2019 ANNUAL REPORT
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D R I V I N G G R O W T H ,
N
B U I L D I N G M O M E N T U M
O U R V I S I O N
To Inspire More Human
Expression, Connection
and Celebration
[
]
O U R M I S S I O N
[
Deliver Smiles!
]
1-800-FLOWERS.COM, Inc. is a leading provider of gifts designed to inspire more human expression,
connection and celebration. The Company’s Celebrations Ecosystem features our all-star family of brands,
including: 1-800-Flowers.com®, 1-800-Baskets.com®, Cheryl’s Cookies®, Harry & David®, Shari’s Berries®,
FruitBouquets.com®, Moose Munch®, The Popcorn Factory®, Wolferman’s BakerySM, Personalization Universe®,
Simply Chocolate®, and Goodsey®. We also offer top-quality steaks and chops from Stock Yards®. Through the
Celebrations Passport® loyalty program, which provides members with free standard shipping and no service
charge across our portfolio of brands, 1-800-FLOWERS.COM, Inc. strives to deepen relationships with customers.
The Company also operates BloomNet®, an international floral wire service providing a broad-range of
products and services designed to help professional florists grow their businesses profitably; NapcoSM,
a resource for floral gifts and seasonal décor; and DesignPac Gifts, LLC, a manufacturer of gift baskets and
towers. 1-800-FLOWERS.COM, Inc. was recognized as the 2019 Mid-Market Company of the Year by CEO
Connection. In addition, Harry & David was named to the Internet Retailer 2019 “The Hot 100” list. Shares in
1-800-FLOWERS.COM, Inc. are traded on the NASDAQ Global Select Market, ticker symbol: FLWS.
F I N A N C I A L H I G H L I G H T S
(From Continuing Operations)
JUNE 30,
2019
JULY 1,
2018
JULY 2,
2017
JULY 3,
2016
JUNE 28,
2015
Total Net Revenues
Gross Profit Margin
Operating Expense Ratio
Adjusted EBITDA(1)
Adjusted EPS
$1,248.6
(in millions, except percentages and per share data)
$1,193.6
43.6%
39.7%
42.1%
38.5%
$ 78.9(2) $ 87.2(4) $ 85.7(6) $ 80.7(8)
$ 82.1
$ 0.52 $ 0.44(3) $ 0.43(5) $ 0.43(7) $ 0.34(9)
$1,173.0
44.1%
40.4%
$1,151.9
42.5%
38.9%
$1,121.5
43.4%
40.1%
(1) Excludes stock-based compensation and non-qualified supplementary retirement plan investment appreciation and depreciation.
(2) Adjusted EBITDA for fiscal 2018 excludes the items included in footnote (1), as well as litigation settlement costs and severance.
(3) Adjusted EPS for fiscal 2018 excludes litigation costs and severance as well as the impact of the re-valuation of the Company’s deferred tax liability of $12.2 million, or $0.18 per diluted-
share, resulting from the Tax Cut and Jobs Act. Fiscal 2018 EPS as reported was $0.61.
(4) Adjusted EBITDA for fiscal 2017 excludes the items included in footnote (1), as well as Harry & David severance costs.
(5) Adjusted EPS for fiscal 2017 excludes Harry & David severance charges and the gain on the sale of Fannie May Confections Brands. Fiscal year 2017 EPS as reported was $0.65.
(6) Adjusted EBITDA for fiscal 2016 excludes the items included in footnote (1), as well as litigation settlement costs and integration costs, including severance, associated with Harry & David
and the rightsizing of Fannie May.
(7) Adjusted EPS for fiscal 2016 excludes the gain from insurance recovery on the Fannie May warehouse fire, loss on the sale of iFlorist, the impairment of foreign equity method investment,
Harry & David integration costs, litigation settlement costs, as well as severance associated with Harry & David and the rightsizing of Fannie May. Fiscal year 2016 EPS as reported was $0.55.
(8) Adjusted EBITDA for fiscal 2015 excludes the items in footnote (1), and includes Harry & David fiscal 2015 first quarter loss in order to present comparable full-year results and excludes
one-time costs associated with the acquisition and integration of Harry & David and the impact of the Fannie May warehouse fire in November 2014.
(9) Adjusted EPS for fiscal 2015 includes Harry & David fiscal 2015 first quarter loss in order to present comparable full-year results and excludes 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 year 2015 EPS, as reported, was $0.30.
TOTA L R E V E N U E S
(From Continuing Operations In Millions)
Adjusted EBITDA(1)
$1,249
$1,194
$1,173
$1,152
$1,122
$87.24
$85.76
$80.78
$82.1
$78.92
FY15
FY16
FY17
FY18
FY19
F I S C A L 2019 AC H I E V E M E N T S
• Grew Total Revenues 8.4 percent to $1.25 billion with strong
growth across all three business segments
• Grew Adjusted EBITDA to $82.1 million
• Generated Free Cash Flow of $45.5 million
• Grew Enterprise Customer File more than 10 percent
F Y 19 % R E V E N U E S
by Segment
Gourmet Foods
& Gift Baskets
52%
Consumer Floral
40%
8%
BloomNet® Wire Service
by Fiscal Quarter
April – June
(Fiscal 4th Quarter)
July – September
(Fiscal 1st Quarter)
21%
13%
46%
20%
October – December
(Fiscal 2nd Quarter)
January – March
(Fiscal 3rd Quarter)
F I N A N C I A L R E P O R T I N S E R T
See inside rear cover pocket
TO O U R S H A R E H O L D E R S
The pace of change in the world today can be dizzying at times.
New technological advancements offer ever increasing
ways for people to communicate, yet somehow people
seem to be less connected than ever. Our vision as a
company is to change that – to leverage innovative
technology and the relationships we have with our mil-
lions of customers to inspire more human expression,
connection and celebration. Toward this goal, we are
intensely focused on continually evolving our Celebrations
Ecosystem by expanding our product offerings, adding new
and exciting brands and creating engagement and experiential
opportunities that will help deliver smiles.
As we drive toward this goal, our results for fiscal 2019 were very
strong. We entered the year with a plan to invest in our lead brands
and drive accelerated revenue growth to between five and seven
percent and we exceeded our goals, with total revenues increasing
more than eight percent to $1.25 billion. We also exceeded our goals
for bottom-line results, with solid growth in Adjusted EBITDA, EPS
and Free Cash Flow for the year. This reflects a combination of factors,
including the strength of our all-star family of brands, our focus on
innovative marketing and merchandising programs and our ability
to leverage our unique business platform.
STRONG REVENUE GROWTH ACROSS ALL THREE
BUSINESS SEGMENTS
In our Gourmet Foods and Gift Baskets segment, we invested in digital
marketing programs for Harry & David to build on the strong growth
momentum we saw in fiscal 2018 – particularly in everyday gifting. As
a result, Harry & David’s ecommerce business grew more than nine
percent for the year, and every-day gifting occasions grew even faster.
In our Consumer Floral segment, we invested in our 1-800-Flowers.com
brand to take advantage of favorable market conditions and accelerate
revenue growth. Throughout the year, the 1-800-Flowers.com brand
further extended its market leadership position, growing revenues
nine percent by focusing on our unparalleled brand strength, truly
original product designs and dedication to providing exemplary
customer service.
We also continued to invest in BloomNet – to capture more order
volume and expand our offering of products and services designed
to help professional florists grow their businesses profitably. This
focus enabled BloomNet to grow its revenues nearly 15 percent for
the year, passing the $100 million milestone and gaining significant
market share.
FOCUS ON INNOVATION
Our results for the year – across all our business segments – reflected
our continued focus on innovation and execution in:
n Our digital marketing programs, including our mobile-first strategy;
n Our merchandising programs that emphasize new and
truly original product development; and
n Our adoption of innovative technologies – such as
Progressive Web Application (PWA), voice recognition
and chat bots – that help enhance our number one
product: the customer experience.
In addition to strong revenue growth, this focus, along
with the investments we made during the year, helped
drive significant growth in our customer file. For the year,
new customer growth across the enterprise was up more than ten
percent, reflecting double-digit increases for both the Harry & David
and the 1-800-Flowers.com brands.
We also drove solid, double-digit growth in membership in our
Celebrations Passport program and in multi-brand customers –
which we define as customers who buy from more than one of our
brands within the year. As we have noted in the past, both multi-
brand customers and Celebrations Passport members represent
our best performing customer cohorts – with the highest purchase
frequency, retention and lifetime value metrics in our customer file.
Importantly, we saw these customer growth trends continuing and
gaining momentum throughout the fiscal year and continuing as
we entered fiscal 2020.
KEY STRATEGIC INITIATIVES IN FISCAL 2019
In terms of technology innovations, during the year:
n We expanded our category-leading position in Conversational
Commerce, where we are now one of the few companies that has
applications running on all five of the leading platforms, including:
Apple Business Chat, Samsung Bixby, Facebook Messenger,
Google Assistant and Amazon Alexa;
n We continued to roll out PWA technology across our mobile
platforms. This initiative was completed in the first quarter
of fiscal 2020 and customers are already experiencing
significantly increased site speeds and an enhanced
customer experience;
n We expanded our integration of SmartGift – a highly personalized,
experiential gifting feature that allows customers to notify their
recipient via text, email or any messaging platform that a gift is
on the way – and then gives the recipient the option of modifying
their delivery preference, further involving them in the total
gifting experience;
n We launched an interactive, telephonic virtual assistant, integrating
artificial intelligence and human understanding to reduce average
time on hold and increase our already high customer satisfaction
metrics; and
n We continued to invest in new technology innovations designed
to help our customers express themselves with the launch of
SmartMessage – an augmented-reality, gift-messaging feature
available on our iOS mobile app.
FOCUS ON TRULY ORIGINAL PRODUCT DESIGNS
On the merchandising front, we continued to focus on developing
truly original gifts at both entry level and luxury price points. Some
of the customer-favorite hits during the year included:
n The expansion of our Unicorn line – based on the success of
our Enchanting Unicorn floral arrangement – including Magical
Unicorn Truffle Cake Pops and the Dazzling Unicorn Fruit Bouquet;
n Our 1-800-Flowers.com succulents collection – popular with
millennials;
n New flavor profiles, including the Cheryl’s Cookies Chocolate-Chip
Brookie (a unique brownie-cookie combo) and The Popcorn Factory’s
Cookies & Cream and Texas Toast flavors; and
n The continued expansion of the Harry & David Gourmet line,
including charcuterie platters, fully prepared meals and award-
winning Harry & David wines, that customers have embraced
for both gifting and home entertaining.
We also introduced our enterprise-wide gifts that give back
collection in support of our Smile Farms philanthropic initiative,
which is focused on creating meaningful employment opportunities
for individuals with developmental disabilities – an organization
that we are proud to support as our signature philanthropic partner.
EXPANDING OUR CELEBRATIONS ECOSYSTEM
Further illustrating our focus on expanding our Celebrations
Ecosystem was the recent acquisition of the Shari’s Berries brand.
Shari’s Berries has strong customer awareness as a leading provider
of dipped berries and other gourmet treats and we see it as an
excellent fit in our all-star family of brands. It is worth noting that
we had the Shari’s Berries brand up on our multi-brand platform
– and helping customers deliver smiles – literally within hours of
having closed the acquisition in August, 2019. This is a testament
to our culture of teamwork and our focus on execution.
CONTINUING OUR MOMENTUM INTO FISCAL 2020
As we enter the new fiscal year, we expect to continue the momen-
tum we have in our revenue growth and accelerate our bottom-line
growth. Our financial guidance for the fiscal year calls for total
consolidated revenue growth of eight-to-nine percent, including
approximately six-to-seven percent organic revenue growth
combined with anticipated contributions from the acquisition of
the Shari’s Berries brand. On the bottom line, we expect Adjusted
EBITDA and EPS to grow in a range of eight-to-ten percent and we
expect to generate Free Cash Flow for the year of approximately
$45 million. We also continue to target achieving Adjusted EBITDA
of approximately $100 million in fiscal 2021.
Toward these goals, we got off to a strong start in our fiscal 2020
first quarter, with revenue growth of more than ten percent and
significant improvements in Adjusted EBITDA and EPS, compared
with the prior year period. These results reflect the benefits from
the investments that we made in fiscal 2019 – and will continue to
make in fiscal 2020 – in our key Harry & David and 1-800-Flowers.com
brands, as well as in our BloomNet business. In addition, we have
initiatives across all our business segments to help drive top and
bottom-line growth. In merchandising, during the first quarter,
we launched:
n The Plant Shop, within the 1-800-Flowers.com brand, building on
the strong growth that we are seeing in plants, for both gifting and
self-consumption. The Plant Shop features a collection of on-trend,
customer favorites of house plants and an expanded selection
of succulents. We are quickly becoming an authority in this
fast-growing category, a favorite of millennial customers.
n The Cards With Pop line from The Popcorn Factory – specially-
designed, envelope-shaped cards available with uniquely curated
sentiments printed on the outside and gourmet popcorn on the
inside. Cards With Pop are designed for customers who wish to
express their thoughts through witty and relevant sentiments for
everyday occasions, cultural moments and holidays, all for $9.99,
shipping included; and
n We launched the repositioning of our Wolferman’s brand as
Wolferman’s Bakery, featuring an expansive assortment of excep-
tional baked goods perfect for entertaining, self-consumption and
gifting. The new positioning reflects how Wolferman’s has evolved
from a brand best-known for its super-thick English muffins to a full
online bakery offering sweet and savory items baked from scratch
daily. As a result of its repositioning, we are experiencing a signifi-
cant increase in demand for these exciting products.
In terms of innovations to enhance the customer experience:
n We have completed the roll out of PWA technology across our
brands, significantly increasing site speeds for our customers on
their mobile devices;
n We launched our new Magic Link capability, enhancing our
customer’s sign-in experience by allowing them to log in to their
accounts with a single click, even if they don’t remember their
username and password; and
n We deployed new 3D capabilities for a collection of top products
on the 1-800-Flowers.com site, enabling customers to not only
preview our products in three dimensions on both desktop and
mobile, but also to see what their gifts will look like on a table or
in a room via augmented reality on their mobile devices.
Looking ahead, we are excited by the many opportunities we see
to further expand our Celebrations Ecosystem and provide our
customers with the innovative products and services that inspire
more human expression, connection and celebration.
I would like to take this opportunity to thank all our associates across
the Company for their unwavering focus on our customers and en-
hancing the experience we provide for them; for their hard work and
dedication to constantly innovating; and for their passion in helping
our customers deliver smiles. I would also like to thank our suppliers
and vendors, as well as our shareholders, for their continued support.
Chris McCann, President and CEO
JANUARY
S U N D AY
M O N D AY
T U E S D AY
1-800-FLOWERS.COM, Inc. is the leading
provider of gifts designed to inspire
more human expression, connection
and celebration. Our Celebrations
Ecosystem features an all-star family of
brands with products across a broad
array of categories, including gourmet
foods, gift baskets and floral gifts for
every occasion, making us a one-stop
destination for all our customers’ gifting
needs. Our brands, many of which are
iconic names beloved by millions of
people, include 1-800-Flowers.com®,
Harry & David®, 1-800-Baskets.com®,
FruitBouquets.com®, Cheryl’s Cookies®,
The Popcorn Factory®, Moose Munch®
and Wolferman’s BakerySM. Solidifying
our market leadership in the gifting
industry and helping to drive our
growth is our commitment to constantly
expanding our product offerings and
broadening the ways we assist our
customers in delivering smiles to more
recipients for more gifting occasions
throughout the year.
5
12
19
26
6
13
7
14
20
Martin Luther King Jr.’s
Birthday (observed)
21
27
28
2020[] W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
1
New Year’s Day
8
15
22
29
2
9
16
23
30
3
10
17
24
31
4
11
18
25
FEBRUARY
S U N D AY
M O N D AY
T U E S D AY
February is a month devoted to love and
our customers have told us how much
they love the 1-800-FLOWERS.COM, Inc.
Celebrations Passport® loyalty program.
The enterprise-wide program offers
free standard shipping and no service
charge across our family of brands
– providing exceptional value on
thoughtful gifts such as Magnificent
Roses®, Shari’s Berries®, delectable
sweets from Simply Chocolate® and
much more for Valentine’s Day and other
occasions all year long. Importantly,
through programs like Celebrations
Passport we’re seeing that customer
behavior profiles are further enhanced,
underscored by increased purchase
frequency, greater retention and higher
life-time value metrics. Our loyalty
members also show a high propensity
to become multi-brand customers, who
are our best customers.
2
Groundhog Day
3
10
4
11
9
16
23
17
Presidents Day
18
24
25
THURSDAYWEDNESDAYSATURDAYFRIDAYSUNDAYTUESDAYMONDAY2020[] W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
1
8
7
14
Valentine’s Day
15
21
28
22
29
5
12
19
26
6
13
20
27
THURSDAYWEDNESDAYSATURDAYFRIDAYSUNDAYTUESDAYMONDAY MARCH
As the floral industry’s leading wire ser-
vice innovator, BloomNet® provides an
unmatched breadth of programs and
products designed to help thousands
of professional florists optimize their
profitability and grow their businesses.
