. The 2013 Credit Facility also revised certain
financial and non-financial covenants, including the
maintenance of certain financial ratios. The Company was
in compliance with these covenants as of June 29, 2014
and June 30, 2013. Outstanding amounts under the 2013
Credit Facility, which matures on April 10, 2018, bear
interest at the Company’s option at either: (i) LIBOR, plus
a spread of between 150 and 225 basis points, as
determined by the Company’s leverage ratio, or (ii) the
agent bank’s prime rate plus a margin. The obligations of
the Company and its subsidiaries under the 2013 Credit
Facility are secured by liens on all personal property of
the Company and its domestic subsidiaries.
Despite the current challenging economic environ-
ment, the Company believes that cash flows from
operations along with available borrowings from its 2013
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. It is anticipated that any borrow-
ings required subsequent to the end of the fiscal second
quarter will be for non-working capital purposes, such as
capital additions, including the completion of the Cheryl’s
production facility expansion, as well as stock repur-
chases and acquisitions.
On August 30, 2014, the Company entered into a
definitive agreement to acquire Harry & David Holdings,
Inc. (Harry & David), a leading multi-channel specialty
retailer and producer of branded premium gift-quality fruit,
gourmet food products and other gifts marketed under the
Harry & David®, Wolferman’s® and Cushman’s® brands.
The Company has secured committed financing for the
$142.5 million purchase price, and working capital
requirements, from certain members of its banking
syndicate. The acquisition is expected to close in October
2014, subject to the satisfaction of customary closing
conditions, including regulatory approval.
Stock Repurchase Program
The Company has a stock repurchase plan through
which purchases can be made from time to time in the
open market and through privately negotiated transac-
tions, subject to general market conditions. The repur-
chase program is financed utilizing available cash. In
March 2013, the Company’s Board of Directors autho-
rized an increase of $20 million to its stock repurchase
plan. The Company repurchased a total of $8.3 million
(1,561,206 shares), $9.6 million (2,490,065 shares) and
$3.3 million (1,133,913 shares) during the fiscal years
ended June 29, 2014, June 30, 2013 and July 1, 2012,
respectively, under this program. As of June 29, 2014,
$10.6 million remains authorized under the plan.
Contractual Obligations
At June 29, 2014, the Company’s contractual obliga-
tions 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)
Operating lease obligations
Sublease obligations
Purchase commitments(*)
$ 14,141
740
47,236
$ 73,522
3,621
49,502
$ 25,754
1,238
2,260
16,834
588
6
$
Total
$126,645
$ 62,117
$ 29,252
$
17,428
(*) Purchase commitments consist primarily of inventory and equipment purchase orders made in the ordinary course of business.
11
$ 16,793
1,055
––
$ 17,848
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Critical Accounting Policies and Estimates
The Company’s discussion and analysis of its
financial position and results of operations are based
upon the consolidated financial statements of 1-800-
FLOWERS.COM, Inc., which have been prepared in
accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements
requires management to make estimates and assump-
tions that affect the reported amount of assets, liabilities,
revenue and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis,
management evaluates its estimates, including those
related to revenue recognition, inventory and long-lived
assets, including goodwill and other intangible assets
related to acquisitions. Management bases its estimates
and judgments on historical experience and on various
other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for
making judgments about the carrying values of assets
and liabilities. Actual results may differ from these
estimates under different assumptions or conditions.
Management believes the following critical accounting
policies, among others, affect its more significant judg-
ments and estimates used in preparation of its consoli-
dated financial statements.
Revenue Recognition
Net revenues are generated by e-commerce opera-
tions from the Company’s online and telephonic sales
channels as well as other operations (retail/wholesale)
and primarily consist of the selling price of merchandise,
service or outbound shipping charges, net of discounts,
returns and credits. Net revenues are recognized
primarily 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. Member-
ship 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.
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. In establishing the appropriate provisions for
customer receivable balances, the Company makes
assumptions with respect to their future collectability.
The Company’s assumptions are based on an assess-
ment of a customer’s credit quality as well as subjective
12
factors and trends, including the aging of receivable
balances. Once the Company considers the factors
above, an appropriate provision is made, which takes into
account the severity of the likely loss on the outstanding
receivable balance based on the Company’s experience
in collecting these amounts. If the financial condition of
the Company’s customers or franchisees were to deterio-
rate, resulting in an impairment of their ability to make
payments, additional allowances may be required.
Inventory
Inventories are valued at the lower of cost or market
using the first-in, first-out method of accounting. The
Company also records an inventory obsolescence
reserve, which represents the difference between the
cost of the inventory and its estimated realizable value,
based on various product sales projections. This reserve
is determined by analyzing inventory skus based on age,
expiration, historical trends and requirements to support
forecasted sales. In addition, and as necessary, the
Company may establish specific reserves for future
known or anticipated events.
Goodwill
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 allo-
cated to its reporting units. Goodwill is not amortized, but it
is subject to an annual assessment for impairment, which
the Company performs during the fourth quarter, or more
frequently if events occur or circumstances change such
that it is more likely than not that an impairment may exist.
The Company tests goodwill for impairment at the
reporting unit level. The Company identifies its reporting
units by assessing whether the components of its operat-
ing segments constitute businesses for which discrete
financial information is available and management of each
reporting unit regularly reviews the operating results of
those components. Goodwill impairment testing involves
a two-step process. The first step requires comparison of
the fair value of each of the reporting units to the respective
carrying value. If the carrying value of the reporting unit is
less than the fair value, no impairment exists and the
second step is not performed. If the carrying value of the
reporting unit is higher than the 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 an equal weighting of the income and
market approaches. The Company uses industry ac-
cepted valuation models and set criteria that are re-
viewed and approved by various levels of management
and, in certain instances, the Company engages third-
party valuation specialists for advice. Under the income
approach, the Company uses a discounted cash flow
methodology which requires management to make
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
significant estimates and assumptions related to fore-
casted revenues, gross profit margins, operating income
margins, working capital cash flow, perpetual growth
rates, and long-term discount rates, among others. For
the market approach, the Company uses the guideline
public company method. Under this method the Company
utilizes information from comparable publicly traded
companies with similar operating and investment
characteristics as the reporting units, to create valuation
multiples that are applied to the operating performance
of the reporting unit being tested, in order to obtain their
respective fair values. The Company also reconciles the
aggregate fair values of its reporting units determined in
the first step (as described above) to its current market
capitalization, allowing for a reasonable control premium.
Based on the goodwill impairment test performed
during the fourth quarter of fiscal 2014, the estimated fair
value of the Company’s reporting units significantly
exceeded their respective carrying value (including
goodwill allocated to each respective reporting unit).
Future changes in the estimates and assumptions above
could materially affect the results of our reviews for
impairment of goodwill. However, as a measure of
sensitivity, a 34% decrease in the fair value of the
Company’s reporting units as of June 29, 2014,
would have had no impact on the carrying value of the
Company’s goodwill. In addition, a decrease of 100
basis points in our terminal (perpetual) growth rate or an
increase of 100 basis points in our weighted-average
cost of capital would still result in a fair value calculation
exceeding our book value for each of our reporting units.
Other Intangibles and Long-Lived Assets
Other intangibles consist of definite-lived intangible
assets (such as investment in licenses, customer lists,
and others) and indefinite-lived intangible assets (such
as acquired trade names and trademarks). The cost of
definite-lived intangible assets 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, while indefinite-lived intangible assets are
not amortized.
Long-lived assets, such as definite-lived intangibles
and property, plant and equipment are reviewed for
impairment whenever changes in circumstances or
events may indicate that the carrying amounts are not
recoverable. When such events or changes in circum-
stances occur, a recoverability test is performed compar-
ing projected undiscounted cash flows from the use and
eventual disposition of an asset or asset group to its
carrying value. If the projected undiscounted cash flows
are less than the carrying value, then an impairment
charge would be recorded for the excess of the carrying
value over the fair value, which is determined by dis-
counting future cash flows.
The Company tests indefinite-lived intangible assets
for impairment at least annually, during the fourth quarter,
or whenever changes in circumstances or events may
indicate that the carrying amounts are not recoverable.
The impairment test for indefinite-lived intangible assets
encompasses calculating a fair value of an indefinite-
13
lived intangible asset and comparing the fair value to
its carrying value. If the carrying value exceeds the fair
value, impairment is recognized for the difference.
To determine fair value of other indefinite-lived intangible
assets, the Company uses an income approach, the
relief-from-royalty method. This method assumes that,
in lieu of ownership, a third party would be willing to pay
a royalty in order to obtain the rights to use the compa-
rable asset. Other indefinite-lived intangible assets’ fair
values require significant judgments in determining both
the assets’ estimated cash flows as well as the appropri-
ate discount and royalty rates applied to those cash flows
to determine fair value.
Based on the indefinite-lived intangible assets
impairment test performed during the fourth quarter of
fiscal 2014, the estimated fair value of the Company’s
intangibles significantly exceeded their respective
carrying value. Future changes in the estimates and
assumptions above could materially affect the results
of our reviews for impairment of intangibles.
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 recog-
nizes as a deferred tax asset, the tax benefits associated
with losses related to operations. 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 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.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Recently Adopted Accounting Pronouncements
In July 2012, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2012-02, “Testing Indefinite-Lived Intangible
Assets for Impairment,” which allows entities to use a
qualitative approach to test indefinite-lived intangible
assets for impairment. ASU No. 2012-02 permits an entity
to first assess qualitative factors to determine whether it
is more likely than not that the fair value of the indefinite-
lived intangible asset is less than its carrying value. If it is
concluded that this is the case, it is necessary to perform
the currently prescribed quantitative impairment test.
Otherwise, the quantitative impairment test is not
required. This ASU became effective for annual and
interim goodwill impairment tests performed for the
Company’s fiscal year ending June 29, 2014. The
adoption of this standard did not have a material impact
on the Company’s consolidated financial statements.
