Supplemental Cash Flow Information:
| - | \n Interest paid amounted to $4.3 million $1.0 million and $1.1 million, for the years ended June 28, 2015, June 29, 2014 and June 30, 2013, respectively. | \n
| - | \n The Company paid income taxes of approximately $5.1 million, $7.0 million and $8.3 million, net of tax refunds received, for the years ended June 28, 2015, June 29, 2014, and June 30, 2013, respectively. | \n
Note 1. Description of Business
For nearly 40 years, 1-800-FLOWERS® (1-800-356-9377 or www.1800flowers.com) has been helping deliver smiles for our customers with gifts for every occasion, including fresh flowers and the finest selection of plants, gift baskets, gourmet foods, confections, candles, balloons and plush stuffed animals. As always, our 100% Smile Guarantee® backs every gift.
The Company’s BloomNet® international floral wire service (www.mybloomnet.net) provides a broad range of quality products and value-added services designed to help professional florists grow their businesses profitably. The 1-800-FLOWERS.COM “Gift Shop” also includes gourmet gifts 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); premium chocolates and confections from Fannie May® (www.fanniemay.com and www.harrylondon.com); gift baskets and towers from 1-800-Baskets.com® (www.1800baskets.com); premium English muffins and other breakfast treats from Wolferman’s (1-800-999-1910 or www.wolfermans.com); carved fresh fruit arrangements from FruitBouquets.com (www.fruitbouquets.com); and top quality steaks and chops from Stock Yards® (www.stockyards.com).
Note 2. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of 1-800-FLOWERS.COM, Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation. During fiscal 2015 and 2014, approximately 1% and 2%, respectively, of consolidated net revenue came from international sources, whereas in fiscal 2013 virtually all of the Company’s revenues had been derived from domestic sources.
During the fourth quarter of fiscal 2013, the Company made the strategic decision to divest the e-commerce and procurement businesses of its Winetasting Network subsidiary in order to focus on growth opportunities in its Gourmet Foods and Gift Baskets business segment. The Company closed on the sale of its Winetasting Network business on December 31, 2013. The Company has classified the results of the e-commerce and procurement business of The Winetasting Network as a discontinued operation for the fiscal years 2014 and 2013.
Fiscal Year
The Company’s fiscal year is a 52- or 53-week period ending on the Sunday nearest to June 30. Fiscal years 2015, 2014 and 2013 consisted of 52 weeks which ended on June 28, 2015, June 29, 2014 and June 30, 2013, respectively.
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.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits with banks, highly liquid money market funds, United States government securities, overnight repurchase agreements and commercial paper with maturities of three months or less when purchased.
Inventories
Inventories are valued at the lower of cost or market using the first-in, first-out method of accounting.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation expense is computed using the straight-line method over the assets’ estimated useful lives. Amortization of leasehold improvements and capital leases is computed using the straight-line method over the shorter of the estimated useful lives and the initial lease terms. The Company capitalizes certain internal and external costs incurred to acquire or develop internal-use software. Capitalized software costs are amortized on a straight-line basis over the estimated useful life of the software. Orchards in production, consisting of direct labor and materials, supervision and other items, are capitalized as part of capital projects in progress – orchards until the orchards produce fruit in commercial quantities. Upon attaining commercial levels of production the capital investments in these orchards are recorded as land improvements. Estimated useful lives are periodically reviewed, and where appropriate, changes are made prospectively. The Company’s property plant and equipment is depreciated using the following estimated lives:
| Building and building improvements (years) | \n 10 | \n - | \n40 | \n
| Leasehold improvements (years) | \n 3 | \n - | \n10 | \n
| Furniture, fixtures and production equipment (years) | \n 3 | \n - | \n10 | \n
| Software (years) | \n 3 | \n - | \n7 | \n
| Orchards in production and land improvements | \n 15 | \n - | \n35 | \n
Property, plant and equipment and other long-lived assets are reviewed for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in each business combination, with the carrying value of the Company’s goodwill allocated to its reporting units, in accordance with the acquisition method of accounting. Goodwill is not amortized, but it is subject to an annual assessment for impairment, which the Company performs during the fourth quarter, or more frequently if events occur or circumstances change such that it is more likely than not that an impairment may exist.
The Company tests goodwill for impairment at the reporting unit level. The Company identifies its reporting units by assessing whether the components of its operating segments constitute businesses for which discrete financial information is available and management of each reporting unit regularly reviews the operating results of those components. Goodwill impairment testing involves a two-step process. The first step requires comparison of the fair value of each of the reporting units to the respective carrying value. If the carrying value of the reporting unit is less than the fair value, no impairment exists and the second step is not performed. If the carrying value of the reporting unit is higher than the fair value, the second step must be performed to compute the amount of the goodwill impairment, if any. In the second step, the impairment is computed by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized for the excess.
The Company generally estimates the fair value of a reporting unit using an equal weighting of the income and market approaches. The Company uses industry accepted valuation models and set criteria that are reviewed and approved by various levels of management and, in certain instances, the Company engages third-party valuation specialists. Under the income approach, the Company uses a discounted cash flow methodology which requires management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, the Company uses the guideline public company method. Under this method the Company utilizes information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that are applied to the operating performance of the reporting unit being tested, in order to obtain their respective fair values. The Company also reconciles the aggregate fair values of its reporting units determined in the first step (as described above) to its current market capitalization, allowing for a reasonable control premium.