Among the expertise BloomNet offers
is a comprehensive digital marketing
services program that can help florists
more effectively attract new customers
through online ad campaigns, engage
customers via social media, and in-
crease their search ranking with Search
Engine Optimization (SEO). Another key
advantage for florists is the BloomNet
digital directory, which highlights
unique floral arrangements and helps
drive incoming orders from sending
florists. In addition, the Floriology®
Institute powered by BloomNet is the
floral industry’s premier education
center. It provides world-class design
instruction, complemented by Floriology®
Magazine, which delivers ongoing floral
design inspiration, plus strategies for
increasing florists’ sales and revenues.
1
8
15
22
29
S U N D AY
M O N D AY
T U E S D AY
2
9
3
10
16
17
Saint Patrick’s Day
23
30
24
31
2020[] 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
6
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7
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20
First Day of Spring
21
National Flower Day
27
28
Saint Patrick’s Day
APRIL
At 1-800-FLOWERS.COM, Inc., embrac-
ing the latest technological innova-
tions to enhance how we engage with
customers is a key component of our
growth strategy. During fiscal 2019,
we expanded our category-leading
position in conversational commerce,
becoming one of the first retailers with
user-friendly applications on all five
of the leading conversational plat-
forms: Apple Business Chat; Facebook
Messenger Bots; Amazon Alexa; Google
Assistant; and Samsung Bixby. We also
continued to roll out Progressive Web
App (PWA) technology across our mobile
platforms, significantly increasing site
speeds and optimization across our
brands. The same dedication to contin-
uous technology innovation extends to
our product offerings, where we con-
stantly launch delicious new offerings
throughout our Gourmet Foods and
Gift Baskets segment, as well as truly
original floral arrangements from our
1-800-Flowers.com® brand.
S U N D AY
M O N D AY
T U E S D AY
5
6
12
Easter
13
7
14
19
26
20
Administrative Professionals’
Week Begins
21
27
28
THURSDAYWEDNESDAYSATURDAYFRIDAYSUNDAYTUESDAYMONDAY2020[] W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
1
April Fools Day
8
Passover Begins at Sunset
2
9
15
16
3
10
17
22
Administrative Professionals’ Day
23
National English Muffin Day
24
29
30
4
11
18
25
THURSDAYWEDNESDAYSATURDAYFRIDAYSUNDAYTUESDAYMONDAY MAY
When it comes to opportunities for
people to express their feelings
through thoughtful gifting, perhaps
no other occasion can match Mother’s
Day. 1-800-FLOWERS.COM, Inc. offers
an unparalleled selection of gifts
that convey just the right sentiments
for Mom’s big day. Whether it’s a
beautiful floral arrangement or vibrant
blooming plant from 1-800-Flowers.com®,
a spectacular gift basket from
1-800-Baskets.com®, or scrumptious
gourmet foods from Harry & David®,
Cheryl’s Cookies®, The Popcorn Factory®
and Simply Chocolate®, we are the
source our customers depend on for
gifts designed to touch hearts and
stir emotions. Further extending the
gift-giving choices for our customers
are unique products from Goodsey®
along with personalized gifts
available from our brands, including
Personalization Universe®.
S U N D AY
M O N D AY
T U E S D AY
3
4
5
Cinco dé Mayo
12
19
10
Mother’s Day
11
18
17
24
25
Memorial Day (observed)
26
31
2020[] W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
1
8
Bring Your Mom to Work Day
15
22
29
2
9
16
23
30
6
13
20
27
7
14
21
28
JUNE
1-800-FLOWERS.COM, Inc. is always
exploring and developing new and
innovative gift products, continually
providing gift-givers and recipients
with new and exciting ways to cel-
ebrate every occasion. During fiscal
2019, The Popcorn Factory® introduced
several distinctive flavor profiles,
including such taste-tempting choices
as Cookies & Cream and Texas Toast –
ideal for Father’s Day. Additionally, the
brand has been expanding its offering
of single-serve popcorn packages,
targeting the growing self-consump-
tion trend. Other outstanding ideas for
Dad’s gift list include mouthwatering
steaks, chops, burgers and seafood
from Stock Yards®, superb wine and
flavorful cuisine from Harry & David
Gourmet®, tasty treats from Cheryl’s
Cookies®, Shari’s Berries®, Wolferman’s
BakerySM and Moose Munch®, plus
freshly-carved fruit arrangements from
FruitBouquets.com®.
S U N D AY
M O N D AY
T U E S D AY
1
8
7
14
Flag Day
15
21
Father’s Day
22
28
29
2
9
16
23
30
THURSDAYWEDNESDAYSATURDAYFRIDAYSUNDAYTUESDAYMONDAY2020[] W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
3
10
17
24
4
11
18
25
5
12
19
6
13
20
First Day of Summer
26
27
THURSDAYWEDNESDAYSATURDAYFRIDAYSUNDAYTUESDAYMONDAY JULY
In fiscal 2019, 1-800-FLOWERS.COM, Inc.
grew its customer file by more than ten
percent, reflecting double-digit increases
for both the Harry & David® and
1-800-Flowers.com® brands. Helping
spur that growth is our relentless focus
on customer satisfaction complemented
by continual enhancements to how
customers are able to do business with
us. Our online Customer Service Hub
offers self-service and live chat support
for order tracking, enabling shoppers
across our family of brands to conve-
niently access delivery windows that
enable them to easily and rapidly modify
their order, schedule specific hours
for order arrival, and make changes
to delivery addresses and dates.
S U N D AY
M O N D AY
T U E S D AY
5
12
19
6
13
20
26
Parents’ Day
27
7
14
Bastille Day
21
28
2020[] W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
Bastille Day
1
8
15
22
29
2
9
16
23
30
3
10
17
24
31
4
Independence Day
11
18
25
AUGUST
S U N D AY
M O N D AY
T U E S D AY
At 1-800-FLOWERS.COM, Inc., our
growth strategies include placing
a strong focus on everyday gifting
through cross-brand marketing and
merchandising. To optimize those
strategies, we are leveraging the market
dominance of Harry & David® and
1-800-Flowers.com® and extending
that leadership to all our other brands,
enabling us to solve more of our
customers’ everyday gifting and
celebratory needs year-round such
as Birthdays, Anniversaries, Sympathy,
Thank You, Get Well, New Baby and
“Just Because.” Additionally, in our
Gourmet Foods and Gift Baskets
segment, we are creating product
collections specifically targeted for
everyday occasions and revenues are
subsequently growing in double-digits
for those occasions.
2
National Friendship
Week Begins
3
9
16
23
10
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24
4
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THURSDAYWEDNESDAYSATURDAYFRIDAYSUNDAYTUESDAYMONDAY2020[] W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
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27
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1
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THURSDAYWEDNESDAYSATURDAYFRIDAYSUNDAYTUESDAYMONDAY SEPTEMBER
There is no substitute for quality, and
the highest quality epitomizes what
our customers and their lucky recip-
ients enjoy with Royal Riviera® Pears
and Oregold® Peaches from Harry &
David®. Harvesting of these cherished
gifts takes place toward the end of each
summer among thousands of trees in
the sprawling Harry & David orchards
located in Medford, Oregon. Meticulous
care is taken by our highly experienced
agricultural experts to assure that only
the juiciest and best tasting pears and
peaches are deemed “gift quality.” It’s
the way it’s always been, ever since
brothers Harry and David Holmes first
took over the family orchard in 1914
and started selling pears as gourmet gifts.
S U N D AY
M O N D AY
T U E S D AY
1
8
6
Labor Day
7
13
Grandparents Day
14
15
20
21
22
First Day of Fall
27
Yom Kippur Begins at Sunset
28
29
2020[] W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
3
10
17
4
5
11
Patriot Day
12
18
Rosh Hashanah Begins at Sunset
19
24
25
26
National Singles Day
2
9
16
23
30
First Day of Fall
OCTOBER
S U N D AY
M O N D AY
T U E S D AY
During fiscal 2019, the 1-800-FLOWERS.COM, Inc.
Business Gift Services division enhanced
its everyday gifting capabilities through a
newly designed website, enabling corpo-
rate accounts to access our extensive
family of brands more efficiently. The
new site offers custom set-up capability
for each account and also supports bulk
upload functionality, reducing the time it
takes for busy corporate buyers to place
orders – a vital benefit during the hectic
holiday gifting season. The division has
also been very successful in growing its
“Surprise and Delight” program, help-
ing corporate accounts build stronger
relationships with their customers and
employees. Our Business Gift Services
division has seen growth through its
loyalty programs which support partners
offering benefits to their members for
personal gifting needs. The division has
also experienced significant growth through
new account acquisition within the financial
services, healthcare and manufacturing
sectors, as well as through partnership
marketing initiatives.
4
11
18
25
5
6
12
Columbus Day (observed)
13
19
26
20
27
THURSDAYWEDNESDAYSATURDAYFRIDAYSUNDAYTUESDAYMONDAY2020[] W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
1
8
15
22
7
14
21
28
National Chocolate Day
29
2
9
3
10
16
National Boss’s Day
17
Sweetest Day
23
30
24
31
Halloween
THURSDAYWEDNESDAYSATURDAYFRIDAYSUNDAYTUESDAYMONDAY NOVEMBER
S U N D AY
M O N D AY
T U E S D AY
Among the many reasons for the
growth of 1-800-FLOWERS.COM, Inc.
is our continual concentration on
customer engagement. Exemplifying
that effort is our focus on offering
customers a wider range of price
points, including products that are
highly innovative yet lower priced. This
includes our new $9.99 “Cards with Pop”
collection from The Popcorn Factory®,
which allows customers to cleverly
express sentiments for many different
occasions, and our ever-popular $5.99
cookie cards from Cheryl’s Cookies®
featuring thoughtful messages. Product
line expansions such as these boost
our ability to engage more customers
through a broader array of gifting
products and brands. These offerings
span top quality value-priced gifts in
several product categories, to beautiful
floral arrangements from 1-800-Flowers.
com® and appetizing gourmet selec-
tions from Harry & David®, to luxury
gifts such as artisanal chocolates from
Simply Chocolate®.
1
8
2
9
15
16
22
29
23
30
3
Election Day
10
17
24
2020[] W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
4
5
11
Veterans Day
12
19
18
25
6
13
20
7
14
21
28
26
Thanksgiving Day
27
DECEMBER
S U N D AY
M O N D AY
T U E S D AY
Much of the ongoing growth of
1-800-FLOWERS.COM, Inc. can be at-
tributed to our strong commitment to
enhancing the customer experience. In
fiscal 2019 we expanded our platform
with SmartGift, a highly personalized
gifting feature that enables customers
to notify their recipient (via text, email
or any messaging platform) that their
gift is on the way – and then give the
recipient the option of modifying their
delivery preference, further involving
them in the total gifting experience. We
also launched an interactive telephonic
virtual assistant, integrating artificial
intelligence and human understanding
to reduce average time on hold and
increase our already high customer
satisfaction metrics. And we continued
to invest in new technology innova-
tions designed to help our customers
express themselves with the launch of
SmartMessage, an augmented reality
(AR) gift messaging feature available
on our iOS mobile app.
6
13
20
27
1
8
15
7
14
21
First Day of Winter
22
28
29
THURSDAYWEDNESDAYSATURDAYFRIDAYSUNDAYTUESDAYMONDAY2020[] W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
3
4
National Cookie Day
5
2
9
16
23
30
10
Hanukkah Begins at Sunset
11
18
12
19
25
Christmas Day
26
First Day of Kwanzaa
17
24
31
New Year’s Eve
THURSDAYWEDNESDAYSATURDAYFRIDAYSUNDAYTUESDAYMONDAY B O A R D O F D I R E C TO R S
James F. McCann
Founder and
Executive Chairman
1-800-FLOWERS.COM, Inc.
Christopher G. McCann
President and
Chief Executive Officer
1-800-FLOWERS.COM, Inc.
Geralyn R. Breig
Chief Executive Officer
AnytownUSA.com
Celia R. Brown
Executive Vice President
Group HR Director
Willis Group
Retired
James A. Cannavino
IBM Company
Senior Vice President
Retired
Eugene F. DeMark C.P.A.
Area Managing Partner
KPMG, LLP, Retired
Leonard J. Elmore
Senior Lecturer
Columbia University
Retired Attorney at Law
Network TV Sports Analyst
Sean P. Hegarty
Managing Partner
Hegarty & Company
Adam Hanft
Chief Executive Officer
Hanft Projects LLC
Katherine Oliver
Principal
Bloomberg Associates
Larry Zarin
Senior Vice President
Chief Marketing Officer
Express Scripts, Inc.
Retired
Fiscal Year 2019
Financial Report
Selected Financial Data
1-800-FLOWERS.COM, Inc. and Subsidiaries
The selected consolidated statement of income data for the fiscal years ended June 30, 2019, July 1, 2018 and
July 2, 2017 and the consolidated balance sheet data as of June 30, 2019 and July 1, 2018, have been derived from
the Company’s audited consolidated financial statements included elsewhere in this Annual Report. The selected
consolidated statement of income data for the fiscal years ended July 3, 2016 and June 28, 2015, and the selected
consolidated balance sheet data as of July 2, 2017, July 3, 2016 and June 28, 2015, 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, acquired iFlorist in December 2013 (subsequently
disposed of in October 2015), Pingg Corp. in May 2013 (subsequently disposed of in June 2015), 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. In May 2017, the Company completed the disposition
of its Fannie May business. The following data reflects the results of operations of these subsidiaries until their dates
of disposition. 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.
2
Selected Financial Data (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
*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.” The Company adopted this ASU in fiscal 2017, and the impact of the adoption of the new guidance was to reclassify $3.6
million of deferred financing costs previously included within “Other Assets” to “Long-term debt” in the consolidated balance sheets as of July 1, 2018 –
see Note 2. in Item 15 below for details. We have not reclassified previous fiscal years for the purposes of this presentation.
**In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” amending revenue recognition guidance (“ASC 606”). The
Company adopted this ASU effective July 2, 2018 for all revenue contracts with our customers using the modified retrospective approach and increased
retained earnings by $0.3 million, reduced accrued expenses by $1.1 million and decreased prepaid expense by $0.8 million– see Note 2. in Item 15 below
for details . The comparative information presented in this Form 10-K has not been restated and continues to be reported under the accounting standards
in effect for those periods. The adoption of the new revenue standard did not have a material impact to our net income for the fiscal year 2019.
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
gifts designed to help customers express, connect and
celebrate. For more than 40 years, 1-800-Flowers.com
has been delivering smiles to customers with gifts for
every occasion, including fresh flowers and the best
selection of plants, gift baskets, gourmet foods,
confections, jewelry, candles, balloons and plush
stuffed animals. As always, our 100% Smile
Guarantee backs every gift.
The Company’s Celebrations Ecosystem
includes the following brands: 1-800-Flowers.com,
1-800 Baskets.com, Cheryl’s Cookies, FruitBouquets.com,
Harry & David, Moose Munch, The Popcorn Factory,
Wolferman’s, Personalization Universe, Simply
Chocolate, Goodsey, DesignPac, and Stock Yards.
Through the Celebrations Passport loyalty program,
which provides members with free standard shipping
and no service charge across our portfolio of brands,
1-800-FLOWERS.COM, Inc. strives to deepen its
relationships with its customers. The Company also
operates BloomNet, an international floral wire service
providing a broad-range of products and services
designed to help professional florists grow their
businesses profitably; as well as Napco, a resource
for floral gifts and seasonal décor.
1-800-FLOWERS.COM, Inc. received the Gold award
in the “Mobile Payments and Commerce” category at the
3
Mobile Marketing Association 2018 Global Smarties
Awards. In addition, Harry & David was named to the
Internet Retailers 2019 “The Hot 100” list. In 2017,
1-800-FLOWERS.COM, Inc. was named to the Stores®
2017 Hot 100 Retailers list. This prestigious list, compiled
annually by the National Retail Federation (NRF), ranks
the nation’s fastest-growing retailers by year-over-year
domestic sales growth. The Company also received the
Gold award in the “Best Artificial Intelligence” category
at the Data & Marketing Association’s 2017 International
ECHO Awards.
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. As such, the Company
expects that its revenues will continue to be closely
tied to changes in consumer sentiment.
The Company has organized its operations into
three categories, or segments: Consumer Floral,
BloomNet Wire Service and Gourmet Foods & Gift
Baskets, reflecting the way the Company evaluates its
business performance and manages its operations.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
On May 30, 2017, the Company completed the sale of
the outstanding equity of Fannie May Confections Brands,
Inc., including its subsidiaries, Fannie May Confections,
Inc. and Harry London Candies, Inc. (“Fannie May”) to
Ferrero International S.A., a Luxembourg corporation
(“Ferrero”). The operations of Fannie May were previously
included within the Company’s Gourmet Foods & Gift
Baskets segment.