Recent Accounting Pronouncements
In April 2014, the FASB issued ASU No. 2014-08,
“Presentation of Financial Statements (Topic 205) and
Property, Plant and Equipment (Topic 360).” ASU No.
2014-08 amends the requirements for reporting discon-
tinued operations and requires additional disclosures
about discontinued operations. Under the new guidance,
only disposals representing a strategic shift in operations
or that have a major effect on the Company’s operations
and financial results should be presented as discontin-
ued operations. This new accounting guidance is effective
for the Company’s fiscal year ending July 3, 2016, and
may be applied retrospectively. We are currently evaluat-
ing the potential impact of adopting this guidance on our
consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09,
“Revenue from Contracts with Customers.” This amended
guidance will enhance the comparability of revenue
recognition practices and will be applied to all contracts
with customers. Expanded disclosures related to the
nature, amount, timing, and uncertainty of revenue that
is recognized are requirements under the amended
guidance. This guidance will be effective for the
Company’s fiscal year ending July 1, 2018 and may
be applied retrospectively. We are currently evaluating
the potential impact of adopting this guidance on our
consolidated financial statements.
Quantitative and Qualitative Disclosures
About Market Risk
The Company’s earnings and cash flows are subject to
fluctuations due to changes in interest rates primarily from
its investment of available cash balances in money market
funds and investment grade corporate and U.S. government
securities, as well as from outstanding debt. As of June 29,
2014, the Company had no debt outstanding under its credit
agreement, as all amounts previously outstanding were
paid off during the fourth quarter of fiscal 2013.
The Company does not enter into derivative transac-
tions for trading purposes, but rather, on occasion, to
14
manage its exposure to interest rate fluctuations. The
Company has managed 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 had 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 was included as a compo-
nent of accumulated other comprehensive income.
Special Note Regarding Forward-Looking
Statements
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 current expectations
or beliefs concerning future events and can generally be
identified by the use of statements that include words
such as “estimate,” “expects,” “project,” “believe,” “antici-
pate,” “intend,” “plan,” “foresee,” “likely,” “will,” or similar
words or phrases. 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
achieve its guidance for revenue, Adjusted EBITDA
and Adjusted EPS; its ability to manage the significantly
increased seasonality of its business; its ability to
integrate the operations of acquired companies, including
Harry & David; 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, and a list of definitions of non-GAAP terms,
including EBITDA and Free Cash Flow, among others,
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. Consequently, you should not
consider any such list to be a complete set of all potential
risks and uncertainties.
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 2014 and 2013.
The Company believes this unaudited information has been prepared substantially on the same basis as the annual audited consoli-
dated 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.
Jun. 29, Mar. 30, Dec. 29, Sep. 29, Jun. 30, Mar. 31, Dec. 30, Sep. 30,
2014 2014 2013 2013 2013 2013 2012 2012
(in thousands, except per share data)
Net revenues:
E-commerce
Other
(telephonic/online) $148,083 $139,918 $180,095 $ 80,880
42,168
39,286
123,048
187,369
71,751
107,513
51,297
79,856
86,242
266,337
155,360
110,977
39,673
179,591
106,048
73,543
Total net revenues
Cost of revenues
Gross Profit
Operating expenses:
$139,109 $ 144,555 $171,774 $ 81,112
38,480
119,592
70,167
49,425
33,854
172,963
102,134
70,829
47,027
191,582
111,125
80,457
79,587
251,360
146,879
104,481
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
Total operating expenses
Operating income (loss)
Interest (income) expense
and other, net
Income (loss) from continuing
operations before income taxes
Income tax expense (benefit)
Income (loss) from continuing
51,131
5,756
12,810
5,191
74,888
4,968
51,581
6,045
13,865
4,932
76,423
(2,880)
57,656
5,319
14,267
5,036
82,278
28,699
34,479
5,398
13,812
4,689
58,378
(7,081)
48,075
5,328
12,016
4,992
70,411
51,439
5,613
13,757
4,838
75,647
418 4,810
54,483
5,363
13,354
4,521
77,721
32,723
5,396
13,061
4,447
55,627
26,760 (6,202)
(398)
(249) (418)
(292)
32
(199)
(538)
(286)
4,570
1,813
(3,129)
(1,391)
28,281
10,798
(7,373)
(2,816)
450
(88)
4,611
1,491
26,222
9,715
(6,488)
(2,045)
operations
2,757
(1,738)
17,483
(4,557)
538
3,120
16,507
(4,443)
Income (loss) from discontinued
operations, net of tax
Gain (loss) on sale of discontinued
operations, net of tax
295
75
(374)
(82)
(749)
(481)
(496)
(163)
––
(62)
877
––
(1,512)
––
––
––
Income (Ioss) from discontinued
operations, net of tax
503
Net income (loss) $ 3,052 $ (1,725) $ 17,986
Less: Net loss attributable to
noncontrolling interest
Net income attributable to
(356)
(300)
(41)
13
295
(82)
(163)
(481)
$ (4,639) $ (1,723) $ 2,639 $ 16,011 $ (4,606)
(2,261)
(496)
––
––
––
––
––
1-800-FLOWERS.COM, Inc.
$ 3,408 $ (1,425) $ 18,027
$ (4,639) $ (1,723)
$ 2,639
$16,011
$(4,606)
Basic net income (loss) per common share
attributable to 1-800-FLOWERS.COM, Inc.
From continuing operations $ 0.05 $ (0.02) $ 0.27 $ (0.07)
From discontinued operations
0.00
0.00
Basic net income per
common share
0.00 0.01
(0.07)
(0.02)
0.28
0.05
Diluted net income (loss) per common share
attributable to 1-800-FLOWERS.COM, Inc.
From continuing operations $ 0.05 $ (0.02) $ 0.27 $ (0.07)
From discontinued operations
0.00
Diluted net income per
common share
0.00 0.01
(0.07)
(0.02)
0.00
0.05
0.27
$ 0.01 $ 0.05 $ 0.25 $ (0.07)
(0.04) (0.01) (0.01) 0.00
(0.03)
0.04
0.25 (0.07)
$ 0.01 $ 0.05 $ 0.25 $ (0.07)
(0.03) (0.01) (0.01) 0.00
(0.03)
0.04
0.24
(0.07)
Weighted average shares used in the calculation of
net income (loss) per common share:
Basic
Diluted
64,112
66,157
64,214
64,214
64,016
66,095
63,799
63,799
63,891
66,620
64,256
66,111
64,824
66,557
64,505
64,505
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 2014, but it was in the third quarter during fiscal 2013, and will fall in the fourth quarter during
fiscal 2015. The seasonality of the Company’s operations will be further impacted by the planned acquisition of Harry & David.
15
Consolidated Balance Sheets
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands, except share data)
June 29, June 30,
2014 2013
Assets
Current assets:
Cash and cash 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
Current liabilities of discontinued operations
Total current liabilities
Deferred tax liabilities
Other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued
Class A common stock, $.01 par value, 200,000,000 shares authorized,
38,119,398 and 36,280,425 shares issued in 2014 and 2013, respectively
Class B common stock, $.01 par value, 200,000,000 shares authorized,
42,058,594 and 42,125,465 shares issued in 2014 and 2013, respectively
Additional paid-in capital
Retained deficit
Accumulated other comprehensive loss
Treasury stock, at cost, 10,818,437 and 9,257,231 Class A shares in 2014 and
2013, respectively, and 5,280,000 Class B shares in 2014 and 2013
Total 1-800-FLOWERS.COM, Inc. stockholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
See accompanying Notes to Consolidated Financial Statements.
16
$ 5,203
13,339
58,520
5,156
9,600
––
91,818
60,147
60,166
44,616
2,002
8,820
––
$267,569
$ 24,447
49,517
343
––
74,307
649
6,495
81,451
––
381
$
154
14,957
55,756
5,746
9,941
6,095
92,649
52,943
47,943
43,276
2,127
10,086
1,049
$250,073
$ 26,235
45,044
––
4,484
75,763
––
5,039
80,802
––
362
421
420
305,510
298,580
(68,565) (83,937)
––
(75)
(54,472) (46,155)
169,271
183,199
––
2,919
169,271
186,118
$267,569
$250,073
Consolidated Statements of Income
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands, except per share data)
Years Ended
June 29, June 30, July 1,
2014 2013 2012
Net revenues
Cost of revenues
Gross profit
Operating expenses:
$756,345
440,672
315,673
$735,497
430,305
305,192
$707,517
414,940
292,577
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
Total operating expenses
Gain on sale of stores
Operating income
Interest expense and other, net
Income from continuing operations before income taxes
Income tax expense from continuing operations
Income from continuing operations
Loss from discontinued operations, net of tax
Gain (loss) on sale of discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income
Less: Net loss attributable to noncontrolling interest
Net income attributable to 1-800-FLOWERS.COM, Inc.
Basic net income (loss) per common share
attributable to 1-800-FLOWERS.COM, Inc.
From continuing operations
From discontinued operations
Basic net income per common share
Diluted net income (loss) per common share
attributable to 1-800-FLOWERS.COM, Inc.
From continuing operations
From discontinued operations
Diluted net income per common share
Weighted average shares used in the calculation of
net income (loss) per common share:
Basic
Diluted
See accompanying Notes to Consolidated Financial Statements.
194,847
22,518
54,754
19,848
291,967
––
23,706
(1,357)
22,349
8,403
13,946
(86)
815
729
$ 14,675
(697)
$ 15,372
$
0.23
0.01
0.24
$
0.22
$
0.01
0.23
$
64,035
66,460
186,720
21,700
52,188
18,798
279,406
––
25,786
181,199
20,426
51,474
19,540
272,639
3,789
23,727
(991) (2,635)
21,092
7,771
13,321
(217)
4,542
4,325
24,795
9,073
15,722
(1,889)
(1,512)
(3,401)
$ 12,321
––
$ 12,321
$ 0.24
(0.05)
$ 0.19
$ 0.24
(0.05)
$ 0.19
64,369
66,792
$ 17,646
––
$ 17,646
$ 0.21
0.07
$ 0.27
$ 0.20
0.07
$ 0.27
64,697
66,239
17
Consolidated Statements of Comprehensive Income
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands)
Years Ended
June 29, June 30, July 1,
2014 2013 2012
$17,646
Net income
141
17,787
$14,675
(75)
14,600
Other comprehensive income (loss)
$12,231
17
12,338
Comprehensive income
Add: Comprehensive net loss attributable to
noncontrolling interest
Comprehensive income attributable to
1-800-FLOWERS.COM, Inc.
