2 0 2 0 A N N U A L R E P O R T
EX P R E S S , C O N N E C T , C E L E B R A T E
E N G A G I N G C U S T O M E R S , D E L I V E R I N G SMILES
E N G AG I N G W I T H O U R C U S TO M E R S
As a company, our Vision is to inspire more human expression,
connection and celebration. This means creating unique
ways to help our customers engage with each other – and our
company – well beyond the transactional process.
It means understanding and communicating
the many ways our products and services help
people build relationships, share with others,
express themselves in meaningful ways and
celebrate moments big and small. To do
this in an authentic way – a way that truly
resonates with our customers – it must reside
with all of us and permeate every aspect
of what we do.
Our customer-first strategy means we
have a clear investment in the needs of
our customers and that we are commit-
ted to consistently bringing them more
value. In the process, we will deepen our
connections and relationships with our
customers, earning their emotional loyalty
for our company and its family of brands.
O U R V I S I O N
I N S P I R E M O R E H U M A N
E X P R E S S I O N , CO N N E C T I O N
A N D C E L E B R AT I O N
O U R M I S S I O N
D E L I V E R S M I L E S !
A B O U T 1 - 800 - F LO W E R S . CO M , I N C .
1-800-FLOWERS.COM, Inc. (the “Company”) is a leading provider of gifts designed to help customers
express, connect and celebrate. The Company’s business platform features our all-star family of
brands, including: 1-800-Flowers.com®, 1-800-Baskets.com®, Cheryl’s Cookies®, Harry & David®,
PersonalizationMall.com®, Shari’s Berries®, FruitBouquets.com®, Moose Munch®, The Popcorn Factory®,
Wolferman’s Bakery® and Simply Chocolate®. 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 relation-
ships with customers. The Company also operates BloomNet®, an international floral service provider
offering 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. 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
Total Net Revenues
Gross Profit Margin
Operating Expense Ratio
Adjusted EBITDA(1)
Adjusted EPS
JUNE 28,
2020
JUNE 30,
2019
JULY 1,
2018
JULY 2,
2017
JULY 3,
2016
(in millions, except percentages and per share data)
$1,489.6
41.8%
36.4%
$ 129.5(2)
$ 0.98(3)
$1,248.6
42.1%
38.5%
$ 82.1
$ 0.52
$1,151.9
42.5%
38.9%
$ 78.9(4)
$ 0.44(5)
$1,193.6
43.6%
39.7%
$ 87.2(6)
$ 0.43(7)
$1,173.0
44.1%
40.4%
$ 85.7(8)
$ 0.43(9)
(1) Excludes stock-based compensation and non-qualified supplementary retirement plan investment appreciation and depreciation.
(2) Adjusted EBITDA for fiscal 2020 excludes the items included in footnote (1), as well as litigation and transaction costs associated with the acquisition of PersonalizationMall.com ($2.7
million) and Harry & David retail store closure costs ($5.2 million).
(3) Adjusted EPS for fiscal 2020 excludes litigation and transaction costs, as well as Harry & David retail store closure costs. Fiscal 2020 EPS, as reported, was $0.89.
(4) Adjusted EBITDA for fiscal 2018 excludes the items included in footnote (1), as well as litigation settlement costs ($0.4 million) and severance ($0.4 million).
(5) 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.
(6) Adjusted EBITDA for fiscal 2017 excludes the items included in footnote (1), as well as Harry & David severance costs.
(7) 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.
(8) 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.
(9) 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.
TOTA L R E V E N U E S
(From Continuing Operations In Millions)
Adjusted EBITDA(1)
$1,490
$1,173 $1,194
$1,152
$1,249
$129.5(2)
$87.2(6)
$85.7(8)
$82.1
$78.9(4)
F Y 20 % R E V E N U E S
8%
BloomNet®
40%
Consumer Floral
SEGMENT
52%
Gourmet Foods & Gift Baskets
28%*
April – June
(Fiscal 4th Quarter)
19%
January – March
(Fiscal 3rd Quarter)
FISCAL
QUARTER
12%
July – September
(Fiscal 1st Quarter)
41%
October – December
(Fiscal 2nd Quarter)
FY16
FY17
FY18
FY19
FY20
(*Reflects impact of COVID-19 pandemic)
F I S C A L 2020 AC H I E V E M E N T S
F I N A N C I A L R E P O R T I N S E R T
s Achieved 19.3 percent growth in total revenue to $1.49 Billion
s Achieved 57.8 percent growth in Adjusted EBITDA to $129.5 Million
s Achieved 129.9 percent growth in Free Cash Flow to $104.7 Million
s Acquired Shari’s Berries (closed August 2019) and acquired
PersonalizationMall.com, LLC (closed August 2020)
See inside rear cover pocket
TO O U R S H A R E H O L D E R S
Fiscal 2020 was both a tremendously successful as
well as a tremendously challenging year. To start,
I would like to acknowledge all our associates
for their dedication and hard work in helping our
customers stay connected and express themselves
despite the unprecedented challenges brought on
by the COVID-19 pandemic. Our record revenue and
profit growth for fiscal 2020 is a testament to their
efforts and demonstrates the effective execution
of our strategy to engage with our customers and
drive sustainable, long-term growth.
As we review fiscal 2020, it is important to note, that
through the first three quarters of the year – before
the impact of the pandemic – we achieved solid top
and bottom-line growth, as well as strong growth in our customer
files. This reflects our ability to leverage our business platform,
including:
n our all-star family of brands;
n our focus on innovation in technology and product development;
n our digital marketing expertise, and;
n our dedication to providing truly exemplary customer service.
The momentum that we carried into our fiscal fourth quarter was
further accelerated by the impact of the health crisis as customers
increasingly turned to our trusted brands and innovative products to
help them remain connected and express themselves during a very
difficult period. As a result, already strong customer demand levels
rose dramatically across our floral and gourmet gift brands.
FOCUS ON OPERATIONAL EXCELLENCE
Our focus on operational excellence was on full display throughout
the year as we leveraged our production and fulfillment capacity
to meet the rising customer demand levels, while concurrently
protecting the health and safety of our associates, our vendors and
our customers. As a result, even while absorbing increased operating
costs associated with the pandemic, we achieved strong bottom-line
results for the full fiscal year.
TRULY ORIGINAL PRODUCTS
In our Gourmet Foods and Gift Baskets segment, throughout the year
we saw customers embracing our great brands and products for an
increasing range of everyday occasions, including birthdays, anniver-
saries, get well, sympathy and just because. This already growing trend
was significantly accelerated by the impact of the pandemic as people
– who were traveling less and isolating more – recognized the need
to stay connected and express themselves to the important people
in their lives. As a result, products and product collections that had
already been showing strong growth, became go-to purchases for our
customers. Products like:
n the Harry & David GourmetSM line of prepared foods – from
charcuterie and cheese – to complete family meals;
n The Popcorn Factory® Tins with Pop® – featuring relevant memes like
“A Socially-Distant Hug”;
n Cheryl’s Cookies® Sentiments Collection, featuring sentiments for
every moment, such as “Here for You,” “Great Job,”
“You’re Awesome,” and more, and;
n Shari’s Berries® – which performed ahead of our
expectations throughout the year.
In our Consumer Floral business, the
1-800-Flowers.com® brand benefited from increasing
demand for everyday occasions along with strong
growth for the Valentine’s and Easter holidays and re-
cord demand for the Mother’s Day holiday. Here too,
customers continued to respond well to our focus on
product innovation, including:
n the expansion of the 1-800-Flowers Plant Shop,
featuring a growing assortment of highly popular
succulents and house plants;
n our new Conversation RosesTM collection with heartfelt sentiments
literally printed right on the rose petals themselves, and;
n the launch of our Jason Wu for Wild BeautyTM line, featuring the
exclusive floral creations of one of the hottest fashion trend setters
on the scene today.
As a result, the 1-800-Flowers.com® brand continued to grow at an
accelerated pace on the largest revenue base in the floral industry,
further extending its market leadership position.
In our BloomNet® business, throughout the year we continued to
focus on strengthening our capabilities as the leading floral industry
service provider, offering a broad range of programs designed to help
our florists grow their businesses profitably. With the onset of the
pandemic, we expanded these efforts significantly to help our local
florist members weather a very challenging environment.
For example, in addition to waiving membership fees for the month
of April, we provided florists with information and assistance so
that they could safely expand their fulfillment capacity and achieve
a much-needed boost to their business for the Mother’s Day
holiday. We also launched several new programs to help our florist
members, including:
n on demand personalized greeting cards that enable florists to
achieve additional revenue on 1-800-Flowers.com® orders;
n Floriology NOWSM, a digital learning platform for continuing
education, and;
n BloomNet WorksSM, a collection of cost savings and profit
enhancing programs.
STRONG NEW CUSTOMER GROWTH
Through the first three quarters of fiscal 2020, we achieved strong
growth of nearly 11 percent in our new customer file. This reflected:
n the trust customers have in our great family of brands;
n our expanded offering of truly original products, designed specifi-
cally to help them express themselves, and;
n the evolution of our marketing messaging,
s to be more relevant,
s to engage directly with our customers in a two-way dialog, and
s to focus on the experience of connection.
TO O U R S H A R E H O L D E R S
New customer growth accelerated dramatically in our fourth quarter,
driving full-year new customer growth to more than 40 percent. In
addition, growth in our Celebrations Passport® Loyalty program and
in Multi-Brand Customers – our best performing customer cohorts –
was even stronger. These trends, along with increased demand from
existing customers, continued into the first half of fiscal 2021, further
enhancing our ability to drive sustainable strong revenue growth
going forward.
than $100 million, our solid balance sheet enables us to continue to
invest to enhance our existing business platform as well as add to our
products and capabilities through our M&A strategy.
OUTLOOK FOR CONTINUED STRONG GROWTH
As we headed into our new year, we stated that, due to the signif-
icant uncertainty in the overall economy related to the ongoing
COVID-19 pandemic, we were not providing guidance for the full
fiscal 2021 year. We did, however, provide guidance for our fiscal
first quarter, which we exceeded both in revenue and profit growth
– driven by continued strong ecommerce growth. In fact, our fiscal
2021 first quarter results represented the sixth consecutive quarter
in which our three business segments – Gourmet Food and Gift
Baskets, Consumer Floral and Gifts, and BloomNet® – recorded solid,
year-over-year growth. Looking ahead, we see the strong
momentum in our business continuing based on
some of the key trends in the macro environ-
LATEST ADDITION TO OUR ALL-STAR BRANDS
In February, we announced an agreement to acquire
PersonalizationMall.com® (“PMall”). While we were set to close on
the acquisition at the end of March, the pandemic caused a delay
of several months, with the final closing occurring on August 3rd.
We are very pleased to have closed the acquisition well ahead of
the key holiday season with the business up and running
and already growing nicely on a year-over-year basis.
M&A STRATEGY BENEFITS GROWTH
Fiscal 2020 was “book-ended” by our acqui-
sitions of Shari’s Berries® in August 2019
and PMall in August 2020. The addition of
these brands to our portfolio reflects the
flexibility of the unique business platform
we have built and illustrates our strategy
to add to our accelerated organic growth
with acquisitions:
n the first, Shari’s Berries®, a smaller “tuck-in”
where we acquired no hard assets,
infrastructure or personnel – and were
able to leverage our existing operating
infrastructure to reposition the brand and
grow its revenue and profitability ahead of our
initial expectations;
Our Commitment
to Diversity
At 1-800-FLOWERS.COM, Inc., we
seek to inspire more human expression,
connection and celebration – for everyone.