Other Intangibles, net
Other intangibles consist of definite-lived intangible assets (such as investment in licenses, customer lists, and others) and indefinite-lived intangible assets (such as acquired trade names and trademarks). The cost of definite-lived intangible assets is amortized to reflect the pattern of economic benefits consumed, over the estimated periods benefited, ranging from 3 to 16 years, while indefinite-lived intangible assets are not amortized.
Long-lived assets, such as definite-lived intangibles and property, plant and equipment are reviewed for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. When such events or changes in circumstances occur, a recoverability test is performed comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. If the projected undiscounted cash flows are less than the carrying value, then an impairment charge would be recorded for the excess of the carrying value over the fair value, which is determined by discounting future cash flows.
The Company tests indefinite-lived intangible assets for impairment at least annually, during the fourth quarter, or whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. The impairment test for indefinite-lived intangible assets encompasses calculating a fair value of an indefinite-lived intangible asset and comparing the fair value to its carrying value. If the carrying value exceeds the fair value, impairment is recognized for the difference. To determine fair value of other indefinite-lived intangible assets, the Company uses an income approach, the relief-from-royalty method. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. Other indefinite-lived intangible assets’ fair values require significant judgments in determining both the assets’ estimated cash flows as well as the appropriate discount and royalty rates applied to those cash flows to determine fair value.
Business Combinations
The Company accounts for business combinations in accordance with ASC Topic 805 which requires, among other things, the acquiring entity in a business combination to recognize the fair value of all the assets acquired and liabilities assumed; the recognition of acquisition-related costs in the consolidated results of operations; the recognition of restructuring costs in the consolidated results of operations for which the acquirer becomes obligated after the acquisition date; and contingent purchase consideration to be recognized at their fair values on the acquisition date with subsequent adjustments recognized in the consolidated results of operations. The fair values assigned to identifiable intangible assets acquired are determined primarily by using an income approach which is based on assumptions and estimates made by management. Significant assumptions utilized in the income approach are based on company specific information and projections which are not observable in the market and are therefore considered Level 3 measurements. The excess of the purchase price over the fair value of the identified assets and liabilities is recorded as goodwill. Operating results of the acquired entity are reflected in the Company’s consolidated financial statements from date of acquisition.
Deferred Catalog Costs
The Company capitalizes the costs of producing and distributing its catalogs. These costs are amortized in direct proportion to actual sales from the corresponding catalog over a period not to exceed 12 months. Included within prepaid and other current assets was $2.5 million and $0.2 million at June 28, 2015 and June 29, 2014 respectively, relating to prepaid catalog expenses.
Investments
The Company has certain 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 investments are comprised of a 32% interest in Flores Online, a Sao Paulo, Brazil based internet floral and gift retailer, that the Company made on May 31, 2012. The book value of this investment was $2.9 million as of June 28, 2015 and $3.2 million as of June 29, 2014, and is included in Other assets within the consolidated balance sheets. The Company’s equity in the net income (loss) of Flores Online for each of the years ended June 28, 2015 and June 29, 2014 was $(0.3) million and $(0.6) million.
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 are included within Other assets in the Company’s consolidated balance sheets. The aggregate carrying amount of the Company’s cost method investments was $0.7 million as of June 28, 2015 and $0.8 million as of June 29, 2014. In addition, the Company had notes receivable from a company it maintains an investment in of $0.3 million as of June 28, 2015 and $0.5 million as of June 29, 2014. As described in Note 4 “Acquisitions”, on December 3, 2013, the Company increased its investment in iFlorist, resulting in a majority ownership interest (56%), through the conversion of notes receivable and the purchase of additional shares from the Company’s founders. The acquisition of a majority interest in iFlorist resulted in the consolidation of iFlorist’s operations.
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 in Other assets in the consolidated balance sheets (see Note 10).
Each reporting period, the Company uses available qualitative and quantitative information to evaluate its investments for impairment. When a decline in fair value, if any, is determined to be other-than-temporary, an impairment charge is recorded in the consolidated statement of operations.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with high quality financial institutions. Concentration of credit risk with respect to accounts receivable is limited due to the Company's large number of customers and their dispersion throughout the United States, and the fact that a substantial portion of receivables are related to balances owed by major credit card companies. Allowances relating to consumer, corporate and franchise accounts receivable ($2.2 million at June 28, 2015 and $2.4 million at June 29, 2014) have been recorded based upon previous experience and management’s evaluation.
Revenue Recognition
Net revenues are generated by e-commerce operations from the Company’s online and telephonic sales channels as well as other operations (retail/wholesale) and primarily consist of the selling price of merchandise, service or outbound shipping charges, net of discounts, returns and credits. Net revenues are recognized primarily upon product delivery and do not include sales tax. Net revenues generated by the Company’s BloomNet Wire Service operations include membership fees as well as other products and service offerings to florists. Membership fees are recognized monthly in the period earned, and products sales are recognized upon product shipment with shipping terms primarily FOB shipping point.
Initial franchise fees are recognized in income when the Company has substantially performed or satisfied all material services or conditions relating to the sale of the franchise and the fees are nonrefundable. Area development fees are nonrefundable and are recognized in income on a pro-rata basis when the conditions for revenue recognition under the individual area development agreements are met. Both initial franchise fees and area development fees are generally recognized upon the opening of a franchise store or upon termination of the agreement between the Company and the franchisee.
Cost of Revenues
Cost of revenues consists 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 includes labor and facility costs related to manufacturing and production operations.
Marketing and Sales
Marketing and sales expense consists primarily of advertising and promotional expenditures, catalog costs, online portal and search expenses, 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’s departments engaged in marketing, selling and merchandising activities.