In fiscal 2015, the Company acquired Harry & David,
whose iconic brands transformed the Company into a
destination for premier gifting. Having successfully
completed the integration of Harry & David, and generat-
ing synergistic operating cost savings in fiscal 2016 and
2017, the Company turned its focus towards unlocking
the revenue growth potential of its family of brands.
During fiscal 2018, the 1-800-Flowers.com and BloomNet
brands increased their marketing and promotional
spending to take advantage of favorable competitive
circumstances, knowing that efforts to take market share
would hurt short term earnings performance, but improve
their customer file, and ultimately their respective longer-
term earnings outlooks. While these efforts were success-
ful in accelerating annual comparable revenue growth to
3.7%, highlighted by second half growth of 5.8%, and
positioned the Company for continued future growth,
operational issues within the Gourmet Foods & Gift
Baskets segment, in addition to the increased marketing
spending, and sale of Fannie May, negatively impacted
the Company’s earnings during fiscal 2018. As a result,
Adjusted EBITDA declined from $85.9 million in fiscal
2017 to $78.9 million in fiscal 2018.
Prior to the setback in fiscal 2018, since fiscal 2010,
the Company had been successful in achieving steady
annualized Adjusted EBITDA improvement, primarily
through cost reductions, efficiency improvements, and
modest revenue growth. However, the Company under-
stood that in order to increase its pace of earnings, it
needed to accelerate its rate of revenue growth, which in
turn required a period of investment in marketing and
branding, that has temporarily slowed short-term EBITDA
growth, but, is ultimately expected to result in higher
longer-term profitability. Given the market landscape and
competitive advantage earned by the 1-800-Flowers
brand, as well as the successful efforts to re-invigorate
Harry & David’s performance, coming into fiscal 2019, the
Company believed that it was well positioned to capture
additional market share and generate incremental
growth. The Company executed on its growth strategy
during fiscal 2019, generating a revenue increase of
8.4% in comparison to fiscal 2018’s adjusted growth
rate of 3.7%, and despite the incremental marketing
and merchandising investment spend behind the
1-800-Flowers and Harry & David brands, as well as the
launch of the Goodsey marketplace, combined with the
restoration of a full performance bonus payout, fiscal
2019 Adjusted EBITDA improved to $82.1 million,
compared to $78.9 million in the prior year.
In terms of strategic initiatives, during fiscal 2019,
the Company:
(cid:127)
Invested behind our lead brands to accelerate
revenue growth – some of the Company’s more
significant initiatives included mobile-first digital and
social commerce marketing programs, merchandising
assortments emphasizing new and original product
development, including new flavor profiles, and our
gourmet lines, which in our Gourmet Food & Gift
Baskets segment enabled us to increase our “every
day” gifting volume,
(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 facilitate long-term growth.
The multi-brand website provides the customer with
an enriched shopping experience using cross-brand
marketing and merchandising programs and by
providing access to the Company’s Celebrations suite
of services, including Passport free shipping and
Reminders membership programs, as well as our
digital self-service portal. These customers exhibit the
highest purchase frequency, retention, and life-time
value metrics in our customer files,
(cid:127)
Invested in operations – the Company continued to
invest in the key areas that will provide for growth in
the future, including:
- Manufacturing, production and distribution –
warehouse expansion and production
improvements for Cheryl’s; manufacturing
production, orchard and facility improvements
for Harry & David,
- Technology – multi-brand website redesign and
customer experience improvements, mobile platform
upgrades, mobile and desktop Progressive Web
Application (PWA) upgrades, and
- Business Intelligence – customer database mining
to effectively market and target key demographics,
(cid:127)
Innovation and positioning for emerging
technologies – The Company has built a reputation
as an innovator and an early adopter of new
technologies. This was illustrated by the
Company’s initiatives, including:
- expanding our category-leading position in
Conversational Commerce, where we are now one
of the few companies that have applications running
on all five of the leading platforms, including: Apple,
Samsung, Facebook, Google and Amazon,
4
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
- continuing to roll out PWA technology across
our mobile and desktop platforms, significantly
increasing site speeds and enhancing the customer
experience,
- expanding our integration with SmartGift – a highly
personalized, experiential gifting feature that allows
customers to notify their recipient via text, email or
any messaging platform, that a gift is on the way –
and then gives the recipient the option of modifying
their delivery preference, further involving them in
the total gifting experience,
- launching an interactive, telephonic virtual assistant,
integrating artificial intelligence and human under
standing to reduce average time on hold and
increase our already high customer satisfaction
metrics; and
- launching Smart Message – an augmented-reality,
gift-messaging feature available on our iOS mobile
app, and
(cid:127) Strengthened its balance sheet - the Company was
able to fund its Christmas holiday working capital
requirements primarily through the use of cash on
hand, and continued to pay down its outstanding term
loan. During May 2019, the Company amended its
credit facility to, among other modifications: (i)
increase the amount of the outstanding term loan
(“Term Loan”) from approximately $97 million to $100
million, (ii) extend the maturity date of the outstanding
Term Loan and the revolving credit facility (“Revolver”)
by approximately 29 months to May 31, 2024, and (iii)
decrease the applicable interest rate margins for
LIBOR and base rate loans by 25 basis points. The
Company also continued to repurchase shares, while
investing capital to grow its businesses utilizing cash
generated from operations. When combined with the
Company’s amended credit facility, the Company
believes that its strong balance sheet, and growing
cash flows, provide it with significant liquidity and
flexibility to invest and enhance future growth, both
organically, as well as through potential acquisitions.
For fiscal 2020, the Company’s guidance reflects its
plans to continue to invest in strategic marketing and
merchandising programs to take advantage of market
conditions and build on the revenue growth momentum
it generated across all three of its business segments
during fiscal 2019. Based on these factors, in fiscal 2020,
the Company anticipates:
(cid:127) Total consolidated revenue growth of 8% to 9%,
compared with the prior year, comprised of organic
revenue growth of approximately 6% to 7%, and
revenue attributable to the Shari’s Berries brand,
acquired in August 2019;
(cid:127) Adjusted EBITDA and EPS growth in a range of
8% to 10%, and;
(cid:127) Free Cash Flow for the year of approximately
$45 million.
Definitions of non-GAAP financial measures:
We sometimes use financial measures derived from
consolidated financial information, but not presented in
our financial statements prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”).
Certain of these are considered “non-GAAP financial
measures” under the SEC rules. See below for definitions
and the reasons why we use these non-GAAP financial
measures. Where applicable, see the Segment
Information and Results of Operations sections below for
reconciliations of these non-GAAP financial measures to
their most directly comparable GAAP financial measures.
These non-GAAP financial measures are referred to as
“adjusted” or “on a comparable basis” below, as these
terms are used interchangeably.
EBITDA and adjusted EBITDA
We define EBITDA as net income (loss) before
interest, taxes, depreciation and amortization. Adjusted
EBITDA is defined as EBITDA adjusted for the impact of
stock-based compensation, Non-Qualified Plan Invest-
ment appreciation/depreciation, and certain items
affecting period to period comparability. See Segment
Information for details on how EBITDA and adjusted
EBITDA were calculated for each period presented.
The Company presents EBITDA and adjusted EBITDA
because it considers such information meaningful
supplemental measures of its performance and believes
such information is frequently used by the investment
community in the evaluation of similarly situated compa-
nies. The Company uses EBITDA and adjusted EBITDA
as factors used to determine the total amount of incentive
compensation available to be awarded to executive
officers and other employees. The Company’s credit
agreement uses EBITDA and adjusted EBITDA to
measure compliance with covenants such as interest
coverage and debt incurrence. EBITDA and adjusted
EBITDA are also used by the Company to evaluate and
price potential acquisition candidates.
EBITDA and adjusted EBITDA have limitations as
analytical tools and should not be considered in isolation
or as a substitute for analysis of the Company’s results as
reported under GAAP. Some of the limitations are: (a)
EBITDA and adjusted EBITDA do not reflect changes in,
or cash requirements for, the Company’s working capital
needs; (b) EBITDA and adjusted EBITDA do 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 require-
ments for such capital expenditures. EBITDA should only
be used on a supplemental basis combined with GAAP
results when evaluating the Company’s performance.
Segment contribution margin
We define segment contribution margin as earnings
before interest, taxes, depreciation and amortization,
5
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
before the allocation of corporate overhead expenses.
See Segment Information for details on how segment
contribution margin was calculated for each period
presented.
When viewed together with our GAAP results, we
believe segment contribution margin provides manage-
ment and users of the financial statements meaningful
information about the performance of our business
segments.
Segment contribution margin is used in addition to
and in conjunction with results presented in accordance
with GAAP and should not be relied upon to the exclusion
of GAAP financial measures. The material limitation
associated with the use of the segment contribution
margin is that it is an incomplete measure of profitability
as it does not include all operating expenses or non-
operating income and expenses. Management compen-
sates for these limitations when using this measure by
looking at other GAAP measures, such as operating
income and net income.
Adjusted net income and adjusted net income per
common share
We define adjusted net income and adjusted net
income per common share as net income and net income
per common share adjusted for certain items affecting
period to period comparability. See Segment
Information below for details on how adjusted net income
and adjusted net income per common share were
calculated for each period presented.
We believe that adjusted net income and adjusted net
income per common share are meaningful measures
because they increase the comparability of period to
period results.
Since these are not measures of performance
calculated in accordance with GAAP, they should not be
considered in isolation of, or as a substitute for, GAAP net
income and net income per common share, as indicators
of operating performance and they may not be compa-
rable to similarly titled measures employed by other
companies.
Free Cash Flow
We define Free Cash Flow as net cash provided by
operating activities, less capital expenditures. The
Company considers Free Cash Flow to be a liquidity
measure that provides useful information to management
and investors about the amount of cash generated by the
business after the purchases of fixed assets, which can
then be used to, among other things, invest in the
Company’s business, make strategic acquisitions,
strengthen the balance sheet and repurchase stock or
retire debt. Free Cash Flow is a liquidity measure that is
frequently used by the investment community in the
evaluation of similarly situated companies.
Since Free Cash Flow is not a measure of perfor-
mance calculated in accordance with GAAP, it should not
be considered in isolation or as a substitute for analysis
of the Company’s results as reported under GAAP. A
limitation of the utility of free cash flow as a measure of
financial performance is that it does not represent the
total increase or decrease in the Company’s cash
balance for the period.
6
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Segment Information
The following table presents the net revenues, gross profit and segment contribution margin from each of the
Company’s business segments, as well as consolidated EBITDA, adjusted EBITDA and adjusted net income, for fiscal
years ended June 30, 2019 and July 1, 2018. For segment information for the fiscal year ended July 2, 2017, please
refer to our Annual Report on Form 10-K for the fiscal year ended July 2, 2017, filed on September 15, 2017.
–
7
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Reconciliation of net income to adjusted net income (non-GAAP):
–
–
–
–
8
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Reconciliation of net income to adjusted EBITDA (non-GAAP):
(a) Segment performance is measured based on segment contribution margin or segment Adjusted EBITDA, reflecting only the direct controllable revenue
and operating expenses of the segments, both of which are non-GAAP measurements. 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), and other items that we do not
consider indicative of our core operating performance.
(b) 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.
(c) The adjustment to deduct the impact of the U.S. tax reform from net income, for the fiscal year ended July 1, 2018, includes the impact of the
re-valuation of the Company’s deferred tax liability of $12.2 million or $0.18 per diluted share, but does not include the ongoing impact of the lower
federal corporate tax rate.
9
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 years
2019, 2018, and 2017, which ended on June 30, 2019,
July 1, 2018, and July 2, 2017, respectively, consisted of
52 weeks.
Net Revenues
Years Ended
June 30, July 1, July 2,
2019 % Change 2018 % Change 2017
(dollars in thousands)
Net revenues:
E-Commerce $ 998,359
250,264
Other
$1,248,623
8.3% $ 921,848 2.8% $ 896,762
296,863
8.8%
-3.5% $1,193,625
8.4% $1,151,921
230,073 -22.5%
Disaggregated revenue by channel follows:
Net revenues consist primarily of the selling price of
the merchandise, service or outbound shipping charges,
less discounts, returns and credits.
During fiscal 2019, net revenues increased 8.4%
in comparison to the prior year, due to strong customer
demand for both holiday and everyday gifting occasions
in our Gourmet Food & Gift Baskets and Consumer Floral
segments, as well as membership, transaction and
services growth in the BloomNet Wire Service segment.
During fiscal 2018, net revenues decreased 3.5%
in comparison to the prior year. On a comparable basis,
adjusting fiscal 2017 net revenues to reflect the May 30,
2017 disposition of Fannie May, net revenues increased
3.7% during fiscal 2018, driven by growth across all
business segments.
Revenue by sales channel:
(cid:127) E-commerce revenues (combined online and
telephonic) increased 8.3% during fiscal 2019,
comprised of 9.0% growth within the Consumer Floral
segment and 7.6% growth in the Gourmet Foods &
Gift Baskets segment. During fiscal 2019, the Com
pany fulfilled approximately 13.2 million e-commerce
orders, at an average order value of $75.44, repre
senting increases of 6.4% and 1.8%, respectively,
compared to fiscal 2018.
E-commerce revenues increased 2.8% during fiscal
2018 compared to the fiscal 2017. On a comparable
basis, adjusting fiscal 2017 e-commerce revenues to
exclude the revenues of Fannie May, e-commerce
revenues increased 4.3% during fiscal 2018, due to
growth within the Company’s Consumer Floral
segment, as well as growth in the Gourmet Foods &
Gift Baskets segment, reflecting year-over-year
growth by Harry & David and 1-800-Baskets. During
10
fiscal 2018, the Company fulfilled approximately 12.4
million e-commerce orders, at an average order value
of $74.04, representing increases of 2.4% and 0.4%,
respectively, compared to fiscal 2017. Adjusted to
exclude Fannie May’s revenue and orders, in fiscal
2018, orders increased 5.2%, while average order
value decreased 0.9%, in comparison to fiscal 2017.
(cid:127) Other revenues are comprised of the Company’s
BloomNet Wire Service segment, as well as the whole-
sale and retail channels of its 1-800-Flowers.com
Consumer Floral and Gourmet Food & Gift Baskets
segments. Other revenues increased 8.8% during
fiscal 2019, primarily as a result of 14.9% growth
within the BloomNet Wire Service segment, and
5.2% growth within the Gourmet Foods & Gift
Baskets segment, driven primarily by increased
wholesale volume, partially offset by a decline in
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Harry & David retail store volume due to a reduction
in store count and a decline in customer traffic.
Other revenues decreased 22.5% during fiscal 2018,
primarily as a result of the May 2017 disposition of
Fannie May, which generated most of its revenues
through its retail and wholesale operations. On a
comparable basis, adjusting fiscal 2017 to exclude the
revenues of Fannie May, other revenues increased
2.0% during fiscal 2018, as a result of growth within
the BloomNet Wire Service segment as well as the
Gourmet Foods & Gift Baskets segment, driven by
1-800-Baskets and Cheryl’s wholesale growth,
partially offset by declines in Harry & David retail store
volume due to a reduction in store count and a decline
in customer traffic.
Revenue by segment:
(cid:127)
1-800-Flowers.com Consumer Floral – this segment
includes the operations of the 1-800-Flowers.com
brand, which derives revenue from the sale of
consumer floral products through its e-commerce
sales channels (telephonic and online sales), retail
stores, and royalties from its franchise operations.
Net revenues increased 8.8% during fiscal 2019 due
to stable growth throughout the year, driven by a
combination of organic growth and increased
investment in strategic marketing and merchandising
programs designed to accelerate growth and increase
market share across its “everyday” gifting occasions,
which focuses on “Birthday”, “Anniversary”, “
Sympathy” and “Just Because” occasions. New
product introductions at both the entry level and luxury
price points, such as the expanded Unicorn and
succulents collections, attract new customers to grow
the brand’s “everyday” business, while supporting
continued growth during the key Christmas,
Valentine’s and Mother’s Day holidays.
Net revenues increased 4.7% during fiscal 2018 due
to strength in everyday gifting driven by the
Company’s investments in strategic marketing and
merchandising programs designed to accelerate
growth and increase market share, while also
expanding its offerings of original gifts. The brand
continued its strong Valentine’s Day growth trend,
driven in part by the brand’s ability to take advantage
of a Wednesday date placement, building off fiscal
2017’s Tuesday date placement, compared to Fiscal
2016’s Sunday Valentine’s Day date placement, which
is the lowest performing date placement within the
week for the Company. While Mother’s Day growth
was also strong, annual growth in fiscal 2018 was
negatively impacted by hurricanes Harvey and Irma.
(cid:127) BloomNet Wire Service – revenues in this segment
are derived from membership fees as well as other
product and service offerings to florists.
