1-800-FLOWERS.COM, Inc. Reports Results For Its Fiscal 2016 Fourth Quarter and Full Year

Fourth Quarter Highlights:

  • Total revenues increased 2.7 percent to $234.4 million, compared
    with $228.3 million in the prior year period.
  • Adjusted EBITDA*, excluding stock-based compensation, was a loss of
    $3.0 million, compared with a loss of $1.8 million in the prior year
    period.
  • GAAP EPS was a loss of $0.17 per share compared with a loss of
    $0.16 per share in the prior year period. Adjusted EPS*
    was
    a loss of $0.14 per share compared with a loss of $0.13 per share in
    the prior year period.

Full Year Highlights:

  • Total revenues increased 4.6 percent to $1.17 billion, compared
    with $1.12 billion in the prior year.
  • Adjusted EBITDA*, excluding stock-based
    compensation, increased 6.6 percent to $85.8 million compared with
    $80.4 million in the prior year.
  • GAAP EPS was $0.55, compared with $0.30 in the prior year period.
    Adjusted EPS* was $0.43, compared with $0.34 per share in the prior
    year.

(*See tables attached to the end of this press release for
reconciliation of all adjustments to applicable GAAP results.)

CARLE PLACE, N.Y.–(BUSINESS WIRE)–1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS), the leading gourmet food and
floral gift provider for all occasions, today reported total revenues
grew 2.7 percent to $234.4 million for its fiscal 2016 fourth quarter
ended July 3, 2016. The revenue increase was driven primarily by the
Company’s Consumer Floral segment which grew 4.6 percent for the quarter.

Gross profit margin for the quarter was 42.9 percent, compared with 43.0
percent in the prior year period. This reflects strong gross margin
growth in the Company’s Consumer Floral and BloomNet segments offset by
lower gross margin in the Company’s Gourmet Foods and Gift Baskets
segment primarily due to impact of the shift of the Easter holiday into
the Company’s fiscal third quarter compared with the prior year period
when Easter fell in the Company’s fiscal fourth quarter. Operating
expenses were 49.6 percent of total revenues compared with 49.3 percent
in the prior year period.

Adjusted EBITDA*, excluding stock-based compensation, was a loss of $3.0
million, compared with a loss of $1.8 million in the prior year period,
primarily reflecting the aforementioned impact of the shift of the
Easter holiday into the Company’s third quarter during fiscal 2016.

GAAP net loss attributable to the Company was $11.1 million, or ($0.17)
per share, compared with a GAAP net loss of $10.7 million, or ($0.16)
per share, in the prior year period. Adjusted net loss* for the quarter
was $9.0 million, or ($0.14) per share, compared with an adjusted net
loss of $8.7 million, or ($0.13) in the prior year period.

FISCAL 2016 FULL YEAR RESULTS:

Total revenues for the Company’s full fiscal 2016 year increased 4.6
percent to $1.17 billion, compared with $1.12 billion in the prior year,
primarily reflecting the timing of the Harry & David acquisition in
fiscal 2015. Gross profit margin for the year increased 70 basis points
to 44.1 percent, compared with 43.4 percent in the prior year. Operating
expenses as a percent of total revenues increased 30 basis points to
40.4 percent, compared with 40.1 percent in the prior year. On a
comparable basis, operating expenses as a percent of total revenues
declined by 20 basis points in fiscal 2016.

Adjusted EBITDA* for fiscal 2016, excluding stock-based compensation,
increased 6.6 percent to $85.8 million, compared with $80.4 million in
the prior year.

GAAP Net Income attributable to the Company increased 81.8 percent to
$36.9 million, or $0.55 per diluted share, compared with $20.3 million,
or $0.30 per diluted share, in the prior year. Adjusted net income
attributable to the Company* increased 25.7 percent to $28.5 million, or
$0.43 per diluted share, compared with $22.7 million, or $0.34 per
diluted share, in the prior year period.

(*See tables attached to the end of this press release for
reconciliations of all adjustments to applicable GAAP results.)

Chris McCann, CEO of 1-800-FLOWERS.COM, said, “Fiscal 2016 was a very
good year for our company on a number of fronts. We achieved solid
revenue growth and drove increases in margins and earnings, despite some
significant headwinds we faced during the year. Importantly, we also
made excellent progress executing on our vision to build what we call
our “Celebratory Ecosystem” which includes our all-star collection of
gifting brands and an ever increasing suite of products and services
designed to help our customers connect and express themselves and
deliver smiles to the important people in their lives.