The Company expenses all advertising costs, with the exception of catalog costs (see Deferred Catalog Costs above), at the time the advertisement is first shown. Advertising expense was $130.6 million, $83.0 million and $77.9 million for the years ended June 28, 2015, June 29, 2014 and June 30, 2013, respectively.
Technology and Development
Technology and development expense consists primarily of payroll and operating expenses of the Company’s information technology group, costs associated with its websites, including hosting, content development and maintenance and support costs related to the Company’s order entry, customer service, fulfillment and database systems. Costs associated with the acquisition or development of software for internal use are capitalized if the software is expected to have a useful life beyond one year and amortized over the software’s useful life, typically three to seven years. Costs associated with repair maintenance or the development of website content are expensed as incurred as the useful lives of such software modifications are less than one year.
Stock-Based Compensation
The Company records compensation expense associated with restricted stock awards and other forms of equity compensation based upon the fair value of stock-based awards as measured at the grant date. The cost associated with share-based awards that are subject solely to time-based vesting requirements, less expected forfeitures, is recognized over the awards’ service period for the entire award on a straight-line basis. The cost associated with performance-based equity awards is recognized for each tranche over the service period, based on an assessment of the likelihood that the applicable performance goals will be achieved.
Derivatives and hedging
The Company does not enter into derivative transactions for trading purposes, but rather, on occasion to manage its exposure to interest rate fluctuations. When entering into these transactions, the Company has managed its floating rate debt using interest rate swaps in order to reduce its exposure to the impact of changing interest rates on its consolidated results of operations and future cash outflows for interest. The Company did not have any open derivative positions at June 28, 2015 and June 29, 2014.
Income Taxes
The Company uses the asset and liability method to account for income taxes. The Company has established deferred tax assets and liabilities for temporary differences between the financial reporting bases and the income tax bases of its assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. The Company recognizes as a deferred tax asset, the tax benefits associated with losses related to operations. Realization of these deferred tax assets assumes that we will be able to generate sufficient future taxable income so that these assets will be realized. The factors that the Company considers in assessing the likelihood of realization include the forecast of future taxable income and available tax planning strategies that could be implemented to realize the deferred tax assets.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements on a particular tax position are measured based on the largest benefit that has a greater than a 50% likelihood of being realized upon settlement. The amount of unrecognized tax benefits (“UTBs”) is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination. We recognize both accrued interest and penalties, where appropriate, related to UTBs in income tax expense. Assumptions, judgment and the use of estimates are required in determining if the “more likely than not” standard has been met when developing the provision for income taxes.
Net Income (Loss) Per Share
Basic net income (loss) per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of common and dilutive common equivalent shares (consisting primarily of employee stock options and unvested restricted stock awards) outstanding during the period. Diluted net loss per share excludes the effect of potential common shares (consisting primarily of employee stock options and unvested restricted stock awards) that would be antidilutive.
Recent Accounting Pronouncements
In April 2015, the FASB issued ASU No. 2015-05, “Customer's Accounting for Fees Paid in a Cloud Computing Arrangement.” This standard provides guidance to help entities determine whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software or as a service contract. Upon adoption, an entity has the option to apply the provisions of ASU 2015-05 either prospectively to all arrangements entered into or materially modified, or retrospectively. This standard is effective for the Company’s fiscal year ending July 2, 2017. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which amends ASC 835-30, “Interest – Imputation of Interest.” In order to simplify the presentation of debt issuance costs, ASU No. 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. This presentation is consistent with the guidance in Concepts Statement 6, which states that debt issuance costs are similar to a debt discount and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. Concepts Statement 6 further states that debt issuance costs are not assets because they provide no future economic benefit. This new guidance is effective for the Company’s fiscal year ending July 2, 2017 and should be applied retrospectively.
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. This guidance will be effective for the Company’s fiscal year ending July 1, 2018 and may be applied retrospectively. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
In April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which amends ASC 205, “Presentation of Financial Statements,” and ASC 360, “Property, Plant, and Equipment.” ASU No. 2014-08 amends the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations or that have a major effect on the Company's operations and financial results should be presented as discontinued operations. This new accounting guidance is effective for the Company’s fiscal year ending July 3, 2016, and may be applied retrospectively. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” which amends ASC 740, “Income Taxes.” The amendments provide guidance on the financial statement presentation of an unrecognized tax benefit, as either a reduction of a deferred tax asset or as a liability, when a net operating loss carryforward, similar tax loss, or a tax credit carryforward exists. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013 and may be applied on either a prospective or retrospective basis. The provisions are effective for the Company’s first quarter of fiscal year ending June 28, 2015. The adoption of these provisions did not have a significant impact on the Company’s consolidated financial statements.
Reclassifications
Certain balances in the prior fiscal years have been reclassified to conform to the presentation in the current fiscal year.
Basis of Presentation
The consolidated financial statements include the accounts of 1-800-FLOWERS.COM, Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation. During fiscal 2015 and 2014, approximately 1% and 2%, respectively, of consolidated net revenue came from international sources, whereas in fiscal 2013 virtually all of the Company’s revenues had been derived from domestic sources.
During the fourth quarter of fiscal 2013, the Company made the strategic decision to divest the e-commerce and procurement businesses of its Winetasting Network subsidiary in order to focus on growth opportunities in its Gourmet Foods and Gift Baskets business segment. The Company closed on the sale of its Winetasting Network business on December 31, 2013. The Company has classified the results of the e-commerce and procurement business of The Winetasting Network as a discontinued operation for the fiscal years 2014 and 2013.
