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 ~~31, 2017~~ 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~~ (Zip code)	(~~Registrant~~’sRegistrant’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 ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit ~~and post~~ 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		☐ ~~Large accelerated filer~~	☑ ~~Accelerated filer~~
	☐ ~~Non-accelerated filer (Do not check if a smaller reporting company)~~	☐ 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~~’sRegistrant’s classes of common stock as of ~~February 2, 2018:~~January 29, 2021:

Class A common stock:	~~35,969,913~~ 36,693,449
Class B common stock:	~~28,567,063~~ 28,153,614

Table of Contents

~~Table of Contents~~

1-800-FLOWERS.COM, Inc.

FORM 10-Q

For the quarterly period ended December 27, 2020

TABLE OF CONTENTS

		Page
Part I.	Financial Information
Item 1.	Condensed Consolidated Financial Statements		1
	~~Condensed Consolidated Balance Sheets~~ – ~~December 31, 2017(Unaudited) and July 2, 2017~~		1
	Condensed Consolidated Balance Sheets – December 27, 2020 (Unaudited) and June 28, 2020		1
	Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) – Three and Six Months Ended December ~~31, 2017~~27, 2020 and ~~January 1, 2017~~December 29, 2019		2
	Condensed Consolidated Statements of ~~Comprehensive~~ ~~Income~~Stockholder’s Equity (Unaudited) – Three and Six Months Ended December ~~31, 2017~~27, 2020 and ~~January 1, 2017~~December 29, 2019		3
	Condensed Consolidated Statements of Cash Flows (Unaudited) – Six Months Ended December ~~31, 2017~~27, 2020 and ~~January 1, 2017~~December 29, 2019		4
	Notes to Condensed Consolidated Financial Statements (Unaudited)		5
Item 2.	~~Management~~’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations		1614
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		3122
Item 4.	Controls and Procedures		31

~~Part II.~~	~~Other Information~~
~~Item 1.~~	~~Legal Proceedings~~		32
~~Item 1A.~~	~~Risk Factors~~		32
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~		33
~~Item 3.~~	~~Defaults upon Senior Securities~~		33
~~Item 4.~~	~~Mine Safety Disclosures~~		33
~~Item 5.~~	~~Other Information~~		33
~~Item 6.~~	~~Exhibits~~		3423

~~Signatures~~Part II.	Other Information		35

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

Signatures

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 31, 2017			July 2, 2017			December 27, 2020			*June 28, 2020*
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	232,589		$	149,732		$	370,586		$	240,506
Trade receivables, net		44,424			14,073			72,590			15,178
Inventories		60,567			75,862			89,389			97,760
Prepaid and other		22,007			17,735			30,879			25,186
Total current assets		359,587			257,402			563,444			378,630

Property, plant and equipment, net		154,606			161,381			197,598			169,075
Operating lease right-of-use assets								88,096			66,760
Goodwill		62,590			62,590			208,048			74,711
Other intangibles, net		60,460			61,090			140,672			66,273
Other assets		11,520			10,007			24,402			18,986
Total assets	$	648,763		$	552,470		$	1,222,260		$	774,435

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	55,252		$	27,781		$	104,965		$	25,306
Accrued expenses		123,504			90,206			285,822			141,741
Current maturities of long-term debt		8,625			7,188			15,000			5,000
Current portion of long-term operating lease liabilities								10,953			8,285
Total current liabilities		187,381			125,175			416,740			180,332

Long-term debt		97,545			101,377			170,912			87,559
Long-term operating lease liabilities								81,308			61,964
Deferred tax liabilities		21,530			33,868			27,244			28,632
Other liabilities		11,565			9,811			28,448			16,174
Total liabilities		318,021			270,231			724,652			374,661

Commitments and contingencies (Note 13)
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, 51,879,967 and 51,227,779 shares issued at December 31, 2017 and July 2, 2017, respectively		519			513
Class B common stock, $0.01 par value, 200,000,000 shares authorized, 33,847,063 and 33,901,603 shares issued at December 31, 2017 and July 2, 2017, respectively		338			339
Stockholders’ equity:
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		339,805			337,726			364,411			358,031
Retained earnings		90,115			32,638			271,438			167,523
Accumulated other comprehensive loss		(160	)		(187	)		(244	)		(243	)
Treasury stock, at cost, 15,877,054 and 14,709,731 Class A shares at December 31, 2017 and July 2, 2017, respectively, and 5,280,000 Class B shares at December 31, 2017 and July 2, 2017		(99,875	)		(88,790	)
Total stockholders’ equity		330,742			282,239
Total liabilities and stockholders’ equity	$	648,763		$	552,470
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								497,608			399,774
Total liabilities and stockholders’ equity							$	1,222,260		$	774,435

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~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 27, 2020*			*December 29, 2019*			*December 27, 2020*			*December 29, 2019*
	December 31, 2017			January 1, 2017		December 31, 2017			January 1, 2017
Net revenues	$	526,093		$	554,553	$	683,442		$	720,382		$	877,256		$	605,642		$	1,161,028		$	792,905
Cost of revenues		290,834			297,559		380,905			392,001			479,010			336,470			647,302			447,587
Gross profit		235,259			256,994		302,537			328,381			398,246			269,172			513,726			345,318
Operating expenses:
Marketing and sales		113,771			119,876		163,493			174,954			194,696			127,404			274,981			184,243
Technology and development		9,175			9,849		18,845			19,337			14,053			11,733			25,656			22,536
General and administrative		19,170			21,551		38,575			43,484			30,835			22,634			59,048			44,156
Depreciation and amortization		8,677			9,167		16,761			17,164			11,060			7,830			19,900			15,465
Total operating expenses		150,793			160,443		237,674			254,939			250,644			169,601			379,585			266,400
Operating income		84,466			96,551		64,863			73,442			147,602			99,571			134,141			78,918
Interest expense, net		1,226			2,154		2,257			3,605			1,927			985			2,967			1,580
Other (income) expense, net		(86	)		1		(346	)		(149	)		(2,257	)		(975	)		(3,256	)		(891	)
Income before income taxes		83,326			94,396		62,952			69,986			147,932			99,561			134,430			78,229
Income tax expense		12,627			31,467		5,475			22,828			34,255			25,409			30,515			19,348
Net income	$	70,699		$	62,929	$	57,477		$	47,158			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	$	1.09		$	0.97	$	0.89		$	0.72		$	1.76		$	1.15		$	1.61		$	0.91

Diluted net income per common share	$	1.06		$	0.93	$	0.86		$	0.70
Diluted net income per common share												$	1.71		$	1.12		$	1.56		$	0.89

Weighted average shares used in the calculation of net income per common share:
Basic		64,601			65,172		64,778			65,112			64,728			64,687			64,524			64,595
Diluted		66,782			67,754		67,037			67,778			66,543			66,401			66,593			66,486

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements..

Table of Contents

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

Condensed Consolidated Statements of ~~Comprehensive~~ Stockholders' Equity~~Income~~

(in ~~thousands)~~thousands, except share data)

(unaudited)

Three Months Ended

Six Months Ended

December 31, 2017

January 1, 2017

December 31, 2017

January 1, 2017

Net income
$ 70,699 $ 62,929 $ 57,477 $ 47,158
Other comprehensive income/(loss) (currency translation & other miscellaneous items)
26 (14 ) 27 81
Comprehensive income
$ 70,725 $ 62,915 $ 57,504 $ 47,239

Three Months Ended December 27, 2020 and December 29, 2019

Common Stock

Additional

Retained

Accumulated

Total

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

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
Net income
- 0 - 0 0 74,152 0 - 0 74,152
Translation adjustment
- 0 - 0 0 0 16 - 0 16
Stock-based compensation
437,625 4 - 0 2,276 0 0 0 0 2,280
Exercise of stock options
25,000 0 0 0 63 0 0 0 0 63
Acquisition of Class A treasury stock
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

Six Months Ended December 27, 2020 and December 29, 2019

Common Stock

Additional

Retained

Accumulated

Total

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

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
Net income
- 0 - 0 0 58,881 0 - 0 58,881
Translation adjustment
- 0 - 0 0 0 16 - 0 16
Stock-based compensation
444,792 4 0 0 4,041 0 0 0 0 4,045
Exercise of stock options
150,000 2 0 0 283 0 0 �� 0 0 285
Acquisition of Class A treasury stock
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

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements..

3
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 31, 2017			January 1, 2017			December 27, 2020			*December 29, 2019*

Operating activities:
Net income	$	57,477		$	47,158		$	103,915		$	58,881
Reconciliation of net income to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		16,761			17,164			19,900			15,465
Amortization of deferred financing costs		480			1,050			545			325
Deferred income taxes		(12,338	)		(1,380	)		(1,388	)		(1,003	)
Bad debt expense		418			656			341			731
Stock-based compensation		2,069			3,498			5,358			4,045
Other non-cash items		(103	)		(400	)		(321	)		(187	)
Changes in operating items:
Trade receivables		(30,769	)		(39,399	)		(56,372	)		(32,918	)
Inventories		15,295			9,916			25,369			25,358
Prepaid and other		(4,272	)		(3,215	)		(1,937	)		1,021
Accounts payable and accrued expenses		69,269			75,304			212,340			90,166
Other assets		(97	)		(35	)
Other liabilities		(24	)		(324	)
Other assets and liabilities								8,897			272
Net cash provided by operating activities		114,166			109,993			316,647			162,156

Investing activities:
Working capital adjustment related to sale of business		(8,500	)		-
Acquisitions, net of cash acquired								(250,943	)		(20,500	)
Capital expenditures, net of non-cash expenditures		(8,864	)		(13,253	)		(15,708	)		(10,712	)
Purchase of equity investments								(1,285	)		(1,001	)
Net cash used in investing activities		(17,364	)		(13,253	)		(267,936	)		(32,213	)

Financing activities:
Acquisition of treasury stock		(11,085	)		(6,822	)		(12,470	)		(5,030	)
Proceeds from exercise of employee stock options		15			267			1,032			285
Proceeds from bank borrowings		30,000			181,000			265,000			20,000
Repayment of bank borrowings		(32,875	)		(183,563	)
Debt issuance costs		-			(1,456	)
Net cash used in financing activities		(13,945	)		(10,574	)
Repayment of notes payable and bank borrowings								(170,000	)		(22,500	)
Debt issuance cost								(2,193	)		(60	)
Net cash provided by (used in) financing activities								81,369			(7,305	)

Net change in cash and cash equivalents		82,857			86,166			130,080			122,638
Cash and cash equivalents:
Beginning of period		149,732			27,826			240,506			172,923
End of period	$	232,589		$	113,992		$	370,586		$	295,561

See accompanying Notes to Condensed Consolidated Financial ~~Statements~~Statements..

Table of Contents

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, Inc. and ~~subsidiaries~~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 and Article 10 of Regulation S-X. ~~They~~Accordingly, they do not include all of the information and notes required by ~~generally accepted accounting principles~~GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring ~~accruals)~~adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended December ~~31, 2017~~27, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending ~~July 1, 2018.~~June 27, 2021. ~~For further information, refer to the consolidated~~These financial statements ~~and footnotes thereto included~~should be read in ~~the Company’s annual report~~conjunction with our Annual Report on Form 10-K for the fiscal year ended ~~July 2, 2017.~~June 28, 2020, which provides a more complete understanding of our accounting policies, financial position, operating results and other matters.

The ~~Company~~’sCompany’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, ~~is expected to generate~~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 in comparison to its fiscal first quarter. ~~In fiscal~~ ~~2017,~~ ~~Easter was on~~ ~~April~~ ~~16th,~~ ~~which resulted in the shift of some revenue and EBITDA from the Company’s~~ ~~third~~ ~~quarter of fiscal~~ ~~2016.~~ ~~In fiscal~~ ~~2018,~~ ~~Easter falls on~~ ~~April~~ ~~1st,~~ ~~which will result in the shift of all Easter-related revenue and EBITDA into the Company’s~~ ~~third~~ ~~quarter of fiscal~~ ~~2018.~~

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.

~~Recent Accounting Pronouncements~~

COVID-19

In
On ~~May 2014,~~March 27, 2020, the ~~FASB issued ASU~~ ~~No.~~~~2014~~-~~09,~~ ~~“Revenue from Contracts with Customers.” This amended guidance will enhance the comparability of revenue recognition practices~~Coronavirus Aid, Relief, and ~~will be applied~~Economic Security (“CARES”) Act was signed into law. The CARES Act provides a substantial stimulus and assistance package intended to all contracts with customers. Expanded disclosures related to the nature, amount, timing, and uncertainty of revenue that is recognized are requirements under the amended guidance. As we continue to evaluateaddress the impact of ~~this ASU, we have determined that the new standard will impact the following areas: the costs of producing~~COVID-19, including tax relief and ~~distributing the Company’s catalogs will be expensed upon mailing, instead of being capitalized~~government loans, grants and amortized in direct proportion to the actual sales; gift card breakage will be estimated based on the historical pattern of gift card redemption, rather than when redemption is considered remote; the Company will defer revenue at the time the Celebrations Reward loyalty points are earned using a relative fair value approach, rather than accruing a liability equal to the incremental cost of fulfilling its obligations. We have further identified the timing of revenue recognition for e-commerce orders (shipping point versus destination) as a potential issue in our analysis, which is ~~not~~ ~~expected to change the total amount of revenue recognized, but could accelerate the timing of when revenue is recognized. We plan to adopt this guidance beginning with the~~ ~~first~~ ~~quarter in the fiscal year ending~~ ~~June 30, 2019,~~ on a retrospective basis, with a cumulative adjustment to retained earnings. We are continuing to evaluate the impact that this ASU, and related amendments and interpretive guidance, will have on our consolidated financial statements, including the related disclosures.

