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1 800 Flowers Com Inc. – ‘10-Q’ for 3/28/21

On:  Friday, 5/7/21, at 1:03pm ET   ·   For:  3/28/21   ·   Accession #:  1437749-21-11266   ·   File #:  0-26841

Previous ‘10-Q’:  ‘10-Q’ on 2/5/21 for 12/27/20   ·   Next:  ‘10-Q’ on 11/5/21 for 9/26/21   ·   Latest:  ‘10-Q’ on 2/8/24 for 12/31/23   ·   1 Reference:  To:  1-800-FLOWERS.COM, Inc. – ‘10-K’ on 9/11/20 for 6/28/20

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 5/07/21  1 800 Flowers Com Inc.            10-Q        3/28/21   71:7.2M                                   RDG Filings/FA

Quarterly Report   —   Form 10-Q

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    959K 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     26K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     25K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     22K 
11: R1          Document And Entity Information                     HTML     77K 
12: R2          Condensed Consolidated Balance Sheets (Current      HTML    118K 
                Period Unaudited)                                                
13: R3          Condensed Consolidated Balance Sheets (Current      HTML     38K 
                Period Unaudited) (Parentheticals)                               
14: R4          Condensed Consolidated Statements of Income and     HTML     95K 
                Comprehensive Income (Loss) (Unaudited)                          
15: R5          Condensed Consolidated Statements of Stockholders'  HTML     92K 
                Equity (Unaudited)                                               
16: R6          Condensed Consolidated Statements of Cash Flows     HTML     93K 
                (Unaudited)                                                      
17: R7          Note 1 - Accounting Policies                        HTML     40K 
18: R8          Note 2 - Net Income (Loss) Per Common Share         HTML     50K 
19: R9          Note 3 - Stock-based Compensation                   HTML     75K 
20: R10         Note 4 - Acquisitions                               HTML     65K 
21: R11         Note 5 - Inventory                                  HTML     29K 
22: R12         Note 6 - Goodwill and Intangible Assets             HTML     60K 
23: R13         Note 7 - Investments                                HTML     24K 
24: R14         Note 8 - Debt                                       HTML     38K 
25: R15         Note 9 - Property, Plant and Equipment              HTML     39K 
26: R16         Note 10 - Fair Value Measurements                   HTML     46K 
27: R17         Note 11 - Income Taxes                              HTML     27K 
28: R18         Note 12 - Business Segments                         HTML    135K 
29: R19         Note 13 - Leases                                    HTML     48K 
30: R20         Note 14 - Commitments and Contingencies             HTML     26K 
31: R21         Significant Accounting Policies (Policies)          HTML     50K 
32: R22         Note 2 - Net Income (Loss) Per Common Share         HTML     49K 
                (Tables)                                                         
33: R23         Note 3 - Stock-based Compensation (Tables)          HTML     78K 
34: R24         Note 4 - Acquisitions (Tables)                      HTML     48K 
35: R25         Note 5 - Inventory (Tables)                         HTML     29K 
36: R26         Note 6 - Goodwill and Intangible Assets (Tables)    HTML     61K 
37: R27         Note 8 - Debt (Tables)                              HTML     30K 
38: R28         Note 9 - Property, Plant and Equipment (Tables)     HTML     37K 
39: R29         Note 10 - Fair Value Measurements (Tables)          HTML     39K 
40: R30         Note 12 - Business Segments (Tables)                HTML    131K 
41: R31         Note 13 - Leases (Tables)                           HTML     45K 
42: R32         Note 1 - Accounting Policies (Details Textual)      HTML     23K 
43: R33         Note 2 - Net Income (Loss) Per Common Share -       HTML     52K 
                Basic and Diluted Net Income Per Common Share                    
                (Details)                                                        
44: R34         Note 3 - Stock-based Compensation (Details          HTML     27K 
                Textual)                                                         
45: R35         Note 3 - Stock-based Compensation - Stock-based     HTML     29K 
                Compensation Expense Recognized (Details)                        
46: R36         Note 3 - Stock-based Compensation - Allocation of   HTML     27K 
                Stock-based Compensation to Operating Expenses                   
                (Details)                                                        
47: R37         Note 3 - Stock-based Compensation - Stock Option    HTML     48K 
                Activity (Details)                                               
48: R38         Note 3 - Stock-based Compensation - Non-vested      HTML     40K 
                Restricted Stock Activity (Details)                              
49: R39         Note 4 - Acquisitions (Details Textual)             HTML     80K 
50: R40         Note 4 - Acquisitions - Preliminary Allocation of   HTML     62K 
                the Purchase Price to the Estimated Fair Values of               
                Assets Acquired and Liabilities Assumed (Details)                
51: R41         Note 4 - Acquisitions - Pro Forma Information       HTML     24K 
                (Details)                                                        
52: R42         Note 5 - Inventory - Summary of Inventory           HTML     28K 
                (Details)                                                        
53: R43         Note 6 - Goodwill and Intangible Assets (Details    HTML     32K 
                Textual)                                                         
54: R44         Note 6 - Goodwill and Intangible Assets - Goodwill  HTML     30K 
                by Segment (Details)                                             
55: R45         Note 6 - Goodwill and Intangible Assets - Other     HTML     47K 
                Intangible Assets (Details)                                      
56: R46         Note 7 - Investments (Details Textual)              HTML     20K 
57: R47         Note 8 - Debt (Details Textual)                     HTML     92K 
58: R48         Note 8 - Debt - Summary of Current and Long-term    HTML     40K 
                Debt (Details)                                                   
59: R49         Note 9 - Property, Plant and Equipment - Summary    HTML     43K 
                of Property, Plant and Equipment (Details)                       
60: R50         Note 10 - Fair Value Measurements - Assets and      HTML     30K 
                Liabilities Measured at Fair Value (Details)                     
61: R51         Note 11 - Income Taxes (Details Textual)            HTML     33K 
62: R52         Note 12 - Business Segments (Details Textual)       HTML     20K 
63: R53         Note 12 - Business Segments - Segment Performance   HTML     54K 
                (Details)                                                        
64: R54         Note 12 - Business Segments - Disaggregation of     HTML     65K 
                Revenue From Contracts With Customers (Details)                  
65: R55         Note 13 - Leases - Lease Costs (Details)            HTML     40K 
66: R56         Note 13 - Leases - Maturities of Lease Liabilities  HTML     37K 
                (Details)                                                        
67: R57         Note 14 - Commitments and Contingencies (Details    HTML     22K 
                Textual)                                                         
69: XML         IDEA XML File -- Filing Summary                      XML    129K 
10: XML         XBRL Instance -- flws20210328b_10q_htm               XML   1.95M 
68: EXCEL       IDEA Workbook of Financial Reports                  XLSX     78K 
 6: EX-101.CAL  XBRL Calculations -- flws-20210328_cal               XML    145K 
 7: EX-101.DEF  XBRL Definitions -- flws-20210328_def                XML   1.01M 
 8: EX-101.LAB  XBRL Labels -- flws-20210328_lab                     XML    852K 
 9: EX-101.PRE  XBRL Presentations -- flws-20210328_pre              XML   1.06M 
 5: EX-101.SCH  XBRL Schema -- flws-20210328                         XSD    151K 
70: JSON        XBRL Instance as JSON Data -- MetaLinks              312±   493K 
71: ZIP         XBRL Zipped Folder -- 0001437749-21-011266-xbrl      Zip    169K 


‘10-Q’   —   Quarterly Report

Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Table of Contents
"Part I
"Financial Information
"Item 1
"Condensed Consolidated Financial Statements
"Condensed Consolidated Balance Sheets -- March 28, 2021 (Unaudited) and June 28, 2020
"Condensed Consolidated Statements of Cash Flows (Unaudited) -- Nine Months Ended March 28, 2021 and March 29, 2020
"Notes to Condensed Consolidated Financial Statements (Unaudited)
"Accompanying Notes to Condensed Consolidated Financial Statements
"Note 1 -- Accounting Policies
"Note 8 -- Debt, in Item 1
"Note 10 -- Fair Value Measurements
"Note 12 -- Business Segments
"Note 13
"Note 13 -- Leases in Item 1
"Segment Information
"Results of Operations
"Signatures

This is an HTML Document rendered as filed.  [ Alternative Formats ]



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 i 0001084869  i 1 800 FLOWERS COM INC  i false  i --06-27  i Q3  i 2021  i   i   i 0.01  i 0.01  i 10,000,000  i 10,000,000  i 0  i 0  i 0.01  i 0.01  i 200,000,000  i 200,000,000  i 55,452,711  i 53,704,477  i 0.01  i 0.01  i 200,000,000  i 200,000,000  i 33,433,614  i 33,822,823  i 18,592,948  i 17,963,551  i 5,280,000  i 5,280,000  i 2016 2017 2018 2019 2020  i 2015 2016 2017 2018 2019 2020  i 3  i 8.9 On May 31, 2019, the Company and certain of its U.S. subsidiaries entered into a Second Amended and Restated Credit Agreement (the “2019 Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent, and a group of lenders. The 2019 Credit Agreement amended and restated the Company’s existing amended and restated credit agreement dated as of December 23, 2016 (the “2016 Credit Agreement”) to, among other modifications: (i) increase the amount of the outstanding term loan (“Term Loan”) from approximately $97 million to $100 million, (ii) extend the maturity date of the outstanding Term Loan and the revolving credit facility (“Revolver”) by approximately 29 months to May 31, 2024, and (iii) decrease the applicable interest rate margins for LIBOR and base rate loans by 25 basis points. The Term Loan is payable in 19 quarterly installments of principal and interest beginning on September 29, 2019, with escalating principal payments, at the rate of 5.0% per annum for the first eight payments, and 10.0% per annum for the remaining 11 payments, with the remaining balance of $62.5 million due upon maturity. The Revolver, in the aggregate amount of $200 million, subject to seasonal reduction to an aggregate amount of $100 million for the period from January 1 through August 1, may be used for working capital and general corporate purposes, subject to certain restrictions. For each borrowing under the 2019 Credit Agreement, the Company may elect that such borrowing bear interest at an annual rate equal to either: (1) a base rate plus an applicable margin varying based on the Company’s consolidated leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the New York fed bank rate plus 0.5%, and (c) a LIBOR rate plus 1%, or (2) an adjusted LIBOR rate plus an applicable margin varying based on the Company’s consolidated leverage ratio. On August 20, 2020, the Company, the Subsidiary Guarantors, JPMorgan Chase Bank, N.A. as administrative 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 (together the "2020 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. For each borrowing under the 2020 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 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%, or (2) an adjusted LIBOR rate plus an applicable margin varying based on the Company’s consolidated leverage ratio. 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. The 2020 Credit Agreement requires that while any borrowings or commitments are outstanding the Company comply with certain financial covenants and affirmative covenants as well as certain negative covenants that, subject to certain exceptions, limit the Company’s ability to, among other things, incur additional indebtedness, make certain investments and make certain restricted payments. The Company was in compliance with these covenants as of March 28, 2021. The 2020 Credit Agreement is secured by substantially all of the assets of the Company. The Company has established a 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 a 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. 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. 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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM  i 10-Q

 

 i QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended  i March 28, 2021

 

or 

 

 i TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

 

Commission File No.  i 0-26841

 

1-800-FLOWERS.COM, Inc.

(Exact name of registrant as specified in its charter)

 

 i Delaware

 i 11-3117311

(State of incorporation)

(I.R.S. Employer Identification No.)

 

 i One Old Country Road,  i Carle Place,  i New York,  i 11514

( i 516)  i 237-6000

(Address of principal executive offices) (Zip code)

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

 i Class A common stock

 i FLWS

 i The Nasdaq Stock Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  i Yes ☑ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit such files).  i Yes ☑   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

☐ Large accelerated filer

 

☑  i Accelerated filer

☐ Non-accelerated filer

 

 i  Smaller reporting company

  

 i  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  i   No

 

The number of shares outstanding of each of the Registrant’s classes of common stock as of April 30, 2021:

 

Class A common stock:

 i 36,931,163

Class B common stock:

 i 28,153,614

 

 

Table of Contents

 

 

 

 

 

 

1-800-FLOWERS.COM, Inc.

FORM 10-Q

For the quarterly period ended March 28, 2021

TABLE OF CONTENTS

 

 

     

Page

 

Part I.

Financial Information

       

Item 1.

Condensed Consolidated Financial Statements

   

1

 
 

Condensed Consolidated Balance Sheets – March 28, 2021 (Unaudited) and June 28, 2020

   

1

 
 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) – Three and Nine Months Ended March 28, 2021 and March 29, 2020

   

2

 
 

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) – Three and Nine Months Ended March 28, 2021 and March 29, 2020

   

3

 
 

Condensed Consolidated Statements of Cash Flows (Unaudited) – Nine Months Ended March 28, 2021 and March 29, 2020

   

4

 
 

Notes to Condensed Consolidated Financial Statements (Unaudited)

   

5

 

Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

   

14

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

   

23

 

Item 4.

Controls and Procedures

   

23

 
           

Part II.