This means fostering a culture of inclusion
where our team members, customers
and partners feel respected, valued and
empowered. We believe that embracing
diversity, and celebrating the
uniqueness of every individual,
makes us a better company.
ment, including:
n the tremendous shift of consumers
to ecommerce shopping where we
are positioned as a leader with our
all-star collection of brands;
n the increase in “nesting” as people
are spending less time traveling
and more time at home and seek to
add more comfort and convenience
to their new, staying-in-place
lifestyle, and;
n the prevailing sentiments that
have emerged from these challenging
times, specifically, our customers’ need
to connect and express themselves to the
n and the second, PMall, a great new extension of our product
offering that adds new capabilities to our platform and instantly
makes us one of the leaders in the personalized products that our
customers tell us they are looking for to help them connect and
express with others.
In both cases, we see significant opportunities to accelerate the
growth of these businesses by leveraging our:
n cross-brand marketing and merchandising;
n digital marketing experience and expertise;
n technology platform, and
n fulfillment network.
FURTHER STRENGTHENING OUR BALANCE SHEET
We finished fiscal 2020 with cash and investments of $240.5 million.
Our term debt balance was $95.0 million and we had zero borrow-
ings outstanding under the working capital line within our revolving
credit facility. As a result, total net cash at the end of the quarter was
$145.5 million. Soon after the year closed, we amended our credit
agreement, adding an incremental $150 million of borrowing capacity
to our existing credit facility through a combination of an incremen-
tal term loan of $100 million and an increase of $50 million in our
revolving credit facility. Along with our strong free cash flow of more
important people in their lives.
We are uniquely well-positioned to benefit from, and
build on these trends, by leveraging our business platform. With
our leadership positions in Floral, Gourmet Foods and now Personalized
products, we can solve more of our customers’ needs to connect
with more of their recipients for more occasions, thus, increasing
customer lifetime value.
As always, we continue to be laser focused on our Vision: to engage
with our customers to inspire more human expression, connection,
and celebration – sentiments that the current environment has
taught us are more important than ever.
In closing, I would like to, once again, thank all of our associates for
their resilience and dedication to our vision to helping our customers
stay connected in what continues to be a very challenging envi-
ronment. I would also like to thank our vendors, suppliers and our
shareholders for their continued support.
Chris McCann, President and CEO
JANUARY
Perhaps more than ever before,
this new year brings with it an oppor-
tunity for people to remind family and
friends how much they care. As the
leading provider of gifts designed to
help customers express, connect and
celebrate, 1-800-FLOWERS.COM, Inc.
is always exploring new ways for cus-
tomers to engage with their recipients
and our Company. Our industry leading
1-800-Flowers.com® floral brand is the
authority in flowers and plants and our
growing portfolio of gifts also features
such iconic gourmet food brands as
Harry & David®, 1-800-Baskets.com®,
Cheryl’s Cookies®, The Popcorn Factory®,
Wolferman’s Bakery® and Moose
Munch®, complemented by our newest
addition, PersonalizationMall.com®. We
are committed to constantly enhancing
the gifting experience through innova-
tive technologies backed by superior
service – building strong relationships
with our customers while making it
easy for them to deliver smiles to the
important people in their lives.
S U N D AY
S U N D AY
M O N D AY
M O N D AY
T U E S D AY
T U E S D AY
3
10
17
24
4
11
5
12
18
Martin Luther King Jr.’s
Birthday (observed)
19
25
26
31
2021 W E D N E S D AY
W E D N E S D AY
THURSDAY
THURSDAY
F R I D AY
F R I D AY
S AT U R D AY
S AT U R D AY
1
New Year’s Day
8
15
22
29
2
9
16
23
30
6
13
20
27
7
14
21
28
FEBRUARY
February is a month filled with ex-
pressions of love, an opportunity to
let someone know how truly special
they are. Fresh flower arrangements
from 1-800-Flowers.com®, crafted
to perfection by the finest floral
artisans, are cherished gifts for
Valentine’s Day. Also ideal are de-
lectable treats from Simply Chocolate®,
Shari’s Berries® and FruitBouquets.com®.
Helping to make Cupid’s day even more
special is PersonalizationMall.com®
which was acquired at the start of
fiscal 2021. The addition of “PMall” to
our all-star family of brands enhanc-
es our ability to help our customers
engage and stay connected with
others. Similar to our market-leading
positions in floral and gourmet
foods, the broad assortment of
products and personalization pro-
cesses offered by PMall makes
us a leader in the growing market
for personalized gifts.
S U N D AY
M O N D AY
T U E S D AY
1
8
2
Groundhog Day
9
7
14
Valentine’s Day
15
Presidents Day
16
22
23
21
28
2021 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
26
6
13
20
27
S U N D AY
M O N D AY
T U E S D AY
MARCH
BloomNet® is a leading floral
industry service provider, offering a
broad range of services to help pro-
fessional florists grow and prosper.
The dedication of BloomNet to its
florists was underscored as the pan-
demic created many challenges for
these local businesses. In addition to
providing florists with information
related to state and federal support
programs, BloomNet introduced
several new initiatives to help
enhance florists’ profitability,
including the BloomNet Greeting
Card Program, which enables florists
to offer customers on-demand,
personalized greeting cards. Also
launched was BloomNet WorksSM,
featuring a collection of cost-reducing
and profit boosting benefits.
BloomNet also unveiled Floriology
NOWSM, a new online education plat-
form featuring video-based courses
covering more than 70 floral design
and business topics – generating
opportunities for florists to expand
their knowledge and their sales
potential.
7
14
1
8
15
21
National Flower Day
22
28
29
2
9
16
23
30
2021 W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
5
12
19
26
6
13
20
First Day of Spring
27
Passover Begins at Sunset
3
10
4
11
17
Saint Patrick’s Day
18
25
24
31
APRIL
1-800-FLOWERS.COM, Inc. increased
revenues substantially in fiscal
2020, punctuated by accelerated
customer growth. Contributing to
that growth is the re-emergence of
Easter as a key celebratory occasion
both for floral gifts and for gourmet
foods. Customers are increasingly
looking to the Easter holiday, and
the Spring season in general, as a
time to engage and connect with
loved ones and friends. Helping
to drive our growth and year-
long revenues is our Celebrations
Passport® loyalty program offering
free standard shipping and no ser-
vice charge on purchases across our
family of brands. Passport members
are among our best customers in
terms of behavior metrics – typified
by increases in purchase frequency,
annual-spend and retention, as well
as showing a high propensity to
become multi-brand customers,
our very best customer cohorts.
S U N D AY
M O N D AY
T U E S D AY
4
Easter
11
18
25
5
12
6
13
19
Administrative Professionals’
Week Begins
20
26
27
2021 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
15
2
9
16
3
10
17
7
14
21
Administrative Professionals’ Day
22
23
National English Muffin Day
24
28
29
30
MAY
At 1-800-Flowers.com®, Mother’s Day
is our number one floral holiday and
May is our biggest plant month of
the year. Building on our authority
position in the plant space, we
launched “The Plant Shop,” offering
new and exclusive botanical choices
that are great for Mother’s Day
and other gifting occasions. This
carefully curated assortment of
plants includes various varieties of
houseplants, succulents, blooming
plants and orchids, plus we offer
ideas and how-to tips, all designed
to help plant lovers create their own
indoor oasis. Across its family of
brands, 1-800-FLOWERS.COM, Inc.
offers a vast array of other top qual-
ity and thoughtful gift possibilities
that are sure to bring a smile of joy
to mom’s face.
S U N D AY
M O N D AY
T U E S D AY
2
3
9
Mother’s Day
10
16
23
17
24
4
11
18
25
30
Memorial Day (observed)
31
2021 W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
5
Cinco dé Mayo
6
7
Bring Your Mom to Work Day
12
19
26
13
20
27
14
21
28
1
8
15
22
29
JUNE
In fiscal 2020, 1-800-FLOWERS.COM, Inc.
achieved solid growth from existing
customers along with more than 40
percent growth in our new customer
file. This growth reflects several factors,
including: the trust customers have
in our family of brands; our expand-
ed offering of truly original products
designed to help customers express
themselves; and re-crafted marketing
messaging designed to engage cus-
tomers in a two-way dialog focusing on
the experience of connecting for such
occasions as Father’s Day. Highlighted
in this messaging is the breadth and
quality of our family of brands, and just
as important, the appreciation that
recipients like dear old dad have for
exceptional gifts from Harry & David®
Gourmet with fine meats such as
steaks, along with unique, personalized
items from PersonalizationMall.com®.
6
13
S U N D AY
M O N D AY
T U E S D AY
1
8
7
14
Flag Day
15
20
Father’s Day
First Day of Summer
21
27
28
22
29
2021 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
26
2
9
16
23
30
JULY
Providing a truly exemplary customer
experience is always a top priority
for 1-800-FLOWERS.COM, Inc. We’re
engaging customers and reinventing
the gift-giving experience through
state-of-the-art technologies,
including an intelligent virtual
assistant that seamlessly combines
artificial intelligence and human un-
derstanding to streamline customer
service. Our use of 3D and augmented
reality enables customers to bring
products to life and visualize them
in their own spaces before making a
purchase. Customers can also send
complimentary e-Cards, choosing
from themed layouts and crafting
their own personalized messages.
We’re also engaging customers
via informative blogs and social
content, providing recipes and
tips about such topics as caring for
plants. And, we’re building engage-
ment through experiential events,
including teaming up with Alice’s
Table to bring virtual flower-arranging
workshops to customers nationwide
and our “Connection Communities”
peer-to-peer support portal that
guides people through life events
by connecting them with others
who have walked the same path.
S U N D AY
M O N D AY
T U E S D AY
4
Independence Day
5
11
18
12
19
25
Parents’ Day
26
6
13
20
27
2021 W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
1
8
7
14
Bastille Day
15
21
28
22
29
2
9
16
23
30
3
10
17
24
31
AUGUST
S U N D AY
M O N D AY
T U E S D AY
Our customers enjoy many oppor-
tunities beyond just holidays to
engage their recipients, including
such everyday occasions as Birthdays,
Thank You, Get Well, Anniversaries,
Sympathy, New Baby and “Just
Because.” Through an array of
cross-brand marketing and
merchandising programs, our
1-800-Flowers.com® floral brand is
extending its market leadership in
everyday gifting to Harry & David®,
Cheryl’s Cookies®, The Popcorn
Factory® and our other food brands.
The result has been dramatic growth
across gourmet food brands for
everyday occasions.
1
National Friendship Week Begins
8
15
22
29
2
9
16
23
30
3
10
17
24
31
2021 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
13
20
27
7
14
21
28
SEPTEMBER
S U N D AY
M O N D AY
T U E S D AY
BloomNet® is committed to offering
innovative services and solutions
florists can utilize to enhance their
success. One example is the Floriology®
Institute. Located in Jacksonville,
Florida, Floriology Institute is the
floral industry’s premier education
center providing world-class floral
design instruction. In addition,
there’s Floriology® magazine, filled
with inspiring design possibilities
and business ideas that can help
florists grow their sales and profits.
And most recently, BloomNet
introduced Farm2FloristSM, a new
wholesale floral marketplace. The
pandemic severely hampered the
supply chain of fresh floral product
that florists depend on to create
bouquets and other arrangements
for their customers. Farm2Florist is a
result of strategic relationships with
best-in-class flower farms, provid-
ing highly reliable access to fresh
floral product delivered quickly, at
substantial savings, from the farms
direct to florists’ doorsteps.
5
6
Labor Day
Rosh Hashanah Begins at Sunset
7
12
Grandparents Day
13
19
26
20
27
14
21
28
2021 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
Patriot Day
18
25
National Singles Day
1
8
2
9
15
Yom Kippur Begins at Sunset
16
22
First Day of Fall
23
29
30
OCTOBER
S U N D AY
M O N D AY
T U E S D AY
During fiscal 2020, the
1-800-FLOWERS.COM, Inc. Business
Gift Services division launched
a new multi-brand corporate
gifting website, making it easy for
businesses to engage employees
and clients. The new site enables
corporate accounts to seamlessly
access gifts from across our fam-
ily of gourmet and floral brands,
providing diverse possibilities to
stay connected with and express
appreciation for employees,
thank clients, offer condolences,
celebrate holidays and convey
many other sentiments. The
Business Gift Services division also
continues to grow its partnership
programs with such organizations
as AAA, AARP, Veterans Advantage
and other large loyalty partners,
engaging their extensive member-
ships with marketing campaigns
designed to promote our vast
selection of gift brands. In addi-
tion, the division has developed
wholesale programs with Lori’s
Gifts – the nation’s largest provider
of hospital gift shop outsourcing
solutions – to offer an extensive
assortment of gifting choices to
hospital visitors and staff.