In ~~July 2015,~~ ~~the FASB issued ASU~~ ~~No.~~~~2015~~-~~11,~~ ~~“Inventory (Topic~~ ~~330~~~~).”~~investments. The pronouncement was issued to simplify the measurement of inventory and changes the measurement from lower of cost or market to lower of cost and net realizable value. The Company adopted this standard effective ~~July 3, 2017.~~ ~~The adoption of ASU~~ ~~2015~~-11CARES Act did not have a ~~significant impact on the Company’s consolidated financial position or results of operations.~~

~~Table of Contents~~

In ~~January 2016,~~ ~~the FASB issued ASU~~ ~~No.~~~~2016~~-~~01,~~ ~~"Financial Instruments~~ – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities." The pronouncement requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. This guidance will become effective for the Company's fiscal year ending ~~June 30, 2019.~~ ~~The adoption is~~ ~~not~~ ~~expected to have a significant~~material impact on the Company’s consolidated financial ~~statements.~~statements during the three and six months ended December 27, 2020.

In ~~February 2016,~~ The Company is closely monitoring the ~~FASB issued ASU~~ impact of COVID-~~No.~~19~~2016~~-~~02,~~ ~~“Leases (Topic~~ ~~842~~~~).” Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities~~ on its ~~balance sheet~~business, including how it will affect its customers, workforce, suppliers, vendors, franchisees, florists, and ~~disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor~~production and ~~sale~~distribution channels, as well as its financial statements. The extent to which COVID-19 impacts the Company’s business and ~~leaseback transactions. Lessees~~financial results will depend on numerous evolving factors, including, but not limited to: the magnitude and ~~lessors are required~~duration of COVID-19, the extent to ~~disclose qualitative~~which it will impact macroeconomic conditions, including interest rates, employment rates and ~~quantitative information about leasing arrangements to enable a user~~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 ~~statements~~information in context with the information reasonably available to ~~assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for~~ the Company~~’s fiscal year ending~~ ~~June 28, 2020.~~ ~~We are currently evaluating~~ and the ~~impact~~ unknown future impacts of COVID-19 as of December 27, 2020 and ~~expect~~through the ~~ASU will have~~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 28, 2020 was $25.9 million (included in “Accrued expenses” on our consolidated ~~financial statements, primarily to~~balance sheets), of which, $8.7 million and $23.7 million was recognized as revenue during the ~~consolidated~~three and six months ended December 27, 2020. The deferred revenue balance ~~sheets and related disclosures.~~as of December 27, 2020 was $61.8 million.

~~March 2016,~~ 5~~the FASB issued ASU~~ ~~No.~~~~2016~~-~~09,~~ ~~“Improvements to Employee Share-Based Payment Accounting.” ASU~~ ~~No.~~~~2016~~-09 ~~affects all entities that issue share-based payment awards to their employees. ASU~~ ~~No.~~~~2016~~-09 ~~simplifies several aspects~~

Table of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company elected to early adopt the amendments in ASU ~~2016~~-~~09,~~ ~~in fiscal~~ ~~2017.~~ As a result, stock-based compensation excess tax benefits are reflected in the Consolidated Statements of Income as a component of the provision for income taxes, whereas they were previously recognized in equity. This change resulted in the recognition of excess tax benefits against income tax expenses, rather than additional paid-in capital, of ~~$1.0~~ ~~million for the year ended~~ ~~July 2, 2017.~~ ~~There was~~ no ~~impact on earnings per share since approximately~~ ~~700,000~~ ~~tax benefit shares for the year ended~~ ~~July 2, 2017,~~ ~~previously associated with the APIC pool calculation, are~~ no longer considered in the diluted share computation. Additionally, our Consolidated Statements of Cash Flows now present excess tax benefits as an operating activity. This change has been applied prospectively in accordance with the ASU and prior periods have ~~not~~ been adjusted. Further, the Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures. The cumulative effect of this change, which was recorded as compensation expense in fiscal ~~2017,~~ ~~was~~ ~~not~~ ~~material to the financial statements. In addition, this ASU allows entities to withhold an amount up to an employees~~’ maximum individual statutory tax rate in the relevant jurisdiction, up from the minimum statutory requirement, without resulting in liability classification of the award. We adopted this change on a modified retrospective basis, with no impact to our consolidated financial statements. Finally, this ASU clarified that the cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity. This change does ~~not~~ ~~have an impact on the Company’s consolidated financials as it conforms with its current practice.~~Contents

Recently Issued Accounting Pronouncements - Adopted
Financial Instruments – Measurement of Credit Losses. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 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~~’sentity’s assumptions, models and methods for estimating expected credit losses. We adopted ASU 2016-13 ~~is effective~~ for the Company’s fiscal ~~year~~2021 (quarter ending ~~July 4, 2021,~~September 27, 2020), ~~and the guidance is to be applied~~ 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.

In ~~June 2016,~~ ~~the FASB issued ASU~~ ~~2016~~-~~15,~~ ~~“Statement of Cash Flows (Topic~~ ~~230~~~~), a consensus of the FASB’s Emerging Issues Task Force.” ASU~~ ~~2016~~-15 ~~is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The ASU is effective for the Company’s fiscal year ending~~ ~~June 30, 2019,~~ and interim periods within those fiscal years. Early adoption is permitted, including interim periods within those fiscal years. An entity that elects early adoption must adopt all of the amendments in the same period. The guidance requires application using a retrospective transition method. The adoption is ~~not~~ ~~expected to have a significant impact on the Company’s consolidated financial statements.~~
In ~~January 2017,~~ ~~the FASB issued ASU~~ ~~No.~~~~2017~~-~~01,~~ ~~"Business Combinations (Topic~~ ~~805~~~~): Clarifying the Definition of a Business (ASU~~ ~~2017~~-01~~)," which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. ASU~~ ~~2017~~-01 ~~is effective for the Company's fiscal year ending~~ ~~June 30, 2019,~~ ~~with early adoption permitted, and should be applied prospectively. We do~~ ~~not~~ ~~expect the standard to have a material impact on our consolidated financial statements.~~
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Goodwill – Impairment Test. In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates step two from the goodwill impairment test. Under ASU 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 year ending~~ ~~July 4, 2021,~~ ~~with early adoption permitted, and should be applied prospectively. We do~~ ~~not~~ ~~expect the standard to have a material impact on our consolidated financial statements.~~
In ~~February 2017,~~ ~~the FASB issued~~ ~~ASU~~ ~~No.~~~~2017~~-~~05,~~ “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets.” This update clarifies the scope of accounting for the derecognition or partial sale of nonfinancial assets to exclude all businesses and nonprofit activities. ASU ~~2017~~-05 ~~also provides a definition for in-substance nonfinancial assets and additional guidance on partial sales of nonfinancial assets. This guidance will be effective~~ for the Company’s fiscal ~~year~~2021 (quarter ending ~~June 30, 2019~~September 27, 2020), ~~and~~on a prospective basis. There was ~~may~~ no~~be applied retrospectively. The Company is currently evaluating the potential~~ material impact of adopting this guidance on our consolidated financial statements.
In ~~May 2017,~~ ~~the FASB issued ASU~~ No~~2017~~-~~09,~~ ~~“Compensation - Stock Compensation (Topic~~ ~~718~~): Scope of Modification Accounting.” This ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting. An entity would ~~not~~ ~~apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. ASU~~ ~~2017~~-09 ~~is effective for the Company's fiscal year ending~~ ~~June 30, 2019,~~ with early adoption permitted, and should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
~~U.S. Tax Reform~~
On ~~December 22, 2017,~~ ~~the U.S. government~~ enacted significant changes to the U.S. tax law following the passage and signing of the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act revises the future ongoing U.S. corporate income tax by, among other things, lowering U. S. corporate income tax rates ~~from~~ ~~35%~~ to ~~21%.~~ ~~As the Company’s fiscal year ends on~~ ~~July 1, 2018,~~ ~~the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately~~ ~~28%~~ ~~for the current fiscal year and~~ ~~21%~~ ~~for subsequent fiscal years. The Tax Act also eliminates the domestic production activities deduction and introduces limitations on certain business expenses and executive compensation deductions. See~~ ~~Note~~ 11 ~~– Income taxes~~ ~~for the impact of the Tax Act on the Company’s financial statements.~~
On ~~December 22, 2017,~~ ~~the SEC issued guidance under Staff Accounting Bulletin~~ ~~No.~~~~118,~~ ~~Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB~~ ~~118”~~~~) directing taxpayers to consider the impact of the Tax Act as “provisional” when it does~~ ~~not~~ ~~have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law.~~ ~~The changes in the Tax Act are broad and complex. The final impacts of the Tax Act~~ ~~may~~ differ from the Company’s estimates due to, among other things, changes in interpretations of the Tax Act, further legislation related to the Tax Act, changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates to estimates the Company has utilized to calculate the impacts of the Tax Act. The Securities Exchange Commission has issued rules that would allow for a measurement period of up to ~~one~~ ~~year after the enactment date of the Tax Act to finalize the related tax impacts.~~
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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

December 31, 2017

January 1, 2017

December 31, 2017

January 1, 2017

(in thousands, except per share data)

Numerator:

Net income
$ 70,699 $ 62,929 $ 57,477 $ 47,158

Denominator:

Weighted average shares outstanding
64,601 65,172 64,778 65,112
Effect of dilutive securities:

Employee stock options
1,549 1,526 1,528 1,503
Employee restricted stock awards
632 1,056 731 1,163
2,181 2,582 2,259 2,666

Adjusted weighted-average shares and assumed conversions
66,782 67,754 67,037 67,778

Net income per common share

Basic
$ 1.09 $ 0.97 $ 0.89 $ 0.72
Diluted
$ 1.06 $ 0.93 $ 0.86 $ 0.70

Three Months Ended

Six Months Ended

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

(in thousands, except per share data)

Numerator:

Net income
$ 113,677 $ 74,152 $ 103,915 $ 58,881

Denominator:

Weighted average shares outstanding
64,728 64,687 64,524 64,595
Effect of dilutive securities:

Employee stock options
824 997 951 1,046
Employee restricted stock awards
991 717 1,118 845
1,815 1,714 2,069 1,891

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

Net income per common share

Basic
$ 1.76 $ 1.15 $ 1.61 $ 0.91
Diluted
$ 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 for the fiscal year ended ~~July 2, 2017,~~ June 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 31, 2017

January 1, 2017

December 31, 2017

January 1, 2017

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

(in thousands)

(in thousands)

Stock options
$ 107 $ 113 $ 215 $ 227 $ 9 $ 28 $ 18 $ 93
Restricted stock
861 1,611 1,854 3.271 2,956 2,252 5,340 3,952
Total
968 1,724 2,069 3,498 2,965 2,280 5,358 4,045
Deferred income tax (expense) benefit
206 438 592 1,141
Deferred income tax benefit
785 300 1,388 1,003
Stock-based compensation expense, net
$ 762 $ 1,286 $ 1,477 $ 2,357 $ 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

December 31, 2017

January 1, 2017

December 31, 2017

January 1, 2017

(in thousands)

Marketing and sales
$ 258 $ 495 $ 556 $ 1,042
Technology and development
51 96 111 196
General and administrative
659 1,133 1,402 2,260
Total
$ 968 $ 1,724 $ 2,069 $ 3,498
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Three Months Ended

Six Months Ended

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

  (in thousands)
Marketing and sales
$ 1,367 $ 1,047 $ 2,511 $ 1,863
Technology and development
226 173 417 292
General and administrative
1,372 1,060 2,430 1,890
Total
$ 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.~~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 ~~31, 2017:~~27, 2020:

Options

Weighted Average
Exercise Price

Weighted Average Remaining Contractual Term (years)

Aggregate Intrinsic Value (000s)

Outstanding at July 2, 2017
2,127,734 $ 2.42
Granted
- $ -
Exercised
(4,000 ) $ 3.71
Forfeited
(17,500
)
$ 9.83
Outstanding at December 31, 2017
2,106,234 $ 2.36 3.4 $ 17,573

Options vested or expected to vest at December 31, 2017
2,106,234 $ 2.36 3.4 $ 17,573
Exercisable at December 31, 2017
1,707,234 $ 2.27 3.3 $ 14,389

Options

Weighted Average
Exercise Price

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

(in years)

(in thousands)

Outstanding at June 28, 2020
1,230,000 $ 2.77
Granted
0 $ 0
Exercised
(429,200 ) $ 2.41
Forfeited

Outstanding at December 27, 2020
800,800 $ 2.97 1.0 $ 18,475

Exercisable at December 27, 2020
785,800 $ 2.63 0.9 $ 18,396

As of December ~~31, 2017,~~27, 2020, the total future compensation cost related to non-vested options, not yet recognized in the statement of income, was ~~$0.6~~$0.1 million and the weighted average period over which these awards are expected to be recognized was ~~1.5~~3.9 years.

