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 December ~~29, 2019~~ 27, 2020

__☐ 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~~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 ☑

The number of shares outstanding of each of the Registrant’s classes of common stock as of January ~~31, 2020:~~29, 2021:

Class A common stock:	~~35,753,963~~36,693,449
Class B common stock:	~~28,542,823~~28,153,614

Table of Contents

1-800-FLOWERS.COM, Inc.

FORM 10-Q

For the quarterly period ended December ~~29, 2019~~ 27, 2020

TABLE OF CONTENTS

		Page
Part I.	Financial Information
Item 1.	Condensed Consolidated Financial Statements		1
	Condensed Consolidated Balance Sheets – December ~~29, 2019~~27, 2020 (Unaudited) and June ~~30, 2019~~28, 2020		1
	Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) – Three and Six Months Ended December 27, 2020 and December 29, 2019 ~~and~~ ~~December 30, 2018~~		2
	Condensed Consolidated Statements of ~~Comprehensive~~ ~~Income~~Stockholder’s Equity (Unaudited) – Three and Six MonthsEnded December 27, 2020 and December 29, 2019 ~~and December 30, 2018~~		3
	Condensed Consolidated Statements of ~~Stockholder’s Equity~~Cash Flows (Unaudited) –~~Three and~~ Six Months Ended December ~~29, 2019~~27, 2020 and December ~~30, 2018~~29, 2019		4
	Notes to Condensed Consolidated Financial Statements ~~of Cash Flows~~ (Unaudited) – ~~Six Months Ended December 29, 2019 and 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		1314
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		1922
Item 4.	Controls and Procedures		2023

Part II.	Other Information
Item 1.	Legal Proceedings		2023
Item 1A.	Risk Factors		2023
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		2023
Item 3.	Defaults upon Senior Securities		2023
Item 4.	Mine Safety Disclosures		2023
Item 5.	Other Information		2023
Item 6.	Exhibits		2124

Signatures			2225

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)

	December 29, 2019			June 30, 2019			December 27, 2020			*June 28, 2020*
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	295,561		$	172,923		$	370,586		$	240,506
Trade receivables, net		44,561			12,374			72,590			15,178
Inventories		68,032			92,361			89,389			97,760
Prepaid and other		23,439			25,580			30,879			25,186
Total current assets		431,593			303,238			563,444			378,630

Property, plant and equipment, net		162,568			166,681			197,598			169,075
Operating lease right-of-use assets		72,943			-			88,096			66,760
Goodwill		74,711			62,590			208,048			74,711
Other intangibles, net		66,727			59,615			140,672			66,273
Other assets		17,678			14,316			24,402			18,986
Total assets	$	826,220		$	606,440		$	1,222,260		$	774,435

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	61,826		$	25,704		$	104,965		$	25,306
Accrued expenses		151,028			96,793			285,822			141,741
Current maturities of long-term debt		5,000			5,000			15,000			5,000
Current portion of long-term operating lease liabilities		8,849			-			10,953			8,285
Total current liabilities		226,703			127,497			416,740			180,332

Long-term debt		89,738			91,973			170,912			87,559
Long-term operating lease liabilities		66,405			-			81,308			61,964
Deferred tax liabilities		27,895			28,898			27,244			28,632
Other liabilities		14,571			15,361			28,448			16,174
Total liabilities		425,312			263,729			724,652			374,661

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, 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
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued								0			0
Class A common stock, $0.01 par value, 200,000,000 shares authorized, 55,166,476 and 53,704,477 shares issued at December 27, 2020 and June 28, 2020, respectively								551			537
Class B common stock, $0.01 par value, 200,000,000 shares authorized, 33,433,614 and 33,822,823 shares issued at December 27, 2020 and June 28, 2020, respectively								334			338
Additional paid-in-capital		353,643			349,319			364,411			358,031
Retained earnings		167,406			108,525			271,438			167,523
Accumulated other comprehensive loss		(253	)		(269	)		(244	)		(243	)
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	)
Treasury stock, at cost, 18,509,689 and 17,963,551 Class A shares at December 27, 2020 and June 28, 2020, respectively, and 5,280,000 Class B shares at December 27, 2020 and June 28, 2020, respectively								(138,882	)		(126,412	)
Total stockholders’ equity		400,908			342,711			497,608			399,774
Total liabilities and stockholders’ equity	$	826,220		$	606,440		$	1,222,260		$	774,435

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

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

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except for per share data)

(unaudited)

	Three Months Ended					Six Months Ended					*Three Months Ended*						*Six Months Ended*
	December 29, 2019			December 30, 2018		December 29, 2019			December 30, 2018		*December 27, 2020*			*December 29, 2019*			*December 27, 2020*			*December 29, 2019*

Net revenues	$	605,642		$	571,316	$	792,905		$	740,812	$	877,256		$	605,642		$	1,161,028		$	792,905
Cost of revenues		336,470			316,489		447,587			417,445		479,010			336,470			647,302			447,587
Gross profit		269,172			254,827		345,318			323,367		398,246			269,172			513,726			345,318
Operating expenses:
Marketing and sales		127,404			119,664		184,243			172,618		194,696			127,404			274,981			184,243
Technology and development		11,733			10,906		22,536			21,185		14,053			11,733			25,656			22,536
General and administrative		22,634			21,603		44,156			42,033		30,835			22,634			59,048			44,156
Depreciation and amortization		7,830			7,969		15,465			15,812		11,060			7,830			19,900			15,465
Total operating expenses		169,601			160,142		266,400			251,648		250,644			169,601			379,585			266,400
Operating income		99,571			94,685		78,918			71,719		147,602			99,571			134,141			78,918
Interest expense, net		985			1,430		1,580			2,420		1,927			985			2,967			1,580
Other (income) expense, net		(975	)		1,266		(891	)		992		(2,257	)		(975	)		(3,256	)		(891	)
Income before income taxes		99,561			91,989		78,229			68,307		147,932			99,561			134,430			78,229
Income tax expense		25,409			23,411		19,348			16,995		34,255			25,409			30,515			19,348
Net income	$	74,152		$	68,578	$	58,881		$	51,312		113,677			74,152			103,915			58,881
Other comprehensive income (loss) (currency translation & other miscellaneous items)												(1	)		16			(1	)		16
Comprehensive income											$	113,676		$	74,168		$	103,914		$	58,897

Basic net income per common share	$	1.15		$	1.07	$	0.91		$	0.80	$	1.76		$	1.15		$	1.61		$	0.91

Diluted net income per common share	$	1.12		$	1.04	$	0.89		$	0.77	$	1.71		$	1.12		$	1.56		$	0.89

Weighted average shares used in the calculation of net income per common share:
Basic		64,687			64,209		64,595			64,415		64,728			64,687			64,524			64,595
Diluted		66,401			66,136		66,486			66,483		66,543			66,401			66,593			66,486

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

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

~~Condensed Consolidated Statements of Comprehensive~~

~~(in thousands)~~

~~(unaudited)~~

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.~~

~~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 December 29, 2019 and December 30, 2018																								Three Months Ended December 27, 2020 and December 29, 2019
	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*				*Comprehensive Loss*			*Shares*		*Amount*			*Equity*
Balance at September 27, 2020																										54,053,730	$	541		33,638,614		$	336		$	360,643	$	157,761	$	(243	)		23,279,906	$	(127,500	)	$	391,538
Net income																										-		0		-			0			0		113,677		0			-		0			113,677
Translation adjustment																										-		0		-			0			0		0		(1	)		-		0			(1	)
Stock-based compensation																										554,924		5		0			0			2,960		0		0			0		0			2,965
Exercise of stock options																										352,822		3		0			0			808		0		0			0		0			811
Conversion – Class B into Class A																										205,000		2		(205,000	)		(2	)		0		0		0			0		0			0
Acquisition of Class A treasury stock																										0		0		0			0			0		0		0			509,783		(11,382	)		(11,382	)
Balance at December 27, 2020																										55,166,476	$	551		33,433,614		$	334		$	364,411	$	271,438	$	(244	)		23,789,689	$	(138,882	)	$	497,608
	Shares		Amount		Shares		Amount		Capital					Comprehensive Loss			Shares		Amount			Equity
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			53,216,294	$	532		33,822,823		$	338		$	351,304	$	93,254	$	(269	)		22,491,206	$	(115,763	)	$	329,396
Net income		-		-		-		-		-		74,152			-			-		-			74,152			-		0		-			0			0		74,152		0			-		0			74,152
Translation adjustment		-		-		-		-		-		-			16			-		-			16			-		0		-			0			0		0		16			-		0			16
Stock-based compensation		437,625		4		-		-		2,276		-			-			-		-			2,280			437,625		4		-			0			2,276		0		0			0		0			2,280
Exercise of stock options		25,000		-		-		-		63		-			-			-		-			63			25,000		0		0			0			63		0		0			0		0			63
Acquisition of Class A treasury stock		-		-		-		-		-		-			-			368,750		(4,999	)		(4,999	)		0		0		0			0			0		0		0			368,750		(4,999	)		(4,999	)
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			53,678,919	$	536		33,822,823		$	338		$	353,643	$	167,406	$	(253	)		22,859,956	$	(120,762	)	$	400,908

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		-		-		-		-		-		68,578			-			-		-			68,578
Translation adjustment		-		-		-		-		-					(71	)		-		-			(71	)
Stock-based compensation		408,009		4		-		-		1,669		-			-			-		-			1,673
Exercise of stock options		178,234		2		-		-		62		-			-			-		-			64
Other		-		-		-		-		-		(790	)		-			-		-			(790	)
Acquisition of Class A treasury stock		-		-		-		-		-		-			-			779,326		(9,365	)		(9,365	)
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

	Six Months Ended December 29, 2019 and December 30, 2018																							Six Months Ended December 27, 2020 and December 29, 2019
	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*				*Comprehensive Loss*			*Shares*		*Amount*			*Equity*
Balance at June 28, 2020																									53,704,477	$	537		33,822,823		$	338		$	358,031	$	167,523	$	(243	)		23,243,551	$	(126,412	)	$	399,774
Net income																											0					0			0		103,915		0					0			103,915
Translation adjustment																									-		0		-			0			0		0		(1	)		-		0			(1	)
Stock-based compensation																									643,590		6		0			0			5,352		0		0			0		0			5,358
Exercise of stock options																									429,200		4		0			0			1,028		0		0			0		0			1,032
Conversion – Class B into Class A																									389,209		4		(389,209	)		(4	)		0		0		0			0		0			0
Acquisition of Class A treasury stock																									0		0		0			0			0		0		0			546,138		(12,470	)		(12,470	)
Balance at December 27, 2020																									55,166,476	$	551		33,433,614		$	334		$	364,411	$	271,438	$	(244	)		23,789,689	$	(138,882	)	$	497,608
	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			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			-		0		-			0			0		58,881		0			-		0			58,881
Translation adjustment		-		-				--		-		-		16			-		-			16			-		0		-			0			0		0		16			-		0			16
Stock-based compensation		444,792		4		-		-		4,041		-		-			-		-			4,045			444,792		4		0			0			4,041		0		0			0		0			4,045
Exercise of stock options		150,000		2		-		-		283		-		-			-		-			285			150,000		2		0			0			283		0		0		��	0		0			285
Acquisition of Class A treasury stock		-		-		-		-		-		-		-			370,863		(5,030	)		(5,030	)		0		0		0			0			0		0		0			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			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
Net income		-		-		-		-		-		51,312		-			-		-			51,312
Translation adjustment		-		-		-		-		-		-		(61	)		-		-			(61	)
Stock-based compensation		409,676		4		-		-		2,624		-		-			-		-			2,628
Exercise of stock options		268,234		3		-		-		362		-		-			-		-			365
Other		-		-		-		-		-		330		-			-		-			330
Acquisition of Class A treasury stock		-		-		-		-		-		-		-			1,124,948		(13,405	)		(13,405	)
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.