“We also continued to make progress in our integration initiatives,
which began with our acquisition of Harry & David and has now evolved
into a holistic approach to operating our entire company. And, we
advanced our ability to increase multi-brand customers – a key long-term
growth strategy – by completing the migration of all of our brands onto
the multi-brand website.”

In addition to the progress achieved during fiscal 2016, McCann said the
Company saw some positive trends across all three of its business
segments. “In Consumer Floral we grew 2.21 percent for the
year on a comparable basis as we continued to expand 1-800-Flowers.com’s
market leading position and drive further increases in bottom line
contribution. BloomNet also continued to drive strong contribution
margin growth, reaching record highs as a percent of total revenues. And
in Gourmet Food and Gift Baskets revenues increased as we saw Harry &
David gradually building momentum, which more than offset lower results
in our Fannie May business, which is now on the mend.” (1Adjusted
for the sale of two, small non-core businesses.)

McCann added that the Company plans to build on the progress that it
made during fiscal 2016 as well as the positive trends it is seeing in
its business to further enhance top and bottom line performance in
fiscal 2017. “As we enter fiscal 2017, we are well positioned to
accelerate revenue growth while continuing to drive strong bottom-line
results.”

During the fiscal fourth quarter, the Company attracted 922,000 new
customers. Approximately 2.0 million customers placed orders during the
quarter, of whom 53.8 percent were repeat customers. For the year, the
Company attracted 3.5 million new customers. Approximately 6.8 million
customers placed orders during the year, of whom 49.0 percent were
repeat customers. This reflects the Company’s focus on effective
marketing and merchandising programs, including initiatives in social
and mobile communications channels and its Celebrations suite of
services – including Celebrations Passport free shipping, Celebrations
Rewards and Celebrations Reminder services.

SEGMENT RESULTS:

  • Consumer Floral: fourth quarter revenues grew 4.6 percent to
    $137.5 million and full-year revenues decreased 0.9 percent to $418.5
    million, compared with $131.5 million and $422.2 million in the
    respective prior year periods. Adjusted for the sale of two small,
    non-core businesses, revenues in this category grew 2.0 percent for
    the full year. Gross profit margin increased 190 basis points to 41.9
    percent for the quarter and 160 basis points to 40.8 percent for the
    full year, compared with 40.0 percent and 39.2 percent in the
    respective prior year periods. Gross margin benefited from enhanced
    sourcing and logistics as well as strong customer satisfaction
    metrics. These factors, combined with a continued focus on efficient
    marketing programs, resulted in a contribution margin increase of 25.0
    percent to $17.7 million and an increase of 16.6 percent to $50.8
    million for the full year, compared with $14.2 million and $43.5
    million in the respective prior year periods.
  • BloomNet Wire Service: fourth quarter revenues declined 5.0
    percent to $21.7 million and full-year revenues declined 0.6 percent
    to $85.5 million, compared with $22.9 million and $86.0 million in the
    respective prior year periods. Gross profit margin increased 130 basis
    points to 58.9 percent in the fourth quarter and 60 basis points to
    56.3 percent for the year, compared with 57.6 percent and 55.7 percent
    in the respective prior year periods. Contribution margin was $8.6
    million for the fourth quarter, down $331,000 compared with $8.9
    million in the prior year period and $30.6 million for the full year,
    up $1.2 million compared with $29.4 million in the prior year.
  • Gourmet Food and Gift Baskets: fourth quarter revenues
    increased 2.0 percent to $75.4 million compared with $74.0 million.
    Gross profit margin for the quarter declined 340 basis points to 39.9
    percent compared with 43.3 percent in the prior year period.
    Contribution margin for the quarter declined 19.6 percent to a loss of
    $9.2 million, compared with a loss of $7.7 million in the prior year
    period. Results for the fourth quarter in this category reflect the
    impact of the shift of the Easter holiday into the Company’s fiscal
    third quarter compared with the prior year when the holiday fell in
    the Company’s fiscal fourth quarter. For the year, revenues grew 9.2
    percent to $670.5 million, compared with $614.0 million in the prior
    year. Gross margin for the year was unchanged from the prior year at
    44.4 percent. Contribution margin for the year increased 6.0 percent
    to $79.4 million, compared with $74.9 million in the prior year. On a
    comparable basis, contribution margin for the year was down 4.9
    percent compared with adjusted contribution margin of $83.5 million in
    the prior year. Full year results comparisons in this category reflect
    the timing of the Harry & David acquisition in fiscal 2015.