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 ~~31, 2017:~~27, 2020:

Shares

Weighted Average Grant Date Fair Value

Shares

Weighted Average Grant Date Fair Value

Non-vested at July 2, 2017
1,352,873 $ 7.44
Non-vested at June 28, 2020
1,608,468 $ 12.01
Granted
881,473 $ 9.47 701,311 $ 21.83
Vested
(593,648
)
$ 7.76 (643,590 ) $ 11.05
Forfeited
(628,946
)
$ 9.50 (29,949 ) $ 19.80
Non-vested at December 31, 2017
1,011,752 $ 7.74
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 ~~31, 2017~~27, 2020, , there was ~~$5.8~~$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 ~~2.2~~1.9 years.
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Note 4 – ~~Disposition~~Acquisition
Acquisition of PersonalizationMall

On ~~March 15, 2017,~~February 14, 2020, ~~the Company and Ferrero International S.A.~~1-800-Flowers.com, Inc., 800-Flowers, Inc., a ~~Luxembourg corporation~~wholly-owned subsidiary of 1-800-Flowers.com, Inc. (the “Purchaser”), PersonalizationMall.com, LLC ("PersonalizationMall"), and Bed Bath & Beyond Inc. (“~~Ferrero”~~Seller”), entered into ~~a Stock~~an Equity Purchase Agreement (the “Purchase Agreement”) pursuant to which ~~Ferrero~~Seller agreed to sell to the Purchaser, and the Purchaser agreed to purchase from ~~the Company~~Seller, all of the issued and outstanding ~~equity~~membership interests of ~~Fannie~~ ~~May~~ ~~Confections Brands, Inc., including its subsidiaries, Fannie~~ ~~May~~ ~~Confections, Inc. and Harry London Candies, Inc. (“Fannie~~ ~~May”)~~ PersonalizationMall for ~~a total consideration of~~ ~~$115.0~~$252.0 million in cash ~~subject~~(subject to ~~adjustment for seasonal working capital. The~~certain working capital ~~adjustment was finalized in~~and other adjustments). On ~~August 2017,~~July 20, 2020, ~~resulting in~~Purchaser, PersonalizationMall, and Seller entered into an ~~$11.4~~ ~~million reduction~~amendment (the “Amendment”) to the Purchase Agreement to, among other things, amend the purchase ~~price. The resulting gain on sale~~price to $245.0 million (subject to certain working capital and other adjustments). On August 3, 2020, the Company completed its acquisition of ~~$14.6~~ ~~million, is included within “Other (income) expense, net” in the Company’s consolidated statements of income in the~~ ~~fourth~~ ~~quarter of fiscal year~~ ~~2017.~~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 ~~Ferrero~~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 ~~entered into~~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 ~~transition services agreement whereby~~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 ~~will provide certain post-closing services to Ferrero and Fannie~~ ~~May~~may ~~for a period of approximately~~ 18 ~~months, related to the business of Fannie~~ ~~May,~~ ~~and a commercial agreement~~achieve with respect to the ~~distribution~~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 ~~Ferrero~~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 ~~Fannie~~other intellectual property, as well as certain raw material inventory and the assumption of specified liabilities.
During the quarter ended ~~May~~June 28, 2020, ~~products.~~the Company finalized the allocation of the purchase price to the identifiable assets acquired and liabilities assumed based on its estimates of their fair values on the acquisition date. 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 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 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 ~~Fannie~~ ~~May~~ the Shari’s Berries brand are reflected in the ~~Company~~’sCompany’s consolidated financial statements ~~through~~ ~~May 30, 2017,~~ from the date of ~~its disposition,~~acquisition, within ~~its~~the Gourmet ~~Food~~Foods & Gift Baskets segment. ~~During fiscal~~ ~~2017,~~ ~~Fannie~~ ~~May~~ ~~contributed net revenues~~Pro forma results of ~~$85.6~~ ~~million. Operating and pre-tax income during such period were~~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~~’sCompany’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 31, 2017

July 2, 2017

December 27, 2020

June 28, 2020

(in thousands)

(in thousands)

Finished goods
$ 26,853 $ 34,476 $ 37,030 $ 35,779
Work-in-process
4,559 11,933 10,864 16,536
Raw materials
29,155 29,453 41,495 45,445
Total inventory
$ 60,567 $ 75,862 $ 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 December 31, 2017 and July 2, 2017
$ 17,441 $ - $ 45,149 $ 62,590
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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~~’sCompany’s other intangible assets consist of the following:

December 31, 2017

July 2, 2017

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:

Intangible assets with determinable lives

Investment in licenses
14-16 $ 7,420 $ 5,990 $ 1,430 $ 7,420 $ 5,937 $ 1,483 14-16 $ 7,420 $ 6,306 $ 1,114 $ 7,420 $ 6,253 $ 1,167
Customer lists
3-10 12,184 8,840 3,344 12,184 8,227 3,957 2-10 23,825 11,972 11,853 12,825 10,474 2,351
Other
5-14 2,946 2,102 844 2,946 2,045 901 5-14 2,946 2,432 514 2,946 2,382 564
Total intangible assets with determinable lives
22,550 16,932 5,618 22,550 16,209 6,341 34,191 20,710 13,481 23,191 19,109 4,082

Trademarks with indefinite lives
54,842 - 54,842 54,749 - 54,749 127191 - 127,191 62,191 - 62,191

Total identifiable intangible assets
$ 77,392 $ 16,932 $ 60,460 $ 77,299 $ 16,209 $ 61,090 $ 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: ~~remainde~~rremainder of ~~fiscal~~ ~~2018~~ - ~~$0.6~~ ~~million, fiscal~~ ~~2019~~ - ~~$0.7~~ ~~million, fiscal~~ ~~2020~~ - ~~$0.6~~ ~~million,~~ fiscal 2021 - ~~$0.6~~$1.8 million, fiscal 2022 - $3.3 million, fiscal ~~$0.5~~2023 - $3.3 million, fiscal 2024 - $3.3 million, fiscal 2025 - $0.8 million and thereafter - $1.0 million.
~~$2.6million.~~9
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Note 7– Investments

~~The Company has certain~~Equity investments in non-marketable equity instruments of private companies. The Company accounts for these investments using the equity method if they provide the Company the ability to exercise significant influence, but ~~not~~ ~~control, over the investee. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee between~~ ~~20%~~ ~~and~~ ~~50%,~~ ~~although other factors, such as representation on the investee~~’s Board of Directors, are considered in determining whether the equity method is appropriate. The Company records equity method investments initially at cost, and adjusts the carrying amount to reflect the Company’s share of the earnings or losses of the investee.
~~The Company’s equity method investment is comprised of an interest in Flores Online,~~without a ~~Sao Paulo, Brazil based internet floral and gift retailer, that the Company originally acquired on~~ ~~May 31, 2012.~~ ~~The Company currently holds~~ ~~24.9%~~ ~~of the outstanding shares of Flores Online. The book value of this investment was~~ ~~$0.6~~ ~~million as of~~ ~~December 31, 2017~~ ~~and~~ ~~$1.0~~ ~~million as of~~ ~~July 2, 2017,~~ ~~and is included in the “Other assets” line item within the Company’s consolidated balance sheets.~~ ~~The Company’s equity in the net loss of Flores Online for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~December 31, 2017~~ ~~and~~ ~~January 1, 2017~~ ~~was less than~~ ~~$0.1~~ ~~million. During the quarter ended~~ ~~December 31, 2017,~~ ~~Flores Online entered into a share exchange agreement with Isabella Flores, whereby among other changes, the Company exchanged~~ 5% ~~of its interest in Flores Online for a~~ 5% ~~interest in Isabella Flores. This new investment of approximately~~ ~~$0.1~~ ~~million is currently being accounted as a cost method investment and is immaterial to the financial statements. In conjunction with this share exchange, the Company determined that the~~readily determinable fair value ~~of its investment in Flores Online was below its carrying value and that this decline was other-than-temporary. As a result, the Company recorded an impairment charge of~~ ~~$0.2~~ ~~million, which is included within the “Other (income) expense, net” line item in the Company’s consolidated statement of income during the quarter ended~~ ~~December 31, 2017.~~
Investments in non-marketable equity instruments of private companies, where the Company does not possess the ability to exercise significant influence, are accounted for ~~under the cost method. Cost method investments are originally recorded~~ at cost, ~~and~~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~~’sCompany’s consolidated balance sheets. The aggregate carrying amount of the Company’s cost method investments was ~~$1.8~~$4.1 million as of December ~~31, 2017~~27, 2020 and ~~$1.7~~$2.8 million as of ~~July 2, 2017.~~June 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).
11
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Note 8 –Debt

The ~~Company~~’sCompany’s current and long-term debt consists of the following:

December 27, 2020

June 28, 2020

(in thousands)

Revolver (1)
$ 0 $ 0
Term Loans (1)
190,000 95,000
Deferred financing costs
(4,088
)
(2,441
)
Total debt
185,912 92,559
Less: current debt
15,000 5,000
Long-term debt
$ 170,912 $ 87,559

December 31, 2017

July 2, 2017

(in thousands)

Revolver (1)
$ - $ -
Term Loan (1)
109,250 112,125
Deferred financing costs
(3,080
)
(3,560
)
Total debt
106,170 108,565
Less: current debt
8,625 7,188
Long-term debt
$ 97,545 $ 101,377
(1) On ~~December 23, 2016,~~ ~~the Company entered into an Amended and Restated Credit Agreement (the~~ ~~“2016~~ ~~Amended Credit Agreement”) with JPMorgan Chase Bank as administrative agent, and a group of lenders. The~~ ~~2016~~ ~~Amended Credit Agreement amended and restated the Company’s credit agreement dated as of~~ ~~September 30, 2014 (~~~~the~~ ~~“2014~~ ~~Agreement”) to, among other things, extend the maturity date of its~~ ~~$115.0~~ ~~million outstanding term loan ("Term Loan") and revolving credit facility (the "Revolver") to~~ ~~December 23, 2021.~~ ~~The Term Loan is payable in~~ 19 ~~quarterly installments of principal and interest beginning on~~ ~~April 2, 2017,~~ ~~with escalating principal payments, at the rate of~~ 5% ~~in year one,~~ ~~7.5%~~ ~~in year two,~~ ~~10%~~ ~~in year three,~~ ~~12.5%~~ ~~in year four, and~~ ~~15%~~ ~~in year five, with the remaining balance of~~ ~~$61.8~~ ~~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~~ ~~2016~~ ~~Amended 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 from~~~~0.75%~~ to ~~1.5%,~~ based on the Company’s consolidated leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the highest of the federal funds rate and the overnight bank funding rate as published by the New York Fed, plus ~~0.5%~~ ~~and (c) an adjusted LIBO rate, plus~~ 1% ~~or (~~2~~) an adjusted LIBO rate plus an applicable margin varying from~~ ~~1.75%~~ to ~~2.5%,~~ ~~based on the Company’s consolidated leverage ratio. The~~ ~~2016~~ Amended Credit Agreement requires that while any borrowings 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 31, 2017.~~ ~~The~~ ~~2016~~ ~~Amended Credit Agreement is secured by substantially all of the assets of the Company and the Subsidiary Guarantors.~~
On May 31, 2019, the Company and certain of its U.S. subsidiaries entered into a Second Amended and Restated Credit Agreement (the “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 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 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.
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 th~~e term loan~~the Term Loan and New Term Loan are as follows: ~~$4.4~~$5.0 million – remainder of fiscal ~~2018,~~2021, $20.0 million - fiscal ~~$10.1~~2022, $20.0 million – fiscal ~~2019,~~2023 ~~$12.9~~and $145.0 million – fiscal ~~2020,~~2024.~~$15.8~~ ~~million - fiscal~~ ~~2021,~~ ~~and~~ ~~$66.1~~ ~~– fiscal~~ ~~2022.~~
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~~Table of Contents~~

Note 9 - Property, Plant and Equipment

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

December 27, 2020

June 28, 2020

(in thousands)

Land
$ 30,789 $ 30,789
Orchards in production and land improvements
18,548 17,139
Building and building improvements
61,679 61,159
Leasehold improvements
25,669 13,675
Production equipment
78,040 57,904
Furniture and fixtures
7,995 7,444
Computer and telecommunication equipment
57,005 55,381
Software
162,304 151,264
Capital projects in progress - orchards
7,291 8,130
Property, plant and equipment, gross
449,320 402,885
Accumulated depreciation and amortization
(251,722
)
(233,810
)
Property, plant and equipment, net
$ 197,598 $ 169,075

December 31, 2017

July 2, 2017

(in thousands)

Land
$ 30,789 $ 30,789
Orchards in production and land improvements
10,773 9,703
Building and building improvements
57,803 56,791
Leasehold improvements
12,305 11,950
Production equipment and furniture and fixtures
48,889 47,293
Computer and telecommunication equipment
46,890 45,026
Software
123,001 119,177
Capital projects in progress - orchards
9,114 9,971
Property, plant and equipment, gross
339,564 330,700
Accumulated depreciation and amortization
(184,958
)
(169,319
)
Property, plant and equipment, net
$ 154,606 $ 161,381
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Table of Contents

~~Not~~eNote 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

~~Level~~ 3
Valuations based on inputs that are supported by little or no market activity and that are ~~supported by little~~significant to the fair value of the assets or no ~~market activity and that are significant to the fair value of the assets or~~ liabilities.
13
~~Table of Contents~~

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)

Assets (liabilities) as of December 31, 2017:

As of December 27, 2020:

Trading securities held in a “rabbi trust” (1)
$ 8,693 $ 8,693 $ - $ - $ 18,617 $ 18,617 $ 0 $ 0
Total assets (liabilities) at fair value
$ 18,617 $ 18,617 $ 0 $ 0
$ 8,693 $ 8,693 $ - $ -

Assets (liabilities) as of July 2, 2017:

As of June 28, 2020:

Trading securities held in a “rabbi trust” (1)
$ 6,916 $ 6,916 $ - $ - $ 13,442 $ 13,442 $ 0 $ 0
$ 6,916 $ 6,916 $ - $ -
Total assets (liabilities) at fair value
$ 13,442 $ 13,442 $ 0 $ 0

