2016 Annual Report
D E L I V E R I N G S M I L E S , D R I V I N G G R O W T H
Always Innovating
1-800-FLOWERS.COM and its brands have always been on
the leading edge of innovation. An example is the cre-
ation of the world’s first “of the month” gift club – the
iconic Harry & David® Fruit-of-the-Month Club®. Other
pioneering accomplishments include being the first
company to adopt an 800 telephone number as its
name, the first merchant to conduct a transaction
on AOL, and the floral industry’s first mobile com-
merce gift center. Today, the innovations continue
with truly original product ideas such as the
“Fabulous Feline” collection of floral cats and many
other unique products designed to deliver smiles.
In fiscal 2016, 1-800-FLOWERS.COM also adopted
several exciting new technologies – including “Bots”
for Facebook Messenger that interact with custom-
ers using natural language, as well as the ability for
customers to place orders using voice commands via
Amazon Alexa. In addition, the Company introduced
“Gwyn” (Gifts When You Need) – an online personal
gift concierge built on artificial intelligence and
powered by IBM Watson.
About 1-800-FLOWERS.COM, Inc.
1-800-FLOWERS.COM, Inc. is a leading provider of gourmet food and floral gifts for all occasions. For the past 40 years,
1-800-FLOWERS® (1-800-356-9377 or www.1800flowers.com) has been helping deliver smiles for our customers with gifts for every
occasion, including fresh flowers and the finest selection of plants, gift baskets, gourmet foods, confections, candles, balloons
and plush stuffed animals. As always, our 100% Smile Guarantee® backs every gift. The company’s Celebrations® suite of services
including Celebrations Passport® Free Shipping/No Service Charge program, Celebrations Rewards® and Celebrations Reminderssm,
are all designed to engage with customers and deepen relationships as a one-stop destination for all celebratory and gifting occa-
sions. In 2016, 1-800-Flowers.com was awarded a Silver Stevie “e-Commerce Customer Service” Award, recognizing the company’s
innovative use of online technologies and social media to service the needs of customers. In addition, 1-800-FLOWERS.COM, Inc.
was recognized as one of Internet Retailer’s Top 300 B2B e-commerce companies and was also recently named in Internet Re-
tailer’s 2016 Top Mobile 500 as one of the world’s leading mobile commerce sites. The company was included in Internet Retailer’s
2015 Top 500 for fast growing e-commerce companies. In 2015, 1-800-Flowers.com was named a winner of the “Best Companies
to Work for in New York State” Award by The New York Society for Human Resource Management (NYS-SHRM). The Company’s
BloomNet® international floral wire service (www.mybloomnet.net) provides a broad range of quality products and value-
added services designed to help professional florists grow their businesses profitably. The 1-800-FLOWERS.COM, Inc. “Gift Shop”
also includes gourmet gifts such as 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® (www.fanniemay.com and www.harrylondon.com); gift baskets and towers from 1-800-Baskets.com® (www.1800baskets.com);
premium English muffins and other breakfast treats from Wolferman’s® (1-800-999-1910 or www.wolfermans.com); carved fresh
fruit arrangements from FruitBouquets.com (www.fruitbouquets.com); and top quality steaks and chops from Stock Yards®
(www.stockyards.com). Shares in 1-800-FLOWERS.COM, Inc. are traded on the NASDAQ Global Select Market, ticker symbol: FLWS.
oioonoonoonnoooonvoonntooiooonnvvnniiannvv Financial Highlights
(From Continuing Operations)
JULY 3,
2016
JUNE 28,
2015
JUNE 29,
2014
JUNE 30,
2013
JULY 1,
2012
(in millions, except percentages and per share data)
$1,173.0
44.1%
40.4%
$ 85.8(2)
$ 0.43(2)
$1,121.5
43.4%
40.1%
$ 80.5(3)
$ 0.34(3)
$756.3
41.7%
38.6%
$ 48.2
$ 0.22
$735.5
41.5%
38.0%
$ 48.9
$ 0.24
$707.5
41.4%
38.5%
$ 44.3(4)
$ 0.20
Total Net Revenues
Gross Profit Margin
Operating Expense Ratio
Adjusted EBITDA(1)
Adjusted EPS
(1) Excluding stock-based compensation.
(2) Adjusted EBITDA and Adjusted EPS for fiscal 2016 exclude one-time costs for severance and integration of Harry & David, as well as the settlement of
litigation. Adjusted EPS for fiscal 2016 also excludes the loss incurred on the sale of iFlorist, the impairment of a foreign equity investment, and the gain
from the Fannie May warehouse fire insurance recovery. Fiscal 2016 EPS as reported was $0.55.
(3) Pro forma for comparability: Includes Harry & David’s fiscal 2015 first quarter loss in order to present comparable full-year results: Adjusted EBITDA
and Adjusted EPS for fiscal 2015 exclude one-time costs associated with the acquisition and integration of Harry & David and the impact of the Fannie
May warehouse fire in November 2014; Fiscal 2015 Adjusted EBITDA as reported was $95.3MM and fiscal 2015 Adjusted EPS as reported was $0.51.
(4) Fiscal 2012 EBITDA was adjusted to exclude a gain on the sale of Fannie May stores.
Total Revenues
(From Continuing Operations In Millions)
Adjusted EBITDA1
$1.17B
$1.12B
$756.3
$735.5
$707.5
$85.82
$80.53
FY16 % Revenues
by Category
Gourmet Food & Gift Baskets
by Season
July – September (Fiscal 1st Quarter)
Consumer Floral
October – December (Fiscal 2nd Quarter)
BloomNet® Wire Service
January – March (Fiscal 3rd Quarter)
April – June (Fiscal 4th Quarter)
$48.9
$48.2
$44.34
FY12
FY13
FY14
FY15
FY16
7%
Fiscal 2016 Achievements
• Grew revenues 4.6 percent to $1.17 Billion
• Grew Adjusted EBITDA(2) (excluding stock-based
compensation) 6.6 percent to $85.8 Million
• Grew Adjusted EPS(2) 26.5 percent to $0.43
• Continued successful integration of Harry & David,
increasing expected synergy savings to $20 Million
36%
7%
57%
13%
47%
20%
20%
Financial Report Insert
See inside rear cover pocket
a
To Our Shareholders
We are pleased to report another solid year of top and bottom line
growth for our company. In fact, Fiscal 2016 was a good year on
a number of fronts. First, we made excellent progress executing
on our vision to build what we call our “Celebratory Ecosystem”
which includes our all-star collection of gifting brands and an ever
increasing suite of products and services designed to help our
customers deliver smiles to the important people in their lives.
We also continued to make progress in our integration initia-
tives, which began with our acquisition of Harry & David and has
now evolved into a holistic approach to how we view and operate
our entire company. A key feature of this approach is that we
are focused on proactively identifying and sharing best practices
across all of our operations and key functional areas. This focus
free shipping program, Celebrations Rewards and Celebrations
Reminders – programs that are all designed to enhance our
customers’ experience.
Solid Performance Across All Three Segments
In addition to the progress we achieved in these important areas,
during the year we saw some positive trends in all three of our
business segments.
In Consumer Floral, 1-800-Flowers continued to extend its
market leading position driving solid comparable revenue growth
for the year and four more quarters of year-over-year increases in
contribution margin. These results reflect several factors, includ-
ing: our focus on truly original product designs – developed by
On March 9, 2016 the Company announced that Jim McCann, Founder, Chairman
and CEO, was transitioning to the position of Executive Chairman and Chris McCann,
President, adding the title of Chief Executive Officer. The announcement coincided
with the 40th anniversary of the Company’s founding and is an integral part of its
long-term succession plan. As Executive Chairman, Jim continues to be involved with
the Company in his role overseeing its management talent evaluation and develop-
ment, M&A and business development and long-term strategic planning. Chris, who
has been steering the Company’s day-to-day operations as President since 2000, has
expanded his responsibilities for overseeing the Company’s operational and organi-
zation processes, including the development and execution of the Company’s annual
and longer-term operating and financial plans.
has already provided benefits, enabling us to exceed our original
estimates for operating synergies, which is now at $20 million over
three years – $10 million of which we have already captured.
Pursuing Multiple Revenue Growth Synergies
While continuing to execute against our initiatives to drive operat-
ing cost synergies, during the year we also began to turn more
focus on pursuing the numerous revenue synergies that we see
across our business platform, including:
n increased cross-brand marketing and merchandising;
n improved customer data analytics and an expanded suite of
CRM tools for our growing customer database;
n new brand and product introductions for our wholesale channels;
n and new initiatives to accelerate growth in corporate gifting.
During the year, we also enhanced our ability to increase
multi-brand customers – a key long-term growth strategy – by
completing the migration of all of our brands onto the multi-
brand website. This enables us to enhance our cross-brand
marketing and merchandising programs – and begin to acceler-
ate our marketing initiatives, including Celebrations Passport
working directly with our talented local BloomNet florists; our
disciplined approach to efficient and effective marketing pro-
grams; and, our intense focus on always enhancing our custom-
ers’ experience – from shopping to delivery – which helped drive
exemplary customer satisfaction metrics.
We expect to build on these positive trends going forward
and we are confident that the 1-800-Flowers brand can accelerate
its revenue growth and further expand its market leadership in
fiscal 2017.
In our BloomNet business, revenues were essentially flat
year-over-year however we continued to drive strong bottom-
line performance, reaching a record high contribution margin
of 36 percent of total revenues. This reflects both effective cost
management, as well as BloomNet’s focus on being the qual-
ity and innovation leader in the wire service business. We are
confident that BloomNet is well positioned to achieve both top
and bottom-line growth in fiscal 2017 when it will benefit from
several factors, including: increasing order volumes from growing
1-800-Flowers and florist shop-to-shop orders in everyday occa-
sions, such as Sympathy, as well as from the favorable Valentine’s-
day placement; increased product sales to an expanded range of
wholesale customers; and new web marketing services and digital
directory advertising offerings.
In our Gourmet Food segment, strong revenue growth for the
year was driven primarily by Harry & David. Here we are gradually
building momentum as we begin to pursue the multiple revenue
synergy opportunities that we see in our business. Harry & David’s
revenue contributions, combined with continued solid growth in
our Cheryl’s and 1-800-Baskets businesses, more than offset lower
performance in our Fannie May brand, which is still working its
way back from the fire at its warehouse in fiscal 2015. To address
Fannie May’s performance – and return it to its strong, pre-fire top
and bottom-line levels – we’ve instituted a number of changes,
including: significant reductions to the brand’s cost structure;
enhanced product assortments; new packaging designs; and
enhanced store merchandising and local marketing programs.
We believe these changes will enable Fannie May to grow its top
line, enhance its gross margin and drive significantly improved
bottom-line contribution.
Strong Balance Sheet Enables Investments In
Key Growth Areas
We finished fiscal 2016 with a strong balance sheet including a
low debt ratio and growing cash flows. Inventory at year-end was
$103.3 million, reflecting the rebuilding of Fannie May’s invento-
ries as well as our decision to build forward some inventory for
the upcoming holiday season to help mitigate increasing costs
associated with seasonal labor recruitment and wages in the first
half of fiscal 2017.
A Culture of Innovation
Importantly, during fiscal 2016 we further illustrated a key feature
of our corporate culture – our focus on Innovation. Simply put:
innovation is part of our DNA. We have always been intensely
focused and committed to being at the forefront of technological
innovation and social trends that help shape consumer behav-
ior. During fiscal 2016 we began to leverage some exciting new
developments in machine-learning or artificial intelligence (A.I.).
We launched the first commerce “bot” on Facebook’s Messenger
platform, where they now have more than 1 billion monthly
active users. We were one of the first external commerce brands
integrated onto the Amazon Alexa voice-enabled platform. And,
we launched “Gwyn” – our own AI-based gift concierge service,
partnering with IBM’s Watson platform. These initiatives have po-
sitioned us as a first mover in the fast emerging world of “conver-
sational commerce.” In addition, we continued to innovate within
the rapidly changing landscape for payments, becoming one
of the launch partners for Apple on their Apple Pay for desktop
and mobile web.
All of these innovations help position us at the forefront of the
fast evolving changes we see in customer access, engagement
and experience. In addition, they also demonstrate how Facebook,
Amazon, IBM and Apple are interested in having our great brands
in their ecosystems.
Focus on Sustainable Growth
It’s important to note that over the past several years we have
nearly doubled our top line through a combination of solid
organic growth and our disciplined approach to M&A. We have
also, concurrently, more than doubled our bottom line in terms
of EBITDA, EPS and Free Cash Flow. We have achieved these
results despite rising labor costs and a tightening market for
seasonal labor; increasing commodity prices; and unfavorable
day placements for the Valentine holiday. As we look ahead, we
know there will always be headwinds that we need to manage
through, however we are now seeing some nice tailwinds in our
business as well. These include the successful integration of
Harry & David which is generating both operating synergies as
well as significant revenue growth opportunities; the strong
momentum in our 1-800-Flowers business, where we now have
favorable Valentine’s-day placements for the next several years;
and the recently completed migration of our brands onto the
multi-brand platform, which enables us to drive more cross-brand
marketing and merchandising programs and create more multi-
brand customers.
Looking Ahead: Accelerating Organic Revenue Growth
We have numerous opportunities available to us that we will
seize upon as we move into fiscal 2017. We will carry forward and
build upon the momentum we have in our 1-800-Flowers, Harry &
David, Cheryl’s and 1-800-Baskets brands. We will execute against
our initiatives to return Fannie May to its strong, pre-fire perfor-
mance levels. We will further expand our multi-brand strategy to
capture more of our customer’s gifting purchases and drive life-
time-value. We will continue to invest in and implement innova-
tive, customer-centric solutions to enhance customer experience.
We will further expand best practice initiatives across the compa-
ny to drive incremental cost and revenue synergies. And, we will
continue to differentiate our company as the leader in providing
gifting solutions for all occasions. By executing against these op-
portunities, we are confident that we will drive accelerated organic
revenue growth – leverage that growth to further expand margins
– and continue to build long-term shareholder value.
We thank you for your continued support.
Jim McCann
Executive Chairman
Chris McCann
President and CEO
ujanuuaa auu yraayy
2 0 1 7
Innovation is engrained in the DNA of
1-800-FLOWERS.COM, Inc., illustrated
by a history of firsts in adopting new
technologies that enhance customer
engagement and the customer experi-
ence. In fiscal 2016, the Company
collaborated with IBM to introduce
“Gwyn” (Gifts When You Need), a
game-changing conversational com-
merce technology powered by IBM
Watson artificial intelligence. Gwyn
interacts with online customers via
natural language text chat, serving as
a gift concierge and learning about
customers’ unique gifting needs to as-
sist them in choosing the perfect gift
for every occasion. Also during fiscal
2016, the Company embarked on sev-
eral other innovative technology ini-
tiatives, including becoming the first
third-party ecommerce retailer to be
deployed on the Amazon Alexa voice-
enabled platform as well as launching
the floral industry’s first text-based
“bot” for Facebook Messenger.
S U N D AY
M O N D AY
T U E S D AY
1
New Year’s Day
8
15
22
29
2
9
31
10
16
Martin Luther King Jr.’s
Birthday (observed)
17
23
30
24
31
W E D N E S D AY
4 1
11
18
25
THURSDAY
F R I D AY
S AT U R D AY
5 1
12
19
26
6
13
20
27
7
14
21
28
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2 0 1 7
S U N D AY
M O N D AY
Of all the gifting occasions throughout
the year, perhaps none can compare to
the romance of Valentine’s Day when it
comes to connecting with that special
someone in our lives. Helping to create
an exceptional customer experience
on Cupid’s big day and every other
day all year long is the Company’s
customer service team. Our highly
trained customer service representa-
tives ensure that every customer re-
ceives the highest caliber of assistance
on everything from advice about
selecting the ideal gift, to monitoring
the fulfillment of each order. During
fiscal 2016, the Company achieved
its best customer satisfaction metrics
ever – fostering loyalty, generating
important customer recommenda-
tions and increasing opportunities for
repeat business. Underscoring these
achievements, 1-800-Flowers.com was
awarded a Silver Stevie “e-Commerce
Customer Service” Award, recognizing
our innovative use of online technolo-
gies and social media in servicing
customer needs.
1
1
5
12
19
26
T U E S D AY
7
14
Valentine’s Day
6
13
20
Presidents’ Day
21
27
28
1
W E D N E S D AY
1
2
Groundhog Day
3
THURSDAY
F R I D AY
S AT U R D AY
8
15
22
9
16
23
10
17
24
4
11
18
25
cmamm rccaa hcc2 0 1 7
BloomNet®, the floral industry’s
leading wire service innovator, offers
products and services designed to
help thousands of local, professional
florists grow their business. In addition
to technology solutions designed to
enhance productivity and profitability
for retail florists, BloomNet is a go-to
source for knowledge that can expand
florists’ revenues. An example is the
Floriology InstituteTM in Jacksonville,
Florida which provides hands-on
courses in floral design taught by
several of the world’s leading design
experts...enabling florists to widen
their sales possibilities with exciting
new floral arrangements reflecting
the latest design trends. During fiscal
2016, Floriology Institute began of-
fering florists the opportunity to earn
coveted American Institute of Floral
Designers “Certified Floral Designer”
(CFD) designation. Also an important
resource for florists is Floriology®
magazine, featuring a wide spectrum
of design ideas, best business practices
and inspiring success stories highlight-
ing flower shop owners.
2
S U N D AY
M O N D AY
T U E S D AY
5
12
6
13
7
14
19
20
First Day of Spring
21
26
27
28
2
W E D N E S D AY
1
8
15
22
29
THURSDAY
F R I D AY
S AT U R D AY
2
9
16
23
30
3
10
4
11
17
St. Patrick’s Day
18
25
24
31
2 0 1 7
Millions of customers look to the
Company’s multi-brand website as
a one-stop gifting destination. The
site introduces customers to our
entire family of brands, helping them
solve for more of their year-round
gifting needs and thereby generating
increased retention and frequency.
Complementing this strategy is our
“Celebratory Ecosystem” focused on
deepening customer relationships
through our “All Star” collection of
brands and our Celebrations suite
of customer engagement services,
including: Celebrations Passport®
providing free delivery across all
our brands for one low annual fee;
Celebrations Rewards® enabling
customers to build and use points
across all brands; and Celebrations
RemindersSM which helps customers
remember all the important celebratory
and gifting occasions in their lives.
2
9
S U N D AY
M O N D AY
T U E S D AY
3
4
10
Passover Begins at Sunset
11
16
Easter
17
18
23
24
Administrative Professionals’
Week Begins
25
30
W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
0 1
5
2
6
12
13
19
20
26
Administrative Professionals’
Day
27
1
April Fools Day
8
15
22
29
7
14
21
28
mamm yaa
2 0 1 7
Thoughtful gifts, unlike just about any
other expression of love and kind-
ness, have a special way of making an
emotional connection with recipients...
delivering smiles to their faces that can
light up a room. Of course, Mother’s
Day offers a great opportunity to ex-
press the perfect sentiments. Whether
it’s an indulgent assortment of spa
products, a beautiful floral arrange-
ment, delectable gourmet foods, or
a vast range of truly original gifts for
Mom’s day and for virtually every
occasion throughout the year,
1-800-FLOWERS.COM, Inc. makes
it easy for customers to create fond
memories that can last a lifetime. Add-
ing to the possibilities is a continuously
growing spectrum of personalize-able
products that can bring a distinctive
touch to any gifting experience.