Other Information

       

Item 1.

Legal Proceedings

   

24

 

Item 1A.

Risk Factors

   

24

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

   

24

 

Item 3.

Defaults upon Senior Securities

   

24

 

Item 4.

Mine Safety Disclosures

   

24

 

Item 5.

Other Information

   

24

 

Item 6.

Exhibits

   

25

 
           

Signatures

   

26

 

 

 

 

 

 

Table of Contents

 

 

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1-800-FLOWERS.COM, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except for share data)

 

  

March 28, 2021

  

June 28, 2020

 
  

(unaudited)

     

Assets

        

Current assets:

        

Cash and cash equivalents

 $ i 256,783  $ i 240,506 

Trade receivables, net

   i 39,121    i 15,178 

Inventories

   i 122,385    i 97,760 

Prepaid and other

   i 30,243    i 25,186 

Total current assets

   i 448,532    i 378,630 
         

Property, plant and equipment, net

   i 197,490    i 169,075 

Operating lease right-of-use assets

   i 86,616    i 66,760 

Goodwill

   i 208,048    i 74,711 

Other intangibles, net

   i 139,962    i 66,273 

Other assets

   i 26,672    i 18,986 

Total assets

 $ i 1,107,320  $ i 774,435 
         

Liabilities and Stockholders' Equity

        

Current liabilities:

        

Accounts payable

 $ i 60,217  $ i 25,306 

Accrued expenses

   i 215,177    i 141,741 

Current maturities of long-term debt

   i 17,500    i 5,000 

Current portion of long-term operating lease liabilities

   i 11,021    i 8,285 

Total current liabilities

   i 303,915    i 180,332 
         

Long-term debt

   i 166,213    i 87,559 

Long-term operating lease liabilities

   i 79,803    i 61,964 

Deferred tax liabilities

   i 26,501    i 28,632 

Other liabilities

   i 30,773    i 16,174 

Total liabilities

   i 607,205    i 374,661 
         

Commitments and contingencies (See Note 13 and Note 14)

          
         

Stockholders’ equity:

        

Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued

   i -    i - 

Class A common stock, $0.01 par value, 200,000,000 shares authorized, 55,452,711 and 53,704,477 shares issued at March 28, 2021 and June 28, 2020, respectively

   i 555    i 537 

Class B common stock, $0.01 par value, 200,000,000 shares authorized, 33,433,614 and 33,822,823 shares issued at March 28, 2021 and June 28, 2020, respectively

   i 334    i 338 

Additional paid-in-capital

   i 367,842    i 358,031 

Retained earnings

   i 272,865    i 167,523 

Accumulated other comprehensive loss

  ( i 244

)

  ( i 243

)

Treasury stock, at cost, 18,592,948 and 17,963,551 Class A shares at March 28, 2021 and June 28, 2020, respectively, and 5,280,000 Class B shares at March 28, 2021 and June 28, 2020

  ( i 141,237

)

  ( i 126,412

)

Total stockholders’ equity

   i 500,115    i 399,774 

Total liabilities and stockholders’ equity

 $ i 1,107,320  $ i 774,435 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

1

 

Table of Contents

 

 

 

 

 

1-800-FLOWERS.COM, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except for per share data)

(unaudited)

 

  

Three Months Ended

  

Nine Months Ended

 
  

March 28, 2021

  

March 29, 2020

  

March 28, 2021

  

March 29, 2020

 
                 

Net revenues

 $ i 474,234  $ i 278,776  $ i 1,635,262  $ i 1,071,681 

Cost of revenues

   i 289,535    i 171,324    i 936,837    i 618,911 

Gross profit

   i 184,699    i 107,452    i 698,425    i 452,770 

Operating expenses:

                

Marketing and sales

   i 127,923    i 78,606    i 402,904    i 262,849 

Technology and development

   i 14,281    i 11,900    i 39,937    i 34,436 

General and administrative

   i 30,912    i 20,031    i 89,960    i 64,187 

Depreciation and amortization

   i 11,892    i 7,803    i 31,792    i 23,268 

Total operating expenses

   i 185,008    i 118,340    i 564,593    i 384,740 

Operating income (loss)

  ( i 309)  ( i 10,888

)

   i 133,832    i 68,030 

Interest expense, net

   i 1,553    i 147    i 4,520    i 1,727 

Other (income) expense, net

  ( i 945

)

   i 2,605   ( i 4,201

)

   i 1,714 

Income (loss) before income taxes

  ( i 917

)

  ( i 13,640

)

   i 133,513    i 64,589 

Income tax expense (benefit)

  ( i 2,344

)

  ( i 3,983

)

   i 28,171    i 15,365 

Net income (loss)

   i 1,427   ( i 9,657

)

   i 105,342    i 49,224 

Other comprehensive income (loss) (currency translation & other miscellaneous items)

   i -    i 1   ( i 1

)

   i 17 

Comprehensive income (loss)

 $ i 1,427  $( i 9,656

)

 $ i 105,341  $ i 49,241 
                 

Basic net income (loss) per common share

 $ i 0.02  $( i 0.15

)

 $ i 1.63  $ i 0.76 
                 

Diluted net income (loss) per common share

 $ i 0.02  $( i 0.15

)

 $ i 1.58  $ i 0.74 
                 

Weighted average shares used in the calculation of net income (loss) per common share:

                

Basic

   i 64,885    i 64,348    i 64,644    i 64,517 

Diluted

   i 66,474    i 64,348    i 66,564    i 66,378 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

2

Table of Contents

 

 

1-800-FLOWERS.COM, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share data)

(unaudited)

 

  

Three Months Ended March 28, 2021 and March 29, 2020

 
  

Common Stock

  

Additional

  

Retained

  

Accumulated

          

Total

 
  

Class A

  

Class B

  

Paid-in

  

Earnings

  

Other

  

Treasury Stock

  

Stockholders

 
  

Shares

  

Amount

  

Shares

  

Amount

  

Capital

      

Comprehensive Loss

  

Shares

  

Amount

  

Equity

 

Balance at December 28, 2020

   i 55,166,476  $ i 551    i 33,433,614  $ i 334  $ i 364,411  $ i 271,438  $( i 244

)

   i 23,789,689  $( i 138,882

)

 $ i 497,608 

Net income

  -    i -   -    i -    i -    i 1,427    i -   -    i -    i 1,427 

Stock-based compensation

   i 36,335    i 1    i -    i -    i 2,870    i -    i -    i -    i -    i 2,871 

Exercise of stock options

   i 249,900    i 3    i -    i -    i 561    i -    i -    i -    i -    i 564 

Acquisition of Class A treasury stock

   i -    i -    i -    i -    i -    i -    i -    i 83,259   ( i 2,355

)

  ( i 2,355

)

Balance at March 28, 2021

   i 55,452,711  $ i 555    i 33,433,614  $ i 334  $ i 367,842  $ i 272,865  $( i 244

)

   i 23,872,948  $( i 141,237

)

 $ i 500,115 
                                         

Balance at December 29, 2019

   i 53,678,919  $ i 536    i 33,822,823  $ i 338  $ i 353,643  $ i 167,406  $( i 253

)

   i 22,859,956  $( i 120,762

)

 $ i 400,908 

Net loss

  -    i -   -    i -    i -   ( i 9,657

)

   i -   -    i -   ( i 9,657

)

Translation adjustment

  -    i -   -    i -    i -    i -    i 1   -    i -    i 1 

Stock-based compensation

   i 23,891    i 1    i -    i -    i 2,395    i -    i -    i -    i -    i 2,396 

Acquisition of Class A treasury stock

   i -    i -    i -    i -    i -    i -    i -    i 382,941   ( i 5,637

)

  ( i 5,637

)

Balance at March 29, 2020

   i 53,702,810  $ i 537    i 33,822,823  $ i 338  $ i 356,038  $ i 157,749  $( i 252

)

   i 23,242,897  $( i 126,399

)

 $ i 388,011 

 

  

Nine Months Ended March 28, 2021 and March 29, 2020

 
  

Common Stock

  

Additional

  

Retained

  

Accumulated

          

Total

 
  

Class A

  

Class B

  

Paid-in

  

Earnings

  

Other

  

Treasury Stock

  

Stockholders

 
  

Shares

  

Amount

  

Shares

  

Amount

  

Capital

      

Comprehensive Loss

  

Shares

  

Amount

  

Equity

 

Balance at June 28, 2020

   i 53,704,477  $ i 537    i 33,822,823  $ i 338  $ i 358,031  $ i 167,523  $( i 243

)

   i 23,243,551  $( i 126,412

)

 $ i 399,774 

Net income

  -    i -   -    i -    i -    i 105,342    i -   -    i -    i 105,342 

Translation adjustment

  -    i -   -    i -    i -    i -   ( i 1

)

  -    i -   ( i 1

)

Stock-based compensation

   i 679,925    i 7    i -    i -    i 8,222    i -    i -    i -    i -    i 8,229 

Exercise of stock options

   i 679,100    i 7    i -    i -    i 1,589    i -    i -    i -    i -    i 1,596 

Conversion – Class B into Class A

   i 389,209    i 4   ( i 389,209

)

  ( i 4

)

   i -    i -    i -    i -    i -    i - 

Acquisition of Class A treasury stock

   i -    i -    i -    i -    i -    i -    i -    i 629,397   ( i 14,825

)

  ( i 14,825

)

Balance at March 28, 2021

   i 55,452,711  $ i 555    i 33,433,614  $ i 334  $ i 367,842  $ i 272,865  $( i 244

)

   i 23,872,948  $( i 141,237

)

 $ i 500,115 
                                         

Balance at June 30, 2019

   i 53,084,127  $ i 530    i 33,822,823  $ i 338  $ i 349,319  $ i 108,525  $( i 269

)

   i 22,489,093  $( i 115,732

)

 $ i 342,711 

Net income

  -    i -   -    i -    i -    i 49,224    i -   -    i -    i 49,224 

Translation adjustment

  -    i -   -    i -    i -    i -    i 17   -    i -    i 17 

Stock-based compensation

   i 468,683    i 5    i -    i -    i 6,436    i -    i -    i -    i -    i 6,441 

Exercise of stock options

   i 150,000    i 2    i -    i -    i 283    i -    i -    i -    i -    i 285 

Acquisition of Class A treasury stock

   i -    i -    i -    i -    i -    i -    i -    i 753,804   ( i 10,667

)

  ( i 10,667

)

Balance at March 29, 2020

   i 53,702,810  $ i 537    i 33,822,823  $ i 338  $ i 356,038  $ i 157,749  $( i 252

)

   i 23,242,897  $( i 126,399

)

 $ i 388,011 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

3

 

Table of Contents

 

 

 

1-800-FLOWERS.COM, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

  

Nine months ended

 
  

March 28, 2021

  

March 29, 2020

 
         

Operating activities:

        

Net income

 $ i 105,342  $ i 49,224 

Adjustments to reconcile net income to net cash provided by operating activities:

        

Depreciation and amortization

   i 31,792    i 23,268 

Amortization of deferred financing costs

   i 844    i 486 

Deferred income taxes

  ( i 2,131

)

  ( i 1,597

)

Bad debt expense

   i 959    i 1,201 

Stock-based compensation

   i 8,229    i 6,441 

Other non-cash items

  ( i 79

)

  ( i 23

)

Changes in operating items:

        

Trade receivables

  ( i 23,520

)

  ( i 15,044

)

Inventories

  ( i 7,627

)

   i 19,353 

Prepaid and other

  ( i 1,301

)

   i 3,148 

Accounts payable and accrued expenses

   i 96,947    i 31,442 

Other assets and liabilities

   i 8,756   ( i 557

)

Net cash provided by operating activities

   i 218,211    i 117,342 
         

Investing activities:

        

Acquisitions, net of cash acquired

  ( i 250,943

)

  ( i 20,500

)

Capital expenditures, net of non-cash expenditures

  ( i 26,821

)

  ( i 22,282

)

Purchase of equity investments

  ( i 1,251

)

  ( i 1,176

)

Net cash used in investing activities

  ( i 279,015

)

  ( i 43,958

)

         

Financing activities:

        

Acquisition of treasury stock

  ( i 14,825

)

  ( i 10,667

)

Proceeds from exercise of employee stock options

   i 1,596    i 285 

Proceeds from bank borrowings

   i 265,000    i 20,000 

Repayment of notes payable and bank borrowings

  ( i 172,497

)

  ( i 23,750

)

Debt issuance cost

  ( i 2,193

)

  ( i 60

)

Net cash provided by (used in) financing activities

   i 77,081   ( i 14,192

)

         

Net change in cash and cash equivalents

   i 16,277    i 59,192 

Cash and cash equivalents:

        

Beginning of period

   i 240,506    i 172,923 

End of period

 $ i 256,783  $ i 232,115 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

4

 

Table of Contents

 

1-800-FLOWERS.COM, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

 

 
 i 

Note 1 Accounting Policies

 

 i 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared by 1-800-FLOWERS.COM, Inc. and Subsidiaries (the “Company”) in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended March 28, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending June 27, 2021. These financial statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended June 28, 2020, which provides a more complete understanding of our accounting policies, financial position, operating results and other matters.