(697)
––
––
$15,297
$12,338
$17,787
See accompanying Notes to Consolidated Financial Statements.
18
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Consolidated Statements of Cash Flows
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands)
Years Ended
June 29, June 30, July 1,
2014 2013 2012
Operating activities:
Net income
Reconciliation of net income to net cash
$ 12,321
$ 17,646
14,675
$
provided by operating activities, net of acquisitions:
Operating activities of discontinued operations
Loss/(gain) on sale of discontinued operations
Depreciation and amortization
Amortization of deferred financing costs
Deferred income taxes
Bad debt expense
Stock-based compensation
Excess tax benefit 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
Excess tax benefit from stock based compensation
Proceeds from exercise of employee stock options
Proceeds from bank borrowings
Repayment of notes payable and bank borrowings
Debt issuance cost
Repayment of capital lease obligations
Other
Net cash used in financing activities
Net change in cash and cash equivalents
Cash and equivalents:
Beginning of year
End of year
1,587
(1,300)
19,848
306
1,454
1,656
4,664
(1,837)
755
(1,893)
(2,564)
436
2,660
(262)
2,355
42,539
(9,000)
––
(22,985)
8
(11)
500
(31,488)
(8,317)
1,837
527
127,000
(127,052)
––
––
3
(6,002)
5,049
154
5,203
$
(179)
2,348
18,798
420
(811)
1,085
4,283
(739)
483
(4,108)
(1,823)
(1,655)
4,368
(609)
463
34,645
(3,700)
––
(20,044)
(903)
117
––
(24,530)
(9,599)
739
535
62,000
(91,250)
(1,234)
(6)
––
(38,815)
(28,700)
28,854
154
$
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(8,683)
19,539
457
7,790
869
4,850
(273)
42
(2,135)
(3,919)
(2,126)
1,694
1,646
947
39,779
(4,336)
12,823
(17,180)
(3,945)
(119)
(124)
(12,881)
(3,277)
273
––
56,000
(71,000)
––
(1,482)
––
(19,486)
7,412
21,442
$ 28,854
Supplemental Cash Flow Information:
- Interest paid amounted to $1.0 million, $1.1 million, and $2.2 million, for the years ended June 29, 2014, June 30, 2013
and July 1, 2012, respectively.
- The Company paid income taxes of approximately $7.0 million, $8.3 million and $5.0 million, net of tax refunds received,
for the years ended June 29, 2014, June 30, 2013 and July 1, 2012, respectively.
See accompanying Notes to Consolidated Financial Statements.
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 helping deliver smiles for our customers with
gifts for every occasion, including fresh flowers and the
finest selection of plants, gift baskets, gourmet foods,
confections, candles, balloons and plush stuffed animals.
As always, our 100% Smile Guarantee backs every gift.
The Company’s BloomNet® international floral wire
service provides a broad range of quality products and
value-added services designed to help professional
florists grow their businesses profitably. The 1-800-
FLOWERS.COM, Inc. “Gift Shop” also includes gourmet
gifts such as popcorn and specialty treats from The
Popcorn Factory®, cookies and baked gifts from Cheryl’s®,
premium chocolates and confections from Fannie May®
and Harry London®, gift baskets and towers from
1-800-BASKETS.COM®, incredible, carved fresh fruit
arrangements from FruitBouquets.comsm, top quality
steaks and chops from Stock Yards®, as well as premium
branded customizable invitations and personal stationery
from FineStationery.com®. The Company’s Celebrations®
brand is a source for creative party ideas, must-read
articles, online invitations and ecards, all created to help
people celebrate holidays and the everyday.
Note 2. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include
the accounts of 1-800-FLOWERS.COM, Inc. and its
subsidiaries (collectively, the “Company”). All significant
intercompany accounts and transactions have been
eliminated in consolidation.
On September 6, 2011, the Company completed the
sale of certain assets of its wine fulfillment services
business operated by its Winetasting Network subsidiary.
During the fourth quarter of fiscal 2013, the Company
made the strategic decision to divest the e-commerce
and procurement businesses of The Winetasting Network
in order to focus on growth opportunities in its Gourmet
Foods and Gift Baskets business segment. The Company
closed on the sale of its Winetasting Network business
on December 31, 2013. As a result, the Company has
classified the results of its wine fulfillment services
business as a discontinued operation for fiscal 2012,
and its e-commerce and procurement businesses as
discontinued operations for all periods presented.
Fiscal Year
The Company’s fiscal year is a 52- or 53-week period
ending on the Sunday nearest to June 30. Fiscal years
2014, 2013 and 2012 consisted of 52 weeks which
ended on June 29, 2014, June 30, 2013 and July 1,
2012, respectively.
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 Cash Equivalents
Cash and cash equivalents consist of demand
deposits with banks, highly liquid money market funds,
United States government securities, overnight repur-
chase 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 are stated at cost less
accumulated depreciation and amortization. Depreciation
expense is computed using the straight-line method over
the assets’ estimated useful lives. Amortization of lease-
hold improvements and capital leases is computed using
the straight-line method over the shorter of the estimated
useful lives and the initial lease terms. The Company
capitalizes certain internal and external costs incurred to
acquire or develop internal-use software. Capitalized
software costs are amortized on a straight-line basis over
the estimated useful life of the software. Estimated useful
lives are periodically reviewed, and where appropriate,
changes are made prospectively. The Company’s
property plant and equipment is depreciated using the
following estimated lives:
Buildings (years)
Leasehold Improvements (years)
Furniture, Fixtures and Equipment (years)
Software (years)
40
3 - 10
3 - 10
3 - 7
Property, plant and equipment and other long-lived
assets are reviewed for impairment whenever changes
in circumstances or events may indicate that the carrying
amounts are not recoverable.
Goodwill
Goodwill represents the excess of the purchase price
over the fair value of the net assets acquired in each
business combination, with the carrying value of the
Company’s goodwill allocated to its reporting units, in
accordance with the acquisition method of accounting.
Goodwill is not amortized, but it is subject to an annual
assessment for impairment, which the Company performs
during the fourth quarter, or more frequently if events
occur or circumstances change such that it is more likely
than not that an impairment may exist.
The Company tests goodwill for impairment at the
reporting unit level. The Company identifies its reporting
units by assessing whether the components of its
operating segments constitute businesses for which
discrete financial information is available and manage-
ment of each reporting unit regularly reviews the operat-
ing results of those components. Goodwill impairment
testing involves a two-step process. The first step requires
comparison of the fair value of each of the reporting units
to the respective carrying value. If the carrying value of
the reporting unit is less than the fair value, no impair-
ment exists and the second step is not performed. If the
carrying value of the reporting unit is higher than the fair
21
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 an equal weighting of the income and
market approaches. The Company uses industry ac-
cepted valuation models and set criteria that are re-
viewed and approved by various levels of management
and, in certain instances, the Company engages third-
party valuation specialists. Under the income approach,
the Company uses a discounted cash flow methodology
which requires management to make significant esti-
mates and assumptions related to forecasted revenues,
gross profit margins, operating income margins, working
capital cash flow, perpetual growth rates, and long-term
discount rates, among others. For the market approach,
the Company uses the guideline public company method.
Under this method the Company utilizes information
from comparable publicly traded companies with similar
operating and investment characteristics as the reporting
units, to create valuation multiples that are applied to
the operating performance of the reporting unit being
tested, in order to obtain their respective fair values.
The Company also reconciles the aggregate fair values
of its reporting units determined in the first step (as
described above) to its current market capitalization,
allowing for a reasonable control premium.
Other Intangibles, net
Other intangibles consist of definite-lived intangible
assets (such as investment in licenses, customer lists,
and others) and indefinite-lived intangible assets (such
as acquired trade names and trademarks). The cost of
definite-lived intangible assets is amortized to reflect the
pattern of economic benefits consumed, over the esti-
mated periods benefited, ranging from 3 to 16 years,
while indefinite-lived intangible assets are not amortized.
Long-lived assets, such as definite-lived intangibles
and property, plant and equipment are reviewed for
impairment whenever changes in circumstances or
events may indicate that the carrying amounts are not
recoverable. When such events or changes in circum-
stances occur, a recoverability test is performed compar-
ing projected undiscounted cash flows from the use and
eventual disposition of an asset or asset group to its
carrying value. If the projected undiscounted cash flows
are less than the carrying value, then an impairment
charge would be recorded for the excess of the carrying
value over the fair value, which is determined by
discounting future cash flows.
The Company tests indefinite-lived intangible assets
for impairment at least annually, during the fourth quarter,
or whenever changes in circumstances or events may
indicate that the carrying amounts are not recoverable.
The impairment test for indefinite-lived intangible assets
encompasses calculating a fair value of an indefinite-
lived intangible asset and comparing the fair value to its
carrying value. If the carrying value exceeds the fair
value, impairment is recognized for the difference. To
determine fair value of other indefinite-lived intangible
assets, the Company uses an income approach, the
relief-from-royalty method. This method assumes that, in
lieu of ownership, a third party would be willing to pay a
royalty in order to obtain the rights to use the comparable
asset. Other indefinite-lived intangible assets’ fair values
require significant judgments in determining both the
assets’ estimated cash flows as well as the appropriate
discount and royalty rates applied to those cash flows to
determine fair value.
Business Combinations
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 are determined primarily by using an
income approach which is based on assumptions and
estimates made by management. Significant assumptions
utilized in the income approach are 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
is recorded as goodwill. Operating results of the acquired
entity are reflected in the Company’s consolidated
financial statements from date of acquisition.
