UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~March 31,~~December 29, 2019

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

For the transition period from ___ to ___

Commission File No. 0-26841

1-800-FLOWERS.COM, Inc.

(Exact name of registrant as specified in its charter)

DELAWARE	11-3117311
(State of incorporation)	(I.R.S. Employer Identification No.)

One Old Country Road, Carle Place, New York, 11514	(516) 237-6000
(Address of principal executive offices) (Zip code)	(Registrant’s telephone number, including area code)

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

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A common stock	FLWS	The Nasdaq Stock Market

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

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

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

☐ Large accelerated filer		☑ Accelerated filer
☐ Non-accelerated filer		☐ Smaller reporting company
		☐ Emerging growth company

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

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

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

~~Title of each class~~	~~Trading symbol(s)~~	~~Name of each exchange on which registered~~
~~Class A common stock~~	~~FLWS~~	~~The Nasdaq Stock Market~~

The number of shares outstanding of each of the Registrant’s classes of common stock as of ~~May 3, 2019:~~January 31, 2020:

Class A common stock:	~~35,775,034~~ 35,753,963
Class B common stock:	28,542,823

Table of Contents

1-800-FLOWERS.COM, Inc.

FORM 10-Q

For the quarterly period ended December 29, 2019

TABLE OF CONTENTS

		Page
Part I.	Financial Information
Item 1.	Condensed Consolidated Financial Statements		1
	Condensed Consolidated Balance Sheets – ~~March 31,~~December 29, 2019 (Unaudited) and ~~July 1, 2018~~June 30, 2019		1
	Condensed Consolidated Statements of Income (Unaudited) – Three and ~~Nine~~Six Months Ended ~~March 31,~~December 29, 2019 and ~~April 1,~~December 30, 2018		2
	Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Three and ~~Nine~~Six MonthsEnded ~~March 31,~~December 29, 2019 and ~~April 1,~~December 30, 2018		3
	Condensed Consolidated Statements of Stockholder’s Equity (Unaudited) – Three and ~~Nine~~Six Months Ended ~~March 31,~~December 29, 2019 and ~~April 1,~~December 30, 2018		4
	Condensed Consolidated Statements of Cash Flows (Unaudited) – ~~Nine~~Six Months Ended ~~March 31,~~December 29, 2019 and ~~April 1,~~December 30, 2018		5
	Notes to Condensed Consolidated Financial Statements (Unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14 13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		22 19
Item 4.	Controls and Procedures		22 20


Part II.	Other Information
Item 1.	Legal Proceedings		22 20
Item 1A.	Risk Factors		22 20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		23 20
Item 3.	Defaults upon Senior Securities		23 20
Item 4.	Mine Safety Disclosures		23 20
Item 5.	Other Information		23 20
Item 6.	Exhibits		23 21

Signatures			24 22

Table of Contents

PART I. – FINANCIAL INFORMATION

ITEM 1. – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Condensed Consolidated Balance Sheets

(in thousands, except for share data)

	March 31, 2019			July 1, 2018			December 29, 2019			June 30, 2019
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	206,377		$	147,240		$	295,561		$	172,923
Trade receivables, net		19,166			12,935			44,561			12,374
Inventories		74,377			88,825			68,032			92,361
Prepaid and other		20,592			24,021			23,439			25,580
Total current assets		320,512			273,021			431,593			303,238

Property, plant and equipment, net		158,190			163,340			162,568			166,681
Operating lease right-of-use assets								72,943			-
Goodwill		62,590			62,590			74,711			62,590
Other intangibles, net		59,762			59,823			66,727			59,615
Other assets		13,894			12,115			17,678			14,316
Total assets	$	614,948		$	570,889		$	826,220		$	606,440

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	25,381		$	41,437		$	61,826		$	25,704
Accrued expenses		103,012			73,299			151,028			96,793
Current maturities of long-term debt		12,219			10,063			5,000			5,000
Current portion of long-term operating lease liabilities								8,849			-
Total current liabilities		140,612			124,799			226,703			127,497

Long-term debt		83,595			92,267			89,738			91,973
Long-term operating lease liabilities								66,405			-
Deferred tax liabilities		27,011			26,200			27,895			28,898
Other liabilities		14,788			12,719			14,571			15,361
Total liabilities		266,006			255,985			425,312			263,729

Commitments and contingencies (See Note 13)
Commitments and contingencies (See Note 13 and Note 14)

Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued		-			-			-			-
Class A common stock, $0.01 par value, 200,000,000 shares authorized, 52,931,127 and 52,071,293 shares issued at March 31, 2019 and July 1, 2018, respectively		528			520
Class B common stock, $0.01 par value, 200,000,000 shares authorized, 33,822,823 shares issued at March 31, 2019 and July 1, 2018		338			338
Class A common stock, $0.01 par value, 200,000,000 shares authorized, 53,678,919 and 53,084,127 shares issued at December 29, 2019 and June 30, 2019, respectively								536			530
Class B common stock, $0.01 par value, 200,000,000 shares authorized, 33,822,823 shares issued at December 29, 2019 and June 30, 2019								338			338
Additional paid-in-capital		347,235			341,783			353,643			349,319
Retained earnings		116,830			73,429			167,406			108,525
Accumulated other comprehensive loss		(258	)		(200	)		(253	)		(269	)
Treasury stock, at cost, 17,209,093 and 15,978,790 Class A shares at March 31, 2019 and July 1, 2018, respectively, and 5,280,000 Class B shares at March 31, 2019 and July 1, 2018		(115,731	)		(100,966	)
Treasury stock, at cost, 17,579,956 and 17,209,093 Class A shares at December 29, 2019 and June 30, 2019, respectively, and 5,280,000 Class B shares at December 29, 2019 and June 30, 2019								(120,762	)		(115,732	)
Total stockholders’ equity		348,942			314,904			400,908			342,711
Total liabilities and stockholders’ equity	$	614,948		$	570,889		$	826,220		$	606,440

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements..

Table of Contents

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

Condensed Consolidated Statements of Income

(in thousands, except for per share data)

(unaudited)

	Three Months Ended						Nine Months Ended						Three Months Ended					Six Months Ended
	March 31, 2019			April 1, 2018			March 31, 2019			April 1, 2018			December 29, 2019			December 30, 2018		December 29, 2019			December 30, 2018

Net revenues	$	248,413		$	238,545		$	989,225		$	921,987		$	605,642		$	571,316	$	792,905		$	740,812
Cost of revenues		150,893			145,090			568,338			525,995			336,470			316,489		447,587			417,445
Gross profit		97,520			93,455			420,887			395,992			269,172			254,827		345,318			323,367
Operating expenses:
Marketing and sales		71,163			68,215			243,781			231,708			127,404			119,664		184,243			172,618
Technology and development		11,511			10,241			32,696			29,086			11,733			10,906		22,536			21,185
General and administrative		22,447			19,553			64,480			58,128			22,634			21,603		44,156			42,033
Depreciation and amortization		7,028			7,885			22,840			24,646			7,830			7,969		15,465			15,812
Total operating expenses		112,149			105,894			363,797			343,568			169,601			160,142		266,400			251,648
Operating income (loss)		(14,629	)		(12,439	)		57,090			52,424
Interest (income) expense, net		(30	)		662			2,390			2,919
Operating income														99,571			94,685		78,918			71,719
Interest expense, net														985			1,430		1,580			2,420
Other (income) expense, net		(1,285	)		31			(293	)		(315	)		(975	)		1,266		(891	)		992
Income (loss) before income taxes		(13,314	)		(13,132	)		54,993			49,820
Income tax expense (benefit)		(5,073	)		(4,669	)		11,922			806
Net income (loss)	$	(8,241	)	$	(8,463	)	$	43,071		$	49,014
Income before income taxes														99,561			91,989		78,229			68,307
Income tax expense														25,409			23,411		19,348			16,995
Net income													$	74,152		$	68,578	$	58,881		$	51,312

Basic net income (loss) per common share	$	(0.13	)	$	(0.13	)	$	0.67		$	0.76
Basic net income per common share													$	1.15		$	1.07	$	0.91		$	0.80

Diluted net income (loss) per common share	$	(0.13	)	$	(0.13	)	$	0.65		$	0.73
Diluted net income per common share													$	1.12		$	1.04	$	0.89		$	0.77

Weighted average shares used in the calculation of net income (loss) per common share:
Weighted average shares used in the calculation of net income per common share:
Basic		64,194			64,527			64,383			64,694			64,687			64,209		64,595			64,415
Diluted		64,194			64,527			66,456			66,949			66,401			66,136		66,486			66,483

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements..

Table of Contents

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

Condensed Consolidated Statements of Comprehensive ~~Income~~

(in thousands)

(unaudited)

Three Months Ended

Nine Months Ended

March 31, 2019

April 1, 2018

March 31, 2019

April 1, 2018

Net income (loss)
$ (8,241 ) $ (8,463 ) $ 43,071 $ 49,014
Other comprehensive income (loss) (currency translation & other miscellaneous items)
3 (38 ) (58 ) (11 )
Comprehensive income (loss)
$ (8,238 ) $ (8,501 ) $ 43,013 $ 49,003

	Three Months Ended				Six Months Ended
	December 29, 2019		December 30, 2018		December 29, 2019		December 30, 2018
Net income	$	74,152	$	68,578	$	58,881	$	51,312
Other comprehensive income (currency translation & other miscellaneous items)		16		71		16		61
Comprehensive income	$	74,168	$	68,649	$	58,897	$	51,373

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements..

Table of Contents

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

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share data)

(unaudited)

	Three Months Ended March 31, 2019 and April 1, 2018																								Three Months Ended December 29, 2019 and December 30, 2018
	Common Stock								Additional		Retained			Accumulated								Total			Common Stock								Additional		Retained			Accumulated								Total
	Class A				Class B				Paid-in		Earnings			Other			Treasury Stock					Stockholders’			Class A				Class B				Paid-in		Earnings			Other			Treasury Stock					Stockholders’
	Shares		Amount		Shares		Amount		Capital		(Deficit)			Comprehensive Loss			Shares		Amount			Equity			Shares		Amount		Shares		Amount		Capital					Comprehensive Loss			Shares		Amount			Equity

Balance at December 30, 2018		52,749,203	$	527		33,822,823	$	338	$	344,769	$	125,071		$	(261	)		22,383,738	$	(114,371	)	$	356,073
Balance at September 29, 2019																										53,216,294	$	532		33,822,823	$	338	$	351,304	$	93,254		$	(269	)		22,491,206	$	(115,763	)	$	329,396
Net income		-		-		-		-		-		(8,241	)		-			-		-			(8,241	)		-		-		-		-		-		74,152			-			-		-			74,152
Translation adjustment		-		-		-		-		-		-			3			-		-			3			-		-		-		-		-		-			16			-		-			16
Stock-based compensation		1,924		-		-		-		1,903		-			-			-		-			1,903			437,625		4		-		-		2,276		-			-			-		-			2,280
Exercise of stock options		180,000		1		-		-		563		-			-			-		-			564			25,000		-		-		-		63		-			-			-		-			63
Acquisition of Class A treasury stock		-		-		-		-		-		-			-			105,355		(1,360	)		(1,360	)		-		-		-		-		-		-			-			368,750		(4,999	)		(4,999	)
Balance at March 31, 2019		52,931,127	$	528		33,822,823	$	338	$	347,235	$	116,830		$	(258	)		22,489,093	$	(115,731	)	$	348,942
Balance at December 29, 2019																										53,678,919	$	536		33,822,823	$	338	$	353,643	$	167,406		$	(253	)		22,859,956	$	(120,762	)	$	400,908

Balance at December 31, 2017		51,879,967	$	519		33,847,063	$	338	$	339,805	$	90,115		$	(160	)		21,157,054	$	(99,875	)	$	330,742
Balance at September 30, 2018																										52,162,960	$	521		33,822,823	$	338	$	343,038	$	57,283		$	(190	)		21,604,412	$	(105,006	)	$	295,984
Net income		-		-		-		-		-		(8,463	)		-			-		-			(8,463	)		-		-		-		-		-		68,578			-			-		-			68,578
Translation adjustment		-		-		-		-		-					(38	)		-		-			(38	)		-		-		-		-		-					(71	)		-		-			(71	)
Stock-based compensation		2,754		-		-		-		932		-			-			-		-			932			408,009		4		-		-		1,669		-			-			-		-			1,673
Exercise of stock options		30,000		-		-		-		164		-			-			-		-			164			178,234		2		-		-		62		-			-			-		-			64
Other																										-		-		-		-		-		(790	)		-			-		-			(790	)
Acquisition of Class A treasury stock		-		-		-		-		-		-			-			93,192		(990	)		(990	)		-		-		-		-		-		-			-			779,326		(9,365	)		(9,365	)
Balance at April 1, 2018		51,912,721	$	519		33,847,063	$	338	$	340,901	$	81,652		$	(198	)		21,250,246	$	(100,865	)	$	322,347
Balance at December 30, 2018																										52,749,203	$	527		33,822,823	$	338	$	344,769	$	125,071		$	(261	)		22,383,738	$	(114,371	)	$	356,073

	Nine Months Ended March 31, 2019 and April 1, 2018																									Six Months Ended December 29, 2019 and December 30, 2018
	Common Stock										Additional		Retained		Accumulated								Total			Common Stock								Additional		Retained		Accumulated								Total
	Class A				Class B						Paid-in		Earnings		Other			Treasury Stock					Stockholders’			Class A				Class B				Paid-in		Earnings		Other			Treasury Stock					Stockholders’
	Shares		Amount		Shares			Amount			Capital		(Deficit)		Comprehensive Loss			Shares		Amount			Equity			Shares		Amount		Shares		Amount		Capital				Comprehensive Loss			Shares		Amount			Equity
Balance at June 30, 2019																											53,084,127	$	530		33,822,823	$	338	$	349,319	$	108,525	$	(269	)		22,489,093	$	(115,732	)	$	342,711
Net income																											-		-		-		-		-		58,881		-			-		-			58,881
Translation adjustment																											-		-				--		-		-		16			-		-			16
Stock-based compensation																											444,792		4		-		-		4,041		-		-			-		-			4,045
Exercise of stock options																											150,000		2		-		-		283		-		-			-		-			285
Acquisition of Class A treasury stock																											-		-		-		-		-		-		-			370,863		(5,030	)		(5,030	)
Balance at December 29, 2019																											53,678,919	$	536		33,822,823	$	338	$	353,643	$	167,406	$	(253	)		22,859,956	$	(120,762	)	$	400,908

