1-800-FLOWERS.COM, Inc. Reports Strong Bottom-Line Results For Its Fiscal 2016 Second Quarter

  • Total revenues from continuing operations grew 2.6 percent, or
    $14.1 million, to $548.4 million, compared with $534.3 million in the
    prior year period, primarily driven by the Company’s Gourmet Foods and
    Gift Baskets segment.
  • EBITDA, excluding stock-based compensation, grew 23.3 percent, or
    $19.8 million, to $104.8 million, compared with $85.0 million in the
    prior year period. Compared with prior year period Adjusted EBITDA of
    $100.7 million, EBITDA increased 4.0%, or $4.1 million.
  • EPS grew 35.3 percent, or $0.24 per diluted share, to $0.92 per
    diluted share compared with $0.68 per diluted share in the prior year
    period. Compared with prior year period Adjusted EPS of $0.83 per
    diluted share, EPS increased 10.8 percent, or $0.09.

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 net
revenues from continuing operations grew 2.6 percent, or $14.1 million,
to $548.4 million for its fiscal 2016 second quarter ended December 27,
2015, compared with total revenues from continuing operations of $534.3
million in the prior year period. The revenue increase was driven by the
Company’s Gourmet Food and Gift Baskets segment.

The Company noted that total revenues for the period, on a comparable
basis, grew approximately 1.0 percent adjusting for the sale of two
small, non-core businesses that provided approximately $5.9 million in
the prior year period, combined with $13.8 million in lost revenues
associated with a Thanksgiving-day 2014 fire at the Company’s Fannie May
warehouse and a $1.6 million purchase accounting adjustment related to
the Harry & David acquisition, which closed September 30, 2014.

Gross profit margin for the quarter increased 110 basis points to 46.1
percent on a reported basis, compared with 45.0 percent in the prior
year period, while operating expenses, on a reported basis, improved 220
basis points to 28.8 percent of total revenues compared with 31.0
percent in the prior year period. This reflected the Company’s focus on
leveraging its business platform to achieve cost reductions, including
increased benefits achieved through the effective integration of Harry &
David.

EBITDA, excluding stock-based compensation expense, increased 23.3
percent, or $19.8 million, on a reported basis, to $104.8 million,
compared with $85.0 million in the prior year period. EBITDA, excluding
stock-based compensation expense, increased 4.0 percent, or $4.1
million, compared with the Adjusted EBITDA, excluding stock based
compensation, of $100.7 million reported in the prior year period which
included the effects of the aforementioned Fannie May warehouse fire and
the transaction costs and purchase accounting adjustments related to the
Harry & David acquisition (*see tables attached to the end of this press
release for reconciliation of all adjustments to applicable GAAP
results).

Net income attributable to the Company on a reported basis increased
34.4 percent to $61.5 million or $0.92 per diluted share, compared with
$45.8 million or $0.68 per diluted share, in the prior year period. Net
income attributable to the Company and EPS from continuing operations
increased 10.9 percent and 10.8 percent, respectively, compared with the
adjusted net income* attributable to the Company of $55.7 million and
adjusted EPS* from continuing operations of $0.83 reported in last
year’s fiscal second quarter.

Jim McCann, CEO of 1-800-FLOWERS.COM, said, “During the fiscal second
quarter, we achieved a double-digit increase in our bottom-line results
through our continued rigorous focus on marketing, merchandising and
operating costs across the enterprise. We are pleased with these
results, particularly in light of a challenging environment
characterized by lower retail traffic, heightened levels of promotions
and uneven consumer demand.”

McCann said the Company was able to achieve revenue growth on a reported
and comparable basis despite a challenging consumer environment. “In our
Gourmet Food and Gift Baskets segment, which represented more than 75
percent of our total sales in the period, we grew revenues in our Fannie
May brand on a reported basis, however on a comparable basis we did not
recover all of the sales lost in the prior year period due to the
aforementioned Thanksgiving day fire. We more than offset this shortfall
with solid growth in our Harry & David and Cheryl’s brands, along with
strong growth in our 1-800-Baskets business.”

McCann also noted that revenues in the Company’s 1-800-Flowers.com
consumer floral brand increased on a comparable basis, when adjusted for
the sale of two small non-core businesses. “Our focus on efficient
marketing programs enabled us to increase gross margins while reducing
total operating expenses. As a result, we achieved yet another quarter
of strong bottom- line contribution for the 1-800-Flowers.com brand.

“With our multi-brand, omni-channel strategy we are uniquely positioned
to solve for an expanding range of our customers celebratory and gifting
needs and thereby enhance loyalty and lifetime value,” he said.