3
10
17
24
4
5
11
Columbus Day (observed)
12
18
25
19
26
Halloween
31
2021 W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
1
8
2
9
15
National Boss’s Day
16
Sweetest Day
7
14
21
22
28
National Chocolate Day
29
23
30
6
13
20
27
NOVEMBER
S U N D AY
M O N D AY
T U E S D AY
The month of November is
a time to give thanks for all
that is important in our lives.
1-800-FLOWERS.COM, Inc. is
grateful for the opportunity to
give back to the communities we
serve through product donations to
local food banks and monetary do-
nations to benefit vital organizations
such as No Kid Hungry. In addition,
we work closely with our signature
philanthropic partner, Smile Farms,
to provide meaningful jobs in
agricultural settings to adults with
developmental disabilities. And, our
Harry & David® team in Medford,
Oregon is passionately involved in
the wonderful work of the Teresa
McCormick Center to help those in
need by providing tools that lead to
self-sufficiency.
7
14
21
1
8
15
22
28
Hanukkah Begins at Sunset
29
2
Election Day
9
16
23
30
2021 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
5
11
Veterans Day
12
18
19
6
13
20
25
Thanksgiving Day
26
27
DECEMBER
S U N D AY
M O N D AY
T U E S D AY
In many ways, the holiday season
is all about connecting with others,
sharing treasured memories and
creating new ones. Christmas,
Hanukkah and Kwanzaa are filled
with possibilities to show our
appreciation for family and for
the friends who are always there
for us. At 1-800-FLOWERS.COM, Inc.,
our unwavering goal is to help
our customers optimize the
ways they connect with their
recipients. Whether it’s gourmet
foods from such top brands as
Harry & David®, Cheryl’s Cookies®
and The Popcorn Factory®,
or beautiful floral creations
from 1-800-Flowers.com®, or
unique personalized gifts from
PersonalizationMall.com®, provid-
ing just the right gift to express
just the right emotions is what we
do best.
5
12
19
6
13
20
7
14
21
First Day of Winter
26
First Day of Kwanzaa
27
28
2021 W E D N E S D AY
THURSDAY
F R I D AY
S AT U R D AY
1
8
15
22
29
2
9
16
23
30
4
National Cookie Day
11
18
25
Christmas Day
3
10
17
24
31
New Year’s Eve
B OA 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 2020
Financial Report
Selected Financial Data
1-800-FLOWERS.COM, Inc. and Subsidiaries
The selected consolidated statement of income data for the years ended June 28, 2020, June 30, 2019 and
July 1, 2018 and the consolidated balance sheet data as of June 28, 2020 and June 30, 2019, 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 years ended July 2, 2017 and July 3, 2016, and the
selected consolidated balance sheet data as of July 1, 2018, July 2, 2017, and July 3, 2016, 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 Shari’s Berries in August 2019. In May 2017, the Company completed the disposition of its
Fannie May business, and in October 2015, disposed of its iFlorist business. The following data reflects the results
of operations of these subsidiaries since their respective dates of acquisition, and /or until their respective 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. 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. 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.
***In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASC 842”). Under this guidance, an entity is
required to recognize right-of-use assets and lease liabilities on its balance sheet. We adopted the new standard effective July 1,
2019 and elected the optional transition method and therefore, we did not apply the standard to the comparative periods presented
in our financial statements. The adoption of the new standard had a material impact to the Company’s Consolidated Balance Sheets,
but no impact to the Consolidated Statements of Income (Operations) or Consolidated Statements of Cash Flows. As such, we
recorded operating lease liabilities of $80.7 million, based on the present value of the remaining minimum rental payments using
discount rates as of the effective date, and a corresponding right-of-use assets of $78.7 million based on the operating lease
liabilities adjusted for deferred rent and lease incentives received.
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®, Stock Yards®,
and Shari’s Berries®. In August 2020, the Company
added to its family of brands with the acquisition of
PersonalizationMall®. 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 service provider providing a broad-range of
products and services designed to help professional
florists grow their businesses profitably; as well as
NapcoSM, a resource for floral gifts and seasonal décor.
Business Segments
The Company operates in the following three busi-
ness segments: Consumer Floral, Gourmet Foods & Gift
Baskets, and BloomNet. The Consumer Floral segment
includes the operations of the Company’s flagship brand,
1-800-Flowers.com, FruitBouquets.com, Flowerama,
Personalization Universe and Goodsey, while the
Gourmet Foods & Gift Baskets segment includes the
operations of Harry & David (which includes Wolferman’s,
Moose Munch and Stock Yards), Cheryl’s (which includes
Mrs. Beasley’s), The Popcorn Factory, DesignPac and
1-800-Baskets (which includes Simply Chocolate) and
Shari’s Berries. The BloomNet segment includes the
operations of BloomNet and Napco.
See Item 1 in Part I for a detailed description of the
Company’s business.
3
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Fiscal 2020 Results
The Company entered fiscal 2020 with strong revenue
growth momentum, coming off of fiscal 2019, which saw
consolidated revenue increase 8.4% in comparison to
fiscal 2018, driven by the successful implementation of
several strategic growth initiatives designed to support
the Company’s flagship 1-800-Flowers and Harry & David
brands. The Company built upon this momentum,
generating revenue growth of 8.3% during the first nine
months of fiscal 2020, accompanied by growth in its
customer files, reflecting the strength of its family of
brands, its focus on technological innovation and product
development, and most importantly, providing an exem-
plary customer experience. The Company was able to
leverage its business platform as this growth rate
accelerated with the onset of the COVID-19 pandemic,
during which time we saw customers increasingly turn to
our brands and product offerings to help them remain
connected and express themselves during this difficult
time. As a result, consolidated annual revenue grew
19.3%, to approximately $1.5 billion during fiscal 2020,
while net income increased 69.7%, to $59.0 million.
Adjusted EBITDA, which excludes the impact of stock-
based compensation, Non-Qualified Plan Investment
appreciation/depreciation, the costs of closing our Harry
& David retail stores, and PersonalizationMall litigation
and transaction costs, increased 57.8%, to $129.5 million.
COVID-19 Impact
In response to the global pandemic, the Company has
taken actions to ensure employee safety and business
continuity, informed by the guidelines set forth by local,
state and federal government and health officials. These
initiatives include developing a “Pandemic Preparedness
and Response Plan,” establishing an internal “nerve
center” to allow for communication and coordination
throughout the business, designing workstream teams to
promote workforce protection and supply chain manage-
ment, and dedicating resources to support customers,
vendors, franchisees, and our BloomNet member florists.
The COVID-19 pandemic has affected, and will
continue to affect, our operations and financial results
for the foreseeable future. While there is significant
uncertainty in the overall consumer environment due to
the COVID-19 crisis, we are seeing strong e-commerce
demand for gourmet foods and gift baskets and our floral
products for holidays and every-day gifting occasions,
as well as for self-consumption. Entering the Company’s
fiscal fourth quarter, immediately following the onset of
the pandemic, we saw significantly increased demand
during the Easter Holiday period, through Mother’s Day,
and then continuing with “Everyday” volume through the
end of the fiscal year. As we look past the end of fiscal
2020, demand trends remain strong through the first
quarter of fiscal 2021. With that said, there are headwinds
(and resulting increased costs) that have been, and will
continue to impact our operations during the foreseeable
future, including the following:
(cid:127) Retail store closures – on March 20, 2020, in
response to government actions, and for the safety
4
of its employees, the Company temporarily closed its
Cheryl’s and Harry & David retail stores. Affected
employees were provided with Company paid special
COVID leave pay through April 3rd, as the nation and
the Company worked to understand the extent and
potential length of the crisis. On April 14th, the difficult
decision was made to permanently close 38 of our 39
Harry & David retail stores. As a result, the Company
incurred a charge of approximately $5.2 million in our
fourth quarter for lease obligations, employee costs
and other store closure costs. Annual revenues
attributable to the closed locations was approximately
$33.0 million.
(cid:127) Wholesale volume reductions – we have seen a
reduction in our wholesale business as a result of
COVID-19, which impacted our fourth quarter results
within our BloomNet and Gourmet Foods and Gift
Baskets segments as these customers were forced
to close during the pandemic, resulting in loss of
revenues, as well as increased reserves on certain
customer receivables. We anticipate that this reduction
in wholesale volume will continue through the fiscal
second quarter of fiscal 2021, as many of our large
wholesale customers are taking a cautious approach
due to the uncertainty surrounding the future impact of
COVID-19 on the overall consumer economy, and
store based retail sales in particular.
(cid:127) BloomNet membership fee reductions – we waived
certain BloomNet membership fees in April 2020 to
help them weather the COVID-19 crisis.
(cid:127)
Increased operating costs – we are seeing increased
costs associated with the changes we have made,
and continue to make, to our manufacturing, ware
house and distribution facilities to provide for the
safety and wellbeing of our associates, including,
among others: required social distancing, enhanced
facility cleaning and sanitizing schedules, and
staggered production shifts.
(cid:127) PersonalizationMall litigation – On February 14, 2020,
the Company entered into an Equity Purchase
Agreement to acquire PersonalizationMall for $252.0
million from Bed Bath & Beyond Inc. The Company
originally expected the Acquisition to close on March
30, 2020. However, due to the unprecedented
circumstances created by the COVID-19 pandemic,
the Company requested a reasonable delay in the
closing date as it believed that conditions to closing
the transaction had not been met, including the shut-
down of PersonalizationMall’s facilities. The Seller
responded to this request by filing a lawsuit in the
Court of Chancery in the State of Delaware on April 1,
2020, seeking a judgment forcing the Company to
close. On July 20, 2020, the Company entered into a
settlement agreement with respect to the litigation and
an amendment to the Equity Purchase Agreement,
which reflects, among other things, an amended
purchase price of $245.0 million. The transaction
closed on August 3, 2020. The Company incurred
approximately $2.7mm of related litigation and
transaction costs during fiscal 2020.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
The scale and overall economic impact of the COVID-
19 crisis is still very difficult to assess. However, the strong
e-commerce demand that we are seeing across our
brands, is expected to offset both the reductions in
wholesale revenue, and the increases in costs noted
above. The Company believes that the operating platform
it has built over the years, combined with its diversified
product line, and ability to engage with its customers will
allow it to successfully navigate this challenging environ-
ment. We remain focused on three key elements of our
business strategy:
(cid:127) Taking care of the health and safety of our associates,
our BloomNet florists, our vendors and our customers,
(cid:127) Maintaining our financial strength and flexibility, and
(cid:127) Continuing to invest in areas of our business that can
help drive future growth.
Fiscal 2021 Guidance
Due to the significant uncertainty in the overall economy
related to the ongoing COVID-19 pandemic, the Company is
not providing guidance for its full fiscal 2021 year.
Regarding the fiscal first quarter: Based on the
strong growth momentum that the Company has carried
into the first two months of fiscal 2021, combined with
anticipated contributions from its recent acquisition of
PersonalizationMall, the Company expects to achieve
total consolidated revenue growth for the first quarter in
the range of 40-to-45 percent (30-to-35 percent organic
growth), compared with the prior year period.
(cid:127) The anticipated strong revenue growth in the quarter
reflects expected e-commerce revenue growth of
more than 70 percent, somewhat offset by lower
wholesale orders and reduced retail revenues
(reflecting the closing of the Harry & David retail stores
in fiscal 2020).
(cid:127) The Company expects the anticipated strong revenue
growth, combined with continued operating leverage
and contributions from PersonalizationMall, will
enable it to drive Adjusted EBITDA for the quarter to
break-even or slightly positive, compared with a loss
of $11.3 million in the prior year period.