(1)
The Company has established a ~~Non-qualified Deferred Compensation~~NQDC Plan for certain members of senior management. Deferred compensation plan assets are invested in mutual funds held in a “rabbi ~~trust”~~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~~’sCompany’s effective tax rate from operations for the three and six months ended December ~~31, 2017~~27, 2020 was ~~15.2%~~23.2% and ~~8.7%~~22.7%, respectively, compared to ~~33.3%~~25.5% and ~~32.6%~~24.7% in the same periods of the prior year. The effective rates for fiscal ~~2018~~ ~~were impacted by changes associated with the Tax Act (see~~ ~~Note~~ 1 -~~Accounting Policies~~ ~~above). During the quarter ended~~ ~~December 31, 2017,~~ ~~the Company recognized a benefit of~~ ~~$15.9~~ ~~million, or~~ ~~$0.24~~ ~~per diluted share related to the impact of the Tax Act, consisting of a discrete tax benefit of~~ ~~$12.2~~ ~~million, or~~ ~~$0.18~~ ~~per diluted share, reflecting a revaluation of deferred tax liabilities at the lower U.S. federal statutory rate of~~ ~~21%,~~2021 and ~~a benefit of~~ ~~$3.7~~ ~~million, or~~ ~~$0.06~~ ~~per diluted share, reflecting the Company’s lower transitional federal tax rate in~~ fiscal ~~2018~~ of ~~28.0~~ ~~percent. In addition, fiscal~~ ~~2018~~ ~~effective rates were impacted by state income taxes, which were partially offset by various permanent differences and tax credits. The effective rates for fiscal~~ ~~2017~~2020 differed from the U.S. federal statutory rate of 21% due to state income taxes and nondeductible expenses for executive compensation, which were ~~more than~~partially offset by various permanent differences and tax credits, including excess tax benefits ~~on stock based compensation as a result of the Company’s adoption of ASU~~ ~~2016~~-~~09.~~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 ~~completed~~is currently undergoing its ~~audit by the Internal Revenue Service~~U.S. federal examination for fiscal ~~year~~ ~~2014,~~2018, however, fiscal ~~years~~year ~~2015~~2019 ~~and~~ ~~2016~~ ~~remain~~remains subject to U.S. federal examination. Due to ongoing state examinations and ~~non-conformity~~nonconformity with the U.S. federal statute of limitations for assessment, certain states remain open from fiscal ~~2012.~~ ~~The Company commenced operations in foreign jurisdictions in~~ ~~2012.~~2016. The Company's foreign income tax filings from fiscal 2015 are open for examination by its respective foreign tax ~~authorities.~~authorities, mainly Canada, Brazil, and the United Kingdom.

The ~~Company��s~~Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At December ~~31, 2017,~~27, 2020, the Company has an unrecognized tax benefit, including ~~an immaterial amount of~~ accrued interest and penalties, of approximately ~~$0.4~~$1.2 million. The Company believes that no ~~significant~~$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~~’sCompany’s management reviews the results of ~~the Company’s~~its operations by the following three business segments:

•1-~~800~~~~-Flowers.com~~     Consumer Floral & Gifts,
•     BloomNet, ~~Wire Service,~~ and
•     Gourmet ~~Food and~~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~~’smanagement’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

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

Net Revenues:

(in thousands)

Segment Net Revenues:

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
135 165 241 360
Intercompany eliminations
(552
)
(545
)
(1,099
)
(900
)
Total net revenues
$ 877,256 $ 605,642 $ 1,161,028 $ 792,905

Operating Income:

Segment Contribution Margin:

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
193,419 133,411 220,495 143,692
Corporate (a)
(34,757
)
(26,010
)
(66,454
)
(49,309
)
Depreciation and amortization
(11,060
)
(7,830
)
(19,900
)
(15,465
)
Operating income
$ 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 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
$ 303,275 $ 0 $ 474,535 $ 777,810 $ 113,858 $ 0 $ 373,226 $ 487,084
Retail
1,210 0 4,088 5,298 1,082 0 23,120 24,202
Wholesale
0 9,150 59,642 68,792 0 7,270 68,238 75,508
BloomNet services
0 24,901 0 24,901 0 18,452 0 18,452
Other
872 0 0 872 776 0 0 776
Corporate
0 0 0 135 0 0 0 165
Eliminations
0 0 0 (552
)
0 0 0 (545
)
Net revenues
$ 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

Three Months Ended

Six Months Ended

Net Revenues:

December 31, 2017

January 1, 2017

December 31, 2017

January 1, 2017

(in thousands)

Segment Net Revenues:

1-800-Flowers.com Consumer Floral
$ 100,064 $ 97,808 $ 176,674 $ 173,023
BloomNet Wire Service
20,375 20,502 40,139 41,466
Gourmet Food & Gift Baskets
405,964 436,870 466,950 506,684
Corporate
317 316 587 579
Intercompany eliminations
(627
)
(943
)
(908
)
(1,370
)
Total net revenues
$ 526,093 $ 554,553 $ 683,442 $ 720,382
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Three Months Ended

Six Months Ended

Operating Income:

December 31, 2017

January 1, 2017

December 31, 2017

January 1, 2017

(in thousands)

Segment Contribution Margin:

1-800-Flowers.com Consumer Floral
$ 10,791 $ 13,128 $ 17,762 $ 21,309
BloomNet Wire Service
7,692 8,189 14,393 15,468
Gourmet Food & Gift Baskets
93,496 104,624 88,509 95,320
Segment Contribution Margin Subtotal
111,979 125,941 120,664 132,097
Corporate (a)
(18,836
)
(20,223
)
(39,040
)
(41,491
)
Depreciation and amortization
(8,677
)
(9,167
)
(16,761
)
(17,164
)
Operating income
$ 84,466 $ 96,551 $ 64,863 $ 73,442
~~(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.~~
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) lease payments, (2) lease term, and (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

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
December 27, 2020
(in thousands)
Weighted-average remaining lease term - operating leases
9.1 years
Weighted-discount rate - operating leases
3.8
%
Maturities of lease liabilities in accordance with ASC 842 as of December 27, 2020 are as follows (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
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~~liquidity.

15
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ITEM 2~~. MANAGEMENT~~’S2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
~~Forward Looking Statements~~

This ~~“Management~~’s“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.~~10-K, for the year ended June 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 28, 2020under 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 ~~subsidiarie~~ssubsidiaries (collectively, the “Company”) is a leading provider of gifts ~~for all celebratory occasions. For~~designed to help customers express, connect and celebrate. The Company’s business platform features our all-star family of brands, including: 1-800-Flowers.com®, 1-800-Baskets.com®, Cheryl’s Cookies®, Harry & David®, PersonalizationMall.com®, Shari’s Berries®, FruitBouquets.com®, Moose Munch®, The Popcorn Factory®, Wolferman’s Bakery® and Simply Chocolate®. We also offer top-quality steaks and chops from Stock Yards®. Through the ~~past 40 years, 1-800-Flowers.com® has been helping deliver smiles~~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 ~~customers~~deepen relationships with ~~a 100% Smile Guarantee® backing every gift.~~ ~~In addition to the 1-800-Flowers.com brand, which offers fresh flowers, plants, fruit and gift baskets, as well as balloons, plush and keepsake gifts, the Company’s~~customers. The Company also operates BloomNet®, an international floral ~~wire~~ service ~~(www.mybloomnet.net) and Napco brands provide~~provider offering a ~~broad range~~broad-range of ~~quality~~ products and ~~value-added~~ services designed to help professional florists grow their businesses ~~profitably. The 1-800-FLOWERS.COM, Inc. family~~profitably; Napco℠, a resource for floral gifts and seasonal décor; and DesignPac Gifts, LLC, a manufacturer of brands also offers everyday gifting and entertaining products such as premium, gift-quality fruits and other gourmet items from Harry & David® (1-877-322-1200 or www.harryanddavid.com), popcorn and specialty treats from The Popcorn Factory® (1-800-541-2676 or www.thepopcornfactory.com); cookies and baked gifts from Cheryl’s® (1-800-443-8124 or www.cheryls.com); gift baskets and towers from 1-800-Baskets.com® (www.1800baskets.com) and DesignPac; premium English muffins and other breakfast treats from Wolferman’s (1-800-999-1910 or www.wolfermans.com); artisanal and specialty chocolates from Simply Chocolate^SM~~(www.simplychocolate.com),~~ carved fresh fruit arrangements from FruitBouquets.com (www.fruitbouquets.com); top quality steaks and chops from Stock Yards® (www.stockyards.com), and personalized gifts from Personalization Universe�� ~~(www.personalizationuniverse.com).~~towers.

~~Service offerings such as~~ ~~Celebrations Passport®, Celebrations Rewards® and Celebrations Reminders® are designed to deepen relationships with customers across all brands.~~ 1-800-FLOWERS.COM, Inc. was named ~~to the Stores® 2017 Hot 100 Retailers List by the National Retail Federation and received the Gold award~~ in the “Best Artificial Intelligence” category at the Data & Marketing Association’s 2017 International ECHO Awards for the Company’s groundbreaking implementation of an artificial intelligence-powered online gift concierge, GWYN.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 28, 2020.
Acquisition of PersonalizationMall

On ~~May 30, 2017,~~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 ~~sale~~$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 ~~outstanding equity~~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 ~~Fannie May Confections Brands, Inc., including its subsidiaries, Fannie May Confections, Inc. and Harry London Candies, Inc. (“Fannie May”)~~the existing Revolver commitments from $200.0 million to ~~Ferrero International S.A.,~~$250.0 million, (ii) establish a ~~Luxembourg corporation (“Ferrero”~~new tranche of term A-1 loans in an aggregate principal amount of $100.0 million (the “New Term Loan”), ~~for a total consideration of $115.0 million in cash, subject to adjustment for seasonal working capital. The~~(iii) increase the working capital ~~adjustment was finalized in August 2017, resulting in an $11.4 million reduction~~sublimit with respect to the ~~purchase price.~~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 ~~resulting gain~~$100.0 million proceeds of the New Term Loan were used to repay the $95.0 million borrowing that had been drawn on ~~sale~~its existing Revolver to finance the acquisition, as well as financing fees of ~~$14.6~~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 ~~included within “Other (income) expense, net”~~significant uncertainty in the ~~Company’s consolidated statements~~overall consumer environment due to the COVID-19 crisis, through the first four weeks of ~~income in the fourth~~our third quarter of fiscal year ~~2017.~~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 ~~Company~~scale and ~~Ferrero also entered into a transition services agreement whereby~~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 ~~provide certain post-closing services~~allow it to ~~Ferrero and Fannie May for a period~~successfully navigate this challenging environment. We remain focused on three key elements of ~~approximately 18 months, related to the~~our business ~~of Fannie May, and a commercial agreement with respect to the distribution of certain Ferrero and Fannie May products.~~strategy:

~~Operating results of Fannie May are reflected in the Company’s consolidated financial statements through May 30, 2017, the date of its disposition, within its Gourmet Food & Gift Baskets segment. See~~ ~~Segment Information~~ ~~and~~ ~~Results of Operations~~ ~~below for a comparison of fiscal 2018 results to fiscal 2017, adjusted to exclude the operations of Fannie May.~~

●
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.

16
14
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 Operationssections 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, as these terms are used interchangeably.~~below.

~~Adjusted~~ ~~revenues~~
~~Adjusted~~ ~~revenues measure GAAP revenues adjusted for the effects of acquisitions, dispositions, and other items affecting period to period comparability. See~~ ~~Segment~~ ~~Information~~ f~~or details on how adjusted revenues were calculated for each period presented.~~
We believe that this measure provides management and investors with a more complete understanding of underlying revenue trends of established, ongoing operations by excluding the effect of activities which are subject to volatility and can obscure underlying trends.
~~Management recognizes that the term "~~adjusted revenues" may be interpreted differently by other companies and under different circumstances. Although this may influence comparability of absolute percentage growth from company to company, we believe that these measures are useful in assessing trends of the Company and its segments, and may therefore be a useful tool in assessing period-to-period performance trends.
~~Adjusted gross profit and adjusted gross profit percentage~~
~~Adjusted gross profit measures~~ GAAP revenues less cost of revenues, adjusted for the effects of acquisitions, dispositions, and other items affecting period to period comparability. Adjusted gross profit percentage measures adjusted gross profit divided by adjusted revenues. See ~~Segment~~ ~~Information~~ ~~for details on how adjusted gross profit and adjusted gross profit percentage were calculated for each period presented.~~
~~We believe that this measure provides management and investors with a more complete understanding of underlying~~ ~~gross profit trends of established, ongoing operations by excluding the effect of activities which are subject to volatility and can obscure underlying trends.~~
~~Management recognizes that the term "~~adjusted gross profit" or “adjusted gross profit percentage” may be interpreted differently by other companies and under different circumstances. Although this interpretation may vary from company to company, we believe that these consistently applied measures are useful in assessing trends of the Company and its segments, and may therefore be a useful tool in assessing period-to-period performance trends.
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~~stock-based compensation, ~~Non-Qualified~~NQDC Plan ~~Investment appreciation/~~investment appreciation/depreciation, and for certain items affecting period to period comparability. See Segment Information orfor 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 ~~used~~ 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.

17
~~Table of Contents~~
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 ~~segment~~ contribution margin adjusted for certain items affecting ~~period to period~~period-to-period comparability. See Segment Information for details on how segment contribution margin ~~and comparable segment contribution margin were~~was calculated for each period presented.

When viewed together with our G~~AAP~~GAAP results, we believe segment contribution margin and ~~comparable~~adjusted segment contribution margin provide management and users of the financial statements meaningful information about the performance of our business segments.

Segment contribution margin and ~~comparable~~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
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 Segment Information b~~elow~~ 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.

