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’sCompany’s effective tax rate from operations for the three and sixnine months ended December 31, 2017April 2, 2023 was 15.2%19.1% and 8.7%-0.6% respectively, compared to 33.3%25.7% and 32.6%18.6% in the same periods of the prior year. The Company’s effective ratestax rate for fiscal 2018three were impacted by changes associated with the Tax Act (see Noteand 1nine -Accounting Policies above). During the quartermonths ended December 31, 2017,April 2, 2023 the Company recognized a benefit of $15.9 million, or $0.24 per diluted share related to the impact of the Tax Act, consisting of a discrete tax benefit of $12.2 million, or $0.18 per diluted share, reflecting a revaluation of deferred tax liabilities at the lower U.S. federal statutory rate of 21%, and a benefit of $3.7 million, or $0.06 per diluted share, reflecting the Company’s lower transitional federal tax rate in fiscal 2018 of 28.0 percent. In addition, fiscal 2018 effective rates were impacted by state income taxes, which were partially offset by various permanent differences and tax credits. The effective rates for fiscal 2017differed from the U.S. federal statutory rate of 21.0% primarily as a result of the non-deductible portion of the goodwill impairment charge as well as state income taxes, non-deductible executive compensation, and tax shortfalls related to stock-based compensation, partially offset by various tax credits. The effective tax rate for the three months ended March 27, 2022 differed from the U.S. federal statutory rate of 21% primarily due to state income taxes which were more thanand nondeductible expenses for executive compensation, partially offset by various permanent differences and tax credits, includingwhereas, the effective tax rate for the nine months ended March 27, 2022 differed from the U.S. federal statutory rate of 21% primarily due to excess tax benefits onfrom stock based compensation, as a result of the Company’s adoption of ASU 2016-09.partially offset by state income taxes.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign countries. The Company completed its audit by the Internal Revenue ServiceU.S. federal examination for fiscal year 2014,2018, however, fiscal years 20152020 and 20162021 remain subject to U.S. federal examination. Due to ongoing state examinations and non-conformitynonconformity with the U.S. federal statute of limitations for assessment, certain states remain open from fiscal 2012. The Company commenced operations in foreign jurisdictions in 2012.2016. The Company's foreign income tax filings from fiscal 2018 are open for examination by its respective foreign tax authorities.authorities, mainly Canada and Brazil.
Note 13– Commitments and Contingencies Leases
The Company currently leases plants, warehouses, offices, store facilities, and equipment under various leases through fiscal 2036. 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:
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 2, 2023 | | | March 27, 2022 | | | April 2, 2023 | | | March 27, 2022 | |
| | | (in thousands) | |
Lease costs: | | | | | | | | | | | | | | | | |
Operating lease costs | | $ | 5,627 | | | $ | 5,113 | | | $ | 16,580 | | | $ | 14,177 | |
Variable lease costs | | | 6,499 | | | | 5,339 | | | | 18,953 | | | | 16,214 | |
Short-term lease cost | | | 474 | | | | 350 | | | | 4,928 | | | | 4,847 | |
Sublease income | | | (253 | ) | | | (185 | ) | | | (737 | ) | | | (542 | ) |
Total lease costs | | $ | 12,347 | | | $ | 10,617 | | | $ | 39,724 | | | $ | 34,696 | |
| | | | | | | | | | | | | | | | | |
Cash paid for amounts included in measurement of operating lease liabilities | | | $ | 15,431 | | | $ | 11,002 | |
Right-of-use assets obtained in exchange for new operating lease liabilities | | | $ | 11,790 | | | $ | 55,143 | |
| | April 2, 2023 | |
| | (in thousands) | |
Weighted-average remaining lease term - operating leases (in years) | | | 8.9 | |
Weighted-discount rate - operating leases | | | 4.0 | % |
Maturities of lease liabilities in accordance with ASC 842 as of April 2, 2023 and reconciliation to balance sheet are as follows (in thousands):
Remainder of 2023 | | $ | 3,782 | |
2024 | | | 22,528 | |
2025 | | | 20,273 | |
2026 | | | 18,343 | |
2027 | | | 16,718 | |
Thereafter | | | 82,881 | |
Total Future Minimum Lease Payments | | | 164,525 | |
Less: Imputed Remaining Interest | | | 27,440 | |
Total Operating Lease Liabilities | | | 137,085 | |
Less: Current portion of long-term operating lease liabilities | | | 15,517 | |
Long-term operating lease liabilities | | $ | 121,568 | |
Note 14 - Accrued Expenses
Accrued expenses consisted of the following:
| | | April 2, 2023 | | | July 3, 2022 | |
| | | (in thousands) | |
Payroll and employee benefits | | $ | 25,725 | | | $ | 37,617 | |
Deferred revenue | | | 41,715 | | | | 33,746 | |
Accrued marketing expenses | | | 14,646 | | | | 19,506 | |
Accrued florist payout | | | 16,380 | | | | 18,938 | |
Accrued purchases | | | 19,824 | | | | 32,141 | |
Other | | | 29,460 | | | | 33,444 | |
Accrued Expenses | | $ | 147,750 | | | $ | 175,392 | |
Note 15– Commitments and Contingencies
Litigation
LitigationCall Center Worker Claim:
ThereIn March of 2018, a putative class action lawsuit was filed against a subsidiary of the Company (the “Subsidiary”) in the U.S. District Court for the District of Oregon, Medford Division (the “Court”), alleging violations of the federal Fair Labor Standards Act (FLSA) and Oregon state law. The complaint was brought on behalf of a putative class of call center workers and alleged that certain Subsidiary policies and practices resulted in class members’ performance of unpaid work. The plaintiff sought class certification, compensation for alleged unpaid and underpaid wages, civil penalties, prejudgment interest, liquidated damages, litigation costs, and attorneys’ fees. Following mediation, the parties reached an agreement in April 2022 to resolve all claims. In September 2022, the Court granted final approval of the settlement agreement, and in November 2022, the Company remitted payment of approximately $2.9 million, which was previously accrued during the quarter ended March 27, 2022, and was included in "Accrued expenses" in the consolidated balance sheets at July 3, 2022. In entering into the settlement agreement, the Subsidiary made no admission of liability.
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 ultimatefinal 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 liquidityliquidity.
ITEM 2.2. MANAGEMENT’S’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward Looking Statements
This “Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A)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 Company’s Company’s Annual Report on Form 10-K.10-K, for the year ended July 3, 2022. The following discussion contains forward-looking statements that reflect the Company’sCompany’s plans, estimates and beliefs. The Company’sCompany’s 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“Forward-Looking Information and Factors That May Affect Future Results” andResults,” under Part I, Item 1A, of the Company’s Company’s Annual Report on Form 10-K, for the year ended July 3, 2022under the heading “Risk Factors.“Risk Factors” and Part II-Other Information, Item 1A in this Form 10-Q.
Business Overview
1-800-FLOWERS.COM, Inc. and its subsidiariessubsidiaries (collectively, the “Company”) is a leading provider of gifts for all celebratory occasions. Fordesigned to help inspire customers to give more, connect more, and build more and better relationships. The Company’s e-commerce business platform features an 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®, Things Remembered®, Moose Munch®, The Popcorn Factory®, Wolferman’s Bakery®, Vital Choice®, Stock Yards® and Simply Chocolate®. Through the past 40 years, 1-800-Flowers.com® has been helping deliver smilesCelebrations 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 customersdeepen relationships with a 100% Smile Guarantee® backing every gift. In addition to the 1-800-Flowers.com brand, which offers fresh flowers, plants, fruitcustomers. The Company also operates BloomNet®, an international floral and gift baskets, as well as balloons, plush and keepsake gifts, the Company’s BloomNet® international floral wireindustry service (www.mybloomnet.net) and Napco brands provideprovider offering a broad rangebroad-range of quality products and value-added services designed to help professional floristsmembers grow their businesses profitably. The 1-800-FLOWERS.COM, Inc. familyprofitably; Napco℠, a resource for floral gifts and seasonal décor; DesignPac Gifts, LLC, a manufacturer of brands also offers everyday gifting and entertaining products 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); gift baskets and towers from 1-800-Baskets.com® (www.1800baskets.com)towers; and DesignPac; premium English muffinsAlice’s Table®, a lifestyle business offering fully digital livestreaming and on demand floral, culinary and other breakfast treats from Wolferman’s (1-800-999-1910 or www.wolfermans.com); artisanal and specialty chocolates from Simply ChocolateSM (www.simplychocolate.com), carved fresh fruit arrangements from FruitBouquets.com (www.fruitbouquets.com); top quality steaks and chops from Stock Yards® (www.stockyards.com), and personalized gifts from Personalization Universe�� (www.personalizationuniverse.com).experiences to guests across the country.
Service offerings such as Celebrations Passport®, Celebrations Rewards®For additional information, see Item 7 of Part II, “Management’s Discussion and Celebrations Reminders® are designed to deepen relationships with customers across all brands. 1-800-FLOWERS.COM, Inc. was named to the Stores® 2017 Hot 100 Retailers List by the National Retail FederationAnalysis of Financial Condition and received the Gold award in the “Best Artificial Intelligence” category at the Data & Marketing Association’s 2017 International ECHO AwardsResults of Operations — Overview” of our Annual Report on Form 10-K for the Company’s groundbreaking implementation of an artificial intelligence-powered online gift concierge, GWYN.year ended July 3, 2022.
Shares in 1-800-FLOWERS.COM, Inc. are traded on the NASDAQ Global Select Market, ticker symbol: FLWS. Acquisition of Vital Choice
On May 30, 2017,October 27, 2021, the Company completed its acquisition of Vital Choice Seafood LLC (“Vital Choice”), a provider of wild-caught seafood and sustainably farmed shellfish, pastured proteins, organic foods, and marine-sourced nutritional supplements. The Company utilized its existing credit facility to fund the sale$20.0 million purchase (subject to certain working capital and other adjustments), which included tradenames, customer lists, websites and operations. Vital Choice revenues were approximately $27.8 million during its most recent year ended December 31, 2020 - see Note 4 –Acquisitions in Item 1.
Acquisition of Alice’s Table
On December 31, 2021, the Company completed its acquisition of Alice’s Table LLC (“Alice’s Table”), a lifestyle business offering fully digital livestreaming and on demand floral, culinary and other experiences to guests across the country. The Company utilized existing cash of $0.8 million, converted the existing accounts receivable from Alice’s Table of $0.3 million and its previous $0.3 million cost method investment in Alice’s Table, in order to acquire 100% ownership in Alice’s Table, which included tradenames, customer lists, websites and operations. Alice’s Table revenues were approximately $3.8 million during the twelve-month period ended September 30, 2021 - see Note 4 –Acquisitions in Item 1.
Acquisition of Things Remembered
On January 10, 2023, the Company completed its acquisition of certain assets of the outstanding equityThings Remembered brand, a provider of Fannie May Confections Brands, Inc., including its subsidiaries, Fannie May Confections, Inc. and Harry London Candies, Inc. (“Fannie May”) to Ferrero International S.A., a Luxembourg corporation (“Ferrero”), for a total consideration of $115.0 million in cash, subject to adjustment for seasonal working capital. The working capital adjustment was finalized in August 2017, resulting in an $11.4 million reduction topersonalized gifts, whose operations will be integrated within the purchase price. The resulting gain on sale of $14.6 million, is included within “Other (income) expense, net”PersonalizationMall.com brand, in the Company’s consolidated statements of income in the fourth quarter of fiscal year 2017.
Consumer Floral & Gifts segment. The Company used cash on hand to fund the $5.0 million purchase, which included the intellectual property, customer list, certain inventory, and Ferrero also entered into a transition services agreement wherebyequipment. The acquisition did not include Things Remembered retail stores. Things Remembered’s annual revenues from its ecommerce operations, based on its most recently available unaudited financial information was $30.4 million for the Company will provide certain post-closing services to Ferrero and Fannie May for a period of approximately 18twelve months related to the business of Fannie May, and a commercial agreement with respect to the distribution of certain Ferrero and Fannie May products.
Operating results of Fannie May are reflectedended November 30, 2022 - see Note 4 –Acquisitions in the Company’s consolidated financial statements through May 30, 2017, the date of its disposition, within its Gourmet Food & Gift Baskets segment. See Segment InformationItem 1 and Results of Operations below for a comparison of fiscal 2018 results to fiscal 2017, adjusted to exclude the operations of Fannie May.
.
Amended Credit Agreement
On August 29, 2022, the Company entered into a Third Amendment to the Company's 2019 Credit Agreement. The Third Amendment amends the 2019 Credit Agreement to, among other modifications, (A) alter the financial maintenance covenants set forth therein by (1) increasing the required maximum consolidated leverage ratio, for the reference period ending October 2, 2022, from 3.25 to 1.00 to 4.25 to 1.00 and (2) decreasing the required minimum consolidated fixed charge coverage ratio, for the reference periods ending October 2, 2022, January 1, 2023, and April 2, 2023, from 1.50 to 1.00 to 1.00 to 1.00 and (B) increase the amount of certain capital expenditures that may be disregarded for purposes of calculating the consolidated fixed charge coverage ratio from $25.0 million to $35.0 million (See Note 8 - Debt, in Item 1, for details).