COMPANY GUIDANCE:

For fiscal 2017, the Company is providing guidance for revenue growth
and bottom-line results as follows:

  • Consolidated revenue growth for the year in a range of 4-to-5 percent,
    compared with revenues of $1.17 billion reported for fiscal 2016.
  • EBITDA growth in a range of 8-to-10 percent compared with Adjusted
    EBITDA of $85.8 reported for fiscal 2016.
  • EPS growth in a range of 5-to-10 percent compared with Adjusted EPS of
    $0.43 reported for fiscal 2016. EPS guidance for fiscal 2017 includes
    an anticipated normalized effective tax rate of 35 percent compared
    with and effective tax rate of 30 percent in fiscal 2016 which
    reflected certain one-time benefits associated with research and
    development credits and the sale of the Company’s non-core UK
    affiliate.
  • Free Cash Flow for the year of approximately $40 million compared with
    $24 million in fiscal 2016.

DEFINITIONS:

EBITDA: Net income (loss) before interest, taxes, depreciation,
amortization. Free Cash Flow: net cash provided by operating activities
less capital expenditures. Category contribution margin: earnings before
interest, taxes, depreciation and amortization, before the allocation of
corporate overhead expenses. Adjusted EBITDA, Adjusted EPS and Adjusted
Net Income/Loss for the fiscal 2016 fourth quarter excludes litigation
settlement costs as well as the final integration costs, including
severance expenses, associated with Harry & David and the rightsizing of
our Fannie May operations. Adjusted EBITDA, Adjusted EPS and Adjusted
Net Income for full year fiscal 2016 exclude the aforementioned items as
well as the one-time insurance settlement gain related to the Fannie May
warehouse and distribution center fire that occurred in fiscal 2015 and
the costs related to the divestiture and impairment of certain, non-core
international investments. Adjusted EBITDA, Adjusted EPS and Adjusted
Net Income/Loss for the fiscal 2015 fourth quarter exclude one-time
costs associated with the integration of Harry & David; Adjusted EBITDA,
Adjusted EPS and Adjusted Net Income for fiscal 2015 exclude one-time
costs associated with the acquisition and integration of Harry & David
and the impact of the Fannie May warehouse fire in November 2014.
Additionally, fiscal 2015 EBITDA and EPS adjusts for seasonal losses
associated with the Harry & David business in its fiscal 2015 first
quarter which were not captured in the Company’s fiscal 2015 results due
to the close of the acquisition on September 30, 2014. The Company
presents EBITDA, Adjusted EBITDA, Adjusted EPS and Free Cash Flow
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 also uses EBITDA and Adjusted EBITDA as factors
used to determine the total amount of incentive compensation available
to be awarded to executive officers and other employees. The Company’s
credit agreement uses EBITDA and Adjusted EBITDA to measure compliance
with covenants such as interest coverage and debt incurrence. EBITDA and
Adjusted EBITDA are also used by the Company to evaluate and price
potential acquisition candidates. EBITDA, Adjusted EBITDA, Adjusted EPS
and Free Cash Flow 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. EBITDA, Adjusted EBITDA,
Adjusted EPS and Free Cash Flow should only be used on a supplemental
basis combined with GAAP results when evaluating the Company’s
performance.

About 1-800-FLOWERS.COM,
Inc.

1-800-FLOWERS.COM,
Inc.
 is a leading provider of gourmet food and floral gifts for all
occasions. For the past 40 years, 1-800-FLOWERS® (1-800-356-9377 or www.1800flowers.com) has
been helping deliver smiles for our customers with gifts for every
occasion, including fresh flowers and the finest selection of plants,
gift baskets, gourmet foods, confections, candles, balloons and plush
stuffed animals. As always, our 100% Smile Guarantee® backs every
gift. The company’s Celebrations suite of services including
Celebrations Passport Free Shipping Program, Celebrations Rewards and
Celebrations Reminders, are all designed to engage with customers and
deepen relationships as a one-stop destination for all celebratory and
gifting occasions. In 2016, 1-800-Flowers.com was awarded Silver Stevie
“e-Commerce Customer Service” Award, recognizing the company’s
innovative use of online technologies and social media to service the
needs of customers. In addition, 1-800-FLOWERS.COM, Inc. was recognized
as one of Internet Retailer’s Top 300 B2B e-commerce companies and was
also recently named in Internet Retailer’s 2016 Top Mobile 500 as one of
the world’s leading mobile commerce sites. The company was included in
Internet Retailer’s 2015 Top 500 for fast growing e-commerce companies.
In 2015, 1-800-Flowers.com was named a winner of the “Best Companies to
Work for in New York State” Award by The New York Society for Human
Resource Management (NYS-SHRM). The Company’s BloomNet® international
floral wire service (www.mybloomnet.net) provides
a broad range of quality products and value-added services designed to
help professional florists grow their businesses profitably. The 1-800-FLOWERS.COM,
Inc.
 “Gift Shop” also includes gourmet gifts such as premium,
gift-quality fruits and other gourmet items from Harry & David®
(1-877-322-1200 or www.harryanddavid.com), popcorn
and specialty treats from The Popcorn Factory® (1-800-541-2676 or www.thepopcornfactory.com); cookies
and baked gifts from Cheryl’s® (1-800-443-8124 or www.cheryls.com); premium
chocolates and confections from Fannie May® (www.fanniemay.com and www.harrylondon.com); gift
baskets and towers from 1-800- Baskets.com® (www.1800baskets.com); premium
English muffins and other breakfast treats from Wolferman’s
(1-800-999-1910 or www.wolfermans.com);
carved fresh fruit arrangements from FruitBouquets.com (www.fruitbouquets.com); and
top quality steaks and chops from Stock Yards® (www.stockyards.com).
Shares in 1-800-FLOWERS.COM, Inc.
are traded on the NASDAQ Global Select Market, ticker symbol: FLWS.