Balance at July 1, 2018		52,071,293	$	520		33,822,823		$	338		$	341,783	$	73,429	$	(200	)		21,258,790	$	(100,966	)	$	314,904			52,071,293	$	520		33,822,823	$	338	$	341,783	$	73,429	$	(200	)		21,258,790	$	(100,966	)	$	314,904
Net income		-		-		-			-			-		43,071		-			-		-			43,071			-		-		-		-		-		51,312		-			-		-			51,312
Translation adjustment		-		-		-			-			-				(58	)		-		-			(58	)		-		-		-		-		-		-		(61	)		-		-			(61	)
Stock-based compensation		411,600		4		-			-			4,527		-		-			-		-			4,531			409,676		4		-		-		2,624		-		-			-		-			2,628
Exercise of stock options		448,234		4		-			-			925		-		-			-		-			929			268,234		3		-		-		362		-		-			-		-			365
Other		-		-		-			-			-		330		-			-		-			330			-		-		-		-		-		330		-			-		-			330
Acquisition of Class A treasury stock		-		-		-			-			-		-		-			1,230,303		(14,765	)		(14,765	)		-		-		-		-		-		-		-			1,124,948		(13,405	)		(13,405	)
Balance at March 31, 2019		52,931,127	$	528		33,822,823		$	338		$	347,235	$	116,830	$	(258	)		22,489,093	$	(115,731	)	$	348,942

Balance at July 2, 2017		51,227,779	$	513		33,901,603		$	339		$	337,726	$	32,638	$	(187	)		19,989,731	$	(88,790	)	$	282,239
Net income		-		-		-			-			-		49,014		-			-		-			49,014
Translation adjustment		-		-		-			-			-				(11	)		-		-			(11	)
Conversion of Class B stock into Class A stock		54,540		1		(54,540	)		(1	)		-		-		-			-		-			-
Stock-based compensation		596,402		5		-			-			2,996		-		-			-		-			3,001
Exercise of stock options		34,000		-		-			-			179		-		-			-		-			179
Acquisition of Class A treasury stock		-		-		-			-			-		-		-			1,260,515		(12,075	)		(12,075	)
Balance at April 1, 2018		51,912,721	$	519		33,847,063		$	338		$	340,901	$	81,652	$	(198	)		21,250,246	$	(100,865	)	$	322,347
Balance at December 30, 2018																											52,749,203	$	527		33,822,823	$	338	$	344,769	$	125,071	$	(261	)		22,383,738	$	(114,371	)	$	356,073

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements..

Table of Contents

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

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended
	March 31, 2019			April 1, 2018			Six months ended
							December 29, 2019			December 30, 2018
Operating activities:
Net income	$	43,071		$	49,014		$	58,881		$	51,312
Reconciliation of net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		22,840			24,646			15,465			15,812
Amortization of deferred financing costs		671			721			325			452
Deferred income taxes		811			(13,004	)		(1,003	)		(654	)
Bad debt expense		1,018			906			731			582
Stock-based compensation		4,531			3,002			4,045			2,628
Other non-cash items		(301	)		249			(187	)		(501	)
Changes in operating items:
Trade receivables		(7,249	)		(9,347	)		(32,918	)		(36,047	)
Inventories		14,448			6,956			25,358			24,819
Prepaid and other		2,675			(45	)		1,021			3,159
Accounts payable and accrued expenses		14,741			1,453			90,166			78,361
Other assets		(349	)		(88	)
Other liabilities		98			110
Other assets and liabilities								272			(340	)
Net cash provided by operating activities		97,005			64,573			162,156			139,583

Investing activities:
Working capital adjustment related to sale of business		-			(8,500	)
Acquisitions, net of cash acquired								(20,500	)		-
Capital expenditures, net of non-cash expenditures		(16,845	)		(15,809	)		(10,712	)		(11,786	)
Purchase of equity investments								(1,001	)		-
Net cash used in investing activities		(16,845	)		(24,309	)		(32,213	)		(11,786	)

Financing activities:
Acquisition of treasury stock		(14,765	)		(12,075	)		(5,030	)		(13,405	)
Proceeds from exercise of employee stock options		929			179			285			365
Proceeds from bank borrowings		30,000			30,000			20,000			30,000
Repayment of bank borrowings		(37,187	)		(35,031	)
Repayment of notes payable and bank borrowings								(22,500	)		(34,312	)
Debt issuance cost								(60	)		-
Net cash used in financing activities		(21,023	)		(16,927	)		(7,305	)		(17,352	)

Net change in cash and cash equivalents		59,137			23,337			122,638			110,445
Cash and cash equivalents:
Beginning of period		147,240			149,732			172,923			147,240
End of period	$	206,377		$	173,069		$	295,561		$	257,685

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements..

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

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1 – Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by 1-800-FLOWERS.COM, Inc. and Subsidiaries (the “Company”) in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. ~~They~~Accordingly, they do not include all of the information and notes required by ~~generally accepted accounting principles~~GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring ~~accruals)~~adjustments) considered necessary for a fair presentation have been included. Operating results for the three and ~~nine~~six month periods ended ~~March 31,~~December 29, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending June ~~30, 2019. For further information, refer to the consolidated~~28, 2020. These financial statements ~~and footnotes thereto included~~should be read in ~~the Company’s~~conjunction with our Annual Report on Form 10-K for the fiscal year ended ~~July 1, 2018~~June 30, 2019., which provides a more complete understanding of our accounting policies, financial position, operating results and other matters.

The Company’s quarterly results may experience seasonal fluctuations. Due to the seasonal nature of the Company’s business, and its continued expansion into non-floral products, the Thanksgiving through Christmas holiday season, which falls within the Company’s second fiscal quarter, generates nearly 50% of the Company’s annual revenues, and all of its earnings. Additionally, due to the number of major floral gifting occasions, including Mother's Day, Valentine’s Day, Easter and Administrative Professionals Week, revenues also rise during the Company’s fiscal third and fourth quarters compared to its fiscal first quarter. In fiscal 2018, Easter was on April 1st, which resulted in the shift of Easter-related revenue and EBITDA into the Company’s third quarter of fiscal 2018. The Easter holiday was on April 21st in 2019, which resulted in the shift of most Easter-related e-commerce and retail revenue and associated EBITDA, from the Company’s third quarter, to its fourth quarter.

Use of Estimates

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

Revenue Recognition

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

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

●

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

●

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

●

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

●

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

Deferred ~~revenues~~Revenues

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

Our total deferred revenue as of ~~July 1, 2018~~June 30, 2019 was ~~$13.5~~$17.3 million (included in “Accrued expenses” on our consolidated balance sheets), of which, ~~$0.9~~$5.9 million and ~~$13.2~~$15.9 million was recognized as revenue during the three and ~~nine~~six months ended ~~March 31, 2019, respectively.~~December 29, 2019. The deferred revenue balance as of ~~March 31,~~December 29, 2019 was ~~$23.9~~$28.8 million.

Recently Issued Accounting Pronouncements - Adopted

~~Revenue from Contracts with Customers.~~ In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” amending revenue recognition guidance (“ASC 606”) and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company determined that the new standard impacted the following areas related to our e-commerce and retail/franchise revenue streams: the costs of producing and distributing the Company’s catalogs will be expensed upon mailing, instead of being capitalized and amortized in direct proportion to the actual sales; gift card breakage will be recognized over the expected customer redemption period, rather than when redemption is considered remote; e-commerce revenue will be recognized upon shipment, when control of the merchandise transfers to the customer, instead of upon receipt by the customer; initial and other franchise fees will be recognized over the franchise term (or remaining franchise term), rather than upon store opening (or renewal/transfer). The Company adopted this ASU effective July 2, 2018 for all revenue contracts with our customers using the modified retrospective approach and increased retained earnings by $0.3 million. The adjustment primarily related to the unredeemed portion of our gift cards (breakage income), which increased retained earnings and reduced accrued expenses by $1.9 million; partially offset by the change in accounting for the Company’s catalogs, which decreased retained earnings and decreased prepaid expense by $0.8 million; as well as a deferral of initial franchise fees, which decreased retained earnings and increased accrued expenses by $0.8 million.

The comparative information presented in this Form 10-Q has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption of the new revenue standard to have a material impact to our net income on an ongoing, annual basis. However, the adoption of the new revenue standard is expected to result in quarterly fluctuations, primarily as a result of the change in accounting for catalog costs, as noted above. During the three months ended March 31, 2019, assuming we had not adopted the new revenue standard, “Marketing and sales” expense, within our statement of operations, would have been approximately $1.6 million higher, thereby increasing our Net loss for the period by approximately $1.0 million (tax effected). During the nine months ended March 31, 2019, assuming we had not adopted the new revenue standard, “Marketing and sales” expense, within our statement of operations, would have been approximately $0.4 million lower, thereby increasing our Net income for the period by approximately $0.3 million (tax effected). The Company’s contract liabilities related to gift cards ($1.7 million as of March 31, 2019) are not considered material for purposes of this disclosure. Refer to Note 12 – Business Segments for disclosure of disaggregated revenues.

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~~Financial Instruments – Recognition and Measurement.~~ In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities," as amended by ASU No. 2018-03, “Financial Instruments-Overall: Technical Corrections and Improvements,” issued in February 2018. The new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income (subject to an exemption for investments that have no readily determinable fair values), requires public business entities to use the exit price notion when measuring 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 value that is required to be disclosed for financial instruments measured at amortized cost. Upon adoption of the new guidance, we have elected to measure the investments we hold in certain non-marketable equity securities in which we do not have a controlling interest or significant influence that have no readily determinable fair values at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer. The Company adopted the guidance prospectively effective July 2, 2018. The adoption did not have a significant impact on the Company’s consolidated financial position or results of operations.

~~Statement of Cash Flows.~~ In June 2016, the FASB 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 Company adopted the guidance restrospectively, effective July 2, 2018. The adoption did not have a significant impact on the Company’s consolidated financial position or results of operations.

~~Business Combinations – Definition of a Business.~~ 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. The Company adopted the guidance prospectively, effective July 2, 2018. The adoption did not have a significant impact on the Company’s consolidated financial position or results of operations.

~~Nonfinancial Assets – Derecognition.~~ 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. The Company adopted the guidance retrospectively, effective July 2, 2018. The adoption did not have a significant impact on the Company’s consolidated financial position or results of operations.

~~Stock Compensation – Modification Accounting.~~ 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. The Company adopted the guidance prospectively, to awards modified on or after the adoption date, effective July 2, 2018. The adoption did not have a significant impact on the Company’s consolidated financial position or results of operations.

~~Cloud Computing Arrangements – Implementation Costs~~. In August 2018, the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by this ASU. The amendments in this Update also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, require the entity to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element and also require the entity to present the capitalized implementation costs in the statement of financial position in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. The Company adopted the guidance prospectively, to all implementation costs incurred after the date of adoption, effective July 2, 2018. The adoption did not have a significant impact on the Company’s consolidated financial position or results of operations.

~~Recently Issued Accounting Pronouncements~~ – ~~Not~~ ~~Yet Adopted~~

~~Leases.~~In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASC 842”).” Under this guidance, 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 user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. ~~This guidance is~~We adopted the new standard effective July 1, 2019 and elected the optional transition method and therefore, we will not apply the standard to the comparative periods presented in our financial statements. The new standard provides a number of optional practical expedients in transition. We elected the ‘package of practical expedients’, that did not require us to reassess, under the new standard, our prior conclusions about lease identification, lease classification and initial direct costs. 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 adoption of the ~~Company’s fiscal year ending June 28, 2020. We are currently evaluating the ASU, but expect that it will have~~new standard had a material impact to the Company’s Consolidated Balance Sheets, but no impact to the Consolidated Statements of Income (Operations) or Consolidated Statements of Cash Flows. As such, we recorded operating lease liabilities of $80.7 million, based on the present value of the remaining minimum rental payments using discount rates as of the effective date, and a corresponding right-of-use assets of $78.7 million based on the operating lease liabilities adjusted for deferred rent and lease incentives received. See Note 13 - Leases for further information about our ~~consolidated financial statements, primarily~~transition to ASC 842 and the ~~consolidated balance sheets and related~~newly required disclosures.

Recently Issued Accounting Pronouncements – Not Yet Adopted

Financial Instruments – Measurement of Credit Losses. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 introduces a new forward-looking “expected loss” approach, to estimate credit losses on most financial assets and certain other instruments, including trade receivables. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. 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.

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Goodwill – Impairment Test. In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit. 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.

~~U.S. Tax Reform~~

On December 22, 2017, the U.S. government enacted significant changes to the U.S. tax law following the passage and signing of the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act revises the future ongoing U.S. corporate income tax by, among other things, lowering U. S. corporate income tax rates from 35% to 21%. Since the Company’s fiscal year ends in June, the lower corporate income tax rate was phased in, resulting in a U.S. statutory federal rate of approximately 28% for fiscal year 2018, and 21% for subsequent fiscal years. The Tax Act also eliminated the domestic production activities deduction and introduced limitations on certain business expenses and executive compensation deductions.

Shortly after the Tax Act was enacted, the SEC staff issued Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (“SAB 118”), which provided guidance on accounting for the Tax Act’s impact. SAB 118 provided a measurement period, which in no case should extend beyond one year from the Tax Act enactment date, during which a company acting in good faith may complete the accounting for the impacts of the Tax Act under ASC Topic 740. In accordance with the expiration of the SAB 118 measurement period, we completed the assessment of the income tax effects of the Tax Act in the second quarter of fiscal 2019, with no adjustments recorded to the provisional amounts.