Macro-Economic Factors
Overall, consumer behavior continues to reflect the significant geo-political, inflationary forces, interest rate hikes, and fears of a recession, that are affecting both their discretionary and nondiscretionary spending. Throughout the current fiscal year discretionary spending remained pressured and consumers continue to moderate their purchases for “Everyday” gifting occasions, and to a lesser extent, “Holiday” gifting occasions.
We expect consumers to remain cautious in the face of macroeconomic pressures, including high inflation, rising interest rates, and fear of recession. For the balance of the fiscal year, we expect that customers will continue to moderate their spending on everyday gifting occasions, and while we also expect that our customers will continue to shop for the important people in their lives during the major upcoming holidays, including Mother’s Day, the fourth quarter of our fiscal year is more heavily weighted towards everyday gifting occasions.
The challenging macro-economic conditions that have affected our customers have also impacted our operating costs. During the second quarter of fiscal 2022, in-bound and out-bound shipping, commodity, labor and fuel costs began to surge, and escalated throughout the balance of the year into our first quarter of fiscal 2023. During our second quarter and third quarter of the current fiscal year, while certain commodity prices remain near historical highs, we began to see a more stable labor market, and significant year-over-year reductions in ocean freight costs.
As a result of these trends, combined with our strategic pricing initiatives, and automation efforts, we expect to continue to see margin improvement during the fourth quarter of our fiscal year, as we cycle against the sharp inflationary period of a year ago. Further, as a management team, we are focusing our efforts on the areas that are within our control, mitigating topline challenges through gross margin improvement and expense management efforts.
Company Guidance
Based on its third quarter performance and outlook for the balance of the year, the Company is updating its fiscal 2023 guidance. This outlook includes a continuation of the challenging consumer environment, which is expected to be mitigated by the Company’s expense management efforts.
The Company expects:
| ● | Total revenues to decline approximately 8% as compared with the prior year; |
| ● | Adjusted EBITDA to be in a range of $85.0 million to $90.0 million; and |
| ● | Free Cash Flow to exceed $75.0 million. |
Refer to "Definitions of non-GAAP Financial Measures" for reconciliation of non-GAAP results to applicable GAAP results.
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 Operationssections below for reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measures. These non-GAAP financial measures are referredWe do not provide a reconciliation of adjusted EBITDA guidance to as “adjusted"net income guidance or “on a comparable basis” below, as these terms are used interchangeably.reconciliation of free cash flow guidance to net cash provided by operating activities because doing so would require unreasonable efforts at this time, because of the uncertainty and variability of the nature and amount of certain components of various necessary GAAP components, including for example those related to compensation, tax items, amortization or others that may arise during the year, and the Company's management believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors. For the same reasons, the Company is unable to address the probable significance of the unavailable information. The lack of such reconciling information should be considered when assessing the impact of such disclosures.
Adjusted revenues
Adjusted revenues measure GAAP revenues adjusted for the effects of acquisitions, dispositions, and other items affecting period to period comparability. See Segment Information for details on how adjusted revenues were calculated for each period presented.
We believe that this measure provides management and investors with a more complete understanding of underlying revenue trends of established, ongoing operations by excluding the effect of activities which are subject to volatility and can obscure underlying trends.
Management recognizes that the term "adjusted revenues" may be interpreted differently by other companies and under different circumstances. Although this may influence comparability of absolute percentage growth from company to company, we believe that these measures are useful in assessing trends of the Company and its segments, and may therefore be a useful tool in assessing period-to-period performance trends.
Adjusted gross profit and adjusted gross profit percentage
Adjusted gross profit measures GAAP revenues less cost of revenues, adjusted for the effects of acquisitions, dispositions, and other items affecting period to period comparability. Adjusted gross profit percentage measures adjusted gross profit divided by adjusted revenues. See Segment Information for details on how adjusted gross profit and adjusted gross profit percentage were calculated for each period presented.
We believe that this measure provides management and investors with a more complete understanding of underlying gross profit trends of established, ongoing operations by excluding the effect of activities which are subject to volatility and can obscure underlying trends.
Management recognizes that the term "adjusted gross profit" or “adjusted gross profit percentage” may be interpreted differently by other companies and under different circumstances. Although this interpretation may vary from company to company, we believe that these consistently applied measures are useful in assessing trends of the Company and its segments, and may therefore be a useful tool in assessing period-to-period performance trends.
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 basedstock-based compensation, Non-QualifiedNQDC Plan Investment appreciation/investment appreciation/depreciation, and for certain items affecting period to periodperiod-to-period comparability. See Segment Information orfor 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 used to determine the total amount of incentive compensation available to be awarded to executive officers and other employees. The Company's credit agreement uses EBITDA and adjusted EBITDA to determine its interest rate and to measure compliance with covenants such as interest coverage and debt incurrence.certain covenants. EBITDA and adjusted EBITDA are also used by the Company to evaluate and price potential acquisition candidates.
EBITDA and adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of the limitations are: (a) EBITDA and adjusted EBITDA do not reflect changes in, or cash requirements for, the Company's working capital needs; (b) EBITDA and adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debts; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and EBITDA does not reflect any cash requirements for such capital expenditures. EBITDA should only be used on a supplemental basis combined with GAAP results when evaluating the Company's performance.
Segment contribution margincontribution 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 segment contribution margin adjusted for certain items affecting period to periodperiod-to-period comparability. See Segment Information for details on how segment contribution margin and comparable segment contribution margin werewas calculated for each period presented.
When viewed together with our GAAPGAAP results, we believe segment contribution margin and comparableadjusted segment contribution margin provide management and users of the financial statements meaningful information about the performance of our business segments.
Segment contribution margin and comparableadjusted 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 it isthey are an incomplete measure of profitability as it doesthey 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 periodperiod-to-period comparability. See Segment Information below 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 periodperiod-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.
Free Cash Flow
We define free cash flow as net cash provided by operating activities, less capital expenditures. The Company considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of fixed assets, which can then be used to, among other things, invest in the Company’s business, make strategic acquisitions, strengthen the balance sheet, and repurchase stock or retire debt. Free cash flow is a liquidity measure that is frequently used by the investment community in the evaluation of similarly situated companies.
Since free cash flow is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in the company's cash balance for the period.
SegmentInformation
The following table presents the net revenues,revenues, gross profit and segment contribution margin from each of the Company’s business segments, as well as consolidated EBITDA, Adjusted EBITDA and adjusted net income.EBITDA.
| | | Three Months Ended |
| | | December 31, 2017 | | | January 1, 2017 | | | Exclude Operating Results of Fannie May | | | Severance Costs | | | Adjusted (non-GAAP) December 31, 2017 | | | Adjusted (non-GAAP) % Change | | |
| | | (dollars in thousands) | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | |
1-800-Flowers.com Consumer Floral | | $ | 100,064 | | | $ | 97,808 | | | $ | - | | | $ | - | | | $ | 97,808 | | | | 2.3 | % | |
BloomNet Wire Service | | | 20,375 | | | | 20,502 | | | | | | | | | | | | 20,502 | | | | -0.6 | % | |
Gourmet Food & Gift Baskets | | | 405,964 | | | | 436,870 | | | | (41,199 | ) | | | - | | | | 395,671 | | | | 2.6 | % | |
Corporate | | | 317 | | | | 316 | | | | | | | | | | | | 316 | | | | 0.3 | % | |
Intercompany eliminations | | | (627 | ) | | | (943 | ) | | | 344 | | | | - | | | | (599 | ) | | | -4.7 | % | |
Total net revenues | | $ | 526,093 | | | $ | 554,553 | | | $ | (40,855 | ) | | $ | - | | | $ | 513,698 | | | | 2.4 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit: | | | | | | | | | | | | | | | | | | | | | | | | | |
1-800-Flowers.com Consumer Floral | | $ | 38,844 | | | $ | 40,300 | | | | - | | | | - | | | $ | 40,300 | | | | -3.6 | % | |
| | | | 38.8 | % | | | 41.2 | % | | | | | | | | | | | 41.2 | % | | | | | |
| | | | | | | | | | | | - | | | | - | | | | | | | | | | |
BloomNet Wire Service | | | 11,693 | | | | 12,310 | | | | | | | | | | | | 12,310 | | | | -5.0 | % | |
| | | | 57.4 | % | | | 60.0 | % | | | - | | | | - | | | | 60.0 | % | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Gourmet Food & Gift Baskets | | | 184,468 | | | | 204,185 | | | | (15,939 | ) | | | - | | | | 188,246 | | | | -2.0 | % | |
| | | | 45.4 | % | | | 46.7 | % | | | | | | | | | | | 47.6 | % | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate (a) | | | 254 | | | | 199 | | | | - | | | | - | | | | 199 | | | | 27.6 | % | |
| | | | 80.1 | % | | | 63.0 | % | | | | | | | | | | | 63.0 | % | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross profit | | $ | 235,259 | | | $ | 256,994 | | | $ | (15,939 | ) | | $ | - | | | $ | 241,055 | | | | -2.4 | % | |
| | | | 44.7 | % | | | 46.3 | % | | | | | | | | | | | 46.9 | % | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment Contribution Margin (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | | |
1-800-Flowers.com Consumer Floral | | $ | 10,791 | | | $ | 13,128 | | | $ | - | | | $ | - | | | $ | 13,128 | | | | -17.8 | % | |
BloomNet Wire Service | | | 7,692 | | | | 8,189 | | | | - | | | | - | | | | 8,189 | | | | -6.1 | % | |
Gourmet Food & Gift Baskets | | | 93,496 | | | | 104,624 | | | | (6,219 | ) | | | 79 | | | | 98,484 | | | | -5.1 | % | |
Segment Contribution Margin Subtotal | | | 111,979 | | | | 125,941 | | | | (6,219 | ) | | | 79 | | | | 119,801 | | | | -6.5 | % | |
Corporate (a) | | | (18,836 | ) | | | (20,223 | ) | | | 356 | | | | - | | | | (19,867 | ) | | | 5.2 | % | |
EBITDA (non-GAAP) | | | 93,143 | | | | 105,718 | | | | (5,863 | ) | | | 79 | | | | 99,934 | | | | -6.8 | % | |
Add: Stock-based compensation | | | 968 | | | | 1,724 | | | | - | | | | - | | | | 1,724 | | | | -43.9 | % | |
Add: Comp charge related to NQ Plan Investment Appreciation | | | 364 | | | | 20 | | | | - | | | | - | | | | 20 | | | | 1720.0 | % | |
Adjusted EBITDA (non-GAAP) | | $ | 94,475 | | | $ | 107,462 | | | $ | (5,863 | ) | | $ | 79 | | | $ | 101,678 | | | | -7.1 | % | |
| | | Three Months Ended | |
| | | April 2, 2023 | | | Goodwill and
Intangible
Impairment | | | Things Remembered Transaction Costs | | | As Adjusted (non-GAAP) April 2, 2023 | | | March 27, 2022 | | | Vital Choice and Alice's Table Transaction Costs | | | Litigation Settlement | | | As Adjusted (non-GAAP) March 27, 2022 | | | % Change | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 233,019 | | | $ | - | | | $ | - | | | $ | 233,019 | | | $ | 264,243 | | | $ | - | | | $ | - | | | $ | 264,243 | | | | -11.8 | % |
BloomNet | | | 36,968 | | | | | | | | | | | | 36,968 | | | | 38,448 | | | | | | | | | | | | 38,448 | | | | -3.8 | % |
Gourmet Foods & Gift Baskets | | | 147,863 | | | | | | | | | | | | 147,863 | | | | 167,402 | | | | | | | | | | | | 167,402 | | | | -11.7 | % |
Corporate | | | 36 | | | | | | | | | | | | 36 | | | | 43 | | | | | | | | | | | | 43 | | | | -16.3 | % |
Intercompany eliminations | | | (320 | ) | | | | | | | | | | | (320 | ) | | | (560 | ) | | | | | | | | | | | (560 | ) | | | 42.9 | % |