Net revenues increased 14.9% during fiscal 2019,
primarily due to higher services revenues, including
membership, clearinghouse, directory and transaction
11
fees, monetizing the increased 1-800-Flowers and
florist-to-florist orders being sent through the network,
building on the efforts begun during the second half of
fiscal 2018 to capture a greater share of orders from
local flower shops and third-party, online floral
companies.
Net revenues increased 2.1% during fiscal 2018, due
to higher wholesale product revenues, and higher
transaction fees due to fee increases, partially offset
by lower membership and ancillary fees resulting from
an unfavorable network shop count. During fiscal
2018, the Company made investments in BloomNet
where it enhanced its digital marketing programs,
offering Search Engine Optimization (“SEO”) and
Search Engine Marketing (“SEM”) capabilities to our
florists for their websites, introduced new digital
directory features designed to help florists highlight
their unique offerings and drive additional incoming
orders from sending florists, and in the second half of
the year, expanded efforts to capture a growing
volume of orders from local flower shops and third-
party, online floral companies, resulting in improved
second half growth.
(cid:127) Gourmet Food & Gift Baskets – this segment
includes the operations of Harry & David,
Wolferman’s, Stock Yards, Cheryl’s, 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
and Cheryl’s brand names, as well as wholesale
operations.
Net revenues increased 7.1% during fiscal 2019,
attributable to growth from nearly all brands, but
primarily due to: (i) strong growth from Harry & David,
driven by improved merchandising assortments,
increased investments in digital marketing programs,
and its “Share More” messaging which resonated with
customers, contributing to new customer acquisition
and increases in its “everyday” business, and (ii)
1-800-Baskets/DesignPac, which generated year-
over-year growth from new and existing wholesale
customers, as well through its e-commerce business
attributable to its Simply Chocolate product line.
Net revenues during fiscal 2018 were unfavorable
by 9.7%, in comparison to prior year, due to the
disposition of Fannie May on May 30, 2017. On a
comparable basis, adjusting fiscal 2017 to exclude
Fannie May results, fiscal 2018 net revenues were
favorable in comparison to adjusted prior year
revenues by 3.2%, driven primarily by continued
growth in everyday gifting in Harry & David and
1-800-Baskets. Comparable segment revenue
growth was attributable to several initiatives
implemented during the year, including: (i) the
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Company’s successful efforts to grow the “everyday”
volume of its Gourmet Foods & Gift Baskets brands
through expanded Birthday, Sympathy and Thank You
merchandise, (ii) development of merchandising
assortments and digital marketing programs that
helped to broaden the demographic reach of the
brands within the segment, and, (iii) the launch of the
Simply Chocolate product line, which is managed by
1-800-Baskets. Comparable revenue growth was
negatively impacted by a temporary disruption in
operations at our Cheryl’s brand, related to the
implementation of a new production and warehouse
management system, which, in turn, led to the brand’s
decision to stop taking orders eight days prior to the
Christmas holiday.
For fiscal 2020, the Company plans to continue to
invest in strategic marketing and merchandising pro-
grams to take advantage of market conditions and
build on the revenue growth momentum. The Company
expects to grow revenues across all three of its
business segments with consolidated revenue growth
of 8.0%-to-9.0% compared with fiscal 2019, including
approximately 6.0%-to-7.0% percent organic revenue
growth, combined with anticipated contributions from
the acquisition of the Shari’s Berries brand (acquired in
August 2019).
Gross Profit
Years Ended
June 30, July 1, July 2,
2019 % Change 2018 % Change 2017
(dollars in thousands)
Gross profit $526,121
Gross margin % 42.1%
$489,025 -6.0% $520,281
43.6%
42.5%
7.6%
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
includes labor and facility costs related to direct-to-
consumer and wholesale production operations.
Gross profit increased 7.6% during the fiscal 2019 due
to the increase in revenues noted above, partially offset
by a lower gross profit percentage. Gross profit decreased
40 basis points during fiscal 2019, reflecting BloomNet’s
lower gross margin percentage, as well as hourly labor,
particularly seasonal labor, and the growth of our
Celebrations Passport free-shipping program, partially
offset by Gourmet Food & Gift Baskets logistics initiatives,
which reduced per order transportation costs, as well as
manufacturing initiatives, including automation and
shifting some production to earlier in the season to better
utilize our core workforce.
Gross profit decreased 6.0%, while gross profit
percentage decreased 110 basis points during fiscal
2018. On a comparable basis, adjusting fiscal 2017 to
exclude the gross profit of Fannie May, which was
12
disposed of on May 30, 2017, gross profit increased 0.3%
during fiscal 2018, while gross profit percentage de-
creased 140 basis points. The higher comparable gross
profit is due to the increase in comparable revenues
noted above, partially offset by a lower gross profit
percentage, primarily reflecting the growth of the
Company’s Passport free-shipping program, higher
promotional competitive landscape particularly during
Valentine’s Day and Mother’s Day, and higher transporta-
tion and hourly labor costs. Gross profit during fiscal 2018
was also negatively impacted by the operational issue at
Cheryl’s during the Christmas holiday season.
Consumer Floral segment – Gross profit increased
7.4% during fiscal 2019, due to the aforementioned
revenue growth, partially offset by a decrease in gross
profit percentage of 50 basis points to 39.2%. The lower
gross profit percentage reflects higher product costs, an
increased Celebrations Passport program participation,
which has been driving improved customer loyalty and
purchase frequency, and increased transportation costs.
Gross profit increased by 2.3% during fiscal 2018, due to
the aforementioned revenue growth, partially offset by a
decrease in gross profit percentage of 90 basis points, to
39.7%. The lower gross profit percentage reflects in-
creased promotional activity in order to increase market
share, especially during the critical Valentine’s Day and
Mother’s Day holidays, and the growth of the Company’s
Passport free-shipping program.
BloomNet Wire Service segment – Gross profit
increased 6.9% during fiscal 2019, due to the increase in
revenues noted above, partially offset by a decrease in
gross profit percentage of 380 basis points to 50.5%. The
lower gross profit percentage is due to the increase in the
volume of lower margin florist-to-florist orders, on
membership and transaction fee margins, as a result of
an increase in rebates to support the brand’s efforts to
gain market share. Gross profit decreased 1.9% during
fiscal 2018, due to a decline in gross profit percentage of
220 basis points to 54.3%, partially offset by the increase
in revenues noted above. The lower gross profit percent-
age was due to sales mix, with a decline in higher margin
membership and related services, offset by an increase in
lower margin wholesale product sales, as well as
increased transportation costs, and higher rebates, as a
result of the Company’s strategy to capture market share.
Gourmet Foods & Gift Baskets segment – Gross
profit increased by 7.9% during fiscal 2019, due to the
increase in revenues noted above, as well as increased
margins. Gross profit percentage increased 30 basis
points to 42.9% during fiscal 2019, due to logistics
initiatives which reduced shipping and transportation
costs, combined with strategic pricing initiatives, and
improved operational performance at Cheryl’s, partially
offset by rising labor costs, and penetration of the
Celebrations Passport program.
Gross profit decreased by 11.8% during fiscal 2018,
while gross profit percentage decreased 100 basis points
to 42.6%, over the same period. On a comparable basis,
adjusting prior year to exclude the gross profit of Fannie
May, which was disposed of on May 30, 2017, gross profit
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
declined 0.7% and gross profit percentage decreased
160 basis points, to 42.6%, during fiscal 2018 in compari-
son to fiscal 2017. The lower gross profit percentage was
due to the impact of the operational issue at Cheryl’s
during the second quarter, which caused increased labor,
expedited shipping and product write-downs, but also
due to the lingering effects experienced in the third
quarter as a result of customer “win-back” promotional
programs and liquidation of inventory which was sold in
place of full margin product. In addition, although revenue
growth provided for improved gross profit at Harry &
David, higher transportation costs at our Harry & David
and wholesale 1-800-Baskets brand, negatively impacted
gross profit percentage.
In fiscal 2020, the Company expects its gross profit to
improve due to sales growth, with gross margins that are
consistent with fiscal 2019, as productivity and logistical
improvements are expected to largely offset labor and
tariff increases.
Marketing and Sales Expense
Years Ended
June 30, July 1, July 2,
2019 % Change 2018 % Change 2017
(dollars in thousands)
Marketing and
sales $319,636 7.0%
$298,810 -5.9% $317,527
Percentage of
sales
25.6%
25.9%
26.6%
Marketing and sales expense consists primarily of
advertising and promotional expenditures, catalog costs,
online portal and search costs, retail store and fulfillment
operations (other than costs included in cost of revenues)
and customer service center expenses, as well as the
operating expenses of the Company’s departments
engaged in marketing, selling and merchandising
activities.
Marketing and sales expense increased 7.0% during
fiscal 2019, primarily due to increased advertising spend
within the Consumer Floral and Gourmet Food & Gift
Baskets segments, associated with the Company’s
incremental marketing efforts designed to accelerate
revenue growth and capture market share, coupled with
an increase in performance-based bonuses. Increased
efficiency around our digital marketing programs gener-
ated strong revenue growth, which in turn, enabled us to
leverage our platform, while automation initiatives in our
service centers drove lower customer service costs. As a
result, marketing and sales as a percentage of net
revenues, during fiscal 2019 decreased to 25.6%
compared with 25.9% in fiscal 2018.
Marketing and sales expense decreased 5.9% during
fiscal 2018, compared to fiscal 2017, due to the disposi-
tion of Fannie May on May 30, 2017. On a comparable
basis, adjusting fiscal 2017 to exclude Fannie May’s
marketing and sales expenditures, marketing and sales
expense increased 2.0% during fiscal 2018, but de-
creased as a percentage of net revenue to 25.9%
13
compared to 26.4% during fiscal year 2017. On a
comparable basis, the increase in spend came from the
Consumer Floral and Gourmet Foods & Gift Baskets
segments, commensurate with revenue growth, as a
result of the Company’s incremental marketing efforts
designed to accelerate revenue growth and capture
market share during the highly competitive and promo-
tional Valentine’s Day and Mother’s Day holidays. This
increased marketing spend was partially offset by a
reduction in performance-based bonuses, resulting in
an overall reduction in total marketing and sales spend
ratios, as a percentage of net revenues.
During fiscal 2019, the Company added approxi-
mately 3.1 million new e-commerce customers, an
increase of 10.7% over the prior year. During fiscal 2018,
the Company added approximately 2.8 million new e-
commerce customers, an increase of 6.6% over fiscal
2017. Approximately 57% of customers who placed e-
commerce orders during fiscal 2019 were repeat custom-
ers compared to approximately 59% in fiscal 2018.
Technology and Development Expense
Years Ended
June 30, July 1, July 2,
2019 % Change 2018 % Change 2017
(dollars in thousands)
Technology and
development
Percentage of
$43,758 11.5% $39,258 0.9% $38,903
sales
3.5%
3.4%
3.3%
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 by
11.5% during fiscal 2019, as a result of increased license
and maintenance costs required to support the
Company’s technology platform, and higher labor and
consulting costs due to annual merit increases and an
increase in performance-based bonuses.
Technology and development expenses increased
0.9% during fiscal 2018, primarily due to increased
license and maintenance costs related to cloud based
contact center telecommunications support, payment
gateways, order management systems, and security
software, partially offset by a decrease in labor and
consulting costs due to reductions in headcount and
performance based bonuses.
During fiscal years 2019, 2018 and 2017, the Com-
pany expended $65.4 million, $61.2 million and $59.2
million, respectively, on technology and development,
of which $21.6 million, $21.9 million and $20.3 million,
respectively, has been capitalized.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
General and Administrative Expense
Years Ended
Interest Expense, net
Years Ended
June 30, July 1, July 2,
2019 % Change 2018 % Change 2017
June 30, July 1, July 2,
2019 % Change 2018 % Change 2017
(dollars in thousands)
General and
(dollars in thousands)
Interest expense,
administrative
$87,654 13.2% $77,440 -7.9% $84,116
net
$2,769
-23.7% $3,631 -37.6% $5,821
Percentage of
sales
7.0%
6.7%
7.0%
General and administrative expense consists of
payroll and other expenses in support of the Company’s
executive, finance and accounting, legal, human re-
sources and other administrative functions, as well as
professional fees and other general corporate expenses.
General and administrative expense increased 13.2%
during fiscal 2019, primarily due to an increase in labor
costs related to performance-based bonuses and merit
increases, as well as increased health insurance costs,
and the reinstatement of the Company’s 401k match
(See Note 14. in Item 15 for details regarding Employee
Retirement Plans).
General and administrative expense decreased 7.9%
during fiscal 2018, primarily due to the disposition of
Fannie May on May 30, 2017. On a comparable basis,
adjusting fiscal 2017 to exclude Fannie May’s general
and administrative expenditures, general and administra-
tive expense during fiscal 2018, was consistent with fiscal
2017 as higher health insurance costs due to unfavorable
medical claims, as well as an increase in legal fees and
bad debt expense, due to the bankruptcy of a wholesale
customer, was offset by lower labor costs due to a
reduction in performance-based bonuses.
Depreciation and Amortization
Years Ended
June 30, July 1, July 2,
2019 % Change 2018 % Change 2017
(dollars in thousands)
Depreciation and
amortization
Percentage of
$29,965 -7.7% $32,469 -2.7% $33,376
sales
2.4%
2.8% 2.8%
Depreciation and amortization expense decreased
7.7% during fiscal 2019, as certain short-lived assets
were fully depreciated/amortized early in fiscal 2019,
while the timing of certain longer-term capital projects
have been extended into fiscal 2020.
Depreciation and amortization expense decreased
2.7% during fiscal 2018, due to the disposition of Fannie
May. On a comparable basis, adjusting fiscal 2017 to
exclude Fannie May’s depreciation and amortization
expense, depreciation and amortization expense
increased 4.5% during fiscal 2018, as a result of recent
shorter-lived IT capital expenditures.
Interest expense, net consists primarily of interest
expense and amortization of deferred financing costs
attributable to the Company’s credit facility (See Note 9.
in Item 15 for details), net of income earned on the
Company’s available cash balances.
Interest expense, net decreased 23.7% during fiscal
2019, due to an increase in interest income, resulting
from higher invested cash balances and associated rates
earned on these balances, combined with a declining
outstanding Term Loan balance, partially offset by
increasing interest rates on the Company’s credit facility.
Interest expense, net decreased 37.6% during
fiscal 2018, due to the scheduled repayment of term loan
borrowings, the funding of Christmas holiday working
capital requirements primarily through the use of cash on
hand from the sale of Fannie May, in comparison to fiscal
2017, when the Company funded working capital
requirements through its revolving credit facility, as well
as higher interest income on the Company’s outstanding
cash balances (associated with cash received from the
sale of Fannie May in the prior year).
Other Income, net
Years Ended
June 30, July 1, July 2,
2019 % Change 2018 % Change 2017
(dollars in thousands)
Other income,
net $644
6.4% $605 -96.1% $15,471
Other income, net for fiscal 2019 consists primarily of
investment earnings on the Company’s Non-Qualified
Deferred Compensation Plan assets.
Other income, net for fiscal 2018 consists primarily of
investment earnings of the Company’s Non-Qualified
Deferred Compensation Plan assets, partially offset by a
$0.2 million impairment related to the Company’s equity
method investment in Flores Online (see Note 2. for
details).
Other (income) expense, net for fiscal 2017 consists
primarily of a $14.6 million gain on the sale of Fannie May
(see Note 4. for details), a $1.0 million investment gain
related to the Company’s Non-Qualified Deferred
Compensation Plan (see “General and Administrative”
expense above), partially offset by a $0.1 million loss
related to the Company’s equity in the net loss of Flores
Online (see Note 2. for details).
14
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Income Taxes
During the fiscal years 2019, 2018, and 2017, the
Company recorded income tax expense (benefit) from
continuing operations of $8.2 million, ($2.8) million, and
$12.0 million, respectively, resulting in an effective tax
rate of 19.1%, -7.3%, and 21.4%, respectively. The
Company’s effective tax rate for fiscal 2019 differed from
the U.S. federal statutory rate of 21% primarily due to the
impact of excess tax benefit from stock-based compensa-
tion and various tax credits, partially offset by state
income taxes and non-deductible executive compensa-
tion as a result of recent tax reform from The Tax Cuts and
Jobs Act (“Tax Act”) which removed the performance
based exclusion for determining the deductible limit.