7
8
14
Mother’s Day
15
2
S U N D AY
M O N D AY
T U E S D AY
1 1
2 1
9
16
23
21
28
22
29
Memorial Day
(observed)
30
2
W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
4
11
18
25
3 1
10
17
24
31
5
Cinco dé Mayo
6
12
19
26
29
13
20
27
30
S U N D AY
M O N D AY
T U E S D AY
2 0 1 7
1-800-FLOWERS.COM, Inc. is honored
to have been included in Internet
Retailer’s 2016 Top Mobile 500 as one
of the world’s leading mobile com-
merce sites. Keeping with our commit-
ment to remaining on the forefront
of new innovations by adopting
state-of-the-art technologies in the
mobile world and embracing many
other emerging technologies, in fiscal
2016 the Company began offering
its customers the convenience of
Apple Pay on desktop and mobile
web. Using this technology, which is
available in Safari on iPhone, iPad
and Mac, customers can easily and
quickly complete a secure and private
payment on www.1800flowers.com
with a single touch – enhancing the
customer experience by simplifying
the checkout process.
4
11
1
5
12
18
Father’s Day
19
25
26
2
6
13
20
27
W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
1
8
7
14
Flag Day
15
21
First Day of Summer
22
28
29
2
9
16
23
30
3
10
17
24
yjulyy2 0 1 7
2
1
Everyday gifting is one of the
strongest growth areas for
1-800-FLOWERS.COM, Inc. In addition
to relying on our family of brands
for an immense selection of gifts to
celebrate holidays, customers are
increasingly coming to us for gifts
that can turn any day into a special
celebration. For instance, many of our
gifts are perfect for sharing at summer
gatherings...from a succulent assort-
ment of freshly carved Fruit Bouquets
by 1800flowers.comSM , to tempting
Fannie May® fine chocolates, to
mouthwatering Cheryl’s® cookies, as
well as many more gourmet treats.
Also a growing opportunity is the
market for shareable food gifts ap-
propriate for sympathy occasions.
With Harry & David®, Fannie May®,
1-800-Baskets.com®, Cheryl’s®, and
more, we offer a uniquely broad range
of shareable gourmet gifts that can be
conveniently delivered to the home to
be appreciated and enjoyed by family
and friends.
S U N D AY
M O N D AY
T U E S D AY
2
9
16
3
10
17
23
Parents’ Day
24
30
31
4
Independence Day
11
18
25
2
W E D N E S D AY
1
5
12
19
26
THURSDAY
F R I D AY
S AT U R D AY
2
6
13
20
27
1
8
7
14
Bastille Day
15
21
28
22
29
2 0 1 7
Flower shops are home to some of the most
creative people to be found anywhere.
Through the 1-800-Flowers.com® Local
Artisan program, local floral designers
are given an opportunity to showcase
their artistic talents and promote their
truly original products to millions of
consumers via the 1-800-Flowers.com
website. The program is highly
popular, enabling florists to take
advantage of the enormous reach of
the 1-800-Flowers.com site to gain wide-
spread exposure and increased sales
for their products. In fiscal 2016, a Local
Artisan landing page was added on
www.1800flowers.com where the stories
of the artisans and their unique products
are featured. Besides benefiting local flo-
rists, the program also plays an integral
role in the Company’s development of
new products, continuously simulating
innovative ideas in floral design.
6
13
20
27
S U N D AY
M O N D AY
T U E S D AY
1
8
15
22
29
7
National Friendship
Week Begins
14
21
28
W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
4
11
18
25
5
12
19
26
0 2
9
16
23
30
3
10
17
24
31
epttee ett beemeebbree
tsess
2 0 1 7
The 1-800-Flowers.com® brand has
long been a leader in gifts for all
occasions. Through the merchan-
dising strength of our multi-brand
website, we are uniquely positioned
to introduce millions of customers to
our expanded collection of gourmet
food brands including Harry & David®,
The Popcorn Factory®, Fannie May®
chocolates, Cheryl’s® cookies, and
Stock Yards® steaks and chops, along
with Fruit Bouquets by 1800flowers.comSM
and 1-800-Baskets.com®. This strategy
is helping to drive the creation of new
products across our entire family
of brands while also increasing the
opportunities for everyday gifting, cel-
ebrating such occasions as birthdays,
new babies and anniversaries, and
for expressing get well and sympathy
sentiments.
S U N D AY
M O N D AY
T U E S D AY
1
5
3
4
Labor Day
10
Grandparents Day
11
Patriot Day
12
17
24
18
25
19
26
W E D N E S D AY
2
6
13
7
14
THURSDAY
F R I D AY
S AT U R D AY
1
8
2
9
15
16
20
Rosh Hashanah
Begins at Sunset
21
22
First Day of Fall
23
27
28
29
Yom Kippur Begins at Sunset
30
etoocc boo eeree
oocoo
2 0 1 7
Business gifting is a thoughtful way
for bosses, colleagues and associates
to recognize achievements, provide
incentives, say thank you, and offer
condolences. During fiscal 2016, the
Company’s Corporate Gifts division
created partnerships with several top
companies. Among these is Service
Corporation International (SCI), North
America’s largest provider of funeral
and cemetery services. Through SCI’s
Dignity Memorial brand, an exclusive
new online sympathy gift program
was launched offering distinctive,
personalized sympathy gift options.
Partnerships were also established with
the Citi ThankYou® Rewards program
and with Capital One®. Citi custom-
ers can redeem points for flowers and
other gifts in our family of brands, and
Capital One service agents can offer
gifts to customers as part of a “just be-
cause” program. Exclusive agreements
were also created to provide gifts to
many other well-known companies
and organizations, including South-
west Airlines, AAA, AARP, Caesar Total
Rewards, and Bank of America.
S U N D AY
M O N D AY
T U E S D AY
1
1
National Children’s Day
8
15
22
29
2
9
Columbus Day (observed)
3
10
16
National Boss’s Day
17
23
30
24
31
Halloween
1
W E D N E S D AY
4
52
11
18
25
12
19
26
THURSDAY
F R I D AY
S AT U R D AY
6
13
20
27
7
14
21Sweetest Day
28
2 0 1 7
A fresh chill is in the air, guests are
arriving, and it’s time to celebrate the
late autumn start of another festive
holiday season. Helping to make fall
celebrations extra memorable is the
Company’s “All Star” line-up of leading
gift brands. Floral centerpieces from
1-800-Flowers.com® adorn tables
and mantels. And whetting ap-
petites is our expansive portfolio of
delicious gourmet food gifts from
Harry & David®, Cheryl’s® cookies, The
Popcorn Factory®, and Fannie May®
chocolates, plus juicy Fruit Bouquets
by 1800flowers.comSM and overflowing
gift baskets from 1-800-Baskets.com®.
1-800-FLOWERS.COM, Inc. has built
this extraordinary collection of gift
possibilities through a combination of
birthing brands internally and strategic
acquisitions – enhancing our relation-
ships with customers who know and
trust us to provide exactly what they
want for an increasingly broad range
of celebratory occasions.
2
1
5
12
19
26
S U N D AY
M O N D AY
T U E S D AY
2
6
13
20
27
7
Election Day
14
21
28
2
W E D N E S D AY
1
8
15
22
29
THURSDAY
F R I D AY
S AT U R D AY
4
11
Veterans Day
18
25
2
9
16
3
10
17
23
Thanksgiving Day
24
30
2 0 1 7
‘Tis the season for bountiful gifts,
and for many people no gift is more
eagerly awaited than world famous
Royal Riviera® pears from Harry &
David®. As far as the eye can see, our
own orchards cascade across the
southern Oregon countryside, ready
for harvest in late summer/early fall –
ultimately yielding what are arguably
the most flavorful and juiciest pears
anywhere on the planet. Also help-
ing to make the holidays joyous are
several other Harry & David® brands
including Moose Munch® premium
popcorn, Wolferman’s® baked goods
and specialty foods, and the newly
introduced Orchard Table® brand of
prepared gourmet foods designed
to make entertaining and the enjoy-
ment of delicious meals effortless
and inviting.
S U N D AY
M O N D AY
T U E S D AY
1
5
12
Hanukkah Begins at Sunset
19
4
11
18
25
Christmas Day
26
First Day of Kwanzaa
31
3
10
17
24
W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
0 2
6
13
20
27
1
8
15
7
14
21
First Day of Winter
22
28
29
First Day of Kwanzaa
2
9
16
23
30
Board of Directors
James F. McCann
Executive Chairman
1-800-FLOWERS.COM, Inc.
Christopher G. McCann
President and
Chief Executive Officer
1-800-FLOWERS.COM, Inc.
Geralyn R. Breig
Former President
Clarks, Americas Region
James A. Cannavino
IBM Company
Senior Vice President
Retired
Eugene F. DeMark C.P.A.
Area Managing Partner
KPMG, LLP, Retired
BankUnited Director
Leonard J. Elmore
Network Television
Sports Analyst
Attorney at Law
Celia R. Brown
Former EVP
Group HR Director
Willis Group
Larry Zarin
Express Scripts, Inc.
Senior Vice President
Chief Marketing Officer
Retired
Sean P. Hegarty
Managing Partner
Hegarty & Company
Fiscal Year 2016
Financial Report
Selected Financial Data
1-800-FLOWERS.COM, Inc. and Subsidiaries
The selected consolidated statement of operations data for the years ended July 3, 2016, June 28, 2015
and June 29, 2014 and the consolidated balance sheet data as of July 3, 2016 and June 28, 2015, have been
derived from the Company’s audited consolidated financial statements included elsewhere in this Annual Report.
The selected consolidated statement of operations data for the years ended June 30, 2013 and July 1, 2012, and
the selected consolidated balance sheet data as of June 29, 2014, June 30, 2013 and July 1, 2012, 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 income and balance sheet data.
The Company acquired Harry & David in September 2014, 16 franchised stores from GB Chocolates in June 2014,
iFlorist in December 2013 (subsequently disposed in October 2015), Pingg Corp. in May 2013 (subsequently
disposed of in June 2015), Flowerama in August 2011, and Fine Stationery, Inc. in May 2011 (subsequently disposed
of in June 2015). 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 its Winetasting
Network subsidiary 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 the results of the e-commerce and procurement businesses as discontinued operations for fiscal 2014,
2013 and 2012. This information should be read together with the discussion in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and the Company’s consolidated financial statements
and notes to those statements included elsewhere in this Annual Report.
Years Ended
July 3, June 28, June 29, June 30, July 1,
2016 2015 2014 2013 2012
(in thousands, except per share data)
Consolidated Statement of Income Data:
Net revenues $1,173,024 $1,121,506
634,311
Cost of revenues
Gross profit
487,195
Operating expenses:
655,566
517,458
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
Total operating expenses
Gain on sale of stores
Operating income
Interest expense, net
Other (income) expense, net
Income from continuing operations
before income taxes
Income tax expense from
continuing operations
Income from continuing operations
Income (loss) from discontinued operations,
net of tax
Net income
Less: Net loss attributable to
noncontrolling interest
Net income attributable to
318,175
39,234
84,383
32,384
474,176
––
43,282
6,674
(14,839)
299,801
34,745
85,908
29,124
449,578
––
37,617
5,753
1,550
$756,345
440,672
315,673
194,847
22,518
54,754
19,848
291,967
––
23,706
1,305
52
$735,497
430,305
305,192
186,720
21,700
52,188
18,798
279,406
––
25,786
1,713
(722)
$707,517
414,940
292,577
181,199
20,426
51,474
19,540
272,639
3,789
23,727
2,675
(40)
51,447
15,579
35,868
––
35,868
30,314
22,349
24,795
21,092
10,930
19,384
––
19,384
8,403
13,946
729
14,675
9,073
15,722
(3,401)
12,321
7,771
13,321
4,325
17,646
(1,007)
(903)
(697)
––
––
1-800-FLOWERS.COM, Inc. $ 36,875 $ 20,287
$ 15,372
$ 12,321
$ 17,646
Basic net income (loss) per common share
attributable to 1-800-FLOWERS.COM, Inc.
From continuing operations $ 0.57 $ 0.31
From discontinued operations
0.00
Basic net income per common share $ 0.57 $ 0.31
Diluted net income (loss) per common share
––
attributable to 1-800-FLOWERS.COM, Inc.
From continuing operations $ 0.55 $ 0.30
0.00
From discontinued operations
Diluted net income per common share $ 0.55 $ 0.30
Weighted average shares used in the calculation
of net income (loss) per common share:
Basic
Diluted
64,896
67,083
64,976
67,602
––
2
$ 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
Selected Financial Data (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
As of
July 3, June 28, June 29, June 30, July 1,
2016 2015 2014 2013 2012
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents
Working capital
Total assets
Long-term liabilities
Total 1-800-FLOWERS.COM, Inc.
$ 5,203
17,511
267,569
7,144
$ 27,826
45,798
506,514
143,067
$ 27,940
36,361
501,946
168,083
$
154
16,886
250,073
5,039
$ 28,854
29,721
262,213
17,080
stockholders’ equity
242,586
208,449
183,228
169,271
161,748
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
1-800-FLOWERS.COM, Inc. and Subsidiaries
Business Overview
1-800-FLOWERS.COM, Inc. and its subsidiaries
(collectively, the “Company”) is a leading provider of
gourmet food and floral gifts for all occasions. For the
past 40 years, 1-800-FLOWERS® (1-800-356-9377 or
www.1800flowers.com) has been helping deliver smiles
for our customers with gifts for every occasion, including
fresh flowers and the finest selection of plants, gift
baskets, gourmet foods, confections, candles, balloons
and plush stuffed animals. As always, our 100% Smile
Guarantee® backs every gift. The company’s Celebra-
tions® suite of services including Celebrations Passport®
Free Shipping program, Celebrations Rewards® and
Celebrations RemindersSM, are all designed to engage
with customers and deepen relationships as a one-stop
destination for all celebratory and gifting occasions. In
2016, 1-800-Flowers.com was awarded a Silver Stevie
“e-Commerce Customer Service” Award, recognizing the
company’s innovative use of online technologies and
social media to service the needs of customers.
In addition, 1-800-FLOWERS.COM, Inc. was recognized
as one of Internet Retailer’s Top 300 B2B e-commerce
companies and was also recently named in Internet
Retailer’s 2016 Top Mobile 500 as one of the world’s
leading mobile commerce sites. The Company was
included in Internet Retailer’s 2015 Top 500 for fast
growing e-commerce companies. In 2015, 1-800-
FLOWERS.COM was named a winner of the “Best
Companies to Work for in New York State” award by
The New York Society for Human Resource Management
(NYS-SHRM).
The Company’s BloomNet® international floral wire
service (www.mybloomnet.net) provides a broad range of
quality products and value-added services designed to
help professional florists grow their businesses profitably.
The 1-800-FLOWERS.COM, Inc. “Gift Shop” also includes
gourmet gifts such as 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
3
from Cheryl’s® (1-800-443-8124 or www.cheryls.com);
premium chocolates and confections from Fannie May®
(www.fanniemay.com and www.harrylondon.com);
gift baskets and towers from 1-800- Baskets.com®
(www.1800baskets.com); premium English muffins
and other breakfast treats from Wolferman’s®
(1-800-999-1910 or www.wolfermans.com); carved
fresh fruit arrangements from FruitBouquets.com
(www.fruitbouquets.com); and top quality steaks and
chops from Stock Yards® (www.stockyards.com).
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, in turn, is influenced by macro
economic issues such as unemployment, fuel and energy
costs, trends in the housing market and availability of
consumer credit. While consumers appear more upbeat
about the economy, during the recent economic down-
turn, the demand for our products had been adversely
affected by the reduction in consumer spending, and the
Company expects that its revenues will continue to be
closely tied to changes in consumer sentiment.
On September 30, 2014, the Company completed its
acquisition of 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.
During fiscal 2016, the Company was able to achieve
a number of operational and financial milestones:
(cid:127)
Integration of Harry & David – During fiscal 2016,
the Company made significant progress towards
achieving its primary goal of integrating Harry &
David, whose iconic brands have helped transform
the Company into a source for premier gifting,
executing upon identified initiatives that have been
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
estimated to achieve over $20.0 million of annual
synergy savings within three years of the acquisition.
(cid:127) Multi-Brand Customer Initiatives – The Company
continued to expand its multi-brand customer
initiatives, a key ingredient in our strategy to
enhance customer engagement and long-term
growth, by completing the migration of all of the
Company’s brands onto the multi-brand website.
This will provide the ability to enhance the customer
experience by providing for cross-brand marketing
and merchandising programs and ease of access to
the Company’s Celebrations suite of services,
including Celebrations Passport free shipping,
Rewards and Reminders membership programs.
(cid:127) Strengthening balance sheet and investment in
business platforms – Throughout fiscal 2016, the
Company continued its responsible stewardship
of shareholders’ capital, further strengthening its
balance sheet by reducing long-term debt while
continuing to invest in business platforms, category-
leading mobile and social efforts, and the
Company’s innovate focus as a “first mover” in the
fast evolving areas of artificial intelligence and
conversational commerce.
However, there were also a number of significant
headwinds that the Company had to address during
fiscal 2016. While working to integrate Harry & David
and achieve synergy savings, the Company was still
dealing with both the operational and financial ramifica-
tions of its Fannie May warehouse fire. Although the
entire enterprise came together and was able to return
to full capabilities within 5 months of the fire, the
Company experienced unforeseen longer term
consequences on its revenue base, especially within
the brand’s e-commerce and retail channels. With the
benefit of 20/20 hindsight, it appears that the negative
impact on revenues from the fire continued to drag
beyond the Company’s initial estimates, well into fiscal
2016. While the pace of Fannie May’s recovery was
below expectations throughout the year, the Company
was able to offset this impact to earnings as it recovered
its inventory lost to the fire through its property and
business interruption policies, recognizing a gain of
$19.6 million upon settlement in the first quarter of fiscal
2016. In addition to the lingering effects of the fire, the
Company effectively steered its way through the
challenging date placement of Valentine’s Day, which
moved from Saturday in fiscal 2015, already a difficult
date placement, to Sunday in fiscal 2016, recognized in
the e-commerce floral industry as the worst date
placement within the week. This shift presented not only
logistical challenges related to Sunday deliveries, but
also reduced overall demand as customers may forgo
flowers in favor of other options such as dining out or
going to the movies. Fiscal 2016 was also negatively
impacted by a year-over-year reduction in store count,
as well as significant increases in labor costs associated
with the tightening employment market for seasonal
workers and mandated minimum wage increases.
Recognizing the need to balance the Company’s
short and long-term operating and financial objectives,
a key tenet of the Company’s fiscal 2017 strategy, now
that Harry & David has been substantially integrated, is
to continue to focus on execution of its identified cost
synergy savings opportunities, which are expected to
generate annual savings in excess of $20.0 million by
fiscal 2018, while now pursuing revenue generating
synergies such as cross-brand marketing, mining of
customer databases through our expanded suite of
CRM tools and in business gift services and wholesale
channels. Tempered by the continuing challenging
economic climate, the Company expects consolidated
revenue growth in the range of 4-to-5% during fiscal
2017. In terms of bottom-line results, the Company
expects EBITDA growth in a range of 8-10%, and EPS
growth in a range of 5-10%, compared with Adjusted
EBITDA of $85.8 million and Adjusted EPS of $0.43
reported for fiscal 2016 (Fiscal 2016 Adjusted EBITDA
and Adjusted EPS exclude the impact of certain one-
time costs – see Category Information below for details
of the adjustments).
Category Information
The following table presents the 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 e-commerce and procurement businesses
of its Winetasting Network subsidiary, which had
previously been included within its Gourmet Foods &
Gift Baskets category, have been classified as discon-
tinued operations and therefore excluded from category
information below for fiscal 2014. (Due to certain one-
time items, the following Non-GAAP reconciliation
tables have been included within MD&A.)