Table of Contents

~~Table of Contents~~

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

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

							Six months ended
	Six months ended						December 27, 2020			*December 29, 2019*
	December 29, 2019			December 30, 2018
Operating activities:
Net income	$	58,881		$	51,312		$	103,915		$	58,881
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		15,465			15,812			19,900			15,465
Amortization of deferred financing costs		325			452			545			325
Deferred income taxes		(1,003	)		(654	)		(1,388	)		(1,003	)
Bad debt expense		731			582			341			731
Stock-based compensation		4,045			2,628			5,358			4,045
Other non-cash items		(187	)		(501	)		(321	)		(187	)
Changes in operating items:
Trade receivables		(32,918	)		(36,047	)		(56,372	)		(32,918	)
Inventories		25,358			24,819			25,369			25,358
Prepaid and other		1,021			3,159			(1,937	)		1,021
Accounts payable and accrued expenses		90,166			78,361			212,340			90,166
Other assets and liabilities		272			(340	)		8,897			272
Net cash provided by operating activities		162,156			139,583			316,647			162,156

Investing activities:
Acquisitions, net of cash acquired		(20,500	)		-			(250,943	)		(20,500	)
Capital expenditures, net of non-cash expenditures		(10,712	)		(11,786	)		(15,708	)		(10,712	)
Purchase of equity investments		(1,001	)		-			(1,285	)		(1,001	)
Net cash used in investing activities		(32,213	)		(11,786	)		(267,936	)		(32,213	)

Financing activities:
Acquisition of treasury stock		(5,030	)		(13,405	)		(12,470	)		(5,030	)
Proceeds from exercise of employee stock options		285			365			1,032			285
Proceeds from bank borrowings		20,000			30,000			265,000			20,000
Repayment of notes payable and bank borrowings		(22,500	)		(34,312	)		(170,000	)		(22,500	)
Debt issuance cost		(60	)		-			(2,193	)		(60	)
Net cash used in financing activities		(7,305	)		(17,352	)
Net cash provided by (used in) financing activities								81,369			(7,305	)

Net change in cash and cash equivalents		122,638			110,445			130,080			122,638
Cash and cash equivalents:
Beginning of period		172,923			147,240			240,506			172,923
End of period	$	295,561		$	257,685		$	370,586		$	295,561

See accompanying Notes to Condensed Consolidated Financial 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,~~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~~10-Q and Article 10 of Regulation ~~S-X.~~S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended December ~~29, 2019~~ 27, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending June ~~28, 2020.~~ 27, 2021. These financial statements should be read in conjunction with our Annual Report on Form ~~10-K~~10-K for the fiscal year ended June ~~30, 2019~~28, 2020, 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~~historically generated nearly 50% of the Company’s annual revenues, and all of its earnings. ~~Additionally, due~~However, with the onset of the pandemic of the novel strain of coronavirus (“COVID-19”), the Company experienced a significant increase in its revenues and earnings during its fourth quarter of fiscal 2020. These trends have continued through the firstfour weeks of its fiscal 2021third quarter. Our customers have increasingly turned to our brands and our expanded product offerings to help them connect and express themselves during the recent COVID-19 pandemic and our “everyday” gifting product line has seen increased volume. While the continuing impacts of COVID-19 are difficult to predict, the Company expects that its fiscal second quarter will continue to be its largest in terms of revenues and earnings, although increases in the Company’s “everyday” business have and are expected to continue to lessen the seasonality of our business. 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~~in comparison to its fiscal first 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.

COVID-19

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law. The CARES Act provides a substantial stimulus and assistance package intended to address the impact of COVID-19, including tax relief and government loans, grants and investments. The CARES Act did not have a material impact on the Company’s consolidated financial statements during the three and six months ended December 27, 2020.

The Company is closely monitoring the impact of COVID-19 on its business, including how it will affect its customers, workforce, suppliers, vendors, franchisees, florists, and production and distribution channels, as well as its financial statements. The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous evolving factors, including, but not limited to: the magnitude and duration of COVID-19, the extent to which it will impact macroeconomic conditions, including interest rates, employment rates and consumer confidence, the speed of the anticipated recovery, and governmental, business and individual consumer reactions to the pandemic. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of December 27, 2020 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts and credit losses, inventory and related reserves and the carrying value of goodwill and other long-lived assets. While there was not a material impact to the Company’s consolidated financial statements as of and for the three and six months ended December 27, 2020, the Company’s future assessment of these factors and the evolving factors described above, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

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

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 June ~~30, 2019~~ 28, 2020 was ~~$17.3~~$25.9 million (included in “Accrued expenses” on our consolidated balance sheets), of which, ~~$5.9~~$8.7 million and ~~$15.9~~$23.7 million was recognized as revenue during the three and six months ended December ~~29, 2019.~~ 27, 2020. The deferred revenue balance as of December ~~29, 2019~~ 27, 2020 was ~~$28.8~~$61.8 million.

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Recently Issued Accounting Pronouncements - Adopted

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. 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 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 transition to ASC 842 and the 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,~~2016-13, “Financial Instruments-Credit Losses (Topic ~~326)~~326): Measurement of Credit Losses on Financial Instruments.” ASU ~~2016-13~~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. We adopted ASU ~~2016-13 is effective~~2016-13 for the Company’s fiscal 2021 ~~and the guidance is to be applied~~ (quarter ending September 27, 2020), using the modified-retrospective approach. ~~The Company is currently evaluating the potential~~There was no material impact of adopting this guidance on our consolidated financial statements.
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Goodwill – Impairment ~~Test~~.Test. In January 2017, the FASB issued ASU No. ~~2017-04,~~2017-04, "Intangibles - Goodwill and Other (Topic ~~350)~~350): Simplifying the Test for Goodwill Impairment," which eliminates step two from the goodwill impairment test. Under ASU ~~2017-04,~~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~~We adopted this guidance ~~is effective~~ for the Company’s fiscal 2021 ~~with early adoption permitted, and should be applied prospectively. We do not expect the standard to have~~ (quarter ending September 27, 2020), on a prospective basis. There was nomaterial impact of adopting this guidance on our consolidated financial statements.

Note 2 – Net Income Per Common Share

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

	Three Months Ended				Six Months Ended				*Three Months Ended*				*Six Months Ended*
	December 29, 2019		December 30, 2018		December 29, 2019		December 30, 2018		*December 27, 2020*		*December 29, 2019*		*December 27, 2020*		*December 29, 2019*
	(in thousands, except per share data)								(in thousands, except per share data)
Numerator:
Net income	$	74,152	$	68,578	$	58,881	$	51,312	$	113,677	$	74,152	$	103,915	$	58,881

Denominator:
Weighted average shares outstanding		64,687		64,209		64,595		64,415		64,728		64,687		64,524		64,595
Effect of dilutive securities:
Employee stock options		997		1,415		1,046		1,476		824		997		951		1,046
Employee restricted stock awards		717		512		845		592		991		717		1,118		845
		1,714		1,927		1,891		2,068		1,815		1,714		2,069		1,891

Adjusted weighted-average shares and assumed conversions		66,401		66,136		66,486		66,483		66,543		66,401		66,593		66,486

Net income per common share
Basic	$	1.15	$	1.07	$	0.91	$	0.80	$	1.76	$	1.15	$	1.61	$	0.91
Diluted	$	1.12	$	1.04	$	0.89	$	0.77	$	1.71	$	1.12	$	1.56	$	0.89

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~~10-K for the fiscal year ended June ~~30, 2019~~28, 2020, 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				Six Months Ended				*Three Months Ended*				*Six Months Ended*
	December 29, 2019		December 30, 2018		December 29, 2019		December 30, 2018		*December 27, 2020*		*December 29, 2019*		*December 27, 2020*		*December 29, 2019*
	(in thousands)								(in thousands)
Stock options	$	28	$	78	$	93	$	183	$	9	$	28	$	18	$	93
Restricted stock		2,252		1,595		3,952		2,445		2,956		2,252		5,340		3,952
Total		2,280		1,673		4,045		2,628		2,965		2,280		5,358		4,045
Deferred income tax benefit		300		395		1,003		654		785		300		1,388		1,003
Stock-based compensation expense, net	$	1,980	$	1,278	$	3,042	$	1,974	$	2,180	$	1,980	$	3,970	$	3,042

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*
	December 29, 2019		December 30, 2018		December 29, 2019		December 30, 2018		*December 27, 2020*		*December 29, 2019*		*December 27, 2020*		*December 29, 2019*
	(in thousands)								(in thousands)
Marketing and sales	$	1,047	$	731	$	1,863	$	986	$	1,367	$	1,047	$	2,511	$	1,863
Technology and development		173		105		292		156		226		173		417		292
General and administrative		1,060		837		1,890		1,486		1,372		1,060		2,430		1,890
Total	$	2,280	$	1,673	$	4,045	$	2,628	$	2,965	$	2,280	$	5,358	$	4,045

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

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Stock Options

The following table summarizes stock option activity during the six months ended December ~~29, 2019:~~27, 2020:

Options

Weighted Average
Exercise Price

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

Options

Weighted Average
Exercise Price

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

(in years)

(in thousands)

(in years)

(in thousands)

Outstanding at June 30, 2019
1,365,000 $ 2.48
Outstanding at June 28, 2020
1,230,000 $ 2.77
Granted
- $ - 0 $ 0
Exercised
(150,000
)
$ 1.90 (429,200 ) $ 2.41
Forfeited
- $ -
Outstanding at December 29, 2019
1,215,000 $ 2.55 1.7 $ 14,288
Outstanding at December 27, 2020
800,800 $ 2.97 1.0 $ 18,475

Exercisable at December 29, 2019
1,210,000 $ 2.52 1.7 $ 14,267
Exercisable at December 27, 2020
785,800 $ 2.63 0.9 $ 18,396

As of December ~~29, 2019,~~ 27, 2020, the total future compensation cost related to non-vested options, not yet recognized in the statement of income, was ~~$0.0~~$0.1 million and the weighted average period over which these awards are expected to be recognized was ~~0.2~~3.9 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 six months ended December ~~29, 2019:~~27, 2020:

Shares

Weighted Average Grant Date Fair Value

Shares

Weighted Average Grant Date Fair Value

Non-vested at June 30, 2019
1,438,592 $ 10.81
Non-vested at June 28, 2020
1,608,468 $ 12.01
Granted
724,055 $ 13.04 701,311 $ 21.83
Vested
(444,792
)
$ 10.28 (643,590 ) $ 11.05
Forfeited
(45,474
)
$ 12.54 (29,949 ) $ 19.80
Non-vested at December 29, 2019
1,672,381 $ 11.87
Non-vested at December 27, 2020
1,636,240 $ 16.46

The fair value of non-vested shares is determined based on the closing stock price on the grant date. As of December ~~29, 2019,~~ 27, 2020, there was ~~$14.6~~$19.4 million of total unrecognized compensation cost related to non-vested restricted stock-based compensation to be recognized over the weighted-average remaining period of ~~2.0~~1.9 years.

Note 4 – Acquisition

Acquisition of PersonalizationMall

On February 14, 2020, 1-800-Flowers.com, Inc., 800-Flowers, Inc., a wholly-owned subsidiary of 1-800-Flowers.com, Inc. (the “Purchaser”), PersonalizationMall.com, LLC ("PersonalizationMall"), and Bed Bath & Beyond Inc. (“Seller”), entered into an Equity Purchase Agreement (the “Purchase Agreement”) pursuant to which Seller agreed to sell to the Purchaser, and the Purchaser agreed to purchase from Seller, all of the issued and outstanding membership interests of PersonalizationMall for $252.0 million in cash (subject to certain working capital and other adjustments). On July 20, 2020, Purchaser, PersonalizationMall, and Seller entered into an amendment (the “Amendment”) to the Purchase Agreement to, among other things, amend the purchase price to $245.0 million (subject to certain working capital and other adjustments). On August 3, 2020, the Company completed its acquisition of PersonalizationMall, including its newly renovated, leased 360,000 square foot, state-of-the-art production and distribution facility, as well as customer database, tradenames and website. After working capital and related adjustments, total consideration paid was approximately $250.9 million.

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 fair values assigned to PersonalizationMall’s tangible and intangible assets and liabilities assumed are considered preliminary and are based on the information that was available as of the date of the acquisition. 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, establishment of potential acquisition contingencies, and the determination of any residual amount that will be allocated to goodwill. As additional information becomes available, the preliminary purchase price allocation may be revised during the remainder of the measurement period, which will not exceed 12 months from the acquisition date. Any such revisions or changes may be material.

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

PersonalizationMall’s Preliminary Purchase Price Allocation

(in thousands)

Assets Acquired:

Inventories
$ 16,998
Other assets
5,216
Property, plant and equipment
30,792
Operating lease right-of-use assets
21,438
Goodwill
133,337
Other intangibles
76,000
Total assets acquired
$ 283,781

Liabilities assumed:

Accounts payable and accrued expenses
$ 11,400
Operating lease liabilities
21,438
Total liabilities assumed
32,838

Net assets acquired
$ 250,943
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The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment. The estimates and assumptions include the projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future cash flows.
Acquired inventory, consisting of raw materials and supplies, 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.
Property, plant and equipment was valued at book value (cost less accumulated depreciation and amortization), due to the nature of the assets, which included recently acquired production equipment and leasehold improvements for PersonalizationMall's production facility, which became operational in September 2019.
Based on the valuation as of August 3, 2020, of the acquired intangible assets, $11.0 million was assigned to customer lists (4 years life), $65.0 million was assigned to tradenames (indefinite life), and the residual amount of $133.3 million was allocated to Goodwill (indefinite life and deductible for tax purposes). The goodwill recognized in conjunction with the Purchaser’s acquisition of PersonalizationMall 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. It also includes certain other intangible assets that do not qualify for separate recognition, such as an assembled workforce.
The estimated fair value of the acquired trade names 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 PersonalizationMall's weighted average cost of capital, the riskiness of the earnings stream association 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.
As required by ASC 805, “Business Combinations,” the following unaudited pro forma financial information for the three and six months ended December 27, 2020 and December 29, 2019, give effect to the PersonalizationMall acquisition as if it had been completed on July 1, 2019. The unaudited pro forma financial information is prepared by management for informational purposes only in accordance with ASC 805 and is not necessarily indicative of or intended to represent the results that would have been achieved had the acquisition been consummated as of the dates presented, and should not be taken as representative of future consolidated results of operations. The unaudited pro forma financial information does not reflect any operating efficiencies and/or cost savings that the Company may achieve with respect to the combined companies. The pro forma information has been adjusted to give effect to nonrecurring items that are directly attributable to the acquisition.

