1-800-FLOWERS.COM, Inc. Reports Strong Results for Its Fiscal 2016 First Quarter, Including Improved Adjusted EBITDA and Adjusted EPS, on a Comparable Basis

  • Total revenues from continuing operations grew 23.2 percent to
    $156.0 million, primarily reflecting contributions from the Company’s
    Harry & David business.
  • Gross margin increased 120 basis points to 43.3 percent, compared
    with 42.1 in the prior year period.
  • Comparable Adjusted EBITDA1, excluding
    stock-based compensation expense, improved 16.9 per cent, or $2.4
    million to a loss of $12.0 million, compared with a pro forma loss of
    $14.4 million in the prior year period.
  • EPS loss for the quarter was $0.07 compared with a loss of $0.07
    per share in the prior year period. Comparable Adjusted EPS
    2
    improved $0.02 per share to a loss of $0.22, compared with a pro forma
    loss of $0.24 per share in the prior year period.

CARLE PLACE, N.Y.–(BUSINESS WIRE)–1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS), the leading gourmet and floral
gift provider for all occasions, today reported revenue growth from
continuing operations of 23.2 percent to $156.0 million for its fiscal
2016 first quarter ended September 27, 2015, compared with revenues from
continuing operations of $126.7 million in the prior year period.
Revenue growth for the quarter was driven primarily by contributions
from its Harry & David business, which was not included in the prior
year results due to the timing of the closing of the acquisition on
September 30, 2014. The Harry & David revenue contributions, combined
with 7.7 percent revenue growth in the Company’s BloomNet segment, more
than offset slightly lower revenues in the Company’s Consumer Floral
segment, primarily reflecting the sale of certain non-core businesses in
this segment at the end of fiscal 2015, as well as a shift of some mass
market customer shipments within the gourmet food and gift baskets
segment into the current fiscal second quarter.

Gross profit margin from continuing operations for the quarter increased
120 basis points to 43.3 percent, compared with 42.1 percent in the
prior year period. This was primarily driven by increases of 230 basis
points and 80 basis points in the Company’s Gourmet Foods and Gift
Baskets and Consumer Floral segments, respectively, which more than
offset a decline of 80 basis points in the Company’s BloomNet segment.
Operating expense and operating expense ratio were higher during the
quarter reflecting the Harry & David operating expenses which were not
included in the prior year period due to the timing of the acquisition.
On a comparable basis, including the pro forma Harry & David results in
the prior year period, operating expense, excluding stock-based
compensation, was down slightly at $87.4 million compared with $87.9
million in the prior year period. Additionally, operating expense ratio
improved by 30 basis points to 56.0 percent of total revenues. The
combination of these factors resulted in an improvement in comparable
Adjusted EBITDA of 16.9 percent, or $2.4 million, to a loss of $12.0
million, compared with a pro forma loss of $14.4 million in the prior
year period.

Net loss attributable to 1-800-FLOWERS.COM, Inc. was $4.5 million, or
$0.07 per share, compared with a net loss of $4.3 million, or $0.07 per
share, in the prior year period. The net loss attributable to
1-800-FLOWERS.COM, Inc. and EPS for the quarter include an after-tax
benefit of $10.3 million reflecting the final settlement of the
Company’s insurance claims related to the Fannie May warehouse and
distribution center fire that occurred on Thanksgiving Day, 2014
partially offset by costs associated with the write down of certain
foreign business assets during the quarter. On a comparable basis,
adjusted net loss attributable to 1-800-FLOWERS.COM, Inc. improved $1.2
million, or $0.02 per share, to a net loss of $14.3 million, or $0.22
per share, compared with a pro forma net loss of $15.5 million, or $0.24
per share, in the prior year period.

Jim McCann, CEO of 1-800-FLOWERS.COM, Inc., said, “We are very pleased
with our fiscal first quarter results and with the positive trends we
are seeing as we enter the important holiday period. In our Harry &
David business, during the first quarter we achieved solid
year-over-year revenue growth while significantly reducing the
traditional seasonal operating losses for the period. We did this by
leveraging our shared services platform, including technology, finance,
human resources and sourcing, to capture significant operating
efficiencies. These efforts, driven by the very talented teams that we
have assembled across the enterprise, are doing an excellent job of
identifying and aggressively going after cost synergies in all areas of
our operations. As such, we are confident in our ability to achieve the
$15 million in operating cost synergies that we originally forecast and
potentially exceed it in the years ahead.”