18
~~Table of Contents~~
Segment Information ~~Information~~

The following table presents the net ~~revenues,~~revenues, gross profit and segment contribution margin from each of the Company’s business segments, as well as consolidated EBITDA, ~~Adjusted EBITDA~~ and adjusted ~~net income.~~

Three Months Ended

December 31, 2017

January 1, 2017

Exclude Operating Results of
Fannie May

Severance
Costs

Adjusted
(non-GAAP)
December 31, 2017

Adjusted
(non-GAAP)
% Change

(dollars in thousands)
Net revenues:

1-800-Flowers.com Consumer Floral
$ 100,064 $ 97,808 $ - $ - $ 97,808 2.3 %
BloomNet Wire Service
20,375 20,502 20,502 -0.6 %
Gourmet Food & Gift Baskets
405,964 436,870 (41,199 ) - 395,671 2.6 %
Corporate
317 316 316 0.3 %
Intercompany eliminations
(627 ) (943 ) 344 - (599 ) -4.7 %
Total net revenues
$ 526,093 $ 554,553 $ (40,855 ) $ - $ 513,698 2.4 %

Gross profit:

1-800-Flowers.com Consumer Floral
$ 38,844 $ 40,300 - - $ 40,300 -3.6 %
38.8 % 41.2 % 41.2 %
- -
BloomNet Wire Service
11,693 12,310 12,310 -5.0 %
57.4 % 60.0 % - - 60.0 %

Gourmet Food & Gift Baskets
184,468 204,185 (15,939 ) - 188,246 -2.0 %
45.4 % 46.7 % 47.6 %

Corporate (a)
254 199 - - 199 27.6 %
80.1 % 63.0 % 63.0 %

Total gross profit
$ 235,259 $ 256,994 $ (15,939 ) $ - $ 241,055 -2.4 %
44.7 % 46.3 % 46.9 %

EBITDA (non-GAAP):

Segment Contribution Margin (non-GAAP):

1-800-Flowers.com Consumer Floral
$ 10,791 $ 13,128 $ - $ - $ 13,128 -17.8 %
BloomNet Wire Service
7,692 8,189 - - 8,189 -6.1 %
Gourmet Food & Gift Baskets
93,496 104,624 (6,219 ) 79 98,484 -5.1 %
Segment Contribution Margin Subtotal
111,979 125,941 (6,219 ) 79 119,801 -6.5 %
Corporate (a)
(18,836 ) (20,223 ) 356 - (19,867 ) 5.2 %
EBITDA (non-GAAP)
93,143 105,718 (5,863 ) 79 99,934 -6.8 %
Add: Stock-based compensation
968 1,724 - - 1,724 -43.9 %
Add: Comp charge related to NQ Plan Investment Appreciation
364 20 - - 20 1720.0 %
Adjusted EBITDA (non-GAAP)
$ 94,475 $ 107,462 $ (5,863 ) $ 79 $ 101,678 -7.1 %
19
~~Table of Contents~~

Six Months Ended

December 31, 2017

January 1, 2017

Exclude Operating
Results of
Fannie May

Severance Costs

Adjusted
(non-GAAP)
December 31, 2017

Adjusted
(non-GAAP)
% Change

(dollars in thousands)
Net revenues:

1-800-Flowers.com Consumer Floral
$ 176,674 $ 173,023 $ - $ - $ 173,023 2.1 %
BloomNet Wire Service
40,139 41,466 - - 41,466 -3.2 %
Gourmet Food & Gift Baskets
466,950 506,684 (52,573 ) - 454,111 2.8 %
Corporate
587 579 - - 579 1.4 %
Intercompany eliminations
(908 ) (1,370 ) 514 - (856 ) -6.0 %
Total net revenues
$ 683,442 $ 720,382 $ (52,059 ) $ - $ 668,323 2.3 %

Gross profit:

1-800-Flowers.com Consumer Floral
$ 69,578 $ 70,799 $ - $ - $ 70,799 -1.7 %
39.4 % 40.9 % 40.9 %

BloomNet Wire Service
22,751 24,104 - - 24,104 -5.6 %
56.7 % 58.1 % 58.1 %

Gourmet Food & Gift Baskets
209,620 232,936 (20,425 ) - 212,511 -1.4 %
44.9 % 46.0 % 46.8 %

Corporate (a)
588 542 - - 542 8.5 %
100.2 % 93.6 % 93.6 %

Total gross profit
$ 302,537 $ 328,381 $ (20,425 ) $ - $ 307,956 -1.8 %
44.3 % 45.6 % 46.1 %

EBITDA (non-GAAP):

Segment Contribution Margin (non-GAAP):

1-800-Flowers.com Consumer Floral
$ 17,762 $ 21,309 $ - $ - $ 21,309 -16.6 %
BloomNet Wire Service
14,393 15,468 - - 15,468 -6.9 %
Gourmet Food & Gift Baskets
88,509 95,320 (3,018 ) 103 92,405 -4.2 %
Segment Contribution Margin Subtotal
120,664 132,097 (3,018 ) 103 129,182 -6.6 %
Corporate (a)
(39,040 ) (41,491 ) 763 - (40,728 ) 4.1 %
EBITDA (non-GAAP)
81,624 90,606 (2,255 ) 103 88,454 -7.7 %
Add: Stock-based compensation
2,069 3,498 - - 3,498 -40.9 %
Add: Comp charge related to NQ Plan Investment Appreciation
639 282 - - 282 -126.6 %
Adjusted EBITDA (non-GAAP)
$ 84,332 $ 94,386 $ (2,255 ) $ 103 $ 92,234 -8.6 %
EBITDA.

20
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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 %

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

Three Months Ended

Years Ended

December 31, 2017

January 1, 2017

December 31, 2017

January 1, 2017

(in thousands, except per share data)

Net income
$ 70,699 $ 62,929 $ 57,477 $ 47,158
Adjustments to reconcile net income to adjusted net income (non-GAAP)

Deduct: Fannie May operating results
- 5,047 - 629
Deduct: U.S. tax reform impact on deferred taxes (b)
12,158 - 12,158 -
Add back: Severance costs
- 79 - 103
Add back: Income tax expense impact on Fannie May operating results and severance adjustments
- 1,656 - 171
Adjusted net income (non-GAAP)
$ 58,541 $ 59,617 $ 45,319 $ 46,803

Basic and diluted net income per common share

Basic
$ 1.09 $ 0.97 $ 0.89 $ 0.72
Diluted
$ 1.06 $ 0.93 $ 0.86 $ 0.70

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

Basic
$ 0.91 $ 0.91 $ 0.70 $ 0.72
Diluted
$ 0.88 $ 0.88 $ 0.68 $ 0.69

Weighted average shares used in the calculation of net income and adjusted net income (non-GAAP) per common share

Basic
64,601 65,172 64,778 65,112
Diluted
66,782 67,754 67,037 67,778
~~Rec~~~~onciliation of net income to a~~~~djusted EBITDA (non-GAAP) (c~~):

Three Months Ended

Years Ended

December 31, 2017
January 1, 2017
December 31, 2017
January 1, 2017
(in thousands)

Net income
$ 70,699 $ 62,929 $ 57,477 $ 47,158
Add:

Interest expense, net
1,140 2,155 1,911 3,456
Depreciation and amortization
8,677 9,167 16,761 17,164
Income tax expense
12,627 31,467 5,475 22,828
EBITDA (non-GAAP)
93,143 105,718 81,624 90,606
Add:

Severance costs
- 79 - 103
Compensation charge related to NQ plan investment appreciation
364 20 639 282
Stock-based compensation
968 1,724 2,069 3,498
Less:

Fannie May EBITDA
- 5,863 - 2,255
Adjusted EBITDA (non-GAAP)
$ 94,475 $ 101,678 $ 84,332 $ 92,234
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.
b)
~~The adjustment to deduct~~ the impact of U.S. tax reform from Net Income includes the impact of the re-valuation of the Company’s deferred tax liability of $12.2 million, or $0.18 per diluted share, and does not include the ongoing impact of the lower federal corporate tax rate of $3.7 million, or $0.06 per diluted share.
c)
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.

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 %

21
16
Table of Contents

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 ~~Operatio~~nsOperations

Net ~~Revenues~~revenues

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

December 31, 2017

January 1, 2017

% Change

December 31, 2017

January 1, 2017

% 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
$ 424,132 $ 420,594 0.8
%
$ 532,903 $ 527,678 1.0
%
$ 777,810 $ 487,084 59.7
%
$ 1,016,673 $ 616,134 65.0
%
Other
101,961 133,959 -23.9
%
150,539 192,704 -21.9
%
99,446 118,558 -16.1
%
144,355 176,771 -18.3
%
Total net revenues
$ 526,093 $ 554,553 -5.1
%
$ 683,442 $ 720,382 -5.1
%
$ 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 ~~decreased 5.1%~~increased 44.8% and 46.4% during~~both~~ the three and six months ended December ~~31, 2017,~~27, 2020, respectively, compared to the same periods of the prior year, due to higher revenues across our three business segments (+24.7% and +28.4% on a pro-forma basis for the ~~disposition~~three and six months ended December 27, 2020,compared to the respective prior year periods, excluding the impact of ~~Fannie May~~PersonalizationMall, which was acquired on ~~May 30, 2017. On a comparable basis, adjusting fiscal 2017 net~~August 3, 2020,and is included in our Consumer Floral & Gifts segment)as the 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 caused by the pandemic.
17
Table of Contents
Disaggregated revenue by channel follows:

Three Months Ended

Three 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
$ 303,275 $ - $ 474,535 $ 777,810 $ 113,858 $ - $ 373,226 $ 487,084
Retail
1,210 - 4,088 5,298 1,082 - 23,120 24,202
Wholesale
9,150 59,642 68,792 - 7,270 68,238 75,508
BloomNet services
24,901 - 24,901 - 18,452 - 18,452
Other
872 - - 872 776 - - 776
Corporate
- - 135 - - - 165
Eliminations
- - (552
)
- - - (545
)
Net revenues
$ 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 $ - $ 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 ~~to exclude the revenues of Fannie May, net revenues~~(combined online and telephonic) increased ~~2.4%~~by 59.7% and ~~2.3%~~65.0% during the three and six months ended December 31, 2017, respectively, compared to the same periods of the prior year. This increase was due to growth within the Consumer Floral and Gourmet Foods & Gift Baskets segment, attributable to the Harry & David and 1-800-Baskets/DesignPac brands, partially offset by slightly lower revenues in the Company’s BloomNet segment. Comparable revenue growth was negatively impacted by a temporary disruption in operations at our Cheryl’s brand, related to the recent implementation of a new production and warehouse management system, which, in turn, led to the brand’s decision to stop taking orders eight days prior to the Christmas holiday. As a result, the Company estimates that it had to forego approximately $4.0 million in holiday revenues during the three and six months ended December 31, 2017. In addition, revenues during the six months ended December 31, 2017 were negatively impacted, by approximately $1.1 million, due to hurricanes Harvey and Irma.
~~E-commerce revenues (combined online and telephonic) increased by 0.8% and 1.0% during the three and six months ended December 31, 2017,~~ 27, 2020, respectively, compared to the same periods of the prior year, as a result of growth ~~within~~within: (i) the ~~Consumer Floral and~~ Gourmet Foods & Gift Baskets ~~segments. On a comparable basis, adjusting fiscal 2017 e-commerce revenues to exclude~~segment of 27.1% and 34.0%, and (ii) the Consumer Floral & Gifts segment of 166.4% and 128.2%, which includes the revenues of ~~Fannie May, e-commerce revenues increased 3.1% and 2.9% during~~PersonalizationMall, since its date of acquisition on August 3, 2020. During the three and six months ended December ~~31, 2017,~~27, 2020, respectively, ~~compared to the same periods of the prior year. During the three months ended December 31, 2017,~~ the Company fulfilled approximately ~~5.205,000~~9.9 and 13.2 million orders through its e-commerce sales channels (online and telephonic sales), an increase of 70.7% and 75.5% compared to ~~approximately 5,263,000 (5,020,000 adjusted to exclude Fannie May orders in fiscal 2017) during~~ the same period of the prior year, while average order value ~~increased~~decreased 6.5% and 6.0%, to ~~$81.44 during the three months ended December 31, 2017, from $79.92 ($81.92 adjusted to exclude Fannie May~~$78.89 and $76.83, respectively. The decrease in average order value ~~in fiscal 2017) during~~was attributable to the ~~same period~~impact of the prior year. During the six months ended December 31, 2017, the Company fulfilled approximately 6,725,000 orders through its e-commerce sales channels (online and telephonic sales), compared to approximately 6,780,000 (6,526,000 adjusted to exclude Fannie May orders in fiscal 2017) during the same periodmix of ~~the prior year, while average~~PersonalizationMall order value increased to $79.20 during the six months ended December 31, 2017, from $77.83 ($79.36 adjusted to exclude Fannie May average order value in fiscal 2017) during the same period of the prior year.volumes.

Other revenues are comprised of the ~~Company~~’sCompany’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 and~~Foods & Gift Baskets segments. Other revenues decreased by ~~23.9%~~16.1% and ~~21.9%~~18.3% during the three and six months ended December ~~31, 2017, respectively,~~27, 2020, compared to the same periods of the prior year, ~~primarily~~due to: (i) wholesale/retail sales channel declines within the Gourmet Foods & Gift Baskets segment, as ~~a result of~~big-box retail store customers reduced order volumes for the Fannie May disposition during May 2017. On a comparable basis, adjusting fiscal 2017 other revenues to exclude the revenues of Fannie May, other revenues decreased 0.5% during the three months ended December 31, 2017, and increased 0.1% during the six months ended December 31, 2017, comparedholiday season due to the ~~respective prior year periods.~~pandemic, and (ii) the closure of Harry and David retail store operations in the fourth quarter of fiscal 2020, partially offset by an increase in BloomNet segment revenues.