Total net revenues | | $ | 417,566 | | | $ | - | | | $ | - | | | $ | 417,566 | | | $ | 469,576 | | | $ | - | | | $ | - | | | $ | 469,576 | | | | -11.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 88,317 | | | | | | | | | | | $ | 88,317 | | | $ | 96,875 | | | | | | | | | | | $ | 96,875 | | | | -8.8 | % |
| | | | 37.9 | % | | | | | | | | | | | 37.9 | % | | | 36.7 | % | | | | | | | | | | | 36.7 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
BloomNet | | | 15,720 | | | | | | | | | | | | 15,720 | | | | 14,895 | | | | | | | | | | | | 14,895 | | | | 5.5 | % |
| | | | 42.5 | % | | | | | | | | | | | 42.5 | % | | | 38.7 | % | | | | | | | | | | | 38.7 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gourmet Foods & Gift Baskets | | | 36,371 | | | | | | | | | | | | 36,371 | | | | 42,343 | | | | | | | | | | | | 42,343 | | | | -14.1 | % |
| | | | 24.6 | % | | | | | | | | | | | 24.6 | % | | | 25.3 | % | | | | | | | | | | | 25.3 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate | | | 32 | | | | | | | | | | | | 32 | | | | (22 | ) | | | | | | | | | | | (22 | ) | | | 245.5 | % |
| | | | 88.9 | % | | | | | | | | | | | 88.9 | % | | | -51.2 | % | | | | | | | | | | | -51.2 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross profit | | $ | 140,440 | | | $ | - | | | $ | - | | | $ | 140,440 | | | $ | 154,091 | | | $ | - | | | $ | - | | | $ | 154,091 | | | | -8.9 | % |
| | | | 33.6 | % | | | - | | | | - | | | | 33.6 | % | | | 32.8 | % | | | - | | | | - | | | | 32.8 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment Contribution Margin (non-GAAP) (a): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 26,136 | | | $ | - | | | | | | | $ | 26,136 | | | $ | 20,523 | | | $ | - | | | $ | - | | | $ | 20,523 | | | | 27.3 | % |
BloomNet | | | 10,982 | | | | | | | | | | | | 10,982 | | | | 9,783 | | | | | | | | | | | | 9,783 | | | | 12.3 | % |
Gourmet Foods & Gift Baskets | | | (78,480 | ) | | | 64,586 | | | | | | | | (13,894 | ) | | | (17,134 | ) | | | | | | | 2,900 | | | | (14,234 | ) | | | 2.4 | % |
Segment Contribution Margin Subtotal | | | (41,362 | ) | | | 64,586 | | | | - | | | | 23,224 | | | | 13,172 | | | | - | | | | 2,900 | | | | 16,072 | | | | 44.5 | % |
Corporate (b) | | | (30,015 | ) | | | | | | | 201 | | | | (29,814 | ) | | | (26,735 | ) | | | 25 | | | | | | | | (26,710 | ) | | | -11.6 | % |
EBITDA (non-GAAP) | | | (71,377 | ) | | | 64,586 | | | | 201 | | | | (6,590 | ) | | | (13,563 | ) | | | 25 | | | | 2,900 | | | | (10,638 | ) | | | 38.1 | % |
Add: Stock-based compensation | | | 2,487 | | | | | | | | | | | | 2,487 | | | | 1,507 | | | | | | | | | | | | 1,507 | | | | 65.0 | % |
Add: Compensation charge related to NQDC Plan Investment (Depreciation) Appreciation | | | (1,446 | ) | | | | | | | | | | | (1,446 | ) | | | (2,881 | ) | | | | | | | | | | | (2,881 | ) | | | 49.8 | % |
Adjusted EBITDA (non-GAAP) | | $ | (70,336 | ) | | $ | 64,586 | | | $ | 201 | | | $ | (5,549 | ) | | $ | (14,937 | ) | | $ | 25 | | | $ | 2,900 | | | $ | (12,012 | ) | | | 53.8 | % |
| | | Six Months Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | Exclude Operating Results of Fannie May | | | Severance Costs | | | Adjusted (non-GAAP) December 31, 2017 | | | Adjusted (non-GAAP) % Change | |
| | | (dollars in thousands) |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
1-800-Flowers.com Consumer Floral | | $ | 176,674 | | | $ | 173,023 | | | $ | - | | | $ | - | | | $ | 173,023 | | | | 2.1 | % |
BloomNet Wire Service | | | 40,139 | | | | 41,466 | | | | - | | | | - | | | | 41,466 | | | | -3.2 | % |
Gourmet Food & Gift Baskets | | | 466,950 | | | | 506,684 | | | | (52,573 | ) | | | - | | | | 454,111 | | | | 2.8 | % |
Corporate | | | 587 | | | | 579 | | | | - | | | | - | | | | 579 | | | | 1.4 | % |
Intercompany eliminations | | | (908 | ) | | | (1,370 | ) | | | 514 | | | | - | | | | (856 | ) | | | -6.0 | % |
Total net revenues | | $ | 683,442 | | | $ | 720,382 | | | $ | (52,059 | ) | | $ | - | | | $ | 668,323 | | | | 2.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit: | | | | | | | | | | | | | | | | | | | | | | | | |
1-800-Flowers.com Consumer Floral | | $ | 69,578 | | | $ | 70,799 | | | $ | - | | | $ | - | | | $ | 70,799 | | | | -1.7 | % |
| | | | 39.4 | % | | | 40.9 | % | | | | | | | | | | | 40.9 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BloomNet Wire Service | | | 22,751 | | | | 24,104 | | | | - | | | | - | | | | 24,104 | | | | -5.6 | % |
| | | | 56.7 | % | | | 58.1 | % | | | | | | | | | | | 58.1 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Gourmet Food & Gift Baskets | | | 209,620 | | | | 232,936 | | | | (20,425 | ) | | | - | | | | 212,511 | | | | -1.4 | % |
| | | | 44.9 | % | | | 46.0 | % | | | | | | | | | | | 46.8 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate (a) | | | 588 | | | | 542 | | | | - | | | | - | | | | 542 | | | | 8.5 | % |
| | | | 100.2 | % | | | 93.6 | % | | | | | | | | | | | 93.6 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross profit | | $ | 302,537 | | | $ | 328,381 | | | $ | (20,425 | ) | | $ | - | | | $ | 307,956 | | | | -1.8 | % |
| | | | 44.3 | % | | | 45.6 | % | | | | | | | | | | | 46.1 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Segment Contribution Margin (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | |
1-800-Flowers.com Consumer Floral | | $ | 17,762 | | | $ | 21,309 | | | $ | - | | | $ | - | | | $ | 21,309 | | | | -16.6 | % |
BloomNet Wire Service | | | 14,393 | | | | 15,468 | | | | - | | | | - | | | | 15,468 | | | | -6.9 | % |
Gourmet Food & Gift Baskets | | | 88,509 | | | | 95,320 | | | | (3,018 | ) | | | 103 | | | | 92,405 | | | | -4.2 | % |
Segment Contribution Margin Subtotal | | | 120,664 | | | | 132,097 | | | | (3,018 | ) | | | 103 | | | | 129,182 | | | | -6.6 | % |
Corporate (a) | | | (39,040 | ) | | | (41,491 | ) | | | 763 | | | | - | | | | (40,728 | ) | | | 4.1 | % |
EBITDA (non-GAAP) | | | 81,624 | | | | 90,606 | | | | (2,255 | ) | | | 103 | | | | 88,454 | | | | -7.7 | % |
Add: Stock-based compensation | | | 2,069 | | | | 3,498 | | | | - | | | | - | | | | 3,498 | | | | -40.9 | % |
Add: Comp charge related to NQ Plan Investment Appreciation | | | 639 | | | | 282 | | | | - | | | | - | | | | 282 | | | | -126.6 | % |
Adjusted EBITDA (non-GAAP) | | $ | 84,332 | | | $ | 94,386 | | | $ | (2,255 | ) | | $ | 103 | | | $ | 92,234 | | | | -8.6 | % |
| | | Nine Months Ended | |
| | | April 2, 2023 | | | Goodwill and Intangible Impairment | | | Things Remembered Transaction Costs | | | As Adjusted (non-GAAP) April 2, 2023 | | | March 27, 2022 | | | Vital Choice and Alice's Table Transaction Costs | | | Litigation Settlement | | | As Adjusted (non-GAAP) March 27, 2022 | | | % Change | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 672,248 | | | $ | - | | | $ | - | | | $ | 672,248 | | | $ | 760,555 | | | $ | - | | | $ | - | | | $ | 760,555 | | | | -11.6 | % |
BloomNet | | | 103,187 | | | | | | | | | | | | 103,187 | | | | 107,212 | | | | | | | | | | | | 107,212 | | | | -3.8 | % |
Gourmet Foods & Gift Baskets | | | 844,522 | | | | | | | | | | | | 844,522 | | | | 855,830 | | | | | | | | | | | | 855,830 | | | | -1.3 | % |
Corporate | | | 152 | | | | | | | | | | | | 152 | | | | 157 | | | | | | | | | | | | 157 | | | | -3.2 | % |
Intercompany eliminations | | | (1,062 | ) | | | | | | | | | | | (1,062 | ) | | | (1,761 | ) | | | | | | | | | | | (1,761 | ) | | | 39.7 | % |
Total net revenues | | $ | 1,619,047 | | | $ | - | | | $ | - | | | $ | 1,619,047 | | | $ | 1,721,993 | | | $ | - | | | $ | - | | | $ | 1,721,993 | | | | -6.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 262,510 | | | $ | - | | | $ | - | | | $ | 262,510 | | | $ | 302,903 | | | $ | - | | | $ | - | | | $ | 302,903 | | | | -13.3 | % |
| | | | 39.0 | % | | | | | | | | | | | 39.0 | % | | | 39.8 | % | | | | | | | | | | | 39.8 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
BloomNet | | | 44,086 | | | | | | | | | | | | 44,086 | | | | 46,325 | | | | | | | | | | | | 46,325 | | | | -4.8 | % |
| | | | 42.7 | % | | | | | | | | | | | 42.7 | % | | | 43.2 | % | | | | | | | | | | | 43.2 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gourmet Foods & Gift Baskets | | | 302,902 | | | | | | | | | | | | 302,902 | | | | 308,745 | | | | | | | | | | | | 308,745 | | | | -1.9 | % |
| | | | 35.9 | % | | | | | | | | | | | 35.9 | % | | | 36.1 | % | | | | | | | | | | | 36.1 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate | | | 166 | | | | | | | | | | | | 166 | | | | 82 | | | | | | | | | | | | 82 | | | | 102.4 | % |
| | | | 109.2 | % | | | | | | | | | | | 109.2 | % | | | 52.2 | % | | | | | | | | | | | 52.2 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross profit | | $ | 609,664 | | | $ | - | | | $ | - | | | $ | 609,664 | | | $ | 658,055 | | | $ | - | | | $ | - | | | $ | 658,055 | | | | -7.4 | % |
| | | | 37.7 | % | | | - | | | | - | | | | 37.7 | % | | | 38.2 | % | | | - | | | | - | | | | 38.2 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment Contribution Margin (non-GAAP) (a): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 64,832 | | | $ | - | | | $ | - | | | $ | 64,832 | | | $ | 77,869 | | | $ | - | | | $ | - | | | $ | 77,869 | | | | -16.7 | % |
BloomNet | | | 29,847 | | | | | | | | | | | | 29,847 | | | | 32,530 | | | | | | | | | | | | 32,530 | | | | -8.2 | % |
Gourmet Foods & Gift Baskets | | | 26,313 | | | | 64,586 | | | | | | | | 90,899 | | | | 85,695 | | | | | | | | 2,900 | | | | 88,595 | | | | 2.6 | % |
Segment Contribution Margin Subtotal | | | 120,992 | | | | 64,586 | | | | - | | | | 185,578 | | | | 196,094 | | | | - | | | | 2,900 | | | | 198,994 | | | | -6.7 | % |
Corporate (b) | | | (91,595 | ) | | | | | | | 444 | | | | (91,151 | ) | | | (90,694 | ) | | | 540 | | | | | | | | (90,154 | ) | | | -1.1 | % |
EBITDA (non-GAAP) | | | 29,397 | | | | 64,586 | | | | 444 | | | | 94,427 | | | | 105,400 | | | | 540 | | | | 2,900 | | | | 108,840 | | | | -13.2 | % |
Add: Stock-based compensation | | | 5,941 | | | | | | | | | | | | 5,941 | | | | 6,803 | | | | | | | | | | | | 6,803 | | | | -12.7 | % |
Add: Compensation charge related to NQDC Plan Investment (Depreciation) Appreciation | | | (2,548 | ) | | | | | | | | | | | (2,548 | ) | | | 111 | | | | | | | | | | | | 111 | | | | -2,395.5 | % |
Adjusted EBITDA (non-GAAP) | | $ | 32,790 | | | $ | 64,586 | | | $ | 444 | | | $ | 97,820 | | | $ | 112,314 | | | $ | 540 | | | $ | 2,900 | | | $ | 115,754 | | | | -15.5 | % |
Reconciliation of net income to adjusted net income (non-GAAP):
| | | Three Months Ended | | | Years Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | December 31, 2017 | | | January 1, 2017 | |
| | | (in thousands, except per share data) |
| | | | | | | | | | | | | | | | | |
Net income | | $ | 70,699 | | | $ | 62,929 | | | $ | 57,477 | | | $ | 47,158 | |
Adjustments to reconcile net income to adjusted net income (non-GAAP) | | | | | | | | | | | | | | | | |
Deduct: Fannie May operating results | | | - | | | | 5,047 | | | | - | | | | 629 | |
Deduct: U.S. tax reform impact on deferred taxes (b) | | | 12,158 | | | | - | | | | 12,158 | | | | - | |
Add back: Severance costs | | | - | | | | 79 | | | | - | | | | 103 | |
Add back: Income tax expense impact on Fannie May operating results and severance adjustments | | | - | | | | 1,656 | | | | - | | | | 171 | |
Adjusted net income (non-GAAP) | | $ | 58,541 | | | $ | 59,617 | | | $ | 45,319 | | | $ | 46,803 | |
| | | | | | | | | | | | | | | | | |
Basic and diluted net income per common share | | | | | | | | | | | | | | | | |
Basic | | $ | 1.09 | | | $ | 0.97 | | | $ | 0.89 | | | $ | 0.72 | |
Diluted | | $ | 1.06 | | | $ | 0.93 | | | $ | 0.86 | | | $ | 0.70 | |
| | | | | | | | | | | | | | | | | |
Basic and diluted adjusted net income per common share (non-GAAP) | | | | | | | | | | | | | | | | |
Basic | | $ | 0.91 | | | $ | 0.91 | | | $ | 0.70 | | | $ | 0.72 | |
Diluted | | $ | 0.88 | | | $ | 0.88 | | | $ | 0.68 | | | $ | 0.69 | |
| | | | | | | | | | | | | | | | | |
Weighted average shares used in the calculation of net income and adjusted net income (non-GAAP) per common share | | | | | | | | | | | | | | | | |
Basic | | | 64,601 | | | | 65,172 | | | | 64,778 | | | | 65,112 | |
Diluted | | | 66,782 | | | | 67,754 | | | | 67,037 | | | | 67,778 | |
Reconciliation of net income to adjusted EBITDA (non-GAAP) (c):
| | | Three Months Ended | | | Years Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | December 31, 2017 | | | January 1, 2017 | |
| | | (in thousands) |
| | | | | | | | | | | | | | | | | |
Net income | | $ | 70,699 | | | $ | 62,929 | | | $ | 57,477 | | | $ | 47,158 | |
Add: | | | | | | | | | | | | | | | | |
Interest expense, net | | | 1,140 | | | | 2,155 | | | | 1,911 | | | | 3,456 | |
Depreciation and amortization | | | 8,677 | | | | 9,167 | | | | 16,761 | | | | 17,164 | |
Income tax expense | | | 12,627 | | | | 31,467 | | | | 5,475 | | | | 22,828 | |
EBITDA (non-GAAP) | | | 93,143 | | | | 105,718 | | | | 81,624 | | | | 90,606 | |
Add: | | | | | | | | | | | | | | | | |
Severance costs | | | - | | | | 79 | | | | - | | | | 103 | |
Compensation charge related to NQ plan investment appreciation | | | 364 | | | | 20 | | | | 639 | | | | 282 | |
Stock-based compensation | | | 968 | | | | 1,724 | | | | 2,069 | | | | 3,498 | |
Less: | | | | | | | | | | | | | | | | |
Fannie May EBITDA | | | - | | | | 5,863 | | | | - | | | | 2,255 | |
Adjusted EBITDA (non-GAAP) | | $ | 94,475 | | | $ | 101,678 | | | $ | 84,332 | | | $ | 92,234 | |
| 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.