4
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Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Reconciliation of GAAP net income to Adjusted income attributable
to 1-800-FLOWERS.COM, Inc.:
Years Ended
July 3, June 28, June 29,
2016 2015 2014
(in thousands, except per share data)
GAAP net income
Less: Net loss attributable to noncontrolling interest
Income attributable to 1-800-FLOWERS.COM, Inc.
Adjustments to reconcile income attributable to 1-800-FLOWERS.COM, Inc. to
$ 35,868 $ 19,384
(903)
(1,007)
20,287
36,875
$ 13,946
(697)
14,643
Adjusted income attributable to 1-800-FLOWERS.COM, Inc.
Add back: Annualization of net loss attributable to Harry & David –– (18,812) ––
––
Add back: Loss on sale/impairment of iFlorist
2,121
––
Add back: Impairment of foreign equity investment 1,728
––
Add back: Litigation costs 1,500
––
Add back: Harry & David integration costs 828
––
Add back: Harry & David acquisition costs ––
––
Add back: Severance costs
1,437
Add back: Harry & David Purchase accounting adjustment to deferred revenue ––
––
Add: Purchase accounting adjustment for inventory fair value step-up –– 4,760 ––
Add back: Impact of warehouse fire –– 6,556 ––
Deduct: Gain from insurance recovery on warehouse fire (19,611) –– ––
Income tax effect of adjustments 3,633 (1,369) ––
$ 14,643
––
––
––
3,039
4,148
2,457
1,621
Adjusted income attributable to 1-800-FLOWERS.COM, Inc. $ 28,511 $ 22,687
GAAP income (loss) per common share attributable to
1-800-FLOWERS.COM, Inc.
Basic
Diluted
$ 0.57 $ 0.31
$ 0.55 $ 0.30
$ 0.23
$ 0.22
Adjusted income (loss) per common share attributable to
1-800-FLOWERS.COM, Inc.
Basic $ 0.44 $ 0.35
Diluted $ 0.43 $ 0.34
$ 0.23
$ 0.22
Weighted average shares used in the calculation of GAAP income and
Adjusted income per common share attributable to
1-800-FLOWERS.COM, Inc.
Basic 64,896 64,976 64,035
Diluted 67,083 67,602 66,460
Discontinued operations:
Years Ended
July 3, June 28, June 29,
2016 2015 2014
(dollars in thousands)
Net revenues from discontinued operations $ ––
Gross profit from discontinued operations
$ ––
EBITDA from discontinued operations $ ––
$
$
$
––
––
––
$ 1,669
$ 429
$ (868)
6
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Reconciliation of GAAP net income attributable to 1-800-Flowers.com, Inc. to Adjusted EBITDA,
excluding stock-based compensation(b):
Years Ended
July 3, June 28, June 29,
2016 2015 2014
(in thousands)
Income attributable to 1-800-FLOWERS.COM, Inc. $36,875 $20,287
Add:
$14,643
Interest expense and other, net 7,597 7,303 1,357
Depreciation and amortization 32,384 29,124 19,848
Income tax expense 15,579 10,930 8,403
Loss on sale/impairment of iFlorist 2,121 –– ––
Impairment of foreign equity investment 1,728 –– ––
Less:
Net loss attributable to noncontrolling interest 1,007 903 697
Income tax benefit –– –– ––
Gain from insurance recovery on warehouse fire 19,611 –– ––
EBITDA 75,666 66,741 43,554
Add: Impact of warehouse fire –– 6,556 ––
Add: Purchase accounting adjustment to deferred revenue –– 1,621 ––
Add: Purchase accounting adjustment for inventory fair value step-up –– 4,760 ––
Add: Litigation settlement 1,500 –– ––
Add: Acquisition costs –– 4,148 ––
Add: Integration costs 828 3,039 ––
Add: Severance costs 1,437 2,457 ––
Add: Harry & David Q1 2015 EBITDA loss
(pre-acquisition: 3 months ended 9/28/14) –– (14,838) ––
Adjusted EBITDA 79,431 74,484 43,554
Add: Stock-based compensation 6,343 5,962 4,664
Adjusted EBITDA, excluding stock-based compensation $85,774 $80,446 $48,218
(a) 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.
(b) Performance is measured based on segment contribution margin or segment Adjusted EBITDA, reflecting 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, described above, depreciation and amortization, other income (net), nor does it include one-time charges
or gains. 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.
7
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Results of Operations
The Company’s fiscal year is a 52- or 53-week period
ending on the Sunday nearest to June 30. Fiscal year
2016, which ended on July 3, 2016, consisted of 53
weeks, while fiscal years 2015 and 2014, which ended
on June 28, 2015 and June 29, 2014, respectively,
consisted of 52 weeks.
Net Revenues
Years Ended
July 3, June 28, June 29,
2016 % Change 2015 % Change 2014
(dollars in thousands)
Net revenues:
$548,976
E-Commerce $ 882,782 3.9% $ 849,853 54.8%
207,369
290,242 6.8% 271,653 31.0%
Other
$1,173,024 4.6% $ 1,121,506 48.3% $756,345
Net revenues consist primarily of the selling price of
the merchandise, service or outbound shipping charges,
less discounts, returns and credits.
During the year ended July 3, 2016, net revenues
increased 4.6% in comparison to the prior year, as a
result of growth within the Gourmet Food and Gift Baskets
segment due to the incremental revenue generated by
Harry & David, which was acquired on September 30,
2014 (pre-acquisition revenues generated by Harry &
David during the quarter ended September 28, 2014 was
$29.4mm), the impact on prior year revenues of the
Thanksgiving Day Fannie May warehouse fire (estimated
to be $17.3mm), organic growth of 1-800-Flowers.com,
Cheryl’s and 1-800-Baskets wholesale gift business, and
the impact of the 53rd week in fiscal 2016, partially offset
by the impact of the Sunday date placement of
Valentine’s Day, and the dispositions of the iFlorist and
Fine Stationery businesses in October 2015 and June
2015, respectively (which generated a combined $12.1
million of incremental revenues in the prior year), slower
recovery by the Fannie May brand after the fire, and a
year-over-year reduction in the Harry & David store count.
Adjusted for the impact of the timing of the Harry & David
acquisition and purchase accounting adjustments in
fiscal 2015, and the estimated revenue lost as a result of
the fire in 2015, pro forma net revenues increased 2.8%
compared to the prior year.
During the year ended June 28, 2015, net revenues
increased 48.3% in comparison to the prior year primarily
as a result of the incremental revenue generated by Harry
& David, which was acquired on September 30, 2014, as
well as growth across all three of the Company’s busi-
ness segments. After adjusting for lost revenue associ-
ated with the Thanksgiving Day fire at the Company’s
Fannie May warehouse and distribution center, estimated
to be $17.3 million during the year ended June 28, 2015,
and for the impact of purchase accounting adjustments to
reduce the acquired value of Harry & David’s deferred
revenue of $1.6 million during the year ended June 28,
2015, pro forma revenue increased by 50.8% during the
year ended June 28, 2015. Excluding the impact of
acquisitions, organic revenue, adjusted for the estimated
8
lost revenue from the Fannie May warehouse fire,
increased 2.8% during the year ended June 28, 2015,
despite the loss of revenue from the shift in the Valentine’s
Day Holiday to a Saturday in fiscal 2015.
E-commerce revenues (combined online and tele-
phonic sales channels) increased 3.9%, during the year
ended July 3, 2016 compared to the prior year, due to
growth within the Gourmet Food and Gift Baskets
segment, as a result of the incremental revenue gener-
ated by Harry & David, which was acquired on Septem-
ber 30, 2014, the impact on prior year revenues of the
Thanksgiving Day Fannie May warehouse fire, organic
growth within the 1-800-Flowers.com Cheryl’s brands,
and the impact of the 53rd week, and partially offset by
the impact of the dispositions of iFlorist and Fine Statio-
nery in October 2015 and June 2015, respectively, and
the anticipated decline in revenues due to the Sunday
date placement of Valentine’s Day. The Company fulfilled
approximately 12.2 million e-commerce orders, with an
average order value of $72.64, representing increases of
1.4% and 2.4%, respectively, compared to fiscal 2015.
E-commerce revenues increased by 54.8% during the
year ended June 28, 2015, primarily as a result of the
incremental e-commerce revenue generated by the
recent acquisition of Harry & David, as well as organic
growth from the Company’s Gourmet Food and Gift
Baskets segment, offset by the estimated loss of revenues
from the warehouse fire. E-commerce revenues from the
Consumer Floral segment were flat in comparison to
fiscal 2014 as growth during the balance of the year was
offset by a decline in Valentine’s Day revenue resulting
from the shift in the date placement of holiday from Friday
in fiscal 2014 to Saturday in fiscal 2015. Reflecting the
incremental sales from Harry & David, during fiscal 2015,
the Company fulfilled approximately 12.0 million e-
commerce orders, with an average order value of $70.87,
representing increases of 31.5% and 17.9%, respectively,
compared to fiscal 2014.
Other revenues, comprised of the Company’s
BloomNet Wire Service segment, as well as the wholesale
and retail sales channels of its 1-800-Flowers.com
Consumer Floral and Gourmet Food and Gift Baskets
segments, increased by 6.8% and 31.0% during fiscal
2016 and fiscal 2015, respectively. The increase in fiscal
2016 was due to growth within the Gourmet Food and Gift
Baskets segment, resulting from the incremental revenue
generated by Harry & David, which was acquired on
September 30, 2014, organic growth of Cheryl’s and
1-800-Baskets wholesale gift business, and the impact on
prior year revenues of the Thanksgiving 2014 Fannie May
warehouse fire, partially offset by the Sunday date
placement of Valentine’s Day and a year-over-year
reduction in the Harry & David store count. The increase
in fiscal 2015 was primarily due to the addition of Harry &
David’s retail and wholesale operations, and to a lesser
extent, growth within BloomNet, partially offset by the sales
lost as a result of the Thanksgiving Day warehouse fire.
The 1-800-Flowers.com Consumer Floral segment
includes the operations of the 1-800-Flowers.com brand,
which derives revenue from the sale of consumer floral
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
products through its e-commerce sales channels (tele-
phonic and online sales) and royalties from its franchise
operations, as well as iFlorist, a UK based e-commerce
retailer of floral products (through the date of its disposi-
tion in October 2015), and Fine Stationery, an e-com-
merce retailer of stationery products (through the date
of its disposition in June 2015). Net revenues during the
fiscal year ended July 3, 2016 decreased 0.9% as a
result of lower order volume resulting from the Sunday
date placement of Valentine’s Day, and the dispositions
of iFlorist and Fine Stationery, partially offset by organic
growth by the 1-800-Flowers.com brand and the impact
of the 53rd week. Adjusted for the sale of iFlorist and Fine
Stationery, net revenues in this segment grew 2.0% in
fiscal 2016 compared to the prior year. Net revenues
during the fiscal year ended June 28, 2015 increased
0.2% primarily due to the incremental volume provided by
iFlorist, which was acquired in December 2013, offset
by lower order volume resulting from the Saturday
placement of Valentine’s Day. Excluding the impact of the
acquisition of iFlorist, revenue of the 1-800-Flowers.com
Consumer Floral segment decreased by 0.2% in
comparison to fiscal 2014.
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 July 3, 2016 decreased 0.6% due to
lower transaction and ancillary fee revenues as a result of
unfavorable shop to shop order volume sent through the
network due in part to the Sunday date placement of
Valentine’s Day, partially offset by increased revenue as a
result of BloomNet initiatives including the annualization of
a florist transaction program implemented in the 3rd
quarter of fiscal 2015. Net revenues during the fiscal year
ended June 28, 2015 increased 2.1%, as a result of higher
membership and transaction fees, including the implemen-
tation of a new florist transaction program, and increased
ancillary service revenue including directory advertising,
partially offset by lower product sales as a result of
decreased demand and the west coast dock strike.
The Gourmet Food & Gift Baskets segment includes
the operations of Harry & David, Wolferman’s, Stockyards,
Cheryl’s, Fannie May, Harry London, The Popcorn Factory
and 1-800-Baskets/DesignPac. Revenue is derived from
the sale of gourmet fruits, cookies, baked gifts, premium
chocolates and confections, gourmet popcorn, gift
baskets, and prime steaks and chops through the
Company’s e-commerce sales channels (telephonic and
online sales) and company-owned and operated retail
stores under the Harry & David, Cheryl’s and Fannie May
brand names, as well as wholesale operations. Net
revenue during the fiscal year ended July 3, 2016
increased 9.2% in comparison to the prior year, as a
result of the incremental revenue generated by Harry &
David, which was acquired on September 30, 2014, and
the impact on prior year revenues of the Thanksgiving
Day Fannie May warehouse fire, organic growth of
Cheryl’s and 1-800-Baskets wholesale gift business, and
the impact of the 53rd week. Adjusted for the impact of the
timing of the Harry & David acquisition and purchase
accounting adjustments in fiscal 2015, and the estimated
revenue lost as a result of the fire in 2015, pro forma net
revenues increased 1.3% compared to the prior year,
as post-fire recovery of the Fannie May brand has been
slower than originally anticipated. Net revenue during
the fiscal year ended June 28, 2015 increased 143.6%
in comparison to the prior year, driven primarily by the
incremental revenue generated by Harry & David, which
was acquired on September 30, 2014, complemented
by strong organic e-commerce growth from Cheryl’s and
1-800-Baskets, partially offset by reduced revenue from
Fannie May due to the Thanksgiving Day warehouse fire.
After adjusting for the estimated lost revenue from the
warehouse fire, and for the impact of purchase account-
ing adjustments to reduce the acquired value of Harry &
David’s deferred revenue, pro forma revenue for the
Gourmet Food & Gift Baskets segment increased 151.0%
during the year ended June 28, 2015. Excluding the
revenue contribution of Harry & David, Gourmet Food &
Gift Baskets, revenue growth, adjusted for the estimated
lost revenue from the Fannie May warehouse fire,
increased 7.8% during the year ended June 28, 2015.
In fiscal 2017, the Company expects to grow revenues
across all three of its business segments with consoli-
dated revenue growth for the year anticipated to be in the
range of 4-to-5 percent.
Gross Profit
Years Ended
July 3, June 28, June 29,
2016 % Change 2015 % Change 2014
(dollars in thousands)
Gross profit $517,458
Gross margin % 44.1%
$487,195 54.3% $315,673
41.7%
43.4%
6.2%
Gross profit consists of net revenues less cost of
revenues, which is comprised 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
include labor and facility costs related to direct-to-
consumer and wholesale production operations.
Gross profit increased 6.2% during the fiscal year
ended July 3, 2016 in comparison to the prior year,
primarily as a result of the incremental revenue and
associated gross margins generated by Harry & David,
which was acquired on September 30, 2014, the impact
on prior year gross margin of the Thanksgiving Day
Fannie May warehouse fire, organic revenue growth,
the impact of the 53rd week, and sourcing and logistics
synergy savings, partially offset by the impact of the
Sunday date placement of Valentine’s Day, the disposi-
tions of the iFlorist and Fine Stationery businesses
during October 2015 and June 2015, respectively (which
generated $4.4 million of incremental gross margin in
the prior year period), and a year-over-year reduction in
Harry & David store count. Adjusted for the impact of the
timing of the Harry & David acquisition and purchase
accounting adjustments in fiscal 2015, and the estimated
revenue lost as a result of the fire in 2015, pro forma
9
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
gross profit decreased 0.2% compared to the prior year,
as post-fire recovery of the Fannie May brand has been
slower than originally anticipated. Gross margin percent-
age increased 70 basis points to 44.1% during the fiscal
year ended July 3, 2016, primarily due benefits of
enhanced sourcing and logistics, the mix of sales
associated with the recovery from the warehouse fire,
higher margins earned by Harry & David, and the
dispositions of iFlorist and Fine Stationery businesses
which carried lower gross margins. Adjusted for the
impact of the Harry & David acquisition, and the lost
revenue from the fire in the prior year, pro forma gross
margin increased 20 basis points to 44.1%.
Gross profit increased 54.3% during the fiscal year
ended June 28, 2015 in comparison to the prior year,
primarily as a result of the incremental revenue and
associated gross margins generated by Harry & David,
which was acquired on September 30, 2014, as well as
organic growth across all segments, partially offset by the
impact of the revenues lost as a result of the Thanksgiving
Day fire at the Company’s Fannie May warehouse and
distribution center. After adjusting for estimated lost gross
profit from the warehouse fire of $6.8 million during the
year ended June 28, and for the impact of Harry & David
purchase accounting adjustments related to deferred
revenue of $1.6 million and step-up of inventory to fair
value of $4.8 million during the year ended June 28,
2015, gross profit during year ended June 28, 2015,
increased by 58.5% in comparison to the prior year.
Excluding the impact of acquisitions, organic gross profit,
adjusted for the estimated lost revenue from the ware-
house fire, increased 4.5% during the year ended June
28, 2015. Gross margin percentage increased 170 basis
points to 43.4% during the fiscal year ended June 28,
2015 in comparison to the prior year, as a result of the
aforementioned Harry & David acquisition, which earns
higher margins due to its vertically integrated operations,
as well as organic improvements across all business
segments. After adjusting for the estimated lost gross
profit from the warehouse fire for fiscal year ended June
28, 2015 and for the impact of Harry & David purchase
accounting adjustments related to deferred revenue and
step-up of inventory to fair value for fiscal year ended
June 28, 2015, pro forma gross margin percentage
increased to 43.9% for the fiscal year ended June 28,
2015. Excluding the impact of acquisitions, organic
gross margin percentage, adjusted for the estimated lost
revenue from the warehouse fire, was 42.3% during the
fiscal year ended June 28, 2015.
The 1-800-Flowers.com Consumer Floral segment
gross profit increased by 2.9% during the fiscal year
ended July 3, 2016 in comparison to the prior year, while
gross margin percentage increased 160 basis points to
40.8% due to the benefit of synergy savings, which
reduced shipping costs, as well as sourcing improve-
ments and reductions in discounts, which more than
offset the loss of margin caused by the Sunday date
placement of Valentine’s Day and the dispositions of
iFlorist and Fine Stationery in October 2015 and June
2015, respectively. The 1-800-Flowers.com Consumer
Floral segment gross profit increased by 0.5% during the
fiscal year ended June 28, 2015 in comparison to the
prior year, due to the higher revenue, as described above.
Excluding the impact of the acquisition of iFlorist, gross
profit within the 1-800-Flowers.com Consumer Floral
segment increased by 0.3%. Gross margin percentage
increased 10 basis points to 39.2% during the fiscal year
ended June 28, 2015 in comparison to the prior year as
sourcing and logistics improvements were offset by lower
margins earned by iFlorist.
BloomNet Wire Service segment’s gross profit
increased by 0.5% during the fiscal year ended July 3,
2016 in comparison to the prior year, while gross margin
percentage increased 60 basis points, as a result of
sales mix and lower rebates associated with the decline
in shop-to-shop order volume. BloomNet Wire Service
segment’s gross profit increased by 6.7% and gross
margin percentage increased 240 basis points during
the fiscal year ended June 28, 2015, as a result of an
increase in higher margin BloomNet membership,
directory and transaction fees, as well as newly imple-
mented transaction fees, offset in part by a reduction in
lower margin wholesale product revenues.
The Gourmet Food & Gift Baskets segment gross profit
increased by 9.2% during the fiscal year ended July 3,
2016 in comparison to the prior year, as a result of the
incremental revenue and associated gross margins
generated by Harry & David, which was acquired on
September 30, 2014, the recovery from the Thanksgiving
Day Fannie May warehouse fire, the organic revenue
growth referenced above, and synergy savings related to
logistics and sourcing, while gross margin percentage
was consistent at 44%. Adjusted for the impact of the
Harry & David acquisition and the lost revenue from the
fire in the prior year, pro forma gross profit decreased by
0.2%, while gross margin percentage decreased 70 basis
points to 44.4%, reflecting the difficulties encountered by
Fannie May in its efforts to recover after the fire.