The Company’s effective tax rate for fiscal 2018 was
impacted by the enactment of the Tax Act on December
22, 2017 (see Note 2.). Although the Tax Act was enacted
on December 22, 2017, since the Company had a July 1
fiscal year-end, the lower corporate income tax rate was
phased in, resulting in a U.S. statutory federal rate of
approximately 28% for our fiscal 2018, and 21% for the
fiscal 2019. In addition to the impact of the lower transi-
tional rate, during fiscal 2018, the Company recognized a
tax benefit of $12.2 million, or $0.18 per diluted share,
reflecting a revaluation of deferred tax liabilities at the
lower U.S. federal statutory rate of 21%. Adjusted for the
benefit of $12.2 million, the Company’s effective tax rate
would have been 24.8%, reflecting various tax credits
and return to provision adjustments related to the filing of
the Company’s fiscal 2017 tax return. The Company’s
effective tax rate for fiscal 2017 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/deduc-
tions including deductible stock-based compensation,
and the tax effect of the Fannie May disposition in fiscal
2017 (see Note 11. for details).
At June 30, 2019, the Company’s total federal
and state capital loss carryforwards were $27.8 million,
which if not utilized, will expire in fiscal 2022. The
Company’s foreign net operating loss carryforwards
were $3.3 million, which if not utilized, will begin to
expire in fiscal 2034.
15
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Liquidity and Capital Resources
Liquidity and borrowings
The Company’s principal sources of liquidity are cash
on hand, cash flows generated from operations and
borrowings available under the 2019 Credit Agreement
(see Note 9. for details). At June 30, 2019, the Company
had working capital of $175.7 million, including cash and
cash equivalents of $172.9 million, compared to working
capital of $148.2 million, including cash and cash
equivalents of $147.2 million at July 1, 2018. As of June
30, 2019, there were no borrowings outstanding under
the Company’s Revolver. Due to the seasonal nature of
the Company’s business, and its continued expansion
into non-floral products, 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
generate 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 November, 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.
We believe that our sources of funding will be
sufficient to meet our anticipated operating cash needs
for at least the next 12 months. However, any projections
of future cash needs and cash flows are subject to
substantial uncertainty. We continually evaluate
opportunities to repurchase common stock and we
will, from time to time, consider the acquisition of, or
investment in, complementary businesses, products,
services, capital infrastructure, and technologies,
which might affect our liquidity requirements or cause
us to require additional financing.
Cash Flows
Net cash provided by operating activities of $78.1
million for fiscal 2019 was primarily attributable to the
Company’s net income, adjusted for non-cash charges
for depreciation and amortization and stock-based
compensation, as well as increases in accounts payable
and accrued expenses as a result of the timing of our
seasonal inventory build and performance-based bonus
payments, partially offset by the accelerated production
of inventory to reduce the operational risk related to
production ramp requirements during the holiday and
to avoid potential tariff impacts.
Net cash used in investing activities of $32.6 million for
fiscal 2019 was primarily attributable to capital expendi-
tures related to the Company’s technology initiatives and
Gourmet Food & Gift Baskets segment manufacturing
production, warehousing and orchard planting equipment.
Net cash used in financing activities of $19.9 million
for fiscal 2019 was for the acquisition of $14.8 million of
treasury stock, net bank repayments of $4.9 million, debt
issuance costs of $1.4 million related to the amended
credit agreement (see Note 9 for details), partially offset
by $1.2 million in proceeds from the exercise of employee
stock options.
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 transactions,
subject to general market conditions. The repurchase
program is financed utilizing available cash. In October
2016, the Company’s Board of Directors authorized an
increase to its stock repurchase plan of up to $25 million.
In August 2017, the Board of Directors increased the
authorization to $30.0 million, and subsequently increased
it once more on June 27, 2019 to $30.0 million. The
Company repurchased a total of $14.8 million (1,230,303
shares), $12.2 million (1,269,059 shares) and $10.7
million (1,120,706 shares) during fiscal years 2019, 2018
and 2017, respectively, under this program. As of June 30,
2019, $30.0 million remains authorized under the plan.
Contractual Obligations
At June 30, 2019, 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 (1)
Operating lease obligations
Purchase commitments (2)
Total
$116,617
106,567
105,947
$329,131
$ 8,950
16,588
100,479
$126,017
$22,175
25,571
4,536
$52,282
$ 85,492
19,455
932
$105,879
$ ––
44,953
––
$44,953
(1) The payments due for long-term debt include principal and estimated interest payments on the Company’s Term Loan (see Note 9. for details).
Estimated interest payments are based on outstanding principal amounts, currently effective interest rates as of June 30, 2019 and timing of
scheduled principal payments.
(2) Purchase commitments consist primarily of inventory and equipment purchase orders made in the ordinary course of business.
16
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Critical Accounting Policies and Estimates
The Company’s discussion and analysis of its
financial position and results of operations are based
upon the consolidated financial statements of
1-800-FLOWERS.COM, Inc., which have been prepared
in accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements
requires management to make estimates and assumptions
that affect the reported amount of assets, liabilities, revenue
and expenses, and related disclosure of contingent assets
and liabilities. Management evaluates its estimates on an
ongoing basis, and bases its estimates and judgments on
historical experience and on various other factors that are
believed to be reasonable under the circumstances. Actual
results may differ from these estimates under different
assumptions or conditions. We consider accounting
estimates to be critical if both: (i) the nature of the estimate or
assumption is material due to the levels of subjectivity and
judgment involved, and (ii) the impact within a reasonable
range of outcomes of the estimate and assumption is
material to the Company’s financial condition. Our critical
accounting policies relate to goodwill, other intangible
assets and income taxes. Management of the Company has
discussed the selection of critical accounting policies and
the effect of estimates with the Audit Committee of the
Company’s Board of Directors.
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.
The first step (“Step 1”) of the two-step quantitative test
requires comparison of the fair value of each of the
reporting units to their 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 estimates and assump-
tions 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 capitali-
zation, allowing for a reasonable control premium.
During fiscal year 2019, the Company did not perform
a Step 0 analysis and instead opted to perform a Step 1
analysis, and determined that the estimated fair value of
the Company’s reporting units significantly exceeded
their respective carrying values (including goodwill
allocated to each respective reporting unit). As a measure
of sensitivity, a 45% decrease in the fair value of the
Company’s reporting units as of June 30, 2019, would
have had no impact on the carrying value of the
Company’s goodwill. In addition, a decrease of 100 basis
points in our terminal (perpetual) growth rate or an
increase of 100 basis points in our weighted-average
cost of capital would still result in a fair value calculation
exceeding our book value for each of our reporting units,
as of June 30, 2019. During fiscal years 2018 and 2017,
the Company performed a Step 0 analysis and deter-
mined that it was not “more likely than not” that the fair
values of its reporting units were less than their carrying
amounts. Future changes in the estimates and assump-
tions above could materially affect the results of our
reviews for impairment of goodwill. For further discussion
of the methods used and factors considered in our
estimates as part of the impairment testing for Goodwill,
see Note 2 and Note 6.
17
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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,
but are reviewed for impairment whenever changes in
circumstances or events may indicate that the carrying
amounts are not recoverable.
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 year 2019, the Company did not perform a
Step 0 analysis and instead opted to perform a quantitative
test, which determined that the estimated fair value of the
Company’s intangibles exceeded their respective carrying
value in all material respects. During fiscal years 2018 and
2017, the Company performed a Step 0 analysis and
determined that it was not “more likely than not” that the fair
values of the indefinite-lived intangibles were less than
their carrying amounts. Future changes in the estimates
and assumptions above could materially affect the results
of our reviews for impairment of intangibles. For further
discussion of the methods used and factors considered in
our estimates as part of the impairment testing for Good-
will, see Note 2 and Note 6.
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 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. For further
discussion of the methods used and factors considered
in our estimates as part of the impairment testing for
Goodwill, see Note 2 and Note 11.
Recently Issued Accounting Pronouncements
See Note 2. for details regarding the impact of
accounting standards that were recently issued on our
consolidated financial statements.
18
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Quantitative and Qualitative Disclosures
About Market Risk
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 $0.5 million during fiscal 2019.
Special Note Regarding Forward-Looking
Statements
This annual report contains forward-looking statements
within the meaning of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements represent
1-800-FLOWERS.COM, Inc.’s (the “Company”) current expecta-
tions or beliefs concerning future events and can generally be
identified by the use of statements that include words such as
“estimate,” “expects,” “project,” “believe,” “anticipate,” “intend,”
“plan,” “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 state-
ments, including, among others: the Company’s ability to achieve
its guidance for revenue, Adjusted EBITDA and EPS; its ability to
manage the significant seasonality of its business; its ability to
integrate the operations of acquired companies; 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. Reconciliations
for forward looking figures would require unreasonable efforts at
this time because of the uncertainty and variability of the nature
and amount of certain components of various necessary GAAP
components, including for example those related to compensa-
tion, tax items, amortization or others that may arise during the
year, and the Company’s management believes such reconcilia-
tions would imply a degree of precision that would be confusing
or misleading to investors. The lack of such reconciling informa-
tion should be considered when assessing the impact of such
disclosures. 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, please refer to the Company’s SEC filings including
19
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.
Definitions of non-GAAP Financial Measures:
We sometimes use financial measures derived from
consolidated financial information, but not presented in our
financial statements prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”). Certain of these are
considered “non-GAAP financial measures” under the U.S.
Securities and Exchange Commission (“SEC”) rules. Non-GAAP
financial measures referred to in this document are either
labeled as “non-GAAP” or designated as such with a “1”. See
below for definitions and the reasons why we use these non-
GAAP financial measures.
EBITDA and Adjusted EBITDA
We define EBITDA as net income (loss) before interest,
taxes, depreciation and amortization. Adjusted EBITDA is defined
as EBITDA adjusted for the impact of stock-based compensation,
Non-Qualified Plan Investment appreciation/depreciation, and
for certain items affecting period-to-period comparability. The
Company presents EBITDA and Adjusted EBITDA because it
considers such information meaningful supplemental measures of
its performance and believes such information is frequently used
by the investment community in the evaluation of similarly situated
companies. The Company uses EBITDA and Adjusted EBITDA as
factors used to determine the total amount of incentive compen-
sation available to be awarded to executive officers and other
employees. The Company’s credit agreement uses EBITDA and
Adjusted EBITDA to determine its interest rate and to measure
compliance with certain covenants. EBITDA and Adjusted EBITDA
are also used by the Company to evaluate and price potential
acquisition candidates. EBITDA and Adjusted EBITDA have
limitations as analytical tools and should not be considered in
isolation or as a substitute for analysis of the Company’s results
as reported under GAAP. Some of the limitations are: (a) EBITDA
and Adjusted EBITDA do not reflect changes in, or cash
requirements for, the Company’s working capital needs; (b)
EBITDA and Adjusted EBITDA do 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. EBITDA and Adjusted EBITDA
should only be used on a supplemental basis combined with
GAAP results when evaluating the Company’s performance.
Free Cash Flow
We define Free Cash Flow as net cash provided by
operating activities less capital expenditures. The Company
considers Free Cash Flow to be a liquidity measure that
provides useful information to management and investors about
the amount of cash generated by the business after the
purchases of fixed assets, which can then be used to, among
other things, invest in the Company’s business, make strategic
acquisitions, strengthen the balance sheet and repurchase
stock or retire debt. Free Cash Flow is a liquidity measure that is
frequently used by the investment community in the evaluation
of similarly situated companies. Since Free Cash Flow is not a
measure of performance calculated in accordance with GAAP,
it should not be considered in isolation or as a substitute for
analysis of the Company’s results as reported under GAAP. A
limitation of the utility of free cash flow as a measure of financial
performance is that it does not represent the total increase or
decrease in the Company’s cash balance for the period.
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
2019 and 2018. 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.
The Company’s quarterly results may experience seasonal fluctuations – see the Seasonality section in Item 1 for
details. Refer above to the Results of Operations section for a discussion of significant events and transactions.
20
Consolidated Balance Sheets
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands, except share data)
See accompanying Notes to Consolidated Financial Statements.
21
Consolidated Statements of Income
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands, except per share data)
See accompanying Notes to Consolidated Financial Statements.
22
Consolidated Statements of Comprehensive Income
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands)
See accompanying Notes to Consolidated Financial Statements.
23
Consolidated Statements of Stockholders’ Equity
1-800-FLOWERS.COM, Inc. and Subsidiaries
Years ended June 30, 2019, July 1, 2018 and July 2, 2017
(in thousands, except share data)
See accompanying Notes to Consolidated Financial Statements.
24
Consolidated Statements of Cash Flows
1-800-FLOWERS.COM, Inc. and Subsidiaries
(in thousands)
Supplemental Cash Flow Information:
- Interest paid amounted to $4.7 million, $4.0 million, and $4.4 million, for the years ended June 30, 2019, July 1, 2018 and
July 2, 2017, respectively.
- The Company paid income taxes of approximately $8.8 million, $5.2 million, and $6.8 million, net of tax refunds received,
for the years ended June 30, 2019, July 1, 2018, and July 2, 2017, respectively.
See accompanying Notes to Consolidated Financial Statements.
25
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 gifts
designed to help customers express, connect and celebrate.
For more than 40 years, 1-800-Flowers.com has been
delivering smiles to customers with gifts for every occasion,
including fresh flowers and the best selection of plants,
gift baskets, gourmet foods, confections, jewelry, candles,
balloons and plush stuffed animals. As always, our 100%
Smile Guarantee backs every gift.
The Company’s Celebrations Ecosystem includes the
following brands: 1-800-Flowers.com, 1-800-Baskets.com,
Cheryl’s Cookies, FruitBouquets.com, Harry & David,
Moose Munch, The Popcorn Factory, Wolferman’s,
Personalization Universe, Simply Chocolate, Goodsey,
DesignPac, and Stock Yards. Through the Celebrations
Passport loyalty program, which provides members with
free standard shipping and no service charge across our
portfolio of brands, 1-800-FLOWERS.COM, Inc. strives to
deepen its relationships with its customers. The Company
also operates BloomNet, an international floral wire
service providing a broad-range of products and services
designed to help professional florists grow their busi-
nesses profitably; as well as Napco, a resource for floral
gifts and seasonal décor.
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. All significant intercompany accounts and transactions
have been eliminated in consolidation. During fiscal
years 2019, 2018 and 2017, approximately 1% of consoli-
dated net revenue came from international sources.
Fiscal Year
The Company’s fiscal year is a 52- or 53-week period
ending on the Sunday nearest to June 30. Fiscal years
2019, 2018, and 2017, which ended on June 30, 2019,
July 1, 2018, and July 2, 2017, 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 repur-
chase agreements and commercial paper with maturities
of three months or less when purchased.
Inventories
Inventories are valued at the lower of cost or market
using the first-in, first-out method of accounting.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation
expense is computed using the straight-line method over
the assets’ estimated useful lives. Amortization of lease-
hold improvements and capital leases is computed using
the straight-line method over the shorter of the estimated
useful lives and the initial lease terms. The Company
capitalizes certain internal and external costs incurred to
acquire or develop internal-use software. Capitalized
software costs are amortized on a straight-line basis over
the estimated useful life of the software. 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 are
depreciated using the following estimated lives:
10 - 40
Building and building improvements (years)
Leasehold improvements (years)
3 - 10
Furniture, fixtures and production equipment (years) 3 - 10
Software (years)
3 - 7
Orchards in production and
land improvements (years)
15 - 35
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 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
26
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 performed to compute the amount of
the goodwill impairment, 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 year 2019, the Company did not perform
a Step 0 analysis and instead opted to perform a Step 1
analysis, and determined that the estimated fair value of
the Company’s reporting units significantly exceeded
their respective carrying values (including goodwill
allocated to each respective reporting unit). During fiscal
years 2018 and 2017, the Company performed a Step 0
analysis and determined that it was not “more likely than
not” that the fair values of its reporting units were less
than their carrying amounts. Future changes in the
estimates and assumptions above could materially affect
the results of our reviews for impairment of goodwill.
Other Intangibles, net
Other intangibles consist of definite-lived intangible
assets (such as investment in licenses, customer lists,
27
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 year 2019, the Company did not perform a
Step 0 analysis and instead opted to perform a quantitative
test, which determined that the estimated fair value of the
Company’s intangibles exceeded their respective carrying
value in all material respects. During fiscal years 2018 and
2017, the Company performed a Step 0 analysis and
determined that it was not “more likely than not” that the fair
values of the indefinite-lived intangibles were less than
their carrying amounts. Future changes in the estimates
and assumptions above could materially affect the results
of our reviews for impairment of intangibles.
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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. Starting in fiscal 2019, with the
adoption of ASU No. 2014-09 (see below), these costs
are expensed upon mailing, instead of being amortized in
direct proportion to actual sales, as was the case in fiscal
years 2018 and 2017. Included within prepaid and other
current assets was $2.8 million and $3.0 million at June
30, 2019 and July 1, 2018 respectively, relating to
prepaid catalog expenses.
Investments
Equity investments accounted for under the
equity method
The Company has certain investments in non-
marketable equity instruments of private companies.