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The Company’s fiscal year is a 52- or 53-week period ending on the Sunday nearest to June 30. Fiscal years 2015, 2014 and 2013 consisted of 52 weeks which ended on June 28, 2015, June 29, 2014 and June 30, 2013, respectively.
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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.
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Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation expense is computed using the straight-line method over the assets’ estimated useful lives. Amortization of leasehold improvements and capital leases is computed using the straight-line method over the shorter of the estimated useful lives and the initial lease terms. The Company capitalizes certain internal and external costs incurred to acquire or develop internal-use software. Capitalized software costs are amortized on a straight-line basis over the estimated useful life of the software. Orchards in production, consisting of direct labor and materials, supervision and other items, are capitalized as part of capital projects in progress – orchards until the orchards produce fruit in commercial quantities. Upon attaining commercial levels of production the capital investments in these orchards are recorded as land improvements. Estimated useful lives are periodically reviewed, and where appropriate, changes are made prospectively. The Company’s property plant and equipment is depreciated using the following estimated lives:
| Building and building improvements (years) | \n 10 | \n - | \n40 | \n
| Leasehold improvements (years) | \n 3 | \n - | \n10 | \n
| Furniture, fixtures and production equipment (years) | \n 3 | \n - | \n10 | \n
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Property, plant and equipment and other long-lived assets are reviewed for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable.
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Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in each business combination, with the carrying value of the Company’s goodwill allocated to its reporting units, in accordance with the acquisition method of accounting. Goodwill is not amortized, but it is subject to an annual assessment for impairment, which the Company performs during the fourth quarter, or more frequently if events occur or circumstances change such that it is more likely than not that an impairment may exist.
The Company tests goodwill for impairment at the reporting unit level. The Company identifies its reporting units by assessing whether the components of its operating segments constitute businesses for which discrete financial information is available and management of each reporting unit regularly reviews the operating results of those components. Goodwill impairment testing involves a two-step process. The first step requires comparison of the fair value of each of the reporting units to the respective carrying value. If the carrying value of the reporting unit is less than the fair value, no impairment exists and the second step is not performed. If the carrying value of the reporting unit is higher than the fair value, the second step must be performed to compute the amount of the goodwill impairment, if any. In the second step, the impairment is computed by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized for the excess.
The Company generally estimates the fair value of a reporting unit using an equal weighting of the income and market approaches. The Company uses industry accepted valuation models and set criteria that are reviewed and approved by various levels of management and, in certain instances, the Company engages third-party valuation specialists. Under the income approach, the Company uses a discounted cash flow methodology which requires management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, the Company uses the guideline public company method. Under this method the Company utilizes information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that are applied to the operating performance of the reporting unit being tested, in order to obtain their respective fair values. The Company also reconciles the aggregate fair values of its reporting units determined in the first step (as described above) to its current market capitalization, allowing for a reasonable control premium.
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Other intangibles consist of definite-lived intangible assets (such as investment in licenses, customer lists, and others) and indefinite-lived intangible assets (such as acquired trade names and trademarks). The cost of definite-lived intangible assets is amortized to reflect the pattern of economic benefits consumed, over the estimated periods benefited, ranging from 3 to 16 years, while indefinite-lived intangible assets are not amortized.
Long-lived assets, such as definite-lived intangibles and property, plant and equipment are reviewed for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. When such events or changes in circumstances occur, a recoverability test is performed comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. If the projected undiscounted cash flows are less than the carrying value, then an impairment charge would be recorded for the excess of the carrying value over the fair value, which is determined by discounting future cash flows.
The Company tests indefinite-lived intangible assets for impairment at least annually, during the fourth quarter, or whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. The impairment test for indefinite-lived intangible assets encompasses calculating a fair value of an indefinite-lived intangible asset and comparing the fair value to its carrying value. If the carrying value exceeds the fair value, impairment is recognized for the difference. To determine fair value of other indefinite-lived intangible assets, the Company uses an income approach, the relief-from-royalty method. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. Other indefinite-lived intangible assets’ fair values require significant judgments in determining both the assets’ estimated cash flows as well as the appropriate discount and royalty rates applied to those cash flows to determine fair value.
"}]},{"name":"rpt:f-428","factDimensions":{"xbrl:concept":"us-gaap:FiniteLivedIntangibleAssetUsefulLife","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","us-gaap:RangeAxis":"us-gaap:MinimumMember"},"factValues":[{"value":"P3Y"}]},{"name":"rpt:f-429","factDimensions":{"xbrl:concept":"us-gaap:FiniteLivedIntangibleAssetUsefulLife","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","us-gaap:RangeAxis":"us-gaap:MaximumMember"},"factValues":[{"value":"P16Y"}]},{"name":"rpt:f-430","factDimensions":{"xbrl:concept":"us-gaap:BusinessCombinationsPolicy","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Business Combinations
The Company accounts for business combinations in accordance with ASC Topic 805 which requires, among other things, the acquiring entity in a business combination to recognize the fair value of all the assets acquired and liabilities assumed; the recognition of acquisition-related costs in the consolidated results of operations; the recognition of restructuring costs in the consolidated results of operations for which the acquirer becomes obligated after the acquisition date; and contingent purchase consideration to be recognized at their fair values on the acquisition date with subsequent adjustments recognized in the consolidated results of operations. The fair values assigned to identifiable intangible assets acquired are determined primarily by using an income approach which is based on assumptions and estimates made by management. Significant assumptions utilized in the income approach are based on company specific information and projections which are not observable in the market and are therefore considered Level 3 measurements. The excess of the purchase price over the fair value of the identified assets and liabilities is recorded as goodwill. Operating results of the acquired entity are reflected in the Company’s consolidated financial statements from date of acquisition.