The Gourmet Food & Gift Baskets segment gross profit
increased by 159.5% during the fiscal year ended June
28, 2015 in comparison to the prior year, driven primarily
by the incremental revenue generated by Harry & David,
which was acquired on September 30, 2014, and strong
organic e-commerce growth from Cheryl’s and 1-800-
Baskets, partially offset by reduced revenue from Fannie
May, due to the Thanksgiving Day warehouse fire. After
adjusting for estimated lost gross profit from the ware-
house fire of $6.7 million during the year ended June 28,
2015 and for the impact of Harry & David purchase
accounting adjustments related to deferred revenue of
$1.6 million and step-up of inventory to fair value of $4.8
million during the year ended June 28, 2015, gross profit
during the year ended June 28, 2015 increased by
172.0% in comparison to fiscal 2014. Excluding the
impact of acquisitions, organic gross profit, adjusted for
the estimated lost revenue from the warehouse fire,
increased 9.7% during the year ended June 28, 2015.
Gross margin percentage increased 270 basis points
during the year ended June 28, 2015 to 44.4% as a result
of the Harry & David acquisition, which earns higher
margins due to its vertically integrated operations, and
10
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
due to the timing of the acquisition which excluded the
first quarter of Harry & David’s operations which carries a
lower gross margin due to the seasonality of its business,
as well as productivity improvements across all brands
within the segment. After adjusting for the estimated lost
gross profit from the warehouse fire for the year ended
June 28, 2015 and for the impact of Harry & David
purchase accounting adjustments related to deferred
revenue and step-up of inventory to fair value for year
ended June 28, 2015, pro forma gross margin percent-
age increased 350 basis points to 45.2%. Excluding the
impact of the acquisition of Harry & David, organic gross
margin percentage, adjusted for the estimated lost
revenue from the warehouse fire, increased 70 basis
points to 42.4% during the year ended June 28, 2015.
In fiscal 2017, the Company expects its gross profit to
improve relative to sales growth, as gross margin
percentage in fiscal 2017 is expected to be consistent
with fiscal 2016.
Marketing and Sales Expense
Years Ended
July 3, June 28, June 29,
2016 % Change 2015 % Change 2014
(dollars in thousands)
Marketing and
sales $318,175 6.1%
$299,801
53.9% $194,847
Percentage of
sales
27.1%
26.7%
25.8%
Marketing and sales expense consists primarily of
advertising and promotional expenditures, catalog costs,
online portal and search costs, retail store and fulfillment
operations (other than costs included in cost of revenues)
and customer service center expenses, as well as the
operating expenses of the Company’s departments
engaged in marketing, selling and merchandising
activities.
Marketing and sales expenses increased 6.1%
(27.1% as a percentage of revenues) during the fiscal
year ended July 3, 2016 compared to the prior year
(26.7% as a percentage of revenues) primarily due to the
incremental marketing expenses of Harry & David, which
was acquired on September 30, 2014. During the fiscal
year ended June 28, 2015, marketing and sales ex-
penses increased 53.9% in comparison to the prior year
primarily as a result of the incremental spend due to the
acquisitions of Harry & David on September 30, 2014, as
well as higher labor and facility costs associated with an
increase in Fannie May store count. Adjusted for the
impact of the Harry & David acquisition and the ware-
house fire in the prior year, pro forma marketing and sales
expense as a percentage of revenues was consistent
with the prior year ratio. The increase in marketing and
sales as a percentage of net revenues during the year
ended June 28, 2015 was due to the impact of the Harry
& David acquisitions, combined with the impact of the
warehouse fire. Excluding the impact of the acquisitions,
organic marketing and sales as a percentage of net
revenues, adjusted for the estimated lost revenue from
the warehouse fire, was 25.9% during the year ended
June 28, 2015, comparable with the prior year.
During the fiscal year ended July 3, 2016, the
Company added approximately 3.5 million new e-
commerce customers, compared to 3.5 million in fiscal
2015, and 2.4 million in fiscal 2014. Approximately 49%
of customers who placed e-commerce orders during
fiscal 2016 were repeat customers compared to 50%
in fiscal 2015 and 49% in fiscal 2014.
Technology and Development Expense
Years Ended
July 3, June 28, June 29,
2016 % Change 2015 % Change 2014
(dollars in thousands)
Technology and
development
Percentage of
$ 39,234
12.9% $ 34,745 54.3% $22,518
sales
3.3%
3.1%
3.0%
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.
Technology and development expenses increased
12.9% (3.3% as a percentage of revenues) during the
fiscal year ended July 3, 2016 compared to the prior year
(3.1% as a percentage of revenues) primarily due to the
incremental technology and development costs of Harry
& David, which was acquired on September 30, 2014.
Technology and development expenses increased 54.3%
during the fiscal year ended July 3, 2016 compared to the
prior year due to the technology and development costs
of Harry & David, which was acquired on September 30,
2014. Adjusted for the impact of the Harry & David
acquisition and the warehouse fire in the prior year,
pro technology and development expense as a percent-
age of revenues was consistent with the prior year ratio.
Technology spend as a percentage of net revenues
increased to 3.1% during the fiscal year ended July 3,
2016, compared to the prior year. Excluding the impact
of acquisitions, organic technology and development
expense as a percentage of net revenues, adjusted for
the estimated lost revenue from the warehouse fire,
was 3.0% during the fiscal year ended June 28, 2015.
During the fiscal years ended July 3, 2016, June 28,
2015 and June 29, 2014, the Company expended $60.6
million, $52.1 million and $36.6 million, respectively, on
technology and development, of which $21.4 million, $17.4
million and $14.1 million, respectively, has been capitalized.
11
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
General and Administrative Expense
Years Ended
Interest Expense, net
Years Ended
July 3, June 28, June 29,
2016 % Change 2015 % Change 2014
July 3, June 28, June 29,
2016 % Change 2015 % Change 2014
(dollars in thousands)
General and
(dollars in thousands)
Interest expense,
administrative
$ 84,383
-1.8% $ 85,908 56.9% $ 54,754
net
$ 6,674
16.0% $ 5,753 340.8% $ 1,305
Percentage of
sales
7.2%
7.7%
7.2%
General and administrative expense consists of
payroll and other expenses in support of the Company’s
executive, finance and accounting, legal, human
resources and other administrative functions, as well as
professional fees and other general corporate expenses.
General and administrative expense decreased 1.8%
(7.2% as a percentage of revenues) during the fiscal year
ended July 3, 2016 in comparison to the prior year (7.7%
as a percentage of revenues), as result of synergistic
savings, integration expenses incurred in the prior year,
and a decrease in performance based bonuses and
integration expenses, partially offset by the incremental
general and administrative expenses of Harry & David,
which was acquired on September 30, 2014. General
and administrative expense increased by 56.9% during
the fiscal year ended June 28, 2015 in comparison to the
prior year, as a result of incremental general and adminis-
trative expense of Harry & David, acquired on September
30, 2014, and the related acquisition and integration
expenses of $9.6 million during the fiscal year ended
June 28, 2015. Excluding the impact of acquisitions,
organic general and administrative expense as a
percentage of net revenues, adjusted for the estimated
lost revenue from the warehouse fire, was 7.2% during
the fiscal year ended June 28, 2015.
Depreciation and Amortization
Years Ended
July 3, June 28, June 29,
2016 % Change 2015 % Change 2014
(dollars in thousands)
Depreciation and
amortization
Percentage of
$ 32,384
11.2% $ 29,124 46.7% $19,848
sales
2.8%
2.6% 2.6%
Depreciation and amortization expense increased by
11.2% during the fiscal year ended July 3, 2016 in
comparison to the prior year, as a result of the incremen-
tal depreciation and amortization expenses of Harry &
David, acquired on September 30, 2014, including the
impact of the additional intangibles amortization, as well
as a result of the Company’s technology improvements.
Depreciation and amortization expense increased by
46.7% during the fiscal year ended June 28, 2015 in
comparison to the prior year, as a result of the incremen-
tal depreciation and amortization expenses of Harry &
David, acquired on September 30, 2014, including the
impact of the additional intangibles amortization.
12
Interest expense, net consists primarily of interest
expense and amortization of deferred financing costs
attributable to the Company’s credit facility (See Note 9.
Long-Term Debt in Item 15 for details regarding the 2014
Credit Facility), net of income earned on the Company’s
available cash balances.
Interest expense, net increased 16.0% during the year
ended July 3, 2016 in comparison to the prior year, as a
result of the additional interest expense and deferred
financing costs associated with the term debt used to
finance the Harry & David acquisition, entered into on
September 30, 2014 and the additional interest expense
on the Company’s revolver to fund the working capital
requirements of Harry & David during the first quarter of
the current fiscal year. Interest expense, net increased
340.8% during the fiscal year ended June 28, 2015 in
comparison to the prior year, as a result of the additional
interest expense associated with the Term Loan used to
finance the Harry & David acquisition and related working
capital requirements of Harry & David.
Other (income) Expense, net
Years Ended
July 3, June 28, June 29,
2016 % Change 2015 % Change 2014
(dollars in thousands)
Other (income) expense,
net $(14,839) 1,057.4% $ 1,550 2,880.8% $ 52
Other (income) expense, net for the year ended
July 3, 2016 consists primarily of a $19.6 million gain
on insurance recoveries related to the Fannie May
warehouse fire (see Note 18. Fire at the Fannie May
Warehouse and Distribution Facility in Item 15 for details),
offset by a $2.1 million impairment of iFlorist assets held
for sale and loss on sale (see Note 4. Acquisitions and
Dispositions in Item 15 for details), a $1.7 million impair-
ment of the Company’s investment in Flores Online
(see Note 2. Significant Accounting Policies in Item 15
for details), and a $0.7 million impairment of cost method
investments (see Note 2. Significant Accounting Policies
in Item 15 for details).
Other (income) expense, net for the year ended
June 28, 2015 consists primarily of losses on the sale of
the Company’s Fine Stationery ($0.5 million) and Pingg
($0.6 million) brands during June 2015, as well as losses
from its equity interest in Flores Online, partially offset by
an increase in investment income in the Company’s
Non-Qualified Deferred Compensation Plan.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Income Taxes
During the fiscal years ended July 3, 2016, June 28,
2015 and June 29, 2014, the Company recorded income
tax expense from continuing operations of $15.6 million,
$10.9 million and $8.4 million, respectively, resulting in
an effective tax rate of 30.3%, 36.1% and 37.6%, respec-
tively. 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, valuation allowance
changes, rate differences, tax settlements, various tax
credits/deductions as well as deductible stock-based
compensation.
At July 3, 2016 the Company’s federal net operating
loss carryforwards were $2.2 million, which if not utilized,
will begin to expire in fiscal 2025. The federal net operat-
ing loss is subject to Section 382 limitations of $0.3
million per year. The Company’s foreign net operating
loss carryforward was $10.5 million, while the state net
operating losses were $5.7 million, before federal benefit,
which if not utilized, will begin to expire in fiscal 2017.
Discontinued Operations
During the fourth quarter of fiscal 2013, the Company
made the strategic decision to divest the e-commerce
and procurement businesses of its Winetasting Network
subsidiary 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 the e-commerce
and procurement business of The Winetasting Network
as a discontinued operation for fiscal 2014.
Results for discontinued operations are as follows:
Years Ended
July 3, June 28, June 29,
2016 2015 2014
(in thousands, except per share data)
Net revenues
from discontinued
$
operations
––
Loss from
discontinued
operations,
net of tax
Gain on
sale of
discontinued
operations,
net of tax
Income from
discontinued
operations
$ ––
$ ––
$
––
$
$
$
$
––
––
––
––
$ 1,669
$ (86)
$
815
$
729
Liquidity and Capital Resources
Cash Flows
At July 3, 2016, the Company had working capital
of $45.8 million, including cash and cash equivalents
of $27.8 million, compared to working capital of $31.5
million, including cash and cash equivalents of $27.9
million at June 28, 2015.
Net cash provided by operating activities of $57.7
million for the fiscal year ended July 3, 2016 was prima-
rily related to net income, adjusted for non-cash charges
for depreciation and amortization, stock-based compen-
sation, deferred income taxes, bad debt expense and the
impairments/sale of iFlorist and foreign equity invest-
ments, partially offset by working capital changes
primarily related to timing of collection of trade receiv-
ables (net of the collection of the Fannie May fire insur-
ance settlement), inventory build to restore Fannie May
product levels, and decreases in accounts payable and
accrued expenses, primarily related to the timing of year
end resulting from the 53rd week in fiscal 2016.
Net cash used in investing activities of $33.9 million
was attributable to capital expenditures related to the
Company’s technology infrastructure, as well as improve-
ments and equipment purchases within the Gourmet
Food & Gift Baskets segment. Fiscal 2017 capital spend-
ing is expected to be consistent with fiscal 2016.
Net cash used in financing activities of $23.9 million
for the fiscal year ended July 3, 2016 was for term debt
repayment on borrowings under the Company’s 2014
Credit Facility of $14.5 million, and the acquisition of
$15.2 million of treasury stock, partially offset by proceeds
from exercises of employee stock options of $3.5 million
and excess tax benefits from stock based compensation
of $2.4 million. As of July 3, 2016 there were no borrow-
ings outstanding under the Company’s Revolver.
Credit Facility
See Note 9. Long-Term Debt in Item 15 for details
regarding the 2014 Credit Facility.
Despite the current challenging economic environ-
ment, the Company believes that cash flows from
operations along with available borrowings from its 2014
Credit Facility will be a sufficient source of liquidity. Due to
the seasonal nature of the Company’s business, and its
continued expansion into non-floral products, including
the acquisition of Harry & David, the Thanksgiving
through Christmas holiday season, which falls within the
Company’s second fiscal quarter, is expected to generate
nearly 50% of the Company’s annual revenues, and all of
its earnings. As a result, the Company expects to gener-
ate significant cash from operations during its second
quarter, and then utilize that cash for operating needs
during its fiscal third and fourth quarters, after which time
the Company expects to borrow against its Revolver to
fund pre-holiday manufacturing and inventory purchases.
Borrowings under the Revolver typically peak in Novem-
ber, at which time cash generated from operations during
the Christmas holiday shopping season are expected to
enable the Company to repay working capital borrowings
prior to the end of December.
13
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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
June 2015, the Company’s Board of Directors authorized
an increase of $25 million to its stock repurchase plan.
The Company repurchased a total of $15.2 million
(1,714,550 shares), $8.4 million (1,056,038 shares) and
$8.3 million (1,561,206 shares) during the fiscal years
ended July 3, 2016, June 28, 2015 and June 29, 2014,
respectively, under this program. As of July 3, 2016, $12.0
million remains authorized under the plan.
Contractual Obligations
At July 3, 2016, the Company’s contractual obligations from continuing operations consist of:
Payments due by period
(in thousands)
Less than More than
Total 1 year 1 - 3 years 3 - 5 years 5 years
Long-term debt obligations
(including interest)
Operating lease obligations
Purchase commitments(*)
Unrecognized tax liabilities
Total
$125,278
121,873
93,519
1,157
$341,827
$ 22,643
19,671
89,677
946
$ 132,937
$ 52,417
32,083
3,823
211
$ 88,534
$
50,218
21,338
19
––
$
––
48,781
––
––
$
71,575
$ 48,781
(*) Purchase commitments consist primarily of inventory and equipment purchase orders made in the ordinary course of business.
Critical Accounting Policies and Estimates
The Company’s discussion and analysis of its
financial position and results of operations are
based upon the consolidated financial statements of
1-800-FLOWERS.COM, Inc., which have been prepared
in accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements
requires management to make estimates and assump-
tions that affect the reported amount of assets, liabilities,
revenue and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis,
management evaluates its estimates, including those
related to revenue recognition, inventory and long-lived
assets, including goodwill and other intangible assets
related to acquisitions. Management bases its estimates
and judgments on historical experience and on various
other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for
making judgments about the carrying values of assets
and liabilities. Actual results may differ from these
estimates under different assumptions or conditions.
Management believes the following critical accounting
policies, among others, affect its more significant judg-
ments and estimates used in preparation of its consoli-
dated financial statements.
Revenue Recognition
Net revenues are generated by e-commerce opera-
tions from the Company’s online and telephonic sales
channels as well as other operations (retail/wholesale)
and primarily consist of the selling price of merchandise,
service or outbound shipping charges, net of discounts,
returns and credits. Net revenues are recognized
primarily upon product delivery and do not include sales
tax. 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.
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
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
14
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
forecasted sales. In addition, and as necessary, the
Company may establish specific reserves for future
known or anticipated events.
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.
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 management of each
reporting unit regularly reviews the operating results
of those components.
In applying the goodwill impairment test, the Company
has the option to perform a qualitative test (also known as
“Step 0”) or a two-step quantitative test (consisting of
“Step 1” and “Step 2”). Under the Step 0 test, the Com-
pany first assesses qualitative factors to determine
whether it is more likely than not that the fair value of the
reporting units is less than its carrying value. Qualitative
factors may include, but are not limited to economic
conditions, industry and market considerations, cost
factors, overall financial performance of the reporting
unit and other entity and reporting unit specific events.
If after assessing these qualitative factors, the Company
determines it is “more-likely-than-not” that the fair value
of the reporting unit is less than the carrying value, then
performing the two-step quantitative test is necessary.
15
The first step (“Step 1”) of the two-step quantitative
test 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 (“Step
2”) is not performed. If the carrying value of the reporting
unit is higher than the fair value, Step 2 must be per-
formed to compute the amount of the goodwill impair-
ment, if any. In Step 2, 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
accepted valuation models and set criteria that are
reviewed 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.
During fiscal 2016 the Company performed a Step 0
analysis and determined that it is not “more likely than
not” that the fair values of the reporting units were less
than their carrying amounts. During fiscal years 2015 and
2014, the Company performed the two-step quantitative
impairment test.
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
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
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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.
In applying the impairment test, the Company has the
option to perform a qualitative test (also known as “Step 0”)
or a quantitative test. Under the Step 0 test, the Company
assesses qualitative factors to determine whether it is more
likely than not that an indefinite-lived intangible asset is
impaired. Qualitative factors may include, but are not
limited to economic conditions, industry and market
considerations, cost factors, financial performance, legal
and other entity and asset specific events. If after assessing
these qualitative factors, the Company determines it is
“more-likely-than-not” that the indefinite-lived intangible
asset is impaired, then performing the quantitative test is
necessary. The quantitative 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.
During fiscal 2016 the Company performed a Step 0
analysis and determined that it is not “more likely than
not” that the fair values of the indefinite-lived intangibles
were less than their carrying amounts. During fiscal years
2015 and 2014, the Company performed the two-step
quantitative impairment test.
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.
Recent Accounting Pronouncements
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 June 30, 2019 and may
be applied retrospectively. The Company is currently
evaluating the potential impact of adopting this guidance
on our consolidated financial statements.
In April 2015, the Financial Accounting Standards
Board (“FASB”) issued ASU No. 2015-05, “Customer’s
Accounting for Fees Paid in a Cloud Computing Arrange-
ment.” This standard provides guidance to help entities
determine whether a cloud computing arrangement
contains a software license that should be accounted for
as internal-use software or as a service contract. Upon
adoption, an entity has the option to apply the provisions
of ASU 2015-05 either prospectively to all arrangements
entered into or materially modified, or retrospectively. This
standard is effective for the Company’s fiscal year ending
July 2, 2017. The Company is currently evaluating the
potential impact of adopting this guidance on our
consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03,
“Simplifying the Presentation of Debt Issuance Costs,”
which amends ASC 835-30, “Interest – Imputation of
Interest.” In order to simplify the presentation of debt
issuance costs, ASU No. 2015-03 requires that debt
issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from
that debt liability, consistent with the presentation of a
debt discount. This presentation is consistent with the
guidance in Concepts Statement 6, which states that debt
issuance costs are similar to a debt discount and in effect
reduce the proceeds of borrowing, thereby increasing the
effective interest rate. Concepts Statement 6 further states
16
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
that debt issuance costs are not assets because they
provide no future economic benefit. This new guidance
is effective for the Company’s fiscal year ending July 2,
2017 and should be applied retrospectively.