Three months ended December 27, 2020

Three months ended December 29, 2019

Six months ended December 27, 2020

Six months ended December 29, 2019

(in thousands)

Net Revenues
$ 877,256 $ 687,596 $ 1,177,021 $ 896,297
Net Income
114,071 83,084 110,289 66,443
The unaudited pro forma amounts above include the following adjustments:
-
A decrease of operating expenses by $0.5 and $5.4 million during the three and six months ended December 27, 2020, to eliminate transaction and litigation costs directly related to the transaction that do not have a continuing impact on operating results.
-
An increase of operating expenses by $0.2 million during the six months ended December 27, 2020 and $0.7 million and $1.4 million during the three and six months ended December 29, 2019, respectively, to reflect the additional amortization expense related to the increase in definite lived intangible assets.
-
An increase in interest expense of $0.6 million during the six months ended December 27, 2020 and $1.0 and $2.1 million during the three and six months ended December 29, 2019, respectively, which is comprised of incremental interest and amortization of deferred financing costs associated with the New Term Loan (as defined below). The interest rate used for the purposes of these pro forma statements, of 3.5%, was the rate in effect at loan inception.
-
The combined pro forma results were tax effected using the Company's effective tax rate for the respective periods
Net revenue attributable to PersonalizationMall, included within the three and six month periods ended December 27, 2020, was $122.2 million and $142.6 million, and corresponding operating income during the periods, excluding litigation and transaction costs, was $24.3 million and $25.4 million.
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~~During the quarter ended June 28, 2020, the Company finalized the allocation of the purchase price ~~was allocated~~ to the identifiable assets acquired and liabilities assumed based on ~~our preliminary~~its 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.

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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.~~

Shari’s Berries 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

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~~Foods & 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 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:

December 29, 2019

June 30, 2019

(in thousands)

Finished goods
$ 36,430 $ 36,820
Work-in-process
7,644 17,535
Raw materials
23,958 38,006
Total inventory
$ 68,032 $ 92,361

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December 27, 2020

June 28, 2020

(in thousands)

Finished goods
$ 37,030 $ 35,779
Work-in-process
10,864 16,536
Raw materials
41,495 45,445
Total inventory
$ 89,389 $ 97,760

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 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

Consumer Floral & Gifts

BloomNet

Gourmet Foods &
Gift Baskets

Total

(in thousands)

Balance at June 28, 2020
$ 17,441 $ 0 $ 57,270 $ 74,711
Acquisition of PersonalizationMall
133,337 0 0 133,337
Balance at December 27, 2020
$ 150,778 $ 0 $ 57,270 $ 208,048

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

December 29, 2019

June 30, 2019

December 27, 2020

June 28, 2020

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 thousands)

(in years)

(in thousands)

Intangible assets with determinable lives

Investment in licenses
14-16 $ 7,420 $ 6,200 $ 1,220 $ 7,420 $ 6,148 $ 1,272 14-16 $ 7,420 $ 6,306 $ 1,114 $ 7,420 $ 6,253 $ 1,167
Customer lists
2-10 12,825 10,123 2,702 12,184 9,798 2,386 2-10 23,825 11,972 11,853 12,825 10,474 2,351
Other
5-14 2,946 2,332 614 2,946 2,280 666 5-14 2,946 2,432 514 2,946 2,382 564
Total intangible assets with determinable lives
23,191 18,655 4,536 22,550 18,226 4,324 34,191 20,710 13,481 23,191 19,109 4,082
Trademarks with indefinite lives
62,191 - 62,191 55,291 - 55,291 127191 - 127,191 62,191 - 62,191
Total identifiable intangible assets
$ 85,382 $ 18,655 $ 66,727 $ 77,841 $ 18,226 $ 59,615 $ 161,382 $ 20,710 $ 140,672 $ 85,382 $ 19,109 $ 66,273

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 ~~2020~~2021 - ~~$0.5~~$1.8 million, fiscal ~~2021~~2022 - ~~$0.9~~$3.3 million, fiscal ~~2022~~2023 - ~~$0.6~~$3.3 million, fiscal ~~2023~~2024 - ~~$0.5~~$3.3 million, fiscal ~~2024~~2025 - ~~$0.5~~$0.8 million and thereafter - ~~$1.5~~$1.0 million.
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Note 7 – Investments

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 ~~$2.6~~$4.1 million as of December ~~29, 2019~~ 27, 2020 and ~~$1.6~~$2.8 million as of June ~~30, 2019.~~ 28, 2020.

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:

December 29, 2019

June 30, 2019

December 27, 2020

June 28, 2020

(in thousands)

(in thousands)

Revolver (1)
$ - $ - $ 0 $ 0
Term Loan (1)
97,500 100,000
Term Loans (1)
190,000 95,000
Deferred financing costs
(2,762
)
(3,027
)
(4,088
)
(2,441
)
Total debt
94,738 96,973 185,912 92,559
Less: current debt
5,000 5,000 15,000 5,000
Long-term debt
$ 89,738 $ 91,973 $ 170,912 $ 87,559

~~(1)~~(1)
On May 31, 2019, the Company and certain of its U.S. subsidiaries entered into a Second Amended and Restated Credit Agreement (the ~~“2019~~“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~~(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~~December 29, 2019, with escalating principal payments, at the rate of 5.0% per annum for the firsteight 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 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 based on the Company’s consolidated leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the New York fed bank rate plus 0.5%, and (c) a LIBOR rate plus 1%, or (2) an adjusted LIBOR rate plus an applicable margin varying based on the Company’s consolidated leverage ratio.
For each borrowing under the 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 based on the Company’s consolidated leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the New York fed bank rate plus 0.5% and (c) a LIBOR rate plus 1% or (2) an adjusted LIBOR rate plus an applicable margin varying based on the Company’s consolidated leverage ratio. The 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 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 December 29, 2019. The
On August 20, 2020, the Company, the Subsidiary Guarantors, JPMorgan Chase Bank, N.A. as administrative agent, and a group of lenders entered into a First Amendment (the “First Amendment”) to the 2019 Credit Agreement. The First Amendment amends the 2019 Credit Agreement (together the "2020 Credit Agreement”) to, among other modifications, (i) increase the aggregate principal amount of the existing Revolver commitments from $200.0 million to $250.0 million, (ii) establish a new tranche of term A-1 loans in an aggregate principal amount of $100.0 million (the “New Term Loan”), (iii) increase the working capital sublimit with respect to the Revolver from $175.0 million to $200.0 million, and (iv) increase the seasonally-reduced Revolver commitments from $100.0 million to $125.0 million for the period from January 1 through August 1 for each fiscal year of the Company. The New Term Loan will mature on May 31, 2024. Proceeds of the borrowing under the New Term Loan may be used for working capital and general corporate purposes of the Company and its subsidiaries, subject to certain restrictions. For each borrowing under the 2020 Credit Agreement, the Company may elect that such borrowing bear interest at an annual rate equal to either (1) a base rate plus the applicable margin for the relevant class of borrowing, which such margins vary based on the Company’s consolidated leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the New York fed bank rate plus 0.5%, and (c) a LIBOR rate plus 1%, or (2) an adjusted LIBOR rate plus an applicable margin varying based on the Company’s consolidated leverage ratio. The New Term Loan is payable in 15 quarterly installments of principal and interest beginning on September 27, 2020, with escalating principal payments, at the rate of 5.0% per annum for the firstfour payments, and 10.0% per annum for the remaining 11 payments, with the remaining balance of $67.5 million due upon maturity.
The 2020 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 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 December 27, 2020. The 2020 Credit Agreement is secured by substantially all of the assets of the Company.

Future principal payments under the Term Loan and New Term Loan are as follows: ~~$2.5~~$5.0 million – remainder of fiscal ~~2020, $5.0~~2021, $20.0 million - fiscal 2022, $20.0 million – fiscal ~~2021, $10.0 million - fiscal 2022, $10.0~~2023 and $145.0 million – fiscal ~~2023 and $70.0 million – fiscal~~ 2024.
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Note 9 - Property, Plant and Equipment

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

December 29, 2019

June 30, 2019

December 27, 2020

June 28, 2020

(in thousands)

(in thousands)

Land
$ 30,789 $ 30,789 $ 30,789 $ 30,789
Orchards in production and land improvements
11,701 11,339 18,548 17,139
Building and building improvements
60,255 59,236 61,679 61,159
Leasehold improvements
14,135 13,861 25,669 13,675
Production equipment and furniture and fixtures
63,556 61,415
Production equipment
78,040 57,904
Furniture and fixtures
7,995 7,444
Computer and telecommunication equipment
54,104 53,694 57,005 55,381
Software
139,797 132,078 162,304 151,264
Capital projects in progress - orchards
8,524 9,902 7,291 8,130
Property, plant and equipment, gross
382,861 372,314 449,320 402,885
Accumulated depreciation and amortization
(220,293
)
(205,633
)
(251,722
)
(233,810
)
Property, plant and equipment, net
$ 162,568 $ 166,681 $ 197,598 $ 169,075

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Table of Contents
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)

As of December 29, 2019:

As of December 27, 2020:

Trading securities held in a “rabbi trust” (1)
$ 14,159 $ 14,159 $ - $ - $ 18,617 $ 18,617 $ 0 $ 0
Total assets (liabilities) at fair value
$ 14,159 $ 14,159 $ - $ - $ 18,617 $ 18,617 $ 0 $ 0

As of June 30, 2019:

As of June 28, 2020:

Trading securities held in a “rabbi trust” (1)
$ 11,816 $ 11,816 $ - $ - $ 13,442 $ 13,442 $ 0 $ 0
Total assets (liabilities) at fair value
$ 11,816 $ 11,816 $ - $ - $ 13,442 $ 13,442 $ 0 $ 0

~~(1)~~(1)
The Company has established ana 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 ~~assets”~~liabilities” 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 six months ended December ~~29, 2019~~ 27, 2020 was ~~25.5%~~23.2% and ~~24.7%~~22.7%, respectively, compared to ~~25.4%~~25.5% and ~~24.9%~~24.7% in the same periods of the prior year. The effective rates for fiscal ~~2020~~2021 and fiscal ~~2019~~2020 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 excess tax benefits from stock-based compensation.

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 ~~2017,~~2018, however, fiscal year ~~2018~~2019 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.~~2016. The Company's foreign income tax filings from fiscal ~~2014~~2015 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 December ~~29, 2019,~~ 27, 2020, the Company has an unrecognized tax benefit, including accrued interest and penalties, of approximately ~~$0.9~~$1.2 million. The Company believes that ~~$0.2~~$0.8 million of unrecognized tax positions will be resolved over the next twelve months.
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~~Table of Contents~~

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 & Gifts,
•     BloomNet, ~~Wire Service,~~ and
•     Gourmet ~~Food~~Foods & Gift Baskets

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Table of Contents
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.~~compensation. Assets and liabilities are reviewed at the consolidated level by management and not accounted for by segment.

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

December 29, 2019

December 30, 2018

December 29, 2019

December 30, 2018

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

Net Revenues:

(in thousands)

(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
Consumer Floral & Gifts
$ 305,357 $ 115,716 $ 466,903 $ 206,484
BloomNet
34,051 25,722 66,789 51,162
Gourmet Foods & Gift Baskets
538,265 464,584 628,194 535,799
Corporate
165 315 360 582 135 165 241 360
Intercompany eliminations
(545
)
(543
)
(900
)
(901
)
(552
)
(545
)
(1,099
)
(900
)
Total net revenues
$ 605,642 $ 571,316 $ 792,905 $ 740,812 $ 877,256 $ 605,642 $ 1,161,028 $ 792,905

Operating Income:

Segment Contribution Margin:

1-800-Flowers.com Consumer Floral
$ 10,890 $ 9,808 $ 19,414 $ 17,303
BloomNet Wire Service
9,134 8,257 17,491 15,895
Gourmet Food & Gift Baskets
113,387 105,514 106,787 96,393
Consumer Floral & Gifts
$ 45,657 $ 10,890 $ 64,893 $ 19,414
BloomNet
12,141 9,134 22,562 17,491
Gourmet Foods & Gift Baskets
135,621 113,387 133,040 106,787
Segment Contribution Margin Subtotal
133,411 123,579 143,692 129,591 193,419 133,411 220,495 143,692
Corporate (a)
(26,010
)
(20,925
)
(49,309
)
(42,060
)
(34,757
)
(26,010
)
(66,454
)
(49,309
)
Depreciation and amortization
(7,830
)
(7,969
)
(15,465
)
(15,812
)
(11,060
)
(7,830
)
(19,900
)
(15,465
)
Operating income
$ 99,571 $ 94,685 $ 78,918 $ 71,719 $ 147,602 $ 99,571 $ 134,141 $ 78,918

(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.