|
| b)
| The adjustment to deduct the impact of U.S. tax reform from Net Income includes the impact of the re-valuation of the Company’s deferred tax liability of $12.2 million, or $0.18 per diluted share, and does not include the ongoing impact of the lower federal corporate tax rate of $3.7 million, or $0.06 per diluted share.
|
| c)
| 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.
|
Reconciliation of net income (loss) to adjusted net income (loss) (non-GAAP): | | Three Months Ended | | | Nine Months Ended | |
| | | April 2, 2023 | | | March 27, 2022 | | | April 2, 2023 | | | March 27, 2022 | |
| | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | (70,993 | ) | | $ | (23,409 | ) | | $ | (22,155 | ) | | $ | 51,860 | |
Adjustments to reconcile net income (loss) to adjusted net income (loss) (non-GAAP) | | | | | | | | | | | | | | | | |
Add: Transaction costs | | | 201 | | | | 25 | | | | 444 | | | | 540 | |
Add: Litigation settlement | | | - | | | | 2,900 | | | | - | | | | 2,900 | |
Add: Goodwill and Intangibles Impairment | | | 64,586 | | | | - | | | | 64,586 | | | | - | |
Deduct: Income tax effect on adjustments | | | (11,546 | ) | | | (533 | ) | | | (11,609 | ) | | | (641 | ) |
Adjusted net income (loss) (non-GAAP) | | $ | (17,752 | ) | | $ | (21,017 | ) | | $ | 31,266 | | | $ | 54,659 | |
| | | | | | | | | | | | | | | | | |
Basic and diluted net income (loss) per common share | | | | | | | | | | | | | | | | |
Basic | | $ | (1.10 | ) | | $ | (0.36 | ) | | $ | (0.34 | ) | | $ | 0.80 | |
Diluted | | $ | (1.10 | ) | | $ | (0.36 | ) | | $ | (0.34 | ) | | $ | 0.79 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Basic and diluted adjusted net income (loss) per common share (non-GAAP) | | | | | | | | | | | | | | | | |
Basic | | $ | (0.27 | ) | | $ | (0.32 | ) | | $ | 0.48 | | | $ | 0.84 | |
Diluted | | $ | (0.27 | ) | | $ | (0.32 | ) | | $ | 0.48 | | | $ | 0.83 | |
| | | | | | | | | | | | | | | | | |
Weighted average shares used in the calculation of basic and diluted net income (loss) and adjusted net income (loss) per common share | | | | | | | | | | | | | | | | |
Basic | | | 64,767 | | | | 65,028 | | | | 64,660 | | | | 65,086 | |
Diluted | | | 64,767 | | | | 65,028 | | | | 64,660 | | | | 65,849 | |
Reconciliation of net income (loss) to adjusted EBITDA (non-GAAP): | | Three Months Ended | | | Nine Months Ended | |
| | | April 2, 2023 | | | March 27, 2022 | | | April 2, 2023 | | | March 27, 2022 | |
| | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | (70,993 | ) | | $ | (23,409 | ) | | $ | (22,155 | ) | | $ | 51,860 | |
Add: Interest expense and other, net | | | 3,116 | | | | 5,233 | | | | 11,150 | | | | 5,431 | |
Add: Depreciation and amortization | | | 13,267 | | | | 12,693 | | | | 40,276 | | | | 36,251 | |
Add: Income tax expense (benefit) | | | (16,767 | ) | | | (8,080 | ) | | | 126 | | | | 11,858 | |
EBITDA | | | (71,377 | ) | | | (13,563 | ) | | | 29,397 | | | | 105,400 | |
Add: Stock-based compensation | | | 2,487 | | | | 1,507 | | | | 5,941 | | | | 6,803 | |
Add: Compensation charge related to NQDC plan investment (depreciation) appreciation | | | (1,446 | ) | | | (2,881 | ) | | | (2,548 | ) | | | 111 | |
Add: Goodwill and Intangible Impairment | | | 64,586 | | | | - | | | | 64,586 | | | | - | |
Add: Transaction costs | | | 201 | | | | 25 | | | | 444 | | | | 540 | |
Add: Litigation settlement | | | - | | | | 2,900 | | | | - | | | | 2,900 | |
Adjusted EBITDA | | $ | (5,549 | ) | | $ | (12,012 | ) | | $ | 97,820 | | | $ | 115,754 | |
(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
Results of OperationsNet revenues
Net Revenues
| | | Three Months Ended | | | Six Months Ended | | | Three Months Ended | | | Nine Months Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | April 2,
2023 | | | March 27,
2022 | | | % Change | | | April 2, 2023 | | | March 27,
2022 | | | % Change | |
| | | (dollars in thousands) | | | | | | | (dollars in thousands) | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | |
E-Commerce | | $ | 424,132 | | | $ | 420,594 | | | | 0.8 | % | | $ | 532,903 | | | $ | 527,678 | | | | 1.0 | % | | $ | 357,801 | | | $ | 409,777 | | | -12.7 | % | | $ | 1,387,133 | | | $ | 1,500,670 | | | -7.6 | % |
Other | | | 101,961 | | | | 133,959 | | | | -23.9 | % | | | 150,539 | | | | 192,704 | | | | -21.9 | % | | | 59,765 | | | | 59,799 | | | -0.1 | % | | | 231,914 | | | | 221,323 | | | 4.8 | % |
Total net revenues | | $ | 526,093 | | | $ | 554,553 | | | | -5.1 | % | | $ | 683,442 | | | $ | 720,382 | | | | -5.1 | % | | $ | 417,566 | | | $ | 469,576 | | | -11.1 | % | | $ | 1,619,047 | | | $ | 1,721,993 | | | -6.0 | % |
Net revenues consist primarily of the selling price of the merchandise, service or outbound shipping charges, less discounts, returns and credits.
Net revenues decreased 5.1%11.1% and 6.0% duringboth the three and sixnine months ended December 31, 2017,April 2, 2023, respectively, compared to the same periods of the prior year, due to lower volume across all segments, reflecting a continuation of the dispositiontrends that we have experienced throughout this fiscal year, in which discretionary spending remains pressured and consumers continue to moderate their spending on purchases for “Everyday” gifting occasions, and to a lesser extent, “Holiday” gifting occasions, combined with the prudent use of Fannie Maypromotional offerings and advertising campaigns that balance the long-term goals of the Company with strategies to improve gross margins and operating spend ratios during this challenging economic environment.
Adjusted for the non-comparative impact of Alice’s Table and Vital Choice, which were acquired on May 30, 2017. On a comparable basis, adjusting fiscal 2017 netDecember 31, 2021 and October 27, 2021, respectively, consolidated revenues decreased 6.4% during the nine months ended April 2, 2023, in comparison to exclude the prior year period. The Company acquired Things Remembered on January 10, 2023, and launched the brand on its e-commerce platform in April 2023. As such, Things Remembered revenues of Fannie May, net revenues increased 2.4% and 2.3%were immaterial during the three and sixnine months ended April 2, 2023.
To provide perspective, our post-pandemic fiscal 2023 (three and nine months ended April 2, 2023) revenues exceeded our pre-pandemic fiscal 2019 (three and nine months ended March 31, 2019) revenues by 68.1% and 63.7%, respectively. This revenue growth includes revenues attributable to Shari’s Berries, which was acquired in August 2019, PersonalizationMall, which was acquired on August 3, 2020, Vital Choice, which was acquired on October 27, 2021, and Alice's Table, which was acquired on December 31, 2017, respectively, compared to2021. Excluding revenues from these acquisitions, pro-forma, post-pandemic revenues for the same periodsthree and nine months ended April 2, 2023, exceeded pre-pandemic (three and nine months ended March 31, 2019) revenues by 41.4% and 37.4%, respectively.