~~Table of Contents~~

Note 2 – Net Income Per Common Share

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

	Three Months Ended						Nine Months Ended				Three Months Ended				Six Months Ended
	March 31, 2019			April 1, 2018			March 31, 2019		April 1, 2018		December 29, 2019		December 30, 2018		December 29, 2019		December 30, 2018
	(in thousands, except per share data)										(in thousands, except per share data)
Numerator:
Net income (loss)	$	(8,241	)	$	(8,463	)	$	43,071	$	49,014
Net income											$	74,152	$	68,578	$	58,881	$	51,312

Denominator:
Weighted average shares outstanding		64,194			64,527			64,383		64,694		64,687		64,209		64,595		64,415
Effect of dilutive securities:
Employee stock options		-			-			1,444		1,564		997		1,415		1,046		1,476
Employee restricted stock awards		-			-			629		691		717		512		845		592
		-			-			2,073		2,255		1,714		1,927		1,891		2,068

Adjusted weighted-average shares and assumed conversions		64,194			64,527			66,456		66,949		66,401		66,136		66,486		66,483

Net income (loss) per common share
Net income per common share
Basic	$	(0.13	)	$	(0.13	)	$	0.67	$	0.76	$	1.15	$	1.07	$	0.91	$	0.80
Diluted	$	(0.13	)	$	(0.13	)	$	0.65	$	0.73	$	1.12	$	1.04	$	0.89	$	0.77

Note 3 – Stock-Based Compensation

The Company has a Long Term Incentive and Share Award Plan, which is more fully described in Note 12 and Note 13 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended ~~July 1, 2018~~June 30, 2019, that provides for the grant to eligible employees, consultants and directors of stock options, restricted shares, and other stock-based awards.

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

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	March 31, 2019		April 1, 2018		March 31, 2019		April 1, 2018		December 29, 2019		December 30, 2018		December 29, 2019		December 30, 2018
	(in thousands)				(in thousands)				(in thousands)
Stock options	$	67	$	108	$	250	$	323	$	28	$	78	$	93	$	183
Restricted stock		1,836		825		4,281		2,679		2,252		1,595		3,952		2,445
Total		1,903		933		4,531		3,002		2,280		1,673		4,045		2,628
Deferred income tax benefit		328		254		982		846		300		395		1,003		654
Stock-based compensation expense, net	$	1,575	$	679	$	3,549	$	2,156	$	1,980	$	1,278	$	3,042	$	1,974

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

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	March 31, 2019		April 1, 2018		March 31, 2019		April 1, 2018		December 29, 2019		December 30, 2018		December 29, 2019		December 30, 2018
	(in thousands)				(in thousands)				(in thousands)
Marketing and sales	$	830	$	248	$	1,816	$	804	$	1,047	$	731	$	1,863	$	986
Technology and development		118		49		274		160		173		105		292		156
General and administrative		955		636		2,441		2,038		1,060		837		1,890		1,486
Total	$	1,903	$	933	$	4,531	$	3,002	$	2,280	$	1,673	$	4,045	$	2,628

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

Stock Options

The following table summarizes stock option activity during the ~~nine~~six months ended ~~March 31,~~December 29, 2019:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (000s)		Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
															(in years)		(in thousands)
Outstanding at July 1, 2018		1,968,234		$	2.35
Outstanding at June 30, 2019											1,365,000		$	2.48
Granted		-		$	-						-		$	-
Exercised		(448,234	)	$	2.12						(150,000	)	$	1.90
Forfeited		(2,000	)	$	2.22						-		$	-
Outstanding at March 31, 2019		1,518,000		$	2.42		2.3	$	24,004
Outstanding at December 29, 2019											1,215,000		$	2.55		1.7	$	14,288

Exercisable at March 31, 2019		1,385,000		$	2.36		2.2	$	21,976
Exercisable at December 29, 2019											1,210,000		$	2.52		1.7	$	14,267

As of ~~March 31,~~December 29, 2019, the total future compensation cost related to non-vested options, not yet recognized in the statement of income, was ~~$0.2~~$0.0 million and the weighted average period over which these awards are expected to be recognized was ~~0.6~~0.2 years.

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Restricted Stock

The Company grants shares of Common Stock to its employees that are subject to restrictions on transfer and risk of forfeiture until fulfillment of applicable service and performance conditions and, in certain cases, holding periods (Restricted Stock). The following table summarizes the activity of non-vested restricted stock awards during the ~~nine~~six months ended ~~March 31,~~December 29, 2019:

	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value

Non-vested at July 1, 2018		968,273		$	7.70
Non-vested at June 30, 2019							1,438,592		$	10.81
Granted		937,313		$	12.70		724,055		$	13.04
Vested		(411,600	)	$	7.91		(444,792	)	$	10.28
Forfeited		(24,037	)	$	9.62		(45,474	)	$	12.54
Non-vested at March 31, 2019		1,469,949		$	10.80
Non-vested at December 29, 2019							1,672,381		$	11.87

The fair value of non-vested shares is determined based on the closing stock price on the grant date. As of ~~March 31,~~December 29, 2019, there was ~~$11.6~~$14.6 million of total unrecognized compensation cost related to non-vested restricted stock-based compensation to be recognized over the weighted-average remaining period of ~~2.2~~2.0 years.

Note 4 – Acquisition

Acquisition of Shari’s Berries

On August 14, 2019, the Company completed its acquisition of the Shari’s Berries business ("Shari's Berries"), a leading provider of dipped berries and other specialty treats, through a bankruptcy proceeding of certain assets of the gourmet food business of the FTD Companies, Inc. The transaction, for a purchase price of $20.5 million, included the Shari’s Berries domain names, copyrights, trademarks, customer data, phone numbers and other intellectual property, as well as certain raw material inventory and the assumption of specified liabilities.

The total purchase price was allocated to the identifiable assets acquired and liabilities assumed based on our preliminary estimates of their fair values on the acquisition date. The Company is in the process of finalizing its allocation and this may result in potential adjustments to the carrying value of the respective recorded assets and liabilities, establishment of certain additional intangible assets, revisions of useful lives of intangible assets, and the determination of any residual amount that will be allocated to goodwill. Of the acquired intangible assets, $0.6 million was assigned to customer lists, which is being amortized over the estimated remaining life of 2 years, $6.9 million was assigned to tradenames, and $12.1 million was assigned to goodwill, which is expected to be deductible for tax purposes. The goodwill recognized in conjunction with our acquisition of Shari’s Berries is primarily related to synergistic value created in terms of both operating costs and revenue growth opportunities, enhanced financial and operational scale, and other strategic benefits.

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

	Shari’s Berries Preliminary Purchase Price Allocation
	(in thousands)
Current assets	$	1,029
Intangible assets		7,540
Goodwill		12,121
Total assets acquired		20,690

Current liabilities		190
Net assets acquired	$	20,500

Raw materials inventory was valued at book value, as there have not been any significant price fluctuations or other events that would materially change the cost to replace the raw materials.

The estimated fair value of the acquired tradenames was determined using the relief from royalty method, which is a risk-adjusted discounted cash flow approach. The relief from royalty method values an intangible asset by estimating the royalties saved through ownership of the asset. The relief from royalty method requires identifying the future revenue that would be generated by the trademark, multiplying it by a royalty rate deemed to be avoided through ownership of the asset and discounting the projected royalty savings amounts back to the acquisition date. The royalty rate used in the valuation was based on a consideration of market rates for similar categories of assets. The discount rate used in the valuation was based on the Company’s weighted average cost of capital, the riskiness of the earnings stream associated with the trademarks and the overall composition of the acquired assets.

The estimated fair value of the acquired customer lists was determined using the excess earnings method under the income approach. This method requires identifying the future revenue that would be generated by existing customers at the time of the acquisition, considering an appropriate attrition rate based on the historical experience of the Company. Appropriate expenses are then deducted from the revenues and economic rents are charged for the return on contributory assets. The after-tax cash flows attributable to the asset are discounted back to their net present value at an appropriate intangible asset rate of return and summed to calculate the value of the customer lists.

Operating results of the Shari’s Berries brand are reflected in the Company’s consolidated financial statements from the date of acquisition, within the Gourmet Food & Gift Baskets segment. Pro forma results of operations have not been presented, as the impact on the Company’s consolidated financial results would not have been material.

~~Note 4 – Disposition~~

On March 15, 2017, the Company and Ferrero International S.A., a Luxembourg corporation (“Ferrero”), entered into a Stock Purchase Agreement (the “Purchase Agreement”) pursuant to which Ferrero agreed to purchase from the Company all of the outstanding equity of Fannie May Confections Brands, Inc., including its subsidiaries, Fannie May Confections, Inc. and Harry London Candies, Inc. (“Fannie May”) for a total consideration of $115.0 million in cash, subject to adjustment for seasonal working capital. On May 30, 2017, the Company closed on the transaction, and the working capital adjustment was finalized in August 2017, resulting in an $8.5 million payment to Ferrero during the first quarter of fiscal 2018. The associated gain of $14.6 million was included within “Other (income) expense, net” in the fourth quarter of fiscal 2017.

The Company and Ferrero also entered into a transition services agreement, as amended, whereby the Company will provide certain post-closing services to Ferrero and Fannie May for a period of approximately 20 months, related to the business of Fannie May, and a commercial agreement with respect to the distribution of certain Ferrero and Fannie May products.

Note 5 – Inventory

The Company’s inventory, stated at cost, which is not in excess of market, includes purchased and manufactured finished goods for sale, packaging supplies, crops, raw material ingredients for manufactured products and associated manufacturing labor and is classified as follows:

	March 31, 2019		July 1, 2018
	(in thousands)				December 29, 2019		June 30, 2019
					(in thousands)
Finished goods	$	31,947	$	33,930	$	36,430	$	36,820
Work-in-process		10,418		17,575		7,644		17,535
Raw materials		32,012		37,320		23,958		38,006
Total inventory	$	74,377	$	88,825	$	68,032	$	92,361

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Note 6 – Goodwill and Intangible Assets

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

1-800-Flowers.com Consumer Floral

BloomNet Wire Service

Gourmet Food & Gift Baskets

Total

(in thousands)

Balance at March 31, 2019 and July 1, 2018
$ 17,441 $ - $ 45,149 $ 62,590

	1-800-Flowers.com Consumer Floral		BloomNet Wire Service		Gourmet Food & Gift Baskets		Total
	(in thousands)
Balance at June 30, 2019	$	17,441	$	-	$	45,149	$	62,590
Acquisition of Shari’s Berries		-		-		12,121		12,121
Balance at December 29, 2019	$	17,441	$	-	$	57,270	$	74,711

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

			March 31, 2019						July 1, 2018								December 29, 2019						June 30, 2019
	Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net		Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
	(in years)														(in years)		(in thousands)
Intangible assets with determinable lives

Investment in licenses		14-16	$	7,420	$	6,121	$	1,299	$	7,420	$	6,042	$	1,378		14-16	$	7,420	$	6,200	$	1,220	$	7,420	$	6,148	$	1,272
Customer lists		3-10		12,184		9,703		2,481		12,184		9,354		2,830		2-10		12,825		10,123		2,702		12,184		9,798		2,386
Other		5-14		2,946		2,255		691		2,946		2,172		774		5-14		2,946		2,332		614		2,946		2,280		666
Total intangible assets with determinable lives				22,550		18,079		4,471		22,550		17,568		4,982				23,191		18,655		4,536		22,550		18,226		4,324

Trademarks with indefinite lives				55,291		-		55,291		54,841		-		54,841				62,191		-		62,191		55,291		-		55,291

Total identifiable intangible assets			$	77,841	$	18,079	$	59,762	$	77,391	$	17,568	$	59,823			$	85,382	$	18,655	$	66,727	$	77,841	$	18,226	$	59,615

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Future estimated amortization expense is as follows: remainder of fiscal ~~2019 - $0.2 million, fiscal~~ 2020 - ~~$0.6~~$0.5 million, fiscal 2021 - ~~$0.6~~$0.9 million, fiscal 2022 - ~~$0.5~~$0.6 million, fiscal 2023 - $0.5 million, fiscal 2024 - $0.5 million and thereafter - ~~$2.1~~$1.5 million.

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Note 7 – Investments

~~Equity investments accounted for under the equity method~~

The Company has certain investments in non-marketable equity instruments of private companies. The Company accounts for these investments using the equity method if they provide the Company the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee between 20% and 50%, although other factors, such as representation on the investee’s Board of Directors, are considered in determining whether the equity method is appropriate. The Company records equity method investments initially at cost and adjusts the carrying amount to reflect the Company’s share of the earnings or losses of the investee.

The Company’s equity method investment is comprised of an interest in Flores Online S.A. ("Flores Online"), a Sao Paulo, Brazil-based internet floral and gift retailer, that the Company originally acquired on May 31, 2012. The Company currently holds 24.9% of the outstanding shares of Flores Online. The book value of this investment was $0.5 million as of March 31, 2019 and $0.6 million as of July 1, 2018, and is included in the “Other assets” line item within the Company’s consolidated balance sheets. The Company’s equity in the net loss of Flores Online for the three and nine months ended March 31, 2019 and April 1, 2018, respectively, was less than $0.1 million. During the quarter ended December 31, 2017, Flores Online entered into a share exchange agreement with Isabela Flores Intermediações Ltda. ("Isabela Flores"), whereby among other changes, the Company exchanged 5% of its interest in Flores Online for a 5% interest in Isabela Flores. This new investment of approximately $0.1 million is currently being accounted for as an equity investment without a readily determinable fair value (see below). In conjunction with this share exchange, the Company determined that the fair value of its investment in Flores Online was below its carrying value and that this decline was other-than-temporary. As a result, the Company recorded an impairment charge of $0.2 million, which is included within “Other (income) expense, net” in the Company’s consolidated statement of income during the quarter ended December 31, 2017.