 

The Company’s quarterly results may experience seasonal fluctuations. 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, historically generated nearly 50% of the Company’s annual revenues, and all of its earnings. However, with the onset of the pandemic of the novel strain of coronavirus (“COVID-19”), our customers have increasingly turned to our brands and our expanded product offerings to help them connect and express themselves, 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 the aforementioned increase in the Company’s “everyday” business has and is expected to continue to lessen the seasonality of our business. Due to the number of major floral gifting occasions, including Mother's Day, Valentine’s Day, Easter and Administrative Professionals Week, revenues also rise during the Company’s fiscal third and fourth quarters in comparison to its fiscal first quarter.

 

 i 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

 i 

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 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 statements during the three and nine months ended  March 28, 2021.

 

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 consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of March 28, 2021 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 three and nine months ended March 28, 2021, 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.

 

 i 

Revenue Recognition

 

Net revenue is measured based on the amount of consideration that we expect to receive, reduced by discounts and estimates for credits and returns (calculated based upon previous experience and management’s evaluation). Service and outbound shipping charged to customers are recognized at the time the related merchandise revenues are recognized and are included in net revenues. Inbound and outbound shipping and delivery costs are included in cost of revenues. Net revenues exclude sales and other similar taxes collected from customers.

 

A description of our principal revenue generating activities is as follows:

 

E-commerce revenues - consumer products sold through our online and telephonic channels. Revenue is recognized when control of the merchandise is transferred to the customer, which generally occurs upon shipment. Payment is typically due prior to the date of shipment.

Retail revenues - consumer products sold through our retail stores. Revenue is recognized when control of the goods is transferred to the customer, at the point of sale, at which time payment is received.

Wholesale revenues - products sold to our wholesale customers for subsequent resale. Revenue is recognized when control of the goods is transferred to the customer, in accordance with the terms of the applicable agreement. Payment terms are typically 30 days from the date control over the product is transferred to the customer.

BloomNet Services - membership fees as well as other service offerings to florists. Membership and other subscription-based fees are recognized monthly as earned. Services revenues related to orders sent through the floral network are variable, based on either the number of orders or the value of orders, and are recognized in the period in which the orders are delivered. The contracts within BloomNet Services are typically month-to-month and as a result no consideration allocation is necessary across multiple reporting periods. Payment is typically due less than 30 days from the date the services were performed. 

 

Deferred Revenues

 

Deferred revenues are recorded when the Company has received consideration (i.e. advance payment) before satisfying its performance obligations. As such, customer orders are recorded as deferred revenue prior to shipment or rendering of product or services. Deferred revenues primarily relate to e-commerce orders placed, but not shipped, prior to the end of the fiscal period, as well as for monthly subscription programs, including our Fruit of the Month Club and Celebrations Passport program.

 

Our total deferred revenue as of June 28, 2020 was $ i 25.9 million (included in “Accrued expenses” on our consolidated balance sheets), of which, $ i 8.7 million and $ i 23.7 million was recognized as revenue during the three and nine months ended March 28, 2021. The deferred revenue balance as of March 28, 2021 was $ i 50.4 million.  

 

 / 

5

Table of Contents

 

 i 

Recently Issued Accounting Pronouncements - Adopted

 

Financial Instruments – Measurement of Credit Losses. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 introduces a new forward-looking “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 disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. We adopted ASU 2016-13 for the Company’s fiscal 2021 (quarter ending September 27, 2020), using the modified-retrospective approach. There was no material impact of adopting this guidance on our consolidated financial statements. 

 

Goodwill – Impairment Test. In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates step two 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. We adopted this guidance for the Company’s fiscal 2021 (quarter ending September 27, 2020), on a prospective basis. There was no material impact of adopting this guidance on our consolidated financial statements.

 

 / 

 

 
 i 

Note 2 Net Income (loss) Per Common Share

 

The following table sets forth the computation of basic and diluted net income (loss) per common share:

 

 i 
  

Three Months Ended

  

Nine Months Ended

 
  

March 28, 2021

  

March 29, 2020

  

March 28, 2021

  

March 29, 2020

 
  

(in thousands, except per share data)

 

Numerator:

                

Net income (loss)

 $ i 1,427  $( i 9,657

)

 $ i 105,342  $ i 49,224 
                 

Denominator:

                

Weighted average shares outstanding

   i 64,885    i 64,348    i 64,644    i 64,517 

Effect of dilutive securities:

                

Employee stock options

   i 604    i -    i 837    i 1,035 

Employee restricted stock awards

   i 985    i -    i 1,083    i 826 
    i 1,589    i -    i 1,920    i 1,861 
                 

Adjusted weighted-average shares and assumed conversions

   i 66,474    i 64,348    i 66,564    i 66,378 
                 

Net income (loss) per common share

                

Basic

 $ i 0.02  $( i 0.15

)

 $ i 1.63  $ i 0.76 

Diluted

 $ i 0.02  $( i 0.15

)

 $ i 1.58  $ i 0.74 
 / 

 

 / 
 
 i 

Note 3 Stock-Based Compensation

 

The Company has a Long Term Incentive and Share Award Plan, which is more fully described in Note 12 and Note 13 to the consolidated financial statements included in the Companys Annual Report on Form 10-K for the fiscal year ended June 28, 2020, that provides for the grant to eligible employees, consultants and directors of stock options, restricted shares, and other stock-based awards.

 

The amounts of stock-based compensation expense recognized in the periods presented are as follows:

 

 i 
  

Three Months Ended

  

Nine Months Ended

 
  

March 28, 2021

  

March 29, 2020

  

March 28, 2021

  

March 29, 2020

 
  

(in thousands)

 

Stock options

 $ i 9  $ i 6  $ i 27  $ i 99 

Restricted stock

   i 2,862    i 2,390    i 8,202    i 6,342 

Total

   i 2,871    i 2,396    i 8,229    i 6,441 

Deferred income tax benefit

   i 743    i 594    i 2,131    i 1,597 

Stock-based compensation expense, net

 $ i 2,128  $ i 1,802  $ i 6,098  $ i 4,844 
 / 

 

Stock-based compensation is recorded within the following line items of operating expenses:

 

 i 
  

Three Months Ended

  

Nine Months Ended

 
  

March 28, 2021

  

March 29, 2020

  

March 28, 2021

  

March 29, 2020

 
  

(in thousands)

 

Marketing and sales

 $ i 1,236  $ i 1,097  $ i 3,747  $ i 2,960 

Technology and development

   i 132    i 181    i 549    i 473 

General and administrative

   i 1,503    i 1,118    i 3,933    i 3,008 

Total

 $ i 2,871  $ i 2,396  $ i 8,229  $ i 6,441 
 / 

 

Stock based compensation expense has not been allocated between business segments, but is reflected as part of Corporate overhead (see Note 12 - Business Segments).

 

6

 

Table of Contents

 

Stock Options

 

The following table summarizes stock option activity during the nine months ended March 28, 2021:

 

 i 
  

Options

  

Weighted Average

Exercise Price

  

Weighted Average Remaining Contractual Term

  

Aggregate Intrinsic Value

 
          

(in years)

  

(in thousands)

 

Outstanding at June 28, 2020

   i 1,230,000  $ i 2.77         

Granted

   i -  $ i -         

Exercised

  ( i 679,100

)

 $ i 2.47         

Forfeited

                

Outstanding at March 28, 2021

   i 550,900  $ i 3.12    i 0.8  $ i 12,702 
                 

Exercisable at March 28, 2021

   i 535,900  $ i 2.63    i 0.6  $ i 12,620 
 / 

 

As of March 28, 2021, the total future compensation cost related to non-vested options, not yet recognized in the statement of income, was $ i 0.1 million and the weighted average period over which these awards are expected to be recognized was  i 3.6 years.

 

Restricted Stock

 

The Company grants shares of Common Stock to its employees that are subject to restrictions on transfer and risk of forfeiture until fulfillment of applicable service and performance conditions and, in certain cases, holding periods (Restricted Stock). The following table summarizes the activity of non-vested restricted stock awards during the nine months ended March 28, 2021:

 

 i 
  

Shares

  

Weighted Average Grant Date Fair Value

 

Non-vested at June 28, 2020

   i 1,608,468  $ i 12.01 

Granted

   i 634,610  $ i 22.10 

Vested

  ( i 679,925

)

 $ i 11.06 

Forfeited

  ( i 30,129

)

 $ i 19.80 

Non-vested at March 28, 2021

   i 1,533,024  $ i 16.46 
 / 

 

The fair value of non-vested shares is determined based on the closing stock price on the grant date. As of March 28, 2021, there was $ i 15.2 million of total unrecognized compensation cost related to non-vested, restricted, stock-based compensation to be recognized over the weighted-average remaining period of  i 1.5 years.  

 / 

 

 
 i 

Note 4 Acquisitions

 

Acquisition of PersonalizationMall

 

On February 14, 2020, 1-800-Flowers.com, Inc., 800-Flowers, Inc., a wholly-owned subsidiary of 1-800-Flowers.com, Inc. (the “Purchaser”), PersonalizationMall.com, LLC ("PersonalizationMall"), and Bed Bath & Beyond Inc. (“Seller”), entered into an Equity Purchase Agreement (the “Purchase Agreement”) pursuant to which Seller agreed to sell to the Purchaser, and the Purchaser agreed to purchase from Seller, all of the issued and outstanding membership interests of PersonalizationMall for $ i 252.0 million in cash (subject to certain working capital and other adjustments). On July 20, 2020, Purchaser, PersonalizationMall, and Seller entered into an amendment (the “Amendment”) to the Purchase Agreement to, among other things, amend the purchase price to $ i 245.0 million (subject to certain working capital and other adjustments). On August 3, 2020, the Company completed its acquisition of PersonalizationMall, including its newly renovated, leased  i 360,000 square foot, state-of-the-art production and distribution facility, as well as customer database, tradenames and website. After working capital and related adjustments, total consideration paid was approximately $ i 250.9 million.

 

The total purchase price was allocated to the identifiable assets acquired and liabilities assumed based on our preliminary estimates of their fair values on the acquisition date. The fair values assigned to PersonalizationMall’s tangible and intangible assets and liabilities assumed are considered preliminary and are based on the information that was available as of the date of the acquisition. The Company is in the process of finalizing its allocation and this may result in potential adjustments to the carrying value of the respective recorded assets and liabilities, establishment of certain additional intangible assets, revisions of useful lives of intangible assets, establishment of potential acquisition contingencies, and the determination of any residual amount that will be allocated to goodwill. As additional information becomes available, the preliminary purchase price allocation may be revised during the remainder of the measurement period, which will not exceed 12 months from the acquisition date. Any such revisions or changes may be material.

 

The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed:

 

 i 
  

PersonalizationMalls Preliminary Purchase Price Allocation

 
  

(in thousands)

 

Assets Acquired:

    

Inventories

 $ i 16,998 

Other assets

   i 5,216 

Property, plant and equipment

   i 30,792 

Operating lease right-of-use assets

   i 21,438 

Goodwill

   i 133,337 

Other intangibles

   i 76,000 

Total assets acquired

 $ i 283,781 
     

Liabilities assumed:

    

Accounts payable and accrued expenses

 $ i 11,400 

Operating lease liabilities

   i 21,438 

Total liabilities assumed

   i 32,838 
     

Net assets acquired

 $ i 250,943 
 / 

 

7

Table of Contents

 

The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment. The estimates and assumptions include the projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future cash flows.

 

Acquired inventory, consisting of raw materials and supplies, 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.

 

Property, plant and equipment was valued at book value (cost less accumulated depreciation and amortization), due to the nature of the assets, which included recently acquired production equipment and leasehold improvements for PersonalizationMall's production facility, which became operational in September 2019.

 

Based on the valuation as of August 3, 2020, of the acquired intangible assets, $ i 11.0 million was assigned to customer lists ( i 4 years life), $ i 65.0 million was assigned to tradenames (indefinite life), and the residual amount of $ i 133.3 million was allocated to Goodwill (indefinite life and deductible for tax purposes). The goodwill recognized in conjunction with the Purchaser’s acquisition of PersonalizationMall is primarily related to synergistic value created in terms of both operating costs and revenue growth opportunities, enhanced financial and operational scale, and other strategic benefits. It also includes certain other intangible assets that do not qualify for separate recognition, such as an assembled workforce.

 

The estimated fair value of the acquired trade names 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 identifying 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 PersonalizationMall's weighted average cost of capital, the riskiness of the earnings stream association 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 customers 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.

 

As required by ASC 805, “Business Combinations,” the following unaudited pro forma financial information for the three and nine months ended March 28, 2021 and March 29, 2020, give effect to the PersonalizationMall acquisition as if it had been completed on July 1, 2019. The unaudited pro forma financial information is prepared by management for informational purposes only in accordance with ASC 805 and is not necessarily indicative of or intended to represent the results that would have been achieved had the acquisition been consummated as of the dates presented, and should not be taken as representative of future consolidated results of operations. The unaudited pro forma financial information does not reflect any operating efficiencies and/or cost savings that the Company may achieve with respect to the combined companies. The pro forma information has been adjusted to give effect to nonrecurring items that are directly attributable to the acquisition.