"}]},{"name":"rpt:f-431","factDimensions":{"xbrl:concept":"us-gaap:DeferredChargesPolicyTextBlock","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Deferred Catalog Costs
The Company capitalizes the costs of producing and distributing its catalogs. These costs are amortized in direct proportion to actual sales from the corresponding catalog over a period not to exceed 12 months. Included within prepaid and other current assets was $2.5 million and $0.2 million at June 28, 2015 and June 29, 2014 respectively, relating to prepaid catalog expenses.
"}]},{"name":"rpt:f-432","factDimensions":{"xbrl:concept":"flws:MaximumPeriodOverWhichCostsOfProducingAndDistributingCatalogsAmortized","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","us-gaap:ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis":"flws:iFloristMember"},"factValues":[{"value":"P12M"}]},{"name":"rpt:f-433","factDimensions":{"xbrl:concept":"flws:PrepaidCatalogExpensesCurrent","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"2500000","decimals":-5}]},{"name":"rpt:f-434","factDimensions":{"xbrl:concept":"flws:PrepaidCatalogExpensesCurrent","xbrl:period":"2013-07-01T00:00:00/2014-06-30T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"200000","decimals":-5}]},{"name":"rpt:f-435","factDimensions":{"xbrl:concept":"us-gaap:InvestmentPolicyTextBlock","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Investments
The Company has certain 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 investments are comprised of a 32% interest in Flores Online, a Sao Paulo, Brazil based internet floral and gift retailer, that the Company made on May 31, 2012. The book value of this investment was $2.9 million as of June 28, 2015 and $3.2 million as of June 29, 2014, and is included in Other assets within the consolidated balance sheets. The Company’s equity in the net income (loss) of Flores Online for each of the years ended June 28, 2015 and June 29, 2014 was $(0.3) million and $(0.6) million.
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 are included within Other assets in the Company’s consolidated balance sheets. The aggregate carrying amount of the Company’s cost method investments was $0.7 million as of June 28, 2015 and $0.8 million as of June 29, 2014. In addition, the Company had notes receivable from a company it maintains an investment in of $0.3 million as of June 28, 2015 and $0.5 million as of June 29, 2014. As described in Note 4 “Acquisitions”, on December 3, 2013, the Company increased its investment in iFlorist, resulting in a majority ownership interest (56%), through the conversion of notes receivable and the purchase of additional shares from the Company’s founders. The acquisition of a majority interest in iFlorist resulted in the consolidation of iFlorist’s operations.
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 in Other assets in the consolidated balance sheets (see Note 10).
Each reporting period, the Company uses available qualitative and quantitative information to evaluate its investments for impairment. When a decline in fair value, if any, is determined to be other-than-temporary, an impairment charge is recorded in the consolidated statement of operations.
"}]},{"name":"rpt:f-436","factDimensions":{"xbrl:concept":"us-gaap:EquityMethodInvestmentOwnershipPercentage","xbrl:period":"2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","us-gaap:ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis":"flws:iFloristMember"},"factValues":[{"value":"0.32","decimals":2}]},{"name":"rpt:f-437","factDimensions":{"xbrl:concept":"us-gaap:EquityMethodInvestments","xbrl:period":"2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD","us-gaap:ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis":"flws:iFloristMember"},"factValues":[{"value":"2900000","decimals":-5}]},{"name":"rpt:f-438","factDimensions":{"xbrl:concept":"us-gaap:EquityMethodInvestments","xbrl:period":"2014-06-30T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD","us-gaap:ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis":"flws:iFloristMember"},"factValues":[{"value":"3200000","decimals":-5}]},{"name":"rpt:f-439","factDimensions":{"xbrl:concept":"us-gaap:IncomeLossFromEquityMethodInvestments","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD","us-gaap:RangeAxis":"us-gaap:MaximumMember","us-gaap:ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis":"flws:iFloristMember"},"factValues":[{"value":"-300000","decimals":-5}]},{"name":"rpt:f-440","factDimensions":{"xbrl:concept":"us-gaap:IncomeLossFromEquityMethodInvestments","xbrl:period":"2013-07-01T00:00:00/2014-06-30T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD","us-gaap:RangeAxis":"us-gaap:MaximumMember","us-gaap:ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis":"flws:iFloristMember"},"factValues":[{"value":"-600000","decimals":-5}]},{"name":"rpt:f-441","factDimensions":{"xbrl:concept":"us-gaap:CostMethodInvestments","xbrl:period":"2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"700000","decimals":-5}]},{"name":"rpt:f-442","factDimensions":{"xbrl:concept":"us-gaap:CostMethodInvestments","xbrl:period":"2014-06-30T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"800000","decimals":-5}]},{"name":"rpt:f-443","factDimensions":{"xbrl:concept":"us-gaap:LoansReceivableNet","xbrl:period":"2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"300000","decimals":-5}]},{"name":"rpt:f-444","factDimensions":{"xbrl:concept":"us-gaap:LoansReceivableNet","xbrl:period":"2014-06-30T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"500000","decimals":-5}]},{"name":"rpt:f-445","factDimensions":{"xbrl:concept":"us-gaap:BusinessCombinationStepAcquisitionEquityInterestInAcquireeIncludingSubsequentAcquisitionPercentage","xbrl:period":"2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","us-gaap:ScheduleOfEquityMethodInvestmentEquityMethodInvesteeNameAxis":"flws:iFloristMember"},"factValues":[{"value":"0.56","decimals":2}]},{"name":"rpt:f-446","factDimensions":{"xbrl:concept":"us-gaap:ConcentrationRiskCreditRisk","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with high quality financial institutions. Concentration of credit risk with respect to accounts receivable is limited due to the Company's large number of customers and their dispersion throughout the United States, and the fact that a substantial portion of receivables are related to balances owed by major credit card companies. Allowances relating to consumer, corporate and franchise accounts receivable ($2.2 million at June 28, 2015 and $2.4 million at June 29, 2014) have been recorded based upon previous experience and management’s evaluation.