In July 2015, the FASB issued ASU No. 2015-11,
“Inventory (Topic 330).” The pronouncement was issued
to simplify the measurement of inventory and changes the
measurement from lower of cost or market to lower of cost
and net realizable value. ASU 2015-11 is effective for the
Company’s fiscal year ending July 1, 2018. The adoption
of ASU 2015-11 is not expected to have a significant
impact on the Company’s consolidated financial position
or results of operations.
In November 2015 the FASB issued ASU No. 2015-17,
“Balance Sheet Classification of Deferred Taxes,” which
will require entities to present deferred tax assets
(“DTAs”) and deferred tax liabilities (“DTLs”) as noncur-
rent in a classified balance sheet. The ASU simplifies the
current guidance (ASC 740-10-45-4), which requires
entities to separately present DTAs and DTLs as current
and noncurrent in a classified balance sheet. The ASU is
effective for the Company’s fiscal year ending July 1,
2018, and interim periods within those annual periods.
However, the FASB allowed early adoption of the
standard, and therefore, the Company adopted this ASU
as of December 27, 2015, and has reclassified all prior
periods to be consistent with the requirements outlined in
the ASU. The impact of the adoption was to reclassify and
net $4.9 million of current deferred tax assets within long-
term deferred tax liabilities, as of June 28, 2015.
In January 2016, the FASB issued ASU 2016-01,
“Financial Instruments – Overall: Recognition and
Measurement of Financial Assets and Financial Liabili-
ties.” The pronouncement requires equity investments
(except those accounted for under the equity method of
accounting, or those that result in consolidation of the
investee) to be measured at fair value with changes in fair
value recognized in net income, requires public business
entities to use the exit price notion when measuring the
fair value of financial instruments for disclosure purposes,
requires separate presentation of financial assets and
financial liabilities by measurement category and form of
financial asset, and eliminates the requirement for public
business entities to disclose the method(s) and significant
assumptions used to estimate the fair value that is
required to be disclosed for financial instruments mea-
sured at amortized cost. These changes become effective
for the Company’s fiscal year ending June 30, 2019.
The adoption is not expected to have a significant impact
on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02,
“Leases (Topic 842).” Under this guidance, an entity is
required to recognize right-of-use assets and lease
liabilities on its balance sheet and disclose key informa-
tion about leasing arrangements. This guidance offers
specific accounting guidance for a lessee, a lessor and
sale and leaseback transactions. Lessees and lessors
are required to disclose qualitative and quantitative
information about leasing arrangements to enable a user
of the financial statements to assess the amount, timing
and uncertainty of cash flows arising from leases. This
guidance is effective for the Company’s fiscal year ending
June 28, 2020. The Company is currently evaluating the
potential impact of adopting this guidance on our
consolidated financial statements.
In March 2016 the FASB issued ASU No. 2016-09,
“Improvements to Employee Share-Based Payment
Accounting.” ASU No. 2016-09 affects all entities that
issue share-based payment awards to their employees.
ASU No. 2016-09 simplifies several aspects of the
accounting for share-based payment transactions,
including the income tax consequences, classification
of awards as either equity or liabilities, and classification
on the statement of cash flows, including recognizing all
excess tax benefits and tax deficiencies as income tax
expense or benefit in the income statement rather than
in additional paid-in capital. ASU No. 2016-09 is effective
for the Company’s fiscal year ending July 1, 2018. The
Company is currently evaluating the potential impact of
adopting this guidance on our consolidated financial
statements.
In June 2016, the FASB issued ASU no. 2016-13,
“Financial Instruments-Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments.”
ASU 2016-13 introduces a new forward-looking “ex-
pected loss” approach, to estimate credit losses on most
financial assets and certain other instruments, including
trade receivables. The estimate of expected credit losses
will require entities to incorporate considerations of
historical information, current information and reasonable
and supportable forecasts. This ASU also expands the
disclosure requirements to enable users of financial
statements to understand the entity’s assumptions,
models and methods for estimating expected credit
losses. ASU 2016-13 is effective for the Company’s
fiscal year ending July 4, 2021, and the guidance is to
be applied using the modified-retrospective approach.
The Company is currently evaluating the potential impact
of adopting this guidance on our consolidated financial
statements.
17
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Quantitative and Qualitative Disclosures
About Market Risk
Special Note Regarding Forward-Looking
Statements
The Company is exposed to market risk from the
effect of interest rate changes and changes in the market
values of its investments.
Interest Rate Risk
The Company’s exposure to market risk for changes
in interest rates relates primarily to the Company’s
investment of available cash balances and its long-term
debt. The Company generally invests its cash and cash
equivalents in investment grade corporate and U.S.
government securities. Due to the currently low rates of
return the Company is receiving on its cash equivalents,
the potential for a significant decrease in short-term
interest rates is low and, therefore, a further decrease
would not have a material impact on the Company’s
interest income. Borrowings under the Company’s credit
facility bear interest at a variable rate, plus an applicable
margin, and therefore expose the Company to market risk
for changes in interest rates. The effect of a 50 basis point
increase in current interest rates on the Company’s
interest expense would be approximately $0.7 million
during year ended July 3, 2016.
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, EBITDA and EPS; its ability to
manage the significant 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 contingen-
cies, 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.
18
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
2016 and 2015. The Company believes this unaudited information has been prepared substantially on the same basis as
the annual audited consolidated financial statements and all necessary adjustments, consisting of only normal recurring
adjustments, have been included in the amounts stated below to present fairly the Company’s results of operations.
The operating results for any quarter are not necessarily indicative of the operating results for any future period.
Jul. 3, Mar. 27, Dec. 27, Sep. 28, Jun. 28, Mar. 29, Dec. 28, Sep. 28,
2016 2016 2015 2015 2015 2015 2014 2014
(in thousands, except per share data)
Net revenues:
E-commerce
Other
(telephonic/online) $186,411 $179,413 $412,261
136,120
548,381
295,798
252,583
47,984
234,395
133,750
100,645
54,794
234,207
137,486
96,721
Total net revenues
Cost of revenues
Gross Profit
Operating expenses:
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
Total operating expenses
Operating income (loss)
Interest expense, net
Other (income) expense, net
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Less: Net loss attributable to
noncontrolling interest
Net income (loss) attributable to
1-800-FLOWERS.COM, Inc.
74,608
10,175
23,351
8,105
116,239
(15,594)
1,382
312
(17,288)
(6,234)
(11,054)
119,539
71,502
9,845
9,903
20,055
21,006
8,761
7,546
158,200
109,957
(13,236)
94,383
1,239 2,162
242
91,979
30,495
61,484
145
(14,620)
(5,494)
(9,126)
$104,697
51,344
156,041
88,532
67,509
52,526
9,311
19,971
7,972
89,780
(22,271)
1,891
(15,538)
(8,624)
(3,188)
(5,436)
$178,830 $177,903 $409,082 $ 84,038
42,665
126,703
73,390
53,313
54,334
232,237
136,915
95,322
49,461
228,291
130,156
98,135
125,193
534,275
293,850
240,425
71,629
9,427
23,910
7,519
112,485
70,574
10,389
22,772
7,825
111,560
(14,350) (16,238)
––
––
1,631
2,281
(17,869)
(16,631)
(7,056)
(5,866)
(10,765) (10,813)
35,572
122,026
5,600
9,329
13,668
25,558
5,101
8,679
165,592
59,941
74,833 (6,628)
––
753
(7,381)
(2,803)
(4,578)
––
2,638
72,195
26,655
45,540
––
––
(55)
(952)
(26)
(318)
(231)
(328)
$(11,054) $ (9,126) $ 61,539
$ (4,484) $ (10,739) $ (10,495) $ 45,771 $ (4,250)
Basic net income (loss) per common share
attributable to 1-800-FLOWERS.COM, Inc.
From continuing operations $ (0.17) $ (0.14) $ 0.95
From discontinued operations
Basic net income per
common share
$ (0.17) $ (0.14) $ 0.95
––
$ (0.07)
–– –– ––
Diluted net income (loss) per common share
attributable to 1-800-FLOWERS.COM, Inc.
From continuing operations $ (0.17) $ (0.14) $ 0.92
From discontinued operations
–– ––
Diluted net income per
common share
$ (0.17) $ (0.14) $
––
0.92
$ (0.16) $ (0.16) $ 0.71 $ (0.07)
–– –– –– ––
$ (0.07)
$ (0.16) $ (0.16) $ 0.71 $ (0.07)
$ (0.07)
––
$ (0.16) $ (0.16) $ 0.68 $ (0.07)
–– –– –– ––
$ (0.07) $ (0.16) $ (0.16) $ 0.68 $ (0.07)
Weighted average shares used in the calculation of
net income (loss) per common share:
Basic
Diluted
65,376
65,376
64,687
64,687
64,669
66,979
64,825
64,825
65,188
65,188
64,909
64,909
64,443
67,061
63,948
63,948
The Company’s quarterly results may experience seasonal fluctuations – see the Seasonality section in Item 1
of the Company’s Annual Report on Form 10-K for details. Refer above to the Results of Operations section in Item 7
of the Company’s Annual Report on Form 10-K for a discussion of significant events and transactions.
19
Consolidated Balance Sheets
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands, except share data)
July 3, June 28,
2016 2015
Assets
Current assets:
Cash and cash equivalents
Trade receivables, net
Insurance receivable
Inventories
Prepaid and other
Total current assets
Property, plant and equipment, net
Goodwill
Other intangibles, net
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses
Current maturities of long-term debt
Total current liabilities
Long-term debt
Deferred tax liabilities
Other liabilities
Total liabilities
Commitments and contingencies (Note 17)
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,
48,846,449 and 42,875,291 shares issued in 2016 and 2015, respectively
Class B common stock, $.01 par value, 200,000,000 shares authorized,
35,263,004 and 39,310,044 shares issued in 2016 and 2015, respectively
Additional paid-in capital
Retained deficit
Accumulated other comprehensive loss
Treasury stock, at cost, 13,589,025 and 11,874,475 Class A shares in 2016 and
2015, respectively, and 5,280,000 Class B shares in 2016 and 2015
Total 1-800-FLOWERS.COM, Inc. stockholders’ equity
Noncontrolling interest in subsidiary
Total equity
Total liabilities and equity
See accompanying Notes to Consolidated Financial Statements.
20
$ 27,826
19,123
––
103,328
16,382
166,659
171,362
77,667
79,000
11,826
$506,514
$ 35,201
66,066
19,594
120,861
97,969
35,517
9,581
$263,928
––
488
$ 27,940
16,191
2,979
93,163
14,822
155,095
170,100
77,097
82,125
12,656
$497,073
$ 35,425
73,639
14,543
123,607
117,563
37,807
7,840
$286,817
––
429
393
353
319,108
331,349
(11,403) (48,278)
(371)
(146)
(78,055) (62,832)
208,449
242,586
1,807
––
210,256
242,586
$506,514
$497,073
Consolidated Statements of Income
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands, except per share data)
Years Ended
July 3, June 28, June 29,
2016 2015 2014
Net revenues
Cost of revenues
Gross profit
Operating expenses:
$1,173,024 $1,121,506 $756,345
440,672
315,673
655,566
517,458
634,311
487,195
Marketing and sales
Technology and development
General and administrative
Depreciation and amortization
Total operating expenses
Operating income
Interest expense, net
Other (income) expense, 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 on sale of discontinued operations, net of tax
Income 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 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 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 per common share:
318,175
39,234
84,383
32,384
474,176
43,282
6,674
(14,839)
51,447
15,579
35,868
––
––
––
299,801
34,745
85,908
29,124
449,578
37,617
5,753
1,550
30,314
10,930
19,384
––
––
––
$ 35,868 $
(1,007)
$ 36,875 $
19,384
(903)
20,287
$ 0.57 $ 0.31
––
$ 0.57 $ 0.31
––
194,847
22,518
54,754
19,848
291,967
23,706
1,305
52
22,349
8,403
13,946
(86)
815
729
$ 14,675
(697)
$ 15,372
$
0.23
0.01
0.24
$
$ 0.55 $ 0.30
––
$ 0.22
0.01
$ 0.55 $ 0.30 $ 0.23
––
Basic
Diluted
64,896
67,083
64,976
67,602
64,035
66,460
See accompanying Notes to Consolidated Financial Statements.
21
Consolidated Statements of Comprehensive Income
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands)
Years Ended
July 3, June 28, June 29,
2016 2015 2014
$14,675
Net income
(75)
14,600
$35,868
Other comprehensive income/(loss) (currency translation) 252
36,120
$19,384
(505)
18,879
Comprehensive income
Less:
Net loss attributable to noncontrolling interest
Other comprehensive income (loss) (currency translation)
(1,007)
(903)
(697)
attributable to noncontrolling interest
87
Comprehensive net loss attributable to noncontrolling interest (920)
Comprehensive income attributable to
(180)
(1,083)
(29)
(726)
1-800-FLOWERS.COM, Inc.
$37,040
$19,962
$15,326
See accompanying Notes to Consolidated Financial Statements.
22
Consolidated Statements of Stockholders’ Equity
1-800-FLOWERS.COM, Inc. and Subsidiaries
Years ended July 3, 2016, June 28, 2015 and June 29, 2014
(in thousands, except share data)
Accumulated Total
Common Stock Additional Other 1-800-FLOWERS.COM, Inc.
Class A Class B Paid-In Retained Comprehensive Treasury Stock Stockholders’ Noncontrolling Total
Shares Amount Shares Amount Capital Deficit Loss Shares Amount Equity Interest Equity
Balance at June 30, 2013
36,280,425
$ 362 42,125,465
$ 421
$ 298,580 $ (83,937)
$ ––
14,537,231 $(46,155)
$ 169,271
$
––
$169,271
Net income
Translation adjustment
Conversion of Class B stock
into Class A stock
Stock-based compensation
Exercise of stock options
Excess tax benefit from
stock-based compensation
Acquisition of Class A treasury stock
Noncontrolling interest
––
––
––
––
––
––
––
––
66,871
1,608,052
164,050
1 (66,871)
––
––
16
2
(1)
––
––
––
––
––
4,648
525
––
––
––
––
––
––
––
––
––
––
––
––
1,757
––
––
15,372
––
––
––
––
––
––
––
––
(46)
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
1,561,206 (8,317)
––
––
15,372
(697)
14,675
(46)
(29)
(75)
––
4,664
527
1,757
(8,317)
––
––
––
––
––
––
3,616
––
4,664
527
1,757
(8,317)
3,616
Balance at June 29, 2014
38,119,398
381 42,058,594
420
305,510 (68,565)
(46)
16,098,437 (54,472)
183,228
2,890
186,118
3
2
20,287
(903)
19,384
(325)
(180)
(505)
Balance at June 28, 2015
42,875,291
429 39,310,044
393
319,108 (48,278)
(371)
17,154,475 (62,832)
208,449
1,807
210,256
Net income
Translation adjustment
Conversion of Class B stock
into Class A stock
Stock-based compensation
Exercise of stock options
Excess tax benefit from
stock-based compensation
Acquisition of Class A treasury stock
––
––
––
––
––
––
––
––
2,748,550
1,154,173
853,170
27 (2,748,550)
––
––
12
9
(27)
––
––
––
––
––
––
––
––
––
––
––
––
––
5,950
5,533
2,115
––
20,287
––
––
––
––
––
––
––
(325)
––
––
––
––
––
Net income
Translation adjustment
Noncontrolling interest write-off
Conversion of Class B stock
into Class A stock
Stock-based compensation
Exercise of stock options
Excess tax benefit from
––
––
––
––
––
––
––
––
––
––
––
––
4,047,040
879,863
1,044,255
40 (4,047,040)
––
––
9
10
(40)
––
––
stock-based compensation
Acquisition of Class A treasury stock
––
––
––
––
––
––
––
––
––
––
––
––
6,334
3,507
2,400
––
36,875
––
––
––
––
––
––
––
––
165
60
––
––
––
––
––
––
––
1,056,038 (8,360)
2,115
(8,360)
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
5,962
5,542
––
6,343
3,517
––
––
1,714,550 (15,223)
2,400
(15,223)
36,875
(1,007)
35,868
165
252
60 (887) (827)
87
––
––
––
––
––
––
5,962
5,542
2,115
(8,360)
––
––
––
––
––
––
6,343
3,517
2,400
(15,223)
Balance at July 3, 2016
48,846,449
$ 488 35,263,004
$ 353
$ 331,349 $ (11,403)
$ (146)
18,869,025 $(78,055)
$ 242,586
$ –– $242,586
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands)
Years Ended
July 3, June 28, June 29,
2016 2015 2014
Operating activities:
Net income
Reconciliation of net income to net cash
$ 19,384
$ 14,675
35,868
$
provided by operating activities, net of acquisitions/dispositions:
Operating activities of discontinued operations
Gain on sale of discontinued operations
Depreciation and amortization
Amortization of deferred financing costs
Deferred income taxes
Foreign equity investment impairment
Loss on sale/impairment of iFlorist
Non-cash impact of write-offs related to warehouse fire
Bad debt expense
Stock-based compensation
Excess tax benefit from stock-based compensation
Other non-cash items
Changes in operating items:
Trade receivables
Insurance receivable
Inventories
Prepaid and other
Accounts payable and accrued expenses
Other assets
Other liabilities
Net cash provided by operating activities
Investing activities:
Acquisitions, net of cash acquired
Capital expenditures, net of non-cash expenditures
Other
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
Other
Net cash (used in) provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents:
Beginning of year
End of year
––
––
32,384
1,791
(3,000)
2,278
1,990
––
1,278
6,343
(2,400)
517
(4,210)
2,979
(10,216)
(1,560)
(6,429)
(29)
89
57,673
––
(33,938)
––
––
(33,938)
(15,223)
2,400
3,517
178,000
(192,543)
––
––
(23,849)
(114)
27,940
27,826
$
––
––
29,124
1,501
2,471
––
––
29,522
1,295
5,962
(2,550)
1,439
8,331
(2,979)
26,390
8,047
(2,235)
(1,058)
1,089
125,733
(131,994)
(32,572)
963
––
(163,603)
(8,360)
2,550
5,542
239,500
(172,983)
(5,642)
––
60,607
22,737
5,203
$ 27,940
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)
(3)
500
(31,488)
(8,317)
1,837
527
127,000
(127,052)
––
3
(6,002)
5,049
154
5,203
$
Supplemental Cash Flow Information:
-
Interest paid amounted to $5.0 million, $4.3 million and $1.0 million, for the years ended July 3, 2016,
June 28, 2015 and June 29, 2014, respectively.
- The Company paid income taxes of approximately $13.4 million, $5.1 million and $7.0 million, net of tax refunds
received, for the years ended July 3, 2016, June 28, 2015, and June 29, 2014, respectively.
See accompanying Notes to Consolidated Financial Statements.