 

 i 
  

Three months ended March 28, 2021

  

Three months ended March 29, 2020

  

Nine months ended March 28, 2021

  

Nine months ended March 29, 2020

 
  

(in thousands)

 

Net Revenues

 $ i 474,234  $ i 304,421  $ i 1,651,255  $ i 1,200,718 

Net Income

   i 1,427   ( i 10,536

)

   i 111,848    i 55,935 
 / 

 

The unaudited pro forma amounts above include the following adjustments:

 

 

-  

A decrease of operating expenses by $ i 0 and $ i 5.4 million during the three and nine months ended March 28, 2021, to eliminate transaction and litigation costs directly related to the transaction that do not have a continuing impact on operating results. 

 

-

An increase of operating expenses by $ i 0.2 million during the nine months ended  March 28, 2021 and $ i 0.7 million and $ i 2.1 million during the three and nine months ended March 29, 2020, respectively, to reflect the additional amortization expense related to the increase in definite lived intangible assets. 

 

An increase in interest expense of $ i 0.6 million during the nine months ended March 28, 2021 and $ i 1.0 and $ i 3.1 million during the three and nine months ended March 29, 2020, respectively, which is comprised of incremental interest and amortization of deferred financing costs associated with the New Term Loan (as defined below). The interest rate used for the purposes of these pro forma statements, of  i 3.5%, was the rate in effect at loan inception.  

 

The combined pro forma results were tax effected using the Company's effective tax rate for the respective periods   

 

Net revenue attributable to PersonalizationMall, included within the three and nine month periods ended March 28, 2021, was $ i 40.2 million and $ i 182.8 million, and corresponding operating income during the periods, excluding litigation and transaction costs, was $ i 1.9 million and $ i 27.5 million.

 

Acquisition of Sharis 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 $ i 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 Company 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 acquisition date. Of the acquired intangible assets, $ i 0.6 million was assigned to customer lists, which is being amortized over the estimated remaining life of  i 2 years, $ i 6.9 million was assigned to tradenames, and $ i 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.

 

8

 

Table of Contents

 

The following table summarizes the allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed at the date of the acquisition:

 

  

Sharis Berries Purchase Price Allocation

 
  

(in thousands)

 

Current assets

 $ i 1,029 

Intangible assets

   i 7,540 

Goodwill

   i 12,121 

Total assets acquired

   i 20,690 
     

Current liabilities

   i 190 

Net assets acquired

 $ i 20,500 

 

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 identifying 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 customers 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.

 / 

 

 
 i 

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:

 

 i 
  

March 28, 2021

  

June 28, 2020

 
  

(in thousands)

 

Finished goods

 $ i 55,283  $ i 35,779 

Work-in-process

   i 12,715    i 16,536 

Raw materials

   i 54,387    i 45,445 

Total inventory

 $ i 122,385  $ i 97,760 
 / 

 

 / 
 
 i 

Note 6 Goodwill and Intangible Assets

 

The following table presents goodwill by segment and the related change in the net carrying amount:

 

 i 
  

Consumer Floral & Gifts

  

BloomNet

  

Gourmet Foods &

Gift Baskets

  

Total

 
  

(in thousands)

 

Balance at June 28, 2020

 $ i 17,441  $ i -  $ i 57,270  $ i 74,711 

Acquisition of PersonalizationMall

   i 133,337    i -    i -    i 133,337 

Balance at March 28, 2021

 $ i 150,778  $ i -  $ i 57,270  $ i 208,048 
 / 

 

The Company’s other intangible assets consist of the following:

 

 i 
      

March 28, 2021

  

June 28, 2020

 
  

Amortization Period

  

Gross Carrying Amount

  

Accumulated Amortization

  

Net

  

Gross Carrying Amount

  

Accumulated Amortization

  

Net

 
  

(in years)

  

(in thousands)

 

Intangible assets with determinable lives

                            

Investment in licenses

   i 14- i 16  $ i 7,420  $ i 6,332  $ i 1,088  $ i 7,420  $ i 6,253  $ i 1,167 

Customer lists

   i 2- i 10    i 23,825    i 12,835    i 10,990    i 12,825    i 10,474    i 2,351 

Other

   i 5- i 14    i 2,946    i 2,458    i 488    i 2,946    i 2,382    i 564 

Total intangible assets with determinable lives

       i 34,191    i 21,625    i 12,566    i 23,191    i 19,109    i 4,082 

Trademarks with indefinite lives

       i 127,396   -    i 127,396    i 62,191   -    i 62,191 

Total identifiable intangible assets

     $ i 161,587  $ i 21,625  $ i 139,962  $ i 85,382  $ i 19,109  $ i 66,273 
 / 

 

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Future estimated amortization expense is as follows: remainder of fiscal 2021 - $ i 0.9 million, fiscal 2022 - $ i 3.3 million, fiscal 2023 - $ i 3.3 million, fiscal 2024 - $ i 3.3 million, fiscal 2025 - $ i 0.8 million and thereafter - $ i 1.0 million.

 

9

Table of Contents

 / 

 

 
 i 

Note 7 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 qualitatively 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 $ i 4.1 million as of March 28, 2021 and $ i 2.8 million as of June 28, 2020

 

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).

 / 

 

 
 i 

Note 8 Debt

 

The Company’s current and long-term debt consists of the following:

 i 
  

March 28, 2021

  

June 28, 2020

 
  

(in thousands)

 

Revolver (1)

 $ i -  $ i - 

Term Loans (1)

   i 187,500    i 95,000 

Deferred financing costs

  ( i 3,787

)

  ( i 2,441

)

Total debt

   i 183,713    i 92,559 

Less: current debt

   i 17,500    i 5,000 

Long-term debt

 $ i 166,213  $ i 87,559 
 / 

 

(1)

On May 31, 2019, the Company and certain of its U.S. subsidiaries entered into a Second Amended and Restated Credit Agreement (the “2019 Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent, and a group of lenders. The 2019 Credit Agreement amended and restated the Company’s existing amended and restated credit agreement dated as of December 23, 2016 (the “2016 Credit Agreement”) to, among other modifications: (i) increase the amount of the outstanding term loan (“Term Loan”) from approximately $ i 97 million to $ i 100 million, (ii) extend the maturity date of the outstanding Term Loan and the revolving credit facility (“Revolver”) by approximately 29 months to May 31, 2024, and (iii) decrease the applicable interest rate margins for LIBOR and base rate loans by  i 25 basis points. The Term Loan is payable in  i 19 quarterly installments of principal and interest beginning on September 29, 2019, with escalating principal payments, at the rate of  i 5.0% per annum for the first eight payments, and  i 10.0% per annum for the remaining 11 payments, with the remaining balance of $ i 62.5 million due upon maturity. The Revolver, in the aggregate amount of $ i 200 million, subject to seasonal reduction to an aggregate amount of $ i 100 million for the period from January 1 through August 1, may be used for working capital and general corporate purposes, subject to certain restrictions. For each borrowing under the 2019 Credit Agreement, the Company may elect that such borrowing bear interest at an annual rate equal to either: (1) a base rate plus an applicable margin varying based on the Company’s consolidated leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the New York fed bank rate plus  i 0.5%, and (c) a LIBOR rate plus  i 1%, or (2) an adjusted LIBOR rate plus an applicable margin varying based on the Company’s consolidated leverage ratio.

On August 20, 2020, the Company, the Subsidiary Guarantors, JPMorgan Chase Bank, N.A. as administrative 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 (together the "2020 Credit Agreement”) to, among other modifications, (i) increase the aggregate principal amount of the existing Revolver commitments from $ i 200.0 million to $ i 250.0 million, (ii) establish a new tranche of term A-1 loans in an aggregate principal amount of $ i 100.0 million (the “New Term Loan”), (iii) increase the working capital sublimit with respect to the Revolver from $ i 175.0 million to $ i 200.0 million, and (iv) increase the seasonally-reduced Revolver commitments from $ i 100.0 million to $ i 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. For each borrowing under the 2020 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 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  i 0.5%, and (c) a LIBOR rate plus  i 1%, or (2) an adjusted LIBOR rate plus an applicable margin varying based on the Company’s consolidated leverage ratio. The New Term Loan is payable in  i 15 quarterly installments of principal and interest beginning on September 27, 2020, with escalating principal payments, at the rate of  i 5.0% per annum for the first four payments, and  i 10.0% per annum for the remaining 11 payments, with the remaining balance of $ i 67.5 million due upon maturity.

The 2020 Credit Agreement requires that while any borrowings or commitments are outstanding the Company comply with certain financial covenants and affirmative covenants as well as certain negative covenants that, subject to certain exceptions, limit the Company’s ability to, among other things, incur additional indebtedness, make certain investments and make certain restricted payments. The Company was in compliance with these covenants as of March 28, 2021. The 2020 Credit Agreement is secured by substantially all of the assets of the Company.

 

Future principal payments under the Term Loan and New Term Loan are as follows: $ i 2.5 million – remainder of fiscal 2021, $ i 20.0 million - fiscal 2022, $ i 20.0 million – fiscal 2023 and $ i 145.0 million – fiscal 2024. 

 / 

 

 
 i 

Note 9 - Property, Plant and Equipment

 

The Company’s property, plant and equipment consists of the following:

 

 i 
  

March 28, 2021

  

June 28, 2020

 
  

(in thousands)

 

Land

 $ i 30,789  $ i 30,789 

Orchards in production and land improvements

   i 18,548    i 17,139 

Building and building improvements

   i 61,755    i 61,159 

Leasehold improvements

   i 26,038    i 13,675 

Production equipment

   i 78,764    i 57,904 

Furniture and fixtures

   i 8,016    i 7,444 

Computer and telecommunication equipment

   i 57,373    i 55,381 

Software

   i 168,276    i 151,264 

Capital projects in progress - orchards

   i 10,873    i 8,130 

Property, plant and equipment, gross

   i 460,432    i 402,885 

Accumulated depreciation and amortization

  ( i 262,942

)

  ( i 233,810

)

Property, plant and equipment, net

 $ i 197,490  $ i 169,075 
 / 

 

10

Table of Contents

 / 

 

 
 i 

Note 10 - Fair Value Measurements

 

Cash and cash equivalents, trade and other receivables, prepaids, accounts payable and accrued expenses are reflected in the consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments. Although no trading market exists, the Company believes that the carrying amount of its debt approximates fair value due to its variable nature. The Company’s investments in non-marketable equity instruments of private companies are carried at cost and are periodically assessed for other-than-temporary impairment, when an event or circumstances indicate that an other-than-temporary decline in value may have occurred. The Company’s remaining financial assets and liabilities are measured and recorded at fair value (see table below). The Company’s non-financial assets, such as definite lived intangible assets and property, plant and equipment, are recorded at cost and are assessed for impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred. Goodwill and indefinite lived intangibles are tested for impairment annually, or more frequently, if events occur or circumstances change such that it is more likely than not that an impairment may exist, as required under the accounting standards.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy 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:

 

 i 
  

Carrying Value

  

Fair Value Measurements

Assets (Liabilities)

 
      

Level 1

  

Level 2

  

Level 3

 
  

(in thousands)

 

As of March 28, 2021:

                

Trading securities held in a “rabbi trust” (1)

 $ i 20,923  $ i 20,923  $ i -  $ i - 

Total assets (liabilities) at fair value

 $ i 20,923  $ i 20,923  $ i -  $ i - 
                 

As of June 28, 2020:

                

Trading securities held in a “rabbi trust” (1)

 $ i 13,442  $ i 13,442  $ i -  $ i - 

Total assets (liabilities) at fair value

 $ i 13,442  $ i 13,442  $ i -  $ i - 
 / 

 

 

(1)

The Company has established a 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 a 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. 

 / 

 

 
 i 

Note 11 Income Taxes

 

At the end of each interim reporting period, the Company estimates its effective income tax rate expected to be applicable for the full year. This estimate is used in providing for income taxes on a year-to-date basis and may change in subsequent interim periods. The Company’s effective tax rate from operations for the three and nine months ended March 28, 2021 was  i 255.6% and  i 21.1%, respectively, compared to  i 29.2% and  i 23.8% in the same periods of the prior year. The effective rates for fiscal 2021 and fiscal 2020 differed from the U.S. federal statutory rate of  i 21% due to state income taxes and nondeductible expenses for executive compensation, which were partially offset by various permanent differences and tax credits, including excess tax benefits from stock-based compensation.

 

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 2018, however, fiscal year 2019 remains subject to U.S. federal examination. Due to ongoing state examinations and nonconformity with the U.S. federal statute of limitations for assessment, certain states remain open from fiscal 2016. The Company's foreign income tax filings from fiscal 2015 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 March 28, 2021, the Company has an unrecognized tax benefit, including accrued interest and penalties, of approximately $ i 1.2 million. The Company believes that $ i 0.8 million of unrecognized tax positions will be resolved over the next twelve months.