Regarding the fiscal second quarter: While there
remains considerable uncertainty in the overall economy,
the Company expects the current strong e-commerce
demand to continue into the key holiday season in its
second fiscal quarter. In addition, the Company antici-
pates solid contributions to revenues and profits from its
recently acquired PersonalizationMall business. The
Company anticipates that these factors, combined with
the continued strong growth in its customer files, will
offset certain headwinds, including higher operating costs
due to the COVID-19 pandemic, lower wholesale orders
from mass market retailers, capacity constraints at third-
party shipping vendors and the potential distraction of the
pending national election.
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.
5
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Segment contribution margin and adjusted segment
contribution margin
Adjusted net income and adjusted net income per
common share
We define segment contribution margin as earnings
before interest, taxes, depreciation and amortization,
before the allocation of corporate overhead expenses.
Adjusted segment contribution margin is defined as
contribution margin adjusted for certain items affecting
period-to-period comparability. 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 and adjusted
segment contribution margin provide management and
users of the financial statements meaningful information
about the performance of our business segments.
Segment contribution margin and adjusted segment
contribution margin are 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 associ-
ated with the use of the segment contribution margin and
adjusted segment contribution margin is that they are an
incomplete measure of profitability as they do not include
all operating expenses or non-operating income and
expenses. Management compensates for these limita-
tions when using this measure by looking at other GAAP
measures, such as operating income and net income.
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.
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 28, 2020 and June 30, 2019. For segment information for the fiscal year ended July 1, 2018,
please refer to our Annual Report on Form 10-K for the fiscal year ended July 1, 2018, filed on September 14, 2018.
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, Informa-
tion 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.
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
2020, 2019 and 2018, which ended on June 28, 2020,
June 30, 2019, and July 1, 2018, respectively, consisted
of 52 weeks.
Net Revenues
Years Ended
June 28, June 30, July 1,
2020 % Change 2019 % Change 2018
(dollars in thousands)
Net revenues:
E-Commerce $1,230,385 23.2% $ 998,359 8.3% $ 921,848
8.8%
230,073
Other
8.4% $1,151,921
259,252 3.6% 250,264
$1,489,637 19.3% $1,248,623
Net revenues consist primarily of the selling price of
the merchandise, service or outbound shipping charges,
less discounts, returns and credits.
During the year ended June 28, 2020, net revenues
increased 19.3% in comparison to the prior year, reflect-
ing strong execution of the Company’s strategy to engage
Disaggregated revenue by channel follows:
with its customers and build deeper relationships and
thereby drive sustainable, long-term growth. The annual
growth rate reflects “pre-COVID-19” growth of approxi-
mately 8.3% through the first three quarters of fiscal 2020,
and “post-COVID-19” growth of 61.0% during the fourth
quarter of fiscal 2020. The Company experienced growth
across its three business segments, reflecting the
strategic marketing and merchandising investments
across the Company’s brands, the continuing positive
trends in everyday gifting occasions, increased self-
consumption within the Gourmet Foods & Gift Baskets
segment, as well as incremental revenues from Shari’s
Berries, which was acquired on August 14, 2019.
Excluding the incremental revenue contributed by Shari’s
Berries, which was acquired on August 14, 2019,
consolidated net revenues grew 16.3% in fiscal 2020
compared to the prior year.
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 Foods & Gift Baskets and Consumer
Floral segments, as well as membership, transaction and
services growth in the BloomNet segment.
Revenue by sales channel:
(cid:127) E-commerce revenues (combined online
and telephonic) increased 23.2% during fiscal 2020,
comprised of 19.6% growth within the Consumer
Floral segment and 26.7% growth in the Gourmet
Foods & Gift Baskets segment. During fiscal 2020, the
Company fulfilled approximately 16.4 million e-
commerce orders (an increase of 24.1% compared to
fiscal 2019) at an average order value of $74.94 (a
decrease of 0.7% compared to fiscal 2019).
E-commerce revenues 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 Company fulfilled approximately 13.2 million
e-commerce orders, at an average order value of
$75.44, representing increases of 6.4% and 1.8%,
respectively, compared to fiscal 2018.
(cid:127) Other revenues are comprised of the Company’s
BloomNet segment, as well as the wholesale and
retail channels of its 1-800-Flowers.com Consumer
Floral and Gourmet Foods & Gift Baskets segments.
Other revenues increased 3.6% during fiscal 2020,
10
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
primarily as a result of 8.6% growth within the
BloomNet segment, and 0.9% growth within the
Gourmet Foods & Gift Baskets segment.
Other revenues increased 8.8% during fiscal 2019,
primarily as a result of 14.9% growth within the
BloomNet segment, and 5.2% growth within the
Gourmet Foods & Gift Baskets segment, driven
primarily by increased wholesale volume, partially
offset by a decline 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 19.2% during fiscal 2020
reflecting the continued benefit of the strategic
marketing and merchandising investments made in
the Company’s flagship brands over the past two
years, combined with the significant growth achieved
during the 4th quarter, triggered by the pandemic. The
Company experienced record Easter and Mother’s
Day holidays, with post holiday “everyday” volume
continuing to show strong year over year improvement.
Net revenues increased 8.8% during fiscal 2019 due
to stable growth throughout the year, driven by a
combination of organic growth and increased invest-
ment in strategic marketing and merchandising
programs designed to accelerate growth and increase
market share across its “everyday” gifting occasions,
which focuses on “Birthday”, “Anniversary”, “Sympa-
thy” 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.
(cid:127) BloomNet – revenues in this segment are derived
from membership fees as well as other product and
service offerings to florists.
Net revenues increased 8.6% during fiscal 2020,
primarily due to increased demand for directory,
settlement processing revenues (due to the higher
florist-to-florist order volume), and transaction fees
(driven primarily by increased 1-800-Flowers.com,
florist-to-florist, and Shari’s Berries order volume sent
through the network), and favorable wholesale
demand throughout the year due to new customer
acquisitions. Offsetting the above increases were
lower membership and reciprocity fees due to fee
waivers in April 2020 to support our florist network
during the worst of the pandemic.
primarily due to higher services revenues, including
membership, settlement processing, directory and
transaction 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.
(cid:127) Gourmet Foods & Gift Baskets – this segment
includes the operations of Harry & David,
Wolferman’s, Stock Yards, Cheryl’s Cookies, The
Popcorn Factory, 1-800-Baskets/DesignPac, and
Shari’s Berries (acquired on August 14, 2019).
Revenue is derived from the sale of gourmet fruits,
cookies, baked gifts, premium chocolates and
confections, gourmet popcorn, gift baskets, dipped
berries, 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 21.1% during fiscal 2020, as
a result of favorable sales across all brands within the
segment, and incremental revenue from Shari’s
Berries, acquired in August 2019. The favorability was
attributable to increased demand throughout the year,
with growth of 9.7% during the first nine months of the
year, then fueled by accelerated e-commerce demand
coinciding with the onset of COVID-19, as product
offerings, convenience, and brand sentiment reso-
nated with customers. Wholesale/retail volume, which
had been trending significantly favorable to prior year
before the onset of COVID-19, ended relatively flat for
the year due to the closure of many of the brand’s
retail customer’s stores, and the closure of the Harry &
David retail store operations in the 4th quarter.
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) as 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.
Gross Profit
Years Ended
June 28, June 30, July 1,
2020 % Change 2019 % Change 2018
(dollars in thousands)
Gross profit $622,196
Gross margin % 41.8%
$526,121
42.1%
18.3%
7.6% $489,025
42.5%
Net revenues increased 14.9% during fiscal 2019,
Gross profit consists of net revenues less cost of
11
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 18.3% during fiscal 2020 due to
the increase in revenues noted above, partially offset by a
lower gross profit percentage. Gross profit percentage
decreased 30 basis points during fiscal 2020, due to
lower margins within the Gourmet Foods & Gift Baskets
and BloomNet segments, partially offset by improved
margins in the Consumer Floral segment. The lower
margins were attributable to the acquisition of Shari’s
Berries, which carries a lower gross margin, and macro-
economic headwinds including: (i) rising labor and
transportation costs, (ii) tariffs, and (iii) increased costs
associated with the changes we have made, and
continue to make, to our manufacturing, warehouse and
distribution facilities to provide for the safety and
wellbeing of our associates in light of COVID-19, includ-
ing: required social distancing, enhanced facility cleaning
and sanitizing schedules, and staggered production
shifts. These headwinds have been partially offset by the
Company’s strategic pricing initiatives and operational
productivity improvements.
Gross profit increased 7.6% during 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 Foods & Gift Baskets logistics initia-
tives, 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.
Consumer Floral segment – Gross profit increased
19.9% during fiscal 2020, due to the aforementioned
revenue growth and an increase in gross profit percent-
age of 20 basis points to 39.4%. The higher gross profit
percentage reflects lower promotional activity throughout
the year due to the elimination of the loyalty points
program, instead emphasizing “Passport” to increase
purchase frequency. 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 percent-
age reflects higher product costs, an increased Celebra-
tions Passport program participation, which has been
driving improved customer loyalty and purchase fre-
quency, and increased transportation costs.
BloomNet segment – Gross profit increased 4.3%
during fiscal 2020, due to the increase in revenues noted
above, partially offset by a decrease in gross profit
percentage of 200 basis points to 48.5%. The lower gross
profit percentage was due to unfavorable wholesale
product margins due to the impact of tariffs, promotional
offerings and higher shipping and merchandise costs, as
well as higher rebates (higher florist-to-florist volume) and
the aforementioned fee waivers in April 2020 to assist the
florist network during the onset of the pandemic. 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.
Gourmet Foods & Gift Baskets segment – Gross
profit increased by 20.0% during fiscal 2020, due to the
increase in revenues noted above, partially offset by a
decrease in gross profit percentage of 40 basis points to
42.5%, mainly due to the acquisition of Shari’s Berries,
which carries a lower gross margin than the rest of the
segment, as well as the aforementioned macro-economic
headwinds and incremental COVID-19 costs. 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.
Marketing and Sales Expense
Years Ended
June 28, June 30, July 1,
2020 % Change 2019 % Change 2018
(dollars in thousands)
Marketing and
sales $363,227 13.6% $319,636 7.0% $298,810
Percentage of
sales
24.4%
25.6%
25.9%
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 13.6% during
fiscal 2020, primarily due to increased advertising spend
within the Gourmet Foods & Gift Baskets and 1-800-
Flowers.com Consumer Floral segments, due to the
Company’s incremental marketing efforts designed to
accelerate revenue growth and capture market share,
partially offset by operational efficiencies and platform
leverage attributable to the revenue growth. The invest-
ment spend was successful in driving significant enter-
prise growth, while improving overall operating expense
leverage and reducing enterprise reliance on promo-
tional pricing, thereby further reinforcing the premium
positioning of the Company’s portfolio of brands. As a
12
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
result, marketing and sales as a percentage of net
revenues, during fiscal 2020 decreased to 24.4%
compared with 25.6% in fiscal 2019.
Marketing and sales expense increased 7.0% during
fiscal 2019, primarily due to increased advertising spend
within the Consumer Floral and Gourmet Foods & 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.
During fiscal 2020, the Company added approxi-
mately 4.2 million new e-commerce customers, an
increase of 40.5% over the prior year. During fiscal 2019,
the Company added approximately 3.0 million new e-
commerce customers, an increase of 10.7% over the prior
year. Approximately 51.7% of customers who placed e-
commerce orders during fiscal 2020 were repeat custom-
ers compared to approximately 57.7% in fiscal 2019.
Technology and Development Expense
Years Ended
June 28, June 30, July 1,
2020 % Change 2019 % Change 2018
(dollars in thousands)
Technology and
development $48,698 11.3% $43,758 11.5% $39,258
Percentage of
sales
3.3%
3.5%
3.4%
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
11.3% during fiscal 2020, as a result of increased
consulting and labor costs, due to higher performance
based bonuses compared to the prior year, increased
hosting costs due to higher usage of cloud storage
applications, and higher maintenance and license costs,
including security and platform enhancements.