The Company accounts for these investments using the
equity method if they provide the Company the ability to
exercise significant influence, but not control, over the
investee. Significant influence is generally deemed to
exist if the Company has an ownership interest in the
voting stock of the investee between 20% and 50%,
although other factors, such as representation on the
investee’s Board of Directors, are considered in
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 investment is com-
prised of an interest in Flores Online, a Sao Paulo, Brazil
based Internet floral and gift retailer, that the Company
originally acquired on May 31, 2012. The Company
currently holds 24.9% of the outstanding shares of Flores
Online. The book value of this investment was $0.5 million
as of June 30, 2019 and $0.6 million as of July 1,
2018, and is included in the “Other assets” line item
within the Company’s consolidated balance sheets.
The Company’s equity in the net loss of Flores Online for
the years ended June 30, 2019, July 1, 2018 and July 2,
2017 was less than $0.1 million per year. During the
quarter ended December 31, 2017, Flores Online entered
into a share exchange agreement with Isabela Flores
Intermediações Ltda. (“Isabela Flores”), whereby among
other changes, the Company exchanged 5% of its
interest in Flores Online for a 5% interest in Isabela
Flores. This new investment of approximately $0.1 million
is currently being accounted for as an equity investment
without a readily determinable fair value (see below). In
conjunction with this share exchange, the Company
determined that the fair value of its investment in Flores
Online was below its carrying value and that this decline
was other-than-temporary. As a result, the Company
recorded an impairment charge of $0.2 million, which
is included within “Other (income) expense, net” in the
Company’s consolidated statement of income during
the quarter ended December 31, 2017.
Equity investments without a readily determinable
fair value
Investments in non-marketable equity instruments of
private companies, where the Company does not possess
the ability to exercise significant influence, are accounted
for at cost, less impairment (assessed qualitatively at each
reporting period), adjusted for observable price changes
from orderly transactions for identical or similar invest-
ments of the same issuer. These investments are included
within “Other assets” in the Company’s consolidated
balance sheets. The aggregate carrying amount of the
Company’s cost method investments was $1.6 million
as of June 30, 2019 and $1.7 million as of July 1, 2018,
including a $1.5 million investment in Euroflorist.
Equity investments with a readily determinable
fair value
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 within the “Other assets” line item in the consoli-
dated balance sheets (see Note 10.).
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 ($2.8 million at June
30, 2019 and $2.4 million at July 1, 2018) have been
recorded based upon previous experience and
management’s evaluation.
28
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Revenue Recognition
Net revenue is measured based on the amount
of consideration that we expect to receive, reduced
by discounts and estimates for credits and returns
(calculated based upon previous experience and
management’s evaluation). Service and outbound
shipping charged to customers are recognized at the
time the related merchandise revenues are recognized
and are included in net revenues. Inbound and
outbound shipping and delivery costs are included in
cost of revenues. Net revenues exclude sales and other
similar taxes collected from customers.
A description of our principal revenue generating
activities is as follows:
- E-commerce revenues - consumer products sold
through our online and telephonic channels.
Revenue is recognized when control of the
merchandise is transferred to the customer,
which generally occurs upon shipment. Payment
is typically due prior to the date of shipment.
- Retail revenues - consumer products sold through
our retail stores. Revenue is recognized when
control of the goods is transferred to the customer,
at the point of sale, at which time payment is
received.
- Wholesale revenues - products sold to our
wholesale customers for subsequent resale.
Revenue is recognized when control of the goods is
transferred to the customer, in accordance with the
terms of the applicable agreement. Payment terms
are typically 30 days from the date control over the
product is transferred to the customer.
- BloomNet Services - membership fees as well as
other service offerings to florists. Membership and
other subscription-based fees are recognized
monthly as earned. Services revenues related to
orders sent through the floral network are variable,
based on either the number of orders or the value of
orders, and are recognized in the period in which
the orders are delivered. The contracts within
BloomNet Services are typically month-to-month and
as a result no consideration allocation is necessary
across multiple reporting periods. Payment is
typically due less than 30 days from the date the
services were performed.
Deferred Revenues
Deferred revenues are recorded when the Company
has received consideration (i.e., advance payment) before
satisfying its performance obligations. As such, customer
orders are recorded as deferred revenue prior to shipment
or rendering of product or services. Deferred revenues
primarily relate to e-commerce orders placed, but not
shipped, prior to the end of the fiscal period, as well as for
monthly subscription programs, including our Fruit of the
Month Club and Celebrations Passport program.
Our total deferred revenue as of July 1, 2018 was
$13.5 million (included in “Accrued expenses” on our
consolidated balance sheets), of which, $13.5 million was
recognized as revenue during the year ended June 30,
2019. The deferred revenue balance as of June 30, 2019
was $17.3 million.
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 expenses, 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 operat-
ing 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 $147.8 million, $138.2 million
and $137.5 million for the years ended June 30, 2019,
July 1, 2018 and July 2, 2017, 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 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
periodically managed its floating rate debt using interest
29
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 June 30, 2019 and July 1, 2018.
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
outstanding during the period. Diluted net income per
share is computed using the weighted-average number
of common and dilutive common equivalent shares
(consisting primarily of employee stock options and
unvested restricted stock awards) outstanding during
the period.
Recently Issued Accounting Pronouncements -
Adopted
Revenue from Contracts with Customers. In May
2014, the FASB issued ASU No. 2014-09, “Revenue from
Contracts with Customers.” amending revenue recogni-
tion guidance (“ASC 606”) and requiring more detailed
disclosures to enable users of financial statements to
understand the nature, amount, timing, and uncertainty
of revenue and cash flows arising from contracts with
customers. The Company determined that the new
standard impacted the following areas related to our e-
commerce and retail/franchise revenue streams: the costs
of producing and distributing the Company’s catalogs will
be expensed upon mailing, instead of being capitalized
and amortized in direct proportion to the actual sales; gift
card breakage will be recognized over the expected
customer redemption period, rather than when redemp-
tion is considered remote; e-commerce revenue will be
recognized upon shipment, when control of the merchan-
dise transfers to the customer, instead of upon receipt by
the customer; initial and other franchise fees will be
recognized over the franchise term (or remaining
franchise term), rather than upon store opening (or
renewal/transfer).
The Company adopted this ASC effective July 2, 2018
for all revenue contracts with our customers using the
modified retrospective approach and increased retained
earnings by $0.3 million. The adjustment primarily related
to the unredeemed portion of our gift cards (breakage
income), which increased retained earnings and reduced
accrued expenses by $1.9 million; partially offset by the
change in accounting for the Company’s catalogs, which
decreased retained earnings and decreased prepaid
expense by $0.8 million; as well as a deferral of initial
franchise fees, which decreased retained earnings and
increased accrued expenses by $0.8 million. The
comparative information presented in this Form 10-K has
not been restated and continues to be reported under the
accounting standards in effect for those periods. The
adoption of the new revenue standard did not have a
material impact to our net income for the fiscal year 2019.
However, the adoption of the new revenue standard did
result in quarterly fluctuations throughout the fiscal year
2019 (which were disclosed in the respective Form 10-
Qs), primarily as a result of the change in accounting for
catalog costs, as noted above. The Company’s contract
liabilities related to gift cards ($1.8 million as of June 30,
2019) are not considered material for purposes of this
disclosure. Refer to Note 15 – Business Segments for
disclosure of disaggregated revenues.
Financial Instruments – Recognition and
Measurement. In January 2016, the FASB issued ASU
No. 2016-01, “Financial Instruments – Overall: Recogni-
tion and Measurement of Financial Assets and Financial
Liabilities,” as amended by ASU No. 2018-03, “Financial
Instruments-Overall: Technical Corrections and Improve-
ments,” issued in February 2018. The new guidance
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 (subject to an exemption for investments that
have no readily determinable fair values), 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
30
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
the fair value that is required to be disclosed for financial
instruments measured at amortized cost. Upon adoption
of the new guidance, we have elected to measure the
investments we hold in certain non-marketable equity
securities in which we do not have a controlling interest
or significant influence, and that have no readily deter-
minable fair values at cost, less impairment, adjusted for
observable price changes from orderly transactions for
identical or similar investments of the same issuer. The
Company adopted the guidance prospectively effective
July 2, 2018. The adoption did not have a significant
impact on the Company’s consolidated financial position
or results of operations.
Statement of Cash Flows. In June 2016, the FASB
issued ASU 2016-15, “Statement of Cash Flows (Topic
230), a consensus of the FASB’s Emerging Issues Task
Force.” ASU 2016-15 is intended to reduce diversity in
practice in how certain transactions are classified in the
statement of cash flows. The Company adopted the
guidance retrospectively, effective July 2, 2018. The
adoption did not have a significant impact on the
Company’s consolidated financial position or results
of operations.
Business Combinations – Definition of a
Business. In January 2017, the FASB issued ASU No.
2017-01, “Business Combinations (Topic 805): Clarifying
the Definition of a Business (ASU 2017-01),” which
revises the definition of a business and provides new
guidance in evaluating when a set of transferred assets
and activities is a business. The Company adopted the
guidance prospectively, effective July 2, 2018. The
adoption did not have a significant impact on the
Company’s consolidated financial position or results
of operations.
Nonfinancial Assets – Derecognition. In February
2017, the FASB issued ASU No. 2017-05, “Other Income -
Gains and Losses from the Derecognition of Nonfinancial
Assets.” This update clarifies the scope of accounting for
the derecognition or partial sale of nonfinancial assets to
exclude all businesses and nonprofit activities. ASU 2017-
05 also provides a definition for in-substance nonfinancial
assets and additional guidance on partial sales of nonfi-
nancial assets. The Company adopted the guidance
retrospectively, effective July 2, 2018. The adoption did not
have a significant impact on the Company’s consolidated
financial position or results of operations.
Stock Compensation – Modification Accounting. In
May 2017, the FASB issued ASU No. 2017-09, “Compen-
sation - Stock Compensation (Topic 718): Scope of
Modification Accounting.” This ASU provides guidance on
the types of changes to the terms or conditions of share-
based payment awards to which an entity would be
required to apply modification accounting. An entity would
not apply modification accounting if the fair value, vesting
conditions, and classification of the awards are the same
immediately before and after the modification. The
Company adopted the guidance prospectively, to awards
modified on or after the adoption date, effective July 2,
2018. The adoption did not have a significant impact on
the Company’s consolidated financial position or results
of operations.
Cloud Computing Arrangements – Implementation
Costs. In August 2018, the FASB issued ASU No. 2018-
15, “Intangibles - Goodwill and Other - Internal-Use
Software (Subtopic 350-40) - Customer’s Accounting for
Implementation Costs Incurred in a Cloud Computing
Arrangement That Is a Service Contract.” The amend-
ments in this ASU align the requirements for capitalizing
implementation costs incurred in a hosting arrangement
that is a service contract with the requirements for
capitalizing implementation costs incurred to develop or
obtain internal-use software (and hosting arrangements
that include an internal-use software license). The
accounting for the service element of a hosting arrange-
ment that is a service contract is not affected by this ASU.
The amendments in this ASU also require the entity
(customer) to expense the capitalized implementation
costs of a hosting arrangement that is a service contract
over the term of the hosting arrangement, require the
entity to present the expense related to the capitalized
implementation costs in the same line item in the state-
ment of income as the fees associated with the hosting
element (service) of the arrangement and classify
payments for capitalized implementation costs in the
statement of cash flows in the same manner as payments
made for fees associated with the hosting element and
also require the entity to present the capitalized imple-
mentation costs in the statement of financial position in
the same line item that a prepayment for the fees of the
associated hosting arrangement would be presented.
The Company adopted the guidance prospectively, to all
implementation costs incurred after the date of adoption,
effective July 2, 2018. The adoption did not have a
significant impact on the Company’s consolidated
financial position or results of operations.
Recently Issued Accounting Pronouncements –
Not Yet Adopted
Leases. In February 2016, the FASB issued ASU No.
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
information 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 quantita-
tive 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.
We will adopt the new standard beginning with the
first quarter of our fiscal year ending on June 28, 2020.
We have elected the optional transition method to apply
the standard as of the effective date and therefore, we
will not apply the standard to the comparative periods
presented in our financial statements. The new standard
provides a number of optional practical expedients in
transition. We expect to elect the ‘package of practical
expedients’, which permits us not to reassess under the
31
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
new standard our prior conclusions about lease identifi-
cation, lease classification and initial direct costs. We do
not expect to elect the use-of-hindsight or the practical
expedient pertaining to land easements; the latter not
being applicable to us. Further, we will elect a short-term
lease exception policy, permitting us to not apply the
recognition requirements of this standard to short-term
leases (i.e. leases with terms of 12 months or less) and
an accounting policy to account for lease and non-lease
components as a single component for certain classes
of assets.
We are finalizing the impact of the standard to our
accounting policies, processes, disclosures, and internal
control over financial reporting and have implemented
necessary upgrades to our existing lease system. The
Company currently anticipates a material impact to its
Consolidated Balance Sheets, but expects no impact to
the Consolidated Statements of Income or Consolidated
Statements of Cash Flows. We expect to record operating
lease liabilities of approximately $80.7 million based on
the present value of the remaining minimum rental
payments using discount rates as of the effective date.
We expect to record corresponding right-of-use assets
of approximately $78.7 million, based on the operating
lease liabilities adjusted for deferred rent and lease
incentives received.
Financial Instruments – Measurement of Credit
Losses. In June 2016, the FASB issued ASU No. 2016-13,
“Financial Instruments-Credit Losses (Topic 326): Mea-
surement of Credit Losses on Financial Instruments.” ASU
2016-13 introduces a new forward-looking “expected 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 disclo-
sure 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 modi-
fied-retrospective approach. The Company is currently
evaluating the potential impact of adopting this guidance
on our consolidated financial statements.
Goodwill – Impairment Test. In January 2017, the
FASB issued ASU No. 2017-04, “Intangibles - Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill
Impairment,” which eliminates Step 2 from the goodwill
impairment test. Under ASU 2017-04, an entity should
recognize an impairment charge for the amount by which
the carrying amount of a reporting unit exceeds its fair
value up to the amount of goodwill allocated to that
reporting unit. This guidance is effective for the
Company’s fiscal year ending July 4, 2021, with early
adoption permitted, and should be applied prospectively.
We do not expect the standard to have a material impact
on our consolidated financial statements.
U.S. Tax Reform
On December 22, 2017, the U.S. government
enacted significant changes to the U.S. tax law following
the passage and signing of the Tax Cuts and Jobs Act
(the “Tax Act”). The Tax Act revised the future ongoing
U.S. corporate income tax by, among other things,
lowering U. S. corporate income tax rates from 35%
to 21%. Since the Company’s fiscal year ends in June,
the lower corporate income tax rate was phased in,
resulting in a U.S. statutory federal rate of approximately
28% for fiscal year 2018, and 21% for subsequent
fiscal years. The Tax Act also eliminated the domestic
production activities deduction and introduced limitations
on certain business expenses and executive compensa-
tion deductions.
Shortly after the Tax Act was enacted, the SEC staff
issued Staff Accounting Bulletin No. 118, “Income Tax
Accounting Implications of the Tax Cuts and Jobs Act”
(“SAB 118”), which provided guidance on accounting for
the Tax Act’s impact. SAB 118 provided a measurement
period, which in no case should extend beyond one year
from the Tax Act enactment date, during which a company
acting in good faith may complete the accounting for the
impacts of the Tax Act under ASC Topic 740. In accor-
dance with the expiration of the SAB 118 measurement
period, we completed the assessment of the income tax
effects of the Tax Act in the second quarter of fiscal 2019,
with no adjustments recorded to the provisional amounts.
Reclassifications
Certain balances in the prior fiscal years have been
reclassified to conform to the presentation in the current
fiscal year.
32
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 3 – Net Income Per Common Share
from Continuing Operations
The following table sets forth the computation of
basic and diluted net income per common share from
continuing operations:
Years Ended
June 30, July 1, July 2,
2019 2018 2017
(in thousands, except per share data)
Fannie May for a period of approximately 20 months,
related to the business of Fannie May, and a commercial
agreement with respect to the distribution of certain
Ferrero and Fannie May products.
Operating results of Fannie May are reflected in the
Company’s consolidated financial statements through
May 30, 2017, the date of its disposition, within its
Gourmet Foods & Gift Baskets segment. During fiscal
2017, Fannie May contributed net revenues of $85.6
million. Operating and pre-tax income during such
period were not material.
Numerator:
Net income $34,766 $40,791 $44,041
Note 5. Inventory
The Company’s inventory, stated at cost, which is not
in excess of market, includes purchased and manufac-
tured finished goods for sale, packaging supplies, crops,
raw material ingredients for manufactured products and
associated manufacturing labor and is classified as
follows:
June 30, July 1,
2019 2018
(in thousands)
Finished goods $ 36,820 $33,930
17,575
Work-in-process
Raw materials
37,320
Total Inventory $92,361 $88,825
17,535
38,006
Denominator:
Weighted average
shares outstanding
Effect of dilutive securities:
Employee stock
options
Employee restricted
stock awards
Total effect of
dilutive securities
Adjusted weighted-average
shares and assumed
conversions
64,342
64,666
65,191
1,404
1,580
1,519
711
692
1,025
2,115
2,272
2,544
66,457
66,938
67,735
Net income per common share
from continuing operations
attributable to 1-800-FLOWERS.COM, Inc.