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 $0.2 million
and $0.5 million at June 29, 2014 and June 30, 2013
respectively, relating to prepaid catalog expenses.
Investments
The Company has certain investments in non-
marketable equity instruments of private companies.
The Company accounts for these investments using the
equity method if they provide 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 ownership 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 determin-
ing whether the equity method is appropriate. The
Company records equity method investments initially at
cost, and adjusts the carrying amount to reflect the
Company’s share of the earnings or losses of the
22
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
investee. The Company’s equity method investments are
comprised of a 32% interest in Flores Online, a Sao
Paulo, Brazil based internet floral and gift retailer, that the
Company made on May 31, 2012. The book value of this
investment was $3.2 million as of June 29, 2014 and $3.8
million as of June 30, 2013, and is included in Other
assets within the consolidated balance sheets. The
Company’s equity in the net income (loss) of Flores
Online for each of the years ended June 29, 2014 and
June 30, 2013 was $(0.6) million and $0.2 million.
Investments in non-marketable equity instruments
of private companies, where the Company does not
possess the ability to exercise significant influence,
are accounted for under the cost method. Cost method
investments are originally recorded at cost, and are
included within Other assets in the Company’s consoli-
dated balance sheets. The aggregate carrying amount of
the Company’s cost method investments was $0.8 million
as of June 29, 2014 and $2.3 million as of June 30, 2013.
In addition, the Company had notes receivable from a
company it maintains an investment in of $0.5 million as
of June 29, 2014 and $2.3 million as of June 30, 2013.
As described in Note 4 “Acquisitions and Dispositions”,
on December 3, 2013, the Company increased its
investment in iFlorist, resulting in a majority ownership
interest (56%), through the conversion of notes receiv-
able and the purchase of additional shares from the
Company’s founders. The acquisition of a majority interest
in iFlorist resulted in the consolidation of iFlorist’s
operations, and the elimination of both the Company’s
cost-basis investment and notes receivable.
The Company also holds certain trading securities
associated with its Non-Qualified Deferred Compensation
Plan (“NQDC Plan”). These investments are measured
using quoted market prices at the reporting date and are
included in Other assets in the consolidated balance
sheets (see Note 10).
Each reporting period, the Company uses available
qualitative and quantitative information to evaluate its
investments for impairment. When a decline in fair value,
if any, is determined to be other-than-temporary, an
impairment charge is recorded in the consolidated
statement of operations.
Concentration of Credit Risk
Financial instruments that potentially subject the
Company to significant concentrations of credit risk
consist principally of cash and cash equivalents and
accounts receivable. The Company maintains cash and
cash equivalents 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 receiv-
ables are related to balances owed by major credit card
companies. Allowances relating to consumer, corporate
and franchise accounts receivable ($2.4 million and $2.5
million at June 29, 2014 and June 30, 2013, 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
primarily 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. Member-
ship 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.
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 $83.0 million, $77.9 million
and $75.1 million for the years ended June 29, 2014,
June 30, 2013 and July 1, 2012, 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 websites, including hosting, content develop-
ment 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
23
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
beyond one year and amortized over the software’s useful
life, typically three to seven years. Costs associated with
repair maintenance or the development of website 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 restricted stock awards 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, on occasion to
manage its exposure to interest rate fluctuations. The
Company has managed 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 recog-
nizes as a deferred tax asset, the tax benefits associated
with losses related to operations. 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 the Company
considers in assessing the likelihood of realization
include the forecast of future taxable income and avail-
able tax planning strategies that could be implemented
to realize the deferred tax assets.
The Company recognizes the tax benefit from an
uncertain tax position only if it is more likely than not that
the tax position will be sustained on examination by the
taxing authorities based on the technical merits of the
position. The tax benefits recognized in the financial
statements on a particular tax position are measured
based on the largest benefit that has a greater than a
50% likelihood of being realized upon settlement. The
amount of unrecognized tax benefits (“UTBs”) is adjusted
as appropriate for changes in facts and circumstances,
such as significant amendments to existing tax law, new
regulations or interpretations by the taxing authorities,
new information obtained during a tax examination, or
resolution of an examination. We recognize both accrued
interest and penalties, where appropriate, related to
UTBs in income tax expense. 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
24
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.
Recently Adopted Accounting Pronouncements
In July 2012, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2012-02, “Testing Indefinite-Lived Intangible
Assets for Impairment,” which allows entities to use a
qualitative approach to test indefinite-lived intangible
assets for impairment. ASU No. 2012-02 permits an entity
to first assess qualitative factors to determine whether it
is more likely than not that the fair value of the indefinite-
lived intangible asset is less than its carrying value. If it
is concluded that this is the case, it is necessary to
perform the currently prescribed quantitative impairment
test. Otherwise, the quantitative impairment test is not
required. This ASU became effective for annual and
interim goodwill impairment tests performed for the
Company’s fiscal year ending June 29, 2014. The
adoption of this standard did not have a material impact
on the Company’s consolidated financial statements.
Recent Accounting Pronouncements
In April 2014, the FASB issued ASU No. 2014-08,
“Presentation of Financial Statements (Topic 205) and
Property, Plant and Equipment (Topic 360).” ASU No.
2014-08 amends the requirements for reporting discon-
tinued operations and requires additional disclosures
about discontinued operations. Under the new guidance,
only disposals representing a strategic shift in operations
or that have a major effect on the Company’s operations
and financial results should be presented as discontin-
ued operations. This new accounting guidance is effective
for the Company’s fiscal year ending July 3, 2016, and
may be applied retrospectively. We are currently evaluat-
ing the potential impact of adopting this guidance on our
consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09,
“Revenue from Contracts with Customers.” This amended
guidance will enhance the comparability of revenue
recognition practices and will be applied to all contracts
with customers. Expanded disclosures related to the
nature, amount, timing, and uncertainty of revenue that is
recognized are requirements under the amended
guidance. This guidance will be effective for the
Company’s fiscal year ending July 1, 2018 and may be
applied retrospectively. We are currently evaluating the
potential impact of adopting this guidance on our
consolidated financial statements.
Reclassifications
Certain balances in the prior fiscal years have been
reclassified to conform to the presentation in the current
fiscal year.
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 3 – Net Income Per Common Share
from Continuing Operations
The following table sets forth the computation of
basic and diluted net income per common share from
continuing operations:
Years Ended
June 29, June 30, July 1,
2014 2013 2012
(in thousands, except per share data)
Numerator:
Net income
from continuing
operations $13,946 $15,722 $13,321
Less: Net loss
attributable to
noncontrolling interest
Income from continuing
(697)
––
––
operations attributable to
1-800-FLOWERS.COM, Inc. $14,643 $15,722 $13,321
Denominator:
Weighted average
shares outstanding
64,035
64,369
64,697
Effect of dilutive securities:
Employee stock
options (1)
Employee restricted
stock awards
Adjusted weighted-average
shares and assumed
1,083
786
40
1,342
2,425
1,637
2,423
1,502
1,542
conversions
66,460
66,792
66,239
Net income per common share
from continuing operations
attributable to 1-800-FLOWERS.COM, Inc.
Basic $ 0.23 $ 0.24 $ 0.21
Diluted $ 0.22 $ 0.24 $ 0.20
Note (1): The effect of options to purchase 1.2 million, 2.0 million and 5.5
million shares for the years ended June 29, 2014, June 30, 2013 and July
1, 2012, 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
Acquisition of Fannie May retail stores
On June 27, 2014, the Company and GB Chocolates
LLC (GB Chocolates) entered into a settlement agree-
ment, resulting in the termination of the GB Chocolates
franchise agreement, and its exclusive area development
rights. As a result, the Company recognized the previ-
ously deferred non-refundable area development fees
of $0.7 million. In addition, per the terms of the non-
performance Promissory Note, GB Chocolates paid $1.2
million as a result of its failure to complete its develop-
ment obligations under the 2011 Area Development
25
Agreement (the 2011 ADA). As a result, during the
fourth quarter of fiscal 2014, the Company recognized
revenue of $1.0 million ($0.2 million had been previously
recognized). The Company has no plans to market the
territories covered in the 2011 ADA.
In conjunction with the settlement agreement, the
Company and GB Chocolates entered into an asset
purchase agreement whereby the Company repurchased
16 of the original 17 Fannie May retail stores sold to GB
Chocolates in November 2011. The acquisition was
accounted for using the purchase method of accounting
in accordance with FASB guidance regarding business
combinations. The purchase price of $6.4 million was
financed utilizing available cash balances.
The purchase price was allocated to the identifiable
assets acquired and liabilities assumed based on our
preliminary estimates of their fair values on the acquisition
date. The Company is in the process of finalizing its
allocation and this may result in potential adjustments to
the carrying value of the respective recorded assets and
liabilities, establishment of certain additional intangible
assets, and the determination of any residual amount
that will be allocated to goodwill. The goodwill resulting
from this acquisition amounted to $5.8 million, which is
expected to be deductible for tax purposes.
Preliminary
Purchase Price Allocation
(in thousands)
Current Assets
Property, plant and equipment
Goodwill
Net assets acquired
$ 103
487
5,783
$6,373
Operating results of the acquired stores are reflected in
the Company’s consolidated financial statements from the
date of acquisition, within the Gourmet Food & Gift Baskets
segment. Pro forma results of operations have not been
presented, as the impact on the Company’s consolidated
financial results would not have been material.
Acquisition of Colonial Gifts Limited
On December 3, 2013, the Company completed its
acquisition of a controlling interest in Colonial Gifts
Limited (iFlorist). iFlorist, located in the UK, is a direct-to-
consumer marketer of floral and gift-related products
sold and delivered throughout Europe. The acquisition
was achieved in stages and was accounted for using
the acquisition method of accounting in accordance with
the Financial Accounting Standards Board’s (“FASB”)
guidance regarding business combinations.
Prior to December 3, 2013, the Company maintained
an investment in iFlorist in the amount of $1.6 million,
which was included on the Company’s balance sheet
within Other assets. This investment was accounted for
under the cost method, as the Company’s ownership
stake was 19.9%, and it did not have the ability to
exercise significant influence.
