1-800-FLOWERS.COM(FLWS) - 2020 Q2 - Quarterly Report

Part I Condensed Consolidated Financial Statements This section presents unaudited condensed consolidated financial statements, reflecting financial position, operational results, and cash flows, including impacts from ASC 842 and the Shari's Berries acquisition Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | Dec 29, 2019 ($ in thousands) | June 30, 2019 ($ in thousands) | | :--- | :--- | :--- | | Total Current Assets | 431,593 | 303,238 | | Cash and cash equivalents | 295,561 | 172,923 | | Total Assets | 826,220 | 606,440 | | Total Current Liabilities | 226,703 | 127,497 | | Total Liabilities | 425,312 | 263,729 | | Total Stockholders' Equity | 400,908 | 342,711 | Condensed Consolidated Statements of Income Highlights (Unaudited) | Metric | Three Months Ended Dec 29, 2019 ($ in thousands) | Three Months Ended Dec 30, 2018 ($ in thousands) | Six Months Ended Dec 29, 2019 ($ in thousands) | Six Months Ended Dec 30, 2018 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | 605,642 | 571,316 | 792,905 | 740,812 | | Gross Profit | 269,172 | 254,827 | 345,318 | 323,367 | | Operating Income | 99,571 | 94,685 | 78,918 | 71,719 | | Net Income | 74,152 | 68,578 | 58,881 | 51,312 | | Diluted EPS | $1.12 | $1.04 | $0.89 | $0.77 | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended Dec 29, 2019 ($ in thousands) | Six Months Ended Dec 30, 2018 ($ in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 162,156 | 139,583 | | Net cash used in investing activities | (32,213) | (11,786) | | Net cash used in financing activities | (7,305) | (17,352) | | Net change in cash and cash equivalents | 122,638 | 110,445 | - On August 14, 2019, the Company acquired the Shari's Berries business for a purchase price of $20.5 million, recognizing goodwill of $12.1 million from the transaction[48][49] - Effective July 1, 2019, the company adopted ASC 842, recognizing operating lease right-of-use assets of $78.7 million and operating lease liabilities of $80.7 million[36][37] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting revenue growth across segments, trends in profitability and expenses, and the company's liquidity and capital resources - Total net revenues grew 6.0% to $605.6 million for the second quarter and 7.0% to $792.9 million for the first six months of fiscal 2020, with growth across all three business segments[100][101] - The acquisition of Shari's Berries in August 2019 contributed approximately 1.2% of consolidated incremental growth during both the three and six-month periods[101] - Gross profit margin slightly decreased to 44.4% for the quarter and 43.6% for the six months, impacted by product mix and macroeconomic headwinds including rising labor/transportation costs, tariffs, and a highly promotional holiday season[112] Adjusted EBITDA Performance (Non-GAAP) | Period | Adjusted EBITDA ($ in thousands) | YoY Change | | :--- | :--- | :--- | | Three Months Ended Dec 29, 2019 | 110,683 | 7.4% | | Six Months Ended Dec 29, 2019 | 99,386 | 11.4% | Results of Operations This section details operational results, including increased net revenues across segments, gross profit trends, and changes in operating expenses, leading to strong net income and EPS growth Revenue Growth by Segment (Three Months Ended Dec 29, 2019 vs. 2018) | Segment | Net Revenues ($ in thousands) | YoY Change | | :--- | :--- | :--- | | 1-800-Flowers.com Consumer Floral | 115,716 | 7.0% | | BloomNet Wire Service | 25,722 | 9.8% | | Gourmet Food & Gift Baskets | 464,584 | 5.6% | - E-commerce revenues increased 6.2% to $487.1 million in Q2 2020, driven by a 4.8% increase in orders and a 1.3% increase in average order value to $84.53[104] - Marketing and sales expense increased 6.5% for the quarter, remaining relatively stable as a percentage of revenue at 21.0% compared to 20.9% in the prior year, showing efficient marketing spend[118][119] - General and administrative expenses increased 4.8% for the quarter, primarily due to higher labor costs and acquisition-related professional fees[123] Liquidity and Capital Resources The company's liquidity is supported by cash, operating cash flows, and a credit facility, with strong working capital and cash generation from operations, despite significant investing activities - Working capital stood at $204.9 million as of December 29, 2019, a significant increase from $175.7 million at June 30, 2019, reflecting strong cash generation during the holiday season[130] - Net cash provided by operating activities was $162.2 million for the six months ended Dec 29, 2019, primarily due to net income and favorable seasonal changes in working capital[133] - Net cash used in investing activities was $32.2 million, mainly for the $20.5 million acquisition of Shari's Berries and $10.7 million in capital expenditures[134] - The company believes available cash balances are sufficient to fund operating needs through fiscal 2021[131] Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's market risk exposure, primarily from interest rate changes on variable-rate debt, noting a minor impact from hypothetical rate increases - The company's primary market risk is from interest rate changes on its variable-rate debt under the 2019 Credit Agreement[146] - A hypothetical 50 basis point increase in interest rates would result in an approximate $0.1 million and $0.2 million increase in interest expense for the three and six months ended December 29, 2019, respectively[146] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[149] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[150] Part II Legal Proceedings The company is involved in various legal claims, which management believes will not materially adversely affect its financial position or operations - Management opines that pending legal actions will not have a material adverse effect on the Company's financial condition or results[151] Risk Factors This section confirms no material changes to the company's risk factors since the most recent Annual Report on Form 10-K - There were no material changes to the Company's risk factors from the most recent Form 10-K[152] Unregistered Sales of Equity Securities and Use of Proceeds This section details stock repurchase activity for the first six months of fiscal 2020, including the Board's authorization and remaining repurchase capacity Common Stock Repurchases (July 1, 2019 - Dec 29, 2019) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | 09/30/19 - 10/27/19 | - | - | | 10/28/19 - 11/24/19 | 158,750 | $13.24 | | 11/25/19 - 12/29/19 | 210,000 | $13.76 | | Total for Q2 | 368,750 | $13.55 (approx.) | - As of December 29, 2019, $25.0 million remained authorized for repurchase under the company's stock repurchase plan[153] Defaults upon Senior Securities Not applicable Mine Safety Disclosures Not applicable Other Information None Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files - The report includes required certifications from the principal executive officer and principal financial officer, as well as XBRL filings[160]