24
Notes to Consolidated Financial Statements
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 1. Description of Business
1-800-FLOWERS.COM, Inc. and its subsidiaries
(collectively, the “Company”) is a leading provider of
gourmet food and floral gifts for all occasions. For the
past 40 years, 1-800-FLOWERS® (1-800-356-9377 or
www.1800flowers.com) has been helping deliver smiles
for our customers with gifts for every occasion, including
fresh flowers and the finest selection of plants, gift
baskets, gourmet foods, confections, candles, balloons
and plush stuffed animals. As always, our 100%
Smile Guarantee® backs every gift.
The Company’s BloomNet® international floral wire
service (www.mybloomnet.net) provides a broad range of
quality products and value-added services designed to
help professional florists grow their businesses profitably.
The 1-800-FLOWERS.COM, Inc. “Gift Shop” also includes
gourmet gifts such as 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®
(www.fanniemay.com and www.harrylondon.com); gift
baskets and towers from 1-800- Baskets.com®
(www.1800baskets.com); premium English muffins and
other breakfast treats from Wolferman’s® (1-800-999-
1910 or www.wolfermans.com); carved fresh fruit arrange-
ments from FruitBouquets.com (www.fruitbouquets.com);
and top quality steaks and chops from Stock Yards®
(www.stockyards.com).
Note 2. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the
accounts of 1-800-FLOWERS.COM, Inc. and its subsidiar-
ies (collectively, the “Company”). All significant intercom-
pany accounts and transactions have been eliminated
in consolidation. During fiscal 2016, 2015, and 2014
approximately 1%, 2%, and 2% respectively, of consoli-
dated net revenue came from international sources.
During the fourth quarter of fiscal 2013, the Company
made the strategic decision to divest the e-commerce
and procurement businesses of its Winetasting Network
subsidiary 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 the e-commerce and procure-
ment business of The Winetasting Network as a discontin-
ued operation in fiscal 2014.
Fiscal Year
The Company’s fiscal year is a 52- or 53-week period
ending on the Sunday nearest to June 30. Fiscal year
2016, which ended on July 3, 2016, consisted of 53
weeks, while fiscal years 2015 and 2014, which ended
on June 28, 2015 and June 29, 2014, respectively,
consisted of 52 weeks.
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
repurchase agreements and commercial paper with
maturities of three months or less when purchased.
Inventories
Inventories are valued at the lower of cost or market
using the first-in, first-out method of accounting.
Property, Plant and Equipment
Property, plant and equipment 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. Orchards in
production, consisting of direct labor and materials,
supervision and other items, are capitalized as part of
capital projects in progress – orchards until the orchards
produce fruit in commercial quantities. Upon attaining
commercial levels of production the capital investments
in these orchards are recorded as land improvements.
Estimated useful lives are periodically reviewed, and
where appropriate, changes are made prospectively.
The Company’s property plant and equipment is depreci-
ated using the following estimated lives:
10 - 40
Buildings and building improvements (years)
3 - 10
Leasehold improvements (years)
Furniture, fixtures and production equipment (years) 3 - 10
3 - 7
Software (years)
15 - 35
Orchards in production and land improvements
Property, plant and equipment 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
25
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 busi-
nesses for which discrete financial information is available
and management of each reporting unit regularly reviews
the operating results of those components.
In applying the goodwill impairment test, the Company
has the option to perform a qualitative test (also known as
“Step 0”) or a two-step quantitative test (consisting of
“Step 1” and “Step 2”). Under the Step 0 test, the Com-
pany first assesses qualitative factors to determine
whether it is more likely than not that the fair value of the
reporting units is less than its carrying value. Qualitative
factors may include, but are not limited to economic
conditions, industry and market considerations, cost
factors, overall financial performance of the reporting
unit and other entity and reporting unit specific events.
If after assessing these qualitative factors, the Company
determines it is “more-likely-than-not” that the fair value
of the reporting unit is less than the carrying value, then
performing the two-step quantitative test is necessary.
The first step (“Step 1”) of the two-step quantitative test
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 (“Step
2”) is not performed. If the carrying value of the reporting
unit is higher than the fair value, Step 2 must be per-
formed to compute the amount of the goodwill impair-
ment, if any. In Step 2, 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
accepted valuation models and set criteria that are
reviewed 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 Com-
pany 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.
During fiscal 2016 the Company performed a Step 0
analysis and determined that it is not “more likely than
not” that the fair values of the reporting units were less
than their carrying amounts. During fiscal years 2015 and
2014, the Company performed the two-step quantitative
impairment test.
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.
Definite-lived intangibles 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 circumstances occur, a recoverability
test is performed comparing 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.
In applying the impairment test, the Company has the
option to perform a qualitative test (also known as
“Step 0”) or a quantitative test. Under the Step 0 test,
the Company assesses qualitative factors to determine
whether it is more likely than not that an indefinite-lived
intangible asset is impaired. Qualitative factors may
include, but are not limited to economic conditions,
industry and market considerations, cost factors, financial
performance, legal and other entity and asset specific
events. If after assessing these qualitative factors, the
Company determines it is “more-likely-than-not” that the
indefinite-lived intangible asset is impaired, then perform-
ing the quantitative test is necessary. The quantitative
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.
During fiscal 2016 the Company performed a Step 0
analysis and determined that it is not “more likely than
26
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
not” that the fair values of the indefinite-lived intangibles
were less than their carrying amounts. During fiscal years
2015 and 2014, the Company performed the two-step
quantitative impairment test.
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
catalogs over a period not to exceed 12 months. Included
within prepaid and other current assets was $3.0million
and $2.5million at July 3, 2016 and June 28, 2015
respectively, relating to prepaid catalog expenses.
Investments
The Company has certain investments in non-market-
able equity instruments of private companies. The Com-
pany 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 determining 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 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 $1.1 million as of July 3, 2016 and $2.9
million as of June 28, 2015, and is included in the “Other
assets” line item within the Company’s consolidated
balance sheets. The Company’s equity in the net income
(loss) of Flores Online for the years ended July 3, 2016
and June 28, 2015 was $(0.1) million and $(0.3) million,
respectively. During the quarter ended September 27,
2015, the Company determined that the fair value of its
investment in Flores Online ($1.2 million) was below its
carrying value ($2.9 million) and that this decline was
other-than-temporary. As a result, the Company recorded
an impairment charge of $1.7 million, which is included
within the “Other (income) expense, net” line items in the
Company’s consolidated statements of income.
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 the “Other assets” line item within the
Company’s consolidated balance sheets. The aggregate
carrying amount of the Company’s cost method invest-
ments was $1.7 million as of July 3, 2016 (including a
$1.5 million investment in Euroflorist – see Note 4) and
$0.7 million as of June 28, 2015. During the quarter
ended July 3, 2016, the Company determined that the
fair value of one of its cost method investments was
below its carrying value and that the decline was other-
than-temporary. As a result the Company recorded an
impairment charge of $0.5 million, which is included
within the “Other (income) expense, net” line items in
the Company’s consolidated statements of income.
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 condensed 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 ($2.1 million at July 3,
2016 and $2.2 million at June 28, 2015) 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
27
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 delivery and do not include sales tax. Net
revenues generated by the Company’s BloomNet Wire
Service operations include membership fees as well as
other products and service offerings to florists. Membership
fees are recognized monthly in the period earned, and
products sales are recognized upon product shipment
with shipping terms primarily FOB shipping point.
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 $133.1 million, $130.6 million
and $83.0 million for the years ended July 3, 2016,
June 28, 2015 and June 29, 2014, respectively.
Technology and Development
Technology and development expense consists
primarily of payroll and operating expenses of the
Company’s information technology group, costs associated
with its websites, including hosting, content development
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 capitalized if
the software is expected to have a useful life beyond one
year and amortized over the software’s useful life, typically
three to seven years. Costs associated with repair mainte-
nance or the development of website content are ex-
pensed 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 cost
associated with share-based awards that are subject
solely to time-based vesting requirements, less expected
forfeitures, is recognized over the awards’ service period
for the entire award on a straight-line basis. The cost
associated with performance-based equity awards is
recognized for each tranche over the service period,
based on an assessment of the likelihood that the
applicable performance goals will be achieved.
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.
When entering into these transactions, 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.
The Company did not have any open derivative
positions at July 3, 2016 and June 28, 2015.
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 Per Share
Basic net income per common share is computed using
the weighted-average number of common shares out-
standing during the period. Diluted net income per share is
computed using the weighted-average number of common
28
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
and dilutive common equivalent shares (consisting
primarily of employee stock options and unvested
restricted stock awards) outstanding during the period.
Recent Accounting Pronouncements
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 June 30, 2019 and may
be applied retrospectively. The Company is currently
evaluating the potential impact of adopting this
guidance on our consolidated financial statements.
In April 2015, the Financial Accounting Standards
Board (“FASB”) issued ASU No. 2015-05, “Customer’s
Accounting for Fees Paid in a Cloud Computing Arrange-
ment.” This standard provides guidance to help entities
determine whether a cloud computing arrangement
contains a software license that should be accounted for
as internal-use software or as a service contract. Upon
adoption, an entity has the option to apply the provisions
of ASU 2015-05 either prospectively to all arrangements
entered into or materially modified, or retrospectively. This
standard is effective for the Company’s fiscal year ending
July 2, 2017. The Company is currently evaluating the
potential impact of adopting this guidance on our
consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03,
“Simplifying the Presentation of Debt Issuance Costs,”
which amends ASC 835-30, “Interest – Imputation of
Interest.” In order to simplify the presentation of debt
issuance costs, ASU No. 2015-03 requires that debt
issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction
from that debt liability, consistent with the presentation of
a debt discount. This presentation is consistent with the
guidance in Concepts Statement 6, which states that debt
issuance costs are similar to a debt discount and in effect
reduce the proceeds of borrowing, thereby increasing the
effective interest rate. Concepts Statement 6 further states
that debt issuance costs are not assets because they
provide no future economic benefit. This new guidance
is effective for the Company’s fiscal year ending July 2,
2017 and should be applied retrospectively.
In July 2015, the FASB issued ASU No. 2015-11,
“Inventory (Topic 330).” The pronouncement was issued
to simplify the measurement of inventory and changes the
measurement from lower of cost or market to lower of cost
and net realizable value. ASU 2015-11 is effective for the
Company’s fiscal year ending July 1, 2018. The adoption
of ASU 2015-11 is not expected to have a significant
impact on the Company’s consolidated financial position
or results of operations.
In November 2015 the FASB issued ASU No. 2015-17,
“Balance Sheet Classification of Deferred Taxes,” which
will require entities to present deferred tax assets
(“DTAs”) and deferred tax liabilities (“DTLs”) as noncur-
rent in a classified balance sheet. The ASU simplifies the
current guidance (ASC 740-10-45-4), which requires
entities to separately present DTAs and DTLs as current
and noncurrent in a classified balance sheet. The ASU is
effective for the Company’s fiscal year ending July 1,
2018, and interim periods within those annual periods.
However, the FASB allowed early adoption of the
standard, and therefore, the Company adopted this ASU
as of December 27, 2015, and has reclassified all prior
periods to be consistent with the requirements outlined in
the ASU. The impact of the adoption was to reclassify and
net $4.9 million of current deferred tax assets within long-
term deferred tax liabilities, as of June 28, 2015.
In January 2016, the FASB issued ASU 2016-01,
“Financial Instruments – Overall: Recognition and
Measurement of Financial Assets and Financial Liabili-
ties.” The pronouncement requires equity investments
(except those accounted for under the equity method of
accounting, or those that result in consolidation of the
investee) to be measured at fair value with changes in
fair value recognized in net income, requires public
business entities to use the exit price notion when
measuring the fair value of financial instruments for
disclosure purposes, requires separate presentation of
financial assets and financial liabilities by measurement
category and form of financial asset, and eliminates the
requirement for public business entities to disclose the
method(s) and significant assumptions used to estimate
the fair value that is required to be disclosed for financial
instruments measured at amortized cost. These changes
become effective for the Company’s fiscal year ending
June 30, 2019. The adoption is not expected to have a
significant impact on the Company’s consolidated
financial statements.
In February 2016, the FASB issued ASU 2016-02,
“Leases (Topic 842).” Under this guidance, an entity is
required to recognize right-of-use assets and lease
liabilities on its balance sheet and disclose key informa-
tion about leasing arrangements. This guidance offers
specific accounting guidance for a lessee, a lessor and
sale and leaseback transactions. Lessees and lessors
are required to disclose qualitative and quantitative
information about leasing arrangements to enable a user
of the financial statements to assess the amount, timing
and uncertainty of cash flows arising from leases. This
guidance is effective for the Company’s fiscal year ending
June 28, 2020. The Company is currently evaluating the
potential impact of adopting this guidance on our
consolidated financial statements.
In March 2016 the FASB issued ASU No. 2016-09,
“Improvements to Employee Share-Based Payment
Accounting.” ASU No. 2016-09 affects all entities that issue
share-based payment awards to their employees. ASU No.
2016-09 simplifies several aspects of the accounting for
share-based payment transactions, including the income
tax consequences, classification of awards as either equity
or liabilities, and classification on the statement of cash
flows, including recognizing all excess tax benefits and tax
deficiencies as income tax expense or benefit in the
29
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
income statement rather than in additional paid-in capital.
ASU No. 2016-09 is effective for the Company’s fiscal year
ending July 1, 2018. The Company is currently evaluating
the potential impact of adopting this guidance on our
consolidated financial statements.
In June 2016, the FASB issued ASU no. 2016-13,
“Financial Instruments-Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments.”
ASU 2016-13 introduces a new forward-looking “ex-
pected loss” approach, to estimate credit losses on most
financial assets and certain other instruments, including
trade receivables. The estimate of expected credit losses
will require entities to incorporate considerations of
historical information, current information and reasonable
and supportable forecasts. This ASU also expands the
disclosure requirements to enable users of financial
statements to understand the entity’s assumptions,
models and methods for estimating expected credit losses.
ASU 2016-13 is effective for the Company’s fiscal year
ending July 4, 2021, and the guidance is to be applied
using the modified-retrospective approach. The Company
is 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. See “Recent Accounting Pronouncements”
above regarding the impact of our adoption of ASU No.
2015-17 upon the classification of deferred tax assets in
our consolidated balance sheets.
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
July 3, June 28, June 29,
2016 2015 2014
(in thousands, except per share data)
Numerator:
Income from
continuing
operations $35,868 $19,384 $13,946
Less: Net loss
attributable to
noncontrolling interest
Income from continuing
(1,007)
(903)
(697)
operations attributable to
1-800-FLOWERS.COM, Inc. $36,875 $20,287 $14,643
Denominator:
Weighted average
shares outstanding
64,896
64,976
64,035
Effect of dilutive securities:
Employee stock
options (1)
Employee restricted
stock awards
Adjusted weighted-average
shares and assumed
1,294
1,561
1,083
893
2,187
1,065
2,626
1,342
2,425
conversions
67,083
67,602
66,460
Net income per common share
from continuing operations
attributable to 1-800-FLOWERS.COM, Inc.
Basic $ 0.57 $ 0.31 $ 0.23
Diluted $ 0.55 $ 0.30 $ 0.22
Note (1): The effect of options to purchase 0.1 million, 0.1 million
and 1.2 million shares for the years ended July 3, 2016, June 28,
2015 and June 29, 2014, respectively, were excluded from the
calculation of net income per share on a diluted basis as their
effect is anti-dilutive.
30
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 4. Acquisitions and Dispositions
Acquisition of Harry & David
On September 30, 2014, the Company completed
its acquisition of 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 brands. The transac-
tion, for 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 48 Harry & David
retail stores located throughout the country.
During the quarter ended June 28, 2015, the Com-
pany finalized the allocation of the purchase price to the
identifiable assets acquired and liabilities assumed
based on its estimates of their fair values on the acquisi-
tion date. The determination of the fair values of the
acquired assets and assumed liabilities (and the related
determination of estimated lives of depreciable tangible
and identifiable intangible assets) requires significant
judgment. The estimates and assumptions include the
projected timing and amount of future cash flows and
discount rates reflecting risk inherent in the future cash
flows. Of the acquired intangible assets, $5.2 million was
assigned to customer lists, which are being amortized
over the estimated remaining lives of between 4 to 11
years, $35.5 million was assigned to trademarks, $1.1
million was assigned to leasehold positions and $16.0
million was assigned to goodwill, which is not expected to
be deductible for tax purposes. The goodwill recognized
in conjunction with our acquisition of Harry & David is
primarily related to synergistic value created in terms of
both operating costs and revenue growth opportunities,
enhanced financial and operational scale, and other
strategic benefits. It also includes certain other intangible
assets that do not qualify for separate recognition, such
as an assembled workforce.
The following table summarizes the final allocation
of the purchase price to the estimated fair values of
assets acquired and liabilities assumed at the date
of the acquisition:
Harry & David
Final
Purchase Price
Allocation
(in thousands)
Current Assets
Intangible Assets
Goodwill
Property, plant and equipment
Other assets
Total assets acquired
Current liabilities, including short-term debt
Deferred tax liabilities
Other liabilities assumed
Total liabilities assumed
Net assets acquired
$126,268
41,827
16,042
105,079
(131)
289,085
104,513
42,048
24
146,585
$142,500
31
The estimated fair value of the acquired work in
process and finished goods inventory was determined
utilizing the income approach. The income approach
estimates the fair value of the inventory based on the net
retail value of the inventory less operating expenses and
a reasonable profit allowance. Raw materials inventory
was valued at book value, as there have not been any
significant price fluctuations or other events that would
materially change the cost to replace the raw materials.
The estimated fair value of the deferred revenue was
determined based on the costs to perform the remaining
services and/or satisfy the Company’s remaining obliga-
tions, plus a reasonable profit for those activities. These
remaining costs exclude sales and marketing expenses
since the Deferred Revenue has already been “sold,”
and no additional sales and marketing expenses will
be incurred. The reasonable profit to be earned on the
deferred revenue was estimated based on the profit
mark-up that the Company earns on similar services.
The estimated fair value of property, plant and
equipment was determined utilizing a combination of
the cost, sales comparison, market, and excess earnings
method approaches, as follows:
Under the cost approach a replacement cost of the
asset is first determined based on replacing the real
property with assets of equal utility and functionality,
developed based on both the indirect and the direct cost
methods. The indirect cost method includes multiplying
the assets’ historical costs by industry specific inflationary
trend factors to yield an estimated replacement cost. In
applying this method, all direct and indirect costs includ-
ing tax, freight, installation, engineering and other
associated soft costs were considered. The direct cost
method includes obtaining a current replacement cost
estimate from the Company and equipment dealers,
which includes all applicable direct and indirect costs. An
appropriate depreciation allowance is then applied to the
replacement cost based on the effective age of the assets
relative to the expected normal useful lives of the assets,
condition of the assets, and the planned future utilization
of the assets. The determination of fair value also includes
considerations of functional obsolescence and economic
obsolescence, where applicable.
The sales comparison approach was considered for
certain real estate property. Under the sales comparison
approach, an estimate of fair value is determined by
comparing the property being valued to similar properties
that have been sold within a reasonable period from the
valuation date, applying appropriate units of comparison.
The market approach was considered for certain assets with
active secondary markets including agricultural equipment,
automobiles, computer equipment, and general equipment,
mobile equipment, packaging machinery and semi-tractors.
Under the market approach market, comparables for the
assets are obtained from equipment dealers, resellers,
industry databases, and published price guides. The market
comparables are then adjusted to the subject assets based
on age, condition or type of transaction. All applicable direct
and indirect costs are also considered and reflected in the
final fair value determination.