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.
During the fiscal years ended June 28, 2020, June 30,
2019 and July 1, 2018, the Company expended $69.5
13
million, $65.4 million and $61.2 million, respectively, on
technology and development, of which $20.8 million,
$21.6 million and $21.9 million, respectively, has been
capitalized.
General and Administrative Expense
Years Ended
June 28, June 30, July 1,
2020 % Change 2019 % Change 2018
(dollars in thousands)
General and
administrative $97,394 11.1% $87,654 13.2% $77,440
Percentage of
sales
6.5%
7.0%
6.7%
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 11.1%
during fiscal 2020, primarily due to an increase in labor
costs primarily related to performance-based bonuses,
higher transaction and legal costs associated with the
acquisition of PersonalizationMall.com, and higher bad
debt expense, primarily related to the impact of COVID-19
on certain corporate, wholesale, and florist accounts,
partially offset by lower health insurance and travel costs.
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 Part IV, Item 15 for details regarding Employee
Retirement Plans).
Depreciation and Amortization
Years Ended
June 28, June 30, July 1,
2020 % Change 2019 % Change 2018
(dollars in thousands)
Depreciation and
amortization $32,513 8.5% $29,965 -7.7% $32,469
Percentage of
sales
2.2% 2.4% 2.8%
Depreciation and amortization expense increased
8.5% during fiscal 2020, primarily as a result of recent
short-lived capital expenditures to support the Company’s
IT infrastructure.
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
had been extended into fiscal 2020.
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Interest Expense, net
Years Ended
June 28, June 30, July 1,
2020 % Change 2019 % Change 2018
(dollars in thousands)
Interest expense,
net $2,438 -12.0% $2,769 -23.7% $3,631
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 Part IV, Item 15 for details), net of income earned on
the Company’s available cash balances.
Interest expense, net decreased 12.0% during fiscal
2020, due to a decline in the outstanding Term Loan
balance, and decreasing interest rates on the Company’s
credit facility, partially offset by lower interest income on
available cash balances due to decreasing interest rates.
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.
Other Income (expense), net
Years Ended
June 28, June 30, July 1,
2020 % Change 2019 % Change 2018
(dollars in thousands)
Other income
(expense), net $(84)
-113.0% $644 6.4% $605
Other income, net for the years ended June 30, 2019
and July 1, 2018 consist primarily of investment earnings
on the Company’s Non-Qualified Deferred Compensation
Plan assets.
Income Taxes
During the fiscal years ended June 28, 2020, June 30,
2019, and July 1, 2018, the Company recorded income
tax expense (benefit) from continuing operations of $18.8
million, $8.2 million, and ($2.8) million, respectively,
resulting in an effective tax rate of 24.2%, 19.1%, and -
7.3%, respectively. The Company’s effective tax rate for
fiscal 2020 differed from the U.S. federal statutory rate of
21% primarily due to state income taxes and nondeduct-
ible expenses for executive compensation, partially offset
by various permanent differences and tax credits,
including excess tax benefits from stock-based compen-
sation. 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 compensation and various tax credits,
partially offset by state income taxes and non-deductible
executive compensation as a result of recent tax reform
from The Tax Cuts and Jobs Act (“Tax Act”), which
removed the performance-based exclusion for determin-
ing 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 11 in Part IV, Item
15 for details). 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 fiscal
2019. In addition to the impact of the lower transitional
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.
At June 28, 2020, the Company’s total federal and
state capital loss carryforwards were $26.9 million, which
if not utilized, will expire in fiscal 2022. The Company’s
foreign net operating loss carryforwards were $3.9
million, which if not utilized, will begin to expire in
fiscal 2034.
14
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 18. in Part IV, Item 15 for details). At June 28,
2020, the Company had working capital of $198.3 million,
including cash and cash equivalents of $240.5 million,
compared to working capital of $175.4 million, including
cash and cash equivalents of $172.9 million at June 30,
2019. As of June 28, 2020, 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, histori-
cally generated nearly 50% of the Company’s annual
revenues, and all of its earnings. However, with the onset
of the COVID-19 pandemic, the Company experienced a
significant increase in its revenues and earnings during
its fourth quarter of fiscal 2020. These trends have
continued through the first two months of its fiscal 2021
first quarter. Our customers have increasingly turned to
our brands and our expanded product offerings to help
them connect and express themselves during the recent
COVID-19 pandemic and our “everyday” gifting product
line has seen increased volume. While the continuing
impacts of COVID-19 are difficult to predict, the Company
expects that its fiscal second quarter will continue to be its
largest in terms of revenues and earnings, although
increases in the Company’s “everyday” business have
and are expected to continue to lessen the seasonality of
our business. 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 opera-
tions 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 opportu-
nities 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.
We have not identified any material liquidity deficien-
cies as a result of the COVID-19 pandemic. We will
continue to monitor and assess the impact COVID-19 may
have on our business and financial results. See Part I.
Item 1A. “Risk Factors” and Part II. Item 7. “Management’s
Discussion and Analysis of Financial Condition and
Results of Operations” for further information.
Cash Flows
Net cash provided by operating activities of $139.4
million for the fiscal year ended June 28, 2020 was
primarily attributable to the Company’s net income,
adjusted for non-cash charges for depreciation and
amortization, stock-based compensation, and bad debt
15
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
expense, as well as increases in accounts payable and
accrued expenses as a result of the timing of our sea-
sonal inventory build and performance-based bonus
payments, partially offset by increases in trade receiv-
ables and inventory related to increased sales volumes.
Net cash used in investing activities of $56.4 million
was primarily attributable to the acquisition of Shari’s
Berries for $20.5 million, and capital expenditures of
$34.7 million related to the Company’s technology
initiatives and Gourmet Foods & Gift Baskets segment
manufacturing production and warehousing equipment.
Net cash used in financing activities of $15.5 million
for the fiscal year ended June 28, 2020 was primarily due
to the acquisition of $10.7 million of treasury stock and
net bank repayments of $5.0 million.
Stock Repurchase Program
The Company has a stock repurchase plan through
which purchases can be made from time to time in the
open market and through privately negotiated transac-
tions, subject to general market conditions. The repur-
chase program is financed utilizing available cash. In
August 2017, the board of directors increased the
authorization to $30.0 million, and on June 27, 2019,
increased it once more to $30.0 million. The Company
repurchased a total of $10.7 million (754,458 shares),
$14.8 million (1,230,303 shares) and $12.2 million
(1,269,059 shares) during the fiscal years ended June
28, 2020, June 30, 2019 and July 1, 2018, respectively,
under this program. As of June 28, 2020, $19.3 million
remains authorized under the plan.
Contractual Obligations
At June 28, 2020, the Company’s contractual obligations consist of:
(cid:127)
Long-term debt obligations – payments due under the Company’s 2019 Credit Agreement (See Note 9 – Long-Term
Debt in Item 15 for details).
(cid:127) Operating lease obligations – payments due under the Company’s long-term operating leases (See Note 16 –
Leases in Item 15 for details).
(cid:127) Purchase commitments – consisting primarily of inventory and IT related equipment purchase orders and license
agreements made in the ordinary course of business – see below for the contractual payments due by period.
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 assump-
tions 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 esti-
mates 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 condi-
tions. 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 dis-
cussed 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 ac-
cepted valuation models and set criteria that are re-
viewed and approved by various levels of management
and, in certain instances, the Company engages third-
party valuation specialists. Under the income approach,
the Company uses a discounted cash flow methodology
which requires management to make significant esti-
mates and assumptions related to forecasted revenues,
gross profit margins, operating income margins, working
capital cash flow, perpetual growth rates, and long-term
discount rates, among others. For the market approach,
the Company uses the guideline public company method.
Under this method the Company utilizes information from
comparable publicly traded companies with similar
operating and investment characteristics as the reporting
units, to create valuation multiples that are applied to the
operating performance of the reporting unit being tested,
in order to obtain their respective fair values. The 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.
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 in Part IV, Item 15.
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
17
Management’s Discussion and Analysis (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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.
For further discussion of the methods used and factors
considered in our estimates as part of the impairment
testing for other intangibles, see Note 2 and Note 6 in
Part IV, Item 15.
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. For further
discussion see Note 11, in Part IV, Item 15.
Recently Issued Accounting Pronouncements
See Note 2. in Part IV, Item 15 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 the fiscal year ended June 28, 2020.
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 and the impact
of the COVID-19 pandemic on the Company; 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-
19
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 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
2020 and 2019. 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 in Item 7 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.
(84)
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 28, 2020, June 30, 2019 and July 1, 2018
(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 $3.5 million, $4.7 million, and $4.0 million, for the years ended June 28, 2020, June 30, 2019 and
July 1, 2018, respectively.
- The Company paid income taxes of approximately $15.5 million, $8.8 million, and $5.2 million, net of tax refunds received,
for the years ended June 28, 2020, June 30, 2019, and July 1, 2018, 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. is a leading provider of
gifts designed to help customers express, connect and
celebrate. The Company’s business platform features our
all-star family of brands, including: 1-800-Flowers.com®,
1-800-Baskets.com®, Cheryl’s Cookies®, Harry &
David®, PersonalizationMall.com®, Shari’s Berries®,
FruitBouquets.com®, Moose Munch®, The Popcorn
Factory®, Wolferman’s Bakery® and Simply Chocolate®.
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 oper-
ates BloomNet®, an international floral service provider
offering a broad-range of products and services designed
to help professional florists grow their businesses
profitably; NapcoSM, a resource for floral gifts and sea-
sonal décor; and DesignPac Gifts, LLC, a manufacturer of
gift baskets and towers.
Note 2. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include
the accounts of 1-800-FLOWERS.COM, Inc. and its
subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The
Company’s net revenues from international sources were
not material during fiscal years 2020, 2019 and 2018.
Fiscal Year
The Company’s fiscal year is a 52- or 53-week period
ending on the Sunday nearest to June 30. Fiscal years
2020, 2019, and 2018, which ended on June 28, 2020,
June 30, 2019, and July 1, 2018, 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, at which time they
are reclassified to orchards in production. 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
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
26
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
determines it is “more-likely-than-not” that the fair value of
the reporting unit is less than the carrying value, then
performing the two-step quantitative test is necessary.
The first step (“Step 1”) of the two-step quantitative test
requires comparison of the fair value of each of the
reporting units to the respective carrying value. If the
carrying value of the reporting unit is less than the fair
value, no impairment exists and the second step (“Step
2”) is not performed. If the carrying value of the reporting
unit is higher than the fair value, Step 2 must be per-
formed to compute the amount of the goodwill impair-
ment, if any. In Step 2, the impairment is computed by
comparing the implied fair value of the reporting unit
goodwill with the carrying amount of that goodwill. If the
carrying amount of the reporting unit goodwill exceeds
the implied fair value of that goodwill, an impairment loss
is recognized for the excess.
The Company generally estimates the fair value of a
reporting unit using an equal weighting of the income and
market approaches. The Company uses industry ac-
cepted valuation models and set criteria that are re-
viewed and approved by various levels of management
and, in certain instances, the Company engages third-
party valuation specialists. Under the income approach,
the Company uses a discounted cash flow methodology
which requires management to make significant esti-
mates and assumptions related to forecasted revenues,
gross profit margins, operating income margins, working
capital cash flow, perpetual growth rates, and long-term
discount rates, among others. For the market approach,
the Company uses the guideline public company method.
Under this method the Company utilizes information from
comparable publicly traded companies with similar
operating and investment characteristics as the reporting
units, to create valuation multiples that are applied to the
operating performance of the reporting unit being tested,
in order to obtain their respective fair values. The 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 years 2020 and 2018, 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. During fiscal
year 2019, the Company performed 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). 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,
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.