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

Three Months Ended

Three 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
$ 113,858 $ - $ 373,226 $ 487,084 $ 106,300 $ - $ 352,521 $ 458,821
Retail
1,082 - 23,120 24,202 1,063 - 24,971 26,034
Wholesale
- 7,270 68,238 75,508 - 5,793 62,511 68,304
BloomNet services
- 18,452 - 18,452 - 17,642 - 17,642
Other
776 - - 776 743 - - 743
Corporate
- - - 165 - - - 315
Eliminations
- - - (545 ) - - - (543 )
Net revenues
$ 115,716 $ 25,722 $ 464,584 $ 605,642 $ 108,106 $ 23,435 $ 440,003 $ 571,316

Six months ended

Six months ended

Three Months Ended

Three Months Ended

December 29, 2019

December 30, 2018

December 27, 2020

December 29, 2019

Consumer Floral

BloomNet Wire Service

Gourmet Food and Gift Baskets

Consolidated

Consumer Floral

BloomNet Wire Service

Gourmet Food and Gift Baskets

Consolidated

Consumer Floral & Gifts

BloomNet

Gourmet Foods & Gift Baskets

Consolidated

Consumer Floral & Gifts

BloomNet

Gourmet Foods & Gift Baskets

Consolidated

Net revenues
(in thousands)
(in thousands)

E-commerce
$ 202,946 $ - $ 413,188 $ 616,134 $ 189,750 $ - $ 386,771 $ 576,521 $ 303,275 $ 0 $ 474,535 $ 777,810 $ 113,858 $ 0 $ 373,226 $ 487,084
Retail
2,021 - 30,610 32,631 1,924 - 32,750 34,674 1,210 0 4,088 5,298 1,082 0 23,120 24,202
Wholesale
- 16,018 92,001 108,019 - 13,926 81,000 94,926 0 9,150 59,642 68,792 0 7,270 68,238 75,508
BloomNet services
- 35,144 - 35,144 - 33,502 - 33,502 0 24,901 0 24,901 0 18,452 0 18,452
Other
1,517 - - 1,517 1,508 - - 1,508 872 0 0 872 776 0 0 776
Corporate
- - - 360 - - - 582 0 0 0 135 0 0 0 165
Eliminations
- - - (900 ) - - - (901 ) 0 0 0 (552
)
0 0 0 (545
)
Net revenues
$ 206,484 $ 51,162 $ 535,799 $ 792,905 $ 193,182 $ 47,428 $ 500,521 $ 740,812 $ 305,357 $ 34,051 $ 538,265 $ 877,256 $ 115,716 $ 25,722 $ 464,584 $ 605,642

Six months ended

Six months ended

December 27, 2020

December 29, 2019

Consumer Floral & Gifts

BloomNet

Gourmet Foods & Gift Baskets

Consolidated

Consumer Floral & Gifts

BloomNet

Gourmet Foods & Gift Baskets

Consolidated

Net revenues

(in thousands)

E-commerce
$ 463,067 $ 0 $ 553,606 $ 1,016,673 $ 202,946 $ 0 $ 413,188 $ 616,134
Retail
2,157 0 5,661 7,818 2,021 0 30,610 32,631
Wholesale
0 20,443 68,927 89,370 0 16,018 92,001 108,019
BloomNet services
0 46,346 0 46,346 0 35,144 0 35,144
Other
1,679 0 0 1,679 1,517 0 0 1,517
Corporate
0 0 0 241 0 0 0 360
Eliminations
0 0 0 (1,099
)
0 0 0 (900
)
Net revenues
$ 466,903 $ 66,789 $ 628,194 $ 1,161,028 $ 206,484 $ 51,162 $ 535,799 $ 792,905

11
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Table of Contents

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. Further, we elected a short-term lease exception policy, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component for certain classes of assets. The right-of-use asset is initially and subsequently measured at the carrying amount of the lease liability adjusted for any prepaid or accrued lease payments, remaining balance of lease incentives received, unamortized initial direct costs, or impairment charges relating to the right-of-use asset. Right-of-use assets are assessed for impairment using the long-lived assets impairment guidance. The discount rate used to determine the present value of lease payments is our estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, as we generally cannot determine the interest rate implicit in the lease.

We recognize expense for our operating leases on a straight-line basis over the lease term. As these leases expire, it can be expected that in the normal course of business they will be renewed or replaced. Renewal option periods are included in the measurement of lease liability, where the exercise is reasonably certain to occur. Key estimates and judgments in accounting for leases include how we determine: ~~(1)~~(1) lease payments, ~~(2)~~(2) lease term, and ~~(3)~~(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 27, 2020

December 27, 2020

(in thousands)

Lease costs:

Operating lease costs
$ 3,679 $ 7,026
Variable lease costs
5,451 9,650
Short-term lease cost
3,420 5,227
Sublease income
(201
)
(406
)
Total lease costs
$ 12,349 $ 21,497

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 27, 2020

(in thousands)

Cash paid for amounts included in measurement of operating lease liabilities
$ 6,507
Right-of-use assets obtained in exchange for new operating lease liabilities
$ 26,919

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~~27, 2020

(in thousands)

Weighted-average remaining lease term - operating leases

~~9.7~~9.1 years
Weighted-discount rate - operating leases

~~Weighted-discount rate - operating leases~~
3.8 ~~3.8~~
%
%

Maturities of lease liabilities in accordance with ASC 842 as of December ~~29, 2019~~ 27, 2020 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):~~
Remainder of 2021
$ 7,191
2022
13,916
2023
13,593
2024
13,047
2025
10,665
Thereafter
52,105
Total Future Minimum Lease Payments
110,517
Less Imputed Remaining Interest
18,256
Total
$ 92,261

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 14 – Commitments and Contingencies

Litigation

~~There~~Bed Bath & Beyond:
On April 1, 2020, the Seller commenced an action against the Company in the Court of Chancery for the State of Delaware, which is captioned Bed Bath & Beyond Inc. v. 1-800-Flowers.com, et ano., C.A. (the “Complaint”), alleging a breach of the Equity Purchase Agreement (the “Agreement”), dated February 14, 2020, between Seller, PersonalizationMall, the Company and the Purchaser, pursuant to which the Seller agreed to sell to Purchaser, and the Purchaser agreed to purchase from Seller, all of the issued and outstanding membership interests of PersonalizationMall. The action was initiated after the Company requested a reasonable delay in the closing under the Purchase Agreement due to the unprecedented circumstances created by COVID-19. The Complaint requested an order of specific performance to consummate the transaction under the Purchase Agreement plus attorney’s fees and costs in connection with the action. The Company filed its answer to the Complaint on April 17, 2020 and an order governing expedited proceedings was approved on April 9, 2020 that set a trial date for late September 2020. On July 21, 2020, the Company and Seller entered into a settlement agreement, pursuant to which the Company agreed to move forward with its purchase of PersonalizationMall for $245.0 million, subject to certain working capital and other adjustments. The transaction closed on August 3, 2020. In connection with the settlement agreement, the parties executed a Stipulation and Proposed Order of Dismissal, resulting in the voluntary dismissal with prejudice of the litigation relating to the transaction.
In addition, there are various claims, lawsuits, and pending actions against the Company and its subsidiaries incident to the operations of its businesses. It is the opinion of management, after consultation with counsel, that the ~~ultimate~~final 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.

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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)~~("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 June ~~30, 2019~~28, 2020. 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~~Results,” under Part I, Item 1A, of the Company’s Annual Report on Form 10-K, for the year ended June ~~30, 2019~~28, 2020 under the heading “Risk ~~Factors.”~~Factors” and Part II-Other Information, Item 1A in this Form 10-Q.

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. 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:~~business platform features our all-star family of brands, including: 1-800-Flowers.com®, 1-800-Baskets.com®, Cheryl’s Cookies®, Harry & David®, ~~Shari's~~PersonalizationMall.com®, Shari’s Berries®, ~~FruitBouquets.com~~^SMFruitBouquets.com®, Moose Munch®, The Popcorn Factory®, Wolferman’s ~~Bakery ®, Personalization Universe®,~~Bakery® and Simply Chocolate®~~, Goodsey®, DesignPac®~~. We also offer top-quality steaks and chops from 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~~provider offering a ~~broad range~~broad-range of products and services designed to help professional florists grow their businesses profitably; ~~as well as Napco~~^SMNapco℠, a resource for floral gifts and seasonal dé~~cor.~~cor; and DesignPac Gifts, LLC, a manufacturer of gift baskets and towers.

1-800-FLOWERS.COM, Inc. was ~~recognized as~~named in the ~~2019 Mid-Market Company of the Year by CEO Connection.~~Forbes 2021 Best Small Companies List.

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 June ~~30, 2019.~~28, 2020.
Acquisition of PersonalizationMall
On August 3, 2020, the Company completed its acquisition of PersonalizationMall.com LLC ("PersonalizationMall"), a leading ecommerce provider of personalized products. The extensive offerings of PersonalizationMall include a wide variety of personalization processes such as sublimation, embroidery, digital printing, engraving and sandblasting, while providing an industry-leading customer experience based on a fully integrated business platform that includes a highly automated personalization process and rapid order fulfillment.
The Company used a combination of cash on its balance sheet and its existing credit facility to fund the $245.0 million purchase (subject to certain working capital and other adjustments), which included its newly renovated, leased 360,000 square foot, state-of-the-art production and distribution facility, as well as customer database, tradenames and website. PersonalizationMall’s revenues were approximately $171.2 million in its fiscal year 2020.
Amended Credit Agreement
Subsequent to, but in contemplation of the acquisition, on August 20, 2020, the Company entered into a First Amendment to its 2019 Credit Agreement to: (i) increase the aggregate principal amount of the existing Revolver commitments from $200.0 million to $250.0 million, (ii) establish a new tranche of term A-1 loans in an aggregate principal amount of $100.0 million (the “New Term Loan”), (iii) increase the working capital sublimit with respect to the Revolver from $175.0 million to $200.0 million, and (iv) increase the seasonally-reduced Revolver commitments from $100.0 million to $125.0 million for the period from January 1 through August 1 for each fiscal year of the Company. The $100.0 million proceeds of the New Term Loan were used to repay the $95.0 million borrowing that had been drawn on its existing Revolver to finance the acquisition, as well as financing fees of approximately $2.0 million (See Note 8 - Debt, in Item 1. for details).
COVID-19 Impact
In response to the global pandemic, the Company has taken actions to promote employee safety and business continuity, informed by the guidelines set forth by local, state and federal government and health officials. These initiatives include developing a “Pandemic Preparedness and Response Plan,” establishing an internal “nerve center” to allow for communication and coordination throughout the business, designing workstream teams to promote workforce protection and supply chain management, and dedicating resources to support customers, vendors, franchisees, and our BloomNet member florists.
The COVID-19 pandemic has affected, and will continue to affect, our operations and financial results for the foreseeable future. While there is significant uncertainty in the overall consumer environment due to the COVID-19 crisis, through the first four weeks of our third quarter of fiscal year 2021, we continue to see strong e-commerce demand for gourmet foods and gift baskets and our floral and personalized products. With that said, there are also headwinds (and resulting increased costs) that have been, and will continue to impact our operations during the foreseeable future, including the following:
●
Retail store closures – on March 20, 2020, in response to government actions, and for the safety of its employees, the Company temporarily closed its Cheryl’s and Harry & David retail stores. Affected employees were provided with Company-paid special COVID leave pay through April 3rd, as the nation and the Company worked to understand the extent and potential length of the crisis. On April 14th, the difficult decision was made to permanently close 38 of our 39 Harry & David retail stores. As a result, the Company incurred a charge of approximately $5.2 million in our fourth quarter of fiscal year 2020 for lease obligations, employee costs and other store closure costs. Annual revenues attributable to the closed locations was approximately $33.0 million.
●
Wholesale volume reductions - we have seen a reduction in our wholesale business as a result of COVID-19, which impacted our first and second quarter results within our Gourmet Foods and Gift Baskets segment, as many of our large wholesale customers took a cautious approach to the holiday season due to the uncertainty surrounding COVID-19 and its potential impact on brick and mortar retail store traffic.
●
Increased operating costs - we have seen third-party carrier capacity constraints and an associated increase in transportation costs, increases in seasonal labor wage rates, as well as operating inefficiencies and costs associated with the changes we have made, and continue to make, to our manufacturing, warehouse and distribution facilities to provide for the safety and wellbeing of our associates, including: required social distancing, enhanced facility cleaning and sanitizing schedules, and staggered production shifts.
The scale and overall economic impact of the COVID-19 crisis is still very difficult to assess. However, the Company believes that the operating platform it has built over the years, combined with its diversified product line, and ability to engage with its customers will allow it to successfully navigate this challenging environment. We remain focused on three key elements of our business strategy:
●
Taking care of the health and safety of our associates, our BloomNet florists, our vendors and our customers,
●
Maintaining our financial strength and flexibility, and
●
Continuing to invest in areas of our business that can help drive future growth.
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Table of Contents
Company Guidance
Due to the significant uncertainty in the overall economy related to the ongoing COVID-19 pandemic, the Company is not providing guidance for its full fiscal 2021 year at this time.
Regarding the fiscal third quarter:
o
Based on the continued strong ecommerce growth momentum that has carried into January 2021, the Company expects to achieve total consolidated revenue growth for its third fiscal quarter, including contributions from PersonalizationMall, in a range of 45-to-50 percent, compared with the prior year period.
o
The Company anticipates that the strong revenue growth will help offset certain headwinds, including the Sunday placement of the key Valentine’s Day holiday, increased year-over-year labor and transportation costs and operating inefficiencies related to the COVID-19 pandemic.
o
As a result, the Company anticipates achieving Adjusted EBITDA of between $4.0-and-$5.0 million, compared with an Adjusted EBITDA loss of $2.4 million in the prior year period, and
o
an EPS loss of between $0.09-and-$0.11, compared with an EPS loss of $0.15 in the prior year period.