Basic $ 0.54 $ 0.63 $ 0.68
Diluted $ 0.52 $ 0.61 $ 0.65
Note 4. Dispositions
On March 15, 2017, the Company and Ferrero
International S.A., a Luxembourg corporation (“Ferrero”),
entered into a Stock Purchase Agreement (the “Purchase
Agreement”) pursuant to which Ferrero agreed to
purchase from the Company all of the outstanding equity
of Fannie May Confections Brands, Inc., including its
subsidiaries, Fannie May Confections, Inc. and Harry
London Candies, Inc. (“Fannie May”) for a total consider-
ation of $115.0 million in cash, subject to adjustment for
seasonal working capital. On May 30, 2017, the Com-
pany closed on the transaction, and the working capital
adjustment was finalized in August 2017, resulting in an
$8.5 million payment to Ferrero during the first quarter of
fiscal 2018. The associated gain on sale of $14.6 million,
is included within “Other income, net” in the Company’s
consolidated statement of income in the fourth quarter of
fiscal 2017.
The Company and Ferrero also entered into a
transition services agreement whereby the Company
provided certain post-closing services to Ferrero and
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 Foods &
Floral Service Gift Baskets Total
(in thousands)
$17,441
Balance at July 2, 2017
$17,441
Balance at July 1, 2018
$17,441
Balance at June 30, 2019
––
––
––
$
$
$
$45,149
$45,149
$45,149
$62,590
$62,590
$62,590
There were no goodwill impairment charges in any segment during the years ended June 30, 2019, July 1, 2018
and July 2, 2017.
The Company’s other intangible assets consist of the following:
June 30, July 1,
2019 2018
Gross Gross
Amortization Carrying Accumulated Carrying Accumulated
Period Amount Amortization Net Amount Amortization Net
(in years) (in thousands)
Intangible assets with determinable lives
Investment in
licenses
Customer lists
Other
14-16
3-10
5-14
$ 7,420 $ 6,148
9,798
2,280
12,184
2,946
$ 1,272
2,386
666
$ 7,420 $ 6,042 $ 1,378
2,830
774
9,354
2,172
12,184
2,946
Total intangible assets with
determinable lives
Trademarks with
indefinite lives
Total identifiable
intangible assets
22,550
18,226
4,324
22,550
17,568
4,982
55,291
––
55,291
54,841
––
54,841
$ 77,841
$18,226
$59,615
$77,391 $17,568
$59,823
Intangible assets with determinable lives are reviewed for impairment whenever events or changes in circum-
stances indicate that the carrying amount of an asset or asset group may not be recoverable. No material impairments
were recognized for the years ended June 30, 2019, July 1, 2018 and July 2, 2017.
The amortization of intangible assets for the years ended June 30, 2019, July 1, 2018 and July 2, 2017 was $0.7
million, $1.4 million and $1.4 million, respectively. Future estimated amortization expense is as follows: 2020 - $0.6
million, 2021 - $0.6 million, 2022 - $0.5 million, 2023 - $0.5 million, 2024 - $0.5 million and thereafter - $1.6 million.
34
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 7. Property, Plant and Equipment
Note 9. Long-Term Debt
June 30, July 1,
2019 2018
(in thousands)
$ 30,789
$ 30,789
The Company’s current and long-term debt consists of
the following:
June 30, July 1,
2019 2018
(in thousands)
11,339
59,236
13,861
10,962
58,450
12,997
Revolver (1)
Term Loan (1)
Deferred financing costs
Total debt
Less: current debt
Long-term debt
$
––
$
––
100,000 104,938
(3,027) (2,608)
102,330
10,063
$ 92,267
96,973
5,000
$ 91,973
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
amortization
Property, plant and
equipment, net
61,415
53,066
53,694
132,078
46,925
115,944
9,902
10,789
372,314
339,922
(205,633) (176,582)
$166,681
$163,340
Depreciation expense for the years ended June 30,
2019, July 1, 2018 and July 2, 2017 was $29.3 million,
$31.1 million, and $32.0 million, respectively.
Note 8. Accrued Expenses
Accrued expenses consisted of the following:
June 30, July 1,
2019 2018
(in thousands)
Payroll and employee benefits
Deferred revenue
Accrued marketing expenses
Accrued florist payout
Other
Accrued Expenses
$28,585 $12,992
13,524
12,472
6,890
27,421
$96,793 $73,299
17,305
14,423
8,038
28,442
(1) On May 31, 2019, the Company and certain of its U.S.
subsidiaries (collectively, the “Subsidiary Guarantors”)
entered into a Second Amended and Restated Credit
Agreement (the “2019 Credit Agreement”) with JPMorgan
Chase Bank, N.A. as administrative agent, and a group of
lenders. The 2019 Credit Agreement amended and restated
the Company’s existing amended and restated credit
agreement dated as of December 23, 2016 (the “2016 Credit
Agreement”) to, among other modifications: (i) increase the
amount of the outstanding term loan (“Term Loan”) from
approximately $97 million to $100 million, (ii) extend the
maturity date of the outstanding Term Loan and the revolving
credit facility (“Revolver”) by approximately 29 months to
May 31, 2024, and (iii) decrease the applicable interest rate
margins for LIBOR and base rate loans by 25 basis points.
The Term Loan is payable in 19 quarterly installments of
principal and interest beginning on September 29, 2019, with
escalating principal payments, at the rate of 5.0% per annum
for the first eight payments, and 10.0% per annum for the
remaining 11 payments, with the remaining balance of $62.5
million due upon maturity. The Revolver, in the aggregate
amount of $200 million, subject to seasonal reduction to an
aggregate amount of $100 million for the period from January
1 through August 1, may be used for working capital and
general corporate purposes, subject to certain restrictions.
For each borrowing under the 2019 Credit Agreement, the
Company may elect that such borrowing bear interest at an
annual rate equal to either: (1) a base rate plus an applicable
margin varying based on the Company’s consolidated
leverage ratio, where the base rate is the highest of (a) the
prime rate, (b) the New York fed bank rate rate plus 0.5% and
(c) a LIBOR rate plus 1% or (2) an adjusted LIBOR rate plus
an applicable margin varying based on the Company’s
consolidated leverage ratio. The 2019 Credit Agreement
requires that while any borrowings or commitments are
outstanding the Company comply with certain financial
covenants and affirmative covenants as well as certain
negative covenants that, subject to certain exceptions, limit
the Company’s ability to, among other things, incur additional
indebtedness, make certain investments and make certain
restricted payments. The Company was in compliance with
these covenants as of June 30, 2019. The 2019 Amended
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:
$5.0 million – fiscal 2020, $5.0 million – fiscal 2021, $10.0 million
– fiscal 2022, $10.0 million – fiscal 2023 and $70.0 million –
fiscal 2024.
35
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 10. Fair Value Measurements
Cash and cash equivalents, trade and other receiv-
ables, prepaids, accounts payable and accrued ex-
penses 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 circum-
stances indicate that an other-than-temporary decline
in value may have occurred. The Company’s remaining
financial assets and liabilities are measured and re-
corded 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 circum-
stances change such that it is more likely than not that
an impairment may exist, as required under the account-
ing standards.
Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability, in
the principal or most advantageous market for the asset
or liability, in an orderly transaction between market
participants at the measurement date. The authoritative
guidance for fair value measurements establishes
a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or
liabilities (level 1 measurements) and the lowest priority
to unobservable inputs (level 3 measurements). The
three levels of the fair value hierarchy under the
guidance are described below:
Level 1 Valuations based on quoted prices in active
markets for identical assets or liabilities that the
entity has the ability to access.
Level 2 Valuations based on quoted prices for similar
assets or liabilities, quoted prices in markets
that are not active, or other inputs that are
observable or can be corroborated by
observable data for substantially the full term
of the assets or liabilities.
Level 3 Valuations based on inputs that are supported
by little or no market activity and that are
significant to the fair value of the assets
or liabilities.
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 June 30, 2019:
Trading securities
held in a
“rabbi trust” (1) $11,816 $11,816 $ –– $ ––
$11,816 $11,816 $ –– $ ––
Assets (liabilities) as of July 1, 2018:
Trading securities
held in a
“rabbi trust” (1) $ 9,368 $ 9,368 $ –– $ ––
$ 9,368 $ 9,368 $ –– $ ––
(1) The Company has established a Non-qualified Deferred
Compensation Plan (the “NQDC 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 the rabbi trust are measured using
quoted market prices at the reporting date and are included in
the “Other assets” line item, with the corresponding liability
included in the “Other liabilities” line item in the consolidated
balance sheets.
Note 11. Income Taxes
Significant components of the income tax provision
are as follows:
Years Ended
June 30, July 1, July 2,
2019 2018 2017
(in thousands)
Current provision:
Federal
State
Foreign
Current income
tax expense
$2,809
2,710
––
$ 3,385 $11,859
1,758
––
1,514
––
5,519
4,899
13,617
Deferred provision (benefit):
Federal
State
Foreign
Deferred income tax
expense (benefit)
Income tax expense
3,138
(427)
(13)
(9,331)
1,648
15
(1,563)
(90)
4
2,698
(7,668)
(1,649)
The following table presents by level, within the fair
(benefit)
$8,217
$(2,769) $11,968
36
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
A reconciliation of the U.S. federal statutory tax rate to
the Company’s effective tax rate is as follows:
Years Ended
June 30, July 1, July 2,
2019 2018 2017
Tax at U.S. statutory rates
35.0%
State income taxes, net
of federal tax benefit
2.3
4.4
Valuation allowance change (0.3)
14.9
Non-deductible compensation 0.7 –– ––
Excess tax benefit from
5.7
2.6
28.0%
21.0%
stock-based compensation (4.4) (1.6) (1.6)
Domestic production
deduction –– (2.0) (2.1)
Tax credits (1.8) (2.5) (1.7)
Tax Act impact on
deferred tax balance (1) –– (32.0) ––
Return to provision (1.0) (5.8) ––
Tax effect of
Fannie May disposition –– –– (25.3)
Other, net 0.5 0.3 (0.1)
Effective tax rate 19.1% (7.3)% 21.4%
(1) On December 22, 2017, the U.S. government
enacted comprehensive tax legislation pursuant to the
Tax Cuts and Jobs Act (the “Tax Act”), which significantly
revised the ongoing U.S. corporate income tax law by
lowering the U.S. federal corporate income tax rate
from 35% to 21%. Due to the Company’s fiscal year end,
the lower income tax rate was phased in, resulting in a
U.S. statutory federal rate of approximately 28% for the
Company’s fiscal year ended July 1, 2018, and 21% for
the fiscal year ended June 30, 2019. Accordingly, for the
fiscal year ended July 1, 2018, the Company recorded a
deferred tax benefit of $12.2 million related to the change
in deferred tax liabilities.
Shortly after the Tax Act was enacted, the SEC Staff
issued Staff Accounting Bulletin 118, “Income Tax
Implications of the Tax Cuts and Jobs Act” (“SAB 118”),
which provided guidance on accounting for the Tax Act’s
impact. SAB 118 provided a measurement period during
which a company acting in good faith may complete the
accounting for the impacts of the Tax Act. We completed
the assessment of the income tax effects of the Tax Act in
the second quarter of fiscal 2019, with no adjustments
recorded to the provisional amounts.
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. The signifi-
cant components of the Company’s deferred income tax
assets (liabilities) are as follows:
Years Ended
June 30, July 1,
2019 2018
(in thousands)
Deferred income tax assets:
Loss and credit
carryforwards
Accrued expenses
and reserves
Stock-based
compensation
Deferred compensation
Gross deferred
$ 10,955 $ 11,286
3,866
1,798
2,150
3,871
1,344
1,711
income tax assets
18,212
Less: Valuation allowance (9,872) (9,972)
8,240
Deferred tax assets, net
18,769
8,897
Deferred income tax liabilities:
Other intangibles (14,664) (14,983)
Tax in excess of
book depreciation (23,131) (19,457)
Deferred tax liabilities (37,795) (34,440)
Net deferred
income tax liabilities
$ (28,898) $ (26,200)
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 certain state and all
foreign net operating losses as well as federal and state
capital loss carryforwards. The Company does not expect
to utilize the federal and state capital loss carryforward
prior to expiration and has therefore provided for a full
valuation allowance. At June 30, 2019, the Company’s
total federal and state capital loss carryforwards
were $27.8 million, which if not utilized, will expire in
fiscal 2022. The Company’s foreign net operating loss
carryforwards were $3.3 million, which if not utilized, will
begin to expire in fiscal 2034.
The Company files income tax returns in the U.S.
federal jurisdiction, various state jurisdictions, and
various foreign countries. The Company is currently
undergoing its U.S. federal examination for
fiscal 2017, however, fiscal 2018 remain subject to U.S.
federal examination. Due to ongoing state examinations
and nonconformity with the U.S. federal statute of
limitations for assessment, certain states remain open
from fiscal 2015. The Company’s foreign income tax
filings from fiscal 2014 forward are open for examination
37
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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. At June 30,
2019, the Company has reserved approximately 4.5 mil-
lion shares of Class A common stock for issuance,
including options previously authorized for issuance
under the 1999 Stock Incentive Plan.
The amounts of stock-based compensation expense
recognized within operating income (1) in the periods
presented are as follows:
Years Ended
June 30, July 1, July 2,
2019 2018 2017 (2)
(in thousands)
Stock options
Restricted stock awards
Total
Deferred income tax benefit
Stock-based compensation
$ 315
5,995
6,310
1,578
$ 429
3,297
3,726
961
$ 446
5,248
5,694
2,213
expense, net
$4,732 $2,765
$3,481
Stock based compensation expense is recorded
within the following line items of operating expenses:
Years Ended
June 30, July 1, July 2,
2019 2018 2017 (2)
(in thousands)
Marketing and sales
Technology and
development
General and administrative
Total
$2,725
$ 989
$1,624
411
3,174
198
2,539
$6,310 $3,726
315
3,755
$5,694
(1) Stock-based compensation expense has not been
allocated between business segments, but is reflected as
part of Corporate overhead. (See Note 15. for details).
(2) Excludes approximately $0.4 million of stock-based
compensation expense recorded within the gain on the
sale of Fannie May, resulting from the acceleration of
vesting of shares for Fannie May personnel, upon
closing of the disposition.
by its respective foreign tax authorities, mainly Canada,
Brazil, and the United Kingdom.
The Company’s policy is to recognize interest and
penalties accrued on any unrecognized tax benefits as a
component of income tax expense. At June 30, 2019, the
Company has an unrecognized tax benefit, including an
immaterial amount of accrued interest and penalties, of
approximately $0.9 million. The Company believes
that $0.2 million of the unrecognized tax positions will
be resolved over the next twelve months.
Note 12. Capital Stock
Holders of Class A common stock generally have the
same rights as the holders of Class B common stock,
except that holders of Class A common stock have one
vote per share and holders of Class B common stock
have 10 votes per share on all matters submitted to the
vote of stockholders. Holders of Class A common stock
and Class B common stock generally vote together as a
single class on all matters presented to the stockholders
for their vote or approval, except as may be required by
Delaware law. Class B common stock may be converted
into Class A common stock at any time on a one-for-one
share basis. Each share of Class B common stock will
automatically convert into one share of Class A common
stock upon its transfer, with limited exceptions. During
fiscal 2018, 78,780 shares of Class B common stock were
converted into shares of Class A common stock, while
none were converted during fiscal 2019.
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
October 2016, the Company’s Board of Directors autho-
rized an increase to its stock repurchase plan of up to $25
million. In August 2017, the Board of Directors increased
the authorization to $30.0 million, and subsequently
increased it once more on June 27, 2019 to $30.0 million.
The Company repurchased a total of $14.8 million
(1,230,303 shares), $12.2 million (1,269,059 shares) and
$10.7 million (1,120,706 shares) during the fiscal years
ended June 30, 2019, July 1, 2018 and July 2, 2017,
respectively, under this program. As of June 30, 2019,
$30.0 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 (as amended and restated as of October 22,
2009, as amended as of October 28, 2011 and September
14, 2016) (the “Plan”). The Plan is a broad-based, long-
term incentive program that is intended to provide incen-
tives to attract, retain and motivate employees, consultants
and directors in order to achieve the Company’s long-term
growth and profitability objectives. 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”).