Regarding customer metrics for the quarter, the Company said it
attracted 1.0 million new customers. Approximately 2.5 million customers
placed orders during the quarter, of which 59.7 percent were repeat
customers. This reflects the Company’s effective marketing and
merchandising programs, including initiatives in social and mobile
communication channels and it’s Celebrations suite of services –
Celebrations Passport, Celebrations Rewards and Celebrations Reminders –
all designed to engage with its customers and deepen its relationships
as their one-stop destination for all of their celebratory and gifting
occasions.

SEGMENT RESULTS FROM CONTINUING OPERATIONS:

The Company provides fiscal 2016 second quarter selected financial
results for its Gourmet Foods and Gift Baskets, Consumer Floral and
BloomNet business segments in the tables attached to this release and as
follows:

  • Gourmet Food and Gift Baskets: Revenues
    increased 4.7 percent to $434.3 million on a reported basis, compared
    with $414.7 million in the prior year period. This reflects growth in
    the Company’s Harry & David, Fannie May and Cheryl’s brands along with
    strong growth in our wholesale gift baskets business. Gross margin for
    the quarter increased 70 basis points on a reported basis to 46.7
    percent compared with 46.0 percent in the prior year period. Segment
    contribution margin increased 14.8 percent, or $13.4 million, on a
    reported basis to $103.9 million compared with $90.5 million in the
    prior year period reflecting strong cost controls and enhanced
    operating leverage. On a comparable basis, revenues grew 1.0 percent
    compared with pro forma revenues of $429.9 reported in the prior year
    period. Contribution margin, on a comparable basis, increased 1.5
    percent. (See the tables attached to the end of this press release
    for pro forma results.)
  • Consumer Floral: Revenues in this segment
    were $94.8 million, down 4.8 percent, or $4.8 million, compared with
    $99.6 million in the prior year period. Gross profit margin for the
    quarter increased 160 basis points to 40.3 percent compared with 38.7
    percent in the prior year period. Segment contribution margin
    increased 23.2 percent to $11.7 million, compared with $9.5 million in
    the prior year period, primarily reflecting the lower marketing
    expenses and the aforementioned increased gross margin. On a
    comparable basis, revenues in this segment grew 1.1 percent when
    adjusted for the approximately $5.9 million in lost revenues
    associated with the aforementioned sale of two small, non-core
    businesses.
  • BloomNet Wire Service: Revenues were
    $19.7 million, down 2.2 percent compared with $20.1 million primarily
    reflecting the timing of orders for wholesale products. Gross margin
    for the quarter increased 180 basis points to 56.9 percent compared
    with 55.1 percent in the prior year period, reflecting product mix.
    Segment contribution margin increased 10.3 percent to $7.4 million
    compared with $6.7 million in the prior year period reflecting
    improved operating leverage and the increased gross margin.

Company Guidance:

Based on its results through the first half of fiscal 2016, the Company
is adjusting its guidance for revenue growth and reiterating its
guidance for bottom-line results as follows:

  • The Company expects to achieve consolidated revenue growth for the
    year in a range of four-to-five percent, compared with revenues of
    $1.12 billion reported for fiscal 2015.
  • The Company expects to grow EBITDA approximately 10 percent and EPS in
    excess of 20 percent, compared with pro forma fiscal 2015 Adjusted
    EBITDA* of $80.5 million and pro forma fiscal 2015 Adjusted EPS* of
    $0.33 per diluted share. (*Pro forma fiscal 2015 Adjusted EBITDA and
    Adjusted EPS include seasonal losses associated with Harry & David
    that were incurred in its fiscal 2015 first quarter. These losses were
    not captured in the Company’s fiscal 2015 results due to the close of
    the acquisition on September 30, 2014.)
  • The Company is maintaining its bottom-line guidance through a
    combination of rigorous cost controls and higher than originally
    forecast synergy savings associated with the integration of Harry &
    David which are offsetting higher input costs associated with rising
    labor rates and higher prices for some key commodities, such as cocoa
    and eggs.
  • As a result, the Company is increasing its forecast for synergy
    savings to $20 million over three years, from $15 million.
  • The Company also reiterated its guidance for Free Cash Flow in Fiscal
    2016 of approximately $35 million.