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
On December 3, 2013, the Company acquired an
additional interest in iFlorist, bringing the Company’s
ownership interest to 56.2%. The acquisition of the
additional interest was financed through the conversion
of $1.9 million of notes owed by iFlorist to the Company,
and a $1.6 million cash payment to iFlorist’s founders.
Concurrent with the additional investment, the Company
remeasured its initial equity investment in iFlorist, and
determined that the acquisition date fair value approxi-
mated the Company’s carrying value of $1.6 million, and
therefore no gain or loss was recognized. On the acquisi-
tion date, the Company also measured the fair value of
the noncontrolling interest which amounted to $3.6
million. The acquisition-date fair values of the Company’s
previously held equity interest in iFlorist and the
noncontrolling interest were determined based on the
market price the Company paid for its ownership interest
in iFlorist on the acquisition date, assuming that a 20%
control premium was paid to obtain the controlling
interest. The following summarizes the fair values of the
acquisition date purchase price components:
iFlorist Fair Value
of Purchase Price Components
(in thousands)
Cash
Converted debt
Initial equity investment
Noncontrolling interest
Total purchase price
$1,640
1,964
1,629
3,616
$8,849
The total purchase price was allocated to the identifi-
able assets acquired and liabilities assumed based on
our preliminary estimates of their fair values on the
acquisition date. The Company is in the process of
finalizing its allocation and this may result in potential
adjustments to the carrying value of the respective
recorded assets and liabilities, establishment of certain
additional intangible assets, revisions of useful lives of
intangible assets, and the determination of any residual
amount that will be allocated to goodwill. Of the acquired
intangible assets, $1.3 million was assigned to customer
lists, which is being amortized over the estimated
remaining life of 3 years, $1.9 million was assigned to
trademarks, and $6.5 million was assigned to goodwill,
which is not expected to be deductible for tax purposes.
As a result of cumulative tax losses in the foreign jurisdic-
tion, offset in part by the deferred tax liability arising from
the amortizable customer list which was considered a
source of future income, the Company concluded that a
full valuation allowance be recorded in such jurisdiction.
The following table summarizes the allocation of the
purchase price to the estimated fair values of assets
acquired and liabilities assumed at the date of acquisition
of iFlorist:
iFlorist Preliminary
Purchase Price Allocation
(in thousands)
Current assets
Intangible assets
Goodwill
Property, plant and equipment
Other assets
Total assets acquired
Current liabilities, including
current maturities of long-term debt
Deferred tax liabilities
Other liabiliaties assumed
Net assets acquired
$ 856
3,177
6,537
2,006
30
12,606
3,014
648
95
3,757
$8,849
Operating results of the Company’s membership
interest in iFlorist are reflected in the Company’s consoli-
dated financial statements from the date of acquisition,
essentially all of which is in the 1-800-Flowers.com
Consumer Floral segment. Pro forma results of
operations have not been presented, as the impact
on the Company’s consolidated financial results
would not have been material.
Acquisition of Pingg
On May 31, 2013, the Company completed the
acquisition of Pingg Corp., an online invitation and event
planner. The purchase price, which included the acquisi-
tion of software, receivables and certain other assets and
related liabilities, was approximately $1.6 million.
Approximately $0.4 million of the purchase price was
assigned to goodwill. The acquisition was financed
utilizing available cash balances. Operating results of
the acquired entity, which are not significant, are reflected
in the Company’s consolidated financial statements
from the date of acquisition, in the 1-800-Flowers.com
Consumer Floral segment.
Acquisition of 1-800-Flowers’ European trademarks
On March 11, 2013, the Company acquired the
European rights to various derivations of the 1-800-
Flowers’ tradename, trademark, URL’s and telephone
numbers from Flowerscorp Pty Ltd. for a purchase price
of $4.0 million, which is included within Other intangibles,
net. The Company has paid $3.0 million of the $4.0
million purchase price, and is required to make a final
payment of $1.0 million on March 11, 2015, the balance
of which is included on the balance sheet within
Accrued Expenses.
Sale and franchise of Fannie May retail stores
On November 21, 2011, the Company and GB
Chocolates entered into an agreement whereby the
26
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Flowerama trademark. 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
assets, $2.1 million was assigned to amortizable invest-
ment in licenses (intangibles), which is being amortized
over the estimated useful life of 20 years, based upon
the estimated remaining life of the franchise agreements.
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.
Note 5. Inventory
The Company’s inventory, stated at cost, which is
not in excess of market, includes purchased and manu-
factured finish goods for resale, packaging supplies,
raw material ingredients for manufactured products
and associated manufacturing labor, and is classified
as follows:
June 29, June 30,
2014 2013
(in thousands)
Finished goods
Work-in-process
Raw materials
$30,859
8,566
19,095
$58,520
$30,906
6,465
18,385
$55,756
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 associated 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 the 2011 ADA whereby GB Chocolates
agreed to open a minimum of 45 new Fannie May
franchise stores. The agreement provided exclusive
development rights for several Midwestern states, as
well as specific cities in Florida and Ohio. The terms of the
2011 ADA included 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 became due and payable only if GB
Chocolates did not open all 45 stores as set forth in the
2011 ADA. As of June 30, 2013, the Company had
deferred recognition of $0.7 million, of the original $0.9
million area development fee associated with the 45 store
area development agreement, based upon the number of
stores opened by GB Chocolates at that time (a total of 10
stores were ultimately opened). In addition, through June
30, 2013, the Company had recognized approximately
$0.2 million, of the $1.2 million Non-Performance
Promissory Note, based upon its assessment of the
likelihood that the performance criteria under the
agreement would be achieved.
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
27
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 6. Goodwill and Intangible Assets
The following table presents goodwill by segment and the related change in the net carrying amount:
BloomNet Gourmet
Consumer Wire Food and
Floral Service Gift Baskets (1) Total
(in thousands)
Balance at July 1, 2012
$
Adjustments
Acquisition of Pingg
Balance at June 30, 2013
Acquisition of Fannie May
franchise stores
Adjustments
Acquisition of iFlorist
Balance at June 29, 2014
$ 9,709
––
542
$ 10,251
––
(97)
6,537
$ 16,691
––
––
––
––
––
––
––
––
$
$
$
37,776
(84)
––
37,692
$
5,783
––
––
43,475
$
$ 47,485
(84)
542
$ 47,943
5,783
(97)
6,537
$ 60,166
(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 during fiscal 2009.
The Company’s other intangible assets consist of the following:
June 29, June 30,
2014 2013
Gross Gross
Amortization Carrying Accumulated Carrying Accumulated
Period Amount Amortization Net Amount Amortization Net
(years) (in thousands)
Intangible assets with determinable lives:
Investment in
licenses
Customer lists
Other
Trademarks with
indefinite lives
Total intangible assets
14-16
3-10
5-8
––
$ 7,420 $ 5,621
12,818
2,538
20,977
17,313
2,538
27,271
38,322
$65,593
––
$20,977
$ 1,799
4,495
––
6,294
38,322
$44,616
$ 7,420
15,989
2,538
25,947
36,692
$62,639
$ 5,516
11,334
2,513
19,363
––
$19,363
$ 1,904
4,655
25
6,584
36,692
$43,276
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. During the year ended June 29, 2014, the Company wrote-
down the value of its Fine Stationery tradename from $0.7 million to $0.5 million, and during the year ended June 30,
2013, the Company wrote-down the value of its Fine Stationery tradename from $1.1 million to $0.7 million.
The amortization of intangible assets for the years ended June 29, 2014, June 30, 2013 and July 1, 2012 was $1.6
million, $1.8 million and $1.8 million, respectively. Future estimated amortization expense is as follows: 2015 - $1.8
million, 2016 - $1.7 million, 2017 - $0.9 million, 2018 – $0.6 million, 2019 - $0.1million, and thereafter - $1.2 million.
Note 7. Property, Plant and Equipment
June 29, June 30,
2014 2013
(in thousands)
Land
Building and building improvements
Leasehold improvements
Furniture and fixtures
Production equipment
Computer equipment
Telecommunication equipment
Software
Accumulated depreciation and
amortization
$
2,907
12,551
18,504
4,737
35,845
53,368
4,120
136,226
268,258
208,111
$ 60,147
$
2,907
9,807
17,566
4,903
31,798
57,879
8,204
122,459
255,523
202,580
$ 52,943
28
Note 8. Accrued Expenses
Accrued expenses consisted of the following:
June 29, June 30,
2014 2013
(in thousands)
Payroll and employee benefits
Advertising and marketing
Other
$ 22,601 $ 19,859
9,107
16,078
$ 49,517 $ 45,044
11,803
15,113
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 9. Long-Term Debt
June 29, June 30,
2014 2013
(in thousands)
Revolving line
of credit (1) $ –– $
––
343
––
343 ––
Bank loan (2)
Less current maturities of
long-term debt obligations
343
$ –– $
––
––
(1) On April 10, 2013, the Company repaid all amounts outstanding under
its 2010 Credit Facility, and entered into a Third Amended and Restated
Credit Agreement (the “2013 Credit Facility”). The 2013 Credit Facility
consists of a revolving line of credit with a seasonally adjusted limit ranging
from $150.0 to $200.0 million and a working capital sublimit ranging from
$25.0 to $75.0 million. The 2013 Credit Facility also revised certain financial
and non-financial covenants, including the maintenance of certain financial
ratios. The Company was in compliance with these covenants as of June
29, 2014 and June 30, 2013. Outstanding amounts under the 2013 Credit
Facility, which matures on April 10, 2018, bear interest at the Company’s
option at either: (i) LIBOR, plus a spread of between 150 and 225 basis
points, as determined by the Company’s leverage ratio, or (ii) the agent
bank’s prime rate plus a margin. The obligations of the Company and its
subsidiaries under the 2013 Credit Facility are secured by liens on all
personal property of the Company and its domestic subsidiaries.