 / 

 

 
 i 

Note 12 Business Segments

 

The Company’s management reviews the results of its operations by the following three business segments:

 

•   Consumer Floral & Gifts,

•   BloomNet, and

•   Gourmet Foods & Gift Baskets

 

11

 

Table of Contents

 

Segment performance is measured based on contribution margin, which includes only the direct controllable revenue and operating expenses of the segments. As such, management’s measure of profitability for these segments does not include the effect of corporate overhead (see (a) below), nor does it include depreciation and amortization, other (income) expense, net and income taxes, or stock-based compensation. Assets and liabilities are reviewed at the consolidated level by management and not accounted for by segment.

 

 i 
  

Three Months Ended

  

Nine Months Ended

 
  

March 28, 2021

  

March 29, 2020

  

March 28, 2021

  

March 29, 2020

 

Net Revenues:

 

(in thousands)

 

Segment Net Revenues:

                

Consumer Floral & Gifts

 $ i 260,393  $ i 152,620  $ i 727,296  $ i 359,104 

BloomNet

   i 38,833    i 30,414    i 105,622    i 81,576 

Gourmet Foods & Gift Baskets

   i 175,245    i 95,906    i 803,439    i 631,705 

Corporate

   i 54    i 112    i 295    i 472 

Intercompany eliminations

  ( i 291

)

  ( i 276

)

  ( i 1,390

)

  ( i 1,176

)

Total net revenues

 $ i 474,234  $ i 278,776  $ i 1,635,262  $ i 1,071,681 
                 

Operating Income:

                

Segment Contribution Margin:

                

Consumer Floral & Gifts

 $ i 22,537  $ i 15,439  $ i 87,430  $ i 34,853 

BloomNet

   i 12,042    i 10,025    i 34,604    i 27,516 

Gourmet Foods & Gift Baskets

   i 12,132   ( i 6,275

)

   i 145,172    i 100,512 

Segment Contribution Margin Subtotal

   i 46,711    i 19,189    i 267,206    i 162,881 

Corporate (a)

  ( i 35,128

)

  ( i 22,274

)

  ( i 101,582

)

  ( i 71,583

)

Depreciation and amortization

  ( i 11,892

)

  ( i 7,803

)

  ( i 31,792

)

  ( i 23,268

)

Operating income

 $( i 309

)

 $( i 10,888

)

 $ i 133,832  $ i 68,030 
 / 

 

(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: 

 

 i 
  

Three Months Ended

  

Three Months Ended

 
  

March 28, 2021

  

March 29, 2020

 
  

Consumer Floral & Gifts

  

BloomNet

  

Gourmet Foods & Gift Baskets

  

Consolidated

  

Consumer Floral & Gifts

  

BloomNet

  

Gourmet Foods & Gift Baskets

  

Consolidated

 

Net revenues

 

(in thousands)

 

E-commerce

 $ i 257,982  $ i -  $ i 166,786  $ i 424,768  $ i 150,491  $ i -  $ i 81,360  $ i 231,851 

Retail

   i 1,429    i -    i 1,660    i 3,089    i 1,166    i -    i 5,030    i 6,196 

Wholesale

   i -    i 12,383    i 6,799    i 19,182    i -    i 10,801    i 9,516    i 20,317 

BloomNet services

   i -    i 26,450    i -    i 26,450    i -    i 19,613    i -    i 19,613 

Other

   i 982    i -    i -    i 982    i 963    i -    i -    i 963 

Corporate

   i -    i -    i -    i 54    i -    i -    i -    i 112 

Eliminations

   i -    i -    i -   ( i 291

)

   i -    i -    i -   ( i 276

)

Net revenues

 $ i 260,393  $ i 38,833  $ i 175,245  $ i 474,234  $ i 152,620  $ i 30,414  $ i 95,906  $ i 278,776 
 / 

 

  

Nine months ended

  

Nine months ended

 
  

March 28, 2021

  

March 29, 2020

 
  

Consumer Floral & Gifts

  

BloomNet

  

Gourmet Foods & Gift Baskets

  

Consolidated

  

Consumer Floral & Gifts

  

BloomNet

  

Gourmet Foods & Gift Baskets

  

Consolidated

 

Net revenues

 

(in thousands)

 

E-commerce

 $ i 721,049  $ i -  $ i 720,392  $ i 1,441,441  $ i 353,436  $ i -  $ i 494,549  $ i 847,985 

Retail

   i 3,585    i -    i 7,321    i 10,906    i 3,187    i -    i 35,640    i 38,827 

Wholesale

   i -    i 32,826    i 75,726    i 108,552    i -    i 26,819    i 101,516    i 128,335 

BloomNet services

   i -    i 72,796    i -    i 72,796    i -    i 54,757    i -    i 54,757 

Other

   i 2,662    i -    i -    i 2,662    i 2,481    i -    i -    i 2,481 

Corporate

   i -    i -    i -    i 295    i -    i -    i -    i 472 

Eliminations

   i -    i -    i -   ( i 1,390

)

   i -    i -    i -   ( i 1,176

)

Net revenues

 $ i 727,296  $ i 105,622  $ i 803,439  $ i 1,635,262  $ i 359,104  $ i 81,576  $ i 631,705  $ i 1,071,681 

 

12

Table of Contents

 / 

 

 
 i 

Note 13 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 recognize 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. 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 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:

 i 
  

Three Months Ended

March 28, 2021

  

Nine Months Ended March 28, 2021

 
  

(in thousands)

 

Lease costs:

        

Operating lease costs

 $ i 3,631  $ i 10,657 

Variable lease costs

   i 5,513    i 15,163 

Short-term lease cost

   i 678    i 5,905 

Sublease income

  ( i 203

)

  ( i 609)

Total lease costs

 $ i 9,619  $ i 31,116 
 / 

 

  

Nine Months Ended

 
  

March 28, 2021

 
  

(in thousands)

 
     

Cash paid for amounts included in measurement of operating lease liabilities

 $ i 10,095 

Right-of-use assets obtained in exchange for new operating lease liabilities

 $ i 28,212 

 

  

March 28, 2021

 
  

(in thousands)

 

Weighted-average remaining lease term - operating leases

 

8.9 years

 

Weighted-discount rate - operating leases

   i 3.8

%

 

Maturities of lease liabilities in accordance with ASC 842 as of March 28, 2021 are as follows (in thousands):

 

 i 

Remainder of 2021

 $ i 3,604 

2022

   i 14,071 

2023

   i 13,893 

2024

   i 13,359 

2025

   i 10,977 

Thereafter

   i 52,444 

Total Future Minimum Lease Payments

   i 108,348 

Less Imputed Remaining Interest

   i 17,524 

Total

 $ i 90,824 
 / 

 

 / 
 
 i 

Note 14 Commitments and Contingencies

 

Litigation

 

Bed Bath & Beyond

 

On April 1, 2020, the Seller 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 “Purchase Agreement”), dated February 14, 2020, between Seller, PersonalizationMall, the Company and the Purchaser, pursuant to which the Seller agreed to sell to Purchaser, and the Purchaser agreed to purchase from Seller, 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 Purchase Agreement due to the unprecedented circumstances created by COVID-19. The Complaint requested an order of specific performance to consummate the transaction under the Purchase 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 Seller entered into a settlement agreement, pursuant to which the Company agreed to move forward with its purchase of PersonalizationMall for $ i 245.0 million, subject to certain working capital and other adjustments. The transaction closed on August 3, 2020. 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 subsidiaries 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.

 

13

Table of Contents

 

 

 / 
 

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

This Managements Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide an understanding of our financial condition, change in financial condition, cash flow, liquidity and results of operations. The following MD&A discussion should be read in conjunction with the consolidated financial statements and notes to those statements that appear elsewhere in this Form 10-Q and in the Companys Annual Report on Form 10-K, for the year ended June 28, 2020. The following discussion contains forward-looking statements that reflect the Companys plans, estimates and beliefs. The Companys actual results could differ materially from those discussed or referred to in the forward-looking statements. Factors that could cause or contribute to any differences include, but are not limited to, those discussed under the caption Forward-Looking Information and Factors That May Affect Future Results, under Part I, Item 1A, of the Companys Annual Report on Form 10-K, for the year ended June 28, 2020 under the heading Risk Factors and Part II-Other Information, Item 1A in this Form 10-Q.

 

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. 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 operates BloomNet®, an international floral service provider offering a broad-range of products and services designed to help professional florists grow their businesses profitably; Napco℠, 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 named in the Forbes 2021 Best Small Companies List.

 

Shares in 1-800-FLOWERS.COM, Inc. are traded on the NASDAQ Global Select Market, ticker symbol: FLWS.

 

For additional information, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” of our Annual Report on Form 10-K for the year ended June 28, 2020

 

Acquisition of PersonalizationMall

 

On August 3, 2020, the Company completed its acquisition of PersonalizationMall.com LLC ("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 renovated, leased 360,000 square foot, state-of-the-art production and distribution facility, as well as customer database, tradenames and website. PersonalizationMall’s revenues were approximately $171.2 million in its fiscal year 2020.

 

Amended Credit Agreement

 

Subsequent to, but in contemplation of the acquisition, on August 20, 2020, the Company entered into a First Amendment to its 2019 Credit Agreement to: (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 $100.0 million proceeds of the New Term Loan were used to repay the $95.0 million borrowing that had been drawn on its existing Revolver to finance the acquisition, as well as financing fees of approximately $2.0 million (See Note 8 - Debt, in Item 1. for details). 

 

COVID-19 Impact

 

In response to the global pandemic, the Company has taken actions to promote 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 management, 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, as we enter its peak selling season, we continue to see strong e-commerce demand in our floral business through the first four weeks of our fourth quarter of fiscal year 2021. With that said, there are also headwinds (and resulting increased costs) that have been, and will continue to impact our operations during the foreseeable future, including the following:

 

 

Retail store closures – on March 20, 2020, in response to government actions, and for the safety 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 of fiscal year 2020 for lease obligations, employee costs and other store closure costs. Annual revenues attributable to the closed locations was approximately $33.0 million.

 

 

Wholesale volume reductions - we have seen a reduction in our wholesale business as a result of COVID-19, which impacted our first, second and third quarter results within our Gourmet Foods and Gift Baskets segment as many of our large wholesale customers were taking a cautious approach to the holiday season due to the uncertainty surrounding the future impact of COVID-19 on their brick and mortar retail stores.

 

 

Increased operating costs - we are seeing some 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, including: required social distancing, enhanced facility cleaning and sanitizing schedules, and staggered production shifts, as well as overall wage rate increases.

     
 

Fulfillment capacity constraints – the nationwide increase in e-commerce volume has also resulted in third-party carrier capacity constraints, in addition to increased delivery costs.

 

14

Table of Contents

The scale and overall economic impact of the COVID-19 crisis is still very difficult to assess as the Company begins to annualize the impact that COVID-19 has had on consumer behavior. However, the Company believes that the e-commerce 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 environment and continue to grow revenues at a double-digit pace through the remainder of fiscal 2021 and into fiscal 2022. We remain focused on three key elements of our business strategy:

 

 

Taking care of the health and safety of our associates, our BloomNet florists, our vendors and our customers,

 

 

Maintaining our financial strength and flexibility, and

 

 

Continuing to invest in areas of our business that can help drive future growth.

 

Company Guidance

 

The Company’s guidance for its fiscal fourth quarter ending June 27, 2021 is based on several factors including:

 

o

continued solid ecommerce demand in the 1-800-Flowers.com floral business that has carried into April combined with anticipated contributions from PersonalizationMall, partially offset by the shift of some Easter revenues into the Company’s third quarter, and;

 

o

the challenging comparison with the prior year period which included record top and bottom-line growth resulting from the surge in ecommerce demand and significantly lower year-over-year digital marketing pricing associated with the initial impact of the COVID-19 pandemic.

 

 

As a result, the Company expects to achieve total consolidated revenue growth for its fiscal fourth quarter in a range of 10-to-15 percent, compared with the prior year period.

 

 

Based on this revenue growth, somewhat offset by higher digital marketing costs, the Company anticipates achieving Adjusted EBITDA for its fiscal fourth quarter in a range of $25.0 million -to- $30 million, compared with $32.5 million in the prior year period, and EPS in a range of $0.18-to-$0.20, compared with EPS of $0.23 in the prior year period.

 

 

Combined with the results of its first three fiscal quarters, the Company anticipates achieving the following results for its full 2021 fiscal year:

 

o

Revenue growth of approximately 40 percent to total revenue for the year of more than $2.0 billion compared with $1.49 billion in the prior year.

 

o

Adjusted EBITDA in a range of $208.0 million -to- $213.0 million compared with $129.5 million in the prior year, and

 

o

EPS in a range of $1.75 -to- $1.80 compared with EPS of $0.98 in the prior year.

 

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 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 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.