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, NQDC Plan 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 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 and adjusted segment contribution margin
We define segment contribution margin as earnings before interest, taxes, depreciation and amortization, before the allocation of corporate overhead expenses. Adjusted segment contribution margin is defined as contribution margin adjusted for certain items affecting period-to-period comparability. 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~~and adjusted segment contribution margin provide management and users of the financial statements meaningful information about the performance of our business segments.

Segment contribution margin isand adjusted segment contribution margin are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. The material limitation associated with the use of the segment contribution margin and adjusted segment contribution margin is that ~~it is~~they are an incomplete measure of profitability as ~~it does~~they do not include all operating expenses or non-operating income and expenses. Management compensates for these limitations when using this measure by looking at other GAAP measures, such as operating income and net income.

Adjusted net income (loss) and adjusted or comparable net income (loss) per common share
13
We define adjusted net income (loss) and adjusted or comparable net income (loss) per common share as net income (loss) and net income (loss) per common share adjusted for certain items affecting period to period comparability. See ~~Table of Contents~~Segment Information
below for details on how adjusted net income (loss) and adjusted or comparable net income (loss) per common share were calculated for each period presented.

We believe that adjusted net income (loss) and adjusted or comparable net income (loss) per common share are meaningful measures because they increase the comparability of period to period results.
Since these are not measures of performance calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, GAAP net income (loss) and net income (loss) per common share, as indicators of operating performance and they may not be comparable to similarly titled measures employed by other companies.
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, and adjusted 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 %

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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Three Months Ended

December 27, 2020

PersonalizationMall Litigation and Transaction Costs

Harry & David Store Closure Costs

As Adjusted (non-GAAP) December 27, 2020

December 29, 2019

% Change

Net revenues:

Consumer Floral & Gifts
$ 305,357 $ - $ - $ 305,357 $ 115,716 163.9 %
BloomNet
34,051 - - 34,051 25,722 32.4 %
Gourmet Foods & Gift Baskets
538,265 - - 538,265 464,584 15.9 %
Corporate
135 - - 135 165 -18.2 %
Intercompany eliminations
(552 ) - - (552 ) (545 ) -1.3 %
Total net revenues
$ 877,256 $ - $ - $ 877,256 $ 605,642 44.8 %

Gross profit:

Consumer Floral & Gifts
$ 134,474 $ - $ - $ 134,474 $ 44,544 201.9 %
44.0 % 44.0 % 38.5 %

BloomNet
16,820 - - 16,820 13,161 27.8 %
49.4 % 49.4 % 51.2 %

Gourmet Foods & Gift Baskets
246,890 - - 246,890 211,362 16.8 %
45.9 % 45.9 % 45.5 %

Corporate
62 - - 62 105 -41.0 %
45.9 % 45.9 % 63.6 %

Total gross profit
$ 398,246 $ - $ - $ 398,246 $ 269,172 48.0 %
45.4 % - - 45.4 % 44.4 %

EBITDA (non-GAAP):

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

Consumer Floral & Gifts
$ 45,657 $ - $ - $ 45,657 $ 10,890 319.3 %
BloomNet
12,141 - - 12,141 9,134 32.9 %
Gourmet Foods & Gift Baskets
135,621 - (78 ) 135,543 113,387 19.5 %
Segment Contribution Margin Subtotal
193,419 - (78 ) 193,341 133,411 44.9 %
Corporate (b)
(34,757 ) 513 - (34,244 ) (26,010 ) -31.7 %
EBITDA (non-GAAP)
158,662 513 (78 ) 159,097 $ 107,401 48.1 %
Add: Stock-based compensation
2,965 2,965 2,280 30.0 %
Add: Compensation charge related to NQDC Plan Investment Appreciation
2,227 - - 2,227 1,002 122.2 %
Adjusted EBITDA (non-GAAP)
$ 163,854 $ 513 $ (78 ) $ 164,289 $ 110,683 48.4 %

Six Months Ended

December 27, 2020

PersonalizationMall Litigation and Transaction Costs

Harry & David Store Closure Costs

As Adjusted (non-GAAP) December 27, 2020

December 29, 2019

% Change

Net revenues:

Consumer Floral & Gifts
$ 466,903 $ - $ - $ 466,903 $ 206,484 126.1 %
BloomNet
66,789 - - 66,789 51,162 30.5 %
Gourmet Foods & Gift Baskets
628,194 - - 628,194 535,799 17.2 %
Corporate
241 - - 241 360 -33.1 %
Intercompany eliminations
(1,099 ) - - (1,099 ) (900 ) -22.1 %
Total net revenues
$ 1,161,028 $ - $ - $ 1,161,028 $ 792,905 46.4 %

Gross profit:

Consumer Floral & Gifts
$ 200,060 $ - $ - $ 200,060 $ 80,594 148.2 %
42.8 % 42.8 % 39.0 %

BloomNet
31,658 - - 31,658 26,119 21.2 %
47.4 % 47.4 % 51.1 %

Gourmet Foods & Gift Baskets
281,897 - - 281,897 238,404 18.2 %
44.9 % 44.9 % 44.5 %

Corporate
111 - - 111 201 -44.8 %
46.1 % 46.1 % 55.8 %

Total gross profit
$ 513,726 $ - $ - $ 513,726 $ 345,318 48.8 %
44.2 % - - 44.2 % 43.6 %

EBITDA (non-GAAP):

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

Consumer Floral & Gifts
$ 64,893 $ - $ - $ 64,893 $ 19,414 234.3 %
BloomNet
22,562 - - 22,562 17,491 29.0 %
Gourmet Foods & Gift Baskets
133,040 - (483 ) 132,557 106,787 24.1 %
Segment Contribution Margin Subtotal
220,495 - (483 ) 220,012 143,692 53.1 %
Corporate (b)
(66,454 ) 5,403 - (61,051 ) (49,309 ) -23.8 %
EBITDA (non-GAAP)
154,041 $ 5,403 $ (483 ) $ 158,961 94,383 68.4 %
Add: Stock-based compensation
5,358 5,358 4,045 32.5 %
Add: Compensation charge related to NQDC Plan Investment Appreciation
3,207 - - 3,207 958 234.8 %
Adjusted EBITDA (non-GAAP)
$ 162,606 $ 5,403 $ (483 ) $ 167,526 $ 99,386 68.6 %
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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.

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

Three Months Ended

Six Months Ended

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

Net income
$ 113,677 $ 74,152 $ 103,915 $ 58,881
Adjustments to reconcile net income to adjusted net income (non-GAAP)

Add: Personalization Mall litigation and transaction costs
513 - 5,403 -
Deduct: Harry & David store closure cost adjustment
(78 ) - (483 ) -
Deduct: Income tax (benefit) on adjustments
125 - (1,117 ) -
Adjusted net income (non-GAAP)
$ 114,237 $ 74,152 $ 107,718 $ 58,881

Basic and diluted net income per common share

Basic
$ 1.76 $ 1.15 $ 1.61 $ 0.91
Diluted
$ 1.71 $ 1.12 $ 1.56 $ 0.89

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

Basic
$ 1.76 $ 1.15 $ 1.67 $ 0.91
Diluted
$ 1.72 $ 1.12 $ 1.62 $ 0.89

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

Basic
64,728 64,687 64,524 64,595
Diluted
66,543 66,401 66,593 66,486
Reconciliation of net income to adjusted EBITDA (non-GAAP):

Three Months Ended

Six Months Ended

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

Net income
$ 113,677 $ 74,152 $ 103,915 $ 58,881
Add: Interest expense, net
(330 ) 10 (289 ) 689
Add: Depreciation and amortization
11,060 7,830 19,900 15,465
Add: Income tax expense
34,255 25,409 30,515 19,348
EBITDA
158,662 107,401 154,041 94,383
Add: Stock-based compensation
2,965 2,280 5,358 4,045
Add: Compensation charge related to NQDC plan investment appreciation
2,227 1,002 3,207 958
Add: Personalization Mall litigation and transaction costs
513 - 5,403 -
Deduct: Harry & David store closure cost adjustment
(78 ) - (483 ) -
Adjusted EBITDA
$ 164,289 $ 110,683 $ 167,526 $ 99,386

(a) Segment performance is measured based on segment contribution margin or segment Adjusted EBITDA, reflecting only the direct controllable revenue and operating expenses of the segments, both of which are non-GAAP measurements. As such, management’s measure of profitability for these segments does not include the effect of corporate overhead, described above, depreciation and amortization, other income (net), and other items that we do not consider indicative of our core operating performance.

(b) Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as Stock-Based Compensation. In order to leverage the Company’s infrastructure, these functions are operated under a centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center, which are allocated directly to the above categories based upon usage, are included within corporate expenses as they are not directly allocable to a specific segment.

Results of Operations

Net revenues

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

December 29, 2019

December 30, 2018

% Change

December 29, 2019

December 30, 2018

% Change

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

(dollars in thousands)

Net revenues:

E-Commerce
$ 487,084 $ 458,821 6.2
%
$ 616,134 $ 576,521 6.9
%
$ 777,810 $ 487,084 59.7
%
$ 1,016,673 $ 616,134 65.0
%
Other
118,558 112,495 5.4
%
176,771 164,291 7.6
%
99,446 118,558 -16.1
%
144,355 176,771 -18.3
%
Total net revenues
$ 605,642 $ 571,316 6.0
%
$ 792,905 $ 740,812 7.0
%
$ 877,256 $ 605,642 44.8
%
$ 1,161,028 $ 792,905 46.4
%

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

Net revenues increased ~~6.0%~~44.8% and ~~7.0%~~46.4% during the three and six months ended December ~~29, 2019,~~27, 2020, respectively, compared to the same periods of the prior year, due to ~~growth~~higher revenues across ~~all~~our three ~~of the Company’s~~ business ~~segments. Revenues within the 1-800-Flowers.com Consumer Floral segment increased 7.0%~~segments (+24.7% and ~~6.9% during~~+28.4% on a pro-forma basis for the three and six months ended December ~~29, 2019,~~ 27, 2020,compared to the ~~same~~ respective prior year 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 a result of increases in its advertising services and wholesale product volume. Due to the seasonality of its businesses, the Gourmet Food & Gift Baskets segment comprises approximately 77% and 68% of total consolidated revenues during the three and six months ended December 29, 2019, respectively. Revenue growth of 5.6% and 7.0% for the periods presented, is primarily attributable to: (i) Harry & David e-commerce growth, resulting from the continuing digital transformation of its marketing programs, as well as its expanded product offerings, combined with (ii) strong growth in the 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 byexcluding the impact of PersonalizationMall, which was acquired on August 3, 2020,and is included in our Consumer Floral & Gifts segment)as the ~~shortened~~positive trends we had been seeing in everyday gifting occasions during the previous two quarters continued throughout the 2020 holiday gifting season. The marketing and merchandising investments that the Company has made across its brands, including product offerings and messaging that have resonated with our customers, coupled with the strategic acquisitions of Shari’s Berries® in August of 2019 and PersonalizationMall.com in August of 2020, have enabled the Company to capitalize on the consumer behavioral shift to e-commerce shopping ~~season~~ caused by the ~~late Thanksgiving/Cyber Monday, which resulted in 6 fewer shopping days between Thanksgiving and Christmas in the second quarter~~pandemic.
17
Table of ~~fiscal 2020 in comparison to the prior year.~~Contents

Disaggregated revenue by channel follows:

Three Months Ended

Three Months Ended

Three Months Ended

Three Months Ended

December 29, 2019

December 30, 2018

December 27, 2020

December 29, 2019

Consumer Floral

BloomNet Wire Service

Gourmet Food and Gift Baskets

Consolidated

Consumer Floral

BloomNet Wire Service

Gourmet Food and Gift Baskets

Consolidated

Consumer Floral & Gifts

BloomNet

Gourmet Foods & Gift Baskets

Consolidated

Consumer Floral & Gifts

BloomNet

Gourmet Foods & Gift Baskets

Consolidated

Net revenues
(in thousands)

(in thousands)

E-commerce
$ 113,858 $ - $ 373,226 $ 487,084 $ 106,300 $ - $ 352,521 $ 458,821 $ 303,275 $ - $ 474,535 $ 777,810 $ 113,858 $ - $ 373,226 $ 487,084
Retail
1,082 - 23,120 24,202 1,063 - 24,971 26,034 1,210 - 4,088 5,298 1,082 - 23,120 24,202
Wholesale
- 7,270 68,238 75,508 - 5,793 62,511 68,304 9,150 59,642 68,792 - 7,270 68,238 75,508
BloomNet services
- 18,452 - 18,452 - 17,642 - 17,642 24,901 - 24,901 - 18,452 - 18,452
Other
776 - - 776 743 - - 743 872 - - 872 776 - - 776
Corporate
- - - 165 - - - 315 - - 135 - - - 165
Eliminations
- - - (545 ) - - - (543 ) - - (552
)
- - - (545
)
Net revenues
$ 115,716 $ 25,722 $ 464,584 $ 605,642 $ 108,106 $ 23,435 $ 440,003 $ 571,316 $ 305,357 $ 34,051 $ 538,265 $ 877,256 $ 115,716 $ 25,722 $ 464,584 $ 605,642

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
15
~~Table of Contents~~

Six months ended

Six months ended

December 27, 2020

December 29, 2019

Consumer Floral & Gifts

BloomNet

Gourmet Foods & Gift Baskets

Consolidated

Consumer Floral & Gifts

BloomNet

Gourmet Foods & Gift Baskets

Consolidated

Net revenues

(in thousands)