(2) Bank loan assumed through the Company’s acquisition of a majority
interest in iFlorist.
Note 10. Fair Value Measurements
Cash and cash equivalents, receivables, accounts
payable and accrued expenses are reflected in the consoli-
dated balance sheets at carrying value, which approximates
fair value due to the short-term nature of these instruments.
The Company’s investments in non-marketable equity
instruments of private companies are carried at cost and are
periodically assessed for other-than-temporary impairment,
when an event or circumstances indicate that an other-than-
temporary decline in value may have occurred. The
Company’s remaining financial assets and liabilities are
measured and recorded at fair value (see table below). The
Company’s non-financial assets, such as definite lived
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 tested for impairment annually, or more
frequently if events occur or circumstances change such that it
is more likely than not that an impairment may exist, as
required under the accounting standards.
Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability, in
the principal or most advantageous market for the asset
or liability, in an orderly transaction between market
participants at the measurement date. The authoritative
guidance for fair value measurements establishes a fair
value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy
gives the highest priority to unadjusted 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, financial assets and liabilities measured
at fair value on a recurring basis as of June 29, 2014:
Fair Value Measurements
Assets (Liabilities)
Carrying Value Level 1 Level 2 Level 3
(in thousands)
Assets (liabilities):
Trading securities
held in a
“rabbi trust” (1)
$2,146 $2,146 $ –– $ ––
$2,146
$2,146 $ –– $ ––
(1) Trading securities held in a rabbi trust are measured using quoted
market prices at the reporting date and are included in Other assets, with
the corresponding liability includes in Other liabilities, in the consolidated
balance sheets. The Company established a Non-qualified Deferred
Compensation Plan (Note 14 – Employee Retirement Plans) for certain
members of senior management in fiscal 2009. Deferred compensation is
invested in mutual funds held in a “rabbi trust” which is restricted for
payment to participants of the NQDC Plan.
The following table presents, by level, within the fair
value hierarchy, financial assets and liabilities measured
at fair value on a recurring basis as of June 30, 2013:
Fair Value Measurements
Assets (Liabilities)
Carrying Value Level 1 Level 2 Level 3
(in thousands)
Assets (liabilities):
Trading securities
held in a
“rabbi trust” (1)
Non-performance
promissory note (2)
$1,708 $1,708 $ –– $ ––
205
–– –– 205
$1,913 $1,708 $ –– $ 205
(1) Trading securities held in a rabbi trust are measured using quoted
market prices at the reporting date and are included in Other assets, with
the corresponding liability includes in Other liabilities, in the consolidated
balance sheets. The Company established a Non-qualified Deferred
Compensation Plan (Note 14 – Employee Retirement Plans) for certain
members of senior management in fiscal 2009. Deferred compensation is
invested in mutual funds held in a “rabbi trust” which is 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 on the consolidated balance sheets.
29
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 and foreign jurisdic-
tions. The Company concluded its federal examination by
the Internal Revenue Service for fiscal year 2011, however,
fiscal years 2012 and 2013 remain subject to federal
examination. Due to ongoing state examinations and
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 June 29, 2014,
the Company has an unrecognized tax position of
approximately $0.5 million, including accrued interest
and penalties of $0.1 million. The Company believes
that no additional significant unrecognized tax positions
will be resolved over the next twelve months.
Significant components of the income tax provision
from continuing operations are as follows:
Years Ended
June 29, June 30, July 1,
2014 2013 2012
(in thousands)
Current provision (benefit):
Federal
State
Foreign
$ 6,439
1,247
11
7,697
$ 7,983
1,845
––
9,828
$ (1,643)
1,155
––
(488)
Deferred provision (benefit):
Federal
State
Foreign
773
28
(95)
706
(730)
(25)
––
(755)
8,479
(220)
––
8,259
Income tax expense
$ 8,403
$ 9,073
$ 7,771
A reconciliation of the U.S. federal statutory tax rate to
the Company’s effective tax rate is as follows:
Years Ended
June 29, June 30, July 1,
2014 2013 2012
35.0%
Tax at U.S. statutory rates
State income taxes, net
of federal tax benefit
35.0%
35.0%
4.0
3.7
3.3
Non-deductible stock-based
compensation –– –– 0.6
Non-deductible goodwill
amortization –– –– 1.7
1.2 (0.3) (1.1)
Rate differences
(1.2)
Tax credits (1.7) (1.2)
Tax settlements (1.0) 1.1 ––
(2.2)
Other, net
36.8%
0.4
37.6%
(1.3)
36.6%
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. The signifi-
cant components of the Company’s deferred income tax
assets (liabilities) are as follows:
Years Ended
June 29, June 30,
2014 2013
(in thousands)
Deferred income tax assets:
Net operating loss and
credit carryforwards
Accrued expenses
and reserves
Stock-based
compensation
Book in excess of
tax depreciation
Gross deferred
$4,342
$ 3,230
6,178
3,420
1,322
5,848
3,266
1,055
income tax assets
13,399
Less: Valuation allowance (2,241) (1,477)
11,922
15,262
13,021
Deferred income tax liabilities:
Other intangibles (6,512) (4,049)
Tax in excess of
book depreciation –– ––
(6,512) (4,049)
Net deferred income tax assets
$6,509
$ 7,873
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 estab-
lished valuation allowances primarily for net operating
loss carryforwards in certain states and its United
Kingdom subsidiary. At June 29, 2014 the Company’s
federal and foreign net operating loss carryforwards were
$2.8 million and $5.1 million respectively, while the tax
effected state net operating loss was $3.3 million, before
federal benefit, which if not utilized, will begin to expire in
fiscal year 2025, indefinitely, and 2015, respectively. The
federal net operating loss of $2.8 million is subject to
Section 382 limitations of $0.3 million per year.
30
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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.
The Company has a stock repurchase plan through
which purchases can be made from time to time in the
open market and through privately negotiated transac-
tions, subject to general market conditions. The repur-
chase program is financed utilizing available cash. In
March 2013, the Company’s Board of Directors autho-
rized an increase of $20 million to its stock repurchase
plan. The Company repurchased a total of $8.3 million
(1,561,206 shares), $9.6 million (2,490,065 shares) and
$3.3 million (1,133,913 shares) during the fiscal years
ended June 29, 2014, June 30, 2013 and July 1, 2012,
respectively, under this program. As of June 29, 2014,
$10.6 million remains authorized under the plan.
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”). The Plan is a broad-based, long-
term incentive program that is intended to attract, retain
and motivate employees, consultants and directors to
achieve the Company’s long-term growth and profitability
objectives, and therefore align stockholder and employee
interests. The Plan provides for the grant to eligible
employees, consultants and directors of stock options,
share appreciation rights (“SARs”), restricted shares,
restricted share units, performance shares, performance
units, dividend equivalents, and other share-based
awards (collectively “Awards”).
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 “Commit-
tee”). At June 29, 2014, the Company has reserved
approximately $14.5 million shares of common stock for
issuance, including options previously authorized for
issuance under the 1999 Stock Incentive Plan.
The amounts of stock-based compensation expense
recognized in the periods presented are as follows:
Years Ended
June 29, June 30, July 1,
2014 2013 2012
(in thousands, except per share data)
Stock options
Restricted stock awards
Total
Deferred income tax benefit
Stock-based compensation
$ 420
4,244
4,664
1,738
$ 477
3,806
4,283
1,555
$1,073
3,777
4,850
1,796
expense, net
$2,926 $2,728
$3,054
Stock based compensation expense is recorded
within the following line items of operating expenses:
Years Ended
June 29, June 30, July 1,
2014 2013 2012
(in thousands)
Marketing and sales
Technology and
development
General and administrative
Total
$1,261
$1,499
$1,755
298
3,105
428
2,356
$4,664 $4,283
600
2,495
$4,850
Stock-based compensation expense has not been
allocated between business segments, but is reflected as
part of Corporate overhead. (Refer to Note 15. Business
Segments).
Stock Option Plans
The weighted average fair value of stock options on
the date of grant, and the assumptions used to estimate
the fair value of the stock options using the Black-Scholes
option valuation model, were as follows:
Years Ended
June 29, June 30, July 1,
2014 2013 2012
Weighted average fair
value of options granted
Expected volatility
Expected life (in years)
Risk-free interest rate
Expected dividend yield
$3.16
61%
6.6
1.6%
0.0%
$2.95
72%
6.4
0.7%
0.0%
$1.84
72%
8.0
0.9%
0.0%
31
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
The expected volatility of the option is determined using historical volatilities based on historical stock prices.
The Company estimated the expected life of options granted based upon the historical weighted average. The risk-free
interest rate is determined using the yield available for zero-coupon U.S. government issues with a remaining term equal
to the expected life of the option. The Company has never paid a dividend, and as such the dividend yield is 0.0%.
The following table summarizes stock option activity during the year ended June 29, 2014:
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Options Price Term Value (000s)
Outstanding beginning of period 4,723,240 $ 3.89
Granted 25,000 $ 5.39
Exercised (164,050) $ 3.02
Forfeited/Expired (244,400) $ 6.34
Outstanding end of period 4,339,790 $ 3.80
Options vested or expected to
4.2 years $10,188
vest at end of period
Exercisable at June 29, 2014
4,232,111 $ 3.83 4.2 years $ 9,827
2,886,790 $ 4.52 2.8 years $ 5,269
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 2014 and the exercise price, multiplied by the
number of in-the-money options) that would have been received by the option holders had all option holders exercised
their options on June 29, 2014. This amount changes based on the fair market value of the Company’s stock. The total
intrinsic value of options exercised for the years ended June 29, 2014, June 30, 2013 and July 1, 2012 was $0.4
million, $0.6 million, and $0.0 million, respectively.