McCann noted that the Company’s floral business segments also continued
to see positive trends: “In our 1-800-FLOWERS.COM consumer floral
business we recorded our fifth consecutive quarter of bottom-line growth
with contribution margin in this segment up four percent despite what
were essentially flat revenues primarily reflecting the sale of some
non-core businesses and the typically lower revenues associated with the
slow summer months. In addition, BloomNet continued its positive top and
bottom-line trends with revenues up nearly eight percent and
contribution margin up more than six percent for the quarter. BloomNet
continues to extend its market penetration versus the legacy wire
services by leveraging its better value proposition for florists and its
industry leading suite of innovative products and services.” McCann said
the Company expects to build on these positive trends during the
upcoming holiday season, particularly in its Gourmet Foods and Gift
Baskets segment. “While we remain cognizant of the continued uneven
consumer economy, we are better positioned than at any point in our past
– with our expanded family of great gifting brands, our omni-channel
go-to-market focus and our enhanced operating platform – to solve for
our customers’ celebratory and gifting needs and help them deliver
smiles. As such, we are very excited by the opportunities we see to
deliver a strong holiday quarter and another full year of top and bottom
line growth.”

Customer Metrics:

During the first quarter, the Company attracted 500,000 new e-commerce
customers. Approximately 1.1 million e-commerce customers placed orders
during the period, with repeat customers representing 55.4 percent of
the total.

Segment Results From Continuing Operations:

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

  • Consumer Floral: Fiscal first quarter revenues in this segment
    were $72.9 million, down 1.9 percent, compared with $74.4 million in
    the prior year period. This primarily reflects the sale of two, small
    non-core businesses in the fourth quarter of fiscal 2015. Gross margin
    increased 80 basis points to 39.4 percent compared with 38.6 percent
    in the prior year period reflecting efficient use of promotional
    marketing programs as well as enhanced product mix. As a result of
    these factors, category contribution margin increased for the fifth
    consecutive quarter, up 4.1 percent to $7.5 million, compared with
    $7.2 million in the prior year period.
  • BloomNet Wire Service: Revenues for the quarter grew 7.7
    percent to $21.5 million, compared with $20.0 million in the prior
    year period. Gross profit margin was 54.6 percent, down 70 basis
    points compared with 55.3 percent in the prior year period, primarily
    attributable to product mix. Contribution margin increased 6.4 percent
    to $6.9 million compared with $6.5 million in the prior year period.
  • Gourmet Foods and Gift Baskets: Revenues for the quarter
    increased 90.3 percent to $61.6 million, compared with $32.4 million
    in the prior year period. The revenue increase primarily reflects
    contributions from the Harry & David business, which was not included
    in the prior year period results due to the timing of the acquisition
    close on September 30, 2014. On a comparable basis, including the pro
    forma Harry & David contribution in the prior year period, revenues in
    this segment were essentially flat year-over-year. This reflects the
    shift of some mass market customer shipments into the current fiscal
    second quarter. Gross profit margin increased 230 basis points to 43.2
    percent, compared with 40.9 percent in the prior year period,
    primarily reflecting product mix. Contribution margin loss was $8.5
    million compared with $2.4 million in the prior year period, primarily
    reflecting seasonal operating loss associated with the Harry & David
    business which were not included in the prior year period results.
    Importantly, the Company was able to significantly reduce the Harry &
    David operating loss on a year-over-year basis by successfully
    leveraging its business platform during the quarter. As a result, on a
    comparable basis, including the pro forma Harry & David operating
    losses in the prior year quarter, contribution margin in this segment
    improved 14.0 percent, or $1.4 million, to a loss of 8.5 million,
    compared with a pro forma loss of $9.9 million in the prior year
    period.

Company Guidance:

The Company is reiterating its guidance for fiscal 2016:

  • In terms of revenues, the Company expects to achieve consolidated
    revenue growth for the year in a range of five-to-seven percent,
    compared with revenues of $1.12 billion reported for fiscal 2015.
  • In terms of bottom-line results, 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 are 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 anticipates generating approximately $35 million in Free
    Cash Flow in Fiscal 2016, excluding the insurance proceeds related to
    the Fannie May warehouse and distribution center fire.