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. Pro forma 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 from
continuing operations, Comparable EBITDA and Comparable 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 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. Some of the limitations of EBITDA and Adjusted
EBITDA are: (a) EBITDA and Adjusted EBITDA do not reflect changes in, or
cash requirements for, the Company’s working capital needs; (b) EBITDA
and Adjusted EBITDA do not reflect the significant interest expense, or
the cash requirements necessary to service interest or principal
payments, on the Company’s debts; and (c) although depreciation and
amortization are non-cash charges, the assets being depreciated and
amortized may have to be replaced in the future and EBITDA does not
reflect any cash requirements for such capital expenditures. EBITDA and
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 nearly 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. Most notably, 1-800-FLOWERS.COM, Inc. was recognized as one of
Internet Retailers Top 300 B2B e-commerce companies. In addition, 1-800-FLOWERS.COM was
recently named in Internet Retailer’s 2016 Top Mobile 500 as one of the
world’s leading mobile commerce sites. The company was also 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). 1-800-FLOWERS.COM was
awarded the 2014 Silver Stevie Award, recognizing the organization’s
outstanding Customer Service and commitment to our 100% Smile
Guarantee®. 1-800-FLOWERS.COM received
a Gold Award for Best User Experience on a Mobile Optimized Site for
the 2013 Horizon
Interactive Awards
. 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 “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:
capturing integration operating synergy cost savings of $20 million over
three years; its ability to offset rising input costs through rigorous
cost management and synergy savings; its ability to leverage its
consolidated customer database and new multi-brand website to attract
and retain customers and help grow revenues; 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 Adjusted EBITDA growth of
approximately 10 percent and Adjusted EPS growth in excess of 20
percent, compared with pro forma fiscal 2015 Adjusted EBITDA* of $80.5
million and pro forma fiscal 2015 Adjusted EPS* of $0.33 per fully
diluted share and its ability to generate Free Cash Flow for the year of
approximately $35 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, January 28, 2016, at
11:00 a.m. (EST). 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. EST on the day of the call at: 1-855-859-2056 or
1-404-537-3406; Conference ID: 34284399.

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)

 

December 27,
2015
(unaudited)

June 28,
2015

 
Assets
Current assets:
Cash and cash equivalents $ 108,444 $ 27,940
Trade receivables, net 78,206 16,191
Insurance receivable 2,979
Inventories 95,009 93,163
Prepaid and other   17,995   14,822
Total current assets 299,654 155,095
 
Property, plant and equipment, net 165,815 170,100
Goodwill 76,956 77,097
Other intangibles, net 79,936 82,125
Other assets   12,981   12,656
Total assets $ 635,342 $ 497,073
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 60,679 $ 35,425
Accrued expenses 146,519 73,639
Current maturities of long-term debt   16,031   14,543
Total current liabilities 223,229 123,607
 
Long-term debt 108,656 117,563
Deferred tax liabilities 36,279 37,807
Other liabilities   8,922   7,840
Total liabilities   377,086   286,817
Total 1-800-FLOWERS.COM, Inc. stockholders’ equity 258,256 208,449
Noncontrolling interest in subsidiary     1,807
Total equity   258,256   210,256
Total liabilities and equity $ 635,342 $ 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 Six Months Ended

December 27,
2015

 

December 28,
2014

December 27,
2015

 

December 28,
2014

Net revenues:
E-commerce (combined online and telephonic) $ 412,261 $ 409,082 $ 516,958 $ 493,120
Other   136,120     125,193     187,464     167,858  
Total net revenues 548,381 534,275 704,422 660,978
Cost of revenues   295,798     293,850     384,330     367,240  
Gross profit 252,583 240,425 320,092 293,738
Operating expenses:
Marketing and sales 119,539 122,026 172,065 157,598
Technology and development 9,845 9,329 19,156 14,929
General and administrative 20,055 25,558 40,026 39,226
Depreciation and amortization   8,761     8,679     16,733     13,780  
Total operating expenses   158,200     165,592     247,980     225,533  
Operating income 94,383 74,833 72,112 68,205
Interest expense, net 2,162 2,489 4,053 2,809
Other (income) expense, net   242     149     (15,296 )   582  
Income before income taxes 91,979 72,195 83,355 64,814
Income tax expense   30,495     26,655     27,307     23,852  
Net income $ 61,484   $ 45,540   $ 56,048   $ 40,962  
Less: Net loss attributable to noncontrolling interest   (55 )   (231 )   (1,007 )   (559 )
Net income attributable to 1-800-FLOWERS.COM, Inc. $ 61,539   $ 45,771   $ 57,055   $ 41,521  
 
Basic net income per common share attributable to 1-800-FLOWERS.COM,
Inc.
$ 0.95   $ 0.71   $ 0.88   $ 0.65  
 
Diluted net income per common share attributable to
1-800-FLOWERS.COM, Inc.
$ 0.92   $ 0.68   $ 0.85

$0.85

 

64,218

  $ 0.62

$0.62

 

64,218

 
 
Weighted average shares used in the calculation of net income per
common share:
Basic   64,669     64,443     64,747     64,195  
Diluted   66,979     67,061     67,220     66,641  
 
 

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

Selected Financial Information

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

 
Six months ended

December 27,
2015

   