The following table summarizes information about stock options outstanding at June 29, 2014:
Options Outstanding Options Exercisable
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Options Contractual Life Exercise Options Exercise
Exercise Price Outstanding (years) Price Exercisable Price
1.69 - 1.79
$
$
2.01 - 2.63
$ 2.87 - 3.11
3.26 - 6.52
$
6.90 - 9.95
$
1,013,500
1,054,900
1,041,303
650,234
579,853
4,339,790
6.3
7.3
2.0
2.4
1.0
4.2
$ 1.79
$ 2.62
$ 3.10
$ 6.11
$ 8.09
$ 3.80
382,500
296,400
1,029,803
598,234
579,853
2,886,790
$ 1.79
$ 2.62
$ 3.10
$ 6.08
$ 8.09
$ 4.52
As of June 29, 2014, the total future compensation
cost related to non-vested options not yet recognized in
the statement of operations was $1.9 million and the
weighted average period over which these awards are
expected to be recognized was 4.8 years.
The Company grants shares of Common Stock to its
employees that are subject to restrictions on transfer and
risk of forfeiture until fulfillment of applicable service
conditions and, in certain cases, holding periods (Re-
stricted Stock).
The following table summarizes the activity of non-vested
restricted stock during the year ended June 29, 2014:
Weighted
Average
Grant Date
Shares Fair Value
Non-vested – beginning of period 3,433,355 $ 2.80
Granted 1,760,918 $ 5.09
Vested (1,608,052) $ 2.50
Forfeited (899,536) $ 4.52
Non-vested - end of period 2,686,685 $ 3.90
The fair value of non-vested shares is determined based
on the closing stock price on the grant date. As of June 29,
32
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
2014, there was $6.8 million of total unrecognized com-
pensation cost related to non-vested restricted stock-based
compensation to be recognized over a weighted-average
period of 2.8 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 contributions to
the 401(k) plan in amounts not exceeding federal
guidelines. On an annual basis the Company, as deter-
mined 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 2014, 2013 and 2012.
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 participation
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 June 29, 2014 and June
30, 2013, these plan liabilities, which are included in Other
liabilities within the Company’s Consolidated Balance
Sheet, totaled $2.1 million and $1.7 million, 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. Com-
pany contributions during the years ended June 29, 2014,
July 1, 2012 and July 3, 2011 were less than $0.1 million.
Gains and losses on these investments, which were
immaterial during fiscal years 2014, 2013 and 2012, are
included in Interest expense and other, net, within the
Company’s Consolidated Statements of Income.
Note 15. Business Segments
The Company’s management reviews the results of
the Company’s operations by the following three busi-
ness segments:
(cid:127) 1-800-Flowers.com Consumer Floral,
(cid:127) BloomNet Wire Service, and
(cid:127) Gourmet Food and Gift Baskets
Segment performance is measured based on contribu-
tion 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), nor does it include depreciation and amortization,
other income, and income taxes, or stock-based compensa-
tion, which is 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
June 29, June 30, July 1,
2014 2013 2012
(in thousands)
Net revenues:
1-800-Flowers.com
Consumer Floral
BloomNet Wire
Service
Gourmet Food &
Gift Baskets
Corporate
Intercompany
$421,336
$411,526
$398,184
84,199
81,822
82,582
251,990
243,225
228,002
797
789
773
eliminations (1,977) (1,865) (2,024)
Total net revenues
$756,345
$735,497
$707,517
Operating Income from Continuing Operations
Years Ended
June 29, June 30, July 1,
2014 2013 2012
(in thousands)
Segment Contribution Margin:
1-800-Flowers.com
Consumer Floral $40,252 $ 47,193 $ 39,147
BloomNet Wire
Service
Gourmet Food &
Gift Baskets (2)
Segment Contribution
Margin Subtotal
26,715 25,611 22,339
27,122 20,345 30,193
94,089 93,149 91,679
Corporate (1) (50,535) (48,565) (48,412)
Depreciation and
amortization (19,848) (18,798) (19,540)
Operating income $23,706 $ 25,786 $ 23,727
(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) GFGB segment contribution margin during the year ended July 1, 2012
includes a $3.8 million ($2.4mm, net of tax) gain on the sale of 17 Fannie
May stores, which were being operated as franchised locations post-sale.
33
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 16. Discontinued Operations
On September 6, 2011, the Company completed the
sale of certain assets of its wine fulfillment services
business operated by its Winetasting Network subsidiary.
The sales price consisted of $12.0 million of cash
proceeds at closing, resulting in a gain on sale of $8.7
million ($4.5 million, net of tax). The Company has
classified the results of its e-commerce and procurement
business of Winetasting Network as a discontinued
operation for all periods presented. During the fourth
quarter of fiscal 2013, the Company made the strategic
decision to divest the e-commerce and procurement
businesses of The Winetasting Network in order to focus
on growth opportunities in its Gourmet Foods and Gift
Baskets business segment. The Company closed on the
sale of its e-commerce and procurement businesses on
December 31, 2013. The Company had originally
estimated a loss of $2.3 million ($1.5 million, net of tax),
which was provided for during the fourth quarter of fiscal
2013, but the loss was reduced to $1.0 million, upon
finalization of terms and closing on the sale. As a result,
the Company reversed $1.3 million ($0.8 million, net of
tax) of its accrual for the estimated loss during the fiscal
year ended June 29, 2014. The Company has classified
the results of its wine fulfillment services business as a
discontinued operation for fiscal 2012 and 2011, and the
e-commerce and procurement business of Winetasting
Network as a discontinued operation for all periods
presented.
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 June 29, 2014 future minimum payments under
non-cancelable operating leases with initial terms of one
year or more consist of the following:
Operating
Leases
(in thousands)
2014
2015
2016
2017
2018
Thereafter
Total minimum lease payments
$14,141
13,332
12,422
9,954
6,880
16,793
$73,522
At June 29, 2014, the aggregate future sublease
rental income under long-term operating sub-leases for
land and buildings and the corresponding rental expense
under long-term operating leases were as follows:
Results for discontinued operations are as follows:
Years Ended
Sublease Sublease
Income Expense
June 29, June 30, July 1,
2014 2013 2012
(in thousands, except per share data)
Net revenues from
discontinued
operations $ 1,669 $ 5,154 $10,743
Loss from
discontinued
operations,
net of tax $ (86) $ (1,889) $ (217)
Gain (loss) on
sale of discontinued
operations,
net of tax $ 815 $ (1,512) $ 4,542
Income (loss) from
discontinued
operations $ 729 $ (3,401) $ 4,325
Note 17. Commitments and Contingencies
Leases
The Company currently leases office, store facilities,
and equipment under various leases through fiscal 2026.
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
34
(in thousands)
2014
2015
2016
2017
2018
Thereafter
$ 740
677
561
310
278
1,055
$ 740
677
561
310
278
1,055
$3,621 $3,621
Rent expense was approximately $17.7 million, $17.7
million and $17.4 million for the years ended June 29,
2014, June 30, 2013 and July 1, 2012, respectively.
Other Commitments
The Company’s purchase commitments consist
primarily of inventory, equipment and technology purchase
orders made in the ordinary course of business, most of
which have terms less than one year. As of June 29, 2014,
the Company had fixed and determinable off-balance
sheet purchase commitments with remaining terms in
excess of one year of approximately $2.4 million, primarily
related to the Company’s technology infrastructure.
The Company had approximately $1.7 million in
unused stand-by letters of credit as of June 29, 2014.
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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
(“CUTPA”) 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 December 23, 2011, plaintiff filed a
notice of voluntary dismissal seeking to dismiss the entire
action without prejudice. The court entered an Order on
November 28, 2012, dismissing the case in its entirety. This
case was subsequently refiled in the United States District
Court for the District of Connecticut.
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 “Consolidated
Action”). A consolidated amended complaint was filed by
plaintiffs on September 7, 2012, purporting to assert claims
substantially similar to those originally asserted. The
Company moved to dismiss the consolidated amended
complaint on December 7, 2012, which was subsequently
refiled at the direction of the Court on January 16, 2013.
On December 5, 2012, the same plaintiff from the
action voluntarily dismissed in the United States District
Court for the Eastern District of New York filed a pur-
ported class action complaint in the United States
District Court for the District of Connecticut naming the
Company and numerous other parties as defendants,
purporting to assert claims substantially similar to those
asserted in the consolidated amended complaint (the
“Frank Action”). On January 23, 2013, plaintiffs in the
Consolidated Action filed a motion to transfer and
consolidate the action filed on December 5, 2012 with
the Consolidated Action. The Company intends to
defend each of these actions vigorously.
On January 31, 2013, the court issued an order to
show cause directing plaintiffs’ counsel in the Frank
Action, also counsel for plaintiffs in the Consolidated
Action, to show cause why the Frank Action is distinguish-
able from the Consolidated Action such that it may be
maintained despite the prior-pending action doctrine. On
June 13, 2013, the court issued an order in the Frank
Action suspending deadlines to answer or to otherwise
35
respond to the complaint until 21 days after the court
decides whether the Frank Action should be consolidated
with the Consolidated Action. On July 24, 2013 the Frank
Action was reassigned to Judge Vanessa Bryant, before
whom the Consolidated Action is currently pending, for all
further proceedings. On August 14, 2013, other defendants
filed a motion for clarification in the Frank Action requesting
that Judge Bryant clarify the order suspending deadlines.
On March 28, 2014, the Court issued a series of
rulings disposing of all the pending motions in both the
Consolidated Action and the Frank Action. Among other
things, the Court dismissed several causes of action,
leaving pending a claim for CUTPA violations stemming
from Trilegiant’s refund mitigation strategy and a claim for
unjust enrichment. Thereafter, the Court consolidated the
Frank case into the Consolidated Action. On April 28,
2014 Plaintiffs moved for leave to appeal the various
rulings against them to the United States Court of
Appeals for the Second Circuit and to have a partial final
judgment entered dismissing those claims that the Court
had ordered dismissed. The Court has not yet ruled on
this new motion. The Company has filed its answer to the
complaint on May 12, 2014.
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 aforemen-
tioned 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.