"}]},{"name":"rpt:f-447","factDimensions":{"xbrl:concept":"us-gaap:AllowanceForDoubtfulAccountsReceivableCurrent","xbrl:period":"2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"2200000","decimals":-5}]},{"name":"rpt:f-448","factDimensions":{"xbrl:concept":"us-gaap:AllowanceForDoubtfulAccountsReceivableCurrent","xbrl:period":"2014-06-30T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"2400000","decimals":-5}]},{"name":"rpt:f-449","factDimensions":{"xbrl:concept":"us-gaap:RevenueRecognitionPolicyTextBlock","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Revenue Recognition
Net revenues are generated by e-commerce operations from the Company’s online and telephonic sales channels as well as other operations (retail/wholesale) and primarily consist of the selling price of merchandise, service or outbound shipping charges, net of discounts, returns and credits. Net revenues are recognized primarily upon product delivery and do not include sales tax. Net revenues generated by the Company’s BloomNet Wire Service operations include membership fees as well as other products and service offerings to florists. Membership fees are recognized monthly in the period earned, and products sales are recognized upon product shipment with shipping terms primarily FOB shipping point.
Initial franchise fees are recognized in income when the Company has substantially performed or satisfied all material services or conditions relating to the sale of the franchise and the fees are nonrefundable. Area development fees are nonrefundable and are recognized in income on a pro-rata basis when the conditions for revenue recognition under the individual area development agreements are met. Both initial franchise fees and area development fees are generally recognized upon the opening of a franchise store or upon termination of the agreement between the Company and the franchisee.
"}]},{"name":"rpt:f-450","factDimensions":{"xbrl:concept":"us-gaap:CostOfSalesPolicyTextBlock","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Cost of Revenues
Cost of revenues consists 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 includes labor and facility costs related to manufacturing and production operations.
"}]},{"name":"rpt:f-451","factDimensions":{"xbrl:concept":"us-gaap:SellingGeneralAndAdministrativeExpensesPolicyTextBlock","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Marketing and Sales
Marketing and sales expense consists primarily of advertising and promotional expenditures, catalog costs, online portal and search expenses, 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’s departments engaged in marketing, selling and merchandising activities.
The Company expenses all advertising costs, with the exception of catalog costs (see Deferred Catalog Costs above), at the time the advertisement is first shown. Advertising expense was $130.6 million, $83.0 million and $77.9 million for the years ended June 28, 2015, June 29, 2014 and June 30, 2013, respectively.
"}]},{"name":"rpt:f-452","factDimensions":{"xbrl:concept":"us-gaap:AdvertisingExpense","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"130600000","decimals":-5}]},{"name":"rpt:f-453","factDimensions":{"xbrl:concept":"us-gaap:AdvertisingExpense","xbrl:period":"2013-07-01T00:00:00/2014-06-30T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"83000000","decimals":-5}]},{"name":"rpt:f-454","factDimensions":{"xbrl:concept":"us-gaap:AdvertisingExpense","xbrl:period":"2012-07-02T00:00:00/2013-07-01T00:00:00","xbrl:entity":"cik:0001084869","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"77900000","decimals":-5}]},{"name":"rpt:f-455","factDimensions":{"xbrl:concept":"us-gaap:ResearchDevelopmentAndComputerSoftwarePolicyTextBlock","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Technology and Development
Technology and development expense consists primarily of payroll and operating expenses of the Company’s information technology group, costs associated with its websites, including hosting, content development and maintenance and support costs related to the Company’s order entry, customer service, fulfillment and database systems. Costs associated with the acquisition or development of software for internal use are capitalized if the software is expected to have a useful life beyond one year and amortized over the software’s useful life, typically three to seven years. Costs associated with repair maintenance or the development of website content are expensed as incurred as the useful lives of such software modifications are less than one year.
"}]},{"name":"rpt:f-456","factDimensions":{"xbrl:concept":"us-gaap:PropertyPlantAndEquipmentUsefulLife","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","us-gaap:PropertyPlantAndEquipmentByTypeAxis":"us-gaap:SoftwareAndSoftwareDevelopmentCostsMember","us-gaap:RangeAxis":"us-gaap:MinimumMember"},"factValues":[{"value":"P3Y"}]},{"name":"rpt:f-457","factDimensions":{"xbrl:concept":"us-gaap:PropertyPlantAndEquipmentUsefulLife","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869","us-gaap:PropertyPlantAndEquipmentByTypeAxis":"us-gaap:SoftwareAndSoftwareDevelopmentCostsMember","us-gaap:RangeAxis":"us-gaap:MaximumMember"},"factValues":[{"value":"P7Y"}]},{"name":"rpt:f-458","factDimensions":{"xbrl:concept":"us-gaap:ShareBasedCompensationOptionAndIncentivePlansPolicy","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Stock-Based Compensation
The Company records compensation expense associated with restricted stock awards and other forms of equity compensation based upon the fair value of stock-based awards as measured at the grant date. The cost associated with share-based awards that are subject solely to time-based vesting requirements, less expected forfeitures, is recognized over the awards’ service period for the entire award on a straight-line basis. The cost associated with performance-based equity awards is recognized for each tranche over the service period, based on an assessment of the likelihood that the applicable performance goals will be achieved.