Equity investments without a readily determinable fair value

Investments in non-marketable equity instruments of private companies, where the Company does not possess the ability to exercise significant influence, are accounted for at cost, less impairment (assessed qualitatively at each reporting period), adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer. These investments are included within “Other assets” in the Company’s consolidated balance sheets. The aggregate carrying amount of the Company’s cost method investments was ~~$1.7~~$2.6 million as of ~~March 31,~~December 29, 2019 and ~~July 1, 2018.~~$1.6 million as of June 30, 2019.

Equity investments with a readily determinable fair value

The Company also holds certain trading securities associated with its Non-Qualified Deferred Compensation Plan (“NQDC Plan”). These investments are measured using quoted market prices at the reporting date and are included within the “Other assets” line item in the consolidated balance sheets (see Note 10 - Fair Value Measurements).

Note 8 –Debt

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

	March 31, 2019			July 1, 2018
	(in thousands)						December 29, 2019			June 30, 2019
							(in thousands)
Revolver (1)	$	-		$	-		$	-		$	-
Term Loan (1)		97,750			104,938			97,500			100,000
Deferred financing costs		(1,936	)		(2,608	)		(2,762	)		(3,027	)
Total debt		95,814			102,330			94,738			96,973
Less: current debt		12,219			10,063			5,000			5,000
Long-term debt	$	83,595		$	92,267		$	89,738		$	91,973

(1) On December 23, 2016, the Company entered into an Amended and Restated Credit Agreement (the “2016 Amended Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent, and a group of lenders. The 2016 Amended Credit Agreement amended and restated the Company’s credit agreement dated September 30, 2014 to, among other things, extend the maturity date of the $115.0 million outstanding term loan ("Term Loan") and the revolving credit facility (the "Revolver") by approximately two years to December 23, 2021. The Term Loan is payable in 19 quarterly installments of principal and interest beginning on April 2, 2017, with escalating principal payments, at the rate of 5% in year one, 7.5% in year two, 10% in year three, 12.5% in year four, and 15% in year five, with the remaining balance of $61.8
(1)
On May 31, 2019, the Company entered into a Second Amended and Restated Credit Agreement (the “2019 Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent, and a group of lenders. The 2019 Credit Agreement amended and restated the Company’s existing amended and restated credit agreement dated as of December 23, 2016 (the “2016 Credit Agreement”) to, among other modifications: (i) increase the amount of the outstanding term loan (“Term Loan”) from approximately $97 million to $100 million, (ii) extend the maturity date of the outstanding Term Loan and the revolving credit facility (“Revolver”) by approximately 29 months to May 31, 2024, and (iii) decrease the applicable interest rate margins for LIBOR and base rate loans by 25 basis points. The Term Loan is payable in 19 quarterly installments of principal and interest beginning on September 29, 2019, with escalating principal payments, at the rate of 5.0% per annum for the first eight payments, and 10.0% per annum for the remaining 11 payments, with the remaining balance of $62.5 million due upon maturity. The Revolver, in the aggregate amount of $200 million, subject to seasonal reduction to an aggregate amount of $100 million for the period from January 1 through August 1, may be used for working capital and general corporate purposes, subject to certain restrictions.

For each borrowing under the ~~2016 Amended~~2019 Credit Agreement, the Company may elect that such borrowing bear interest at an annual rate equal to either: (1) a base rate plus an applicable margin varying ~~from 0.75% to 1.5%,~~ based on the Company’s consolidated leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the ~~highest of the federal funds rate and the overnight bank funding rate as published by the~~ New York ~~Fed,~~fed bank rate plus 0.5%, and (c) ~~an adjusted LIBO~~a LIBOR rate plus 1%, or (2) an adjusted ~~LIBO~~LIBOR rate plus an applicable margin varying ~~from 1.75% to 2.5%,~~ based on the Company’s consolidated leverage ratio. The ~~2016 Amended~~2019 Credit Agreement requires that while any borrowings or commitments are outstanding the Company comply with certain financial covenants and affirmative covenants as well as certain negative covenants that, subject to certain exceptions, limit the ~~Company's~~Company’s ability to, among other things, incur additional indebtedness, make certain investments and make certain restricted payments. The Company was in compliance with these covenants as of ~~March 31,~~December 29, 2019. The ~~2016 Amended~~2019 Credit Agreement is secured by substantially all of the assets of the ~~Company and the subsidiary guarantors, named therein.~~Company.

Future principal payments under the Term Loan are as follows: ~~$2.9~~$2.5 million – remainder of fiscal 2020, $5.0 million – fiscal ~~2019, $12.9~~2021, $10.0 million - fiscal 2022, $10.0 million – fiscal ~~2020, $15.8 million - fiscal 2021,~~2023 and ~~$66.1~~$70.0 million – fiscal ~~2022.~~

2024.

109

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Note 9 - Property, Plant and Equipment

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

	March 31, 2019			July 1, 2018
	(in thousands)						December 29, 2019			June 30, 2019
							(in thousands)
Land	$	30,789		$	30,789		$	30,789		$	30,789
Orchards in production and land improvements		11,312			10,962			11,701			11,339
Building and building improvements		59,115			58,450			60,255			59,236
Leasehold improvements		13,430			12,997			14,135			13,861
Production equipment and furniture and fixtures		57,915			53,066			63,556			61,415
Computer and telecommunication equipment		50,042			46,925			54,104			53,694
Software		125,927			115,944			139,797			132,078
Capital projects in progress - orchards		8,222			10,789			8,524			9,902
Property, plant and equipment, gross		356,752			339,922			382,861			372,314
Accumulated depreciation and amortization		(198,562	)		(176,582	)		(220,293	)		(205,633	)
Property, plant and equipment, net	$	158,190		$	163,340		$	162,568		$	166,681

Note 10 - Fair Value Measurements

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

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the guidance are described below:

Level 1		Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2		Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3		Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table presents by level, within the fair value hierarchy, financial assets and liabilities measured at fair value on a recurring basis:

	Carrying Value		Fair Value Measurements Assets (Liabilities)						Carrying Value		Fair Value Measurements Assets (Liabilities)
			Level 1		Level 2		Level 3				Level 1		Level 2		Level 3
	(in thousands)								(in thousands)
Assets (liabilities) as of March 31, 2019:
As of December 29, 2019:
Trading securities held in a “rabbi trust” (1)	$	11,338	$	11,338	$	-	$	-	$	14,159	$	14,159	$	-	$	-
Total assets (liabilities) at fair value									$	14,159	$	14,159	$	-	$	-
	$	11,338	$	11,338	$	-	$	-

Assets (liabilities) as of July 1, 2018:
As of June 30, 2019:
Trading securities held in a “rabbi trust” (1)	$	9,368	$	9,368	$	-	$	-	$	11,816	$	11,816	$	-	$	-
	$	9,368	$	9,368	$	-	$	-
Total assets (liabilities) at fair value									$	11,816	$	11,816	$	-	$	-

(1)

The Company has established an NQDC Plan for certain members of senior management. Deferred compensation plan assets are invested in mutual funds held in a “rabbi trust,” which is restricted for payment to participants of the NQDC Plan. Trading securities held in a rabbi trust are measured using quoted market prices at the reporting date and are included in the “Other assets” line item, with the corresponding liability included in the “Other liabilities” line item in the consolidated balance sheets.

Note 11 – Income Taxes

At the end of each interim reporting period, the Company estimates its effective income tax rate expected to be applicable for the full year. This estimate is used in providing for income taxes on a year-to-date basis and may change in subsequent interim periods. The Company’s effective tax rate from operations for the three and ~~nine~~six months ended ~~March 31,~~December 29, 2019 was ~~38.1%~~25.5% and ~~21.7%~~24.7% respectively, compared to ~~35.6%~~25.4% and ~~1.6%~~24.9% in the same periods of the prior year. The effective rates for fiscal 2020 and fiscal 2019 differed from the U.S. federal statutory rate of 21% due to state income taxes and nondeductible expenses for executive compensation, which were partially offset by various permanent differences and tax credits, including ~~increased~~ excess tax benefits from stock-based compensation. The effective rates for fiscal 2018 differed from the transitional U.S. federal tax rate of 28.0% due to a tax benefit of $12.2 million, or $0.18 per diluted share, recognized during the second quarter of fiscal 2018, reflecting a revaluation of deferred tax liabilities at the lower U.S. federal statutory rate of 21% as a result of the Tax Act (see ~~Note 1~~ – Accounting Policies above), and various permanent differences, tax credits, and return to provision adjustments related to the filing of the Company’s fiscal 2017 tax return, partially offset by state income taxes.

~~Table of Contents~~

The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign countries. The Company is currently undergoing its U.S. federal examination for fiscal ~~2016,~~2017, however, fiscal ~~years 2015, 2017, and~~year 2018 ~~remain~~remains subject to U.S. federal examination. Due to ongoing state examinations and nonconformity with the U.S. federal statute of limitations for assessment, certain states remain open from fiscal 2015. The Company's foreign income tax filings from fiscal 2014 are open for examination by its respective foreign tax authorities, mainly Canada, Brazil, and the United Kingdom.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At ~~March 31,~~December 29, 2019, the Company has an unrecognized tax benefit, including ~~an immaterial amount of~~ accrued interest and penalties, of approximately ~~$0.6~~$0.9 million. The Company believes that ~~$0.1~~$0.2 million of unrecognized tax positions will be resolved over the next twelve months.

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Note 12 – Business Segments

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

• 1-800-Flowers.com Consumer Floral,

• BloomNet Wire Service, and

• Gourmet Food & Gift Baskets

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

Three Months Ended

Nine Months Ended

Net Revenues:

March 31, 2019

April 1, 2018

March 31, 2019

April 1, 2018

(in thousands)

Segment Net Revenues:

1-800-Flowers.com Consumer Floral
$ 144,821 $ 135,782 $ 338,003 $ 312,456
BloomNet Wire Service
28,185 24,498 75,613 64,637
Gourmet Food & Gift Baskets
75,445 78,458 575,966 545,408
Corporate
263 264 845 851
Intercompany eliminations
(301
)
(457
)
(1,202
)
(1,365
)
Total net revenues
$ 248,413 $ 238,545 $ 989,225 $ 921,987

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
Operating Income (Loss):	March 31, 2019			April 1, 2018			March 31, 2019			April 1, 2018
				(in thousands)									December 29, 2019			December 30, 2018			December 29, 2019			December 30, 2018
Net Revenues:													(in thousands)
Segment Net Revenues:
1-800-Flowers.com Consumer Floral													$	115,716		$	108,106		$	206,484		$	193,182
BloomNet Wire Service														25,722			23,435			51,162			47,428
Gourmet Food & Gift Baskets														464,584			440,003			535,799			500,521
Corporate														165			315			360			582
Intercompany eliminations														(545	)		(543	)		(900	)		(901	)
Total net revenues													$	605,642		$	571,316		$	792,905		$	740,812

Operating Income:
Segment Contribution Margin:
1-800-Flowers.com Consumer Floral	$	15,364		$	16,226		$	32,667		$	33,988		$	10,890		$	9,808		$	19,414		$	17,303
BloomNet Wire Service		9,480			8,439			25,375			22,832			9,134			8,257			17,491			15,895
Gourmet Food & Gift Baskets		(7,202	)		(8,811	)		89,191			79,698			113,387			105,514			106,787			96,393
Segment Contribution Margin Subtotal		17,642			15,854			147,233			136,518			133,411			123,579			143,692			129,591
Corporate (a)		(25,243	)		(20,408	)		(67,303	)		(59,448	)		(26,010	)		(20,925	)		(49,309	)		(42,060	)
Depreciation and amortization		(7,028	)		(7,885	)		(22,840	)		(24,646	)		(7,830	)		(7,969	)		(15,465	)		(15,812	)
Operating income (loss)	$	(14,629	)	$	(12,439	)	$	57,090		$	52,424
Operating income													$	99,571		$	94,685		$	78,918		$	71,719

(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.

~~Table of Contents~~

The following tables represent a disaggregation of revenue from contracts with customers, by channel:

	Three Months Ended									Three Months Ended									Three Months Ended									Three Months Ended
	March 31, 2019									April 1, 2018									December 29, 2019									December 30, 2018
	Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated			Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated			Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated			Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated
Net revenues																			(in thousands)
E-commerce	$	142,552	$	-	$	61,810	$	204,362		$	133,442	$	-	$	63,422	$	196,864		$	113,858	$	-	$	373,226	$	487,084		$	106,300	$	-	$	352,521	$	458,821
Retail		1,189		-		5,727		6,916			1,272		-		6,326		7,598			1,082		-		23,120		24,202			1,063		-		24,971		26,034
Wholesale		-		9,321		7,908		17,229			-		8,838		8,710		17,548			-		7,270		68,238		75,508			-		5,793		62,511		68,304
BloomNet services		-		18,864		-		18,864			-		15,660		-		15,660			-		18,452		-		18,452			-		17,642		-		17,642
Other		1,080		-		-		1,080			1,068		-		-		1,068			776		-		-		776			743		-		-		743
Corporate		-		-		-		263			-		-		-		264			-		-		-		165			-		-		-		315
Eliminations		-		-		-		(301	)		-		-		-		(457	)		-		-		-		(545	)		-		-		-		(543	)
Net revenues	$	144,821	$	28,185	$	75,445	$	248,413		$	135,782	$	24,498	$	78,458	$	238,545		$	115,716	$	25,722	$	464,584	$	605,642		$	108,106	$	23,435	$	440,003	$	571,316

	Nine Months Ended									Nine Months Ended									Six months ended									Six months ended
	March 31, 2019									April 1, 2018									December 29, 2019									December 30, 2018
	Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated			Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated			Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated			Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated
Net revenues																			(in thousands)
E-commerce	$	332,302	$	-	$	448,581	$	780,883		$	306,479	$	-	$	423,289	$	729,768		$	202,946	$	-	$	413,188	$	616,134		$	189,750	$	-	$	386,771	$	576,521
Retail		3,113		-		38,477		41,590			3,199		-		39,270		42,469			2,021		-		30,610		32,631			1,924		-		32,750		34,674
Wholesale		-		23,247		88,908		112,155			-		22,204		82,849		105,053			-		16,018		92,001		108,019			-		13,926		81,000		94,926
Bloomnet services		-		52,366		-		52,366			-		42,433		-		42,433
BloomNet services																				-		35,144		-		35,144			-		33,502		-		33,502
Other		2,588		-		-		2,588			2,778		-		-		2,778			1,517		-		-		1,517			1,508		-		-		1,508
Corporate		-		-		-		845			-		-		-		851			-		-		-		360			-		-		-		582
Eliminations		-		-		-		(1,202	)		-		-		-		(1,365	)		-		-		-		(900	)		-		-		-		(901	)
Net revenues	$	338,003	$	75,613	$	575,966	$	989,225		$	312,456	$	64,637	$	545,408	$	921,987		$	206,484	$	51,162	$	535,799	$	792,905		$	193,182	$	47,428	$	500,521	$	740,812

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Note 13 – Leases

The Company currently leases plants, warehouses, offices, store facilities, and equipment under various leases through fiscal 2034. Most lease agreements are of a long-term nature (over a year), although the Company does also enter into short-term leases, primarily for seasonal needs. Lease agreements may contain renewal options and rent escalation clauses and require the Company to pay real estate taxes, insurance, common area maintenance and operating expenses applicable to the leased properties. The Company accounts for its leases in accordance with ASC 842. At contract inception, we determine whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time, by assessing whether we have the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset.