Note 18. Subsequent Event – Pending
Acquisition of Harry & David
On August 30, 2014, the Company entered into a
definitive agreement to acquire Harry & David Holdings,
Inc (Harry & David), a leading multi-channel specialty
retailer and producer of branded premium gift-quality
fruit, gourmet food products and other gifts marketed
under the Harry & David®, Wolferman’s® and
Cushman’s® brands. The anticipated transaction, at a
purchase price of $142.5 million, includes the Harry &
David’s brands and websites as well as its headquarters,
manufacturing and distribution facilities and orchards in
Medford, Oregon, a warehouse and distribution facility in
Hebron, Ohio and 47 Harry & David retail stores located
throughout the country. Harry & David’s revenues were
approximately $380 million in its fiscal 2013. 1-800-
FLOWERS.COM, Inc. has secured committed funding for
the acquisition from JP Morgan Chase and Wells Fargo
Bank. The acquisition is expected to close in October
2014, subject to the satisfaction of customary closing
conditions, including regulatory approval.
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 sheet of 1-800-FLOWERS.COM, Inc. and
Subsidiaries as of June 29, 2014 and the related
consolidated statements of income, comprehensive
income, stockholders’ equity, and cash flows for the year
then ended. In connection with our audit of the financial
statements, we have also audited the financial statement
schedule for the year ended June 29, 2014, listed in the
accompanying index. These financial statements and
schedule are the responsibility of the Company’s manage-
ment. Our responsibility is to express an opinion on these
financial statements and schedule 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 the financial statements are free of material
misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall presenta-
tion of the financial statements and schedule. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statement
referred to above present fairly, in all material respects,
the financial position of 1-800-FLOWERS.COM, Inc. and
Subsidiaries at June 29, 2014, and the results of their
operations and their cash flows for the year then ended,
in conformity with accounting principles generally
accepted in the United States of America.
Also, in our opinion, the financial statement schedule,
when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein for
the year ended June 29, 2014.
We also have audited, in accordance with the
standards of the Public Company Accounting Oversight
Board (United States), 1-800-FLOWERS.COM, Inc. and
Subsidiaries’ internal control over financial reporting as of
June 29, 2014 based on criteria established in Internal
Control – Integrated Framework (1992) issued by the
Committee of Sponsoring Organizations of the Treadway
Commission (COSO) and our report dated September 12,
2014 expressed an unqualified opinion thereon.
BDO USA, LLP
Melville, NY
September 12, 2014
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 Subsid-
iaries (the Company) as of June 30, 2013, and the related
consolidated statements of income, comprehensive income,
stockholders’ equity, and cash flows for each of the two
years in the period ended June 30, 2013. Our audits also
included the financial statement schedule listed in the Index
at Item 15(a) for the two years ended June 30, 2013. These
financial statements and schedule are the responsibility of
the Company’s management. Our responsibility is to
express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made
by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the consoli-
dated financial position of 1-800-FLOWERS.COM, Inc.
and Subsidiaries at June 30, 2013, and the consolidated
results of their operations and their cash flows for each of
the two years in the period ended June 30, 2013, in
conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also have audited, in accordance with the
standards of the Public Company Accounting Oversight
Board (United States), 1-800-FLOWERS.COM, Inc. and
Subsidiaries’ internal control over financial reporting as
of June 30, 2013, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission
(1992 framework) and our report dated September 13,
2013 expressed an unqualified opinion thereon.
Jericho, New York
September 13, 2013
36
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:
(cid:127) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transac-
tions and dispositions of the assets of the Company;
(cid:127) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of
financial statements in accordance with 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
(cid:127) provide reasonable assurance regarding preven-
tion or timely detection of unauthorized acquisition, use
or disposition of the Company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effec-
tiveness to future periods are subject to the risk that
controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management, including the Company’s Chief
Executive 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 assess-
ment, management concluded that the Company’s
internal control over financial reporting was effective
as of June 29, 2014.
The Company’s independent registered public
accounting firm, BDO USA, LLP, audited the effective-
ness of the Company’s internal control over financial
reporting as of June 29, 2014. BDO USA, LLP’s
report on the effectiveness of the Company’s internal
control over financial reporting as of June 29, 2014 is
set forth below.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
1-800-FLOWERS.COM, Inc. and Subsidiaries
We have audited 1-800-FLOWERS.COM, Inc. and
Subsidiaries’ (the “Company”) internal control over
financial reporting as of June 29, 2014, based on criteria
established in Internal Control – Integrated Framework
(1992) issued by the Committee of Sponsoring Organiza-
tions 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 assur-
ance about whether effective internal control over
financial reporting was maintained in all material re-
spects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit
also included performing such other procedures as we
considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is
a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes
in accordance with generally accepted accounting
principles. A company’s internal control over financial
reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting prin-
ciples, and that receipts and expenditures of the com-
pany are being made only in accordance with authoriza-
tions of management and directors of the company; and
(3) provide reasonable assurance regarding prevention
37
Report of Independent Registered Public Accounting Firm (continued)
or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk
that controls may become inadequate because of
changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our opinion, 1-800-FLOWERS.COM, Inc. and
Subsidiaries maintained, in all material respects,
effective internal control over financial reporting as
of June 29, 2014, based on the COSO criteria.
We also have audited, in accordance with the
standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheet of
1-800-FLOWERS.COM, Inc. and Subsidiaries as of
June 29, 2014 and the related consolidated statements
of income, comprehensive income, stockholders’ equity,
and cash flows for the year then ended and our report
dated September 12, 2014 expressed an unqualified
opinion thereon.
BDO USA, LLP
Melville, NY
September 12, 2014
Market for Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Holders
As of August 29, 2014, there were approximately
263 stockholders of record of the Company’s Class A
common stock, although the Company believes that
there is a significantly larger number of beneficial
owners. As of August 29, 2014, there were approxi-
mately 15 stockholders of record of the Company’s
Class B common stock.
Dividend Policy
The Company has never declared or paid any
cash dividends on its Class A or Class B common
stock. 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.
Purchases of Equity Securities by the Issuer
The Company has a stock repurchase plan through
which purchases can be made from time to time in the
open market and through privately negotiated transac-
tions, subject to general market conditions. The repur-
chase program is financed utilizing available cash. In
March 2013, the Company’s Board of Directors autho-
rized an increase of $20 million to its stock repurchase
plan. The Company repurchased a total of $8.3 million
(1,561,206 shares), $9.6 million (2,490,065 shares) and
$3.3 million (1,133,913 shares) during the fiscal years
Market Information
1-800-FLOWERS.COM’s Class A common stock
trades on The NASDAQ Global Select Market under the
ticker symbol “FLWS.” There is no established public
trading market for the Company’s Class B common
stock. The following table sets forth the reported high
and low sales prices for the Company’s Class A
common stock for each of the fiscal quarters during the
fiscal years ended June 29, 2014 and June 30, 2013.
High Low
Year ended June 29, 2014
July 1, 2013 – September 29, 2013
$ 7.17
September 30, 2013 – December 29, 2013 $ 5.75
$ 5.88
December 30, 2013 – March 30, 2014
$ 5.95
March 31, 2014 – June 29, 2014
Year ended June 30, 2013
July 2, 2012 – September 30, 2012
October 1, 2012 – December 30, 2012
December 31, 2012 – March 31, 2013
April 1, 2013 – June 30, 2013
$ 4.12
$ 3.93
$ 5.12
$ 6.60
$ 5.15
$ 4.53
$ 4.65
$ 4.97
$ 3.13
$ 2.77
$ 3.45
$ 4.75
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.
38
Market for Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities (continued)
ended June 29, 2014, June 30, 2013 and July 1, 2012, respectively, under this program. As of June 29, 2014, $10.6
million remains authorized under the plan.
The following table sets forth, for the months indicated, the Company’s purchase of common stock during the fiscal
year ended June 29, 2014, which includes the period July 1, 2013 through June 29, 2014:
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 Programs
Period Shares Purchased Paid Per Share (1) Programs (in thousands)
(in thousands, except average price paid per share)
7/01/13 - 7/28/13
7/29/13 - 8/25/13
8/26/13 - 9/29/13
9/30/13 - 10/27/13
10/28/13 - 11/24/13
11/25/13 - 12/29/13
12/30/13 - 1/26/14
1/27/14 - 2/23/14
2/24/14 - 3/30/14
3/31/14 - 4/27/14
4/28/14 - 5/25/14
5/26/14 - 6/29/14
10.0
0.5
301.4
393.6
420.7
106.2
82.7
38.3
48.5
93.1
19.4
46.9
Total
1,561.2
$5.97
$5.99
$5.38
$5.43
$5.11
$5.04
$5.16
$5.01
$5.55
$5.58
$5.54
$5.56
$5.31
10.0
0.5
301.4
393.6
420.6
106.2
82.7
38.3
48.5
93.1
19.4
46.9
1,561.2
(1) Average price per share excludes commissions and other transaction fees.
$18,889
$18,886
$17,253
$15,111
$12,959
$12,419
$11,989
$11,797
$11,526
$11,005
$10,899
$10,632
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 6/30/09 in stock or index, including reinvestment of dividends. Fiscal year ending June 30.
39
One Old Country Road, Suite 500
Carle Place, NY 11514
(516) 237-6000
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 current expectations or beliefs
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,” “fore-
see,” “likely,” “will,” or similar words or phrases. 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 achieve its guidance for revenue, Adjusted EBITDA and
Adjusted EPS; its ability to manage the significantly increased
seasonality of its business; its ability to integrate the opera-
tions of acquired companies, including Harry & David; 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 obliga-
tion to publicly update any of the forward-looking state-
ments, 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 fac-
tors, and a list of definitions of non-GAAP terms, including
EBITDA and Free Cash Flow, among others, 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. Consequently, you should not consider any such list
to be a complete set of all potential risks and uncertainties.
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
BDO USA, LLP
401 Broadhollow Road
Suite 201
Melville, NY 11747
(631) 501-9600
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
World-Class Florists Worldwide Delivery
One Old Country Road, Suite 500, Carle Place, NY 11514
(516) 237-6000 • www.1800flowers.com