27
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 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 years 2020 and 2018, 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. During fiscal year 2019, the Company per-
formed a quantitative test, which determined that the
estimated fair value of the Company’s intangibles
exceeded their respective carrying value in all material
respects. Future changes in the estimates and assump-
tions above could materially affect the results of our
reviews for impairment of intangibles.
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
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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
year 2018. Included within prepaid and other current
assets was $3.0 million and $2.8 million at June 28, 2020
and June 30, 2019 respectively, relating to prepaid
catalog expenses.
Investments
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 qualita-
tively at each reporting period), adjusted for observable
price changes from orderly transactions for identical or
similar investments 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
$2.8 million as of June 28, 2020 and $1.6 million as of
June 30, 2019.
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 consolidated balance
sheets (see Note 10 - Fair Value Measurements).
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 ($5.7 million at June
28, 2020 and $2.8 million at June 30, 2019) have been
recorded based upon previous experience and
management’s evaluation.
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 (calcu-
lated 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
28
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 June 30, 2019 was
$17.3 million (included in “Accrued expenses” on our
consolidated balance sheets), of which, $17.3 million was
recognized as revenue during the year ended June 28,
2020. The deferred revenue balance as of June 28, 2020
was $25.9 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 $171.4 million, $147.8 million
and $138.2 million for the years ended June 28, 2020,
June 30, 2019 and July 1, 2018, 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 associ-
ated 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,
29
based on an assessment of the likelihood that the appli-
cable 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
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 28, 2020 and June 30, 2019.
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.
Net Income Per Share
Basic net income per common share is computed using
the weighted-average number of common shares out-
standing during the period. Diluted net income per share is
computed using the weighted-average number of common
and dilutive common equivalent shares (consisting
primarily of employee stock options and unvested re-
stricted stock awards) outstanding during the period.
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Recently Issued Accounting Pronouncements -
Adopted
In February 2016, the FASB issued ASU No. 2016-02,
“Leases (Topic 842)” (“ASC 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 quantitative
information about leasing arrangements to enable a user
of the financial statements to assess the amount, timing
and uncertainty of cash flows arising from leases. We
adopted the new standard effective July 1, 2019 and
elected the optional transition method 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 elected the ‘package of practical expedients’,
that did not require us to reassess, under the new stan-
dard, our prior conclusions about lease identification,
lease classification and initial direct costs. Further, we
elected 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. The adoption of the new standard had a
material impact to the Company’s Consolidated Balance
Sheets, but no impact to the Consolidated Statements of
Income (Operations) or Consolidated Statements of Cash
Flows. As such, we recorded operating lease liabilities of
$80.7 million, based on the present value of the remaining
minimum rental payments using discount rates as of the
effective date, and a corresponding right-of-use assets of
$78.7 million based on the operating lease liabilities
adjusted for deferred rent and lease incentives received.
See Note 16 - Leases for further information about our
transition to ASC 842 and the newly required disclosures.
Recently Issued Accounting Pronouncements –
Not Yet Adopted
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 June
27, 2021, and the guidance is to be applied using the
modified-retrospective approach. The Company is currently
evaluating the potential impact of adopting this guidance
on our consolidated financial statements.
30
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 June 27, 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.
COVID-19
On March 27, 2020, the Coronavirus Aid, Relief, and
Economic Security (“CARES”) Act was signed into law.
The CARES Act provides a substantial stimulus and
assistance package intended to address the impact of the
pandemic of the novel strain of coronavirus (“COVID-19”),
including tax relief and government loans, grants and
investments. The CARES Act did not have a material
impact on the Company’s consolidated financial state-
ments during the fiscal year ended June 28, 2020.
The Company is closely monitoring the impact of
COVID-19 on its business, including how it will affect its
customers, workforce, suppliers, vendors, franchisees,
florists, and production and distribution channels, as well
as its financial statements. The extent to which COVID-19
impacts the Company’s business and financial results will
depend on numerous evolving factors, including, but not
limited to: the magnitude and duration of COVID-19, the
extent to which it will impact macroeconomic conditions,
including interest rates, employment rates and consumer
confidence, the speed of the anticipated recovery, and
governmental, business and individual consumer
reactions to the pandemic. The Company assessed
certain accounting matters that generally require consid-
eration of forecasted financial information in context with
the information reasonably available to the Company and
the unknown future impacts of COVID-19 as of June 28,
2020 and through the date of this report. The accounting
matters assessed included, but were not limited to, the
Company’s allowance for doubtful accounts and credit
losses, inventory and related reserves and the carrying
value of goodwill and other long-lived assets. While there
was not a material impact to the Company’s consolidated
financial statements as of and for the year ended June
28, 2020, the Company’s future assessment of these
factors and the evolving factors described above, could
result in material impacts to the Company’s consolidated
financial statements in future reporting periods.
Reclassifications
Certain balances in the prior fiscal years have been
reclassified to conform to the presentation in the current
fiscal year.
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 3 – Net Income Per Common Share
The following table sets forth the computation of basic
and diluted net income:
Years Ended
June 28, June 30, July 1,
2020 2019 2018
(in thousands, except per share data)
Numerator:
Net income $58,998 $34,766 $40,791
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
Net income per common share:
64,463
64,342
64,666
1,042
1,404
1,580
903
711
692
1,945
2,115
2,272
66,408
66,457
66,938
Basic $ 0.92 $ 0.54 $ 0.63
Diluted $ 0.89 $ 0.52 $ 0.61
Note 4. Acquisition
Acquisition of Shari’s Berries
On August 14, 2019, the Company completed its
acquisition of the Shari’s Berries business (“Shari’s
Berries”), a leading provider of dipped berries and other
specialty treats, through a bankruptcy proceeding of
certain assets of the gourmet food business of the FTD
Companies, Inc. The transaction, for a purchase price
of $20.5 million, included the Shari’s Berries domain
names, copyrights, trademarks, customer data, phone
numbers and other intellectual property, as well as
certain raw material inventory and the assumption
of specified liabilities.
During the quarter ended June 28, 2020, the Com-
pany finalized the allocation of the purchase price to the
identifiable assets acquired and liabilities assumed
based on its estimates of their fair values on the acquisi-
tion date. There were no measurement period adjust-
ments made between the preliminary purchase price
allocation and final purchase price allocation. Of the
acquired intangible assets, $0.6 million was assigned to
customer lists, which is being amortized over the esti-
mated remaining life of 2 years, $6.9 million was as-
signed to tradenames, and $12.1 million was assigned
to goodwill, which is expected to be deductible for tax
purposes. The goodwill recognized in conjunction with
our acquisition of Shari’s Berries is primarily related to
synergistic value created in terms of both operating costs
and revenue growth opportunities, enhanced financial
and operational scale, and other strategic benefits.
The following table summarizes the preliminary and
final allocation of the purchase price to the estimated fair
values of assets acquired and liabilities assumed at the
date of the acquisition:
Shari’s Berries
Preliminary & Final
Purchase Price Allocation
(in thousands)
Current assets
Intangible assets
Goodwill
Total assets acquired
Current liabilities
Net assets acquired
$ 1,029
7,540
12,121
20,690
190
$20,500
Raw materials inventory was valued at book value, as
there have not been any significant price fluctuations or
other events that would materially change the cost to
replace the raw materials.
The estimated fair value of the acquired tradenames
was determined using the relief from royalty method,
which is a risk-adjusted discounted cash flow approach.
The relief from royalty method values an intangible asset
by estimating the royalties saved through ownership of
the asset. The relief from royalty method requires identify-
ing the future revenue that would be generated by the
trademark, multiplying it by a royalty rate deemed to be
avoided through ownership of the asset and discounting
the projected royalty savings amounts back to the
acquisition date. The royalty rate used in the valuation
was based on a consideration of market rates for similar
categories of assets. The discount rate used in the
valuation was based on the Company’s weighted
average cost of capital, the riskiness of the earnings
stream associated with the trademarks and the overall
composition of the acquired assets.
The estimated fair value of the acquired customer lists
was determined using the excess earnings method under
the income approach. This method requires identifying the
future revenue that would be generated by existing custom-
ers at the time of the acquisition, considering an appropriate
attrition rate based on the historical experience of the
Company. Appropriate expenses are then deducted from
the revenues and economic rents are charged for the return
on contributory assets. The after-tax cash flows attributable
to the asset are discounted back to their net present value at
an appropriate intangible asset rate of return and summed
to calculate the value of the customer lists.
Operating results of the Shari’s Berries brand are
reflected in the Company’s consolidated financial
statements from the date of acquisition, within the
Gourmet Foods & Gift Baskets segment. Pro forma results
of operations have not been presented, as the impact on
the Company’s consolidated financial results would not
have been material.
31
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 5. Inventory
The Company’s inventory, stated at cost, which is not in excess of market, includes purchased and manufactured
finished goods for sale, packaging supplies, crops, raw material ingredients for manufactured products and associated
manufacturing labor and is classified as follows:
June 28, June 30,
2020 2019
(in thousands)
Finished goods
Work-in-process
Raw materials
Total inventory
$ 35,779
16,536
45,445
$97,760
$36,820
17,535
38,006
$92,361
Note 6. Goodwill and Intangible Assets
The following table presents goodwill by segment and the related change in the net carrying amount:
Gourmet
Consumer Foods &
Floral BloomNet Gift Baskets Total
(in thousands)
$17,441
Balance at July 1, 2018
$17,441
Balance at June 30, 2019
$ ––
Acquisition of Shari’s Berries
$17,441
Balance at June 28, 2020
––
––
––
––
$
$
$
$
$45,149
$45,149
$12,121
$57,270
$62,590
$62,590
$12,121
$74,711
There were no goodwill impairment charges in any segment during the years ended June 28, 2020, June 30, 2019
and July 1, 2018.
The Company’s other intangible assets consist of the following:
June 28, June 30,
2020 2019
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 $ 6,253
10,474
2,382
12,825
2,946
$ 1,167
2,351
564
$ 7,420 $ 6,148 $ 1,272
2,386
666
9,798
2,280
12,184
2,946
Total intangible assets with
determinable lives
Trademarks with
indefinite lives
Total identifiable
intangible assets
23,191
19,109
4,082
22,550
18,226
4,324
62,191
––
62,191
55,291
––
55,291
$ 85,382
$19,109
$66,273
$77,841 $18,226
$59,615
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 28, 2020, June 30, 2019 and July 1, 2018, respectively.
The amortization of intangible assets for the years ended June 28, 2020, June 30, 2019 and July 1, 2018 was $0.9
million, $0.7 million and $1.4 million, respectively. Future estimated amortization expense is as follows: 2021 - $0.9
million, 2022 - $0.6 million, 2023 - $0.5 million, 2024 - $0.5 million, 2025 - $0.5 million and thereafter - $1.1 million.
32
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 28, June 30,
2020 2019
(in thousands)
$ 30,789
$ 30,789
The Company’s current and long-term debt consists of
the following:
June 28, June 30,
2020 2019
(in thousands)
17,139
61,159
13,675
11,339
59,236
13,861
Revolver (1), (2)
Term Loan (1), (2)
Deferred financing costs
Total debt
Less: current debt
Long-term debt
$
––
$
––
95,000 100,000
(2,441) (3,027)
96,973
5,000
$ 91,973
92,559
5,000
$87,559
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
65,348
61,415
55,381
151,264
53,694
132,078
8,130
9,902
402,885
372,314
(233,810) (205,633)
$169,075
$166,681
Depreciation expense for the years ended June 28,
2020, June 30, 2019 and July 1, 2018 was $31.6 million,
$29.3 million, and $31.1 million, respectively.