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. 1Comparable Adjusted EBITDA
includes pro forma Harry & David results for the prior year period and
excludes one-time acquisition and integration related costs incurred in
the prior and current year periods, respectively; 2Comparable
Adjusted EPS includes the aforementioned adjustments and excludes the
after-tax benefit of $10.3 million reflecting the final settlement of
the Company’s insurance claims related to the Fannie May warehouse and
distribution center fire that occurred on Thanksgiving Day 2014
partially offset by costs associated with the write down of certain
foreign business assets during the quarter. 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,”
“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:
continued market penetration in its BloomNet wire service business, 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 five-to-seven 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 $80.0 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, Tuesday, November 3, 2015, 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: 1-855-859-2056 or
1-404-537-3406; Conference ID: 59331769.

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)

 

 

 

September 27,
2015
(unaudited)

 

June 28,
2015

 

Assets

Current assets:
Cash and cash equivalents $ 1,987 $ 27,940
Trade receivables, net 28,889 16,191
Insurance receivable 25,000 2,979
Inventories 188,034 93,163
Deferred tax assets 5,483 4,873
Prepaid and other   19,683   14,822
Total current assets 269,076 159,968
 
Property, plant and equipment, net 167,777 170,100
Goodwill 76,957 77,097
Other intangibles, net 80,877 82,125
Other assets   10,464   12,656
Total assets $ 605,151 $ 501,946
 

Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable $ 36,816 $ 35,425
Accrued expenses 58,867 73,639
Current debt   143,324   14,543
Total current liabilities 239,007 123,607
 
Long-term debt and obligations under capital leases 114,000 117,563
Deferred tax liabilities 42,550 42,680
Other liabilities   7,813   7,840
Total liabilities   403,370   291,690
Total stockholders’ equity 200,839 208,449
Noncontrolling interest in subsidiary   942   1,807
Total equity   201,781   210,256
Total liabilities and equity $ 605,151 $ 501,946
 
 

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
 

September 27,
2015

 

September 28,
2014

 
Net revenues:
E-commerce (combined online and telephonic) $ 104,697 $ 84,038

Other

  51,344     42,665  
Total net revenues 156,041 126,703
Cost of revenues   88,532     73,390  
Gross profit 67,509 53,313
Operating expenses:
Marketing and sales 52,526 35,572
Technology and development 9,311 5,600
General and administrative 19,971 13,668
Depreciation and amortization   7,972     5,101  
Total operating expenses   89,780     59,941  
Operating loss (22,271 ) (6,628 )
Interest expense, net 1,891 320
Other (income) expense, net   (15,538 )   433  
Loss before income taxes (8,624 ) (7,381 )
Income tax benefit   (3,188 )   (2,803 )
Net loss   (5,436 )   (4,578 )
Less: Net loss attributable to noncontrolling interest   (952 )   (328 )
Net loss attributable to 1-800-FLOWERS.COM, Inc. $ (4,484 ) $ (4,250 )

 

Basic and diluted net loss per common share attributable to
1-800-FLOWERS.COM, Inc.:

 

 

$

 

 

(0.07

 

 

)

 

 

$

 

 

(0.07

 

 

)

Basic and diluted weighted average shares used in the calculation of
net loss per common share
  64,825     63,948  
 
 

1-800-FLOWERS.COM, Inc. and Subsidiaries
Selected
Financial Information

Consolidated Statements of Cash
Flows

(In thousands)
(unaudited)

 

  Three months ended

September 27,
2015

 

September 28,
2014

 

Operating activities:

Net loss ($5,436 ) ($4,578 )

Reconciliation of net loss to net cash used in operating
activities:

Depreciation and amortization 7,972 5,101
Amortization of deferred financing costs 414 77
Deferred income taxes (740 ) (502 )
Foreign equity method investment impairment 1,728
Asset held for sale impairment 1,879
Business interruption insurance gain (19,611 )
Bad debt expense 454 359
Stock-based compensation 1,518 1,267
Other non-cash items 181 70
Changes in operating items:
Trade receivables (13,152 ) (11,881 )
Insurance receivable (449 )
Inventories (94,756 ) (37,437 )
Prepaid and other (4,861 ) (1,130 )
Accounts payable and accrued expenses (15,342 ) (10,256 )
Other assets (75 ) (197 )
Other liabilities   45     (423 )
 
