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1-800-FLOWERS.COM, Inc. Reports Continued Positive Trends In Revenues, EBITDA And EPS From Continuing Operations For Its Fiscal 2012 Fourth Quarter And Full Year

Stock quotes in this article: FLWS

Conference Call:

The Company will conduct a conference call to discuss the above details and attached financial results today, Thursday, August 23, 2012 at 11:00 a.m. (EDT). The call will be “web cast” live via the Internet and can be accessed from the Investor Relations section of the 1-800-FLOWERS.COM web site at www.1800flowersinc.com A recording of the call will be posted on the Investor Relations section of the Company’s web site within two hours of the call’s completion. A telephonic replay of the call can be accessed for 48 hours beginning at 2:00 p.m. EDT on the day of the call at: 1-855-859-2056 or 1-404-537-3406; Conference ID: 18445174.

Note: Attached tables are an integral part of this press release without which the information presented in this press release should be considered incomplete.

Correction of an Immaterial Error in the Financial Statements

During the first quarter of fiscal 2013, prior to announcing the Company's financial results for its fiscal 2012 fourth quarter and year ended July 1, 2012, certain errors primarily related to the accounting for deferred tax liabilities on non-amortizable intangibles arising from historical acquisitions prior to fiscal 2007 were identified. These errors in purchase price allocation subsequently impacted the goodwill impairment charge recorded by the Company in fiscal 2009. In connection with this review, the Company also identified an issue related to the treatment of deferred tax liabilities on basis differences related to fixed assets which were recorded in error during fiscal years 2009 and prior.

The Company is in the final stages of its review of this matter, and expects that it will result in a prior period adjustment to increase net income, and thus, decrease the retained deficit by approximately $1.2 million on the June 28, 2009 Consolidated Statements of Stockholders' Equity, with a corresponding adjustment to goodwill by approximately $7.6 million and deferred tax liabilities by approximately $6.4 million. The Company believes this prior period adjustment is qualitatively and quantitatively immaterial to the respective balances adjusted and will have no impact on the 2012, 2011 or 2010 statements of operations or cash flows. Correcting prior year financial statements for these immaterial errors will not require previously filed reports to be amended and as such the Company will correct the error by making adjustments to prior comparative period financial information beginning with its Annual Report on Form 10-K for the year ended July 1, 2012.

 

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

Condensed Consolidated Balance Sheets

(In thousands)

 
          July 1,

2012

      July 3,

2011

 
Assets
Current assets:
Cash and equivalents $ 28,854 $ 21,442
Receivables, net 14,968 11,916
Inventories 55,744 51,185
Deferred tax assets 5,698 5,416
Prepaid and other 11,082 8,871
Current assets of discontinued operations   100   3,506
Total current assets $ 116,446 102,336
 
Property, plant and equipment, net 48,669 49,908
Goodwill 41,277 39,348
Other intangibles, net 41,838 41,748
Deferred tax assets 7,516 16,943
Other assets 7,875 5,204
Non-current assets of discontinued operations   -   2,738
Total assets $ 263,621 $ 258,225
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses $ 70,154 $ 66,878

Current maturities of long-term debt and obligations under

capital leases

15,756 16,488
Current liabilities of discontinued operations   110   956
Total current liabilities $ 86,020 84,322
 
Long-term debt and obligations under capital leases 13,500 29,250
Other liabilities 3,580 2,884
Non-current liabilities of discontinued operations   -   109
Total liabilities   103,100   116,565
Total stockholders’ equity   160,521   141,660
Total liabilities and stockholders’ equity $ 263,621 $ 258,225
 

 

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

Selected Financial Information

Consolidated Statements of Operations

(In thousands, except for per share data)

 
          Three Months Ended       Year Ended
July 1,

2012

      July 3,

2011

July 1,

2012

      July 3,

2011

 
Net revenues:
E-commerce (combined online and telephonic) $ 139,095 $ 142,060 $ 515,205 $ 485,378
Other   40,461     40,093     201,052     186,227  
 
Total net revenues 179,556 182,153 716,257 671,605
 
Cost of revenues   105,524     108,920     422,298     395,161  
 
Gross profit 74,032 73,233 293,959 276,444
 
Operating expenses:
Marketing and sales 48,612 49,915 182,512 173,531
Technology and development 5,227 5,529 20,479 20,168
General and administrative 12,915 12,807 51,972 49,360
Depreciation and amortization   4,871     4,999     19,576     20,271  
 
Total operating expenses 71,625 73,250 274,539 263,330
 
Gain on sale of stores   -     -     3,789     -  
 
Operating income (loss) 2,407 (17 ) 23,209 13,114
 
Interest expense, net   (322 )   (756 )   (2,312 )   (4,077 )
 