 

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, NQDC Plan investment appreciation/depreciation, and for 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 companies. The Company uses EBITDA and adjusted EBITDA as factors 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 requirements for such capital expenditures. EBITDA should only be used on a supplemental basis combined with GAAP results when evaluating the Company's performance.

 

15

Table of Contents

 

Segment contribution margin and adjusted segment contribution margin

 

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 associated 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 limitations when using this measure by looking at other GAAP measures, such as operating income and net income. 

 

Adjusted net income (loss) and adjusted or comparable net income (loss) per common share

We define adjusted net income (loss) and adjusted or comparable net income (loss) per common share as net income (loss) and net income (loss) per common share adjusted for certain items affecting period-to-period comparability. See Segment Information below for details on how adjusted net income (loss) and adjusted or comparable net income (loss) per common share were calculated for each period presented.

 

We believe that adjusted net income (loss) and adjusted or comparable net income (loss) 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 (loss) and net income (loss) per common share, as indicators of operating performance and they may not be comparable to similarly titled measures employed by other companies. 

 

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, and adjusted EBITDA.

 

   

Three Months Ended

 
   

March 28, 2021

   

March 29, 2020

   

PersonalizationMall Litigation & Transaction Costs

   

As Adjusted (non-GAAP) March 29, 2020

   

% Change

 
    (dollars in thousands)

Net revenues:

                                       

Consumer Floral & Gifts

  $ 260,393     $ 152,620     $ -     $ 152,620       70.6 %

BloomNet

    38,833       30,414       -       30,414       27.7 %

Gourmet Foods & Gift Baskets

    175,245       95,906       -       95,906       82.7 %

Corporate

    54       112       -       112       -51.8 %

Intercompany eliminations

    (291 )     (276 )     -       (276 )     -5.4 %

Total net revenues

  $ 474,234     $ 278,776     $ -     $ 278,776       70.1 %
                                         

Gross profit:

                                       

Consumer Floral & Gifts

  $ 98,397     $ 59,943     $ -     $ 59,943       64.2 %
      37.8 %     39.3 %             39.3 %        
                                         

BloomNet

    17,194       14,401       -       14,401       19.4 %
      44.3 %     47.3 %             47.3 %        
                                         

Gourmet Foods & Gift Baskets

    69,091       32,956       -       32,956       109.6 %
      39.4 %     34.4 %             34.4 %        
                                         

Corporate

    17       152       -       152       -88.8 %
      31.5 %     135.7 %             135.7 %        
                                         

Total gross profit

  $ 184,699     $ 107,452     $ -     $ 107,452       71.9 %
      38.9 %     38.5 %     -       38.5 %        
                                         

EBITDA (non-GAAP):

                                       

Segment Contribution Margin (non-GAAP) (a):

                                       

Consumer Floral & Gifts

  $ 22,537     $ 15,439     $ -     $ 15,439       46.0 %

BloomNet

    12,042       10,025       -       10,025       20.1 %

Gourmet Foods & Gift Baskets

    12,132       (6,275 )     -       (6,275 )     293.3 %

Segment Contribution Margin Subtotal

    46,711       19,189       -       19,189       143.4 %

Corporate (b)

    (35,128 )     (22,274 )     911       (21,363 )     -64.4 %

EBITDA (non-GAAP)

    11,583       (3,085 )     911       (2,174 )     632.8 %

Add: Stock-based compensation

    2,871       2,396       -       2,396       19.8 %

Add: Compensation charge related to NQDC Plan Investment Appreciation/(Depreciation)

    916       (2,611 )     -       (2,611 )     135.1 %

Adjusted EBITDA (non-GAAP)

  $ 15,370     $ (3,300 )   $ 911     $ (2,389 )     743.4 %

 

16

Table of Contents

 

   

Nine Months Ended

 
   

March 28, 2021

   

Personalization

Mall Litigation & Transaction Costs

   

Harry & David Store Closure Costs

   

As Adjusted (non-GAAP) March 28, 2021

   

March 29, 2020

   

Personalization

Mall Litigation & Transaction Costs

   

As Adjusted (non-GAAP) March 29, 2020

   

% Change

 
    (dollars in thousands)

Net revenues:

                                                               

Consumer Floral & Gifts

  $ 727,296     $ -     $ -     $ 727,296     $ 359,104     $ -     $ 359,104       102.5 %

BloomNet

    105,622       -       -       105,622       81,576       -       81,576       29.5 %

Gourmet Foods & Gift Baskets

    803,439       -       -       803,439       631,705       -       631,705       27.2 %

Corporate

    295       -       -       295       472       -       472       -37.5 %

Intercompany eliminations

    (1,390 )     -       -       (1,390 )     (1,176 )     -       (1,176 )     -18.2 %

Total net revenues

  $ 1,635,262     $ -     $ -     $ 1,635,262     $ 1,071,681     $ -     $ 1,071,681       52.6 %
                                                                 

Gross profit:

                                                               

Consumer Floral & Gifts

  $ 298,457     $ -     $ -     $ 298,457     $ 140,537     $ -     $ 140,537       112.4 %
      41.0 %                     41.0 %     39.1 %             39.1 %        
                                                                 

BloomNet

    48,852       -       -       48,852       40,520       -       40,520       20.6 %
      46.3 %                     46.3 %     49.7 %             49.7 %        
                                                                 

Gourmet Foods & Gift Baskets

    350,988       -       -       350,988       271,360       -       271,360       29.3 %
      43.7 %                     43.7 %     43.0 %             43.0 %        
                                                                 

Corporate

    128       -       -       128       353       -       353       -63.7 %
      43.4 %                     43.4 %     74.8 %             74.8 %        

Total gross profit

  $ 698,425     $ -     $ -     $ 698,425     $ 452,770     $ -     $ 452,770       54.3 %
      42.7 %     -       -       42.7 %     42.2 %     -       42.2 %        
                                                                 

EBITDA (non-GAAP):

                                                               

Segment Contribution Margin (non-GAAP) (a):

                                                               

Consumer Floral & Gifts

  $ 87,430     $ -     $ -     $ 87,430     $ 34,853     $ -     $ 34,853       150.9 %

BloomNet

    34,604       -       -       34,604       27,516       -       27,516       25.8 %

Gourmet Foods & Gift Baskets

    145,172       -       (483 )     144,689       100,512       -       100,512       44.0 %

Segment Contribution Margin Subtotal

    267,206       -       (483 )     266,723       162,881       -       162,881       63.8 %

Corporate (b)

    (101,582 )     5,403       -       (96,179 )     (71,583 )     911       (70,672 )     -36.1 %

EBITDA (non-GAAP)

    165,624       5,403       (483 )     170,544       91,298       911       92,209       85.0 %

Add: Stock-based compensation

    8,229       -       -       8,229       6,441       -       6,441       27.8 %

Add: Compensation charge related to NQDC Plan Investment Appreciation/(Depreciation)

    4,123       -       -       4,123       (1,653 )     -       (1,653 )     349.4 %

Adjusted EBITDA (non-GAAP)

  $ 177,976     $ 5,403     $ (483 )   $ 182,896     $ 96,086     $ 911     $ 96,997       88.6 %

 

Reconciliation of net income (loss) to adjusted net income (loss) (non-GAAP):

 

Three Months Ended

   

Nine Months Ended

 
   

March 28, 2021

   

March 29, 2020

   

March 28, 2021

   

March 29, 2020

 
    (in thousands, except per share data)
                                 

Net income (loss)

  $ 1,427     $ (9,657 )   $ 105,342     $ 49,224  

Adjustments to reconcile net income (loss) to adjusted net income (loss) (non-GAAP)

                               

Add: PersonalizationMall litigation and transaction costs

    -       911       5,403       911  

Deduct: Harry & David store closure cost adjustment

    -       -       (483 )     -  

Deduct: Income tax benefit on adjustments

    79       (217 )     (1,038 )     (217 )

Adjusted net income (loss) (non-GAAP)

  $ 1,506     $ (8,963 )   $ 109,224     $ 49,918  
                                 

Basic and diluted net income (loss) per common share

                               

Basic

  $ 0.02     $ (0.15 )   $ 1.63     $ 0.76  

Diluted

  $ 0.02     $ (0.15 )   $ 1.58     $ 0.74  
                                 
                                 

Basic and diluted adjusted net income (loss) per common share (non-GAAP)

                               

Basic

  $ 0.02     $ (0.14 )   $ 1.69     $ 0.77  

Diluted

  $ 0.02     $ (0.14 )   $ 1.64     $ 0.75  
                                 

Weighted average shares used in the calculation of net income (loss) and adjusted net income (loss) per common share

                               

Basic

    64,885       64,348       64,644       64,517  

Diluted

    66,474       64,348       66,564       66,378  

 

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Table of Contents

 

Reconciliation of net income (loss) to adjusted EBITDA (non-GAAP):

 

Three Months Ended

   

Nine Months Ended

 
   

March 28, 2021

   

March 29, 2020

   

March 28, 2021

   

March 29, 2020

 
    (in thousands)
                                 

Net income (loss)

  $ 1,427     $ (9,657 )   $ 105,342     $ 49,224  

Add: Interest expense, net

    608       2,752       319       3,441  

Add: Depreciation and amortization

    11,892       7,803       31,792       23,268  

Add: Income tax expense

    -       -       28,171       15,365  

Deduct: Income tax benefit

    2,344       3,983       -       -  

EBITDA

    11,583       (3,085 )     165,624       91,298  

Add: Stock-based compensation

    2,871       2,396       8,229       6,441  

Add: Compensation charge related to NQDC plan investment appreciation/(depreciation)

    916       (2,611 )     4,123       (1,653 )

Add: Personalization Mall litigation and transaction costs

    -       911       5,403       911  

Deduct: Harry & David store closure cost adjustment

    -       -       (483 )     -  

Adjusted EBITDA

  $ 15,370     $ (2,389 )   $ 182,896     $ 96,997  
                                 
                                 

(a) Segment performance is measured based on segment contribution margin or segment Adjusted EBITDA, reflecting only the direct controllable revenue and operating expenses of the segments, both of which are non-GAAP measurements. As such, management’s measure of profitability for these segments does not include the effect of corporate overhead, described above, depreciation and amortization, other income (net), and other items that we do not consider indicative of our core operating performance.

 
                                 

(b) Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as Stock-Based Compensation. In order to leverage the Company’s infrastructure, these functions are operated under a centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center, which are allocated directly to the above categories based upon usage, are included within corporate expenses as they are not directly allocable to a specific segment.

 

 

Results of Operations

 

Net revenues

 

   

Three Months Ended

   

Nine Months Ended

 
   

March 28, 2021

   

March 29, 2020

   

% Change

   

March 28, 2021

   

March 29, 2020

   

% Change

 
   

(dollars in thousands)

         

Net revenues:

                                               

E-Commerce

  $ 424,768     $ 231,851       83.2

%

  $ 1,441,441     $ 847,985       70.0

%

Other

    49,466       46,925       5.4

%

    193,821       223,696       -13.4

%

Total net revenues

  $ 474,234     $ 278,776       70.1

%

  $ 1,635,262     $ 1,071,681       52.6

%

 

Net revenues consist primarily of the selling price of the merchandise, service or outbound shipping charges, less discounts, returns and credits.

 

Net revenues increased 70.1% and 52.6% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, due to higher revenues across our three business segments (+55.7% and +35.5% on a pro-forma basis for the three and nine months ended March 28, 2021, compared to the respective prior year periods, excluding the impact of PersonalizationMall, which was acquired on August 3, 2020, and is included in our Consumer Floral & Gifts segment) as the favorable growth trends we had been seeing in everyday gifting occasions beginning with the fourth quarter of fiscal 2020 continued through the 2020 holiday gifting season and into the third quarter of fiscal 2021. The marketing and merchandising investments that the Company has made across its brands, including product offerings and messaging that have resonated with our customers, coupled with the strategic acquisitions of Shari’s Berries® in August of 2019 and PersonalizationMall.com® in August of 2020, have enabled the Company to capitalize on the consumer behavioral shift to e-commerce shopping accelerated by the pandemic. In addition, the Easter holiday was on April 4th in 2021, compared to April 12th in 2020, resulting in the shift of some Easter-related revenue and associated EBITDA, into the Company’s fiscal third quarter.