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
The fair value of orchards in production was deter-
mined based on the excess earnings method under the
income approach. This valuation approach assumed that
the orchards’ production could be sold independently
through a wholesale market rather than Harry & David’s
retail channel. The excess earnings method required
calculating future crop revenue as determined by
multiplying the future crop volume in tons to be produced
by the projected price per ton based on the USDA
“Agricultural Prices” report released January 31, 2015 by
the National Agricultural Statistics Services. Appropriate
expenses were deducted from the sales attributable to
the orchards and economic rents were charged for the
return on contributory assets. The after-tax cash flows
attributable to the asset were discounted back to their
net present value at an appropriate rate of return and
summed to calculate the value of the orchards.
The estimated fair value of the acquired trademarks
was determined using the relief from royalty method,
which is a risk-adjusted discounted cash flow approach.
The relief from royalty method values an intangible asset
by estimating the royalties saved through ownership of
the asset. The relief from royalty method requires identify-
ing the future revenue that would be generated by the
trademark, multiplying it by a royalty rate deemed to be
avoided through ownership of the asset and discounting
the projected royalty savings amounts back to the
acquisition date. The royalty rate used in the valuation
was based on a consideration of market rates for similar
categories of assets. The discount rate used in the
valuation was based on the Company’s weighted
average cost of capital, the riskiness of the earnings
stream association with the trademarks and the overall
composition of the acquired assets.
appropriate attrition rate based on the historical experi-
ence of the Company. Appropriate expenses are then
deducted from the revenues and economic rents are
charged for the return on contributory assets. The after-tax
cash flows attributable to the asset are discounted back to
their net present value at an appropriate intangible asset
rate of return and summed to calculate the value of the
customer lists.
Operating results of Harry & David are reflected in the
Company’s consolidated financial statements from the
date of acquisition, within its Gourmet Food & Gift Baskets
segment. Harry & David contributed net revenues of
$359.7 million and operating income of approximately
$24.6 million from September 30, 2014 through June 28,
2015. These amounts are not necessarily indicative of the
results of operations that Harry & David would have
realized had it continued to operate as a stand-alone
company during the period presented due to integration
activities since the acquisition date, and due to costs that
are now reflected in the Company’s unallocated corpo-
rate costs which are not allocated to Harry & David.
As required by ASC 805, “Business Combinations,”
the following unaudited pro forma financial information for
the year ended June 28, 2015, gives effect to the Harry &
David acquisition as if it had been completed on July 1,
2013. The unaudited pro forma financial information is
prepared by management for informational purposes
only in accordance with ASC 805 and is not necessarily
indicative of or intended to represent the results that
would have been achieved had the acquisition been
consummated as of the dates presented, and should not
be taken as representative of future consolidated results
of operations. The unaudited pro forma financial informa-
tion does not reflect any operating efficiencies and/or cost
savings that the Company may achieve with respect to
the combined companies. The pro forma information has
been adjusted to give effect to nonrecurring items that are
directly attributable to the acquisition.
The estimated fair value of the acquired customer lists
was determined using the excess earnings method under
the income approach. This method requires identifying the
future revenue that would be generated by existing
customers at the time of the acquisition, considering an
Years Ended
June 28, 2015 June 29, 2014
July 3, 2016 (unaudited) (unaudited)
(Actuals) (Pro-forma) (Pro-forma)
Net revenues from continuing operations
$1,173,024
Income from continuing operations
attributable to 1-800-FLOWERS.COM, Inc.
Diluted net income per common share
attributable to 1-800-FLOWERS.COM, Inc.
$
$
36,875
0.55
$1,152,103
$
$
17,812
0.26
$1,142,946
$
$
19,439
0.29
The unaudited pro forma amounts above include the following adjustments:
(1) An increase of net revenues and a decrease of cost of sales by $1.6 million and $4.8 million, to reflect the impact of purchase accounting adjustments
related to Harry & David’s deferred revenue and inventory fair value step-up in the year ended June 28, 2015.
(2) A decrease of operating expenses by $17.4 million during the year ended June 28, 2015, to eliminate acquisition costs ($11.9 million during the year
ended June 28, 2015), integration costs ($3.0 million during the year ended June 28, 2015) and severance costs ($2.5 million during the year ended June
28, 2015) directly related to the transaction.
(3) A decrease of operating expenses by $0.4 million during the year ended June 29, 2014, to eliminate acquisition costs directly related to the transaction.
(4) An increase of operating expenses by $0.2 million during the year ended June 29, 2014, to reflect the additional amortization expense related to the
increase in definite lived intangibles.
(5) An increase to interest expense by $1.1 million for the year ended June 28, 2015 to reflect the incremental impact of the 2014 Credit Facility utilized to
finance the acquisition, assuming our new credit facility was in place on July 1, 2013.
(6) The adjustments above were tax effected at the combined entity’s assumed effective tax rate for the respective periods.
32
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
and capital on integrating Harry & David and achieving
expected synergy savings. During October 2015, the
Company completed the sale of substantially all of the
assets of iFlorist to Euroflorist AB (“Euroflorist”), a pan-
European floral and gifting company headquartered in
Malmo, Sweden. As consideration for the assets sold, the
Company received an investment in Euroflorist with a fair
value on the date of sale of approximately $1.5 million.
The Company will account for this investment using the
cost method as it does not possess the ability to exercise
significant influence over Euroflorist.
As a result of the above, the Company determined
that the iFlorist business (disposal group) met the held for
sale criteria, as prescribed by FASB ASC 360-10-45-9,
as of September 27, 2015. As a result, the Company
compared iFlorist’s carrying amount ($3.4 million) to its
fair value less cost to sell ($1.5 million), and recorded
an impairment charge of $1.9 million during the period
ended September 27, 2015. The Company recorded this
impairment charge within “Other (income) expense, net”
in the condensed consolidated statements of operations.
During the quarter ended December 27, 2016, the
Company completed the sale of the iFlorist business
and recorded an additional loss on sale of $0.2 million.
Note 5. Inventory
The Company’s inventory, stated at cost, which is not in
excess of market, includes purchased and manufactured
finished goods for sale, packaging supplies, crops, raw
material ingredients for manufactured products and
associated manufacturing labor and is classified as follows:
July 3, June 28,
2016 2015
(in thousands)
Finished goods $ 44,264
24,573
Work-in-process
34,491
Raw materials
$103,328
$43,254
16,020
33,889
$93,163
Acquisition of Fannie May retail stores
On June 27, 2014, the Company and GB Chocolates
LLC (GB Chocolates) entered into a settlement agreement,
resulting in the termination of the GB Chocolates franchise
agreement, and its exclusive area development rights.
As a result, in fiscal 2014, the Company recognized the
previously 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 development
obligations under the 2011 Area Development 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.
During the quarter ended June 28, 2015, the Com-
pany finalized the allocation of the purchase price to the
identifiable assets acquired and liabilities assumed
based on our estimates of their fair values on the
acquisition date. There have been no measurement
period adjustments. The following table summarizes the
final allocation of the purchase price to the estimated fair
values of assets acquired and liabilities assumed at the
date of the acquisition:
Final
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.
Disposition 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 FASB’s guidance regarding business combinations.
During the quarter ended September 27, 2015, the
Company’s management committed to a plan to sell its
iFlorist business in order to focus its internal resources
33
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 &
Floral Service Gift Baskets (1) Total
Balance at June 29, 2014
Harry & David acquisition
iFlorist measurement period
adjustment
iFlorist translation adjustment
Other
Balance at June 28, 2015
Other
Balance at July 3, 2016
$ 16,691
––
1,320
(429)
––
$ 17,582
(141)
$ 17,441
$
$
$
––
––
––
––
––
––
––
––
$
43,475
16,042
––
––
(2)
$
59,515
711
60,226
$
$ 60,166
16,042
1,320
(429)
(2)
$ 77,097
570
$ 77,667
(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.
There were no goodwill impairment charges in any segment during the years ended July 3, 2016, June 28, 2015
and June 29, 2014.
The Company’s other intangible assets consist of the following:
July 3, June 28,
2016 2015
Amortization Gross Gross
Period Carrying Accumulated Carrying Accumulated
(years) Amount Amortization Net Amount Amortization Net
(in thousands)
Intangible assets with determinable lives
Investment in
licenses
Customer lists
Other
14 - 16
3 - 10
5 - 14
Trademarks with
indefinite lives
Total identifiable
intangible assets
$ 7,420 $ 5,832
15,960
2,698
24,490
21,144
3,665
32,229
$ 1,588
5,184
967
7,739
71,261
––
71,261
$
7,420
21,815
3,665
32,900
72,144
$ 5,727
14,595
2,597
22,919
$ 1,693
7,220
1,068
9,981
––
72,144
$103,490
$24,490
$79,000
$105,044
$22,919
$82,125
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. No material impairments were recognized for the
years ended July 3, 2016, June 28, 2015 and June 29, 2014.
The amortization of intangible assets for the years ended July 3, 2016, June 28, 2015 and June 29, 2014 was $1.9
million, $2.1 million and $1.6 million, respectively. Future estimated amortization expense is as follows: 2017 - $1.5
million, 2018 - $1.3 million, 2019 - $0.7million, 2020 - $0.6 million, 2021 - $1.0 million and thereafter - $2.6 million.
34
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 7. Property, Plant and Equipment
July 3, June 28,
2016 2015
(in thousands)
Land
Orchards in production and
land improvements
Building and building improvements
Leasehold improvements
Production equipment and
furniture and fixtures
Computer and
telecommunication equipment
Software
Capital projects in progress
- orchards
Property, plant and
equipment, gross
Accumulated depreciation and
$ 30,789
$ 31,077
9,483
54,950
21,584
9,028
55,121
19,459
72,912
63,132
52,737
136,333
56,582
150,695
8,513
7,335
387,301
392,429
amortization (215,939) (222,329)
Property, plant and
equipment, net
$171,362
$170,100
Depreciation expense for the years ended July 3,
2016, June 28, 2015 and June 29, 2014 was $30.5
million, $27.0 million and $18.2 million, respectively.
Note 8. Accrued Expenses
Accrued expenses consisted of the following:
July 3, June 28,
2016 2015
(in thousands)
Payroll and employee benefits $ 25,892 $ 36,370
Other
37,269
Accrued Expenses $ 66,066 $ 73,639
40,174
Note 9. Long-Term Debt
The Company’s current and long-term debt consists of
the following:
July 3, June 28,
2016 2015
(in thousands)
Revolver (1)
Term Loan (1)
Bank loan (2)
Total debt
Less: current maturities of
long-term debt
Long-term debt
$
$
––
––
117,563 131,813
–– 293
117,563 132,106
19,594
$ 97,969
14,543
$117,563
(1) In order to finance the Harry & David acquisition, on September
30, 2014, the Company entered into a Credit Agreement with
JPMorgan Chase Bank as administrative agent, and a group of
lenders (the “2014 Credit Facility”), consisting of a $142.5 million
five-year term loan (the “Term Loan”) with a maturity date of
35
September 30, 2019, and a co-terminus revolving credit facility (the
“Revolver”), with a seasonally adjusted limit ranging from $100.0 to
$200.0 million, which may be used for working capital (subject to
applicable sublimits) and general corporate purposes. The Term
Loan is payable in 20 quarterly installments of principal and interest
beginning in December 2014, with escalating principal payments at
the rate of 10% in years one and two, 15% in years three and four,
and 20% in year five, with the remaining balance of $42.75 million
due upon maturity. Upon closing of the acquisition, the Company
borrowed $136.7 million under the Revolver to repay amounts
outstanding under the Company’s and Harry & David’s previous
credit agreements, as well as to pay acquisition-related transaction
costs. There were no amounts outstanding under the Revolver as
of July 3, 2016 or June 28, 2015.
The 2014 Credit Facility requires that while any borrowings are
outstanding the Company comply with certain financial and non-
financial covenants, including the maintenance of certain financial
ratios. The Company was in compliance with these covenants as of
July 3, 2016. Outstanding amounts under the 2014 Credit Facility
bear interest at the Company’s option at either: (i) LIBOR, plus a
spread of 175 to 250 basis points, as determined by the Company’s
leverage ratio, or (ii) ABR, plus a spread of 75 to 150 basis points.
The 2014 Credit Agreement is secured by substantially all of the
assets of the Company and the Subsidiary Guarantors.
Future principal payments under the term loan are as follows:
$19.6 million – 2017, $21.4 million – 2018, $26.7 million – 2019
and $49.9 million – 2020.
(2) Bank loan assumed through the Company’s acquisition of a
majority interest in iFlorist. The Company repaid this loan during
the quarter ended December 27, 2015.
Note 10. Fair Value Measurements
Cash and cash equivalents, trade and other receiv-
ables, accounts payable and accrued expenses are
reflected in the consolidated balance sheets at carrying
value, which approximates fair value due to the short-term
nature of these instruments. Although no trading market
exists, the Company believes that the carrying amount of
its debt approximates fair value due to its variable nature.
The 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
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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.
The Company’s policy is to recognize interest and
penalties accrued on any unrecognized tax benefits as
a component of income tax expense. At July 3, 2016,
the Company has an unrecognized tax position of
approximately $1.2 million, including accrued interest
and penalties of $0.1 million. The Company believes
that $0.9 million of 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
July 3, June 28, June 29,
2016 2015 2014
Level 3 Valuations based on inputs that are supported
(in thousands)
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:
Fair Value Measurements
Assets (Liabilities)
Carrying Value Level 1 Level 2 Level 3
(in thousands)
Assets (liabilities) as of July 3, 2016:
Trading securities
held in a
“rabbi trust” (1)
$4,852 $4,852 $ –– $ ––
$4,852
$4,852 $ –– $ ––
Assets (liabilities) as of June 28, 2015:
Trading securities
held in a
“rabbi trust” (1)
$3,118 $3,118 $ –– $ ––
$3,118
$3,118 $ –– $ ––
(1) The Company has established a Non-qualified Deferred
Compensation Plan for certain members of senior management.
Deferred compensation plan assets are invested in mutual funds
held in a “rabbi trust” which is restricted for payment to participants
of the NQDC Plan. 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 included in
Other liabilities, in the consolidated balance sheets.
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 is currently being audited by the
Internal Revenue Service for fiscal year 2014, while fiscal
years 2012, 2013 and 2015 remain subject to federal
examination. Due to ongoing state examinations and
non-conformity with the federal statute of limitations for
assessment, certain states also remain open from fiscal
2012. The Company’s foreign income tax filings are open
for examination by its respective foreign tax authorities in
Canada, Brazil, and the United Kingdom from fiscal 2012.
36
Current provision (benefit):
Federal
State
Foreign
Current Income
tax expense
$15,876
2,703
––
$ 6,630
1,840
(11)
$6,439
1,247
11
18,579
8,459
7,697
Deferred provision (benefit):
Federal
State
Foreign
Deferred income tax
expenses (benefit)
(2,949)
(7)
(44)
1,970
631
(130)
(3,000)
2,471
Income tax expense
$15,579
$ 10,930
773
28
(95)
706
$8,403
A reconciliation of the U.S. federal statutory tax rate to
the Company’s effective tax rate is as follows:
Years Ended
July 3, June 28, June 29,
2016 2015 2014
Tax at U.S. statutory rates
State income taxes, net
of federal tax benefit
35.0%
35.0%
35.0%
3.4
1.3
Valuation allowance change
Rate differences
(2.6)
Tax settlements 1.1
Deductible stock-based
3.8
2.6
1.1
1.4
3.7
1.5
1.2
(1.0)
compensation (0.2) (1.3) (0.2)
Domestic production
deduction (2.6) (2.2) (1.9)
Tax credits (4.2) (3.9) (1.7)
(0.4) 1.0
Other, net
36.1%
Effective tax rate
(0.9)
30.3%
37.6%
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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
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. During
fiscal 2016 and 2015, 4,047,040 and 2,748,550 shares of
Class B common stock, respectively, were converted into
shares of Class A common stock.
July 3, June 28,
2016 2015
(in thousands)
Deferred income tax assets:
Net operating loss and
credit carryforwards
Accrued expenses
and reserves
Stock-based
compensation
Gross deferred
$ 6,901 $ 6,743
7,267
4,531
5,921
3,622
income tax assets
16,286
Less: Valuation allowance (4,936) (4,589)
11,697
Deferred tax assets, net
13,763
18,699
Deferred income tax liabilities:
Other intangibles (24,357) (23,307)
Tax in excess of
book depreciation (24,923) (26,197)
Deferred tax liabilities (49,280) (49,504)
Net deferred
income tax liabilities
$ (35,517) $(37,807)
A valuation allowance is provided when it is more
likely than not that some portion, or all, of the deferred tax
assets will not be realized. The Company has established
valuation allowances primarily for net operating loss
carryforwards in certain states and its United Kingdom,
Brazilian and Canadian subsidiaries. At July 3, 2016 the
Company’s federal net operating loss carryforwards were
$2.2 million, which if not utilized, will begin to expire in
fiscal 2025. The federal net operating loss is subject to
Section 382 limitations of $0.3 million per year. The
Company’s foreign net operating loss carryforward was
$10.5 million, while the state net operating losses were
$5.7 million, before federal benefit, which if not utilized,
will begin to expire in fiscal 2017.
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
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 June 2015, the Company’s Board of Directors autho-
rized an increase of $25 million to its stock repurchase
plan. The Company repurchased a total of $15.2 million
(1,714,550 shares), $8.4 million (1,056,038 shares) and
$8.3 million (1,561,206 shares) during the fiscal years
ended July 3, 2016, June 28, 2015 and June 29, 2014,
respectively, under this program. As of July 3, 2016,
$12.0 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 July 3, 2016, the Company has reserved approxi-
mately 10.5 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
July 3, June 28, June 29,
2016 2015 2014
(in thousands, except per share data)
Stock options
Restricted stock awards
Total
Deferred income tax benefit
Stock-based compensation
$ 432
5,911
6,343
1,987
$ 459
5,503
5,962
2,087
$ 420
4,244
4,664
1,738
expense, net
$4,356 $3,875
$2,926
37
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Stock based compensation expense is recorded
within the following line items of operating expenses:
Years Ended
estimate the fair value of the stock options using the
Black-Scholes option valuation model, were as follows:
Years Ended
July 3, June 28, June 29,
2016 2015 2014
July 3, June 28, June 29,
2016 (1) 2015 2014
(in thousands)
Weighted average fair
Marketing and sales
Technology and
development
General and administrative
Total
$2,306
$1,866
$1,261
493
3,544
392
3,704
$6,343 $5,962
298
3,105
$4,664
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 Options
The weighted average fair value of stock options
on the date of grant, and the assumptions used to
value of options granted
Expected volatility
Expected life (in years)
Risk-free interest rate
Expected dividend yield
n/a
n/a
n/a
n/a
n/a
$4.86
52%
7.3
1.9%
0.0%
$3.16
61%
6.6
1.6%
0.0%
(1) No options were granted during the fiscal year ended July 3, 2016.
The expected volatility of the option is determined
using historical volatilities based on historical stock
prices. The Company estimated the expected life of
options granted based upon the historical weighted
average. The risk-free interest rate is determined using
the yield available for zero-coupon U.S. government
issues with a remaining term equal to the expected life
of the option. The Company has never paid a dividend,
and as such the dividend yield is 0.0%.
The following table summarizes stock option activity during the year ended July 3, 2016:
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Term Intrinsic
Options Price (in years) Value (000s)
Outstanding beginning of period 3,345,146 $ 2.93
Granted –– $ ––
Exercised (1,044,255) $ 3.36
Forfeited/Expired (118,657) $ 7.33
Outstanding end of period 2,182,234 $ 2.49
Options vested or expected to
4.8 $14,236
vest at end of period 2,117,259 $ 2.49 4.8 $13,821
1,261,234 $ 2.45 4.6 $ 8,271
Exercisable at July 3, 2016
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 2016 and the exercise price, multiplied
by the number of in-the-money options) that would have been received by the option holders had all option holders
exercised their options on July 3, 2016. This amount changes based on the fair market value of the Company’s stock.