| | | Three Months Ended | |
| | | Consumer Floral & Gifts | | | BloomNet | | | Gourmet Foods & Gift Baskets | | | Corporate and Eliminations | | | Consolidated | |
| | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
Net revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E-commerce | | $ | 230,403 | | | $ | 261,707 | | | | -12.0 | % | | $ | - | | | $ | - | | | | - | % | | $ | 127,398 | | | $ | 148,070 | | | | -14.0 | % | | $ | - | | | $ | - | | | $ | 357,801 | | | $ | 409,777 | | | | -12.7 | % |
Other | | | 2,616 | | | | 2,536 | | | | 3.2 | % | | | 36,968 | | | | 38,448 | | | | -3.8 | % | | | 20,465 | | | | 19,332 | | | | 5.9 | % | | | (284 | ) | | | (517 | ) | | | 59,765 | | | | 59,799 | | | | -0.1 | % |
Total net revenues | | $ | 233,019 | | | $ | 264,243 | | | | -11.8 | % | | $ | 36,968 | | | $ | 38,448 | | | | -3.8 | % | | $ | 147,863 | | | $ | 167,402 | | | | -11.7 | % | | $ | (284 | ) | | $ | (517 | ) | | $ | 417,566 | | | $ | 469,576 | | | | -11.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other revenues detail | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail and other | | | 2,616 | | | | 2,536 | | | | 3.2 | % | | | - | | | | - | | | | - | | | | 1,686 | | | | 1,656 | | | | 1.8 | % | | | - | | | | - | | | | 4,302 | | | | 4,192 | | | | 2.6 | % |
Wholesale | | | - | | | | - | | | | - | | | | 14,695 | | | | 15,322 | | | | -4.1 | % | | | 18,779 | | | | 17,676 | | | | 6.2 | % | | | - | | | | - | | | | 33,474 | | | | 32,998 | | | | 1.4 | % |
BloomNet services | | | - | | | | - | | | | - | | | | 22,273 | | | | 23,126 | | | | -3.7 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | 22,273 | | | | 23,126 | | | | -3.7 | % |
Corporate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 36 | | | | 43 | | | | 36 | | | | 43 | | | | -16.3 | % |
Eliminations | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (320 | ) | | | (560 | ) | | | (320 | ) | | | (560 | ) | | | 42.9 | % |
Total other revenues | | $ | 2,616 | | | | 2,536 | | | | 3.2 | % | | $ | 36,968 | | | $ | 38,448 | | | | -3.8 | % | | $ | 20,465 | | | $ | 19,332 | | | | 5.9 | % | | $ | (284 | ) | | $ | (517 | ) | | $ | 59,765 | | | | 59,799 | | | | -0.1 | % |
| | | Nine Months Ended | |
| | | Consumer Floral & Gifts | | | BloomNet | | | Gourmet Foods & Gift Baskets | | | Corporate and Eliminations | | | Consolidated | |
| | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| Net revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E-commerce | | $ | 665,866 | | | $ | 753,813 | | | | -11.7 | % | | $ | - | | | $ | - | | | | - | % | | $ | 721,267 | | | $ | 746,857 | | | | -3.4 | % | | $ | - | | | $ | - | | | $ | 1,387,133 | | | $ | 1,500,670 | | | | -7.6 | % |
Other | | | 6,382 | | | | 6,742 | | | | -5.3 | % | | | 103,187 | | | | 107,212 | | | | -3.8 | % | | | 123,255 | | | | 108,973 | | | | 13.1 | % | | | (910 | ) | | | (1,604 | ) | | | 231,914 | | | | 221,323 | | | | 4.8 | % |
Total net revenues | | $ | 672,248 | | | $ | 760,555 | | | | -11.6 | % | | $ | 103,187 | | | $ | 107,212 | | | | -3.8 | % | | $ | 844,522 | | | $ | 855,830 | | | | -1.3 | % | | $ | (910 | ) | | $ | (1,604 | ) | | $ | 1,619,047 | | | $ | 1,721,993 | | | | -6.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other revenues detail | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail and other | | | 6,382 | | | | 6,742 | | | | -5.3 | % | | | - | | | | - | | | | - | | | | 7,907 | | | | 8,084 | | | | -2.2 | % | | | - | | | | - | | | | 14,289 | | | | 14,826 | | | | -3.6 | % |
Wholesale | | | - | | | | - | | | | - | | | | 40,370 | | | | 39,890 | | | | 1.2 | % | | | 115,348 | | | | 100,889 | | | | 14.3 | % | | | - | | | | - | | | | 155,718 | | | | 140,779 | | | | 10.6 | % |
BloomNet services | | | - | | | | - | | | | - | | | | 62,817 | | | | 67,322 | | | | -6.7 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | 62,817 | | | | 67,322 | | | | -6.7 | % |
Corporate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 152 | | | | 157 | | | | 152 | | | | 157 | | | | -3.2 | % |
Eliminations | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,062 | ) | | | (1,761 | ) | | | (1,062 | ) | | | (1,761 | ) | | | 39.7 | % |
Total other revenues | | $ | 6,382 | | | | 6,742 | | | | -5.3 | % | | $ | 103,187 | | | $ | 107,212 | | | | -3.8 | % | | $ | 123,255 | | | $ | 108,973 | | | | 13.1 | % | | $ | (910 | ) | | $ | (1,604 | ) | | $ | 231,914 | | | | 221,323 | | | | 4.8 | % |
Revenue by sales channel:
E-commerce revenues (combined online and Gourmet Foods & Gift Baskets segment, attributable to the Harry & Davidtelephonic) decreased 12.7% and 1-800-Baskets/DesignPac brands, partially offset by slightly lower revenues in the Company’s BloomNet segment. Comparable revenue growth was negatively impacted by a temporary disruption in operations at our Cheryl’s brand, related to the recent implementation of a new production and warehouse management system, which, in turn, led to the brand’s decision to stop taking orders eight days prior to the Christmas holiday. As a result, the Company estimates that it had to forego approximately $4.0 million in holiday revenues7.6% during the three and sixnine months ended December 31, 2017. In addition, revenues during the six months ended December 31, 2017 were negatively impacted, by approximately $1.1 million, due to hurricanes Harvey and Irma.
E-commerce revenues (combined online and telephonic) increased by 0.8% and 1.0% during the three and six months ended December 31, 2017, respectively, compared to the same periods of the prior year, as a result of growth within the Consumer Floral and Gourmet Foods & Gift Baskets segments. On a comparable basis, adjusting fiscal 2017 e-commerce revenues to exclude the revenues of Fannie May, e-commerce revenues increased 3.1% and 2.9% during the three and six months ended December 31, 2017, respectively, compared to the same periods of the prior year. During the three months ended December 31, 2017, the Company fulfilled approximately 5.205,000 orders through its e-commerce sales channels (online and telephonic sales), compared to approximately 5,263,000 (5,020,000 adjusted to exclude Fannie May orders in fiscal 2017) during the same period of the prior year, while average order value increased to $81.44 during the three months ended December 31, 2017, from $79.92 ($81.92 adjusted to exclude Fannie May average order value in fiscal 2017) during the same period of the prior year. During the six months ended December 31, 2017, the Company fulfilled approximately 6,725,000 orders through its e-commerce sales channels (online and telephonic sales), compared to approximately 6,780,000 (6,526,000 adjusted to exclude Fannie May orders in fiscal 2017) during the same period of the prior year, while average order value increased to $79.20 during the six months ended December 31, 2017, from $77.83 ($79.36 adjusted to exclude Fannie May average order value in fiscal 2017) during the same period of the prior year.
Other revenues are comprised of the Company’s BloomNet Wire Service segment, as well as the wholesale and retail channels of its 1-800-Flowers.com Consumer Floral and Gourmet Food and Gift Baskets segments. Other revenues decreased by 23.9% and 21.9% during the three and six months ended December 31, 2017,April 2, 2023, respectively, compared to the same periods of the prior year, primarily as a result of a decline in demand for “Everyday” gifts within all our segments, attributable to the Fannie May dispositionmacro-economic conditions noted above, which have negatively impacted consumer discretionary spending.
During the three and nine months ended April 2, 2023, the Company fulfilled approximately 4.6 million and 16.3 million orders through its e-commerce sales channel (online and telephonic sales), a decrease of 15.8% and 12.7%, respectively, compared to the same periods of the prior year. During the three and nine months ended April 2, 2023, average order value increased 3.8% and 5.9%, to $78.25 and $85.01, respectively, as a result of strategic price increases, and product mix into higher price point items.
Excluding the impact of the acquisitions of Vital Choice and Alice’s Table, pro-forma e-commerce revenues declined 8.1% during May 2017. On a comparable basis, adjusting fiscal 2017 otherthe nine months ended April 2, 2023, compared to the same period of the prior year.
Other revenues to exclude are comprised of the revenuesCompany’s BloomNet segment, as well as the wholesale and retail channels of Fannie May, otherits Consumer Floral & Gifts and Gourmet Foods & Gift Baskets segments.
Other revenues decreased 0.5% during the three months ended December 31, 2017,April 2, 2023, were consistent with the same period of the prior year, as higher wholesale volumes within the Gourmet Foods & Gift Baskets segment, as a result of increased spring and Easter volume, offset lower revenues within the BloomNet segment due to the overall macro-economic conditions.
Other revenues increased 0.1%4.8% during the sixnine months ended December 31, 2017,April 2, 2023, compared to the respectivesame period of the prior year, periods.due to increased wholesale product demand within the Gourmet Foods & Gift Baskets segment, as consumers returned to in person “brick-and-mortar” shopping, as well as increased spring and Easter demand, partially offset by lower revenues within the BloomNet segment due to the overall macro-economic conditions.
Revenue by segment:
The 1-800-Flowers.com Consumer Floral & Gifts – this segment, which includes the operations of the 1-800-Flowers.com and PersonalizationMall brands, as well as Alice’s Table, subsequent to its acquisition on December 31, 2021, and the Things Remembered brand, whichsubsequent to its acquisition on January 10, 2023, 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 2.3%within this segment decreased 11.8% and 2.1%,11.6% during the three and sixnine months ended December 31, 2017, in comparisonApril 2, 2023, respectively, compared to the same periods of the prior year, due to increasedreduced “Everyday” product demand driven by merchandising and marketingweaker than anticipated Valentine’s Day demand, as consumer discretionary spending continues to shrink in the current inflationary environment, combined with planned reductions in advertising spend, as the brands focused their efforts as well as an increaseon improving gross margin and operating spend efficiency in promotional activity in order to expand market share. Revenuesthe face of softening demand.
Pro-forma segment revenues decreased 11.7% during the sixnine months ended December 31, 2017 were negatively impacted, by approximately $0.8 million, due to hurricanes Harvey and Irma.April 2, 2023, adjusting for the acquisition of Alice’s Table.
The BloomNet Wire Service- revenues in this segment includes revenuesare derived from membership fees, as well as other product and service offerings to florists.offerings. Net revenues decreased 0.6% and 3.2%3.8% during both the three and sixnine months ended December 31, 2017, respectively,April 2, 2023, compared to thethe same periods of the prior year, primarilyyear.
The net revenue decline during the three months ended April 2, 2023 was due to a decline in wholesale product revenues, as well as services revenues, attributable to reduced membership/transaction fee revenues associated with a decline in order volume processed through the network, as well as lower directory services ad revenues.
Net revenues declined during the nine months ended April 2, 2023 due to lower membership, services revenues, attributable to reduced membership/transaction fees and ancillaryfee revenues resulting fromassociated with a decline in order volume processed through the network, shop count,as well as lower directory services ad revenues, partially offset by higherstrong wholesale product revenues. During the six months ended December 31, 2017, these decreases were exacerbated by the impact of hurricanes Harvey and Irma, as BloomNet provided financial aid to floristsdemand in the affected areas, and waived approximately $0.2 millionfirst quarter of membership fees.the fiscal year, driven by product availability, which had been constrained by supply chain issues in the prior year.
The Gourmet FoodFoods & Gift Baskets – this segment includes the operations of Harry & David, Wolferman’s, Stockyards,Wolferman’s, Stock Yards, Cheryl’s Fannie May (through the date of its disposition on May 30, 2017),Cookies, The Popcorn Factory, 1-800-Baskets/DesignPac, Shari’s Berries, and 1-800-Baskets/DesignPac.Vital Choice, subsequent to its October 27, 2021 acquisition date. Revenue is derived from the sale of gourmet fruits, cookies, baked gifts, premium chocolates and confections, gourmet popcorn, gift baskets, anddipped berries, prime steaks, chops, and chopsfish, through the Company’s e-commerce sales channels (telephonic and online sales) and company-owned and operated retail stores under the Harry & David Cheryl’s and Fannie May (through the date of its disposition)Cheryl’s brand names, as well as wholesale operations.
Net revenues within this segment decreased 7.1%11.7% and 7.8%1.3% during the three and sixnine months ended December 31, 2017, respectively,April 2, 2023 compared to the same periods of the prior year, as a result of lower e-commerce sales, primarily due to the dispositionmacro-economic weakness, which has significantly reduced “Everyday” occasion volumes, combined with planned reductions in advertising spend, as the brands focused their efforts on improving gross margin and operating spend efficiency in the face of Fannie May on May 30, 2017. On a comparable basis, adjusting fiscal year 2017softening demand. Wholesale revenues were slightly favorable to exclude Fannie May, net revenues increased 2.6% and 2.8% during the three and six months ended December 31, 2017, respectively, compared to the same periods of the prior year due to growth by the Harry & Davidincreased Spring and 1-800-Baskets.com consumerEaster volumes, and wholesale channel brands. Comparableimproved demand as consumers return to traditional “brick-and-mortar” shopping.
Pro-forma segment growth was attributable to several initiatives implementedrevenues decreased 2.1% during the second half of fiscal 2017, including: (i) the Company’s successful efforts to grow the “everyday” volume of its Gourmet Foods & Gift Baskets brands through expanded birthday and sympathy merchandise, (ii) the modernization of the Harry & David brand, which focused on developing merchandising assortments and digital marketing programs that helped to broaden the demographic reach of the brand, and, (ii) the launch of the Simply Chocolates product line, which is managed by 1-800-Baskets. As noted above, Cheryl’s revenue decrease, in comparison to the prior year, was due to the Company’s decision to suspend order taking as a result of operational issues experienced during the weeks leading up to the Christmas holiday. As a result, the Company estimates that it had to forego approximately $4.0 million in holiday revenues during the three and sixnine months ended December 31, 2017. In addition, revenues duringApril 2, 2023, adjusting for the six months ended December 31, 2017 were negatively impacted, by approximately $0.2 million, due to hurricanes Harvey and Irma. The operational issues at Cheryl’s have been addressed, and business has returned to its normal pace.
acquisition of Vital Choice.