E-commerce
$ 463,067 $ - $ 553,606 $ 1,016,673 $ 202,946 $ - $ 413,188 $ 616,134
Retail
2,157 - 5,661 7,818 2,021 - 30,610 32,631
Wholesale
- 20,443 68,927 89,370 - 16,018 92,001 108,019
BloomNet services
- 46,346 - 46,346 - 35,144 - 35,144
Other
1,679 - - 1,679 1,517 - - 1,517
Corporate
- - - 241 - - - 360
Eliminations
- - - (1,099
)
- - - (900
)
Net revenues
$ 466,903 $ 66,789 $ 628,194 $ 1,161,028 $ 206,484 $ 51,162 $ 535,799 $ 792,905

Revenue by sales channel:
E-commerce revenues (combined online and telephonic) increased by ~~6.2%~~59.7% and 65.0% during the three and six months ended December ~~29, 2019,~~27, 2020, respectively, compared to the same ~~period~~periods of the prior year, ~~primarily~~ as a result of growth ~~within~~within: (i) the Gourmet ~~Food~~Foods & Gift Baskets segment of ~~5.9%~~27.1% and 34.0%, ~~complemented by growth within~~and (ii) the ~~1-800-Flowers.com~~Consumer Floral & Gifts segment of ~~7.1%.~~166.4% and 128.2%, which includes the revenues of PersonalizationMall, since its date of acquisition on August 3, 2020. During the three and six months ended December ~~29, 2019,~~27, 2020, respectively, the Company fulfilled approximately ~~5.8~~9.9 and 13.2 million orders through its e-commerce sales channels (online and telephonic sales), an increase of ~~4.8%~~70.7% and 75.5% compared to the same period of the prior year, while average order value ~~increased 1.3%~~decreased 6.5% and 6.0%, 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~~$78.89 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 Gourmet Food & Gift Baskets and 1-800-Flowers.com Consumer Floral segments of 6.8% and 7.0%,$76.83, respectively. During the six months ended December 29, 2019, the Company fulfilled approximately 7.5 million orders through its e-commerce sales channels (online and telephonic sales), an increase of 5.3% compared to the same period of the prior year, whileThe decrease in average order value ~~increased 1.5%, to $81.82, during the six months ended December 29, 2019, compared~~was attributable to the ~~same period~~impact of the ~~prior year.~~mix of PersonalizationMall order volumes.

Other revenues are comprised of the Company’s BloomNet ~~Wire Service~~ segment, as well as the wholesale and retail channels of its ~~1-800-Flowers.com~~Consumer Floral & Gifts and Gourmet ~~Food~~Foods & Gift Baskets segments. Other revenues ~~increased~~decreased by ~~5.4%~~16.1% and 18.3% during the three and six months ended December ~~29, 2019,~~27, 2020, compared to the same ~~period~~periods of the prior year, due ~~to growth~~to: (i) wholesale/retail sales channel declines within the Gourmet ~~Food~~Foods & Gift Baskets segment, ~~of 4.4% and BloomNet Wire Service segment of 9.8%.~~
~~Other revenues increased by 7.6% during~~as big-box retail store customers reduced order volumes for the ~~six months ended December 29, 2019, compared~~holiday season due to the ~~same period~~pandemic, and (ii) the closure of Harry and David retail store operations in the ~~prior year, driven primarily~~fourth quarter of fiscal 2020, partially offset by ~~growth within the Gourmet Food & Gift Baskets~~an increase in BloomNet segment ~~of 7.8% and BloomNet Wire Service segment of 7.9%.~~revenues.

Revenue by segment:
~~1-800-Flowers.com~~ Consumer Floral & Gifts – this segment, which ~~consists~~historically has consisted primarily of the operations of the 1-800-Flowers.com brand, but now includes revenues attributable to PersonalizationMall subsequent to its August 3, 2020 acquisition date, derives revenue from the sale of consumer floral products and gifts through its e-commerce sales channels (telephonic and online sales), retail stores, and royalties from its franchise operations. Net revenues increased ~~7.0%~~163.9% and ~~6.9%~~126.1% during the three and six months ended December ~~29, 2019,~~27, 2020, compared to the same periods of the prior year, ~~reflecting~~reflecting: (i) the ~~strategic~~ marketing and merchandising investments made in our flagship brand, which have driven our growth and market share gains that ~~we have been making~~began in the ~~Company’s flagship brand.~~second half of Fiscal 2018, continued through Fiscal 2020, and accelerated with the start of the pandemic, as well as (ii) the incremental revenues of PersonalizationMall. Excluding the revenues derived from PersonalizationMall, segment pro-forma revenue growth was 58.3% and 57.1% during the three and six months ended December 27, 2020, respectively.

BloomNet ~~Wire Service~~- revenues in this segment are derived from membership fees, as well as other product and service offerings to florists. Net revenues increased ~~9.8%~~32.4% and ~~7.9%~~30.5% during the three and six months ended December ~~29, 2019,~~27, 2020, respectively, compared to the same periods of the prior year, primarily due to increased: (i) settlement processing revenues, due to the higher ~~services revenue, including digital directory~~florist-to-florist order volume, (ii)transaction, reciprocity and ~~transaction~~membership fees, ~~(driven~~driven primarily by increased ~~1-800-Flowers and Shari’s Berries~~ order volume sent through the ~~network), as well as increasing demand for our expanded line of~~network, and (iii) favorable wholesale ~~products.~~demand.

Gourmet ~~Food~~Foods & Gift Baskets – this segment includes the operations of Harry & David, Wolferman’s, Stock Yards, Cheryl’s Cookies, The Popcorn Factory, 1-800-Baskets/DesignPac, and 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 increased ~~5.6%~~15.9% and ~~7.0%~~17.2% during the three and six months ended December ~~29, 2019,~~27, 2020, respectively, compared to the same periods of the prior year, ~~primarily~~ due ~~to: (i) Harry & David~~to favorable e-commerce revenues across the segment, partially offset by reduced wholesale and retail volumes. E-commerce revenue growth ~~which continues to benefit from~~of 27.1% and 34.0% during the ~~digital transformation~~three and six months ended December 27, 2020, respectively, was the result of ~~its marketing programs~~increased demand during the Christmas holiday period, as well as ~~its expanded~~increased penetration of “everyday” volume within the segment, which benefitted from the impact of the COVID-19 pandemic as product offerings, convenience, and brand sentiment resonated with customers. Wholesale/retail channel revenues declined 30.2% and 39.2%, during the three and six months ended December 27, 2020, respectively, as big-box retail store customers reduced order volumes due to the pandemic and as a result of ~~unique, shareable gifts for both holiday (seasonal fruits~~the closure of the Harry and bakery) and everyday occasions, as well as Harry & David’s Gourmet line, which includes prepared meals and wines for both gifting and entertaining, which is enabling the brand to attract new customers while also deepening engagement with existing customers, (ii) strong growthDavid retail store operations in the ~~DesignPac wholesale business due to increased demand fueled by new product designs and an expanded customer list, and (iii) the acquisition~~fourth quarter of ~~Shari’s Berries on August 14, 2019.~~fiscal 2020.
18
Table of Contents

Gross profit

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

December 29, 2019

December 30, 2018

% Change

December 29, 2019

December 30, 2018

% Change

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

(dollars in thousands)

Gross profit
$ 269,172 $ 254,827 5.6
%
$ 345,318 $ 323,367 6.8
%
$ 398,246 $ 269,172 48.0
%
$ 513,726 $ 345,318 48.8
%
Gross profit %
44.4
%
44.6
%
43.6
%
43.7
%
45.4
%
44.4
%
44.2
%
43.6
%

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 ~~5.6%~~48.0% and ~~6.8%~~48.8% during the three and six months ended December ~~29, 2019,~~27, 2020, respectively, compared to the same periods of the prior year, as a result of the increase in revenues noted ~~above, partially offset by a slight decrease in gross profit percentage.~~above. Gross profit percentage ~~declined 20~~increased 100 basis points and 1060 basis points, ~~to 44.4% and 43.6%,~~ during the ~~respective~~ three and six months ended December ~~29, 2019,~~27, 2020, respectively, compared to the same periods of the prior year, as ~~a result~~higher margins in the Consumer Floral & Gifts (primarily due to the acquisition of ~~a product mix, combined with macro-economic headwinds including: (i) rising labor~~PersonalizationMall, which carries higher margins) and ~~transportation costs; (ii) tariffs; and (iii) a highly promotional Christmas holiday associated with the shortened shopping season caused by the late Thanksgiving holiday, largely~~Gourmet Foods & Gift Basket segments were offset by lower margins in the ~~Company’s strategic pricing initiatives, efficient use~~BloomNet segment. On a pro-forma basis, excluding the impact of ~~promotional marketing programs,~~PersonalizationMall, gross margin percentage was 44.4% and ~~operational productivity improvements.~~
~~1-800-Flowers.com Consumer Floral segment~~ ~~- Gross profit increased by 7.0% and 7.6%~~43.2% during the three and six months ended December ~~29, 2019,~~27, 2020, respectively.
Consumer Floral & Gifts segment - Gross profit increased by 201.9% and 148.2% during the three and six months ended December 27, 2020, respectively, compared to the same periods of the prior year, as a result of the revenue increases noted ~~above. Gross profit~~above and increases in gross margin percentage of ~~38.5%~~550 basis points, to 44.0% and 380 basis points, to 42.8%, during the respective three and six months periods ended December ~~29, 2019,~~27, 2020. The increase in gross margin percentage was ~~consistent~~primarily attributable to the acquisition of PersonalizationMall, which carries higher margins, as well as pricing initiatives and reductions in promotional activity after the onset of COVID-19, partially offset by higher product and delivery costs associated with the ~~same period~~pandemic. On a pro-forma basis, excluding the impact of ~~the prior year,~~PersonalizationMall, acquired on August 3, 2020, gross margin percentage was 39.2% and ~~improved 20 basis points, to 39.0%,~~39.1% during the three and six months ended December ~~29, 2019 compared to the same period of the prior year, primarily due to efficient use of promotional pricing programs.~~27, 2020, respectively.

BloomNet ~~Wire Service~~ segment - Gross profit increased by ~~6.8%~~27.8% and 21.2% during the three and six months ended December ~~29, 2019,~~27, 2020, respectively, compared to the same ~~period~~periods of the prior year, due to the increase in ~~revenues~~revenue noted above, partially offset by a decline in gross margin percentage of ~~140~~180 basis points, to ~~51.2%~~49.4%, ~~due~~and 370 basis points, to ~~product sales mix associated with the outsized increase in wholesale product revenues. Gross profit increased by 7.8%~~47.4% during the respective three months ended and six months ended December ~~29, 2019 compared to the same period of the prior year~~27, 2020, due to ~~the increase in revenues noted above, as gross margin percentage of 51.1% was consistent with the same period of the prior year.~~higher rebates (higher florist-to-florist volume) and unfavorable wholesale product margins due to mix, and higher shipping and product costs.

Gourmet ~~Food~~Foods & Gift Baskets segment - Gross profit increased by ~~5.3%~~16.8% and ~~6.6%~~18.2% during the three and six months ended December ~~29, 2019,~~27, 2020, respectively, compared to the same periods of the prior year, due to the revenue increase noted above, ~~partially offset by~~as well as an increase in gross profit percentage ~~which decreased 10~~of 40 basis points, to ~~45.5%~~45.9%, and 2040 basis points, to ~~44.5%~~44.9% during the three ~~months ended~~ and six months ended December ~~29, 2019 compared~~27, 2020, respectively. The improvement in gross margin percentage was primarily attributable to ~~the same periods of the prior year, primarily~~lower promotions, merchandise assortment, and channel mix, partially offset by higher transportation costs due to holiday surcharges and expedited ship methods, as ~~a result of the input cost increases described above.~~well as increased labor costs.
16
~~Table of Contents~~

Marketing and sales expense

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

December 29, 2019

December 30, 2018

% Change

December 29, 2019

December 30, 2018

% Change

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

(dollars in thousands)

Marketing and sales
$ 127,404 $ 119,664 6.5
%
$ 184,243 $ 172,618 6.7
%
$ 194,696 $ 127,404 52.8
%
$ 274,981 $ 184,243 49.2
%
Percentage of net revenues
21.0
%
20.9
%
23.2
%
23.3
%
22.2
%
21.0
%
23.7
%
23.2
%

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 ~~6.5%~~52.8% and ~~6.7%~~49.2% during the three and six months ended December ~~29, 2019,~~27, 2020, respectively, compared to the same periods of the prior year, ~~primarily due to increased advertising spend within the Gourmet Food & Gift Baskets and 1-800-Flowers.comConsumer Floral segments, due to the Company’s incremental~~as a result of marketing ~~efforts~~initiatives designed to accelerate revenue growth and capture market share ~~partially offset by~~within both the Gourmet Foods & Gift Baskets segment, and the Consumer Floral & Gifts segment, which includes the incremental marketing costs of PersonalizationMall, which was acquired on August 3, 2020. On a pro-forma basis, excluding the impact of PersonalizationMall, marketing and sales as a percentage of net revenues, was 21.4% and 23.1% during the three and six months ended December 27,2020, respectively, compared to 21.0% and 23.2% in the same periods of the prior year, reflecting the operational efficiencies and platform leverage attributable to the revenue growth. As a result, marketing and sales as a percentage of net revenues increased 10 basis points, to 21.0% for the three months ended December 29, 2019, but decreased 10 basis points, to 23.2%, for the six months ended December 29, 2019, in comparison to the same periods of the prior year.