"}]},{"name":"rpt:f-459","factDimensions":{"xbrl:concept":"us-gaap:DerivativesPolicyTextBlock","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Derivatives and hedging
The Company does not enter into derivative transactions for trading purposes, but rather, on occasion to manage its exposure to interest rate fluctuations. When entering into these transactions, the Company has managed its floating rate debt using interest rate swaps in order to reduce its exposure to the impact of changing interest rates on its consolidated results of operations and future cash outflows for interest. The Company did not have any open derivative positions at June 28, 2015 and June 29, 2014.
"}]},{"name":"rpt:f-460","factDimensions":{"xbrl:concept":"us-gaap:IncomeTaxPolicyTextBlock","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Income Taxes
The Company uses the asset and liability method to account for income taxes. The Company has established deferred tax assets and liabilities for temporary differences between the financial reporting bases and the income tax bases of its assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. The Company recognizes as a deferred tax asset, the tax benefits associated with losses related to operations. Realization of these deferred tax assets assumes that we will be able to generate sufficient future taxable income so that these assets will be realized. The factors that the Company considers in assessing the likelihood of realization include the forecast of future taxable income and available tax planning strategies that could be implemented to realize the deferred tax assets.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements on a particular tax position are measured based on the largest benefit that has a greater than a 50% likelihood of being realized upon settlement. The amount of unrecognized tax benefits (“UTBs”) is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination. We recognize both accrued interest and penalties, where appropriate, related to UTBs in income tax expense. Assumptions, judgment and the use of estimates are required in determining if the “more likely than not” standard has been met when developing the provision for income taxes.
"}]},{"name":"rpt:f-461","factDimensions":{"xbrl:concept":"flws:MinimumPercentageLikelihoodOfTaxBenefitBeingRealizedUponSettlementOfTaxPositionToBeRecognized","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"0.50","decimals":2}]},{"name":"rpt:f-462","factDimensions":{"xbrl:concept":"us-gaap:EarningsPerSharePolicyTextBlock","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Net Income (Loss) Per Share
Basic net income (loss) per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of common and dilutive common equivalent shares (consisting primarily of employee stock options and unvested restricted stock awards) outstanding during the period. Diluted net loss per share excludes the effect of potential common shares (consisting primarily of employee stock options and unvested restricted stock awards) that would be antidilutive.
"}]},{"name":"rpt:f-463","factDimensions":{"xbrl:concept":"flws:RecentAccountingPronouncementsPolicyTextBlock","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Recent Accounting Pronouncements
In April 2015, the FASB issued ASU No. 2015-05, “Customer's Accounting for Fees Paid in a Cloud Computing Arrangement.” This standard provides guidance to help entities determine whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software or as a service contract. Upon adoption, an entity has the option to apply the provisions of ASU 2015-05 either prospectively to all arrangements entered into or materially modified, or retrospectively. This standard is effective for the Company’s fiscal year ending July 2, 2017. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which amends ASC 835-30, “Interest – Imputation of Interest.” In order to simplify the presentation of debt issuance costs, ASU No. 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. This presentation is consistent with the guidance in Concepts Statement 6, which states that debt issuance costs are similar to a debt discount and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. Concepts Statement 6 further states that debt issuance costs are not assets because they provide no future economic benefit. This new guidance is effective for the Company’s fiscal year ending July 2, 2017 and should be applied retrospectively.
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. This guidance will be effective for the Company’s fiscal year ending July 1, 2018 and may be applied retrospectively. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
In April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which amends ASC 205, “Presentation of Financial Statements,” and ASC 360, “Property, Plant, and Equipment.” ASU No. 2014-08 amends the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations or that have a major effect on the Company's operations and financial results should be presented as discontinued operations. This new accounting guidance is effective for the Company’s fiscal year ending July 3, 2016, and may be applied retrospectively. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” which amends ASC 740, “Income Taxes.” The amendments provide guidance on the financial statement presentation of an unrecognized tax benefit, as either a reduction of a deferred tax asset or as a liability, when a net operating loss carryforward, similar tax loss, or a tax credit carryforward exists. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013 and may be applied on either a prospective or retrospective basis. The provisions are effective for the Company’s first quarter of fiscal year ending June 28, 2015. The adoption of these provisions did not have a significant impact on the Company’s consolidated financial statements.
"}]},{"name":"rpt:f-464","factDimensions":{"xbrl:concept":"us-gaap:PriorPeriodReclassificationAdjustmentDescription","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"Reclassifications
Certain balances in the prior fiscal years have been reclassified to conform to the presentation in the current fiscal year.