Gross profit
Gross Profit
| | | Three Months Ended | | | Six Months Ended | | | Three Months Ended | | | Nine Months Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit | | $ | 235,259 | | | $ | 256,994 | | | | -8.5 | % | | $ | 302,537 | | | $ | 328,381 | | | | -7.9 | % | | $ | 140,440 | | | $ | 154,091 | | | -8.9 | % | | $ | 609,664 | | | $ | 658,055 | | | -7.4 | % |
Gross profit % | | | 44.7 | % | | | 46.3 | % | | | | | | | 44.3 | % | | | 45.6 | % | | | | | | 33.6 | % | | 32.8 | % | | | | | 37.7 | % | | 38.2 | % | | | |
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 includeincludes labor and facility costs related to direct-to-consumer and wholesale production operations.operations, as well as payments made to sending florists related to order volume referred through the Company’s BloomNet network.
Gross profit decreased 8.5%8.9% and 7.9%7.4% during the three and sixnine months ended December 31, 2017,April 2, 2023, respectively, in comparisoncompared to the same periods of the prior year, while grossprimarily due to lower revenues noted above.
Gross profit percentage decreased 160 and 130increased 80 basis points during the three and six months ended December 31, 2017, respectively, in comparisonApril 2, 2023, compared to the same periods of the prior year. On a comparable basis, adjusting prior year gross profit to exclude Fannie May, which was disposed of on May 30, 2017, gross profit decreased 2.4% and 1.8% during the three and six months ended December 31, 2017, respectively, in comparison to the same periods of the prior year, while grossdriven by improvements within the Consumer Floral & Gifts and BloomNet segments, as a result of strategic pricing initiatives and lower in-bound freight costs.
Gross profit percentage decreased 220 and 180by 50 basis points during the same periods. nine months ended April 2, 2023 compared to the prior year, reflecting the annualization of macro-economic headwinds in the first quarter of fiscal 2023, attributable to higher commodity, labor, inbound and outbound shipping costs, including the impact of fuel surcharges, as well as the write-off of dated perishable product, partially offset by the improvements in the second and third quarter, as noted above.
The lower comparable gross profit,Company has and gross profit percentage, primarily reflectswill continue to implement strategies designed to mitigate the impact of the operational issue atvarious headwinds noted above, including pricing initiatives across our product assortment, advancements in our logistics optimization programs to mitigate rising third-party shipping costs and deploying automation to increase throughput and efficiency and address high cost of labor. Ocean freight costs have come down significantly from their highs of last year, and over time, we expect commodity costs will revert to more historical norms.
Gross profit by segment follows:
Consumer Floral & Gifts segment - Gross profit decreased by 8.8% during the Company’s Cheryl’s Cookies brand,three months ended April 2, 2023 due to the impact of the lower revenues noted above, partially offset by favorable gross profit percentage attributable to strategic pricing initiatives and product mix, reflected in the higher average order value, as well as increased transportation costs in the Gourmet Food and Gift Baskets segment, and increased promotional activity within the Consumer Floral segment in order to increase market share.lower inbound ocean freight rates.
The 1-800-Flowers.com Consumer Floral segment grossGross profit decreased by 3.6%13.3% during the nine months ending April 2, 2023, due to the impact of the lower revenues noted above, as well as a decrease in gross profit percentage, driven by higher ocean freight (carried on earlier inventory buys), as well as higher outbound freight, and 1.7%labor rates, partially offset by pricing initiatives which are reflected in the higher average order value noted above.
BloomNetsegment - Gross profit increased by 5.5% during the three and six months ended December 31, 2017, respectively, in comparisonApril 2, 2023, compared to the same period of the prior year, due to a decrease inan improved gross profit percentage, of 240 and 150 basis points to 38.8% and 39.4%, respectively, partially offset by the aforementioned revenue growth. Thedecrease in revenues noted above. Gross profit percentage increased in comparison to the prior year primarily due to improvements in wholesale margins, as a result of strategic pricing initiatives and lower gross profit percentages reflect an increase in promotional activity initiated to extend the market share of the 1-800-Flowers brand, as well as an increase in Passport free shipping participation, which has improved customer loyalty and purchase frequency.ocean freight
BloomNet Wire Service segment’s grossGross profit decreased by 5.0% and 5.6%4.8% during the three and sixnine months ended December 31, 2017, respectively, in comparisonApril 2, 2023, compared to the same period of the prior year, due to the decrease inlower revenues noted above, as well as decreases in gross profit percentagethe impact of 260 and 140 basis points, to 57.4% and 56.7%, respectively, Thea lower gross profit percentages aremargin percentage, due to sales mix, with a decline in higher margin membership and related services, offset by an increase ingreater proportion of revenues derived from lower margin wholesale product sales.sales, and higher rebates.
The Gourmet FoodFoods & Gift Baskets segment gross - Gross profit decreased by 9.7%14.1% and 10.0%1.9%, respectively, during the three and sixnine months ended December 31, 2017, respectively, in comparisonApril 2, 2023, compared to the same periods of the prior year, while gross profit percentage decreased 130 and 110 basis points to 45.4% and 44.9%, over the same respective periods. On a comparable basis, adjusting prior year gross profit to exclude Fannie May, which was disposed of on May 30, 2017, gross profit decreased 2.0% and 1.4% during the three and six months ended December 31, 2017, respectively, in comparisonprimarily due to the same periods of the prior year, while gross profit percentage decreased 220 and 190 basis points to 45.4% and 44.9%, over the same respective periods. The lower comparable gross profit andrevenue decrease noted above, combined with a decline in gross profit percentage primarily reflects the impact of the operational issue at the Company’s Cheryl’s Cookies brand, which negatively impacted gross profitattributable to increased promotions to incentivize customer demand and to work down long inventory positions, combined with continued inflationary pressures on component costs, partially offset by approximately $4.0 million as a result of increased labor, expedited shipping, expiring productlower ocean freight, automation efficiencies, and higher customer credits. In addition, although revenue growth provided for improved gross profit at Harry & David, higher transportation costs at Harry & David and our wholesale baskets brands negatively impacted gross profit percentage.pricing initiatives.
Marketing and Sales Expensesales expense
| | | Three Months Ended | | | Six Months Ended | | | Three Months Ended | | | Nine Months Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Marketing and sales | | $ | 113,771 | | | $ | 119,876 | | | | -5.1 | % | | $ | 163,493 | | | $ | 174,954 | | | | -6.6 | % | | $ | 106,472 | | | $ | 130,645 | | | -18.5 | % | | $ | 390,077 | | | $ | 432,795 | | | -9.9 | % |
Percentage of net revenues | | | 21.6 | % | | | 21.6 | % | | | | | | | 23.9 | % | | | 24.3 | % | | | | | | 25.5 | % | | 27.8 | % | | | | | 24.1 | % | | 25.1 | % | | | |
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’sCompany’s departments engaged in marketing, selling and merchandising activities.
Marketing and sales expense decreased 5.1%18.5% and 6.6%9.9% during the three and sixnine months ended December 31, 2017,April 2, 2023, respectively, compared to the same periods of the prior year, due to the disposition of Fannie May on May 30, 2017. On a comparable basis, adjusting prior year marketing and sales expense to exclude Fannie May’s expenditures, marketing and sales expense increased 1.8% during both the three and six months ended December 31, 2017, in comparison to the same periodsperiod of the prior year, due to increased marketingvariable components associated with lower revenues, combined with reduced, but more efficient advertising spend, within the Consumer Floral and Gourmet Foods & Gift Baskets segments, commensurate with revenue growth, including the Company’s efforts to test digital marketing strategies during the holiday season for applications throughout the remainder of the fiscal year. These increases were partially offset by a reduction in performance based bonuses.expense optimization efforts.
Technology and Development Expensedevelopment expense
| | | Three Months Ended | | | Six Months Ended | | | Three Months Ended | | | Nine Months Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | January 1, 2017 | | | January 1, 2017 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2022 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Technology and development | | $ | 9,175 | | | $ | 9,849 | | | | -6.8 | % | | $ | 18,845 | | | $ | 19,337 | | | | -2.5 | % | | $ | 14,837 | | | $ | 14,456 | | | 2.6 | % | | $ | 44,529 | | | $ | 41,369 | | | 7.6 | % |
Percentage of net revenues | | | 1.7 | % | | | 1.8 | % | | | | | | | 2.8 | % | | | 2.7 | % | | | | | | 3.6 | % | | 3.1 | % | | | | | 2.8 | % | | 2.4 | % | | | |
Technology and development expense consists primarily of payroll and operating expenses of the Company’sCompany’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 expenses decreased 6.8%expense increased by 2.6% and 2.5%7.6% during the three and sixnine months ended December 31, 2017,April 2, 2023, respectively, compared to the same periodperiods of the prior year, primarily due to favorable hostinghigher maintenance and support for the Company’s technology platform enhancements, including higher labor and consulting costs, and labor expenses resulting from a reduction in performance based bonuses, partially offset by increased license and maintenance costs related to security and order processing platforms.lower performance-based compensation in the current year.
General and Administrative Expenseadministrative expense
| | | Three Months Ended | | | Six Months Ended | | | Three Months Ended | | | Nine Months Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
General and administrative | | $ | 19,170 | | | $ | 21,551 | | | | -11.0 | % | | $ | 38,575 | | | $ | 43,484 | | | | -11.3 | % | | $ | 25,922 | | | $ | 22,553 | | | 14.9 | % | | $ | 81,075 | | | $ | 78,491 | | | 3.3 | % |
Percentage of net revenues | | | 3.6 | % | | | 3.9 | % | | | | | | | 5.6 | % | | | 6.0 | % | | | | | | 6.2 | % | | 4.8 | % | | | | | 5.0 | % | | 4.6 | % | | | |
General and administrative expense consists of payroll and other expenses in support of the Company’sCompany’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 expense decreased 11.0% and 11.3%expenses increased 14.9%, during the three and six months ended December 31, 2017, compared to the same period of the prior year, primarily due to the disposition of Fannie May on May 30, 2017. On a comparable basis, adjusting prior year general and administrative expense to exclude Fannie May’s expenditures, general and administrative expense decreased 3.9% and 3.7% during the respective three and six months ended December 31, 2017, in comparison to the same periods of the prior year, due to reductions in travel, and labor resulting from a reduction in performance based bonuses, partially offset by an increase in the value of Non-Qualified Deferred Compensation Plan investments (increase offset in Other (income) expense net line item on the financials statement – see below), and higher health insurance costs.
Depreciation and Amortization Expense
| | | Three Months Ended | | | Six Months Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | $ | 8,677 | | | $ | 9,167 | | | | -5.3 | % | | $ | 16,761 | | | $ | 17,164 | | | | -2.3 | % |
Percentage of net revenues | | | 1.6 | % | | | 1.7 | % | | | | | | | 2.5 | % | | | 2.4 | % | | | | |
Depreciation and amortization expense for the three months ended December 31, 2017 decreased 5.3% and 2.3%, in comparisonApril 2, 2023, compared to the same period of the prior year, due to the dispositionimpact of Fannie May. On a comparable basis, adjustingincreases in health care claim costs, and change in the value of non-qualified deferred compensation plan investments (see equal offset in “other income/expense, net”), partially offset by lower performance-based compensation.
General and administrative expenses increased 3.3% during the nine months ended April 2, 2023, compared to the same period of the prior year, depreciationdue to an increase in bad debt expense, legal fees, and health care costs, partially offset by lower labor costs resulting from a change in the value of non-qualified deferred compensation plan investments (see equal offset in “other income/expense, net”), and lower performance-based compensation.
Depreciation and amortization expense to exclude Fannie May, depreciation
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | $ | 13,267 | | | $ | 12,693 | | | | 4.5 | % | | $ | 40,276 | | | $ | 36,251 | | | | 11.1 | % |
Percentage of net revenues | | | 3.2 | % | | | 2.7 | % | | | | | | | 2.5 | % | | | 2.1 | % | | | | |
Depreciation and amortization expense increased 3.9%4.5% and 7.9%11.1% during the respective three and sixnine months ended December 31, 2017, in comparisonApril 2, 2023, respectively, compared to the same periods of the prior year, due to distribution facility automation projects and IT related ecommerce/platform enhancements, as a result ofwell as incremental amortization associated with recent shorter-lived IT capital expenditures.acquisitions.
Goodwill and intangible impairment
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Goodwill and intangible impairment | | $ | 64,586 | | | $ | - | | | | - | % | | $ | 64,586 | | | $ | - | | | | - | % |
Based upon the continuing pressures on consumer discretionary spending, ongoing geopolitical events, the current inflationary macro-economic conditions, related cost input headwinds that have negatively impacted the Company’s gross margins, and resulting downward revisions to its forecast, the Company concluded that a triggering event had occurred for its Gourmet Foods & Gift Baskets reporting unit during the quarter ended April 2, 2023. As such, the Company performed an impairment test of the reporting unit’s goodwill, intangibles and long-lived assets as of April 2, 2023, and fully impaired the related goodwill, and partially impaired certain tradenames within the reporting unit. See Note 6 – Goodwill and Intangibles, net, in Item I for details.