~~The 1-800-Flowers.com~~ Revenue by segment:
Consumer Floral & Gifts – this segment, ~~includes~~which historically has consisted primarily of the operations of the 1-800-Flowers.com brand, ~~which~~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 ~~2.3%~~163.9% and ~~2.1%,~~126.1% during the three and six months ended December ~~31, 2017, in comparison~~27, 2020, compared to the same periods of the prior year, ~~due to increased demand~~reflecting: (i) the marketing and merchandising investments made in our flagship brand, which have driven ~~by merchandising~~our growth and ~~marketing efforts,~~market share gains that began in the second half of Fiscal 2018, continued through Fiscal 2020, and accelerated with the start of the pandemic, as well as ~~an increase in promotional activity in order to expand market share. Revenues~~(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 ~~31, 2017 were negatively impacted, by approximately $0.8 million, due to hurricanes Harvey and Irma.~~27, 2020, respectively.

~~The~~ BloomNet ~~Wire Service~~- revenues in this segment ~~includes revenues~~are derived from membership fees, as well as other product and service offerings to florists. Net revenues ~~decreased 0.6%~~increased 32.4% and ~~3.2%~~30.5% during the three and six months ended December ~~31, 2017,~~27, 2020, respectively, compared to thethe same periods of the prior year, primarily due to ~~lower~~increased: (i) settlement processing revenues, due to the higher florist-to-florist order volume, (ii)transaction, reciprocity and membership ~~transaction~~ fees, driven primarily by increased order volume sent through the network, and ~~ancillary revenues resulting from a decline in network shop count, partially offset by higher~~(iii) favorable wholesale product revenues. During the six months ended December 31, 2017, these decreases were exacerbated by the impact of hurricanes Harvey and Irma, as BloomNet provided financial aid to florists in the affected areas, and waived approximately $0.2 million of membership fees.demand.

~~The~~ Gourmet ~~Food~~Foods & Gift Baskets – this segment includes the operations of Harry & David, ~~Wolferman’s, Stockyards,~~Wolferman’s, Stock Yards, Cheryl’s ~~Fannie May (through the date of its disposition on May 30, 2017),~~Cookies, The Popcorn Factory, 1-800-Baskets/DesignPac, and ~~1-800-Baskets/DesignPac.~~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 ~~Cheryl’s~~ and ~~Fannie May (through the date of its disposition)~~Cheryl’s brand names, as well as wholesale operations. Net revenues ~~decreased 7.1%~~increased 15.9% and ~~7.8%~~17.2% during the three and six months ended December ~~31, 2017,~~27, 2020, respectively, compared to the same periods of the prior year, due to favorable e-commerce revenues across the ~~disposition~~segment, partially offset by reduced wholesale and retail volumes. E-commerce revenue growth of ~~Fannie May on May 30, 2017. On a comparable basis, adjusting fiscal year 2017 revenues to exclude Fannie May, net revenues increased 2.6%~~27.1% and ~~2.8%~~34.0% during the three and six months ended December ~~31, 2017,~~27, 2020, respectively, ~~compared to~~was the ~~same periods~~result of increased demand during the Christmas holiday period, as well as increased penetration of “everyday” volume within the segment, which benefitted from the impact of the ~~prior year due to growth by the Harry & David~~COVID-19 pandemic as product offerings, convenience, and ~~1-800-Baskets.com consumer~~brand sentiment resonated with customers. Wholesale/retail channel revenues declined 30.2% and wholesale channel brands. Comparable segment growth was attributable to several initiatives implemented during the second half of fiscal 2017, including: (i) the Company’s successful efforts to grow the “everyday” volume of its Gourmet Foods & Gift Baskets brands through expanded birthday and sympathy merchandise, (ii) the modernization of the Harry & David brand, which focused on developing merchandising assortments and digital marketing programs that helped to broaden the demographic reach of the brand, and, (ii) the launch of the Simply Chocolates product line, which is managed by 1-800-Baskets. As noted above, Cheryl’s revenue decrease, in comparison to the prior year, was due to the Company’s decision to suspend order taking as a result of operational issues experienced during the weeks leading up to the Christmas holiday. As a result, the Company estimates that it had to forego approximately $4.0 million in holiday revenues39.2%, during the three and six months ended December ~~31, 2017. In addition, revenues during the six months ended December 31, 2017 were negatively impacted, by approximately $0.2 million,~~27, 2020, respectively, as big-box retail store customers reduced order volumes due to ~~hurricanes Harvey~~the pandemic and ~~Irma. The operational issues at Cheryl’s have been addressed,~~as a result of the closure of the Harry and ~~business has returned to its normal pace.~~
David retail store operations in the fourth quarter of fiscal 2020.

22
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Table of Contents

Gross ~~Profit~~profit

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

December 31, 2017

January 1, 2017

% Change

December 31, 2017

January 1, 2017

% Change

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

(dollars in thousands)

Gross profit
$ 235,259 $ 256,994 -8.5
%
$ 302,537 $ 328,381 -7.9
%
$ 398,246 $ 269,172 48.0
%
$ 513,726 $ 345,318 48.8
%
Gross profit %
44.7
%
46.3
%
44.3
%
45.6
%
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 ~~include~~includes labor and facility costs related to direct-to-consumer and wholesale production ~~operations.~~operations, as well as payments made to sending florists related to order volume sent through the Company’s BloomNet network.

Gross profit ~~decreased 8.5%~~increased 48.0% and ~~7.9%~~48.8% during the three and six months ended December ~~31, 2017,~~27, 2020, respectively, ~~in comparison~~compared to the same periods of the prior year, ~~while gross~~as a result of the increase in revenues noted above. Gross profit percentage ~~decreased 160~~increased 100 basis points and ~~130~~60 basis points, during the three and six months ended December ~~31, 2017,~~27, 2020, respectively, ~~in comparison~~compared to the same periods of the prior ~~year.~~year, as higher margins in the Consumer Floral & Gifts (primarily due to the acquisition of PersonalizationMall, which carries higher margins) and Gourmet Foods & Gift Basket segments were offset by lower margins in the BloomNet segment. On a ~~comparable~~pro-forma basis, ~~adjusting prior year~~excluding the impact of PersonalizationMall, gross ~~profit to exclude Fannie May, which~~margin percentage was ~~disposed of on May 30, 2017, gross profit decreased 2.4%~~44.4% and ~~1.8%~~43.2% during the three and six months ended December ~~31, 2017,~~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, ~~in comparison~~compared to the same periods of the prior year, ~~while~~as a result of the revenue increases noted above and increases in gross ~~profit~~margin percentage ~~decreased 220 and 180~~of 550 basis points, to 44.0% and 380 basis points, to 42.8%, during the ~~same periods.~~respective three and six months periods ended December 27, 2020. The ~~lower comparable~~increase in gross ~~profit,~~margin percentage was primarily attributable to the acquisition of PersonalizationMall, which carries higher margins, as well as pricing initiatives and ~~gross profit percentage, primarily reflects~~reductions in promotional activity after the onset of COVID-19, partially offset by higher product and delivery costs associated with the pandemic. On a pro-forma basis, excluding the impact of ~~the operational issue at the Company’s Cheryl’s Cookies brand, as well as increased transportation costs in the Gourmet Food~~PersonalizationMall, acquired on August 3, 2020, gross margin percentage was 39.2% and ~~Gift Baskets segment, and increased promotional activity within the Consumer Floral segment in order to increase market share.~~
~~The 1-800-Flowers.com Consumer Floral segment gross profit decreased by 3.6% and 1.7%~~39.1% during the three and six months ended December ~~31, 2017,~~ respectively, in comparison to the same period of the prior year, due to a decrease in gross profit percentage of 240 and 150 basis points to 38.8% and 39.4%, respectively, partially offset by the aforementioned revenue growth. The lower gross profit percentages reflect an increase in promotional activity initiated to extend the market share of the 1-800-Flowers brand, as well as an increase in Passport free shipping participation, which has improved customer loyalty and purchase frequency.27, 2020, respectively.

BloomNet ~~Wire Service~~ segment~~’s gross~~ - Gross profit ~~decreased~~increased by ~~5.0%~~27.8% and ~~5.6%~~21.2% during the three and six months ended December ~~31, 2017,~~27, 2020, respectively, ~~in comparison~~compared to the same ~~period~~periods of the prior year, due to the ~~decrease~~increase in ~~revenues~~revenue noted above, ~~as well as decreases~~partially offset by a decline in gross ~~profit~~margin percentage of ~~260 and 140~~180 basis points, to ~~57.4%~~49.4%, and ~~56.7%, respectively, The lower gross profit percentages are~~370 basis points, to 47.4% during the respective three months ended and six months ended December 27, 2020, due to ~~sales mix, with a decline in~~ higher ~~margin membership~~rebates (higher florist-to-florist volume) and ~~related services, offset by an increase in lower margin~~unfavorable wholesale product ~~sales.~~margins due to mix, and higher shipping and product costs.

~~The~~ Gourmet ~~Food~~Foods & Gift Baskets segment ~~gross~~ - Gross profit ~~decreased~~increased by ~~9.7%~~16.8% and ~~10.0%~~18.2% during the three and six months ended December ~~31, 2017,~~27, 2020, respectively, ~~in comparison~~compared to the same periods of the prior year, ~~while~~due to the revenue increase noted above, as well as an increase in gross profit percentage ~~decreased 130 and 110~~of 40 basis points, to ~~45.4%~~45.9%, and ~~44.9%, over the same respective periods. On a comparable~~40 basis ~~adjusting prior year gross profit~~points, to ~~exclude Fannie May, which was disposed of on May 30, 2017, gross profit decreased 2.0% and 1.4%~~44.9% during the three and six months ended December ~~31, 2017, respectively,~~27, 2020, respectively. The improvement in ~~comparison~~gross margin percentage was primarily attributable to ~~the same periods of the prior year, while gross profit percentage decreased 220~~lower promotions, merchandise assortment, and 190 basis points to 45.4% and 44.9%, over the same respective periods. The lower comparable gross profit and gross profit percentage primarily reflects the impact of the operational issue at the Company’s Cheryl’s Cookies brand, which negatively impacted gross profitchannel mix, partially offset by approximately $4.0 million as a result of increased labor, expedited shipping, expiring product and higher customer credits. In addition, although revenue growth provided for improved gross profit at Harry & David, higher transportation costs ~~at Harry & David~~due to holiday surcharges and ~~our wholesale baskets brands negatively impacted gross profit percentage.~~
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~~Table of Contents~~
expedited ship methods, as well as increased labor costs.

Marketing and ~~Sales Expense~~sales expense

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

December 31, 2017

January 1, 2017

% Change

December 31, 2017

January 1, 2017

% Change

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

(dollars in thousands)

Marketing and sales
$ 113,771 $ 119,876 -5.1
%
$ 163,493 $ 174,954 -6.6
%
$ 194,696 $ 127,404 52.8
%
$ 274,981 $ 184,243 49.2
%
Percentage of net revenues
21.6
%
21.6
%
23.9
%
24.3
%
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~~’sCompany’s departments engaged in marketing, selling and merchandising activities.

Marketing and sales expense ~~decreased 5.1%~~increased 52.8% and ~~6.6%~~49.2% during the three and six months ended December ~~31, 2017,~~27, 2020, respectively, compared to the same periods of the prior year,~~, due~~ as a result of marketing initiatives designed to accelerate revenue growth and capture market share within both the ~~disposition~~Gourmet Foods & Gift Baskets segment, and the Consumer Floral & Gifts segment, which includes the incremental marketing costs of ~~Fannie May~~PersonalizationMall, which was acquired on ~~May 30, 2017.~~August 3, 2020. On a ~~comparable~~pro-forma basis, ~~adjusting prior year~~excluding the impact of PersonalizationMall, marketing and sales ~~expense to exclude Fannie May’s expenditures, marketing~~as a percentage of net revenues, was 21.4% and ~~sales expense increased 1.8%~~23.1% during ~~both~~ the three and six months ended December ~~31, 2017,~~27,2020, respectively, compared to 21.0% and 23.2% in ~~comparison to~~ the same periods of the prior year, ~~due~~reflecting the operational efficiencies and platform leverage attributable to ~~increased marketing spend within~~ the ~~Consumer Floral and Gourmet Foods & Gift Baskets segments, commensurate with~~ revenue growth, including the Company’s efforts to test digital marketing strategies during the holiday season for applications throughout the remainder of the fiscal year. These increases were partially offset by a reduction in performance based bonuses.growth.
Technology and ~~Development Expense~~development expense

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

December 31, 2017

January 1, 2017

% Change

January 1, 2017

January 1, 2017

% Change

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

(dollars in thousands)

Technology and development
$ 9,175 $ 9,849 -6.8
%
$ 18,845 $ 19,337 -2.5
%
$ 14,053 $ 11,733 19.8
%
$ 25,656 $ 22,536 13.8
%
Percentage of net revenues
1.7
%
1.8
%
2.8
%
2.7
%
1.6
%
1.9
%
2.2
%
2.8
%

Technology and development expense consists primarily of payroll and operating expenses of the ~~Company~~’sCompany’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 decreased 6.8%~~expense increased 19.8% and ~~2.5%~~13.8% during the three and six months ended December ~~31, 2017,~~27, 2020, respectively, compared to the same ~~period~~periods of the prior year, primarily due to ~~favorable~~increased labor, hosting ~~costs and labor expenses resulting from a reduction in performance based bonuses, partially offset by increased license~~ and maintenance costs ~~related~~incurred to ~~security and order processing platforms.~~support the Company’s technology platform, in addition to the incremental technology costs associated with PersonalizationMall, which was acquired on August 3, 2020.

