1-800-FLOWERS.COM(FLWS) - 2019 Q2 - Quarterly Report

Part I Part I. Financial Information This section provides the unaudited condensed consolidated financial statements and management's discussion for the period ended December 30, 2018 Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for 1-800-FLOWERS.COM, Inc. for the quarterly period ended December 30, 2018 Condensed Consolidated Balance Sheets Total assets increased to $685.5 million from $570.9 million, driven by a rise in cash and cash equivalents to $257.7 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 30, 2018 (Unaudited) | Jul 1, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $257,685 | $147,240 | | Total current assets | $390,199 | $273,021 | | Total assets | $685,461 | $570,889 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $203,512 | $124,799 | | Total liabilities | $329,388 | $255,985 | | Total stockholders' equity | $356,073 | $314,904 | Condensed Consolidated Statements of Income Net revenues grew to $571.3 million for the quarter and $740.8 million for six months, while net income slightly decreased due to higher tax expense Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric | Three Months Ended Dec 30, 2018 | Three Months Ended Dec 31, 2017 | Six Months Ended Dec 30, 2018 | Six Months Ended Dec 31, 2017 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $571,316 | $526,093 | $740,812 | $683,442 | | Gross profit | $254,827 | $235,259 | $323,367 | $302,537 | | Operating income | $94,685 | $84,466 | $71,719 | $64,863 | | Net income | $68,578 | $70,699 | $51,312 | $57,477 | | Diluted EPS | $1.04 | $1.06 | $0.77 | $0.86 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $139.6 million, ending the period with $257.7 million in cash and cash equivalents Six Months Ended Cash Flow Summary (in thousands) | Activity | Dec 30, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | Net cash provided by operating activities | $139,583 | $114,166 | | Net cash used in investing activities | ($11,786) | ($17,364) | | Net cash used in financing activities | ($17,352) | ($13,945) | | Net change in cash and cash equivalents | $110,445 | $82,857 | | Cash and cash equivalents, end of period | $257,685 | $232,589 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, including ASC 606 adoption, seasonality, segment reporting, and the impact of the 2017 Tax Act - The company's business is highly seasonal, with the second fiscal quarter (Thanksgiving through Christmas) accounting for nearly 50% of annual revenues and all of its earnings[20] - The company adopted the new revenue recognition standard (ASC 606) effective July 2, 2018, using the modified retrospective approach, resulting in a net increase to retained earnings of $0.3 million, primarily related to gift card breakage income[27] - The company completed its assessment of the 2017 Tax Cuts and Jobs Act in the second quarter of fiscal 2019, with no adjustments to provisional amounts, and the U.S. statutory federal rate is 21% for fiscal 2019 and subsequent years[40][41] Segment Net Revenues - Six Months Ended (in thousands) | Segment | Dec 30, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | 1-800-Flowers.com Consumer Floral | $193,182 | $176,674 | | BloomNet Wire Service | $47,428 | $40,139 | | Gourmet Food & Gift Baskets | $500,521 | $466,950 | | Total Net Revenues | $740,812 | $683,442 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, highlighting revenue growth across segments, stable gross profit, and strong liquidity Results of Operations Net revenues increased 8.4% to $740.8 million for the six-month period, driven by e-commerce growth and segment performance, despite a slight gross margin decline Revenue Growth by Period (in thousands) | Period | Net Revenues | % Change YoY | | :--- | :--- | :--- | | Three Months Ended Dec 30, 2018 | $571,316 | 8.6% | | Six Months Ended Dec 30, 2018 | $740,812 | 8.4% | - E-commerce revenue, representing the majority of sales, increased by 8.2% for both the three and six-month periods ended Dec 30, 2018, driven by a 6.9% increase in e-commerce orders and a 1.2% increase in average order value for the six-month period[103][104] - The Gourmet Food & Gift Baskets segment revenue grew 7.2% for the six-month period, driven by strong performance at Harry & David, a recovery at Cheryl's Cookies, and growth in the 1-800-Baskets/DesignPac business[109] - Gross profit margin for the six-month period decreased by 60 basis points to 43.7%, reflecting promotional activity, rising labor costs, growth of the Passport free shipping program, and a mix shift in the BloomNet segment[111] Liquidity and Capital Resources The company maintains strong liquidity with $257.7 million cash on hand, positive operating cash flow, and sufficient credit for future operations - At December 30, 2018, the company had working capital of $186.7 million, including cash and cash equivalents of $257.7 million[132] - Net cash from operating activities for the six-month period was $139.6 million, primarily driven by net income and seasonal working capital changes[134] - The company repurchased $13.4 million of treasury stock during the first six months of fiscal 2019, with $6.6 million remaining authorized under the stock repurchase plan as of December 30, 2018[136][137] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on variable-rate debt, with a 50 basis point increase impacting interest expense by $0.3 million - The company is exposed to interest rate risk primarily through its variable-rate long-term debt[146] - A 50 basis point increase in interest rates would have resulted in an approximate $0.3 million increase in interest expense for the six months ended December 30, 2018[147] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[148] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[149] Part II Part II. Other Information This section covers legal proceedings, risk factors, and details on the company's equity securities repurchases Legal Proceedings Management believes current legal proceedings will not materially adversely affect the company's financial position or results - Management does not expect pending legal proceedings to have a material adverse effect on the Company's financial condition or results of operations[151] Risk Factors No material changes to the company's risk factors were reported for the period - No material changes to the Company's risk factors were reported for the period[152] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,125,000 shares for $13.4 million, with $6.6 million remaining authorized under the plan Issuer Purchases of Equity Securities (in thousands, except per share data) | Period | Total Shares Purchased | Average Price Paid Per Share | Total Shares Purchased as Part of Program | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | 08/27/18 - 09/30/18 | 345.6 | $11.66 | 345.6 | $15,957 | | 10/01/18 – 10/28/18 | 318.4 | $11.12 | 318.4 | $12,409 | | 10/29/18 – 11/25/18 | 346.0 | $12.70 | 346.0 | $8,010 | | 11/26/18 – 12/30/18 | 115.0 | $12.31 | 115.0 | $6,591 | | Total | 1,125.0 | $11.89 | 1,125.0 | N/A | - As of December 30, 2018, $6.6 million remained authorized for repurchase under the company's stock repurchase plan[153]