December 28,
2014

 
Operating activities:
Net income $ 56,048 $ 40,962

Reconciliation of net income to net cash provided by operating
activities,
  net of acquisitions:

Depreciation and amortization 16,733 13,780
Amortization of deferred financing costs 817 639
Deferred income taxes (1,527 ) (3,429 )
Foreign equity method investment impairment 1,728
Loss on sale/impairment of iFlorist 2,138
Non-cash impact of write-offs related to warehouse fire 29,522
Insurance proceeds for warehouse fire related to property damage 15,000
Bad debt expense 642 739
Stock-based compensation 3,181 2,782
Other non-cash items 181 1,474
Changes in operating items:
Trade receivables (62,657 ) (49,166 )
Insurance receivable 4,940 (14,945 )
Inventories (2,266 ) 48,990
Prepaid and other 1,572 6,218
Accounts payable and accrued expenses 90,290 86,480
Other assets (106 ) (879 )
Other liabilities   (69 )   35  
Net cash provided by operating activities 111,644 178,202
 
Investing activities:
Acquisitions, net of cash acquired (133,117 )
Capital expenditures, net of non-cash expenditures (13,052 ) (14,927 )
Other       641  
Net cash used in investing activities (13,052 ) (147,403 )
 
Financing activities:
Acquisition of treasury stock (11,232 ) (5,011 )
Proceeds from exercise of employee stock options 564 1,788
Proceeds from bank borrowings 178,000 239,786
Repayment of notes payable and bank borrowings (185,419 ) (165,895 )
Debt issuance costs (5,602 )
Other       152  
Net cash (used in) provided by financing activities (18,087 ) 65,218
   
Net change in cash and cash equivalents 80,505 96,017
Cash and cash equivalents:
Beginning of year   27,940     5,203  
End of year $ 108,444   $ 101,220  
 

 

Selected Financial Information – Category Information
 
(in thousands)
(unaudited)
  Three Months Ended

December 27,
2015

 

Reported
December 28,
2014

 

Impact of
Warehouse Fire

 

Impact of Purchase
Accounting Adjustment
to Deferred
Revenue

 

Impact of Purchase
Accounting Adjustment for
Inventory
Fair Value
Step-Up

 

Impact of Harry
& David
Acquisition Costs

 

As Adjusted
December 28,
2014

 

%
Change

 
             
Net revenues:
1-800-Flowers.com Consumer Floral $ 94,826 $ 99,600 $ $ $ $ $ 99,600 -4.8 %
BloomNet Wire Service 19,674 20,110 250 20,360 -3.4 %
Gourmet Food & Gift Baskets 434,317 414,669 13,596 1,621 429,886 1.0 %
Corporate 298 312 312 -4.5 %
Intercompany eliminations   (734 )   (416 )                       (416 ) 76.4 %
Total net revenues $ 548,381   $ 534,275     $ 13,846     $ 1,621   $   $   $ 549,742   -0.2 %
 
Gross profit:
1-800-Flowers.com Consumer Floral $ 38,218 $ 38,577 $ $ $ $ $ 38,577 -0.9 %
40.3 % 38.7 % 38.7 %
 
BloomNet Wire Service 11,204 11,075 50 11,125 0.7 %
56.9 % 55.1 % 54.6 %
 
Gourmet Food & Gift Baskets 202,976 190,577 5,856 1,621 4,760 202,814 0.1 %
46.7 % 46.0 % 47.2 %
 
Corporate (*) 186 196 196 -5.1 %
62.4 % 62.8 % 62.8 %
                       
Total gross profit $ 252,583   $ 240,425     $ 5,906     $ 1,621   $ 4,760   $   $ 252,712   -0.1 %
  46.1 %   45.0 %     42.7 %                 46.0 %
 
Category Contribution Margin:
1-800-Flowers.com Consumer Floral $ 11,733 $ 9,527 $ $ $ $ $ 9,527 23.2 %
BloomNet Wire Service 7,355 6,668 50 6,718 9.5 %
Gourmet Food & Gift Baskets   103,874     90,455       5,531       1,621     4,760         102,367   1.5 %
Category Contribution Margin Subtotal 122,962 106,650 5,581 1,621 4,760 118,612 3.7 %
Corporate (*) (19,818 ) (23,138 ) 3,755 (19,383 ) 2.2 %
                       
EBITDA $ 103,144 $ 83,512 $ 5,581 $ 1,621 $ 4,760 $ 3,755 $ 99,229 3.9 %
 
Add: Stock-based compensation 1,663 1,515 1,515 9.8 %
                       
EBITDA, excluding stock-based compensation $ 104,807   $ 85,027     $ 5,581     $ 1,621   $ 4,760   $ 3,755   $ 100,744   4.0 %
 

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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