24
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Table of Contents

General and ~~Administrative Expense~~administrative expense

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

December 31, 2017

January 1, 2017

% Change

December 31, 2017

January 1, 2017

% Change

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

(dollars in thousands)

General and administrative
$ 19,170 $ 21,551 -11.0
%
$ 38,575 $ 43,484 -11.3
%
$ 30,835 $ 22,634 36.2
%
$ 59,048 $ 44,156 33.7
%
Percentage of net revenues
3.6 % 3.9
%
5.6
%
6.0
%
3.5
%
3.7
%
5.1
%
5.6
%

General and administrative expense consists of payroll and other expenses in support of the ~~Company~~’sCompany’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 decreased 11.0%~~expenses increased 36.2% and ~~11.3%~~33.7% during the three and six months ended December ~~31, 2017,~~27, 2020, respectively, compared ~~to the same period of the prior year, primarily due to the disposition of Fannie May on May 30, 2017~~. On a comparable basis, adjusting prior year general and administrative expense to exclude Fannie May’s expenditures, general and administrative expense decreased 3.9% and 3.7% during the respective three and six months ended December 31, 2017, in comparison to the same periods of the prior year, due to ~~reductions in travel,~~incremental costs related to: (i) PersonalizationMall (including transaction and litigation related costs), (ii) higher labor ~~resulting from a reduction in~~costs due to annual merit increases and performance ~~based~~related bonuses ~~partially offset by an increase in~~as well as investment earnings on the ~~value of Non-Qualified Deferred Compensation~~Company’s NQDC Plan ~~investments (increase offset in~~ assets (offset within Other (income) ~~expense net~~ ~~line item on the financials statement – see below),~~expenses noted below, and ~~higher~~(iii) incremental health ~~insurance costs.~~and safety-related COVID-19 related expenses.

Depreciation and amortization expense ~~and Amortization Expense~~

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

December 31, 2017

January 1, 2017

% Change

December 31, 2017

January 1, 2017

% Change

December 27, 2020

December 29, 2019

% Change

December 27, 2020

December 29, 2019

% Change

(dollars in thousands)

(dollars in thousands)

Depreciation and amortization
$ 8,677 $ 9,167 -5.3
%
$ 16,761 $ 17,164 -2.3
%
$ 11,060 $ 7,830 41.3
%
$ 19,900 $ 15,465 28.7
%
Percentage of net revenues
1.6
%
1.7
%
2.5
%
2.4
%
1.3
%
1.3
%
1.7
%
2.0
%

Depreciation and amortization expense ~~for the three months ended December 31, 2017 decreased 5.3%~~ expenses increased 41.3% and 2.3%, in comparison to the same period of the prior year, due to the disposition of Fannie May. On a comparable basis, adjusting prior year depreciation and amortization expense to exclude Fannie May, depreciation and amortization expense increased 3.9% and 7.9%28.7% during the ~~respective~~ three and six months ended December ~~31, 2017, in comparison~~27, 2020, respectively, compared to the same periods of the prior year, primarily due to the incremental depreciation and customer list amortization associated with PersonalizationMall, as ~~a result of~~well as recent ~~shorter-lived~~short-lived IT ~~capital expenditures.~~
related ecommerce/platform enhancements.

Interest ~~Expense,~~(income) expense, net

Three Months Ended

Six Months Ended

December 31, 2017

January 1, 2017

% Change

December 31, 2017

January 1, 2017

% Change

(dollars in thousands)

Interest expense, net
$ 1,226 $ 2,154 -43.1
%
$ 2,257 $ 3,605 -37.4
%

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~~’sCompany’s credit facility (See Note 8 - Debt,, in Item 1.1. for ~~details regarding the 2016 Amended Credit Facility)~~details), net of income earned on the Company’s available cash balances.

Interest expense, net ~~decreased 43.1%~~increased 95.6% and ~~37.4%~~87.8% during the three and six months ended December ~~31, 2017 in comparison~~27, 2020, respectively, compared to the same periods of the prior year, ~~as a result~~ due to the incremental interest expense associated with the New Term Loan, which was used to partially finance the acquisition of ~~scheduled repayment of term loan borrowings~~PersonalizationMall, and ~~funding fiscal 2018 working capital requirements primarily through~~lower interest income on the ~~use of~~Company’s outstanding cash ~~on hand from the sale of Fannie May, in comparison~~balances due to ~~fiscal 2017, when the Company funded working capital requirements through its revolving credit facility.~~
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~~Table of Contents~~
lower interest rates.

Other (income) expense, net

Three Months Ended

Six Months Ended

December 31, 2017

January 1, 2017

% Change

December 31, 2017

January 1, 2017

% Change

(dollars in thousands)

Other (income) expense, net
$ (86
)
$ 1 8,700
%
$ (346
)
$ (149
)
132.2
%

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 ~~31, 2017~~27, 2020, respectively, consists primarily of investment ~~earnings of~~gain on the Company’s ~~Non-Qualified Deferred Compensation~~NQDC Plan ~~assets, partially offset by a $0.2 million impairment related to the Company’s equity method investment in Flores Online (see~~ ~~Note 7 - Investmentsabove).~~
~~Other (income) expense, net for the three and six months ended January 1, 2017 primarily consists of~~ investment earnings of the Company’s Non-Qualified Deferred Compensation Plan assets for both the three and six months ended January 1, 2017, partially offset by a decrease in the Company’s equity interest in Flores Online of $0.1 million for both the three and six months ended January 1, 2017.assets.

Income Taxes
The Company recorded an income tax expense of ~~$12.6~~$34.3 million and ~~$5.5~~$30.5 million ~~respectively,~~ during the three and six months ended December ~~31, 2017~~27, 2020, respectively, and ~~income tax expense of $31.5~~$25.4 million and ~~$22.8~~$19.3 million ~~respectively,~~ during the three and six months ended ~~January 1, 2017.~~December 29, 2019, respectively. The Company’s effective tax rate for the three and six months ended December ~~31, 2017~~27, 2020 was ~~15.2%~~23.2% and ~~8.7%~~22.7%, respectively, compared to ~~33.3%~~25.5% and ~~32.6%~~24.7% in the same periods of the prior year. The effective rates for fiscal ~~2018 were impacted by changes associated with the Tax Act (see~~ ~~Note 1 -Accounting Policies~~ in Item 1. above). During the quarter ended December 31, 2017, the Company recognized a benefit of $15.9 million, or $0.24 per diluted share related to the impact of the Tax Act, consisting of a discrete tax benefit of $12.2 million, or $0.18 per diluted share, reflecting a revaluation of deferred tax liabilities at the lower U.S. federal statutory rate of 21%,year 2021 and ~~a benefit of $3.7 million, or $0.06 per diluted share, reflecting the Company’s lower transitional federal tax rate in~~ fiscal 2018 of 28.0 percent. In addition, fiscal 2018 effective rates were impacted by state income taxes, which were partially offset by various permanent differences and tax credits. The effective rates for fiscal 2017year 2020 differed from the U.S. federal statutory rate of 21% due to state income taxes and nondeductible expenses for executive compensation, which were ~~more than~~partially offset by various permanent differences and tax credits, including excess tax benefits ~~on stock based compensation as a result~~from stock-based compensation.
20
Table of the Company’s adoption of ASU 2016-09. At December 31, 2017, the Company has an unrecognized tax benefit, including an immaterial amount of accrued interest and penalties, of approximately $0.4 million. The Company believes that no significant unrecognized tax positions will be resolved over the next twelve months.Contents

Liquidity and Capital Resources
Liquidity and borrowings

The Company's principal sources of liquidity are cash on hand, cash flows generated from operations and ~~the~~ borrowings available under the ~~2016~~2020 Credit ~~Facility~~Agreement (see Note 8 - Debt in Item 1 for details). At December ~~31, 2017,~~27, 2020, the Company had working capital of ~~$172.2~~$146.7 million, including cash and cash equivalents of ~~$232.6~~$370.6 million, compared to working capital of ~~$132.2~~$198.3 million, including cash and cash equivalents of ~~$149.7~~$240.5 million, at ~~July 2, 2017.~~ Borrowings under the Revolver (working capital needs), which were significantly lower than prior year as a result of cash generated from the sale of Fannie May, peaked in November, when cash generated from operations during the Christmas holiday shopping season enabled the Company to repay the Revolver prior to the end of December 2017. June 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 the Company’s second fiscal quarter, ~~is expected to generate~~historically generated nearly 50% of the Company’s annual revenues, and all of its earnings. ~~As a result,~~However, with the onset of the COVID-19 pandemic, the Company ~~generated~~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 2020, the Company borrowed under its Revolver to fund short-term working capital needs, with borrowings peaking at $70.0 million in November 2020. Cash generated from operations during ~~its second quarter, which, after re-paying all borrowings outstanding under its~~the Christmas holiday shopping season enabled the Company to repay the Revolver isin December 2020. Based on current projected cash flows, the Company believes that available cash balances are expected to be sufficient to provide for the Company’s operating needs until the second ~~quarter~~ of fiscal ~~2019,~~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.

WeWhile we believe that our sources of funding will be sufficient to meet our anticipated operating cash needs for at ~~lea~~stleast the next ~~12 months. However,~~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.

26
~~Table~~
To date, we have not identified any material liquidity deficiencies as a result of ~~Contents~~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 ~~$114.2~~$316.6 million, for the six months ended December ~~31, 2017,~~27, 2020, was primarily attributable to the Company’s net income during the period, adjusted by non-cash charges for ~~depreciation/~~depreciation and amortization ~~deferred income taxes (including the impact of the Tax Act – see~~ ~~Note 1 -Accounting Policies~~and ~~Note 11 – Income taxes~~ ~~in Item 1 above) and stock based~~stock-based compensation, ~~as well as~~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 ~~$17.4~~$267.9 million, for the six months ended December ~~31, 2017,~~27, 2020, was primarily attributable to the ~~working~~acquisition of PersonalizationMall for $250.9 million, capital ~~adjustment related to the sale~~expenditures of ~~Fannie May, of which $8.5~~$15.7 million ~~was still due to Ferrero at July 2, 2017 and to capital expenditures~~ related to the Company's technology initiatives, ~~and Gourmet Foods & Gift Basket segment~~as well as manufacturing production and ~~orchard planting~~warehousing equipment.

Net cash ~~used~~ inprovided by financing activities of ~~$13.9~~$81.4 million, for the six months ended December ~~31, 2017 was primarily due~~27, 2020, related to proceeds from bank borrowings of $265.0 million (including the Company’s New Term Loan ~~repayments~~in the amount of ~~$2.9~~$100.0 million, which was used to repay borrowing then outstanding under the Company’s Revolver in the amount of $97.5 million), repayment of notes payable and bank borrowings of $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 ~~$11.1~~$12.5 million of treasury stock. ~~All borrowings under the Company's revolving credit facility were repaid by the end~~
21
Table of ~~the fiscal second quarter.~~ Contents
Stock Repurchase Program

~~The Company has a stock repurchase plan through which purchases can be made from time to time~~See Item 2 in ~~the open market and through privately negotiated transactions, subject to general market conditions. The repurchase program is financed utilizing available cash. On August 30, 2017, the Company’s Board of Directors authorized an increase to its stock repurchase plan of up to $30.0 million. As of December 31, 2017, $21.1 million remained authorized under the plan.~~Part II below for details.
Contractual Obligations

~~There have been no material changes outside~~At December 27, 2020, the ~~ordinary course of business related to the Company~~’sCompany’s contractual obligations ~~as discussed in the Annual Report on Form 10-K for the year ended July 2, 2017.~~consist of:

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~~Table of Contents~~
●
Long-term debt obligations - payments due under the Company's 2020 Credit Agreement (see Note 8 - Debt in Item 1 for details and payments due by period).
●
Operating lease obligations – payments due under the Company’s operating leases (see Note 13 - Leases in Item 1 for details and payments due by 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 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 Company’s Annual Report on Form 10-K for the fiscal year ended ~~July 2, 2017,~~June 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 ~~revenue recognition, accounts receivable, inventory,~~ goodwill, other intangible ~~assets and long-lived~~ assets and income taxes. There have been no significant changes to the assumptions and estimates related to the Company’s critical accounting policies, since ~~July 2, 2017, except for the enactment of the Tax Act (see~~June 28, 2020.
Recently Issued Accounting Pronouncements
See Note 1 -Accounting Policies ~~and~~ ~~Note 11 – Income taxes~~ in Item 1 ~~above~~ for ~~details).~~
~~Recent Accounting Pronouncements~~
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This amended guidance will enhance the comparability of revenue recognition practices and will be applied to all contracts with customers. Expanded disclosures related to the nature, amount, timing, and uncertainty of revenue that is recognized are requirements under the amended guidance. As we continue to evaluatedetails regarding the impact of ~~this ASU, we have determined~~accounting standards that ~~the new standard will impact the following areas: the costs of producing and distributing the Company~~’s catalogs will be expensed upon shipment, instead of being capitalized and amortized in direct proportion to the actual sales; gift card breakage will be estimated based on the historical pattern of gift card redemption, rather than when redemption is considered remote; the Company will defer revenue at the time the Celebrations Reward loyalty points are earned using a relative fair value approach, rather than accruing a liability equal to the incremental cost of fulfilling its obligations. We have further identified the timing of revenue recognition for e-commerce orders (shipping point versus destination) as a potential issue in our analysis, which is not expected to change the total amount of revenue recognized, but could accelerate the timing of when revenue is recognized. We plan to adopt this guidance beginning with the first quarter in the fiscal year ending June 30, 2019 on a retrospective basis with a cumulative adjustment to retained earnings. We are continuing to evaluate the impact that this ASU, and related amendments and interpretive guidance, will have on our consolidated financial statements, including the related disclosures.
~~In July 2015, the FASB~~were recently issued ASU No. 2015-11, “Inventory (Topic 330).” The pronouncement was issued to simplify the measurement of inventory and changes the measurement from lower of cost or market to lower of cost and net realizable value. The Company adopted this standard effective July 3, 2017. The adoption of ASU 2015-11 did not have a significant impact on the Company~~’s consolidated financial position or results of operations.~~
~~In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments~~ – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities." The pronouncement requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. This guidance will become effective for the Company's fiscal year ending June 30, 2019. The adoption is not expected to have a significant impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 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. This guidance is effective for the Company’s fiscal year ending June 28, 2020. We are currently evaluating the impact and expect the ASU will have a material impact on our consolidated financial statements, primarily to the consolidated balance sheets and related disclosures.
28
~~Table of Contents~~
In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting.” ASU No. 2016-09 affects all entities that issue share-based payment awards to their employees. ASU No. 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company elected to early adopt the amendments in ASU 2016-09, in fiscal 2017. As a result, stock-based compensation excess tax benefits are reflected in the Consolidated Statements of Income as a component of the provision for income taxes, whereas they were previously recognized in equity. This change resulted in the recognition of excess tax benefits against income tax expenses, rather than additional paid-in capital, of $1.0 million for the year ended July 2, 2017. There was no impact on earnings per share since approximately 700,000 tax benefit shares for the year ended July 2, 2017, previously associated with the APIC pool calculation, are no longer considered in the diluted share computation. Additionally, our Consolidated Statements of Cash Flows now present excess tax benefits as an operating activity. This change has been applied prospectively in accordance with the ASU and prior periods have not been adjusted. Further, the Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures. The cumulative effect of this change, which was recorded as compensation expense in fiscal 2017, was not material to the financial statements. In addition, this ASU allows entities to withhold an amount up to an employees’ maximum individual statutory tax rate in the relevant jurisdiction, up from the minimum statutory requirement, without resulting in liability classification of the award. We adopted this change on a modified retrospective basis, with no impact to our consolidated financial statements. Finally, this ASU clarified that the cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity. This change does not have an impact on the Company’s consolidated financials as it conforms with its current practice.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 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. ASU 2016-13 is effective for the Company’s fiscal year ending July 4, 2021, and the guidance is to be applied using the modified-retrospective approach. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
~~In June 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230), a consensus of the FASB~~’s Emerging Issues Task Force.” ASU 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The ASU is effective for the Company’s fiscal year ending June 30, 2019, and interim periods within those fiscal years. Early adoption is permitted, including interim periods within those fiscal years. An entity that elects early adoption must adopt all of the amendments in the same period. The guidance requires application using a retrospective transition method. The adoption is not expected to have a significant impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01)," which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. ASU 2017-01 is effective for the Company's fiscal year ending June 30, 2019, with early adoption permitted, and should be applied prospectively. We do not expect the standard to have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates step two from the goodwill impairment test. Under ASU 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 guidance is effective for the Company’s fiscal year ending July 4, 2021, with early adoption permitted, and should be applied prospectively. We do not expect the standard to have a material impact on our consolidated financial statements.
~~In February 2017, the FASB issued~~ ASU No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets.” This update clarifies the scope of accounting for the derecognition or partial sale of nonfinancial assets to exclude all businesses and nonprofit activities. ASU 2017-05 also provides a definition for in-substance nonfinancial assets and additional guidance on partial sales of nonfinancial assets. This guidance will be effective for the Company’s fiscal year ending June 30, 2019 and may be applied retrospectively. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
29
~~Table of Contents~~
In May 2017, the FASB issued ASU No 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting. An entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. ASU 2017-09 is effective for the Company's fiscal year ending June 30, 2019, with early adoption permitted, and should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the potential impact of adopting this guidance 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~~’sCompany’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~~’sCompany’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 ~~efficiently~~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.~~Company’s 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 ~~July 2, 2017~~June 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.
30
In addition, please refer to additional risk factors in ~~Table of Contents~~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~~’sCompany’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 ~~credit facility~~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 ~~$0.2~~$0.3 million and ~~$0.3~~$0.5 million during the three and six months ended December ~~31, 2017,~~27, 2020, respectively.
22
Table of Contents

ITEM 4.4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The ~~Company~~’sCompany’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 ~~31, 2017.~~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 ~~31, 2017.~~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~~’sCompany’s evaluation required by Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934 during the quarter ended December ~~31, 2017,~~27, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31
~~Table~~ 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 ~~Contents~~
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.1A. RISK FACTORS.

There were no material changes to the ~~Company~~’sCompany’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 ~~July 2, 2017.~~
32
~~Table of Contents~~June 28, 2020
.

ITEM 2.2. 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 ~~August 30, 2017,~~June 27, 2019, the ~~Company~~’sCompany’s Board of Directors authorized an increase to its stock repurchase plan of up to $30.0 million. As of December ~~31, 2017, $21.1~~27, 2020, $6.9 million remained authorized under the plan.

The following table sets forth, for the months indicated, the ~~Company~~’sCompany’s purchase of common stock during the first six months of fiscal ~~2018,~~2021, which includes the period July ~~3, 2017~~1, 2020 through December ~~31, 2017:~~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)

07/03/17 - 07/30/17
89.3 $ 9.66 89.3 $ 16,363
07/31/16 - 08/27/17
99.6 $ 9.08 99.6 $ 15,456
08/28/17 - 10/01/17
268.7 $ 9.43 268.7 $ 27,859
10/02/17 - 10/29/17
233.5 $ 9.62 233.5 $ 25,606
10/30/17 - 12/03/17
414.3 $ 9.36 414.3 $ 21,719
12/04/17 - 12/31/17
61.9 $ 10.16 61.9 $ 21,089

Total
1,167.3 $ 9.47 1,167.3
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 5.5. OTHER INFORMATION

None.

33
23
Table of Contents

ITEM 6. EXHIBITS

31.1
~~31.1~~
Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2
~~31.2~~
Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1
~~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.

34
24
Table of Contents

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 ~~9, 2017~~ 5, 2021
/s/ Christopher G. McCann
Christopher G. McCann

Chief Executive Officer,

Director and President

(Principal Executive Officer)

Date:      February ~~9, 2017~~ 5, 2021
/s/ William E. Shea

William E. Shea

Senior Vice President, Treasurer and

Chief Financial Officer (Principal

Financial and Accounting Officer)

35
25

	Three Months Ended December 27, 2020 and December 29, 2019
	*Common Stock*										*Additional*		*Retained*		*Accumulated*								*Total*
	*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

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
Net income		-		0		-			0			0		74,152		0			-		0			74,152
Translation adjustment		-		0		-			0			0		0		16			-		0			16
Stock-based compensation		437,625		4		-			0			2,276		0		0			0		0			2,280
Exercise of stock options		25,000		0		0			0			63		0		0			0		0			63
Acquisition of Class A treasury stock		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

	*Options*			Weighted Average Exercise Price		*Weighted Average Remaining Contractual Term*		*Aggregate Intrinsic Value*
						(in years)		(in thousands)
Outstanding at June 28, 2020		1,230,000		$	2.77
Granted		0		$	0
Exercised		(429,200	)	$	2.41
Forfeited
Outstanding at December 27, 2020		800,800		$	2.97		1.0	$	18,475

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 July 2, 2017		1,352,873		$	7.44
Non-vested at June 28, 2020							1,608,468		$	12.01
Granted		881,473		$	9.47		701,311		$	21.83
Vested		(593,648	)	$	7.76		(643,590	)	$	11.05
Forfeited		(628,946	)	$	9.50		(29,949	)	$	19.80
Non-vested at December 31, 2017		1,011,752		$	7.74
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 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

	December 31, 2017		July 2, 2017		December 27, 2020		*June 28, 2020*
	(in thousands)				(in thousands)
Finished goods	$	26,853	$	34,476	$	37,030	$	35,779
Work-in-process		4,559		11,933		10,864		16,536
Raw materials		29,155		29,453		41,495		45,445
Total inventory	$	60,567	$	75,862	$	89,389	$	97,760

	*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

	December 31, 2017			July 2, 2017
	(in thousands)

Revolver (1)	$	-		$	-
Term Loan (1)		109,250			112,125
Deferred financing costs		(3,080	)		(3,560	)
Total debt		106,170			108,565
Less: current debt		8,625			7,188
Long-term debt	$	97,545		$	101,377

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
~~Level~~ 3		Valuations based on inputs that are supported by little or no market activity and that are ~~supported by little~~significant to the fair value of the assets 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)
Assets (liabilities) as of December 31, 2017:
As of December 27, 2020:
Trading securities held in a “rabbi trust” (1)	$	8,693	$	8,693	$	-	$	-	$	18,617	$	18,617	$	0	$	0
Total assets (liabilities) at fair value									$	18,617	$	18,617	$	0	$	0
	$	8,693	$	8,693	$	-	$	-

Assets (liabilities) as of July 2, 2017:
As of June 28, 2020:
Trading securities held in a “rabbi trust” (1)	$	6,916	$	6,916	$	-	$	-	$	13,442	$	13,442	$	0	$	0
	$	6,916	$	6,916	$	-	$	-
Total assets (liabilities) at fair value									$	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 27, 2020
	(in thousands)
Weighted-average remaining lease term - operating leases	9.1 years
Weighted-discount rate - operating leases		3.8	%

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

	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 31, 2017			January 1, 2017			Exclude Operating Results of Fannie May			Severance Costs		Adjusted (non-GAAP) December 31, 2017			Adjusted (non-GAAP) % Change
	(dollars in thousands)
Net revenues:
1-800-Flowers.com Consumer Floral	$	100,064		$	97,808		$	-		$	-	$	97,808			2.3	%
BloomNet Wire Service		20,375			20,502								20,502			-0.6	%
Gourmet Food & Gift Baskets		405,964			436,870			(41,199	)		-		395,671			2.6	%
Corporate		317			316								316			0.3	%
Intercompany eliminations		(627	)		(943	)		344			-		(599	)		-4.7	%
Total net revenues	$	526,093		$	554,553		$	(40,855	)	$	-	$	513,698			2.4	%

Gross profit:
1-800-Flowers.com Consumer Floral	$	38,844		$	40,300			-			-	$	40,300			-3.6	%
		38.8	%		41.2	%							41.2	%
								-			-
BloomNet Wire Service		11,693			12,310								12,310			-5.0	%
		57.4	%		60.0	%		-			-		60.0	%

Gourmet Food & Gift Baskets		184,468			204,185			(15,939	)		-		188,246			-2.0	%
		45.4	%		46.7	%							47.6	%

Corporate (a)		254			199			-			-		199			27.6	%
		80.1	%		63.0	%							63.0	%

Total gross profit	$	235,259		$	256,994		$	(15,939	)	$	-	$	241,055			-2.4	%
		44.7	%		46.3	%							46.9	%

EBITDA (non-GAAP):

Segment Contribution Margin (non-GAAP):
1-800-Flowers.com Consumer Floral	$	10,791		$	13,128		$	-		$	-	$	13,128			-17.8	%
BloomNet Wire Service		7,692			8,189			-			-		8,189			-6.1	%
Gourmet Food & Gift Baskets		93,496			104,624			(6,219	)		79		98,484			-5.1	%
Segment Contribution Margin Subtotal		111,979			125,941			(6,219	)		79		119,801			-6.5	%
Corporate (a)		(18,836	)		(20,223	)		356			-		(19,867	)		5.2	%
EBITDA (non-GAAP)		93,143			105,718			(5,863	)		79		99,934			-6.8	%
Add: Stock-based compensation		968			1,724			-			-		1,724			-43.9	%
Add: Comp charge related to NQ Plan Investment Appreciation		364			20			-			-		20			1720.0	%
Adjusted EBITDA (non-GAAP)	$	94,475		$	107,462		$	(5,863	)	$	79	$	101,678			-7.1	%

	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	%

	Three Months Ended				Years Ended
	December 31, 2017		January 1, 2017		December 31, 2017		January 1, 2017
	(in thousands, except per share data)

Net income	$	70,699	$	62,929	$	57,477	$	47,158
Adjustments to reconcile net income to adjusted net income (non-GAAP)
Deduct: Fannie May operating results		-		5,047		-		629
Deduct: U.S. tax reform impact on deferred taxes (b)		12,158		-		12,158		-
Add back: Severance costs		-		79		-		103
Add back: Income tax expense impact on Fannie May operating results and severance adjustments		-		1,656		-		171
Adjusted net income (non-GAAP)	$	58,541	$	59,617	$	45,319	$	46,803

Basic and diluted net income per common share
Basic	$	1.09	$	0.97	$	0.89	$	0.72
Diluted	$	1.06	$	0.93	$	0.86	$	0.70

Basic and diluted adjusted net income per common share (non-GAAP)
Basic	$	0.91	$	0.91	$	0.70	$	0.72
Diluted	$	0.88	$	0.88	$	0.68	$	0.69

Weighted average shares used in the calculation of net income and adjusted net income (non-GAAP) per common share
Basic		64,601		65,172		64,778		65,112
Diluted		66,782		67,754		67,037		67,778

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

●	Long-term debt obligations - payments due under the Company's 2020 Credit Agreement (see Note 8 - Debt in Item 1 for details and payments due by period).
●	Operating lease obligations – payments due under the Company’s operating leases (see Note 13 - Leases in Item 1 for details and payments due by 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 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.~~Company’s 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)

07/03/17 - 07/30/17		89.3	$	9.66		89.3	$	16,363
07/31/16 - 08/27/17		99.6	$	9.08		99.6	$	15,456
08/28/17 - 10/01/17		268.7	$	9.43		268.7	$	27,859
10/02/17 - 10/29/17		233.5	$	9.62		233.5	$	25,606
10/30/17 - 12/03/17		414.3	$	9.36		414.3	$	21,719
12/04/17 - 12/31/17		61.9	$	10.16		61.9	$	21,089

Total		1,167.3	$	9.47		1,167.3

31.1	~~31.1~~	Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2	~~31.2~~	Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1	~~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 ~~9, 2017~~ 5, 2021	/s/ Christopher G. McCann Christopher G. McCann Chief Executive Officer, Director and President (Principal Executive Officer)

Date: February ~~9, 2017~~ 5, 2021	/s/ William E. Shea William E. Shea Senior Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)