1-800-FLOWERS.COM, Inc. (FLWS) F4Q2010 Earnings Call Transcript August 19, 2010 11:00 am ET Executives Joseph Pititto – VP, IR Jim McCann – Chairman and CEO Bill Shea – SVP, Finance and Administration, Treasurer and CFO Chris McCann – President Analysts Ingrid Chung – Goldman Sachs Anthony Lebiedzinski – Sidoti and Company Jeff Stein – Soleil Presentation Operator
In addition, this morning we will discuss certain adjusted results and supplemental financial measures that were not prepared in accordance with Generally Accepted Accounting Principles. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying the company's press release issued this morning.The company expressly disclaims any intent or obligation to update any forward-looking statements made in today's call, any recording of today's call, the press release issued earlier today or in any of its SEC filings except as may be otherwise stated by the company. I'll now turn the call over to Jim McCann. Jim McCann Good morning. Throughout fiscal 2010, the consumer was impacted by the continued uncertainty in the macro economy, particularly high unemployment and the slumping housing market. The persistence of those things has resulted in some of the lowest consumer confidence index numbers frankly on record. Consumers are justifiably nervous and as a result their discretionary gift purchasing has declined. This was clearly – this clearly impacted us particularly in our core consumer floral category. With this in the backdrop, I’d like to point out a few things that we've achieved during fiscal 2010, adjusted EBITDA of approximately $29 million, positive adjusted EPS, free cash over approximately $25 million, and a reduction of more than $32 million in total outstanding debt. I believe these results illustrate the strength of our business model and the deep relationships we have with our millions of customers as their florist and gift shop. In addition, we continued to benefit from a number of initiatives we undertook over the past several years including several directly in response to the weakening economy. While some efforts have clearly worked better than others, overall, we continue to position our company for long term growth and enhanced profitability.
We have taken tens of millions of dollars of cost out of our operating platform during the past few years. This disciplined approach to managing our business has enabled us to generate solid cash flows, which we have used to pay down debt and strengthen our balance sheet. It has also given us additional leverage in our business model, which we believe will us to drive stronger profitability on any incremental revenue growth when consumer demand improves.Importantly, this focus on driving operating efficiencies is now ingrained in our company DNA, and we expect further improvements from our operating programs. Our decision to invest in the expansion of our gourmet food and gift baskets category over the past several years has proven to be a good plan. We have built a great platform in this area through a combination of strategic acquisitions and internal development. As a result, we have quickly become a leading player in a category that our customers are increasingly turning to for their gifting and connecting needs. Indeed, this category has held up better in the current economy as consumers appear more willing to purchase our great chocolates, cookies, brownies, popcorn, gift baskets and – both as gifts and personal consumption. Based on the strength of our brands, Fannie May, Cheryl's, the Popcorn Factory and our newest 1-800-BASKETS.COM business, we have been able to drive solid growth in our economic and our e-commerce channels. And our vertical integration in this category enabled us to implement manufacturing efficiencies that drive down our cost and increase our gross profit margins, as you've seen this past year. Concurrent with our successful growth in our gourmet food and gift category, we have made a decision last year to divest what we determined to be a non-strategic asset in our home and children’s gift businesses. This is not an easy decision, but the right one for the long-term growth and profitability of our business. We used the proceeds on this sale to further pay down our term debt, and we also revised our bank credit facility extending terms and revising coverage to provide additional financial flexibility. I just like to point out that over the past two years we have used excess cash to pay down approximately $70 million of our term debt, strengthening our balance sheet and heading towards flexibility. Read the rest of this transcript for free on seekingalpha.com