Interest Expense,expense, net
| | | Three Months Ended | | | Six Months Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | | $ | 1,226 | | | $ | 2,154 | | | | -43.1 | % | | $ | 2,257 | | | $ | 3,605 | | | | -37.4 | % |
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | | $ | 1,712 | | | $ | 1,226 | | | | 39.6 | % | | $ | 8,676 | | | $ | 4,477 | | | | 93.8 | % |
Interest expense, net consists primarily of interest expense and amortization of deferred financing costs attributable to the Company’sCompany’s credit facility (See Note 8 - Debt,, in Item 1.1. for details regarding the 2016 Amended Credit Facility)details), net of income earned on the Company’s available cash balances.
Interest expense, net decreased 43.1%increased 39.6% and 37.4%93.8% during the three and sixnine months ended December 31, 2017 in comparisonApril 2, 2023, respectively, compared to the same periods of the prior year, as a result of scheduled repayment of term loan borrowings primarily due to higher interest rates, and funding fiscal 2018higher working capital requirementsborrowings during the nine month period, partially offset by favorable interest earned on available cash balances.
Other expense (income), net
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Other expense (income), net | | $ | 1,404 | | | $ | 4,007 | | | | -65.0 | % | | $ | 2,474 | | | $ | 954 | | | | 159.3 | % |
Other expense (income) consists primarily throughof investment losses/(gains) on the use of cash on hand from the sale of Fannie May, in comparison to fiscal 2017, when the Company funded working capital requirements through its revolving credit facility.Company’s NQDC Plan assets.
Other (income) expense, net
| | | Three Months Ended | | | Six Months Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Other (income) expense, net | | $ | (86 | ) | | $ | 1 | | | | 8,700 | % | | $ | (346 | ) | | $ | (149 | ) | | | 132.2 | % |
Other income, net for the three and six months ended December 31, 2017 consists primarily of investment earnings of the Company’s Non-Qualified Deferred Compensation Plan assets, partially offset by a $0.2 million impairment related to the Company’s equity method investment in Flores Online (see Note 7 - Investmentsabove).
Other (income) expense, net for the three and six months ended January 1, 2017 primarily consists of investment earnings of the Company’s Non-Qualified Deferred Compensation Plan assets for both the three and six months ended January 1, 2017, partially offset by a decrease in the Company’s equity interest in Flores Online of $0.1 million for both the three and six months ended January 1, 2017.
Income Taxes
The Company recorded an income tax expensebenefit of $12.6$16.8 million and $5.5 million, respectively, during the three and six months ended December 31, 2017 and income tax expense of $31.5$0.1 million, and $22.8 million, respectively, during the three and sixnine months ended January 1, 2017.April 2, 2023 respectively, compared to an income tax benefit of $8.1 million and income tax expense of $11.9 million, during the three and nine months ended March 27, 2022, respectively. The Company’s effective tax rate for the three and sixnine months ended December 31, 2017April 2, 2023 was 15.2%19.1% and 8.7%-0.6% respectively, compared to 33.3%25.7% and 32.6%18.6% in the same periods of the prior year. The effective rates for fiscal 2018 were impacted by changes associated with the Tax Act (see Note 1 -Accounting Policies in Item 1. above). During the quarter ended December 31, 2017, the Company recognized a benefit of $15.9 million, or $0.24 per diluted share related to the impact of the Tax Act, consisting of a discrete tax benefit of $12.2 million, or $0.18 per diluted share, reflecting a revaluation of deferred tax liabilities at the lower U.S. federal statutory rate of 21%, and a benefit of $3.7 million, or $0.06 per diluted share, reflecting the Company’s lower transitional federaleffective tax rate in fiscal 2018 of 28.0 percent. In addition, fiscal 2018 effective rates were impacted by state income taxes, which were partially offset by various permanent differencesfor the three and tax credits. The effective rates for fiscal 2017nine months ended April 2, 2023 differed from the U.S. federal statutory rate of 21.0% primarily as a result of the non-deductible portions of the goodwill impairment charge as well as state income taxes, non-deductible executive compensation, and tax shortfalls related to stock-based compensation, partially offset by various tax credits. The effective tax rate for the three months ended March 27, 2022 differed from the U.S. federal statutory rate of 21% primarily due to state income taxes which were more thanand nondeductible expenses for executive compensation, partially offset by various permanent differences and tax credits, includingwhereas, the effective tax rate for the nine months ended March 27, 2022 differed from the U.S. federal statutory rate of 21.0% primarily due to excess tax benefits onfrom stock based compensation, as a result of the Company’s adoption of ASU 2016-09. At December 31, 2017, the Company has an unrecognized tax benefit, including an immaterial amount of accrued interest and penalties, of approximately $0.4 million. The Company believes that no significant unrecognized tax positions will be resolved over the next twelve months.partially offset by state income taxes.
Liquidity and Capital Resources
Liquidity and borrowings
The Company's principal sources of liquidity are cash on hand, cash flows generated from operations and the borrowings available under the 2016Company’s Credit FacilityAgreement (see Note 8 - Debt in Item 1 for details). At December 31, 2017,April 2, 2023, the Company had working capital of $172.2$114.4 million, including cash and cash equivalents of $232.6$51.6 million, compared to working capital of $132.2$82.5 million, including cash and cash equivalents of $149.7$31.5 million, at July 2, 2017. Borrowings under the Revolver (working capital needs), which were significantly lower than prior year as a result of cash generated from the sale of Fannie May, peaked in November, when cash generated from operations during the Christmas holiday shopping season enabled the Company to repay the Revolver prior to the end of December 2017. 3, 2022.
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, is expected to generate nearly 50%over 40% of the Company’s annual revenues, and all of its earnings. As a result,Due to the number of major floral gifting occasions, including Valentine’s Day, Easter, Administrative Professionals Week, and Mother’s Day, revenues also have historically risen during the Company’s fiscal third and fourth quarters in comparison to its fiscal first quarter.
During the first two quarters of fiscal 2023, the Company borrowed under its revolving credit agreement in order to fund pre-holiday manufacturing and inventory procurement requirements, with borrowings peaking at $195.9 million in November 2022. Cash generated significant cash from operations during its second quarter, which, after re-paying allthe Christmas holiday shopping season enabled the Company to repay the borrowings outstanding under itsthe Revolver is expected toin December 2022. Based on current projected cash flows, the Company believes that available cash balances will be sufficient to provide for the Company’s operating needs untilthrough the second quarterremainder of fiscal 2019, when2023, at which time the Company expectswould again expect to borrow against its Revolver to fund pre-holiday manufacturing and inventory purchases. The Company had no amounts outstanding under its Revolver as of April 2, 2023.
WeWhile we believe that our sources of funding will be sufficient to meet our anticipated operating cash needs for at leastleast the next 12 months. However,twelve months, any projections of future cash needs and cash flows are subject to substantial uncertainty. We continually evaluate, opportunities to repurchase common stock and we will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services, capital infrastructure, and technologies, which might affect our liquidity requirements or cause us to require additional financing. The Company is in the process of refinancing its Credit Agreement, which matures in May 2024.
Cash Flows
Net cash provided by operating activities of $114.2$73.1 million, for the sixnine months ended December 31, 2017,April 2, 2023, was primarily attributable to the Company’s net incomeloss during the period, adjusted by non-cash charges for depreciation/goodwill and intangible asset impairment, depreciation and amortization, deferred income taxes (including the impactbad debt expense and stock-based compensation, partially offset by uses of the Tax Act – see Note 1 -Accounting Policies and Note 11 – Income taxes in Item 1 above) and stock based compensation, as well as seasonal changes incash for working capital including holiday related increasespurposes, comprised of decreases in accounts payable and accrued expenses, and reductionsincreases in inventory, partiallytrade receivables, offset by increasesdecreases in receivables related to holiday season sales.inventory.
Net cash used in investing activities of $17.4$36.4 million, for the sixnine months ended December 31, 2017,April 2, 2023, was primarily attributable to the working capital adjustment related to the sale of Fannie May, of which $8.5 million was still due to Ferrero at July 2, 2017 and to capital expenditures primarily related to the Company's technology and automation initiatives and Gourmet Foods & Gift Basket segment manufacturing production and orchard planting equipment.the acquisition of Things Remembered.
Net cash used in financing activities of $13.9$16.6 million, for the sixnine months ended December 31, 2017 wasApril 2, 2023, related primarily due to Term Loan repayments of $2.9 million and the acquisition of $11.1 million of treasury stock. Allbank borrowings under the Company's revolving credit facility were repaid by the endCompany’s term loan, and acquisition of the fiscal second quarter.
Stock Repurchase Program
The Company has a stock repurchase plan through which purchases can be made from time to time in the open market and through privately negotiated transactions, subject to general market conditions. The repurchase program is financed utilizing available cash. On August 30, 2017, the Company’s Board of Directors authorized an increase to its stock repurchase plan of up to $30.0 million. As of December 31, 2017, $21.1 million remained authorized under the plan.
Contractual Obligations
There have been no material changes outside the ordinary course of business related to the Company’s contractual obligations as discussed in the Annual Report on Form 10-K for the year ended July 2, 2017.treasury stock.
Stock Repurchase Program
See Item 2 in Part II below for details.
Contractual Obligations
At April 2, 2023, the Company’s contractual obligations consist of:
● | Long-term debt obligations - payments due under the Company's 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 2023 | | | Fiscal 2024 | | | Fiscal 2025 | | | Fiscal 2026 | | | Fiscal 2027 | | | Thereafter | | | Total | |
Purchase commitments | | $ | 60,888 | | | $ | 34,967 | | | $ | 10,279 | | | $ | 2,124 | | | $ | 168 | | | $ | - | | | $ | 108,426 | |
Critical Accounting Policies and Estimates
As disclosed in the Company’s Company’s Annual Report on Form 10-K for the fiscal year ended July 2, 2017,3, 2022, the discussion and analysis of the Company’s financial condition and results of operations are based upon the consolidated financial statements, of 1-800-FLOWERS.COM, Inc., 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 revenue recognition, accounts receivable, inventory, goodwill, other intangible assets and long-lived assets and income taxes. There have been no significant changes to the assumptions and estimates related to the Company’s critical accounting policies since July 2, 2017,3, 2022, except for the enactment of the Tax Act (see Note 1 -Accounting Policiesas noted below:
Goodwill & Intangible Assets Assessment and Note 11 – Income taxes in Item 1 above for details).Impairment
Recent Accounting PronouncementsInterim Impairment Evaluation
In May 2014,During the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This amended guidance will enhance the comparability of revenue recognition practices and will be applied to all contracts with customers. Expanded disclosures related to the nature, amount, timing, and uncertainty of revenue that is recognized are requirements under the amended guidance. As we continue to evaluate the impact of this ASU, we have determined that the new standard will impact the following areas: the costs of producing and distributing the Company’s catalogs will be expensed upon shipment, instead of being capitalized and amortized in direct proportion to the actual sales; gift card breakage will be estimated based on the historical pattern of gift card redemption, rather than when redemption is considered remote;quarter ended April 2, 2023, the Company will defer revenue at the time the Celebrations Reward loyalty points are earned using a relative fair value approach, ratherevaluated whether events or circumstances had changed such that it would indicate it was more likely than accruing a liability equal to the incremental cost of fulfillingnot that its obligations. We have further identified the timing of revenue recognition for e-commerce orders (shipping point versus destination) as a potential issue in our analysis, which is not expected to change the total amount of revenue recognized, but could accelerate the timing of when revenue is recognized. We plan to adopt this guidance beginning with the first quarter in the fiscal year ending June 30, 2019 on a retrospective basis with a cumulative adjustment to retained earnings. We are continuing to evaluate the impact that this ASU,goodwill, intangible and related amendments and interpretive guidance, will have on our consolidated financial statements, including the related disclosures.
In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330).” The pronouncement was issued to simplify the measurement of inventory and changes the measurement from lower of cost or market to lower of cost and net realizable value. The Company adopted this standard effective July 3, 2017. The adoption of ASU 2015-11 did not have a significant impact on the Company’s consolidated financial position or results of operations.
In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities." The pronouncement requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidationother long-lived assets of the investee) to be measured atGourmet Foods & Gift Baskets reporting units fair value with changes in fair value recognized in net income, requires public business entities to usevalues were less than their carrying amounts. After considering the exit price notion when measuringcontinuing pressures on consumer discretionary spending, ongoing geopolitical events, the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair valuecurrent inflationary macro-economic conditions, related cost input headwinds that is required to be disclosed for financial instruments measured at amortized cost. This guidance will become effective for the Company's fiscal year ending June 30, 2019. The adoption is not expected to have a significant impact onnegatively impacted the Company’s consolidated financial statements.