At the lease commencement date, we determine if a lease should be classified as an operating or a finance lease (we currently have no finance leases) and recognize a corresponding lease liability and a right-of-use asset on our Balance Sheet. The lease liability is initially and subsequently measured as the present value of the remaining fixed minimum rental payments (including base rent and fixed common area maintenance) using discount rates as of the commencement date. Variable payments (including most utilities, real estate taxes, insurance and variable common area maintenance) are expensed as incurred. 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			Six Months Ended
	December 29, 2019			December 29, 2019
	(in thousands)
Lease costs:
Operating lease costs	$	3,666		$	7,306
Variable lease costs		4,346			7,886
Short-term lease cost		3,905			4,970
Sublease income		(208	)		(478	)
Total lease costs	$	11,709		$	19,684

	Six Months Ended
	December 29, 2019
	(in thousands)
Cash paid for amounts included in measurement of operating lease liabilities	$	6,807
Right-of-use assets obtained in exchange for new operating lease liabilities	$	178

	December 29, 2019
	(in thousands)
Weighted-average remaining lease term - operating leases	9.7 years
Weighted-discount rate - operating leases		3.8	%

Maturities of lease liabilities in accordance with ASC 842 as of December 29, 2019 are as follows (in thousands):

Remainder of 2020	$	5,402
2021		11,679
2022		10,310
2023		9,901
2024		9,452
Thereafter		44,888
Total Future Minimum Lease Payments	$	91,632
Less Imputed Remaining Interest		16,378
Total	$	75,254

At June 30, 2019, in accordance with ASC 840, future minimum rental payments under non-cancelable operating leases with initial terms of one year or more consisted of the following (in thousands):

2020	$	16,588
2021		13,490
2022		12,081
2023		9,957
2024		9,498
Thereafter		44,953
Total Future Minimum Lease Payments	$	106,567

Note 1314 – Commitments and Contingencies

Litigation

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 ultimate 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~~liquidity.

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ITEM 2.2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) is intended to provide an understanding of our financial condition, change in financial condition, cash flow, liquidity and results of operations. The following MD&A discussion should be read in conjunction with the consolidated financial statements and notes to those statements that appear elsewhere in this Form 10-Q and in the Company’s Annual Report on Form 10-K, for the year ended ~~July 1, 2018~~June 30, 2019. The following discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’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 Information and Factors That May Affect Future Results” and under Part I, Item 1A, of the Company’s Annual Report on Form 10-K, for the year ended ~~July 1, 2018~~June 30, 2019 under the heading “Risk Factors.”

Overview

1-800-FLOWERS.COM, Inc. and its subsidiaries (collectively, the “Company”) is a leading provider of gifts designed to help customers express, connect and ~~celebrate~~.celebrate. For more than 40 years, 1-800-Flowers.com® has been delivering smiles to customers with gifts for every occasion, including fresh flowers and the best selection of plants, gift baskets, gourmet foods, confections, jewelry, candles, balloons and plush stuffed animals. As always, our 100% Smile Guarantee® backs every gift.

The Company’s Celebrations Ecosystem includes the following brands: 1-800-Flowers.com®, 1-800-Baskets.com®, Cheryl’s Cookies®, ~~FruitBouquets.com®,~~ Harry & David®, Shari's Berries®, FruitBouquets.com^SM, Moose Munch®, The Popcorn Factory®, ~~Wolferman’s®,~~Wolferman’s Bakery ®, Personalization Universe®, Simply Chocolate®, ~~Goodsey~~^SMGoodsey®, DesignPac®, and Stock Yards®. Through the Celebrations Passport® loyalty program, which provides members with free standard shipping and no service charge across our portfolio of brands, 1-800-FLOWERS.COM, Inc. strives to deepen its relationships with its customers. The Company also operates BloomNet®, an international floral wire service providing a ~~broad-range~~broad range of products and services designed to help professional florists grow their businesses ~~profitably,~~profitably; as well as Napco^SM, a resource for floral gifts and seasonal décor.

1-800-FLOWERS.COM, Inc. ~~received~~was recognized as the ~~Gold award in~~2019 Mid-Market Company of the ~~“Mobile Payments and Commerce” category at the Mobile Marketing Association 2018 Global Smarties Awards. In addition, Harry & David was named to the Internet Retailer 2019 “The Hot 100” list.~~ Year by CEO Connection.

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

For additional information, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” of our Annual Report on Form 10-K for the year ended ~~July 1, 2018.~~June 30, 2019.

Definitions of non-GAAP Financial Measures:

We sometimes use financial measures derived from consolidated financial information, but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain of these are considered "non-GAAP financial measures" under the U.S. Securities and Exchange Commission rules. See below for definitions and the reasons why we use these non-GAAP financial measures. Where applicable, see the Segment Information and Results of Operations sections below for reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measures. These non-GAAP financial measures are referred to as “adjusted" or “on a comparable basis” below.

EBITDA and adjusted EBITDA

We define EBITDA as net income (loss) before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for the impact of stock-based compensation, ~~Non-Qualified~~NQDC Plan ~~Investment~~investment appreciation/depreciation, and for certain items affecting period to period comparability. See Segment Information for details on how EBITDA and adjusted EBITDA were calculated for each period presented.

The Company presents EBITDA and adjusted EBITDA because it considers such information meaningful supplemental measures of its performance and believes such information is frequently used by the investment community in the evaluation of similarly situated companies. The Company uses EBITDA and adjusted EBITDA as factors ~~used~~ to determine the total amount of incentive compensation available to be awarded to executive officers and other employees. The Company's credit agreement uses EBITDA and adjusted EBITDA to measure compliance with covenants such as interest coverage and debt incurrence. EBITDA and adjusted EBITDA are also used by the Company to evaluate and price potential acquisition candidates.

EBITDA 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 margin

We define segment contribution margin as earnings before interest, taxes, depreciation and amortization, before the allocation of corporate overhead expenses. See Segment Information for details on how segment contribution margin was calculated for each period presented.

When viewed together with our GAAP results, we believe segment contribution margin provides management and users of the financial statements meaningful information about the performance of our business segments.

Segment contribution margin is 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 is that it is an incomplete measure of profitability as it does 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 and adjusted net income per common share~~

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

~~We believe that adjusted net income and adjusted net income per common share are meaningful measures because they increase the comparability of period to period results.~~

Since these are not measures of performance calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, GAAP net income and net income per common share, as indicators of operating performance and they may not be comparable to similarly titled measures employed by other companies.

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Segment Information

The following table presents the net revenues, gross profit and segment contribution margin from each of the Company’s business segments, as well as consolidated EBITDA, ~~adjusted EBITDA~~ and adjusted ~~net income.~~EBITDA.

	Three Months Ended
	December 29, 2019			December 30, 2018			% Change
	(dollars in thousands)
Net revenues:
1-800-Flowers.com Consumer Floral	$	115,716		$	108,106			7.0	%
BloomNet Wire Service		25,722			23,435			9.8	%
Gourmet Food & Gift Baskets		464,584			440,003			5.6	%
Corporate		165			315			(47.6	%)
Intercompany eliminations		(545	)		(543	)		(0.4	%)
Total net revenues	$	605,642		$	571,316			6.0	%

Gross profit:
1-800-Flowers.com Consumer Floral	$	44,544		$	41,632			7.0	%
		38.5	%		38.5	%

BloomNet Wire Service		13,161			12,328			6.8	%
		51.2	%		52.6	%

Gourmet Food & Gift Baskets		211,362			200,666			5.3	%
		45.5	%		45.6	%

Corporate		105			201			(47.8	%)
		63.6	%		63.8	%

Total gross profit	$	269,172		$	254,827			5.6	%
		44.4	%		44.6	%

EBITDA (non-GAAP):
Segment Contribution Margin (non-GAAP) (a):
1-800-Flowers.com Consumer Floral	$	10,890		$	9,808			11.0	%
BloomNet Wire Service		9,134			8,257			10.6	%
Gourmet Food & Gift Baskets		113,387			105,514			7.5	%
Segment Contribution Margin Subtotal		133,411			123,579			8.0	%
Corporate (b)		(26,010	)		(20,925	)		(24.3	%)
EBITDA (non-GAAP)		107,401		$	102,654			4.6	%
Add: Stock-based compensation		2,280			1,673			36.3	%
Add: Compensation charge related to NQ plan investment appreciation/(depreciation)		1,002			(1,249	)		180.2	%
Adjusted EBITDA (non-GAAP)	$	110,683		$	103,078			7.4	%

Three Months Ended

March 31, 2019

April 1, 2018

% Change

Net revenues:

1-800-Flowers.com Consumer Floral
$ 144,821 $ 135,782 6.7 %
BloomNet Wire Service
28,185 24,498 15.1 %
Gourmet Food & Gift Baskets
75,445 78,458 (3.8% )
Corporate
263 264 (0.4% )
Intercompany eliminations
(301 ) (457 ) 34.1 %
Total net revenues
$ 248,413 $ 238,545 4.1 %

Gross profit:

1-800-Flowers.com Consumer Floral
$ 56,334 $ 53,744 4.8 %
38.9 % 39.6 %

BloomNet Wire Service
14,071 12,931 8.8 %
49.9 % 52.8 %

Gourmet Food & Gift Baskets
26,848 26,532 1.2 %
35.6 % 33.8 %

Corporate
267 248 7.7 %
101.5 % 93.9 %

Total gross profit
$ 97,520 $ 93,455 4.3 %
39.3 % 39.2 %

EBITDA (non-GAAP)

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

1-800-Flowers.com Consumer Floral
$ 15,364 $ 16,226 (5.3% )
BloomNet Wire Service
9,480 8,439 12.3 %
Gourmet Food & Gift Baskets
(7,202 ) (8,811 ) 18.3 %
Segment Contribution Margin Subtotal
17,642 15,854 11.3 %
Corporate (b)
(25,243 ) (20,408 ) (23.7% )
EBITDA (non-GAAP)
(7,601 ) (4,554 ) (66.9% )

Add: Stock-based compensation
1,903 933 104.0 %
Add: Compensation charge related to NQDC Plan investment appreciation
1,294 30 4,213.3 %
Adjusted EBITDA (non-GAAP)
$ (4,404 ) $ (3,591 ) (22.8% )

	Six Months Ended
	December 29, 2019			December 30, 2018			% Change
	(dollars in thousands)
Net revenues:
1-800-Flowers.com Consumer Floral	$	206,484		$	193,182			6.9	%
BloomNet Wire Service		51,162			47,428			7.9	%
Gourmet Food & Gift Baskets		535,799			500,521			7.0	%
Corporate		360			582			(38.1	%)
Intercompany eliminations		(900	)		(901	)		0.1	%
Total net revenues	$	792,905		$	740,812			7.0	%

Gross profit:
1-800-Flowers.com Consumer Floral	$	80,594		$	74,920			7.6	%
		39.0	%		38.8	%

BloomNet Wire Service		26,119			24,235			7.8	%
		51.1	%		51.1	%

Gourmet Food & Gift Baskets		238,404			223,702			6.6	%
		44.5	%		44.7	%

Corporate		201			510			(60.6	%)
		55.8	%		87.6	%

Total gross profit	$	345,318		$	323,367			6.8	%
		43.6	%		43.7	%
EBITDA (non-GAAP):
Segment Contribution Margin (non-GAAP) (a):
1-800-Flowers.com Consumer Floral	$	19,414		$	17,303			12.2	%
BloomNet Wire Service		17,491			15,895			10.0	%
Gourmet Food & Gift Baskets		106,787			96,393			10.8	%
Segment Contribution Margin Subtotal		143,692			129,591			10.9	%
Corporate (b)		(49,309	)		(42,060	)		(17.2	%)
EBITDA (non-GAAP)		94,383			87,531			7.8	%
Add: Stock-based compensation		4,045			2,628			53.9	%
Add: Compensation charge related to NQ plan investment appreciation/(depreciation)		958			(967	)		199.1	%
Adjusted EBITDA (non-GAAP)	$	99,386		$	89,192			11.4	%

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Nine Months Ended

March 31, 2019

April 1, 2018

% Change

Net revenues:

1-800-Flowers.com Consumer Floral
$ 338,003 $ 312,456 8.2 %
BloomNet Wire Service
75,613 64,637 17.0 %
Gourmet Food & Gift Baskets
575,966 545,408 5.6 %
Corporate
845 851 (0.7% )
Intercompany eliminations
(1,202 ) (1,365 ) 11.9 %
Total net revenues
$ 989,225 $ 921,987 7.3 %

Gross profit:

1-800-Flowers.com Consumer Floral
$ 131,254 $ 123,322 6.4 %
38.8 % 39.5 %

BloomNet Wire Service
38,306 35,682 7.4 %
50.7 % 55.2 %

Gourmet Food & Gift Baskets
250,550 236,152 6.1 %
43.5 % 43.3 %

Corporate (b)
777 836 (7.1% )
92.0 % 98.2 %

Total gross profit
$ 420,887 $ 395,992 6.3 %
42.5 % 42.9 %

EBITDA (non-GAAP)

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

1-800-Flowers.com Consumer Floral
$ 32,667 $ 33,988 (3.9% )
BloomNet Wire Service
25,375 22,832 11.1 %
Gourmet Food & Gift Baskets
89,191 79,698 11.9 %
Segment Contribution Margin Subtotal
147,233 136,518 7.8 %
Corporate (b)
(67,303 ) (59,448 ) (13.2% )
EBITDA (non-GAAP)
79,930 77,070 3.7 %
Add: Stock-based compensation
4,531 3,002 50.9 %
Add: Compensation charge related to NQDC Plan investment appreciation
327 669 (51.2% )

Adjusted EBITDA (non-GAAP)
$ 84,788 $ 80,741 5.0 %

~~Table of Contents~~

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

Three Months Ended

Nine Months Ended

March 31, 2019

April 1, 2018

March 31, 2019

April 1, 2018

Net income (loss)
$ (8,241 ) $ (8,463 ) $ 43,071 $ 49,014
Adjustments to reconcile net income (loss) to adjusted net income (loss) (non-GAAP):

Deduct U.S. tax reform benefit on deferred taxes (c)
- - - 12,158
Adjusted net income (loss) (non-GAAP)
$ (8,241 ) $ (8,463 ) $ 43,071 $ 36,856

Basic and diluted net income (loss) per common share

Basic
$ (0.13 ) $ (0.13 ) $ 0.67 $ 0.76
Diluted
$ (0.13 ) $ (0.13 ) $ 0.65 $ 0.73

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

Basic
$ (0.13 ) $ (0.13 ) $ 0.67 $ 0.57
Diluted
$ (0.13 ) $ (0.13 ) $ 0.65 $ 0.55

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

Basic
64,194 64,527 64,383 64,694
Diluted
64,194 64,527 66,456 66,949

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

Three Months Ended

Nine Months Ended

March 31, 2019

April 1, 2018

March 31, 2019

April 1, 2018

Net income (loss)
$ (8,241 ) $ (8,463 ) $ 43,071 $ 49,014
Add:

Interest (income) expense, net
(1,315 ) 693 2,097 2,604
Depreciation and amortization
7,028 7,885 22,840 24,646
Income tax expense
- - 11,922 806
Less:

Income tax benefit
5,073 4,669 - -
EBITDA
(7,601 ) (4,554 ) 79,930 77,070
Add: Compensation charge related to NQDC Plan investment appreciation
1,294 30 327 669
Add: Stock-based compensation
1,903 933 4,531 3,002
Adjusted EBITDA
$ (4,404 ) $ (3,591 ) $ 84,788 $ 80,741

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.
	c)	The adjustment to deduct the U.S. tax reform impact 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, as a result of the Tax Act, but does not include the ongoing impact of the lower federal corporate tax rate.

~~Table of Contents~~

Reconciliation of net income to adjusted EBITDA (non-GAAP):	Three Months Ended					Six Months Ended
	December 29, 2019		December 30, 2018			December 29, 2019		December 30, 2018
	(in thousands)
Net income	$	74,152	$	68,578		$	58,881	$	51,312
Add:
Interest expense, net		10		2,696			689		3,412
Depreciation and amortization		7,830		7,969			15,465		15,812
Income tax expense		25,409		23,411			19,348		16,995
EBITDA		107,401		102,654			94,383		87,531
Add: Stock-based compensation		2,280		1,673			4,045		2,628
Add: Compensation charge related to NQ plan investment appreciation/(depreciation)		1,002		(1,249	)		958		(967	)
Adjusted EBITDA	$	110,683	$	103,078		$	99,386	$	89,192

(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~~Results~~ of Operations

Net revenues

	Three Months Ended							Nine Months Ended							Three Months Ended							Six Months Ended
	March 31, 2019		April 1, 2018		% Change			March 31, 2019		April 1, 2018		% Change			December 29, 2019		December 30, 2018		% Change			December 29, 2019		December 30, 2018		% Change
	(dollars in thousands)														(dollars in thousands)
Net revenues:
E-Commerce	$	204,361	$	196,866		3.8	%	$	780,882	$	729,769		7.0	%	$	487,084	$	458,821		6.2	%	$	616,134	$	576,521		6.9	%
Other		44,052		41,679		5.7	%		208,343		192,218		8.4	%		118,558		112,495		5.4	%		176,771		164,291		7.6	%
Total net revenues	$	248,413	$	238,545		4.1	%	$	989,225	$	921,987		7.3	%	$	605,642	$	571,316		6.0	%	$	792,905	$	740,812		7.0	%

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

Net revenues increased ~~4.1%~~6.0% and 7.0% during the three and six months ended ~~March 31,~~December 29, 2019, respectively, compared to the same ~~period~~periods of the prior year, due to ~~strong~~ growth across all three of the Company’s business segments. Revenues within the 1-800-Flowers.com Consumer Floral segment increased 7.0% and ~~BloomNet segments~~6.9% during the ~~Valentine’s Day holiday,~~three and six months ended December 29, 2019, compared to the same periods of teh prior year, due to marketing and product innovations introduced by the 1-800-Flowers flagship brand, while revenues within the BloomNet Wire Service segment increased 9.8% and 7.9% over the same periods as ~~well as for everyday gifting occasions. Quarterly growth~~a result of increases in ~~these segments was partially offset by a year over year decline within~~its advertising services and wholesale product volume. Due to the seasonality of its businesses, the Gourmet Food & Gift Baskets segment ~~which was negatively impacted by~~comprises approximately 77% and 68% of total consolidated revenues during the ~~shift in~~three and six months ended December 29, 2019, respectively. Revenue growth of 5.6% and 7.0% for the ~~Easter Holiday~~periods presented, is primarily attributable to: (i) Harry & David e-commerce growth, resulting from the ~~third quarter in fiscal 2018 to the fourth quarter in fiscal 2019.~~

~~Net revenues increased 7.3% during the nine months ended March 31, 2019, compared to the same period~~continuing digital transformation of ~~the prior year, due to strong customer demand for both holiday and everyday gifting occasions in our Gourmet Food & Gift Baskets and Consumer Floral segments,~~its marketing programs, as well as ~~membership, transaction and services~~its expanded product offerings, combined with (ii) strong growth in the ~~BloomNet WireService segment,~~1-800-Baskets wholesale gift business, and (iii) contributions from the Shari’s Berries brand, which was acquired in August 2019, and contributed approximately 1.2% of consolidated incremental growth during both the three and six months ended December 29, 2019, partially offset by the ~~shift~~impact of the shortened holiday shopping season caused by the late Thanksgiving/Cyber Monday, which resulted in 6 fewer shopping days between Thanksgiving and Christmas in the ~~Easter Holiday referred~~second quarter of fiscal 2020 in comparison to ~~above.~~the prior year.

Disaggregated revenue by channel follows:

	Three Months Ended									Three Months Ended									Three Months Ended									Three Months Ended
	March 31, 2019									April 1, 2018									December 29, 2019									December 30, 2018
	Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated			Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated			Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated			Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated
Net revenues																			(in thousands)
E-commerce	$	142,552	$	-	$	61,810	$	204,362		$	133,442	$	-	$	63,422	$	196,864		$	113,858	$	-	$	373,226	$	487,084		$	106,300	$	-	$	352,521	$	458,821
Retail		1,189		-		5,727		6,916			1,272		-		6,326		7,598			1,082		-		23,120		24,202			1,063		-		24,971		26,034
Wholesale		-		9,321		7,908		17,229			-		8,838		8,710		17,548			-		7,270		68,238		75,508			-		5,793		62,511		68,304
BloomNet services		-		18,864		-		18,864			-		15,660		-		15,660			-		18,452		-		18,452			-		17,642		-		17,642
Other		1,080		-		-		1,080			1,068		-		-		1,068			776		-		-		776			743		-		-		743
Corporate		-		-		-		263			-		-		-		264			-		-		-		165			-		-		-		315
Eliminations		-		-		-		(301	)		-		-		-		(457	)		-		-		-		(545	)		-		-		-		(543	)
Net revenues	$	144,821	$	28,185	$	75,445	$	248,413		$	135,782	$	24,498	$	78,458	$	238,545		$	115,716	$	25,722	$	464,584	$	605,642		$	108,106	$	23,435	$	440,003	$	571,316

	Six months ended									Six months ended
	December 29, 2019									December 30, 2018
	Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated			Consumer Floral		BloomNet Wire Service		Gourmet Food and Gift Baskets		Consolidated
Net revenues	(in thousands)
E-commerce	$	202,946	$	-	$	413,188	$	616,134		$	189,750	$	-	$	386,771	$	576,521
Retail		2,021		-		30,610		32,631			1,924		-		32,750		34,674
Wholesale		-		16,018		92,001		108,019			-		13,926		81,000		94,926
BloomNet services		-		35,144		-		35,144			-		33,502		-		33,502
Other		1,517		-		-		1,517			1,508		-		-		1,508
Corporate		-		-		-		360			-		-		-		582
Eliminations		-		-		-		(900	)		-		-		-		(901	)
Net revenues	$	206,484	$	51,162	$	535,799	$	792,905		$	193,182	$	47,428	$	500,521	$	740,812

Nine Months Ended

Nine Months Ended

March 31, 2019

April 1, 2018

Consumer Floral

BloomNet Wire Service

Gourmet Food and Gift Baskets

Consolidated

Consumer Floral

BloomNet Wire Service

Gourmet Food and Gift Baskets

Consolidated

Net revenues

E-commerce
$ 332,302 $ - $ 448,581 $ 780,883 $ 306,479 $ - $ 423,289 $ 729,768
Retail
3,113 - 38,477 41,590 3,199 - 39,270 42,469
Wholesale
- 23,247 88,908 112,155 - 22,204 82,849 105,053
Bloomnet services
- 52,366 - 52,366 - 42,433 - 42,433
Other
2,588 - - 2,588 2,778 - - 2,778
Corporate
- - - 845 - - - 851
Eliminations
- - - (1,202 ) - - - (1,365 )
Net revenues
$ 338,003 $ 75,613 $ 575,966 $ 989,225 $ 312,456 $ 64,637 $ 545,408 $ 921,987

Table of Contents

Revenue by sales channel:

E-commerce revenues (combined online and telephonic) increased by ~~3.8%~~6.2% during the three months ended ~~March 31,~~December 29, 2019, compared to the same period of the prior year, primarily as a result of growth within the Gourmet Food & Gift Baskets segment of 5.9%, complemented by growth within the 1-800-Flowers.comConsumer Floral segment of 7.1%. During the three months ended December 29, 2019, the Company fulfilled approximately 5.8 million orders through its e-commerce sales channels (online and telephonic sales), an increase of 4.8% compared to the same period of the prior year, while average order value increased 1.3%, to $84.53, during the three months ended December 29, 2019, compared to the same period of the prior year.

E-commerce revenues (combined online and telephonic) increased by 6.9% during the six months ended December 29, 2019, compared to the same period of the prior year, as a result of growth within the ~~Consumer Floral segment of 6.8%, partially offset by a decline in the~~ Gourmet ~~Foods~~Food & Gift Baskets ~~segment~~and 1-800-Flowers.com Consumer Floral segments of ~~2.5%~~6.8% and 7.0%, ~~primarily due to~~respectively. During the ~~shift of the Easter holiday from the third quarter in fiscal 2018 to the fourth quarter in fiscal 2019. E-commerce revenues increased by 7.0% during the nine~~six months ended March 31, 2019, compared to the same period of the prior year, as a result of growth within the Consumer Floral segment of 8.4% and growth in the Gourmet Foods & Gift Baskets segment of 6.0%. During the three months ended March 31,December 29, 2019, the Company fulfilled approximately ~~3,047,000~~7.5 million orders through its e-commerce sales channels (online and telephonic sales), ~~a decrease~~an increase of ~~0.9%~~5.3% compared to the same period of the prior year, while average order value increased ~~4.7%~~1.5%, to ~~$67.07,~~$81.82, during the ~~three~~six months ended ~~March 31,~~December 29, 2019, compared to the same period of the prior year, primarily due to product sales and segment mix shift due to the timing of the Easter Holiday. During the nine months ended March 31, 2019, the Company fulfilled approximately 10,130,000 orders through its e-commerce sales channels (online and telephonic sales), an increase of 4.6% compared to the same period of the prior year, while average order value increased 2.3%, to $77.08 during the comparative period.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.comConsumer Floral and Gourmet Food & Gift Baskets segments. Other revenues increased by ~~5.7%~~5.4% during the three months ended ~~March 31,~~December 29, 2019, compared to the same period of the prior year, due to growth within the Gourmet Food & Gift Baskets segment of 4.4% and BloomNet Wire Service segment of ~~15%, partially offset by a decline in the Gourmet Foods & Gift Baskets segment of 9.3%, primarily due to the Easter shift.~~ 9.8%.

Other revenues increased by ~~8.4%~~7.6% during the ~~nine~~six months ended ~~March 31,~~December 29, 2019, compared to the same period of the prior year, driven primarily ~~as a result of~~by growth within the ~~Bloomnet and~~ Gourmet ~~Foods~~Food & Gift Baskets ~~segments~~segment of ~~17.0%~~7.8% and ~~4.3%, respectively.~~

~~Table~~BloomNet Wire Service segment of ~~Contents~~

7.9%.

Revenue by segment:

1-800-Flowers.com Consumer Floral – this segment, ~~includes~~which consists primarily of the operations of the 1-800-Flowers.com brand, ~~which~~ derives revenue from the sale of consumer floral products through its e-commerce sales channels (telephonic and online sales), retail stores, and royalties from its franchise operations. Net revenues increased ~~6.7%~~7.0% and ~~8.2%,~~6.9% during the three and ~~nine~~six months ended ~~March 31,~~December 29, 2019, compared to the same periods of the prior year, ~~due to volume growth in both holiday and “everyday” gifting occasions, such as Birthday, Sympathy, Get-well, and Thank-you, driven in part by~~reflecting the ~~Company’s investments in~~ strategic marketing and merchandising ~~programs designed to accelerate growth and increase market share.~~investments that we have been making in the Company’s flagship brand.