Note 8. Accrued Expenses
Accrued expenses consisted of the following:
June 28, June 30,
2020 2019
(in thousands)
Payroll and employee benefits $ 41,931 $28,585
17,305
Deferred revenue
14,423
Accrued marketing expenses
Accrued florist payout
8,038
28,442
Other
Accrued Expenses $141,741 $96,793
25,867
14,680
16,755
42,508
(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 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 (“Re-
volver”) 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 the applicable
margin for the relevant class of borrowing, which such margins
vary 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 plus 0.5%, and (c) a LIBOR rate plus
1% (such rate, the “Base Rate”) or (2) an adjusted LIBOR rate
plus the applicable margin for the relevant class of borrowing,
which such margins vary 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 cov-
enants 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 28, 2020. The 2019
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 2021, $10.0 million - fiscal 2022, $10.0 million
– fiscal 2023, and $70.0 million – fiscal 2024.
(2) The 2019 Credit Agreement was amended subsequent to
year end – see Note 18. – Subsequent Events for details.
33
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
accounting standards.
Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability, in
the principal or most advantageous market for the asset
or liability, in an orderly transaction between market
participants at the measurement date. The authoritative
guidance for fair value measurements establishes a fair
value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (level 1
measurements) and the lowest priority to unobservable
inputs (level 3 measurements). The three levels of the fair
value hierarchy under the guidance are described below:
Level 1 Valuations based on quoted prices in active
markets for identical assets or liabilities that the
entity has the ability to access.
Level 2 Valuations based on quoted prices for similar
assets or liabilities, quoted prices in markets
that are not active, or other inputs that are
observable or can be corroborated by
observable data for substantially the full term
of the assets or liabilities.
Level 3 Valuations based on inputs that are supported
by little or no market activity and that are
significant to the fair value of the assets
or liabilities.
The following table presents by level, within the fair
value hierarchy, financial assets and liabilities measured
at fair value on a recurring basis:
Fair Value Measurements
Assets (Liabilities)
Carrying Value Level 1 Level 2 Level 3
(in thousands)
Assets (liabilities) as of June 28, 2020:
Trading securities
held in a
“rabbi trust” (1) $13,442 $13,442 $ –– $ ––
$13,442 $13,442 $ –– $ ––
Assets (liabilities) as of June 30, 2019:
Trading securities
held in a
“rabbi trust” (1) $11,816 $11,816 $ –– $ ––
$11,816 $11,816 $ –– $ ––
(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 28, June 30, July 1,
2020 2019 2018
(in thousands)
Current provision:
Federal
State
Foreign
Current income
tax expense
$14,727
4,383
––
$2,809 $ 3,385
1,514
––
2,710
––
19,110
5,519
4,899
Deferred provision (benefit):
Federal
State
Foreign
Deferred income tax
expense (benefit)
Income tax expense
(62)
(204)
––
3,138 (9,331)
1,648
(427)
15
(13)
(266)
2,698 (7,668)
(benefit)
$18,844
$8,217 $(2,769)
34
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 28, June 30, July 1,
2020 2019 2018
Tax at U.S. statutory rates
State income taxes, net
of federal tax benefit
5.7
4.5
Valuation allowance change (0.3)
2.6
Non-deductible compensation 1.1 0.7 ––
Excess tax benefit from
4.4
(0.3)
21.0%
21.0%
28.0%
stock-based compensation (1.0) (4.4) (1.6)
Domestic production
deduction –– –– (2.0)
Tax credits (1.1) (1.8) (2.5)
Tax Act impact on
deferred tax balance (1) –– –– (32.0)
Return to provision
(0.3) (1.0) (5.8)
Other, net 0.3 0.5 0.3
Effective tax rate 24.2% 19.1% (7.3)%
(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 years ended June 30,
2019 and June 28, 2020. As a result of the Tax Act, the
Company recorded a deferred tax benefit of $12.2 million
during the fiscal year ended July 1, 2018, 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 adjust-
ments 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
significant components of the Company’s deferred
income tax assets (liabilities) are as follows:
Years Ended
June 28, June 30,
2020 2019
(in thousands)
Deferred income tax assets:
Loss and credit
carryforwards
Accrued expenses
and reserves
Stock-based
compensation
Deferred compensation
Operating lease liability
Gross deferred
$ 10,530 $ 10,955
4,676
3,866
2,190
2,455
17,551
1,798
2,150
––
income tax assets
18,769
Less: Valuation allowance (9,681) (9,872)
8,897
Deferred tax assets, net
37,402
27,721
Deferred income tax liabilities:
Other intangibles (15,337) (14,664)
Tax in excess of
book depreciation (24,336) (23,131)
Operating lease
right-of-use asset
(16,680)
Deferred tax liabilities (56,353) (37,795)
Net deferred
income tax liabilities $ (28,632) $ (28,898)
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 28, 2020, the Company’s
total federal and state capital loss carryforwards
were $26.9 million, which if not utilized, will expire in
fiscal 2022. The Company’s foreign net operating loss
carryforwards were $3.9 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 and fiscal 2019
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
35
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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”).
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 28,
2020, 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 28, June 30, July 1,
2020 2019 2018
(in thousands)
Stock options
Restricted stock awards
Total
Deferred income tax benefit
Stock-based compensation
$ 104
8,330
8,434
2,084
$ 315
5,995
6,310
1,578
$ 429
3,297
3,726
961
expense, net
$6,350 $4,732
$2,765
Stock based compensation expense is recorded
within the following line items of operating expenses:
Years Ended
June 28, June 30, July 1,
2020 2019 2018
(in thousands)
Marketing and sales
Technology and
development
General and administrative
Total
$3,999
$2,725
$ 989
649
3,786
411
3,174
$8,434 $6,310
198
2,539
$3,726
(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).
states remain open from fiscal 2016. The Company’s
foreign income tax filings from fiscal 2015 forward
are open for examination 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 28,
2020, the Company has an unrecognized tax benefit,
including accrued interest and penalties, of
approximately $1.4 million. The Company believes
that $1.0 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 and 2020.
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
August 2017, the Company’s Board of Directors autho-
rized an increase to its stock repurchase plan of up to
$30.0 million, and on June 27, 2019, increased it once
more to $30.0 million. The Company repurchased a total
of $10.7 million (754,458 shares), $14.8 million
(1,230,303 shares), and $12.2 million (1,269,059 shares)
during the fiscal years ended June 28, 2020, June 30,
2019 and July 1, 2018, respectively, under this program.
As of June 28, 2020, $19.3 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 Septem-
ber 14, 2016) (the “Plan”). The Plan is a broad-based,
long-term incentive program that is intended to provide
incentives to attract, retain and motivate employees,
consultants and directors in order to achieve the
36
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Stock Options
The weighted average fair value of stock options on the date of grant, and the assumptions used to estimate the fair
value of the stock options using the Black-Scholes option valuation model, were as follows:
Years Ended
June 28, June 30, July 1,
2020 2019 (1) 2018 (1)
Weighted average fair value of options granted
Expected volatility
Expected life (in years)
Risk-free interest rate
Expected dividend yield
$10.11 n/a
60% n/a
8.0 n/a
n/a n/a
0.0% n/a
n/a
n/a
n/a
n/a
n/a
(1) No options were granted during the fiscal years ended June 30, 2019 or July 1, 2018.
The expected volatility of the option is determined using historical volatilities based on historical stock prices.
The Company estimated the expected life of options granted based upon the historical weighted average. The
risk-free interest rate is determined using the yield available for zero-coupon U.S. government issues with a remaining
term equal to the expected life of the option. The Company has never paid a dividend, and as such the dividend
yield is 0.0%.
The following table summarizes stock option activity during the year ended June 28, 2020:
Weighted Weighted
Average Average Aggregate
Exercise Remaining Intrinsic
Options Price Contractual Term Value
(in years) (in thousands)
Outstanding beginning of period 1,365,000 $ 2.48
Granted 15,000 $20.72
Exercised (150,000) $ 1.90
Forfeited/Expired –– $
––
Outstanding end of period 1,230,000 $ 2.77
Exercisable at June 28, 2020 1,215,000 $ 2.55
$21,043
$21,043
1.3
1.3
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between
the Company’s closing stock price on the last trading day of fiscal 2020 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 28, 2020. 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 28, 2020, June 30, 2019 and July 1, 2018 was $2.3
million, $7.8 million, and $1.1 million, respectively.
The following table summarizes information about stock options outstanding at June 28, 2020:
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
$ 2.63
$10.20
$20.72
205,000
1,000,000
10,000
15,000
1,230,000
0.3
1.4
4.8
9.9
1.3
205,000
$ 1.79
$ 1.79
$ 2.63 1,000,000 $ 2.63
$10.20 10,000 $10.20
$20.72 –– $ ––
$ 2.55
1,215,000
$ 2.77
As of June 28, 2020, 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 4.4 years.
37
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
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 28, 2020:
Weighted
Average
Grant Date
Shares Fair Value
Non-vested – beginning of period 1,438,592
Granted
759,554
Vested (470,350)
Forfeited (119,328)
Non-vested – end of period 1,608,468
$10.81
$13.32
$10.40
$12.15
$12.01
The fair value of non-vested shares is determined based on the closing stock price on the grant date. As of
June 28, 2020, there was $10.0 million of total unrecognized compensation cost related to non-vested restricted
stock-based compensation to be recognized over a weighted-average period of 1.2 years.
Note 14. Employee Retirement Plans
The Company has a 401(k) Profit Sharing Plan
covering substantially all of its eligible employees. All
employees who have attained the age of 21 are eligible
to participate upon completion of one month of service.
Participants may elect to make voluntary contributions
to the 401(k) plan in amounts not exceeding federal
guidelines. On an annual basis the Company, as
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 $1.5 million, $0.9
million and $0.0 million during fiscal years 2020, 2019,
and 2018, 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. There were no Company contributions to the plan
during fiscal years 2020, 2019 and 2018. Distributions
will be made to participants upon termination of employ-
ment or death in a lump sum, unless installments are
selected by the participant. As of June 28, 2020, and
June 30, 2019, these plan liabilities, which are included
in “Other liabilities” within the Company’s consolidated
balance sheets, totaled $13.4 million and $11.8 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. The gains on these investments, which were $0.3
million, $0.7 million, and $0.8 million for the years ended
June 28, 2020, June 30, 2019 and July 1, 2018, respec-
tively, are included in “Other (income) expense, net,”
within the Company’s consolidated statements of income.
38
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 15. Business Segments
The Company’s management reviews the results
of the Company’s operations by the following three
business segments:
(cid:127) 1-800-Flowers.com Consumer Floral,
(cid:127) BloomNet, 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 are
included within corporate overhead. Assets and liabilities
are reviewed at the consolidated level by management
and not accounted for by segment.
Net Revenues
Years Ended
June 28, June 30, July 1,
2020 2019 2018
(in thousands)
Net revenues:
1-800-Flowers.com
Consumer Floral
$ 593,197 $ 497,765 $ 457,460
BloomNet
111,766
102,876
89,569
Gourmet Foods &
Gift Baskets
Corporate
Intercompany
785,547
648,418
605,523
591
1,105
1,114
eliminations (1,464) (1,541) (1,745)
Total net revenues
$1,489,637
$1,248,623 $1,151,921
Operating Income from Continuing Operations
Years Ended
June 28, June 30, July 1,
2020 2019 2018
(in thousands)
Segment Contribution Margin:
1-800-Flowers.com
Consumer Floral $73,806 $49,653 $50,808
BloomNet
35,111 34,705 31,683
Gourmet Foods &
Gift Baskets
Segment Contribution
Margin Subtotal
110,627 82,319 70,927
219,544 166,677 153,418
Corporate (a) (106,667) (91,604) (79,901)
Depreciation and
amortization (32,513) (29,965) (32,469)
Operating income $80,364 $45,108 $41,048
(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.
The following tables represent a disaggregation of revenue from contracts with customers, by channel:
39
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 16. Leases
The Company currently leases plants, warehouses,
offices, store facilities, and equipment under various
leases through fiscal 2034. Most lease agreements are of
a long-term nature (over a year), although the Company
does also enter into short-term leases, primarily for
seasonal needs. Lease agreements may 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 accounts for its
leases in accordance with ASC 842. At contract inception,
we determine whether a contract is, or contains, a lease by
determining whether it conveys the right to control the use
of the identified asset for a period of time, by assessing
whether we have the right to obtain substantially all of the
economic benefits from use of the identified asset, and the
right to direct the use of the identified asset.