In February 2016,gross margins, and resulting downward revisions to its forecast, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under this guidance,Company concluded that a triggering event had occurred for its Gourmet Foods & Gift Baskets reporting unit. As such, the Company performed an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a userimpairment test of the financial statements to assess the amount, timingreporting unit’s goodwill, intangibles and uncertaintylong-lived assets as of cash flows arising from leases. This guidance is effective for the Company’s fiscal year ending June 28, 2020. We are currently evaluating the impact and expect the ASU will have a material impact on our consolidated financial statements, primarily to the consolidated balance sheets and related disclosures.April 2, 2023.
Impairment Assessments – Goodwill and Intangibles
In March 2016,The Company performed its goodwill impairment test by comparing the FASB issued ASU No. 2016-09, “Improvementsfair value of its Gourmet Foods & Gift Baskets reporting unit to Employee Share-Based Payment Accounting.” ASU No. 2016-09 affects all entities that issue share-based payment awards to their employees. ASU No. 2016-09 simplifies several aspectsits respective carrying value. The Company estimated the fair value of the accounting for share-based payment transactions, includingGourmet Foods & Gift Baskets reporting unit using an equal weighting of the income tax consequences, classificationand market approaches, and a discount rate of awards13%. The Company used industry accepted valuation models and set criteria that were reviewed and approved by various levels of management. Under the income approach, the Company used a discounted cash flow methodology which required management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, the Company used the guideline public company method. Under this method the Company utilized information from comparable publicly traded companies with similar operating and investment characteristics as either equitythe reporting units, to create valuation multiples that were applied to the operating performance of the reporting unit being tested, in order to obtain their respective fair values. The Company also reconciled the aggregate fair values of its reporting units to its current market capitalization.
The Company’s impairment test for indefinite-lived intangible assets encompassed calculating a fair value of the indefinite-lived intangible asset and comparing that result to its carrying value. To determine fair value of indefinite-lived intangible assets, the Company used an income approach, the relief-from-royalty method. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. Indefinite-lived intangible assets’ fair values require significant judgments in determining both the assets’ estimated cash flows as well as the appropriate discount and royalty rates applied to those cash flows to determine fair value.
The Company’s impairment test for definite-lived intangibles was performed through a recoverability test, comparing projected undiscounted cash flows from the use and eventual disposition of the asset or liabilities, and classificationasset group to its carrying value.
Based on the statementimpairment assessment performed for the period ending April 2, 2023, the Company recorded a goodwill and intangible impairment charge against its Gourmet Foods & Gift Baskets reporting unit of cash flows.$64.6 million, comprised of $62.3 million which was attributable to goodwill and $2.3 million which was attributable to certain tradenames within the same reporting unit. The Company elected to early adoptconcluded that the amendments in ASU 2016-09, in fiscal 2017. As a result, stock-based compensation excess tax benefits are reflected in the Consolidated Statements of Income as a componentdefinite-lived and other long-lived assets of the provision for income taxes, whereas theyreporting unit were previously recognized in equity. This change resulted in the recognition of excess tax benefits against income tax expenses, rather than additional paid-in capital, of $1.0 million for the year ended July 2, 2017. There was no impact on earnings per share since approximately 700,000 tax benefit shares for the year ended July 2, 2017, previously associated with the APIC pool calculation, are no longer considered in the diluted share computation. Additionally, our Consolidated Statements of Cash Flows now present excess tax benefits as an operating activity. This change has been applied prospectively in accordance with the ASU and prior periods have not been adjusted. Further, the Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures. The cumulative effect of this change, which was recorded as compensation expense in fiscal 2017, was not material to the financial statements. In addition, this ASU allows entities to withhold an amount up to an employees’ maximum individual statutory tax rate in the relevant jurisdiction, up from the minimum statutory requirement, without resulting in liability classification of the award. We adopted this change on a modified retrospective basis, with no impact to our consolidated financial statements. Finally, this ASU clarified that the cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity. This change does not have an impact on the Company’s consolidated financials as it conforms with its current practice.impaired.
In June 2016,Recently Issued Accounting Pronouncements
See Note 1 - Accounting Policies in Item 1 for details regarding 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. ASU 2016-13 is effective for the Company’s fiscal year ending July 4, 2021, and the guidance is to be applied using the modified-retrospective approach. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
In June 2016, the FASBaccounting standards that were recently issued ASU 2016-15, “Statement of Cash Flows (Topic 230), a consensus of the FASB’s Emerging Issues Task Force.” ASU 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The ASU is effective for the Company’s fiscal year ending June 30, 2019, and interim periods within those fiscal years. Early adoption is permitted, including interim periods within those fiscal years. An entity that elects early adoption must adopt all of the amendments in the same period. The guidance requires application using a retrospective transition method. The adoption is not expected to have a significant impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01)," which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. ASU 2017-01 is effective for the Company's fiscal year ending June 30, 2019, with early adoption permitted, and should be applied prospectively. We do not expect the standard to have a material impact on our consolidated financial statements.
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. This guidance is effective for the Company’s fiscal year ending July 4, 2021, with early adoption permitted, and should be applied prospectively. We do not expect the standard to have a material impact on our consolidated financial statements.
In February 2017, the FASB issued ASU No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets.” This update clarifies the scope of accounting for the derecognition or partial sale of nonfinancial assets to exclude all businesses and nonprofit activities. ASU 2017-05 also provides a definition for in-substance nonfinancial assets and additional guidance on partial sales of nonfinancial assets. This guidance will be effective for the Company’s fiscal year ending June 30, 2019 and may be applied retrospectively. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
In May 2017, the FASB issued ASU No 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting. An entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. ASU 2017-09 is effective for the Company's fiscal year ending June 30, 2019, with early adoption permitted, and should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the potential impact of adopting this guidance 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’sCompany’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’sCompany’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 effectivelysuccessfully integrate acquired businesses and grow acquired companies;assets; |
| o | to reduce working capital requirements and capital expenditures; |
| o | to mitigate the impact of supply chain cost and capacity constraints; | | 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 efficiently manage inventories;address the effects of changes in accounting policies, practices, or assumptions, including changes that could potentially require future impairment charges; |
| ● | the outcome of contingencies, including legal proceedings in the normal course of business; and |
| ● | general consumer sentiment and economic conditions that may affect among other things, the levels of discretionary customer purchases of the Company’s products.Company’s products and the costs of shipping and labor. |
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 July 2, 20173, 2022 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 any additional risk factors in Part II, Item 1A in this Form 10-Q. ITEM 3.3. 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’sCompany’s exposure to market risk for changes in interest rates relates primarily to the Company’s investment of available cash balances and its long-term debt. The Company generally invests its cash and cash equivalents in investment grade corporate and U.S. government securities. Due to the currently low rates of return the Company is receiving on its cash equivalents, the potential for a significant decrease in short-term interest rates is low and, therefore, a further decrease would not have a material impact on the Company’s interest income. Borrowings under the Company’s credit facility bear interest at a variable rate, plus an applicable margin, and therefore expose the Company to market risk for changes in interest rates. The effect of a 50 basis point increase in current interest rates on the Company’s interest expense would be approximately $0.2 and $0.3$0.9 million during the three and sixnine months ended December 31, 2017, respectively.April 2, 2023. ITEM 4.4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company’sCompany’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 December 31, 2017.April 2, 2023. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have each concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2017.April 2, 2023, due to a material weakness in internal control over financial reporting related to logical access and segregation of duties, at the application control level, in certain information technology environments. The material weakness was first identified and reported in Management's Report on Internal Control over Financial Reporting in our Annual Report on Form 10-K for the period ending July 3, 2022. Management has taken steps to remediate these deficiencies, including redesigning the logical access and placing enhanced segregation of duties, enhancing its internal documentation and monitoring approach to ensure that all procedures designed to restrict access to applications and data are operating in an optimal manner in order to provide management with comfort that access is properly limited to the appropriate internal personnel. Management began to implement these remedial steps during the first quarter of fiscal 2023. In accordance with our internal control compliance program, a material weakness is not considered remediated until the remediation processes have been operational for a sufficient period of time and successfully tested. In light of this material weakness, management performed additional procedures over our IT environment and personnel affected to determine if any unauthorized action had been taken and found no such instances. Notwithstanding the material weakness described in Management's Report on logical access and segregation of duties in certain technology environments, our management has concluded that our consolidated financial statements for the periods covered by this form 10-Q are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and fairly present, in all material respects, our financial position, results of operations and cash flows for each of the periods presented herein. Changes in Internal Control over Financial Reporting ThereExcept for the remedial actions described above, there were no changes in our internal control over financial reporting identified in connection with the Company’sCompany’s evaluation required by Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934 during the quarter ended December 31, 2017,April 2, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. II. – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Litigation ThereCall Center Worker Claim:
In March of 2018, a putative class action lawsuit was filed against a subsidiary of the Company (the “Subsidiary”) in the U.S. District Court for the District of Oregon, Medford Division (the “Court”), alleging violations of the federal Fair Labor Standards Act (FLSA) and Oregon state law. The complaint was brought on behalf of a putative class of call center workers and alleged that certain Subsidiary policies and practices resulted in class members’ performance of unpaid work. The plaintiff sought class certification, compensation for alleged unpaid and underpaid wages, civil penalties, prejudgment interest, liquidated damages, litigation costs, and attorneys’ fees. Following mediation, the parties reached an agreement in April 2022 to resolve all claims. In September 2022, the Court granted final approval of the settlement agreement, and in November 2022, the Company remitted payment of approximately $2.9 million, which was previously accrued during the quarter ended March 27, 2022, and was included in "Accrued expenses" in the consolidated balance sheets at July 3, 2022. In entering into the settlement agreement, the Subsidiary made no admission of liability. 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 ultimatefinal 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.1A.RISK FACTORS. There were no material changes to the Company’sCompany’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 July 2, 2017. 3, 2022. ITEM 2.2. 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 August 30, 2017,April 22, 2021, the Company’sCompany’s Board of Directors authorized an increase to its stock repurchase plan of up to $30.0$40.0 million. In addition, on February 3, 2022, the Company’s Board of Directors authorized an increase to its stock repurchase plan of up to $40.0 million. As of December 31, 2017, $21.1April 2, 2023, $32.0 million remained authorized under the plan. The following table sets forth, for the months indicated, the Company’sCompany’s purchase of common stock during the first sixnine months of fiscal 2018,2023, which includes the period July 3, 20174, 2022 through December 31, 2017:April 2, 2023: 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) | | | | | | | | | | | | | | | | | | | | | | | | 07/03/17 - 07/30/17 | | | 89.3 | | | $ | 9.66 | | | | 89.3 | | | $ | 16,363 | | 07/31/16 - 08/27/17 | | | 99.6 | | | $ | 9.08 | | | | 99.6 | | | $ | 15,456 | | 08/28/17 - 10/01/17 | | | 268.7 | | | $ | 9.43 | | | | 268.7 | | | $ | 27,859 | | 10/02/17 - 10/29/17 | | | 233.5 | | | $ | 9.62 | | | | 233.5 | | | $ | 25,606 | | 10/30/17 - 12/03/17 | | | 414.3 | | | $ | 9.36 | | | | 414.3 | | | $ | 21,719 | | 12/04/17 - 12/31/17 | | | 61.9 | | | $ | 10.16 | | | | 61.9 | | | $ | 21,089 | | | | | | | | | | | | | | | | | | | | Total | | | 1,167.3 | | | $ | 9.47 | | | | 1,167.3 | | | | | |
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) | | | | | | | | | | | | | | | | | | | | | | | | 07/04/22 - 07/31/22 | | | - | | | $ | - | | | | - | | | $ | 33,203 | | 08/01/22 - 08/28/22 | | | - | | | $ | - | | | | - | | | $ | 33,203 | | 08/29/22 - 10/02/22 | | | - | | | $ | - | | | | - | | | $ | 33,203 | | 10/03/22 - 10/30/22 | | | - | | | $ | - | | | | - | | | $ | 33,203 | | 10/31/22 - 11/27/22 | | | 140,248 | | | $ | 8.38 | | | | 140,248 | | | $ | 32,029 | | 11/28/22 - 01/01/23 | | | - | | | $ | - | | | | - | | | $ | 32,029 | | 01/02/23 - 01/29/23 | | | - | | | $ | - | | | | - | | | $ | 32,029 | | 01/30/23 - 02/26/23 | | | 1,757 | | | $ | 12.34 | | | | 1,757 | | | $ | 32,007 | | 02/27/23 - 04/02/23 | | | - | | | $ | - | | | | - | | | $ | 32,007 | | Total | | | 142,005 | | | $ | 8.42 | | | | 142,005 | | | | | |
(1) | (1) Average price per share excludes commissions and other transaction fees.
|
ITEM 3.3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5.5. OTHER INFORMATION None. ITEM 6. EXHIBITS * Filed herewith. 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: February 9, 2017 May 12, 2023 | /s/ Christopher G. McCann Christopher G. McCann
Chief Executive Officer
Director and President
Director
(Principal Executive Officer) | | | Date: February 9, 2017 May 12, 2023 | /s/ William E. Shea
William E. Shea
Senior Vice President, Treasurer and
Chief Financial Officer (Principal
Financial and Accounting Officer) |
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