Net cash used in operating activities (140,231 ) (59,530 )
 
Investing activities:
Capital expenditures (6,224 ) (4,473 )
Other, net       152  
 

Net cash used in investing activities

(6,224 ) (4,321 )
 

Financing activities:

Acquisition of treasury stock (4,717 ) (1,141 )
Proceeds from exercise of employee stock options 1
Proceeds from bank borrowings 141,903 62,000
Repayment of notes payable and bank borrowings   (16,685 )   (53 )
 

Net cash provided by financing activities

  120,502     60,806  
 
Net change in cash and cash equivalents (25,953 ) (3,045 )
Cash and cash equivalents:
Beginning of period   27,940     5,203  
 
End of period $ 1,987   $ 2,158  
 
 

1-800-FLOWERS.COM, Inc. and Subsidiaries
Selected
Financial Information – Category Information

(in
thousands)
(unaudited)

 
  Three Months Ended

September 27, 2015

   

September 28, 2014

   
Reported  

Integration
Costs

  As Adjusted

September 28,
2014

 

Acquisition
Costs

 

Harry &
David (**)

  As Adjusted

As Adjusted %
Change

         

Net revenues:

1-800-Flowers.com Consumer Floral $ 72,948 $ $ 72,948 $ 74,398 $ $ $ 74,398 -1.9 %
BloomNet Wire Service 21,549 21,549 20,011 20,011 7.7 %
Gourmet Food & Gift Baskets 61,592 61,592 32,359 29,393 61,752 -0.3 %
Corporate 257 257 200 200 28.5 %
Intercompany eliminations   (305 )           (305 )   (265 )                 (265 ) -15.1 %
Total net revenues $ 156,041     $     $ 156,041   $ 126,703       $     $ 29,393     $ 156,096   0.0 %
 
 

Gross profit:

1-800-Flowers.com Consumer Floral $ 28,769 $ $ 28,769 $ 28,734 $ $ $ 28,734 0.1 %
39.4 % 39.4 % 38.6 % 38.6 %
 
BloomNet Wire Service 11,766 11,766 11,076 11,076 6.2 %
54.6 % 54.6 % 55.3 % 55.3 %
 
Gourmet Food & Gift Baskets 26,632 26,632 13,222 12,701 25,923 2.7 %
43.2 % 43.2 % 40.9 % 42.0 %
 
Corporate (*) 342 342 281 281 21.7 %
133.1 % 133.1 % 140.5 % 140.5 %
                       
Total gross profit $ 67,509     $     $ 67,509   $ 53,313     $     $ 12,701     $ 66,014   2.3 %
  43.3 %     0.0 %     43.3 %   42.1 %     0.0 %     43.2 %     42.3 %
 
EBITDA excluding stock- based compensation:

Category Contribution Margin:

1-800-Flowers.com Consumer Floral $ 7,549 $ $ 7,549 $ 7,250 $ $ $ 7,250 4.1 %
BloomNet Wire Service 6,915 6,915 6,497 6,497 6.4 %
Gourmet Food & Gift Baskets   (8,494 )           (8,494 )   (2,435 )           (7,441 )     (9,876 ) 14.0 %
Category Contribution Margin Subtotal 5,970 5,970 11,312 (7,441 ) 3,871 54.2 %
Corporate (*)   (20,269 )     828       (19,441 )   (12,839 )     713       (7,397 )     (19,523 ) 0.4 %

EBITDA

$ (14,299 ) $ 828 $ (13,471 ) $ (1,527 ) $ 713 $ (14,838 ) (15,652 ) 13.9 %
 
Add: Stock-based compensation   1,518             1,518     1,267                 1,267   -19.8 %
 
EBITDA excluding stock-based compensation $ (12,781 )   $ 828     $ (11,953 ) $ (260 )   $ 713     $ (14,838 )     (14,385 ) 16.9 %
 

Contacts

Investor Contact:
Joseph D. Pititto,
(516) 237-6131
invest@1800flowers.com
or
Media
Contact
:
Yanique Woodall, (516) 237-6028
ywoodall@1800flowers.com

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