At the lease commencement date, we determine if a
lease should be classified as an operating or a finance
lease (we currently have no finance leases) and recog-
nize a corresponding lease liability and a right-of-use
asset on our Balance Sheet. The lease liability is initially
and subsequently measured as the present value of the
remaining fixed minimum rental payments (including
base rent and fixed common area maintenance) using
discount rates as of the commencement date. Variable
payments (including most utilities, real estate taxes,
insurance and variable common area maintenance) are
expensed as incurred. The right-of-use asset is initially
and subsequently measured at the carrying amount of
the lease liability adjusted for any prepaid or accrued
lease payments, remaining balance of lease incentives
received, unamortized initial direct costs, or impairment
charges relating to the right-of-use asset. Right-of-use
assets are assessed for impairment using the long-lived
assets impairment guidance. The discount rate used to
determine the present value of lease payments is our
estimated collateralized incremental borrowing rate,
based on the yield curve for the respective lease terms,
as we generally cannot determine the interest rate
implicit in the lease.
We recognize expense for our operating leases on a
straight-line basis over the lease term. As these leases
expire, it can be expected that in the normal course of
business they will be renewed or replaced. Renewal
option periods are included in the measurement of lease
liability, where the exercise is reasonably certain to occur.
Key estimates and judgments in accounting for leases
include how we determine: (1) lease payments, (2) lease
term, and (3) the discount rate used in calculating the
lease liability.
Additional information related to our leases is as follows:
Year Ended
June 28,
2020
(in thousands)
Lease costs:
Operating lease costs
Variable lease costs
Short-term lease cost
Sublease income
Total lease costs
$13,646
14,706
6,638
(941)
$34,049
Year Ended
June 28,
2020
(in thousands)
Cash paid for amounts included in measurement
of operating lease liabilities
Right-of-use assets obtained in exchange for
new operating lease liabilities
$11,916
$
178
June 28,
2020
(in thousands)
Weighted-average remaining lease term -
operating leases (in years)
Weighted-discount rate - operating leases
9.6
3.8%
Maturities of lease liabilities in accordance with ASC
842 as of June 28, 2020 are as follows (in thousands):
2021
$10,812
2022
10,038
2023
9,890
2024
9,530
2025
7,163
Thereafter
37,802
Total Future Minimum Lease Payments
85,235
Less Imputed Remaining Interest
14,986
Total
$70,249
At June 30, 2019, in accordance with ASC 840,
future minimum rental payments under non-cancelable
operating leases with initial terms of one year or more
consisted of the following (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total Future Minimum Lease Payments
$ 16,588
13,490
12,081
9,957
9,498
44,953
$106,567
40
Notes to Consolidated Financial Statements (continued)
1-800-FLOWERS.COM, Inc. and Subsidiaries
Note 18. Subsequent Events
Acquisition of PersonalizationMall
On August 3, 2020, the Company completed its
acquisition of PersonalizationMall, a leading ecommerce
provider of personalized products. The extensive
offerings of PersonalizationMall include a wide variety
of personalization processes such as sublimation,
embroidery, digital printing, engraving and sandblasting,
while providing an industry-leading customer experience
based on a fully integrated business platform that
includes a highly automated personalization process
and rapid order fulfillment.
The Company used a combination of cash on its
balance sheet and its existing credit facility to fund the
$245.0 million purchase (subject to certain working capital
and other adjustments), which included its newly reno-
vated, leased 360,000 square foot state-of-the-art produc-
tion and distribution facility, as well as customer database,
tradenames and website. PersonalizationMall’s revenues
were approximately $171.2 million in its fiscal 2020.
Amended Credit Agreement
On August 20, 2020, the Company, the Subsidiary
Guarantors, JPMorgan Chase Bank, N.A. as administra-
tive agent, and a group of lenders entered into a First
Amendment (the “First Amendment”) to the 2019 Credit
Agreement. The First Amendment amends the 2019
Credit Agreement to, among other modifications, (i)
increase the aggregate principal amount of the existing
Revolver commitments from $200.0 million to $250.0
million, (ii) establish a new tranche of term A-1 loans in
an aggregate principal amount of $100.0 million (the
“New Term Loan”), (iii) increase the working capital
sublimit with respect to the Revolver from $175.0 million
to $200.0 million, and (iv) increase the seasonally-
reduced Revolver commitments from $100.0 million to
$125.0 million for the period from January 1 through
August 1 for each fiscal year of the Company.
The New Term Loan will mature on May 31, 2024.
Proceeds of the borrowing under the New Term Loan
may be used for working capital and general corporate
purposes of the Company and its subsidiaries, subject
to certain restrictions. The Company may elect that
borrowings in respect of the New Term Loan bear
interest at an annual rate equal to either the Base Rate
or the LIBOR Rate. The New Term Loan is payable in 15
quarterly installments of principal and interest beginning
on September 27, 2020, with escalating principal
payments, at the rate of 5.0% per annum for the first
four payments, and 10.0% per annum for the remaining
11 payments, with the remaining balance of $67.5 million
due upon maturity.
Note 17. Commitments and Contingencies
Other Commitments
The Company’s purchase commitments consist
primarily of inventory, equipment and technology
(hardware and software) purchase orders made in the
ordinary course of business, most of which have terms
less than one year. As of June 28, 2020, the Company
had fixed and determinable off-balance sheet purchase
commitments 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 $2.0 million and
$1.6 million in unused stand-by letters of credit as of June
28, 2020 and June 30, 2019, respectively.
Litigation
Bed Bath & Beyond:
On April 1, 2020, Bed Bath & Beyond Inc. (“Bed Bath”)
commenced an action against the Company in the
Court of Chancery for the State of Delaware, which is
captioned Bed Bath & Beyond Inc. v. 1-800-Flowers.com,
et ano., C.A. (the “Complaint”), alleging a breach of
the Equity Purchase Agreement (the “Agreement”),
dated February 14, 2020, between Bed Bath,
PersonalizationMall.com, LLC (“PersonalizationMall”),
the Company and a subsidiary of the Company (the
“Purchaser”) pursuant to which Bed Bath agreed to sell to
Purchaser, and the Purchaser agreed to purchase from
Bed Bath, all of the issued and outstanding membership
interests of PersonalizationMall. The action was initiated
after the Company requested a reasonable delay in the
closing under the Agreement due to the unprecedented
circumstances created by the COVID-19 pandemic. The
Complaint requested an order of specific performance to
consummate the transaction under the Agreement plus
attorney’s fees and costs in connection with the action.
The Company filed its answer to the Complaint on April
17, 2020 and an order governing expedited proceedings
was approved on April 9, 2020 that set a trial date for late
September 2020. On July 21, 2020, the Company and
Bed Bath entered into a settlement agreement, pursuant
to which the Company agreed to move forward with its
purchase of PersonalizationMall for $245 million, subject
to certain working capital and other adjustments. The
transaction closed on August 3, 2020 (see Note 18.
Subsequent Events for details). In connection with the
settlement agreement, the parties’ executed a Stipulation
and Proposed Order of Dismissal, resulting in the
voluntary dismissal with prejudice of the litigation
relating to the transaction.
In addition, there are various claims, lawsuits, and
pending actions against the Company and its subsidiar-
ies incident to the operations of its businesses. It is the
opinion of management, after consultation with counsel,
that the final 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.
41
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and
maintaining adequate internal control over financial
reporting. Internal control over financial reporting is
defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act as a process designed by, or under the
supervision of, the Company’s principal executive and
principal financial officers and effectuated by the
Company’s board of directors, management and other
personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance
with U.S. generally accepted accounting principles (“U.S.
GAAP”), and includes those policies and procedures that:
(cid:127) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
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 Execu-
tive 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 28, 2020.
(cid:127) provide reasonable assurance that transactions are
The Company’s independent registered public
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
accounting firm, BDO USA, LLP, audited the effectiveness
of the Company’s internal control over financial reporting
as of June 28, 2020. BDO USA, LLP’s report on the
effectiveness of the Company’s internal control over
financial reporting as of June 28, 2020 is set forth below.
(cid:127) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use
or disposition of the Company’s assets that could
have a material effect on the financial statements.
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. and
Subsidiaries (the “Company”) internal control over
financial reporting as of June 28, 2020, based on criteria
established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organiza-
tions of the Treadway Commission (the “COSO criteria”).
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting
as of June 28, 2020, 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 28, 2020 and June 30, 2019 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 28,
2020, and the related notes and schedule and our report
dated September 11, 2020 expressing 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 prin-
ciples, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3)
provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
BDO USA, LLP
Melville, New York
September 11, 2020
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 (the “Company”) as of June 28, 2020 and
June 30, 2019, the related consolidated statements of
income and comprehensive income, stockholders’
equity, and cash flows for each of the three years in the
period ended June 28, 2020, 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 at June 28, 2020
and June 30, 2019, and the results of its operations
and its cash flows for each of the three years in the
period ended June 28, 2020, 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 28,
2020, 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 11, 2020
expressed an unqualified opinion thereon.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial
statements, effective on July 1, 2019, the Company changed
its method of accounting for leases due to the adoption of
Accounting Standards Codification Topic 842, Leases.
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 11, 2020
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 years 2019 and 2020.
Holders
As of September 4, 2020, there were approximately 220 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
4, 2020, there were approximately 9 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 August 2017, the board of directors increased the authorization to $30.0 million,
and on June 27, 2019, increased it once more to $30.0 million. The Company repurchased a total of $10.7 million
(754,458 shares), $14.8 million (1,230,303 shares) and $12.2 million (1,269,059 shares) during the fiscal years ended
June 28, 2020, June 30, 2019 and July 1, 2018, respectively, under this program. As of June 28, 2020, $19.3 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 28, 2020, which includes the period July 1, 2019 through June 28, 2020:
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)
07/01/19 - 07/28/19
––
07/29/19 - 08/25/19 ––
2,113
08/26/19 - 09/29/19
––
09/30/19 - 10/27/19
158,750
10/28/19 - 11/24/19
210,000
11/25/19 - 12/29/19
270,000
12/30/19 - 01/26/20
112,941
01/27/20 - 02/23/20
––
02/24/20 - 03/29/20
03/30/20 - 04/26/20
––
654
04/27/20 - 05/24/20
––
05/25/20 - 06/28/20
––
––
$14.85
––
$13.24
$13.76
$14.43
$15.30
––
––
$20.74
––
––
––
2,113
––
158,750
210,000
270,000
112,941
––
––
654
––
Total
754,458
$14.13
754,458
(1) Average price per share excludes commissions and other transaction fees.
$30,000
$30,000
$29,969
$29,969
$27,867
$24,970
$21,065
$19,333
$19,333
$19,333
$19,320
$19,320
Dividends
We have never declared or paid cash dividends on our common stock. We currently do not anticipate paying any cash
dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our
board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital
requirements, general business conditions and other factors that our board of directors may deem relevant.
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 6/30/15 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 and the impact of the COVID-19
pandemic on the Company; 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 com-
petitors; 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 im-
pact of such disclosures. The Company undertakes no obligation to publicly update any of the for-
ward-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 pre-
sented 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. Adjust-
ed EBITDA is defined as EBITDA adjusted for the impact of stock-based compensation, Non-Qual-
ified 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 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 depreci-
ated 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 commu-
nity 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.
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
32 Old Slip
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 U.S. Securities
and Exchange Commission and additional
information about 1-800-FLOWERS.COM, Inc.
may be obtained by visiting the Investor
Relations section at www.1800flowersinc.com,
by calling 516-237-6113, or by writing to:
Investor Relations
1-800-FLOWERS.COM, Inc.
One Old Country Road, Suite 500
Carle Place, NY 11514
One Old Country Road, Suite 500
Carle Place, NY 11514
1800flowers.com
(516) 237-6000