38
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Stock Options
The Company did not grant stock options during fiscal years 2019, 2018 and 2017. The following table
summarizes stock option activity during the year ended June 30, 2019:
Weighted Weighted
Average Average Aggregate
Exercise Remaining Intrinsic
Options Price Contractual Term Value
(in years) (in thousands)
Outstanding beginning of period 1,968,234 $2.35
Granted –– $ ––
Exercised (601,234) $2.06
Forfeited/Expired (2,000) $2.22
Outstanding end of period 1,365,000 $2.48
1,235,000 $2.43
Exercisable at June 30, 2019
$22,388
$20,312
2.1
2.0
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference be-
tween the Company’s closing stock price on the last trading day of fiscal 2018 and the exercise price, multiplied
by the number of in-the-money options) that would have been received by the option holders had all option holders
exercised their options on June 30, 2019. This amount changes based on the fair market value of the Company’s
stock. The total intrinsic value of options exercised for the years ended June 30, 2019, July 1, 2018 and July 2,
2017 was $7.8 million, $1.1 million and $0.5 million, respectively.
The following table summarizes information about stock options outstanding at June 30, 2019:
Options Outstanding Options Exercisable
Weighted- Weighted- Weighted-
Average Average Average
Options Remaining Exercise Options Exercise
Exercise Price Outstanding Contractual Life Price Exercisable Price
(in years)
$ 1.79
$ 2.44
$ 2.63
$10.20
330,000
25,000
1,000,000
10,000
1,365,000
1.3
0.4
2.3
5.8
2.1
$ 1.79
$ 1.79
$ 2.44
$ 2.44
$ 2.63
$ 2.63
$10.20 5,000 $10.20
$ 2.43
1,235,000
$ 2.48
330,000
25,000
875,000
As of June 30, 2019, the total future compensation cost related to non-vested options not yet recognized in the
statement of operations was $0.1 million and the weighted average period over which these awards are expected
to be recognized was 0.4 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 June 30, 2019:
Weighted
Average
Grant Date
Shares Fair Value
962,273
Non-vested – beginning of period
Granted
953,066
Vested (411,600)
Forfeited
(65,147)
Non-vested – end of period 1,438,592
$ 7.72
$12.74
$ 7.91
$11.62
$10.81
The fair value of non-vested shares is determined based on the closing stock price on the grant date. As of June
30, 2019, there was $9.7 million of total unrecognized compensation cost related to non-vested restricted stock-based
compensation to be recognized over a weighted-average period of 1.6 years.
39
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 14. Employee Retirement Plans
The Company has a 401(k) Profit Sharing Plan
covering substantially all of its eligible employees. All
employees who have attained the age of 21 are eligible
to participate upon completion of one month of service.
Participants may elect to make voluntary contributions to
the 401(k) plan in amounts not exceeding federal guide-
lines. On an annual basis the Company, as determined
by its Board of Directors, may make certain discretionary
contributions. Employees are vested in the Company’s
contributions based upon years of service. The Company
contributed $0.9 million, $0.0 million and $0.0 million
during fiscal years 2019, 2018, and 2017, respectively.
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. Up until December 31, 2016, the Company
matched 50% of the deferrals made by each participant
during the applicable period, up to a maximum of $2,500.
Effective January 1, 2017, the Company suspended
contributions. Employees are vested in the Company’s
contributions based upon years of participation in the
plan. Distributions will be made to participants upon
termination of employment or death in a lump sum,
unless installments are selected. As of June 30, 2019,
and July 1, 2018, these plan liabilities, which are in-
cluded in “Other liabilities” within the Company’s consoli-
dated balance sheets, totaled $11.8 million and $9.4
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” within the Company’s consolidated balance
sheets. Company contributions during the year ended
July 2, 2017 were less than $0.1 million. The gains
(losses) on these investments which were $0.7 million,
$0.8 million and $1.0 million for the years ended June 30,
2019, July 1, 2018 and July 2, 2017, respectively, are
included in “Other (income) expense, net,” within the
Company’s consolidated statements of income.
Note 15. Business Segments
The Company’s management reviews the results of
the Company’s operations by the following three busi-
ness segments:
(cid:127) 1-800-Flowers.com Consumer Floral,
(cid:127) BloomNet Wire Service, and
(cid:127) Gourmet Foods & Gift Baskets
Segment performance is measured based on contri-
bution margin, which includes only the direct controllable
revenue and operating expenses of the segments. As
such, management’s measure of profitability for these
segments does not include the effect of corporate
overhead (see (a) below), nor does it include deprecia-
tion and amortization, other (income) expense, net and
income taxes, or stock-based compensation, which is
included within corporate overhead. Assets and liabilities
40
are reviewed at the consolidated level by management
and not accounted for by segment.
Net Revenues
Years Ended
June 30, July 1, July 2,
2019 2018 2017
(in thousands)
Net revenues:
1-800-Flowers.com
Consumer Floral
BloomNet Wire
Service
Gourmet Foods &
Gift Baskets
Corporate
Intercompany
$ 497,765 $ 457,460 $ 437,132
102,876
89,569
87,700
648,418
605,523
670,677
1,105
1,114
1,102
eliminations (1,541) (1,745) (2,986)
Total net revenues
$1,248,623
$1,151,921 $1,193,625
Operating Income from Continuing Operations
Years Ended
June 30, July 1, July 2,
2019 2018 2017
(in thousands)
Segment Contribution Margin:
1-800-Flowers.com
Consumer Floral $49,653 $50,808 $51,860
BloomNet Wire
Service
Gourmet Foods &
Gift Baskets
Segment Contribution
Margin Subtotal
34,705 31,683 32,383
82,319 70,927 77,312
166,677 153,418 161,555
Corporate (a) (91,604) (79,901) (81,820)
Depreciation and
amortization (29,965) (32,469) (33,376)
Operating income $ 45,108 $41,048 $46,359
(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.
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
The following tables represent a disaggregation of revenue from contracts with customers, by channel:
maintenance, utilities, etc.) was approximately $20.0
million, $19.6 million and $28.7 million for the years
ended June 30, 2019, July 1, 2018 and July 2, 2017,
respectively.
Other Commitments
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 June 30, 2019, the Company had fixed
and determinable off-balance sheet purchase commit-
ments with remaining terms in excess of one year of
approximately $5.5 million, primarily related to the
Company’s technology infrastructure and inventory
commitments.
The Company had approximately $1.6 million and
$1.8 million in unused stand-by letters of credit as of
June 30, 2019 and July 1, 2018, respectively.
Litigation
There are various claims, lawsuits, and pending
actions against the Company and its subsidiaries incident
to the operations of its businesses. It is the opinion of
management, after consultation with counsel, that the
ultimate resolution of such claims, lawsuits and pending
actions will not have a material adverse effect on the
Company’s consolidated financial position, results of
operations or liquidity.
Note 16. Commitments and Contingencies
Leases
The Company currently leases office, store facilities,
and equipment under various leases through fiscal 2034.
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 June 30, 2019, future minimum rental payments
under non-cancelable operating leases with initial terms
of one year or more consist of the following:
Operating
Leases
(in thousands)
2020
2021
2022
2023
2024
Thereafter
Total minimum lease payments
$ 16,588
13,490
12,081
9,957
9,498
44,953
$106,567
At June 30, 2019, the total future minimum sublease
rentals under non-cancelable operating sub-leases for
land and buildings were $3.7 million. Rent expense
(excluding executory costs such as real estate taxes,
41
(cid:127)
(cid:127)
(cid:127)
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and
maintaining adequate internal control over financial
reporting. Internal control over financial reporting is
defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act as a process designed by, or under the
supervision of, the Company’s principal executive and
principal financial officers and effectuated by the
Company’s Board of Directors, management and other
personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance
with U.S. generally accepted accounting principles (“U.S.
GAAP”), and includes those policies and procedures that:
pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets
of the Company;
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 June 30, 2019.
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
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 June 30, 2019. BDO USA, LLP’s report on the
effectiveness of the Company’s internal control over
financial reporting as of June 30, 2019 is set forth below.
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.
42
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
1-800-Flowers.com, Inc.
Carle Place, NY
Opinion on Internal Control over Financial Reporting
We have audited 1-800-FLOWERS.COM, Inc. (the
“Company’s”) internal control over financial reporting as
of June 30, 2019, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway
Commission (the “COSO criteria”). In our opinion, based
on our audit, the Company maintained, in all material
respects, effective internal control over financial reporting
as of June 30, 2019, based on the COSO criteria.
We also have audited, in accordance with the
standards of the Public Company Accounting Oversight
Board (United States) (“PCAOB”), the consolidated
balance sheets of 1-800-FLOWERS.COM. Inc. and
Subsidiaries as of June 30, 2019 and July 1, 2018 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 June 30,
2019, and the related notes and schedule, and our report
dated September 13, 2019 expressed an unqualified
opinion thereon.
Basis for Opinion
The Company’s management is responsible for
maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the
accompanying “Item 9A, Management’s Report on
Internal Control over Financial Reporting”. Our responsi-
bility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We
are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the
Company in accordance with U.S. federal securities laws
and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit of internal control over
financial reporting in accordance with the standards of
the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting
was maintained in all material respects. Our audit
included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material
weakness exists, 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.
Definition and Limitations of Internal Control over
Financial Reporting
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
principles, and that receipts and expenditures of the
company are being made only in accordance with
authorizations of management and directors of the
company; and (3) provide reasonable assurance regard-
ing prevention or timely detection of unauthorized acquisi-
tion, use, or disposition of the company’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
BDO USA, LLP
Melville, New York
September 13, 2019
43
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
1-800-FLOWERS.COM, Inc.
Carle Place, NY
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated
balance sheets of 1-800-FLOWERS.COM, Inc. and
Subsidiaries as of June 30, 2019 and July 1, 2018 and the
related consolidated statements of income, comprehensive
income, stockholders’ equity, and cash flows for each of the
three years in the period ended June 30, 2019, and the
related notes and schedule (collectively referred to as the
“consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all
material respects, the financial position of the Company
and subsidiaries at June 30, 2019 and July 1, 2018, and
the results of their operations and their cash flows for each
of the three years in the period ended June 30, 2019, 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) (“PCAOB”), the Company’s
internal control over financial reporting as of June 30,
2019, 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 13, 2019 ex-
pressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audits.
We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. 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, whether due to error or
fraud. Our audits included performing procedures to
assess the risks of material misstatement of the consoli-
dated financial statements, whether due to error or fraud,
and performing procedures that respond to those risks.
Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also
included evaluating 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.
We have served as the Company’s auditor since 2014.
BDO USA, LLP
Melville, New York
September 13, 2019
44
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.
Rights of Common Stock
Holders of Class A common stock generally have the same rights as the holders of Class B common stock, except
that holders of Class A common stock have one vote per share and holders of Class B common stock have 10 votes
per share on all matters submitted to the vote of stockholders. Holders of Class A common stock and Class B common
stock generally vote together as a single class on all matters presented to the stockholders for their vote or approval,
except as may be required by Delaware law. Class B common stock may be converted into Class A common stock at
any time on a one-for-one share basis. Each share of Class B common stock will automatically convert into one share
of Class A common stock upon its transfer, with limited exceptions. During fiscal 2018, 78,780 shares of Class B
common stock were converted into shares of Class A common stock, while none were converted during fiscal 2019.
Holders
As of September 6, 2019, there were approximately 230 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 6,
2019, there were approximately 7 stockholders of record of the Company’s Class B common stock.
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 transactions, subject to general market conditions. The repurchase program is
financed utilizing available cash. In October 2016, the Company’s Board of Directors authorized an increase to its stock
repurchase plan of up to $25 million, then in August 2017, the Board of Directors increased the authorization to $30.0
million, and subsequently increased it once more on June 27, 2019 to $30.0 million. The Company repurchased a total
of $14.8 million (1,230,303 shares), $12.2 million (1,269,059 shares) and $10.7 million (1,120,706 shares) during the
fiscal years ended June 30, 2019, July 1, 2018 and July 2, 2017, respectively, under this program. As of June 30, 2019,
$30.0 million remains authorized under the plan.
The following table sets forth, for the months indicated, the Company’s purchase of common stock during the fiscal
year ended June 30, 2019, which includes the period July 2, 2018 through June 30, 2019:
Total Number of Dollar Value of
Shares Purchased as Shares that May Yet
Part of Publicly Be Purchased Under
Total Number of Average Price Announced Plans or the Plans or
Period Shares Purchased Paid Per Share (1) Programs Programs
(in thousands, except average price paid per share)
07/02/18 - 07/29/18
––
07/30/18 - 08/26/18 ––
345.6
08/27/18 - 09/30/18
318.4
10/01/18 - 10/28/18
346.0
10/29/18 - 11/25/18
115.0
11/26/18 - 12/30/18
90.0
12/31/18 - 01/27/19
15.3
01/28/18 - 02/24/19
––
02/25/19 - 03/31/19
––
04/01/19 - 04/28/19
––
04/29/19 - 05/26/19
––
05/27/19 - 06/30/19
––
––
$11.66
$11.12
$12.70
$12.31
$12.80
$13.34
––
––
––
––
––
––
345.6
318.4
346.0
115.0
90.0
15.3
––
––
––
––
Total
1,230.3
$11.98
1,230.3
(1) Average price per share excludes commissions and other transaction fees.
$19,997
$19,997
$15,957
$12,409
$ 8,010
$ 6,591
$ 5,436
$ 5,231
$ 5,231
$ 5,231
$ 5,231
$30,000
45
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 6/30/14 in stock or index, including reinvestment of dividends. Fiscal year ending June 30.
46
One Old Country Road, Suite 500
Carle Place, NY 11514
(516) 237-6000
Special Note Regarding Forward-Looking Statements
This annual report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking statements represent
1-800-FLOWERS.COM, Inc.’s (the “Company”) current expectations or beliefs concerning future events
and can generally be identified by the use of statements that include words such as “estimate,”
“expects,” “project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” or similar words or
phrases. These forward-looking statements are subject to risks, uncertainties and other factors,
many of which are outside of the Company’s control, which could cause actual results to differ
materially from the results expressed or implied in the forward-looking statements, including,
among others: the Company’s ability to achieve its guidance for revenue, Adjusted EBITDA and
EPS; its ability to manage the significant seasonality of its business; its ability to integrate the
operations of acquired companies; 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. Reconciliations for forward looking figures would
require unreasonable efforts at this time because of the uncertainty and variability of the nature
and amount of certain components of various necessary GAAP components, including for example
those related to compensation, tax items, amortization or others that may arise during the year, and
the Company’s management believes such reconciliations would imply a degree of precision that
would be confusing or misleading to investors. The lack of such reconciling information should be
considered when assessing the impact of such disclosures. 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, 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.
Definitions of non-GAAP Financial Measures:
We sometimes use financial measures derived from consolidated financial information, but not
presented in our financial statements prepared in accordance with U.S. generally accepted ac-
counting principles (“GAAP”). Certain of these are considered “non-GAAP financial measures” under
the U.S. Securities and Exchange Commission (“SEC”) rules. Non-GAAP financial measures referred
to in this document are either labeled as “non-GAAP” or designated as such with a “1”. See below
for definitions and the reasons why we use these non-GAAP financial measures.
EBITDA and Adjusted EBITDA
We define EBITDA as net income (loss) before interest, taxes, depreciation and amortization.
Adjusted EBITDA is defined as EBITDA adjusted for the impact of stock-based compensation,
Non-Qualified Plan Investment appreciation/depreciation, and for certain items affecting
period-to-period comparability. The Company presents EBITDA and Adjusted EBITDA because it
considers such information meaningful supplemental measures of its performance and believes
such information is frequently used by the investment community in the evaluation of similarly
situated companies. The Company uses EBITDA and Adjusted EBITDA as factors used to determine
the total amount of incentive compensation available to be awarded to executive officers and oth-
er employees. The Company’s credit agreement uses EBITDA and Adjusted EBITDA to determine
its interest rate and to measure compliance with certain covenants. EBITDA and Adjusted EBITDA
are also used by the Company to evaluate and price potential acquisition candidates. EBITDA and
Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as
a substitute for analysis of the Company’s results as reported under GAAP. Some of the limitations
are: (a) EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, the
Company’s working capital needs; (b) EBITDA and Adjusted EBITDA do 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. EBITDA and Adjusted EBITDA
should only be used on a supplemental basis combined with GAAP results when evaluating the
Company’s performance.
Free Cash Flow
We define Free Cash Flow as net cash provided by operating activities less capital expenditures.
The Company considers Free Cash Flow to be a liquidity measure that provides useful information
to management and investors about the amount of cash generated by the business after the
purchases of fixed assets, which can then be used to, among other things, invest in the Company’s
business, make strategic acquisitions, strengthen the balance sheet and repurchase stock or retire
debt. Free Cash Flow is a liquidity measure that is frequently used by the investment community
in the evaluation of similarly situated companies. Since Free Cash Flow is not a measure of perfor-
mance calculated in accordance with GAAP, it should not be considered in isolation or as a substi-
tute for analysis of the Company’s results as reported under GAAP. A limitation of the utility of free
cash flow as a measure of financial performance is that it does not represent the total increase or
decrease in the Company’s cash balance for the period.
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
Updated 7/15
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One Old Country Road, Suite 500
Carle Place, NY 11514
1800flowers.com
(516) 237-6000