Income (loss) from continuing operations before income tax

2,085 (773 ) 20,897 9,037
Income tax expense (benefit) from continuing operations   830     (413 )   8,148     3,517  
Income (loss) from continuing operations 1,255 (360 ) 12,749 5,520
 
Income (loss) from discontinued operations, net of tax - 352 (22 ) 202
Gain on sale of discontinued operations, net of tax   200 200     -     4,542     -  
Income from discontinued operations   200     352     4,520     202  
 
Net income (loss) $ 1,455     ($8 ) $ 17,269   $ 5,722  
 

Basic net income (loss) per common share

From continuing operations $ 0.02 ($0.01 ) $ 0.20 $ 0.09
From discontinued operations   0.00     0.01     0.07     0.00  
Net income (loss) per common share $ 0.02   $ 0.00   $ 0.27   $ 0.09  
 

Diluted net income (loss) per common share

From continuing operations $ 0.02 ($0.01 ) $ 0.19 $ 0.08
From discontinued operations   0.00     0.01     0.07     0.00  
Net income (loss) per common share $ 0.02   $ 0.00   $ 0.26   $ 0.09  
 

Weighted average shares used in the calculation of net

income (loss) per common share

Basic   64,741     64,135     64,697     64,001  
Diluted   66,381     64,135     66,239     65,153  
 

 

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

Selected Financial Information

Consolidated Statements of Cash Flows

(In thousands)

 
            Year Ended
July 1,

2012

      July 3,

2011

 
Operating activities
Net income $ 17,269 $ 5,722
Reconciliation of net income to net cash provided by operations:
Operating activities of discontinued operations 1,931 (814 )
Gain on sale of discontinued operations (8,733 ) -
Depreciation and amortization 19,576 20,271
Amortization of deferred financing costs 457 474
Deferred income taxes 8,167 2,262
Bad debt expense 930 1,537
Stock based compensation 4,850 3,961
Excess tax (benefit)/expense from stock based compensation 123 419
Other non-cash items 42 27
Receivables (3,438 ) (1,174 )
Inventories (4,041 ) (5,443 )
Prepaid and other (2,190 ) (1,868 )
Accounts payable and accrued expenses 2,656 6,334
Other assets 1,629 (748 )
Other liabilities   947     (235 )
 
Net cash provided by operating activities $ 40,175 $ 30,725
 
Investing activities
Acquisitions, net of cash acquired (4,336 ) (4,310 )
Proceeds from sale of business 12,823 -
Capital expenditures (17,304 ) (16,890 )
Purchase of investment (3,945 ) (268 )
Other, net (119 ) 100
Investing activities of discontinued operations   -     (127 )
 

Net cash used in investing activities

(12,881 ) (21,495 )
Financing activities
Acquisition of treasury stock (3,277 ) (454 )
Excess tax benefit/(expense) from stock based compensation (123 ) (419 )
Proceeds from excise of employee stock options - 49
Proceeds from bank borrowings 56,000 40,000
Repayment of notes payable and bank borrowings (71,000 ) (52,750 )
Debt issuance cost - (17 )
Repayment of capital lease obligations   (1,482 )   (2,040 )
 
Net cash used in financing activities   (19,882 )   (15,631 )
 
Net change in cash and equivalents 7,412 (6,401 )
Cash and equivalents:
Beginning of period   21,442     27,843  
 
End of period $ 28,854   $ 21,442  
 

 

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

Selected Financial Information

Category Information

(in thousands)

 
        Three Months Ended       Year Ended
July 1,

2012

      July 3,

2011

     

% Change

July 1,

2012

      July 3,

2011

     

% Change

 
Net revenues from continuing operations:
Consumer Floral $ 124,017 $ 123,681 0.3 % $ 398,184 $ 369,199 7.9 %
BloomNet Wire Service 21,745 21,339 1.9 % 82,582 73,282 12.7 %
Gourmet Food & Gift Baskets 33,913 37,187 -8.8 % 236,742 229,390 3.2 %
Corporate (*) 198 295 -32.9 773 1,150 -32.8 %
Intercompany eliminations   (317 )   (349 ) 9.2 %   (2,024 )   (1,416 ) -42.9 %
Total net revenues from continuing operations $ 179,556   $ 182,153   -1.4 % $ 716,257   $ 671,605   6.6 %
 
        Three Months Ended       Year Ended
July 1,

2012

      July 3,

2011

     

% Change

July 1,

2012

      July 3,

2011

     

% Change

 
Gross profit from continuing operations:
Consumer Floral $ 48,634 $ 47,310 2.8 % $ 154,892 $ 140,163 10.5 %
39.2 % 38.3 % 38.9 % 38.0 %
 