 

Disaggregated revenue by channel follows:

 

   

Three Months Ended

   

Three Months Ended

 
   

March 28, 2021

   

March 29, 2020

 
   

Consumer Floral & Gifts

   

BloomNet

   

Gourmet Foods & Gift Baskets

   

Consolidated

   

Consumer Floral & Gifts

   

BloomNet

   

Gourmet Foods & Gift Baskets

   

Consolidated

 

Net revenues

 

(in thousands)

 

E-commerce

  $ 257,982     $ -     $ 166,786     $ 424,768     $ 150,491     $ -     $ 81,360     $ 231,851  

Retail

    1,429       -       1,660       3,089       1,166       -       5,030       6,196  

Wholesale

    -       12,383       6,799       19,182       -       10,801       9,516       20,317  

BloomNet services

    -       26,450       -       26,450       -       19,613       -       19,613  

Other

    982       -       -       982       963       -       -       963  

Corporate

    -       -       -       54       -       -       -       112  

Eliminations

    -       -       -       (291

)

    -       -       -       (276

)

Net revenues

  $ 260,393     $ 38,833     $ 175,245     $ 474,234     $ 152,620     $ 30,414     $ 95,906     $ 278,776  

 

18

Table of Contents

 

   

Nine months ended

   

Nine months ended

 
   

March 28, 2021

   

March 29, 2020

 
   

Consumer Floral & Gifts

   

BloomNet

   

Gourmet Foods & Gift Baskets

   

Consolidated

   

Consumer Floral & Gifts

   

BloomNet

   

Gourmet Foods & Gift Baskets

   

Consolidated

 

Net revenues

 

(in thousands)

 

E-commerce

  $ 721,049     $ -     $ 720,392     $ 1,441,441     $ 353,436     $ -     $ 494,549     $ 847,985  

Retail

    3,585       -       7,321       10,906       3,187       -       35,640       38,827  

Wholesale

    -       32,826       75,726       108,552       -       26,819       101,516       128,335  

BloomNet services

    -       72,796       -       72,796       -       54,757       -       54,757  

Other

    2,662       -       -       2,662       2,481       -       -       2,481  

Corporate

    -       -       -       295       -       -       -       472  

Eliminations

    -       -       -       (1,390

)

    -       -       -       (1,176

)

Net revenues

  $ 727,296     $ 105,622     $ 803,439     $ 1,635,262     $ 359,104     $ 81,576     $ 631,705     $ 1,071,681  

 

Revenue by sales channel:

E-commerce revenues (combined online and telephonic) increased by 83.2% and 70.0% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, as a result of growth within the Gourmet Foods & Gift Baskets segment of 105.0% and 45.7%, and the Consumer Floral & Gifts segment of 71.4% and 104.0%, which includes the revenues of PersonalizationMall, since its date of acquisition on August 3, 2020. Excluding revenues attributable to PersonalizationMall, e-commerce revenues for the enterprise increased 65.9% and 48.4% during the three and nine months ended March 28, 2021.

 

The Company fulfilled approximately 6.3 and 19.5 million orders through its e-commerce sales channels (online and telephonic sales), during the three and nine months ended March 28, 2021, respectively, an increase of 81.2% and 78.1% compared to the same period of the prior year, while average order value increased 1.1% to $67.88 during the three months ended March 28, 2021 and decreased 4.6% to $74.05 during the nine months ended March 28, 2021. The decrease in average order value during the nine month period ended March 28, 2021 was attributable to the impact of the mix of PersonalizationMall order volumes.

 

Other revenues are comprised of the Company’s BloomNet segment, as well as the wholesale and retail channels of its Consumer Floral & Gifts and Gourmet Foods & Gift Baskets segments. Other revenues increased by 5.4% during the three months ended March 28, 2021, compared to the same period of the prior year, due to increases in BloomNet segment revenues driven by higher network order volumes, partially offset by wholesale/retail sales channel declines within the Gourmet Foods & Gift Baskets segment, due to: (i) the closure of Harry & David retail store operations in the fourth quarter of fiscal 2020, and (ii) reduced order volumes from big-box retail store customers as a result of the pandemic.

 

Other revenues decreased by 13.4% during the nine months ended March 28, 2021, compared to the same period of the prior year, due to: (i) wholesale/retail sales channel declines within the Gourmet Foods & Gift Baskets segment, as big-box retail store customers reduced order volumes for the holiday season due to the pandemic, and (ii) the closure of Harry & David retail store operations in the fourth quarter of fiscal 2020, partially offset by an increase in BloomNet segment revenues.

 

Revenue by segment:

Consumer Floral & Gifts – this segment, which historically has consisted primarily of the operations of the 1-800-Flowers.com brand, but now includes revenues attributable to PersonalizationMall subsequent to its August 3, 2020 acquisition date, derives revenue from the sale of consumer floral products and gifts through its e-commerce sales channels (telephonic and online sales), retail stores, and royalties from its franchise operations. Net revenues increased 70.6% and 102.5% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, reflecting: (i) the marketing and merchandising investments made in our flagship brand, which have driven our growth and market share gains that began in the second half of Fiscal 2018, continued through Fiscal 2020, and accelerated with the start of the pandemic, and (ii) the incremental revenues of PersonalizationMall. Excluding the revenues derived from PersonalizationMall, segment pro-forma revenue growth was 44.3% and 51.6% during the three and nine months ended March 28, 2021, respectively, despite the shift of the Valentine’s Day date placement from Friday in fiscal 2020 to Sunday in fiscal 2021, which normally results in a 20% reduction in demand.

 

BloomNet - revenues in this segment are derived from membership fees, as well as other product and service offerings to florists. Net revenues increased 27.7% and 29.5% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, primarily due to increased: (i) settlement processing revenues, due to the higher florist-to-florist order volume, (ii) transaction, reciprocity and membership fees, driven primarily by increased order volume sent through the network, and (iii) favorable wholesale demand.

 

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 82.7% and 27.2% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, due to favorable e-commerce revenues across the segment, partially offset by reduced wholesale and retail volumes. E-commerce revenue growth of 105.0% and 45.7% during the three and nine months ended March 28, 2021, respectively, was the result of: (i) increased penetration of “everyday” volume, and increased holiday volume in the second quarter of fiscal 2021, both of which benefitted from the impact of the COVID-19 pandemic as product offerings, convenience, and brand sentiment resonated with customers, and (ii) a slight shift of Easter revenues into the third quarter of fiscal 2021 due to the timing of the holiday. Wholesale/retail channel revenues declined 41.8% and 39.5%, during the three and nine months ended March 28, 2021, respectively, as big-box retail store customers reduced order volumes due to the pandemic, and as a result of the closure of the Harry & David retail store operations in the fourth quarter of fiscal 2020.

 

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Table of Contents

 

Gross profit

 

   

Three Months Ended

   

Nine Months Ended

 
   

March 28, 2021

   

March 29, 2020

   

% Change

   

March 28, 2021

   

March 29, 2020

   

% Change

 
   

(dollars in thousands)

 
                                                 

Gross profit

  $ 184,699     $ 107,452       71.9

%

  $ 698,425     $ 452,770       54.3

%

Gross profit %

    38.9

%

    38.5

%

            42.7

%

    42.2

%

       

 

Gross profit consists of net revenues less cost of revenues, which is comprised primarily of florist fulfillment costs (fees paid directly to florists), the cost of floral and non-floral merchandise sold from inventory or through third parties, and associated costs, including inbound and outbound shipping charges. Additionally, cost of revenues includes labor and facility costs related to direct-to-consumer and wholesale production operations, as well as payments made to sending florists related to order volume sent through the Company’s BloomNet network. 

 

Gross profit increased 71.9% and 54.3% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, as a result of the increase in revenues noted above. Gross profit percentage increased 40 basis points and 50 basis points, during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year. On a pro-forma basis, excluding the impact of PersonalizationMall, gross margin percentage was 38.2% and 41.7% during the three and nine months ended March 28, 2021, respectively.

 

Gross profit by segment:

Consumer Floral & Gifts segment - Gross profit increased by 64.2% during the three months ended March 28, 2021, compared to the same period of the prior year, as a result of the revenue increase noted above, partially offset by a decrease in gross margin percentage of 150 basis points, to 37.8% due to higher florist fulfillment costs, credits related to 3rd party delivery issues, including ice storms which affected on-time delivery performance during the Valentine’s Day holiday, and transportation costs, partially offset by pricing initiatives, reductions in discounts, and the acquisition of PersonalizationMall, which carries higher margins.

 

Gross profit increased by 112.4% during the nine months ended March 28, 2021, compared to the same period of the prior year, as a result of the revenue increase noted above and increases in gross margin percentage of 190 basis points, to 41.0%, primarily attributable to the acquisition of PersonalizationMall, which carries higher margins, as well as pricing initiatives and reductions in promotional activity after the onset of COVID-19, partially offset by higher product and delivery costs associated with the pandemic.

 

On a pro-forma basis, excluding the impact of PersonalizationMall, acquired on August 3, 2020, gross margin percentage was 36.1% and 37.9% during the three and nine months ended March 28, 2021, respectively. 

 

BloomNet segment - Gross profit increased by 19.4% and 20.6% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, due to the increase in revenue noted above, partially offset by a decline in gross margin percentage of 300 basis points, to 44.3%, and 340 basis points, to 46.3% during the respective three months ended and nine months ended March 28, 2021, due to higher rebates (higher florist-to-florist volume) and unfavorable wholesale product margins due to mix, and higher shipping and product costs.

 

Gourmet Foods & Gift Baskets segment - Gross profit increased by 109.6% and 29.3% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, due to the revenue increase noted above, as well as an increase in gross profit percentage of 500 basis points, to 39.4%, and 70 basis points, to 43.7% during the three and nine months ended March 28, 2021, respectively. The improvement in gross margin percentage was primarily attributable to lower promotions, merchandise assortment, channel mix, and fixed cost efficiency, partially offset by higher transportation costs due to surcharges and expedited ship methods, as well as increased labor costs.

 

Marketing and sales expense

 

   

Three Months Ended

   

Nine Months Ended

 
   

March 28, 2021

   

March 29, 2020

   

% Change

   

March 28, 2021

   

March 29, 2020

   

% Change

 
   

(dollars in thousands)

 
                                                 

Marketing and sales

  $ 127,923     $ 78,606       62.7

%

  $ 402,904     $ 262,849       53.3

%

Percentage of net revenues

    27.0

%

    28.2

%

            24.6

%

    24.5

%

       

 

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 62.7% and 53.3% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, as a result of marketing initiatives designed to accelerate revenue growth and capture market share within both the Gourmet Foods & Gift Baskets segment, and the Consumer Floral & Gifts segment, which includes the incremental marketing costs of PersonalizationMall, which was acquired on August 3, 2020. On a pro-forma basis, excluding the impact of PersonalizationMall, marketing and sales as a percentage of net revenues, was 26.8% and 24.2% during the three and nine months ended March 28, 2021, respectively, compared to 28.2% and 24.5% in the same periods of the prior year, reflecting the operational efficiencies and platform leverage attributable to the revenue growth.

 

Technology and development expense

 

   

Three Months Ended

   

Nine Months Ended

 
   

March 28, 2021

   

March 29, 2020

   

% Change

   

March 28, 2021

   

March 29, 2020

   

% Change

 
   

(dollars in thousands)

 
                                                 

Technology and development

  $ 14,281     $ 11,900       20.0

%

  $ 39,937     $ 34,436       16.0

%

Percentage of net revenues

    3.0

%

    4.3

%

            2.4

%

    3.2

%

       

 

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, design, content development and maintenance and support costs related to the Company’s order entry, customer service, fulfillment and database systems.

 

Technology and development expense increased 20.0% and 16.0% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, primarily due to increased consulting and labor costs, increased hosting and maintenance costs incurred to support the Company’s technology platform, in addition to the incremental technology costs associated with PersonalizationMall, which was acquired on August 3, 2020.

 

20

Table of Contents

 

General and administrative expense

 

   

Three Months Ended

   

Nine Months Ended

 
   

March 28, 2021

   

March 29, 2020

   

% Change

   

March 28, 2021

   

March 29, 2020

   

% Change

 
   

(dollars in thousands)

 
                                                 

General and administrative

  $ 30,912     $ 20,031       54.3

%

  $ 89,960     $ 64,187       40.2

%

Percentage of net revenues

    6.5

%

    7.2

%

            5.5

%

    6.0

%

       

 

General and administrative expense consists of payroll and other expenses in support of the Company’s executive, finance and accounting, legal, human resources and other administrative functions, as well as professional fees and other general corporate expenses.

 

General and administrative expenses increased 54.3% and 40.2% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, due to incremental costs related to: (i) PersonalizationMall (including transaction and litigation related costs), (ii) higher labor costs due to annual merit increases and performance related bonuses, as well as investment earnings on the Company’s NQDC Plan assets (offset within Other (income) expenses noted below), and (iii) incremental health and safety-related COVID-19 related expenses.

 

Depreciation and amortization expense

 

   

Three Months Ended

   

Nine Months Ended

 
   

March 28, 2021

   

March 29, 2020

   

% Change

   

March 28, 2021

   

March 29, 2020

   

% Change

 
   

(dollars in thousands)

 
                                                 

Depreciation and amortization

  $ 11,892     $ 7,803       52.4

%

  $ 31,792     $ 23,268       36.6

%

Percentage of net revenues

    2.5

%

    2.8

%

            1.9

%

    2.2

%

       

 

Depreciation and amortization expense increased 52.4% and 36.6% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, primarily due to the incremental depreciation and customer list amortization associated with PersonalizationMall, recent short-lived IT related ecommerce/platform enhancements and accelerated depreciation on certain legacy systems, which are being replaced with modern platforms.