BloomNet Wire Service ~~-revenues~~- revenues in this segment are derived from membership fees, as well as other product and service offerings to florists. Net revenues increased ~~15.0%~~9.8% and ~~17.0%~~7.9% during the three and ~~nine~~six months ended ~~March 31,~~December 29, 2019, ~~respectively,~~ compared to the same periods of the prior year, primarily due to higher services ~~revenues,~~revenue, including ~~membership, reciprocity, clearinghouse,~~digital directory and transaction fees ~~driven~~(driven primarily by increased 1-800-Flowers and ~~florist-to-florist orders~~Shari’s Berries order volume sent through the ~~network,~~network), as well as ~~an increase in~~increasing demand for our expanded line of wholesale ~~product volume.~~products.

Gourmet Food & Gift Baskets – this segment includes the operations of Harry & David, Wolferman’s, ~~Stockyards,~~Stock Yards, Cheryl’s Cookies, The Popcorn Factory, 1-800-Baskets/DesignPac, and ~~1-800-Baskets/DesignPac.~~Shari’s Berries (acquired on August 14, 2019). Revenue is derived from the sale of gourmet fruits, cookies, baked gifts, premium chocolates and confections, gourmet popcorn, gift baskets, dipped berries, and prime steaks and chops through the Company’s e-commerce sales channels (telephonic and online sales) and company-owned and operated retail stores under the Harry & David and Cheryl’s brand names, as well as wholesale operations. Net revenues ~~decreased 3.8%~~increased 5.6% and 7.0% during the three and six months ended ~~March 31,~~December 29, 2019, compared to the same ~~period~~periods of the prior year primarily due ~~to the Easter holiday shift, partially offset by~~to: (i) Harry & David growth which continues to benefit from the digital transformation of its marketing programs as well as its expanded product offerings of unique, shareable gifts for both holiday (seasonal fruits and 1-800-Baskets growth in “everyday” occasions. Net revenues increased 5.6% during the nine months ended March 31, 2019, compared to the same period of the prior year attributable to: (i) strong growth atbakery) and everyday occasions, as well as Harry & ~~David, driven by improved merchandising assortments, increased investments in digital marketing programs,~~David’s Gourmet line, which ~~contributed~~includes prepared meals and wines for both gifting and entertaining, which is enabling the brand to attract new ~~customer growth, and its “Share More” messaging which resonated~~customers while also deepening engagement with ~~customers; and~~existing customers, (ii) strong growth in the ~~1-800-Baskets/~~DesignPac wholesale business due to increased demand ~~from~~fueled by new product designs and ~~existing wholesale customers, as well as e-commerce demand for~~an expanded customer list, and (iii) the ~~Simply Chocolates line~~acquisition of ~~products, partially offset by the impact of the Easter holiday.~~Shari’s Berries on August 14, 2019.

Gross profit

	Three Months Ended									Nine Months Ended									Three Months Ended									Six Months Ended
	March 31, 2019			April 1, 2018			% Change			March 31, 2019			April 1, 2018			% Change			December 29, 2019			December 30, 2018			% Change			December 29, 2019			December 30, 2018			% Change
	(dollars in thousands)																		(dollars in thousands)

Gross profit	$	97,520		$	93,455			4.3	%	$	420,887		$	395,992			6.3	%	$	269,172		$	254,827			5.6	%	$	345,318		$	323,367			6.8	%
Gross profit %		39.3	%		39.2	%					42.5	%		42.9	%					44.4	%		44.6	%					43.6	%		43.7	%

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

Gross profit increased ~~4.3%~~5.6% and ~~6.3%~~6.8% during the three and ~~nine~~six months ended ~~March 31,~~December 29, 2019, ~~respectively,~~ compared to the same periods of the prior year, ~~due to~~as a result of the increase in revenues noted ~~above.~~above, partially offset by a slight decrease in gross profit percentage. Gross profit percentage ~~increased~~declined 20 basis points and 10 basis points, to 44.4% and 43.6%, during the respective three and six months ended ~~March 31,~~December 29, 2019, compared to the same ~~period~~periods of the prior year, as a result of ~~lower~~a product mix, combined with macro-economic headwinds including: (i) rising labor and transportation costs; (ii) tariffs; and (iii) a highly promotional ~~activity, and reduced transportation costs due to logistics initiatives, partially~~Christmas holiday associated with the shortened shopping season caused by the late Thanksgiving holiday, largely offset by ~~BloomNet’s lower gross margin percentage due to sales mix. Gross profit percentage decreased 40 basis points during~~ the ~~nine months ended March 31, 2019 compared to the same period~~Company’s strategic pricing initiatives, efficient use of ~~the prior year, reflecting BloomNet’s lower gross margin percentage, as well as rising seasonal labor costs,~~promotional marketing programs, and the growth of our Celebrations Passport free shipping program, partially offset by Gourmet Food & Gift Baskets logistics initiatives, which reduced per order transportation costs, as well as manufacturing initiatives including automation and shifting some production to earlier in the season to better utilize our core workforce.operational productivity improvements.

1-800-Flowers.com Consumer Floral segment - Gross profit increased by ~~4.8%~~7.0% and ~~6.4%~~7.6% during the three and ~~nine~~six months ended ~~March 31,~~December 29, 2019, ~~respectively,~~ compared to the same periods of the prior year, as a result of the revenue increases noted ~~above, partially offset by a decrease in gross~~above. Gross profit percentage of ~~70 basis points~~38.5%, during ~~both periods in comparison to~~ the ~~respective periods~~three months ended December 29, 2019, was consistent with the same period of the prior ~~year. The lower gross profit percentages reflect higher product costs, an increased Celebrations Passport program participation, which has~~year, and improved ~~customer loyalty and purchase frequency, and increased transportation costs.~~20 basis points, to 39.0%, during the six months ended December 29, 2019 compared to the same period of the prior year, primarily due to efficient use of promotional pricing programs.

BloomNet Wire Service segment - Gross profit increased by ~~8.8% and 7.4%~~6.8% during the three ~~and nine~~ months ended ~~March 31,~~December 29, 2019, ~~respectively,~~ compared to the same ~~periods~~period of the prior year, due to the increase in revenues noted above, partially offset by a ~~decrease~~decline in gross ~~profit~~margin percentage of ~~290 and 450~~140 basis points, to ~~49.9% and 50.7%~~51.2%, ~~respectively. The lower gross profit percentages are~~ due to product sales mix associated with the ~~mix impact resulting from the~~outsized increase in ~~the volume of lower margin florist-to-florist orders on membership and transaction fee margins.~~

~~Gourmet Food & Gift Baskets segment~~ -wholesale product revenues. Gross profit increased by ~~1.2%~~7.8% during the ~~three~~six months ended March 31, 2019, compared to the same period of the prior year, due to improved margins, partially offset by the decrease in revenue due to the Easter shift as noted above. Gross profit percentage increased 180 basis points to 35.6% during the three months ended March 31, 2019, reflecting logistics initiatives to reduce shipping and transportation costs, combined with strategic pricing initiatives. Gross profit increased 6.1% during the nine months ended March 31,December 29, 2019 compared to the same period of the prior year due to the increase in revenues noted above, as ~~well as increased margins.~~gross margin percentage of 51.1% was consistent with the same period of the prior year.

Gourmet Food & Gift Baskets segment - Gross profit increased by 5.3% and 6.6% during the three and six months ended December 29, 2019, compared to the same periods of the prior year, due to the revenue increase noted above, partially offset by gross profit percentage ~~increased~~which decreased 10 basis points to 45.5%, and 20 basis points to ~~43.5%~~44.5% during the ~~nine~~three months ended ~~March 31,~~and six months ended December 29, 2019 ~~due~~compared to logistics initiatives which reduced shipping and transportation costs, combined with strategic pricing initiatives, and improved operational performance at Cheryl’s, partially offset by rising labor costs, and penetrationthe same periods of the ~~Celebrations Passport program.~~prior year, primarily as a result of the input cost increases described above.

Table of Contents

Marketing and sales expense

	Three Months Ended									Nine Months Ended									Three Months Ended									Six Months Ended
	March 31, 2019			April 1, 2018			% Change			March 31, 2019			April 1, 2018			% Change			December 29, 2019			December 30, 2018			% Change			December 29, 2019			December 30, 2018			% Change
	(dollars in thousands)																		(dollars in thousands)

Marketing and sales	$	71,163		$	68,215			4.3	%	$	243,781		$	231,708			5.2	%	$	127,404		$	119,664			6.5	%	$	184,243		$	172,618			6.7	%
Percentage of net revenues		28.6	%		28.6	%					24.6	%		25.1	%					21.0	%		20.9	%					23.2	%		23.3	%

Marketing and sales expense consists primarily of advertising and promotional expenditures, catalog costs, online portal and search costs, retail store and fulfillment operations (other than costs included in cost of revenues) and customer service center expenses, as well as the operating expenses of the Company’s departments engaged in marketing, selling and merchandising activities.

Marketing and sales expense increased ~~4.3%~~6.5% and ~~5.2%~~6.7% during the three and ~~nine~~six months ended ~~March 31,~~December 29, 2019, compared to the same periods of the prior year, primarily due to increased advertising spend within the ~~Consumer Floral and~~ Gourmet Food & Gift Baskets and 1-800-Flowers.comConsumer Floral segments, ~~as a result of~~due to the Company’s incremental marketing efforts designed to accelerate revenue growth and capture market share, ~~coupled with an increase in performance-based bonuses~~partially offset by operational efficiencies and ~~timing of catalog amortization due~~platform leverage attributable to the ~~adoption of ASC 606. Increased efficiency around our digital marketing programs generated strong~~ revenue ~~growth, which in turn, enabled us to leverage our platform, while automation initiatives in our service centers drove lower customer service costs.~~growth. As a result, ~~despite the shift of the Easter Holiday,~~ marketing and sales as a percentage of net revenues ~~during~~increased 10 basis points, to 21.0% for the three months ended ~~March 31,~~December 29, 2019, ~~was consistent with prior year at 28.6%, and~~but decreased ~~by 50~~10 basis points, to ~~24.6%~~23.2%, ~~during~~for the ~~nine~~six months ended ~~March 31,~~December 29, 2019, ~~compared~~in comparison to the same ~~period~~periods of the prior year.

The variances above include the impact of the adoption of ASC 606, which requires that the costs of producing and distributing the Company’s catalogs be expensed upon mailing, instead of being capitalized and amortized in direct proportion to the actual sales. During the three months ended March 31, 2019, assuming we had not adopted the new revenue standard, “Marketing and sales” expense, within our statement of operations, would have been approximately $1.6 million higher. During the nine months ended March 31, 2019, assuming we had not adopted the new revenue standard, “Marketing and sales” expense, within our statement of operations, would have been approximately $0.4 million higher.

~~Table of Contents~~

Technology and development expense

	Three Months Ended									Nine Months Ended									Three Months Ended									Six Months Ended
	March 31, 2019			April 1, 2018			% Change			March 31, 2019			April 1, 2018			% Change			December 29, 2019			December 30, 2018			% Change			December 29, 2019			December 30, 2018			% Change
	(dollars in thousands)																		(dollars in thousands)

Technology and development	$	11,511		$	10,241			12.4	%	$	32,696		$	29,086			12.4	%	$	11,733		$	10,906			7.6	%	$	22,536		$	21,185			6.4	%
Percentage of net revenues		4.6	%		4.3	%					3.3	%		3.2	%					1.9	%		1.9	%					2.8	%		2.9	%

Technology and development expense consists primarily of payroll and operating expenses of the Company’s information technology group, costs associated with its websites, including hosting, design, content development and maintenance and support costs related to the Company’s order entry, customer service, fulfillment and database systems.

Technology and development expenses increased ~~12.4%~~7.6% and 6.4% during the three and ~~nine~~six months ended ~~March 31,~~December 29, 2019, ~~respectively,~~ compared to the same periods of the prior year, primarily due to increased license and maintenance costs required to support the Company’s technology ~~platform, as well an increase in labor due to annual merit increases and an increase in performance-based bonuses.~~platform.

General and administrative expense

	Three Months Ended									Nine Months Ended									Three Months Ended									Six Months Ended
	March 31, 2019			April 1, 2018			% Change			March 31, 2019			April 1, 2018			% Change			December 29, 2019			December 30, 2018			% Change			December 29, 2019			December 30, 2018			% Change
	(dollars in thousands)																		(dollars in thousands)

General and administrative	$	22,447		$	19,553			14.8	%	$	64,480		$	58,128			10.9	%	$	22,634		$	21,603			4.8	%	$	44,156		$	42,033			5.1	%
Percentage of net revenues		9.0	%		8.2	%					6.5	%		6.3	%					3.7	%		3.8	%					5.6	%		5.7	%

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

General and administrative expense increased ~~14.8%~~4.8% and ~~10.9%~~5.1% during the three and ~~nine~~six months ended ~~March 31,~~December 29, 2019, ~~respectively,~~ compared to the same periods of the prior year, primarily due to ~~an increase in~~higher labor costs, ~~related~~attributable to ~~performance-based bonuses, as well as~~ an increase in the value of Non-Qualified Deferred Compensation Plan investments ~~(increase offset~~(offset by an increase in ~~Other (income) expense net line item~~other income on the financials statement – see below)., and higher acquisition related professional fees, partially offset by lower insurance costs due to favorable claims experience.