Technology and development expense

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

December 29, 2019

December 30, 2018

% Change

December 29, 2019

December 30, 2018

% Change

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

(dollars in thousands)

Technology and development
$ 11,733 $ 10,906 7.6
%
$ 22,536 $ 21,185 6.4
%
$ 14,053 $ 11,733 19.8
%
$ 25,656 $ 22,536 13.8
%
Percentage of net revenues
1.9
%
1.9
%
2.8
%
2.9
%
1.6
%
1.9
%
2.2
%
2.8
%

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~~expense increased ~~7.6%~~19.8% and ~~6.4%~~13.8% during the three and six months ended December ~~29, 2019,~~27, 2020, respectively, compared to the same periods of the prior year, primarily due to increased ~~license~~labor, hosting and maintenance costs ~~required~~incurred to support the Company’s technology ~~platform.~~platform, in addition to the incremental technology costs associated with PersonalizationMall, which was acquired on August 3, 2020.
19
Table of Contents

General and administrative expense

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

December 29, 2019

December 30, 2018

% Change

December 29, 2019

December 30, 2018

% Change

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

(dollars in thousands)

General and administrative
$ 22,634 $ 21,603 4.8
%
$ 44,156 $ 42,033 5.1
%
$ 30,835 $ 22,634 36.2
%
$ 59,048 $ 44,156 33.7
%
Percentage of net revenues
3.7
%
3.8
%
5.6
%
5.7
%
3.5
%
3.7
%
5.1
%
5.6
%

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~~expenses increased ~~4.8%~~36.2% and ~~5.1%~~33.7% during the three and six months ended December ~~29, 2019,~~27, 2020, respectively, compared to the same periods of the prior year, due to incremental costs related to: (i) PersonalizationMall (including transaction and litigation related costs), (ii) higher labor costs due to annual merit increases and performance related bonuses as well as investment earnings on the Company’s NQDC Plan assets (offset within Other (income) expenses noted below, and (iii) incremental health and safety-related COVID-19 related expenses.
Depreciation and amortization expense

Three Months Ended

Six Months Ended

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

Depreciation and amortization
$ 11,060 $ 7,830 41.3
%
$ 19,900 $ 15,465 28.7
%
Percentage of net revenues
1.3
%
1.3
%
1.7
%
2.0
%

Depreciation and amortization expense expenses increased 41.3% and 28.7% during the three and six months ended December 27, 2020, respectively, compared to the same periods of the prior year, primarily due to ~~higher labor costs, attributable to an increase in~~ the ~~value of Non-Qualified Deferred Compensation Plan investments (offset by an increase in other income on the financials statement – see below),~~incremental depreciation and ~~higher acquisition~~customer list amortization associated with PersonalizationMall, as well as recent short-lived IT related ~~professional fees, partially offset by lower insurance costs due to favorable claims experience.~~ecommerce/platform enhancements.
~~Depreciation and amortization expense~~

Three Months Ended

Six Months Ended

December 29, 2019

December 30, 2018

% Change

December 29, 2019

December 30, 2018

% Change

(dollars in thousands)

Depreciation and amortization
$ 7,830 $ 7,969 (1.7
%)
$ 15,465 $ 15,812 (2.2
%)
Percentage of net revenues
1.3
%
1.4
%
2.0
%
2.1
%

Depreciation and amortization expense during the three and six months ended December 29, 2019 decreased 1.7% and 2.2%, respectively, compared to the same periods of the prior year, primarily as a result of timing of capital projects.
17
~~Table of Contents~~

Interest (income) expense, net

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
%)

Three Months Ended

Six Months Ended

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

Interest expense, net
$ 1,927 $ 985 95.6
%
$ 2,967 $ 1,580 87.8
%

Interest expense, net consists primarily of interest expense and amortization of deferred financing costs attributable to the Company’s credit facility (See Note 8 - Debt, in Item 1. for details), net of income earned on the Company’s available cash balances.

Interest expense, net ~~decreased 31.1%~~increased 95.6% and ~~34.7%~~87.8% during the three and six months ended December ~~29, 2019,~~27, 2020, respectively, compared to the same periods of the prior year, due to ~~lower borrowings outstanding,~~the incremental interest expense associated with the New Term Loan, which was used to partially finance the acquisition of PersonalizationMall, and a lower interest ~~rate resulting from~~income on the ~~2019 Credit Agreement amendment, combined with higher invested~~Company’s outstanding cash balances ~~and associated rates earned on these balances.~~due to lower interest rates.

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

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
%

Three Months Ended

Six Months Ended

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

Other (income) expense, net
$ (2,257
)
$ (975
)
131.5
%
$ (3,256
)
$ (891
)
265.4
%

Other ~~income,~~expense, net for the three and six months ended December ~~29, 2019~~27, 2020, respectively, consists primarily of investment ~~income~~gain on the Company’s ~~Non-Qualified Deferred Compensation~~NQDC Plan ~~assets of approximately $1.0 million, whereas in the prior year, there was a loss of $1.2 million.~~assets.

Income Taxes
The Company recorded income tax expense of $34.3 million and $30.5 million during the three and six months ended December 27, 2020, respectively, and $25.4 million and $19.3 million during the three and six months ended December 29, 2019, ~~respectively, and $23.4 million and $17.0 million, during the three and six months ended December 30, 2018,~~ respectively. The Company’s effective tax rate for the three and six months ended December ~~29, 2019~~27, 2020 was ~~25.5%~~23.2% and ~~24.7%~~22.7%, respectively, compared to ~~25.4%~~25.5% and ~~24.9%~~24.7% in the same periods of the prior year. The effective rates for fiscal ~~2020~~year 2021 and fiscal ~~2019~~year 2020 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 excess tax benefits from stock-based compensation. At December 29, 2019, the Company has an unrecognized tax benefit, including accrued interest and penalties, of approximately $0.9 million. The Company believes that $0.2 million of unrecognized tax positions will be resolved over the next twelve months.

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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 ~~2019~~2020 Credit Agreement (see Note 8 - Debt in Item 1 for details). At December ~~29, 2019,~~27, 2020, the Company had working capital of ~~$204.9~~$146.7 million, including cash and cash equivalents of ~~$295.6~~$370.6 million, compared to working capital of ~~$175.7~~$198.3 million, including cash and cash equivalents of ~~$172.9~~$240.5 million, at June ~~30, 2019.~~28, 2020.

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~~the Company’s second fiscal quarter, ~~generates~~historically generated nearly 50% of the Company’s annual revenues, and all of its earnings. However, with the onset of the COVID-19 pandemic, the Company experienced a significant increase in its revenues and earnings during its fourth quarter of fiscal year 2020. These trends have continued through the first four weeks of its fiscal year 2021 third quarter. Our customers have increasingly turned to our brands and our expanded product offerings to help them connect and express themselves during the recent COVID-19 pandemic and our “everyday” gifting product line has seen increased volume. While the continuing impacts of COVID-19 are difficult to predict, the Company expects that its fiscal second quarter will continue to be its largest in terms of revenues and earnings, although increases in the Company’s “everyday” business have and are expected to continue to lessen the seasonality of our business.
The Company utilized cash on hand to fund its operations through August 2020. In September ~~2019. In October 2019,~~2020, the Company borrowed under its Revolver to fund short-term working capital needs, with borrowings peaking at ~~$20.0~~$70.0 million in November ~~2019.~~2020. Cash generated from operations during the Christmas holiday shopping season enabled the Company to repay the Revolver ~~prior to the end of~~in December ~~2019.~~2020. Based on current projected ~~cashflows,~~cash flows, the Company believes that available cash balances are expected to be sufficient to provide for the Company’s operating needs ~~through~~until the second of fiscal ~~2021.~~year 2022, when the Company expects to borrow against its Revolver to fund pre-holiday manufacturing and inventory purchases. The Company has no outstanding amount under its Revolver as of December 27, 2020.

While we believe that our sources of funding will be sufficient to meet our anticipated operating cash needs for at least the next twelve months, any projections of future cash needs and cash flows are subject to substantial uncertainty. We continually evaluate, ~~opportunities to repurchase common stock~~ and we will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services, capital infrastructure, and technologies, which might affect our liquidity requirements or cause us to require additional financing.

To date, we have not identified any material liquidity deficiencies as a result of the COVID-19 pandemic. Based on the information currently available to us, we do not expect the impact of COVID-19 to have a negative impact on our liquidity. We will continue to monitor and assess the impact COVID-19 may have on our business and financial results. See Part II. Item 1A. “Risk Factors”and Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information.
Cash Flows

Net cash provided by operating activities of ~~$162.2~~$316.6 million, for the six months ended December ~~29, 2019,~~27, 2020, was primarily attributable to the Company’s net income during the period, adjusted by non-cash charges for ~~depreciation/~~depreciation and amortization and ~~stock based~~stock-based compensation, 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 related to holiday season sales.

Net cash used in investing activities of ~~$32.2~~$267.9 million, for the six months ended December ~~29, 2019,~~27, 2020, was primarily attributable to the acquisition of ~~Shari’s Berries~~PersonalizationMall for ~~$20.5~~$250.9 million, ~~and~~ capital expenditures of ~~$10.7~~$15.7 million related to the Company's technology initiatives, ~~and Gourmet Food & Gift Baskets segment~~as well as manufacturing production and warehousing equipment.

Net cash ~~used in~~provided by financing activities of ~~$7.3~~$81.4 million, for the six months ended December ~~29, 2019,~~27, 2020, related to proceeds from bank borrowings of $265.0 million (including the Company’s New Term Loan in the amount of $100.0 million, which was ~~primarily due~~used to ~~net~~repay borrowing then outstanding under the Company’s Revolver in the amount of $97.5 million), repayment of notes payable and bank ~~repayments~~borrowings of ~~$2.5~~$170.0 million (including the $97.5 million repayment of the Revolver upon closing of the $100.0 million New Term Loan), and the acquisition of ~~$5.0~~$12.5 million of treasury stock.
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Stock Repurchase Program

See Item 2 in Part II below for details.

Contractual Obligations

At December ~~29, 2019,~~27, 2020, the Company’s contractual obligations consist of:

●
Long-term debt obligations - payments due under the Company's ~~2019~~2020 Credit Agreement (see Note 8 - Debt in Item 1 for ~~details)~~details and payments due by period).
●
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~~details 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.~~period for the long-term operating leases).
●
Purchase commitments - consisting primarily of inventory and IT related equipment purchase orders and license agreements made in the ordinary course of business – see below for the contractual payments due by period.

Payments due by period

(in thousands)

Remaining Fiscal 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

Payments due by period

(in thousands)

Remaining Fiscal 2021

Fiscal 2022

Fiscal 2023

Fiscal 2024

Fiscal 2025

Thereafter

Total

Purchase commitments
$ 92,805 $ 4,986 $ 5,694 $ 4,539 $ 3,750 $ 2,000 $ 113,774

Critical Accounting Policies and Estimates

As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June ~~30, 2019,~~28, 2020, 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 goodwill, other intangible assets and income taxes. There have been no significant changes to the assumptions and estimates related to the Company’s critical accounting policies, since June ~~30, 2019, except for the adoption of ASC 842 (see~~ ~~Note 1 - Accounting Policies~~ ~~in Item 1 above for details).~~ 28, 2020.

Recently Issued Accounting Pronouncements

See Note 1 - Accounting Policies in Item 1 for details regarding the impact of accounting standards that were recently issued on our consolidated financial statements.

Forward Looking Information and Factors that May Affect Future Results

Our disclosure and analysis in this report contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company’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:

o
to achieve revenue and profitability;

o
to leverage its operating platform and reduce operating expenses;

o
to manage the increased seasonality of its business;

o
to cost effectively acquire and retain customers;

o
to effectively integrate and grow acquired companies;

o
to reduce working capital requirements and capital expenditures;

o
to compete against existing and new competitors;

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

o
to cost effectively manage inventories;
●
the outcome of contingencies, including legal proceedings in the normal course of ~~business; and~~business
●
general consumer sentiment and economic conditions that may affect levels of discretionary customer purchases of the Company’s ~~products.~~products; and
●
the impact of COVID-19 on our business and financial statements.

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 June ~~30, 2019~~28, 2020 listed various important factors that could cause actual results to differ materially from expected and historic results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find them in Part I, Item 1A, of that filing under the heading “Cautionary Statements Under the Private Securities Litigation Reform Act of 1995”. We incorporate that section of that Form 10-K in this filing and investors should refer to it. In addition, please refer to additional risk factors in Part II, Item 1A in this Form 10-Q.

ITEM 3.3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from the effect of interest rate changes.

Interest Rate Risk

The Company’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 ~~2019~~2020 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~~$0.3 million and ~~$0.2~~$0.5 million during the three and six months ended December ~~29, 2019.~~27, 2020, respectively.

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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 December ~~29, 2019.~~27, 2020. 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 December ~~29, 2019.~~27, 2020.

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 December ~~29, 2019,~~27, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. To the extent our normal procedures and controls related to our financial close or other reporting processes were adversely impacted by the COVID-19 outbreak, we took appropriate actions and safeguards to reasonably ensure the fair presentation of the financial statements in accordance with GAAP.