The total intrinsic value of options exercised for the years ended July 3, 2016, June 28, 2015 and June 29, 2014 was
$4.2 million, $3.6 million, and $0.4 million, respectively.
The following table summarizes information about stock options outstanding at July 3, 2016:
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
$
$
2.22 - 2.44
$ 2.63 - 2.63
$ 2.88 - 10.20
1,001,000
42,000
1,010,000
129,234
2,182,234
4.3
6.3
0.9
4.1
4.8
$ 1.79
$ 2.43
$ 2.63
$ 6.85
$ 2.49
38
626,000
42,000
508,000
85,234
1,261,234
$ 1.79
$ 2.43
$ 2.63
$ 6.23
$ 2.45
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
As of July 3, 2016, the total future compensation cost
related to non-vested options not yet recognized in the
statement of operations was $1.2 million and the
weighted average period over which these awards are
expected to be recognized was 2.9 years.
Restricted Stock
The Company grants shares of Common Stock to
its employees that are subject to restrictions on transfer
and risk of forfeiture until fulfillment of applicable
service conditions and, in certain cases, holding
periods (Restricted Stock).
The following table summarizes the activity of
non-vested restricted stock during the year ended
July 3, 2016:
Weighted
Average
Grant Date
Shares Fair Value
Non-vested – beginning of period 2,342,052 $ 5.62
Granted 1,027,706 $ 9.01
Vested (879,863) $ 5.21
Forfeited (472,826) $ 8.85
Non-vested – end of period 2,017,069 $ 6.78
The fair value of non-vested shares is determined
based on the closing stock price on the grant date. As of
July 3, 2016, there was $7.4 million of total unrecognized
compensation cost related to non-vested restricted stock-
based compensation to be recognized over a weighted-
average period of 2.1 years.
Note 14. Employee Retirement Plans
The Company has a 401(k) Profit Sharing Plan
covering substantially all of its eligible employees.
All employees who have attained the age of 21 are
eligible to participate upon completion of one month of
service. Participants may elect to make voluntary contri-
butions to the 401(k) plan in amounts not exceeding
federal guidelines. On an annual basis the Company,
as determined by its board of directors, may make certain
discretionary contributions. Employees are vested in the
Company’s contributions based upon years of service.
The Company suspended all contributions during fiscal
years 2016, 2015 and 2014.
The Company also has a nonqualified supplemental
deferred compensation plan for certain executives
pursuant to Section 409A of the Internal Revenue Code.
Participants can defer from 1% up to a maximum of 100%
of salary and performance and non-performance based
bonus. The Company will match 50% of the deferrals
made by each participant during the applicable period,
up to a maximum of $2,500. Employees are vested in the
Company’s contributions based upon years of participa-
tion in the plan. Distributions will be made to participants
upon termination of employment or death in a lump sum,
unless installments are selected. As of July 3, 2016 and
June 28, 2015, these plan liabilities, which are included
in the “Other liabilities” line item within the Company’s
consolidated balance sheets, totaled $4.9 million and
$3.1 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” line item within the Company’s consoli-
dated balance Sheets. Company contributions during the
years ended July 3, 2016, June 28, 2015 and June 29,
2014 were less than $0.1 million. Gains (losses) on these
investments, were ($0.1) million, $0.2 million and $0.3
million for the years ended July 3, 2016, June 28, 2015
and June 29, 2014, are included in Other (income)
expense, net, within the Company’s consolidated
statements of income.
39
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 15. Business Segments
The Company’s management reviews the results
of the Company’s operations by the following three
business 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
contribution margin, which includes only the direct
controllable revenue and operating expenses of the
segments. As such, management’s measure of profitabil-
ity for these segments does not include the effect of
corporate overhead (see (a) below), nor does it include
depreciation and amortization, other (income) expense,
net and income taxes, or stock-based compensation
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
July 3, June 28, June 29,
2016 2015 2014
(in thousands)
Net revenues:
1-800-Flowers.com
Consumer Floral
BloomNet Wire
Service
Gourmet Food &
Gift Baskets
Corporate
Intercompany
$ 418,492 $ 422,199
$421,336
85,483
85,968
84,199
670,453
613,953
251,990
1,066
1,020
797
eliminations (2,470) (1,634) (1,977)
Total net revenues
$1,173,024
$1,121,506
$756,345
Operating Income from Continuing Operations
Years Ended
July 3, June 28, June 29,
2016 2015 2014
(in thousands)
Segment Contribution Margin:
1-800-Flowers.com
Consumer Floral $50,773 $ 43,529 $ 40,252
BloomNet Wire
Service
Gourmet Food &
Gift Baskets
Segment Contribution
Margin Subtotal
30,629 29,398 26,715
79,398 74,889 27,122
160,800 147,816 94,089
Corporate (a) (85,134) (81,075) (50,535)
Depreciation and
amortization (32,384) (29,124) (19,848)
Operating income $ 43,282 $ 37,617 $ 23,706
(a) 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.
40
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 16. Discontinued Operations
During the fourth quarter of fiscal 2013, the Company
made the strategic decision to divest the e-commerce
and procurement businesses of its Winetasting Network
subsidiary 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 the e-commerce
and procurement business of The Winetasting Network
as a discontinued operation in fiscal 2014.
Results for discontinued operations are as follows:
Years Ended
July 3, June 28, June 29,
2016 2015 2014
(in thousands, except per share data)
Net revenues from
discontinued
operations $
Loss from
discontinued
operations,
net of tax $
Gain (loss) on
sale of discontinued
operations,
net of tax $
Income (loss) from
–– $ –– $1,669
–– $ –– $ (86)
–– $ –– $ 815
Other Commitments
discontinued
operations $ –– $ –– $ 729
Note 17. Commitments and Contingencies
Leases
The Company currently leases office, store facilities,
and equipment under various leases through fiscal 2030.
As these leases expire, it can be expected that in the
normal course of business they will be renewed or
replaced. Most lease agreements contain renewal
options and rent escalation clauses and require the
Company to pay real estate taxes, insurance, common
area maintenance and operating expenses applicable
to the leased properties. The Company has also entered
into leases that are on a month-to-month basis. These
leases are classified as either capital leases, operating
leases or subleases, as appropriate.
As of July 3, 2016 future minimum rental payments un-
der non-cancelable operating leases with initial terms of
one year or more consist of the following:
Operating
Leases
(in thousands)
2017
2018
2019
2020
2021
Thereafter
Total minimum lease payments
$ 19,671
16,990
15,093
11,611
9,727
48,781
$121,873
At July 3, 2016, the total future minimum sublease
rentals under non-cancelable operating sub-leases for
land and buildings were $2.3 million. Rent expense was
approximately $33.4 million, $28.3 million and $17.7
million for the years ended July 3, 2016, June 28, 2015
and June 29, 2014, respectively.
The Company’s purchase commitments consist
primarily of inventory, equipment and technology (hard-
ware and software) purchase orders made in the ordinary
course of business, most of which have terms less than
one year. As of July 3, 2016, the Company had fixed and
determinable off-balance sheet purchase commitments
with remaining terms in excess of one year of approxi-
mately $3.8 million, primarily related to the Company’s
technology infrastructure.
The Company had approximately $2.5 million in
unused stand-by letters of credit as of July 3, 2016.
Litigation
From time to time, the Company is subject to legal
proceedings and claims arising in the ordinary course
of business:
Edible Arrangements:
On November 20, 2014, a complaint was filed in the
United States District Court for the District of Connecticut
by Edible Arrangements LLC and Edible Arrangements
International, LLC, alleging that the Company’s use of the
terms “Fruit Bouquets,” “Edible,” “Bouquet,” “Edible Fruit
41
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Arrangements,” Edible Arrangements,” and “DoFruit” and
its use of a six petal pineapple slice design in connection
with marketing and selling edible fruit arrangements
constitutes trademark infringement, false designation of
origin, dilution, and contributory infringement under the
federal Lanham Act, 29 USC § 1114 and 1125(a),
common law unfair competition, and a violation of the
Connecticut Unfair Trade Practices Act, Connecticut
General Statutes § 42-110b (a). The Complaint alleged
Edible Arrangements has been damaged in the amount
of $97.4 million. The Complaint requested a declaratory
judgment in favor of Edible Arrangements, an injunction
against the Company’s use of the terms and design, an
accounting and payment of the Company’s profits from
its sale of edible fruit arrangements, a trebling of the
Company’s profits from such sales or of any damages
sustained by Edible Arrangements, punitive damages,
and attorneys’ fees. On November 24, 2014, the Com-
plaint was amended to add a breach of contract claim for
use of these terms and the design, based on a contract
that had been entered by one of the Company’s subsid-
iaries prior to its acquisition by the Company. On January
29, 2015, the Plaintiffs amended the Complaint to add
one of the Company’s subsidiaries and to claim its
damages were $101.4 million.
The Company filed an Answer and a Counterclaim
on February 27, 2015. The Answer asserted substantial
defenses, including fair use by the Company of generic
and descriptive terms, as expressly permitted under the
Lanham Act, invalidity of Edible Arrangements’ trademark
registrations on grounds of fraud and trademark misuse,
lack of exclusive rights on the part of Edible Arrange-
ments, functionality of the claimed design mark, acquies-
cence, estoppel, and Edible Arrangements’ use of the
claimed trademarks in violation of the antitrust laws.
The Counterclaim sought a declaratory judgment of
lack of infringement and invalidity of claimed marks,
cancellation of Edible Arrangements’ registrations due
to its fraud and misuse, genericism, and lack of second-
ary meaning as to any terms deemed descriptive, and
damages in an amount to be determined for violation of
the antitrust provisions of the federal Sherman Act and
the Connecticut Unfair Trade Practices Act.
Following extensive discovery, the parties engaged
in mediation and reached an agreement in principle to
resolve all claims on June 30, 2016. The parties entered
a Confidential Settlement Agreement on July 22, 2016,
pursuant to which, among other things, the Company
paid $1.5 million to Edible Arrangements and the
Company agreed not to use “Edible”, “Edible Arrange-
ments” or “Do Fruit’ in its marketing, except that the
Company may refer to “Edible Arrangements” to comment
on or compare the Company’s products to those of
“Edible Arrangements”. The Company maintains its rights
to market its products as “Fruit Bouquets” and “Bouquets,”
and to the continued use of its branding of “Fruit
Bouquets.com” and Fruit Bouquets by 1800Flowers.com.
In addition, all claims and counterclaims in the case were
dismissed with prejudice. The Company recorded the
settlement paid to Edible Arrangements in the “General
and administrative expense” line item in the consolidated
statements of income for the year ended July 3, 2016.
42
Note 18. Fire at the Fannie May Warehouse
and Distribution Facility
On November 27, 2014, a fire occurred at the
Company’s Maple Heights, Ohio warehouse and distribu-
tion facility. While the fire did not cause any injuries, the
building was severely damaged, rendering it inoperable
for the key calendar 2014 holiday season, and all Fannie
May and Harry London confections in the facility were
destroyed. As a result, the Company had limited supplies
of its Fannie May Fine Chocolates and Harry London
Chocolates products available in its retail stores as well
as for its ecommerce and wholesale channels during the
2014 holiday season. While the Company implemented
contingency plans to increase production for Fannie May
Fine Chocolates and Harry London Chocolates products
at its production facility in Canton, Ohio and to shift
warehousing and distribution operations to alternate
Company facilities, product availability was severely
limited, impacting revenue and earnings during the fiscal
second and third quarters of fiscal 2015.
The following table reflects the costs related to the fire
and the insurance recovery and associated gain as of
July 3, 2016:
Fire-related
Insurance Recovery
(in thousands)
Loss on inventory
Other fire related costs
Total fire related costs
$ 29,587
5,802
35,389
Less: fire related insurance recoveries (55,000)
$(19,611)
Fire related gain
During the three months ended September 27, 2015,
the Company and its insurance carrier reached final
agreement, and during the three months ended Decem-
ber 27, 2015, the Company received all remaining
proceeds from its Fannie May fire claim. The agreement,
in the amount of $55.0 million, provided for: (i) recovery of
raw materials and work-in-process at replacement cost,
and finished goods at selling price, less costs to complete
the sale and normal discounts and other charges, as well
as (ii) other incremental fire-related costs. The cost of
inventory lost in the fire was approximately $29.6 million,
while other fire-related costs amounted to approximately
$5.8 million, including incremental contracted lease and
cold storage fees which were incurred by the Company
until the move back into its leased facility once the
landlord completed repairs, during the Company’s third
quarter of fiscal 2016. The resulting gain of $19.6 million
is included in “Other (income) expense, net” in the
consolidated statements of income for the year ended
July 3, 2016.
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 reason-
able detail, accurately and fairly reflect the transactions
and dispositions of the assets of the Company;
(cid:127) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with 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 prevention
or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effective-
ness to future periods are subject to the risk that controls
may become inadequate because of changes in condi-
tions, or that the degree of compliance with the policies
or procedures may deteriorate.
Management, including the Company’s Chief
Executive Officer and Chief Financial Officer, assessed
the effectiveness of the Company’s internal control over
financial reporting based on criteria established in
Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework), (the COSO criteria).
Based on this assessment, management concluded
that the Company’s internal control over financial
reporting was effective as of July 3, 2016.
The Company’s independent registered public
accounting firm, BDO USA, LLP, audited the effectiveness
of the Company’s internal control over financial reporting
as of July 3, 2016. BDO USA, LLP’s report on the effec-
tiveness of the Company’s internal control over financial
reporting as of July 3, 2016 is set forth below.
43
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
1-800-Flowers.com, Inc.
Carle Place, NY
We have audited 1-800-Flowers.com, Inc. and
subsidiaries’ (the “Company”) internal control over
financial reporting as of July 3, 2016, based on criteria
established in Internal Control – Integrated Framework
(2013) 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
respects. 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 company
are being made only in accordance with authorizations of
management and directors of the company; and (3)
provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, 1-800-Flowers.com, Inc. and subsidiar-
ies maintained, in all material respects, effective internal
control over financial reporting as of July 3, 2016, based
on the COSO criteria.
We also have audited, in accordance with the stan-
dards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of 1-800-
Flowers.com, Inc. and subsidiaries as of July 3, 2016 and
June 28, 2015, and the related consolidated statements of
income, comprehensive income, stockholders’ equity, and
cash flows for each of the three years in the period ended
July 3, 2016, and our report dated September 16, 2016
expressed an unqualified opinion thereon.
BDO USA, LLP
Melville, New York
September 16, 2016
44
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
1-800-FLOWERS.COM, Inc. and Subsidiaries
Carle Place, NY
We have audited the accompanying consolidated
balance sheets of 1-800-FLOWERS.COM, Inc. and
Subsidiaries as of July 3, 2016 and June 28, 2015 and
the related consolidated statements of income, compre-
hensive income, stockholders’ equity, and cash flows for
each of the three years in the period ended July 3, 2016.
These consolidated financial statements are the respon-
sibility of the Company’s management. Our responsibility
is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assur-
ance about whether the consolidated financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial
statements, assessing the accounting principles used
and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of 1-800-FLOWERS.COM, Inc. and
Subsidiaries at July 3, 2016 and June 28, 2015, and the
results of their operations and their cash flows for each
of the three years in the period ended July 3, 2016, in
conformity with accounting principles generally accepted
in the United States of America.
We also have audited, in accordance with the
standards of the Public Company Accounting Oversight
Board (United States), 1-800-FLOWERS.COM, Inc. and
Subsidiaries internal control over financial reporting as
of July 3, 2016, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway
Commission (COSO) and our report dated September 16,
2016 expressed an unqualified opinion thereon.
BDO USA, LLP
Melville, New York
September 16, 2016
45
Market for Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Market Information
1-800-FLOWERS.COM’s Class A common stock
trades on The NASDAQ Global Select Market under the
ticker symbol “FLWS.” There is no established public
trading market for the Company’s Class B common stock.
The following table sets forth the reported high and low
sales prices for the Company’s Class A common stock for
each of the fiscal quarters during the fiscal years ended
July 3, 2016 and June 28, 2015.
High Low
Year ended July 3, 2016
June 29, 2015 – September 27, 2015
$10.90
September 28, 2015 – December 27, 2015 $10.88
$ 8.42
December 28, 2015 – March 27, 2016
$ 8.38
March 28, 2015 – July 3, 2016
Year ended June 28, 2015
June 30, 2014 – September 28, 2014
$ 7.49
September 29, 2014 – December 28, 2014 $ 9.31
$13.46
December 29, 2014 – March 29, 2015
$13.19
March 30, 2015 – June 28, 2015
$ 7.92
$ 6.80
$ 6.11
$ 6.74
$ 4.96
$ 7.12
$ 7.05
$ 9.36
stock upon its transfer, with limited exceptions. During
fiscal 2016, 4,047,040 shares of Class B common stock
were converted into shares of Class A common stock.
Holders
As of September 1, 2016, there were approximately
255 stockholders of record of the Company’s Class A
common stock, although the Company believes that there
is a significantly larger number of beneficial owners. As of
September 1, 2016, there were approximately 8 stockhold-
ers 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
June 2015, the Company’s Board of Directors authorized
an increase of $25 million to its stock repurchase plan.
The Company repurchased a total of $15.2 million
(1,714,550 shares), $8.4 million (1,056,038 shares) and
$8.3 million (1,561,206 shares) during the fiscal years
ended July 3, 2016, June 28, 2015 and June 29, 2014,
respectively, under this program. As of July 3, 2016,
$12.0 million remains authorized under the plan.
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
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)
the Company’s purchase of common stock during the
fiscal year ended July 3, 2016, which includes the period
June 29, 2015 through July 3, 2016:
The following table sets forth, for the months indicated,
(in thousands, except average price paid per share)
06/29/15 - 07/26/15
07/27/15 - 08/30/15
08/31/15 - 09/27/15
09/28/15 - 10/25/15
10/26/15 - 11/29/15
11/30/15 - 12/27/15
12/28/15 - 01/31/16
02/01/16 - 02/28/16
02/29/16 - 03/27/16
03/28/16 - 04/24/16
04/25/16 - 05/22/16
05/23/16 - 07/03/16
Total
69.8
125.0
320.6
137.4
454.5
89.6
90.0
145.0
––
47.7
89.9
145.0
1,714.6
$10.40
$9.86
$8.56
$9.50
$9.87
$7.95
$6.92
$7.56
––
$7.63
$7.65
$8.30
69.8
125.0
320.6
137.4
454.5
89.5
90.0
145.0
––
47.7
89.9
145.0
$8.85
1,714.6
(1) Average price per share excludes commissions and other transaction fees.
46
$27,273
$26,543
$25,307
$22,554
$21,244
$16,753
$16,039
$15,413
$14,313
$14,313
$13,947
$13,256
$12,048
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 6/30/11 in stock or index, including reinvestment of dividends. Fiscal year ending June 30.
47
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 repre-
sent the Company’s current expectations or beliefs concern-
ing future events and can generally be identified by the use
of statements that include words such as “estimate,” “expects,”
“project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,” “likely,”
“will,” or similar words or phrases. These forward-looking
statements are subject to risks, uncertainties and other fac-
tors, 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 state-
ments, including, among others: the Company’s ability to
achieve its guidance for revenue, EBITDA and EPS; its ability
to manage the significant seasonality of its business; its abil-
ity to integrate the operations of acquired companies, includ-
ing 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 under-
takes no obligation to publicly update any of the forward-
looking statements, whether as a result of new information,
future events or otherwise, made in this annual report or in
any of its SEC filings except as may be otherwise stated by
the Company. For a more detailed description of these and
other risk factors, 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
One Old Country Road
Suite 500
Carle Place, NY 11514
www.1800flowers.com
(516) 237-6000