BloomNet Wire Service 10,483 9,515 10.2 % 38,737 36,877 5.0 %
48.2 % 44.6 % 46.9 % 50.3 %
 
Gourmet Food & Gift Baskets 14,783 16,259 -9.1 % 99,764 98,831 0.9 %
43.6 % 43.7 % 42.1 % 43.1 %
 
Corporate (*) 132 66.7 % 149 50.5 % -11.4 % 566 73.2 % 573 49.8 % -1.3 %
       
Total gross profit from continuing operations $ 74,032   $ 73,233   1.1 % $ 293,959   $ 276,444   6.3 %
  (41.2 %)   (40.2 %)   (41.0 %)   (41.2 %)
 
            Three Months Ended       Year Ended

 

July 1,

2012

      July 3,

2011

     

% Change

July 1,

2012

      July 3,

2011

     

% Change

 

   Adjusted EBITDA from continuing operations,

excluding stock-based compensation:

   Category Contribution Margin (**)

Consumer Floral $ 12,248 $ 11,156 9.8 % $ 39,147 $ 32,669 19.8 %
BloomNet Wire Service 6,414 5,188 23.6 % 22,339 20,195 10.6 %
Gourmet Food & Gift Baskets (***)   601     1,454   -58.7 %   29,789     27,776   7.2 %

   Category Contribution Margin Subtotal

19,263 17,798 8.2 % 91,275 80,640 13.2 %
Corporate (*)   (11,985 )   (12,816 ) 6.5 %   (48,490 )   (47,255 ) -2.6 %

   EBITDA, from continuing operations

7,278 4,982 46.1 % $ 42,785 $ 33,385 28.2 %
Add: Stock-based compensation   1,114     1,101   1.2 %   4,850     3,961   22.4 %

   EBITDA, excluding stock-based compensation

8,392 6,083 38.0 % $ 47,635 $ 37,346 27.6 %
Less: Gain on sale of stores (***)   -     -   -   3,789     -   -

   Adjusted EBITDA from continuing operations,

excluding stock-based compensation

$

8,392

 

$

6,083

 

38.0

%

$

43,846

 

$

37,346

 

17.4

%

 

 

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

Selected Financial Information

Category Information

(in thousands)

 
        Three Months Ended         Years Ended

 

July 1,

2012

      July 3,

2011

July 1,

2012

      July 3,

2011

 

Reconciliation of net income from

continuing operations to EBITDA and

adjusted EBITDA from continuing

operations, less stock-based

compensation:

Net income from continuing operations $ 1,255 ($360 ) $ 12,749 $ 5,520
Add:
Interest expense, net 322 756 2,312 4,077
Depreciation and amortization 4,871 4,999 19,576 20,271
Income tax expense 830 - 8,148 3,517
Less:
Income tax benefit   -   413     -   -
EBITDA from continuing operations $ 7,278 $ 4,982     42,785   33,385
Add: Stock-based compensation   1,114   1,101     4,850   3,961
EBITDA, excluding stock-based compensation 8,392 6,083 47,635 37,346
Less: Gain on sale of stores (***)   -   -     3,789   -

Adjusted EBITDA from continuing

operation, excluding stock based

compensation

$

8,392

$

6,083

 

$

43,846

$

37,346

 
 
(*) 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 category.
 
(**)

Performance is measured based on category contribution margin or category Adjusted EBITDA, reflecting only the direct controllable revenue and operating expenses of the categories. As such, management’s measure of profitability for these categories does not include the effect of corporate overhead, described above, depreciation and amortization, other income (net), nor does it include one-time charges. Management utilizes EBITDA, and adjusted financial information, as a performance measurement tool because it considers such information a meaningful supplemental measure of its performance and believes it is frequently used by the investment community in the evaluation of companies with comparable market capitalization. The Company also uses EBITDA and adjusted financial information as one of the factors used to determine the total amount of bonuses available to be awarded to executive officers and other employees. The Company’s credit agreement uses EBITDA and adjusted financial information to measure compliance with covenants such as interest coverage and debt incurrence. EBITDA and adjusted financial information is also used by the Company to evaluate and price potential acquisition candidates. EBITDA and adjusted financial information have limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of these limitations are: (a) EBITDA does not reflect changes in, or cash requirements for, the Company's working capital needs; (b) EBITDA does 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. Because of these limitations, EBITDA should only be used on a supplemental basis combined with GAAP results when evaluating the Company's performance.

 

 
(***) GFGB category contribution margin during the year ended July 1, 2012, includes a $3.8 million gain on the sale of 17 Fannie May retail stores, which are currently being operated as franchised locations.
 

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