Special Note Regarding Forward Looking Statements:

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements represent the Company’s current expectations
or beliefs concerning future events and can generally be identified by
the use of statements that include words such as “estimate,” “expects,”
“project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,”
“forecast,” “likely,” “will,” “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 which
could cause actual results to differ materially from the results
expressed or implied in the forward- looking statements; including, but
are not limited to, statements regarding the Company’s expectations for:
its ability to achieve its guidance for consolidated revenue growth for
the full year in a range of four-to-five percent; its ability to achieve
EBITDA growth in a range of 8-to-10 percent and EPS growth in a range of
5-to-10 percent, compared with fiscal 2016 Adjusted EBITDA of $85.8
million and Adjusted EPS of $0.43 per share and its ability to generate
Free Cash Flow for the year of approximately $40.0 million; its ability
to leverage its operating platform and reduce operating expense ratio;
its ability to cost effectively acquire and retain customers; the
outcome of contingencies, including legal proceedings in the normal
course of business; its ability to compete against existing and new
competitors; its ability to manage expenses associated with sales and
marketing and necessary general and administrative and technology
investments; its ability to reduce promotional activities and achieve
more efficient marketing programs; and general consumer sentiment and
economic conditions that may affect levels of discretionary customer
purchases of the Company’s products. The Company undertakes no
obligation to publicly update any of the forward-looking statements,
whether as a result of new information, future events or otherwise, made
in this release or in any of its SEC filings except as may be otherwise
stated by the Company. For a more detailed description of these and
other risk factors, please refer to the Company’s SEC filings including
the Company’s Annual Reports on Form 10-K and its Quarterly Reports on
Form 10-Q. Consequently, you should not consider any such list to be a
complete set of all potential risks and uncertainties.

Conference Call:

The Company will conduct a conference call to discuss the above details
and attached financial results today, Thursday, August 25, 2016, at
11:00 a.m. (EDT). The call will be “web cast” live via the Internet and
can be accessed from the Investor Relations section of the
1-800-FLOWERS.COM web site at www.1800flowersinc.com.
A recording of the call will be posted on the Investor Relations section
of the Company’s web site within two hours of the call’s completion. A
telephonic replay of the call can be accessed for 48 hours beginning at
2:00 p.m. EDT on the day of the call at: (US) 1-877-344-7529; (CA)
1-855-669-9658; (International) 1-412-317-0088; enter conference ID #:
10090089.

Note: Attached tables are an integral part of this press release
without which the information presented in this press release should be
considered incomplete.

 

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

Condensed Consolidated Balance Sheets

(In thousands)

 
 
   

July 3,
2016

   

June 28,

2015

 
Assets
Current assets:
Cash and cash equivalents $27,826 $27,940
Trade receivables, net 19,123 16,191
Insurance receivable 2,979
Inventories 103,328 93,163
Prepaid and other 16,382 14,822
Total current assets 166,659 155,095
 
Property, plant and equipment, net 171,362 170,100
Goodwill 77,667 77,097
Other intangibles, net 79,000 82,125
Other assets 11,826 12,656
Total assets $506,514 $497,073
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $35,201 $35,425
Accrued expenses 66,066 73,639
Current maturities of long-term debt 19,594 14,543
Total current liabilities $120,861 123,607
 