PART II.II. – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Litigation

~~There~~Bed Bath & Beyond:
On April 1, 2020, the Seller commenced an action against the Company in the Court of Chancery for the State of Delaware, which is captioned Bed Bath & Beyond Inc. v. 1-800-Flowers.com, et ano., C.A. (the “Complaint”), alleging a breach of the Equity Purchase Agreement (the “Agreement”), dated February 14, 2020, between Seller, PersonalizationMall, the Company and the Purchaser, pursuant to which the Seller agreed to sell to Purchaser, and the Purchaser agreed to purchase from Seller, all of the issued and outstanding membership interests of PersonalizationMall. The action was initiated after the Company requested a reasonable delay in the closing under the Purchase Agreement due to the unprecedented circumstances created by COVID-19. The Complaint requested an order of specific performance to consummate the transaction under the Purchase Agreement plus attorney’s fees and costs in connection with the action. The Company filed its answer to the Complaint on April 17, 2020 and an order governing expedited proceedings was approved on April 9, 2020 that set a trial date for late September 2020. On July 21, 2020, the Company and Seller entered into a settlement agreement, pursuant to which the Company agreed to move forward with its purchase of PersonalizationMall for $245.0 million, subject to certain working capital and other adjustments. The transaction closed on August 3, 2020. In connection with the settlement agreement, the parties executed a Stipulation and Proposed Order of Dismissal, resulting in the voluntary dismissal with prejudice of the litigation relating to the transaction.
In addition, there are various claims, lawsuits, and pending actions against the Company and its subsidiaries incident to the operations of its businesses. It is the opinion of management, after consultation with counsel, that the ~~ultimate~~final resolution of such claims, lawsuits and pending actions will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity.

ITEM 1A. 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 June ~~30, 2019~~28, 2020.

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 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 December ~~29, 2019, $25.0~~27, 2020, $6.9 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 six months of fiscal ~~2020,~~2021, which includes the period July 1, ~~2019~~2020 through December ~~29, 2019:~~27, 2020:

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
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)

06/29/20 - 07/26/20
- $ - - $ 19,320
07/27/20 - 08/23/20
- $ - - $ 19,320
08/24/20 - 09/27/20
36,355 $ 29.94 36,355 $ 18,231
09/28/20 - 10/25/20
- $ - - $ 18,231
10/26/20 - 11/22/20
305,941 $ 21.23 305,941 $ 11,735
11/23/20 - 12/27/20
203,842 $ 23.93 203,842 $ 6,850
Total
546,138 $ 22.82 546,138
(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
Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2
Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
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

Inline XBRL Instance Document
101.SCH

Inline XBRL Taxonomy Extension Schema Document
101.CAL

Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB

Inline XBRL Taxonomy Extension Label Document
101.PRE

Inline XBRL Taxonomy Definition Presentation Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Filed herewith.

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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:      February ~~7, 2020~~5, 2021
/s/ Christopher G. McCann
Christopher G. McCann

Chief Executive Officer,

Director and President

(Principal Executive Officer)

Date:      February ~~7, 2020~~5, 2021
/s/ William E. Shea

William E. Shea

Senior Vice President, Treasurer and

Chief Financial Officer (Principal

Financial and Accounting Officer)

22
25

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value		*Options*			Weighted Average Exercise Price		*Weighted Average Remaining Contractual Term*		*Aggregate Intrinsic Value*
						(in years)		(in thousands)							(in years)		(in thousands)
Outstanding at June 30, 2019		1,365,000		$	2.48
Outstanding at June 28, 2020											1,230,000		$	2.77
Granted		-		$	-						0		$	0
Exercised		(150,000	)	$	1.90						(429,200	)	$	2.41
Forfeited		-		$	-
Outstanding at December 29, 2019		1,215,000		$	2.55		1.7	$	14,288
Outstanding at December 27, 2020											800,800		$	2.97		1.0	$	18,475

Exercisable at December 29, 2019		1,210,000		$	2.52		1.7	$	14,267
Exercisable at December 27, 2020											785,800		$	2.63		0.9	$	18,396

	Shares			Weighted Average Grant Date Fair Value		*Shares*			*Weighted Average Grant Date Fair Value*
Non-vested at June 30, 2019		1,438,592		$	10.81
Non-vested at June 28, 2020							1,608,468		$	12.01
Granted		724,055		$	13.04		701,311		$	21.83
Vested		(444,792	)	$	10.28		(643,590	)	$	11.05
Forfeited		(45,474	)	$	12.54		(29,949	)	$	19.80
Non-vested at December 29, 2019		1,672,381		$	11.87
Non-vested at December 27, 2020							1,636,240		$	16.46

	*PersonalizationMall’s Preliminary Purchase Price Allocation*
	(in thousands)
Assets Acquired:
Inventories	$	16,998
Other assets		5,216
Property, plant and equipment		30,792
Operating lease right-of-use assets		21,438
Goodwill		133,337
Other intangibles		76,000
Total assets acquired	$	283,781

Liabilities assumed:
Accounts payable and accrued expenses	$	11,400
Operating lease liabilities		21,438
Total liabilities assumed		32,838

Net assets acquired	$	250,943

	*Three months ended December 27, 2020*		*Three months ended December 29, 2019*		*Six months ended December 27, 2020*		*Six months ended December 29, 2019*
	(in thousands)
Net Revenues	$	877,256	$	687,596	$	1,177,021	$	896,297
Net Income		114,071		83,084		110,289		66,443

	-	A decrease of operating expenses by $0.5 and $5.4 million during the three and six months ended December 27, 2020, to eliminate transaction and litigation costs directly related to the transaction that do not have a continuing impact on operating results.
	-	An increase of operating expenses by $0.2 million during the six months ended December 27, 2020 and $0.7 million and $1.4 million during the three and six months ended December 29, 2019, respectively, to reflect the additional amortization expense related to the increase in definite lived intangible assets.
	-	An increase in interest expense of $0.6 million during the six months ended December 27, 2020 and $1.0 and $2.1 million during the three and six months ended December 29, 2019, respectively, which is comprised of incremental interest and amortization of deferred financing costs associated with the New Term Loan (as defined below). The interest rate used for the purposes of these pro forma statements, of 3.5%, was the rate in effect at loan inception.
	-	The combined pro forma results were tax effected using the Company's effective tax rate for the respective periods

	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

	*Shari’s Berries 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

	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

	*Consumer Floral & Gifts*		*BloomNet*		Gourmet Foods & Gift Baskets		*Total*
	(in thousands)
Balance at June 28, 2020	$	17,441	$	0	$	57,270	$	74,711
Acquisition of PersonalizationMall		133,337		0		0		133,337
Balance at December 27, 2020	$	150,778	$	0	$	57,270	$	208,048

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.

	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)
As of December 29, 2019:
As of December 27, 2020:
Trading securities held in a “rabbi trust” (1)	$	14,159	$	14,159	$	-	$	-	$	18,617	$	18,617	$	0	$	0
Total assets (liabilities) at fair value	$	14,159	$	14,159	$	-	$	-	$	18,617	$	18,617	$	0	$	0

As of June 30, 2019:
As of June 28, 2020:
Trading securities held in a “rabbi trust” (1)	$	11,816	$	11,816	$	-	$	-	$	13,442	$	13,442	$	0	$	0
Total assets (liabilities) at fair value	$	11,816	$	11,816	$	-	$	-	$	13,442	$	13,442	$	0	$	0

	Six months ended									Six months ended
	December 27, 2020									December 29, 2019
	*Consumer Floral & Gifts*		*BloomNet*		*Gourmet Foods & Gift Baskets*		*Consolidated*			*Consumer Floral & Gifts*		*BloomNet*		*Gourmet Foods & Gift Baskets*		*Consolidated*
Net revenues	(in thousands)
E-commerce	$	463,067	$	0	$	553,606	$	1,016,673		$	202,946	$	0	$	413,188	$	616,134
Retail		2,157		0		5,661		7,818			2,021		0		30,610		32,631
Wholesale		0		20,443		68,927		89,370			0		16,018		92,001		108,019
BloomNet services		0		46,346		0		46,346			0		35,144		0		35,144
Other		1,679		0		0		1,679			1,517		0		0		1,517
Corporate		0		0		0		241			0		0		0		360
Eliminations		0		0		0		(1,099	)		0		0		0		(900	)
Net revenues	$	466,903	$	66,789	$	628,194	$	1,161,028		$	206,484	$	51,162	$	535,799	$	792,905

	December ~~29, 2019~~27, 2020
	(in thousands)
Weighted-average remaining lease term - operating leases	~~9.7~~9.1 years
Weighted-discount rate - operating leases
~~Weighted-discount rate - operating leases~~	3.8	~~3.8~~ %	%

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

Remainder of 2021	$	7,191
2022		13,916
2023		13,593
2024		13,047
2025		10,665
Thereafter		52,105
Total Future Minimum Lease Payments		110,517
Less Imputed Remaining Interest		18,256
Total	$	92,261

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

	o	Based on the continued strong ecommerce growth momentum that has carried into January 2021, the Company expects to achieve total consolidated revenue growth for its third fiscal quarter, including contributions from PersonalizationMall, in a range of 45-to-50 percent, compared with the prior year period.
	o	The Company anticipates that the strong revenue growth will help offset certain headwinds, including the Sunday placement of the key Valentine’s Day holiday, increased year-over-year labor and transportation costs and operating inefficiencies related to the COVID-19 pandemic.
	o	As a result, the Company anticipates achieving Adjusted EBITDA of between $4.0-and-$5.0 million, compared with an Adjusted EBITDA loss of $2.4 million in the prior year period, and
	o	an EPS loss of between $0.09-and-$0.11, compared with an EPS loss of $0.15 in the prior year period.

	Three Months Ended
	December 27, 2020			PersonalizationMall Litigation and Transaction Costs		Harry & David Store Closure Costs			As Adjusted (non-GAAP) December 27, 2020			December 29, 2019			% Change
Net revenues:
Consumer Floral & Gifts	$	305,357		$	-	$	-		$	305,357		$	115,716			163.9	%
BloomNet		34,051			-		-			34,051			25,722			32.4	%
Gourmet Foods & Gift Baskets		538,265			-		-			538,265			464,584			15.9	%
Corporate		135			-		-			135			165			-18.2	%
Intercompany eliminations		(552	)		-		-			(552	)		(545	)		-1.3	%
Total net revenues	$	877,256		$	-	$	-		$	877,256		$	605,642			44.8	%

Gross profit:
Consumer Floral & Gifts	$	134,474		$	-	$	-		$	134,474		$	44,544			201.9	%
		44.0	%							44.0	%		38.5	%

BloomNet		16,820			-		-			16,820			13,161			27.8	%
		49.4	%							49.4	%		51.2	%

Gourmet Foods & Gift Baskets		246,890			-		-			246,890			211,362			16.8	%
		45.9	%							45.9	%		45.5	%

Corporate		62			-		-			62			105			-41.0	%
		45.9	%							45.9	%		63.6	%

Total gross profit	$	398,246		$	-	$	-		$	398,246		$	269,172			48.0	%
		45.4	%		-		-			45.4	%		44.4	%

EBITDA (non-GAAP):
Segment Contribution Margin (non-GAAP) (a):
Consumer Floral & Gifts	$	45,657		$	-	$	-		$	45,657		$	10,890			319.3	%
BloomNet		12,141			-		-			12,141			9,134			32.9	%
Gourmet Foods & Gift Baskets		135,621			-		(78	)		135,543			113,387			19.5	%
Segment Contribution Margin Subtotal		193,419			-		(78	)		193,341			133,411			44.9	%
Corporate (b)		(34,757	)		513		-			(34,244	)		(26,010	)		-31.7	%
EBITDA (non-GAAP)		158,662			513		(78	)		159,097		$	107,401			48.1	%
Add: Stock-based compensation		2,965								2,965			2,280			30.0	%
Add: Compensation charge related to NQDC Plan Investment Appreciation		2,227			-		-			2,227			1,002			122.2	%
Adjusted EBITDA (non-GAAP)	$	163,854		$	513	$	(78	)	$	164,289		$	110,683			48.4	%

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.

	●	~~Purchase commitments - consisting primarily of inventory~~details 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.~~period for the long-term operating leases).
●	Purchase commitments - consisting primarily of inventory and IT related equipment purchase orders and license agreements made in the ordinary course of business – see below for the contractual payments due by period.

	Payments due by period
	(in thousands)
	Remaining Fiscal 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

	Payments due by period
	(in thousands)
	Remaining Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Fiscal 2025		Thereafter		Total
Purchase commitments	$	92,805	$	4,986	$	5,694	$	4,539	$	3,750	$	2,000	$	113,774

	●	general consumer sentiment and economic conditions that may affect levels of discretionary customer purchases of the Company’s ~~products.~~products; and
●	the impact of COVID-19 on our business and financial statements.

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

31.1		Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2		Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
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		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Document
101.PRE		Inline XBRL Taxonomy Definition Presentation Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

	1-800-FLOWERS.COM, Inc. (Registrant)
Date: February ~~7, 2020~~5, 2021	/s/ Christopher G. McCann Christopher G. McCann Chief Executive Officer, Director and President (Principal Executive Officer)

Date: February ~~7, 2020~~5, 2021	/s/ William E. Shea William E. Shea Senior Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)