 

Interest (income) expense, net

 

   

Three Months Ended

   

Nine Months Ended

 
   

March 28, 2021

   

March 29, 2020

   

% Change

   

March 28, 2021

   

March 29, 2020

   

% Change

 
   

(dollars in thousands)

 
                                                 

Interest expense, net

  $ 1,553     $ 147       956.5

%

  $ 4,520     $ 1,727       161.7

%

 

Interest expense, net consists primarily of interest expense and amortization of deferred financing costs attributable to the Company’s credit facility (See Note 8 - Debt, in Item 1. for details), net of income earned on the Company’s available cash balances.

 

Interest expense, net increased 956.5% and 161.7% during the three and nine months ended March 28, 2021, respectively, compared to the same periods of the prior year, due to the incremental interest expense associated with the New Term Loan, which was used to partially finance the acquisition of PersonalizationMall, and lower interest income on the Company’s outstanding cash balances due to lower interest rates.

 

Other (income) expense, net

 

   

Three Months Ended

   

Nine Months Ended

 
   

March 28, 2021

   

March 29, 2020

   

% Change

   

March 28, 2021

   

March 29, 2020

   

% Change

 
   

(dollars in thousands)

 
                                                 

Other (income) expense, net

  $ (945

)

  $ 2,605       136.3

%

  $ (4,201

)

  $ 1,714       345.1

%

 

Other income (expense), net for the three and nine months ended March 28, 2021, respectively, consists primarily of investment (gains)/losses on the Company’s NQDC Plan assets. 

 

Income Taxes

The Company recorded income tax benefit of $2.3 million and income tax expense of $28.2 million during the three and nine months ended March 28, 2021, respectively, and income tax benefit of $4.0 million and income tax expense of $15.4 million during the three and nine months ended March 29, 2020, respectively. The Company’s effective tax rate for the three and nine months ended March 28, 2021 was 255.6% and 21.1%, respectively, compared to 29.2% and 23.8% in the same periods of the prior year. The effective rates for fiscal 2021 and fiscal 2020 differed from the U.S. federal statutory rate of 21% due to state income taxes and nondeductible expenses for executive compensation, which were partially offset by various permanent differences and tax credits, including excess tax benefits from stock-based compensation.

 

21

 

Table of Contents

 

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 2020 Credit Agreement (see Note 8 - Debt in Item 1 for details). At March 28, 2021, the Company had working capital of $144.6 million, including cash and cash equivalents of $256.8 million, compared to working capital of $198.3 million, including cash and cash equivalents of $240.5 million, at June 28, 2020

 

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, historically generated nearly 50% of the Company’s annual revenues, and all of its earnings. However, with the onset of the pandemic of the novel strain of coronavirus (“COVID-19”), our customers have increasingly turned to our brands and our expanded product offerings to help them connect and express themselves, 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 the aforementioned increase in the Company’s “everyday” business has and is expected to continue to lessen the seasonality of our business.

 

The Company utilized cash on hand to fund its operations through August 2020. In September 2020, the Company borrowed under its Revolver to fund short-term working capital needs, with borrowings peaking at $70.0 million in November 2020. Cash generated from operations during the Christmas holiday shopping season enabled the Company to repay the Revolver in December 2020. Based on current projected cash flows, the Company believes that available cash balances are expected to be sufficient to provide for the Company’s operating needs until the second quarter of fiscal year 2022, when the Company expects to borrow against its Revolver to fund pre-holiday manufacturing and inventory purchases. The Company has no outstanding amount under its Revolver as of March 28, 2021.

 

While we believe that our sources of funding will be sufficient to meet our anticipated operating cash needs for at least the next twelve months, any projections of future cash needs and cash flows are subject to substantial uncertainty. We continually evaluate, and 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. 

 

To date, we have not identified any material liquidity deficiencies as a result of the COVID-19 pandemic. Based on the information currently available to us, we do not expect the impact of COVID-19 to have a negative impact on our liquidity. We will continue to monitor and assess the impact COVID-19 may have on our business and financial results. See Part II. Item 1A. Risk Factors and Part I. Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations for further information.

 

Cash Flows

 

Net cash provided by operating activities of $218.2 million, for the nine months ended March 28, 2021, was primarily attributable to the Company’s net income during the period, adjusted by non-cash charges for depreciation and amortization and stock-based compensation, combined with changes in working capital, including increases in accounts payable and accrued expenses (volume related), partially offset by increases in inventory (due to efforts to rebuild inventory levels to accommodate sales growth) and receivables (volume related).

 

Net cash used in investing activities of $279.0 million, for the nine months ended March 28, 2021, was primarily attributable to the acquisition of PersonalizationMall for $250.9 million, capital expenditures of $26.8 million related to the Company's technology initiatives, as well as manufacturing production and warehousing equipment.

 

Net cash provided by financing activities of $77.1 million, for the nine months ended March 28, 2021, related to proceeds from bank borrowings of $265.0 million (including the Company’s New Term Loan in the amount of $100.0 million, which was used to repay borrowings then outstanding under the Company’s Revolver in the amount of $97.5 million), repayment of notes payable and bank borrowings of $172.5 million (including the $97.5 million repayment of the Revolver upon closing of the $100.0 million New Term Loan), and the acquisition of $14.8 million of treasury stock.

 

Stock Repurchase Program

 

See Item 2 in Part II below for details.

 

Contractual Obligations

 

At March 28, 2021, the Company’s contractual obligations consist of:

 

Long-term debt obligations - payments due under the Company's 2020 Credit Agreement (see Note 8 - Debt in Item 1 for details and payments due by period).

Operating lease obligations – payments due under the Company’s operating leases (see Note 13 - Leases in Item 1 for details and payments due by period for the long-term operating leases).

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.

 

   

Payments due by period

 
   

(in thousands)

 
   

Remaining Fiscal 2021

   

Fiscal 2022

   

Fiscal 2023

   

Fiscal 2024

   

Fiscal 2025

   

Thereafter

   

Total

 

Purchase commitments

  $ 106,061     $ 12,999     $ 6,861     $ 5,511     $ 3,750     $ 2,000     $ 137,182  

 

Critical Accounting Policies and Estimates

 

As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2020, the discussion and analysis of the Company’s financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances, and management evaluates its estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. The Company’s most critical accounting policies relate to goodwill, other intangible assets and income taxes. There have been no significant changes to the assumptions and estimates related to the Company’s critical accounting policies, since June 28, 2020.

 

22

Table of Contents

 

Recently Issued Accounting Pronouncements 

 

See Note 1 - Accounting Policies in Item 1 for details regarding the impact of accounting standards that were recently issued on our consolidated financial statements.

 

Forward Looking Information and Factors that May Affect Future Results

 

Our disclosure and analysis in this report contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company’s current expectations or beliefs concerning future events and can generally be identified by the use of statements that include words such as “estimate,” “project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “goal,” “target” 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 that could cause actual results to differ materially from the results expressed or implied in the forward-looking statements, including:

 

the Company’s ability:

 

o   to achieve revenue and profitability;

 

o   to leverage its operating platform and reduce operating expenses;

 

o   to manage the increased seasonality of its business;

 

o   to cost effectively acquire and retain customers;

 

o   to effectively integrate and grow acquired companies;

 

o   to reduce working capital requirements and capital expenditures;

 

o   to compete against existing and new competitors;

 

o   to manage expenses associated with sales and marketing and necessary general and administrative and technology investments; and

 

o   to cost effectively manage inventories;

the outcome of contingencies, including legal proceedings in the normal course of business

general consumer sentiment and economic conditions that may affect levels of discretionary customer purchases of the Company’s products; and

the impact of COVID-19 on our business and financial statements. 

 

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements.

 

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission. Our Annual Report on Form 10-K filing for the fiscal year ended June 28, 2020 listed various important factors that could cause actual results to differ materially from expected and historic results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find them in Part I, Item 1A, of that filing under the heading “Cautionary Statements Under the Private Securities Litigation Reform Act of 1995”. We incorporate that section of that Form 10-K in this filing and investors should refer to it. In addition, please refer to additional risk factors in Part II, Item 1A in this Form 10-Q.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company is exposed to market risk from the effect of interest rate changes.

 

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 2020 Credit Agreement 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 $0.3 million and $0.8 million during the three and nine months ended March 28, 2021, respectively.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures 

 

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of March 28, 2021. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 28, 2021.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting identified in connection with the Company’s evaluation required by Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934 during the quarter ended March 28, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. To the extent our normal procedures and controls related to our financial close or other reporting processes were adversely impacted by the COVID-19 outbreak, we took appropriate actions and safeguards to reasonably ensure the fair presentation of the financial statements in accordance with GAAP.

 

23

Table of Contents

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

Litigation

 

Bed Bath & Beyond

 

On April 1, 2020, the Seller 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 “Purchase Agreement”), dated February 14, 2020, between Seller, PersonalizationMall, the Company and the Purchaser, pursuant to which the Seller agreed to sell to Purchaser, and the Purchaser agreed to purchase from Seller, 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 Purchase Agreement due to the unprecedented circumstances created by COVID-19. The Complaint requested an order of specific performance to consummate the transaction under the Purchase 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 Seller entered into a settlement agreement, pursuant to which the Company agreed to move forward with its purchase of PersonalizationMall for $245.0 million, subject to certain working capital and other adjustments. The transaction closed on August 3, 2020. 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 subsidiaries 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.

 

ITEM 1A. RISK FACTORS.

 

There were no material changes to the Company’s risk factors as discussed in Part 1, Item 1A-Risk Factors in the Company’s Annual Report on Form 10-K for the year ended June 28, 2020.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

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. On June 27, 2019, the Company’s Board of Directors authorized an increase to its stock repurchase plan of up to $30.0 million. As of March 28, 2021, $4.5 million remained authorized under the plan. Subsequent to the end of the quarter, on April 22, 2021, the Company’s Board of Directors authorized an increase to its stock repurchase plan of up to $40.0 million.

 

The following table sets forth, for the months indicated, the Company’s purchase of common stock during the first nine months of fiscal 2021, which includes the period July 1, 2020 through March 28, 2021:

 

Period

 

Total Number of

Shares Purchased

   

Average Price

Paid Per Share (1)

   

Total Number of Shares

Purchased as Part of

Publicly Announced

Plans or Programs

   

Dollar Value of Shares

that May Yet Be Purchased

Under the Plans or Programs

 
   

(in thousands, except average price paid per share)

         
                                 

06/29/20 - 07/26/20

    -     $ -       -     $ 19,320  

07/27/20 - 08/23/20

    -     $ -       -     $ 19,320  

08/24/20 - 09/27/20

    36,355     $ 29.94       36,355     $ 18,231  

09/28/20 - 10/25/20

    -     $ -       -     $ 18,231  

10/26/20 - 11/22/20

    305,941     $ 21.23       305,941     $ 11,735  

11/23/20 - 12/27/20

    203,842     $ 23.93       203,842     $ 6,850  

12/28/20 - 01/24/21

    70,438     $ 27.65       70,438     $ 4,900  

01/25/21 - 02/21/21

    12,821     $ 31.63       12,821     $ 4,494  

02/22/21 - 03/28/21

    -     $ -       -     $ 4,494  

Total

    629,397     $ 23.54       629,397          

(1) Average price per share excludes commissions and other transaction fees.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable. 

 

ITEM 5. OTHER INFORMATION

 

None.

 

24

 

Table of Contents

 

ITEM 6. EXHIBITS

 

31.1

 

Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

31.2

 

Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

32.1

 

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

101.INS

 

Inline XBRL Instance Document

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

101.CAL

 

Inline XBRL Taxonomy Calculation Linkbase Document

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

Inline XBRL Taxonomy Extension Label Document

101.PRE

 

Inline XBRL Taxonomy Definition Presentation Document

104

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

 

25

 

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

1-800-FLOWERS.COM, Inc. 

(Registrant)
 

Date:      May 7, 2021

/s/ Christopher G. McCann      

Christopher G. McCann
Chief Executive Officer, 
Director and President
(Principal Executive Officer)  

   

Date:      May 7, 2021

/s/ William E. Shea      
William E. Shea
Senior Vice President, Treasurer and
Chief Financial Officer (Principal
Financial and Accounting Officer)

 

 

 

26

 

 

 

 

 

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
5/31/24
6/27/2110-K
Filed on:5/7/21
4/30/21
4/22/213,  4,  8-K
For Period end:3/28/21
12/28/20SC 13D/A
9/27/2010-Q
8/20/208-K
8/3/208-K,  8-K/A
7/21/20
7/20/208-K
7/1/20
6/28/2010-K,  5
4/17/20
4/9/20
4/1/208-K
3/29/2010-Q
3/27/20
3/20/20
2/14/208-K,  SC 13G
12/29/1910-Q
9/29/1910-Q
8/14/194
7/1/19
6/30/1910-K
6/27/19
5/31/198-K
12/23/16
 List all Filings 


1 Previous Filing that this Filing References

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 9/11/20  1-800-FLOWERS.COM, Inc.           10-K        6/28/20   95:9.2M                                   RDG Filings/FA
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