Long-term debt 97,969 117,563
Deferred tax liabilities 35,517 37,807
Other liabilities 9,581 7,840
Total liabilities 263,928 286,817
Total 1-800-FLOWERS.COM, Inc. stockholders’ equity 242,586 208,449
Noncontrolling interest in subsidiary 1,807
Total equity 242,586 210,256
Total liabilities and equity $506,514 $497,073
 
       

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

Selected Financial Information

Condensed Consolidated Statements of Operations

(In thousands, except for per share data)

(unaudited)

 
 
Three Months Ended Years Ended

July 3,
2016

   

June 28,

2015

July 3,
2016

   

June 28,

2015

Net revenues:
E-commerce (combined online and telephonic) $186,411 $178,830 $882,782 $849,853
Other 47,984 49,461 290,242 271,653
Total net revenues 234,395 228,291 1,173,024 1,121,506
Cost of revenues 133,750 130,156 655,566 634,311
Gross profit 100,645 98,135 517,458 487,195
Operating expenses:
Marketing and sales 74,608 71,629 318,175 299,801
Technology and development 10,175 9,427 39,234 34,745
General and administrative 23,351 23,910 84,383 85,908
Depreciation and amortization 8,105 7,519 32,384 29,124
Total operating expenses 116,239 112,485 474,176 449,578
Operating income (loss) (15,594) (14,350) 43,282 37,617
Interest expense, net 1,382 1,431 6,674 5,753
Other (income) expense, net 312 850 (14,839) 1,550
Income (loss) before income taxes (17,288) (16,631) 51,447 30,314
Income tax expense (benefit) (6,234) (5,866) 15,579 10,930
Net income (loss) $(11,054) $(10,765) $35,868 $19,384
Less: Net loss attributable to noncontrolling interest (26) (1,007) (903)
Net income (loss) attributable to 1-800-FLOWERS.COM, Inc. $(11,054) $(10,739) $36,875 $20,287
 
Basic net income (loss) per common share attributable to
1-800-FLOWERS.COM, Inc.
$(0.17) $(0.16) $0.57 $0.31
 
Diluted net income (loss) per common share attributable to
1-800-FLOWERS.COM, Inc.
$(0.17) $(0.16) $0.55 $0.30
 
Weighted average shares used in the calculation of net income (loss)
per common share:
Basic 65,376 65,188 64,896 64,976
Diluted 65,376 65,188 67,083 67,602
 
   

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

Selected Financial Information

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

 
 
Years ended

July 3,

2016

   

June 28,

2015

 
Operating activities:
Net income $35,868 $19,384
Reconciliation of net income to net cash provided by operating
activities, net of acquisitions/dispositions:
Depreciation and amortization 32,384 29,124
Amortization of deferred financing costs 1,791 1,501
Deferred income taxes (3,000) 2,471
Foreign equity method investment impairment 2,278
Loss on sale/impairment of iFlorist 1,990
Non-cash impact of write-offs related to warehouse fire 29,522
Bad debt expense 1,278 1,295
Stock-based compensation 6,343 5,962
Excess tax benefit from stock-based compensation (2,400) (2,550)
Other non-cash items 517 1,439
Changes in operating items:
Trade receivables (4,210) 8,331
Insurance receivable 2,979 (2,979)
Inventories (10,216) 26,390
Prepaid and other (1,560) 8,047
Accounts payable and accrued expenses (6,429) (2,235)
Other assets (29) (1,058)
Other liabilities 89 1,089
Net cash provided by operating activities 57,673 125,733
 
Investing activities:
Acquisitions, net of cash acquired (131,994)
Capital expenditures, net of non-cash expenditures (33,938) (32,572)
Other 963
Net cash used in investing activities (33,938) (163,603)
 
Financing activities:
Acquisition of treasury stock (15,223) (8,360)
Excess tax benefit from stock based compensation 2,400 2,550
Proceeds from exercise of employee stock options 3,517 5,542
Proceeds from bank borrowings 178,000 239,500
Repayment of notes payable and bank borrowings (192,543) (172,983)
Debt issuance costs (5,642)
Net cash (used in) provided by financing activities (23,849) 60,607
   
Net change in cash and cash equivalents (114) 22,737
Cash and cash equivalents:
Beginning of year 27,940 5,203
End of year $27,826 $27,940
 

Contacts

1-800-FLOWERS.COM, Inc.
Investors:
Joseph
D. Pititto, 516-237-6131
invest@1800flowers.com
or
Media:
Yanique
Woodall, 516-237-6028
ywoodall@1800flowers.com

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