Depreciation and amortization expense

	Three Months Ended									Nine Months Ended									Three Months Ended									Six Months Ended
	March 31, 2019			April 1, 2018			% Change			March 31, 2019			April 1, 2018			% Change			December 29, 2019			December 30, 2018			% Change			December 29, 2019			December 30, 2018			% Change
	(dollars in thousands)																		(dollars in thousands)

Depreciation and amortization	$	7,028		$	7,885			(10.9	%)	$	22,840		$	24,646			(7.3	%)	$	7,830		$	7,969			(1.7	%)	$	15,465		$	15,812			(2.2	%)
Percentage of net revenues		2.8	%		3.3	%					2.3	%		2.7	%					1.3	%		1.4	%					2.0	%		2.1	%

Depreciation and amortization expense during the three and ~~nine~~six months ended ~~March 31,~~December 29, 2019 decreased ~~10.9%~~1.7% and ~~7.3%~~2.2%, respectively, compared to the same periods of the prior year, primarily as ~~certain short-lived assets were fully depreciated/amortized in the first half~~a result of ~~fiscal 2019.~~timing of capital projects.

Table of Contents

Interest (income) expense, net

Three Months Ended

Nine Months Ended

March 31, 2019

April 1, 2018

% Change

March 31, 2019

April 1, 2018

% Change

(dollars in thousands)

Interest (income) expense, net
$ (30 ) $ 662 104.5
%
$ 2,390 $ 2,919 18.1
%

	Three Months Ended							Six Months Ended
	December 29, 2019		December 30, 2018		% Change			December 29, 2019		December 30, 2018		% Change
	(dollars in thousands)

Interest expense, net	$	985	$	1,430		(31.1	%)	$	1,580	$	2,420		(34.7	%)

Interest ~~(income)~~ expense, net consists primarily of interest expense and amortization of deferred financing costs attributable to the Company’s ~~2016 Amended Credit Agreement~~credit facility (See Note 8 - Debt,, in Item 1.1. for details), net of income earned on the Company’s available cash balances.

Interest ~~(income)~~ expense, net decreased ~~104.5%~~31.1% and ~~18.1%~~34.7% during the three and ~~nine~~six months ended ~~March 31,~~December 29, 2019, ~~respectively,~~ compared to the same periods of the prior year, due to lower borrowings outstanding, and a lower interest rate resulting from the 2019 Credit Agreement amendment, combined with higher invested cash balances and associated rates earned on these ~~balances, combined with a declining outstanding Term Loan balance, partially offset by increasing interest rates on the Company’s variable rate Revolver.~~balances.

Other ~~(income)~~ (income) expense, net

Three Months Ended

Nine Months Ended

March 31, 2019

April 1, 2018

% Change

March 31, 2019

April 1, 2018

% Change

(dollars in thousands)

Other (income) expense, net
$ (1,285 ) $ 31 4,245.2
%
$ (293
)
$ (315
)
(7.0
%)

	Three Months Ended								Six Months Ended
	December 29, 2019			December 30, 2018		% Change			December 29, 2019			December 30, 2018		% Change
	(dollars in thousands)

Other (income) expense, net	$	(975	)	$	1,266		177.0	%	$	(891	)	$	992		189.8	%

Other income, net for the three and ~~nine~~six months ended ~~March 31,~~December 29, 2019 consists primarily of investment ~~(gains) losses of the Company’s Non-Qualified Deferred Compensation Plan assets.~~

~~Other~~ income ~~net for the three and nine months ended April 1, 2018 consists primarily of investment (gains) of~~on the Company’s Non-Qualified Deferred Compensation Plan assets ~~partially offset by~~of approximately $1.0 million, whereas in the prior year, there was a ~~$0.2 million impairment related to the Company’s equity method investment in Flores Online (see~~ ~~Note 7 - Investmentsabove).~~

~~Table~~loss of ~~Contents~~

$1.2 million.

Income Taxes

The Company recorded an income tax ~~benefit~~expense of ~~$5.1~~$25.4 million and ~~$4.7~~$19.3 million, during the three and six months ended ~~March 31,~~December 29, 2019, ~~and April 1, 2018,~~ respectively, and ~~income tax expense of $11.9~~$23.4 million and ~~$0.8~~$17.0 million, during the ~~nine~~three and six months ended ~~March 31, 2019 and April 1,~~December 30, 2018, respectively. The Company’s effective tax rate for the three and ~~nine~~six months ended ~~March 31,~~December 29, 2019 was ~~38.1%~~25.5% and ~~21.7%~~24.7%, respectively, compared to ~~35.6%~~25.4% and ~~1.6%~~24.9% in the same periods of the prior year. The effective rates for fiscal 2020 and fiscal 2019 differed from the U.S. federal statutory rate of 21% due to state income taxes and nondeductible expenses for executive compensation, which were partially offset by various permanent differences and tax credits, including ~~increased~~ excess tax benefits from stock-based compensation. The effective rates for fiscal 2018 differed from the transitional U.S. federal tax rate of 28.0% due to a tax benefit of $12.2 million, or $0.18 per diluted share, recognized during the second quarter of fiscal 2018, reflecting a revaluation of deferred tax liabilities at the lower U.S. federal statutory rate of 21% as a result of the Tax Act (see ~~Note 1~~ – Accounting Policies above), and various permanent differences, tax credits, and return to provision adjustments related to the filing of the Company’s fiscal 2017 tax return, partially offset by state income taxes. At ~~March 31,~~December 29, 2019, the Company has an unrecognized tax benefit, including ~~an immaterial amount of~~ accrued interest and penalties, of approximately ~~$0.6~~$0.9 million. The Company believes that ~~$0.1~~$0.2 million of unrecognized tax positions will be resolved over the next twelve months.

Liquidity and Capital Resources

Liquidity and borrowings

The Company's principal sources of liquidity are cash on hand, cash flows generated from operations and borrowings available under the ~~2016 Amended~~2019 Credit Agreement (see Note 8 - Debtin Item 1 for details). At ~~March 31,~~December 29, 2019, the Company had working capital of ~~$179.9~~$204.9 million, including cash and cash equivalents of ~~$206.4~~$295.6 million, compared to working capital of ~~$148.2~~$175.7 million, including cash and cash equivalents of ~~$147.2~~$172.9 million, at ~~July 1, 2018. As of March 31, 2019, there were no borrowings outstanding under the Company’s working capital Revolver.~~ June 30, 2019.

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 its second fiscal quarter, generates nearly 50% of the Company’s annual revenues, and all of its earnings. ~~As a result,~~The Company utilized cash on hand to fund operations through September 2019. In October 2019, the Company borrowed under its Revolver to fund short-term working capital needs, with borrowings peaking at $20.0 million in November 2019. Cash generated from operations during the ~~second quarter is~~Christmas holiday shopping season enabled the Company to repay the Revolver prior to the end of December 2019. Based on current projected cashflows, the Company believes that available cash balances are expected to be sufficient to provide for the Company’s operating needs ~~until the second quarter of~~through fiscal ~~2020, when the Company expects to borrow against its Revolver to fund pre-holiday manufacturing and inventory purchases.~~2021.

WeWhile we believe that our sources of funding will be sufficient to meet our anticipated operating cash needs for at least the next twelve ~~months. However,~~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.

Cash Flows

Net cash provided by operating activities of ~~$97.0~~$162.2 million, for the ~~nine~~six months ended ~~March 31,~~December 29, 2019, was primarily attributable to the Company’s net income during the period, adjusted by non-cash charges for depreciation/amortization and stock based compensation, ~~as well as~~combined with seasonal changes in working capital, including holiday related increases in accounts payable and accrued expenses, and reductions in inventory, partially offset by increases in ~~receivables.~~receivables related to holiday season sales.

Net cash used in investing activities of ~~$16.8~~$32.2 million, for the ~~nine~~six months ended ~~March 31,~~December 29, 2019, was primarily attributable to the acquisition of Shari’s Berries for $20.5 million, and capital expenditures of $10.7 million related to the Company's technology initiatives and Gourmet Food & Gift Baskets segment manufacturing production ~~warehousing~~ and ~~orchard planting~~warehousing equipment.

Net cash used in financing activities of ~~$21.0~~$7.3 million, for the ~~nine~~six months ended ~~March 31,~~December 29, 2019, was primarily due to ~~Term Loan~~net bank repayments of ~~$7.2~~$2.5 million, and the acquisition of ~~$14.8~~$5.0 million of treasury ~~stock, partially offset by $0.9 million in proceeds from exercise of employee stock options.~~stock.

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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 March 31, 2019, $5.2 million remained authorized under the plan. See Item 2 in Part II below for details.

Contractual Obligations

~~There have been no material changes outside the ordinary course of business related to~~At December 29, 2019, the Company’s contractual obligations ~~as discussed in the Annual Report on Form 10-K for the year ended July 1, 2018.~~consist of:

●

Long-term debt obligations - payments due under the Company's 2019 Credit Agreement (see Note 8 - Debt in Item 1 for details).

●

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

●

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 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Thereafter		Total
Purchase commitments	$	52,739	$	8,403	$	7,460	$	4,612	$	1,103	$	-	$	74,317

Critical Accounting Policies and Estimates

As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended ~~July 1, 2018,~~June 30, 2019, 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 1, 2018,~~June 30, 2019, except for the adoption of ASC ~~606~~842 (see Note 1 - Accounting Policies in Item 1 above for details).

Recently Issued Accounting Pronouncements

~~A discussion of recently issued accounting pronouncements, both adopted and yet to be adopted, is included in~~See Note 1 - Accounting Policies in Item 1 for details regarding the impact of ~~this Quarterly Report~~accounting standards that were recently issued on ~~Form 10-Q.~~our consolidated financial statements.

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Forward Looking Information and Factors that May Affect Future Results

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

●

the Company’s ability:

to achieve revenue and profitability;

to leverage its operating platform and reduce operating expenses;

to manage the increased seasonality of its business;

to cost effectively acquire and retain customers;

to effectively integrate and grow acquired companies;

to reduce working capital requirements and capital expenditures;

to compete against existing and new competitors;

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

to cost ~~efficiently~~effectively manage inventories;

●

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

●

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

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 1, 2018~~June 30, 2019 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.

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’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 ~~2016 Amended~~2019 Credit Agreement bear interest at a variable rate, plus an applicable margin, and therefore expose the Company to market risk for changes in interest rates. The effect of a 50 basis point increase in current interest rates on the Company’s interest expense would be approximately $0.1 million and ~~$0.4~~$0.2 million during the three and ~~nine~~six months ended ~~March 31, 2019, respectively.~~December 29, 2019.

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ITEM 4.4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of ~~March 31,~~December 29, 2019. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~March 31,~~December 29, 2019.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the Company’s evaluation required by Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934 during the quarter ended ~~March 31,~~December 29, 2019, 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

ITEM 1A. RISK FACTORS.

There were no material changes to the Company’s risk factors as discussed in Part 1, Item 1A-Risk Factors in the Company’s Annual Report on Form 10-K for the year ended ~~July 1, 2018~~June 30, 2019.

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

The Company has a stock repurchase plan through which purchases can be made from time to time in the open market and through privately negotiated transactions, subject to general market conditions. The repurchase program is financed utilizing available cash. On ~~August 30, 2017,~~June 27, 2019, the Company’s Board of Directors authorized an increase to its stock repurchase plan of up to $30.0 million. As of ~~March 31,~~December 29, 2019, ~~$5.2~~$25.0 million remained authorized under the plan.

The following table sets forth, for the months indicated, the Company’s purchase of common stock during the first ~~nine~~six months of fiscal ~~2019,~~2020, which includes the period July ~~2, 2018~~1, 2019 through ~~March 31,~~December 29, 2019:

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)

07/02/18 - 07/29/18
- $ - - $ 19,997
07/30/18 - 08/26/18
- $ - - $ 19,997
08/27/18 - 09/30/18
345.6 $ 11.66 345.6 $ 15,957
10/01/18 – 10/28/18
318.4 $ 11.12 318.4 $ 12,409
10/29/18 – 11/25/18
346.0 $ 12.70 346.0 $ 8,010
11/26/18 – 12/30/18
115.0 $ 12.31 115.0 $ 6,591
12/31/18 – 01/27/19
90.0 $ 12.80 90.0 $ 5,436
01/28/18 – 02/24/19
15.3 $ 13.34 15.3 $ 5,231
02/25/19 – 03/31/19
- - - $ 5,231
Total
1,230.3 $ 11.98 1,230.3

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)

07/01/19 - 07/28/19		-	$	-		-	$	30,000
07/29/19 - 08/25/19		-	$	-		-	$	30,000
08/26/19 - 09/29/19		2,113	$	14.85		2,113	$	29,969
09/30/19 - 10/27/19		-	$	-		-	$	29,969
10/28/19 - 11/24/19		158,750	$	13.24		158,750	$	27,867
11/25/19 - 12/29/19		210,000	$	13.76		210,000	$	24,970
Total		370,863	$	13.55		370,863

(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. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

31.1	~~3.2~~	Second Amended and Restated By-Laws (Current Report on Form 8-k filed on April 29, 2019, Exhibit 3.2)**
	~~31.1~~	Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2	~~31.2~~	Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1	~~32.1~~	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS	~~101.INS~~	XBRL Instance Document
101.SCH	~~101.SCH~~	XBRL Taxonomy Extension Schema Document
101.CAL	~~101.CAL~~	XBRL Taxonomy Calculation Linkbase Document
101.DEF	~~101.DEF~~	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	~~101.LAB~~	XBRL Taxonomy Extension Label Document
101.PRE	~~101.PRE~~	XBRL Taxonomy Definition Presentation Document

* Filed herewith.

** Incorporated by reference to exhibits or appendices previously filed with the Securities and Exchange Commission, as indicated by the reference in brackets.

2321

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SIGNATURES

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

	1-800-FLOWERS.COM, Inc. (Registrant)
Date: ~~May 10, 2019~~February 7, 2020	/s/ Christopher G. McCann Christopher G. McCann Chief Executive Officer, Director and President (Principal Executive Officer)

Date: ~~May 10, 2019~~February 7, 2020	/s/ William E. Shea William E. Shea Senior Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)

	1-800-Flowers.com Consumer Floral		BloomNet Wire Service		Gourmet Food & Gift Baskets		Total
	(in thousands)
Balance at March 31, 2019 and July 1, 2018	$	17,441	$	-	$	45,149	$	62,590