"}]},{"name":"rpt:f-465","factDimensions":{"xbrl:concept":"flws:PropertyPlantAndEquipmentEstimatedUsefulLivesTableTextBlock","xbrl:period":"2014-06-30T00:00:00/2015-06-29T00:00:00","xbrl:entity":"cik:0001084869"},"factValues":[{"value":"| Building and building improvements (years) | \n 10 | \n - | \n40 | \n
| Leasehold improvements (years) | \n 3 | \n - | \n10 | \n
| Furniture, fixtures and production equipment (years) | \n 3 | \n - | \n10 | \n
| Software (years) | \n 3 | \n - | \n7 | \n
| Orchards in production and land improvements | \n 15 | \n - | \n35 | \n
Note 3 – Net Income Per Common Share from Continuing Operations
The following table sets forth the computation of basic and diluted net income per common share from continuing operations:
| \n | \n | Years Ended | \n\n | |||||||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | (in thousands, except per share data) | \n \n | |||||||||
| Numerator: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Income from continuing operations | \n \n | $ | \n19,384 | \n\n | \n | $ | \n13,946 | \n\n | \n | $ | \n15,722 | \n\n |
| Less: Net loss attributable to noncontrolling interest | \n \n | \n | (903 | \n) | \n\n | \n | (697 | \n) | \n\n | \n | - | \n\n |
| Income from continuing operations attributable to 1-800-FLOWERS.COM, Inc. | \n \n | $ | \n20,287 | \n\n | \n | $ | \n14,643 | \n\n | \n | $ | \n15,722 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Denominator: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Weighted average shares outstanding | \n \n | \n | 64,976 | \n\n | \n | \n | 64,035 | \n\n | \n | \n | 64,369 | \n\n |
| Effect of dilutive securities: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Employee stock options (1) | \n \n | \n | 1,561 | \n\n | \n | \n | 1,083 | \n\n | \n | \n | 786 | \n\n |
| Employee restricted stock awards | \n \n | \n | 1,065 | \n\n | \n | \n | 1,342 | \n\n | \n | \n | 1,637 | \n\n |
| \n | \n | \n | 2,626 | \n\n | \n | \n | 2,425 | \n\n | \n | \n | 2,423 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Adjusted weighted-average shares and assumed conversions | \n \n | \n | 67,602 | \n\n | \n | \n | 66,460 | \n\n | \n | \n | 66,792 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Net income per common share from continuing operations attributable to 1-800-FLOWERS.COM, Inc. | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Basic | \n \n | $ | \n0.31 | \n\n | \n | $ | \n0.23 | \n\n | \n | $ | \n0.24 | \n\n |
| Diluted | \n \n | $ | \n0.30 | \n\n | \n | $ | \n0.22 | \n\n | \n | $ | \n0.24 | \n\n |
Note (1): The effect of options to purchase 0.1 million, 1.2 million and 2.0 million shares for the years ended June 28, 2015, June 29, 2014 and June 30, 2013, respectively, were excluded from the calculation of net income per share on a diluted basis as their effect is anti-dilutive.
| \n | \n | Years Ended | \n\n | |||||||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | (in thousands, except per share data) | \n \n | |||||||||
| Numerator: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Income from continuing operations | \n \n | $ | \n19,384 | \n\n | \n | $ | \n13,946 | \n\n | \n | $ | \n15,722 | \n\n |
| Less: Net loss attributable to noncontrolling interest | \n \n | \n | (903 | \n) | \n\n | \n | (697 | \n) | \n\n | \n | - | \n\n |
| Income from continuing operations attributable to 1-800-FLOWERS.COM, Inc. | \n \n | $ | \n20,287 | \n\n | \n | $ | \n14,643 | \n\n | \n | $ | \n15,722 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Denominator: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Weighted average shares outstanding | \n \n | \n | 64,976 | \n\n | \n | \n | 64,035 | \n\n | \n | \n | 64,369 | \n\n |
| Effect of dilutive securities: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Employee stock options (1) | \n \n | \n | 1,561 | \n\n | \n | \n | 1,083 | \n\n | \n | \n | 786 | \n\n |
| Employee restricted stock awards | \n \n | \n | 1,065 | \n\n | \n | \n | 1,342 | \n\n | \n | \n | 1,637 | \n\n |
| \n | \n | \n | 2,626 | \n\n | \n | \n | 2,425 | \n\n | \n | \n | 2,423 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Adjusted weighted-average shares and assumed conversions | \n \n | \n | 67,602 | \n\n | \n | \n | 66,460 | \n\n | \n | \n | 66,792 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Net income per common share from continuing operations attributable to 1-800-FLOWERS.COM, Inc. | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Basic | \n \n | $ | \n0.31 | \n\n | \n | $ | \n0.23 | \n\n | \n | $ | \n0.24 | \n\n |
| Diluted | \n \n | $ | \n0.30 | \n\n | \n | $ | \n0.22 | \n\n | \n | $ | \n0.24 | \n\n |
Note 4. Acquisitions
Acquisition of Harry & David
On September 30, 2014, the Company completed its acquisition of Harry & David, a leading multi-channel specialty retailer and producer of branded premium gift-quality fruit, gourmet food products and other gifts marketed under the Harry & David brands. The transaction, for a purchase price of $142.5 million, includes the Harry & David’s brands and websites as well as its headquarters, manufacturing and distribution facilities and orchards in Medford, Oregon, a warehouse and distribution facility in Hebron, Ohio and 48 Harry & David retail stores located throughout the country.
During the quarter ended June 28, 2015, 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. 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. Of the acquired intangible assets, $5.2 million was assigned to customer lists, which are being amortized over the estimated remaining lives of between 4 to 11 years, $35.5 million was assigned to trademarks, $1.1 million was assigned to leasehold positions and $16.0 million was assigned to goodwill, which is not expected to be deductible for tax purposes. The goodwill recognized in conjunction with our acquisition of Harry & David 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 includes certain other intangible assets that do not qualify for separate recognition, such as an assembled workforce.
The following table summarizes the final allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed at the date of the acquisition, as well as adjustments made during the measurement period:
| \n | \n | Harry & David Preliminary Purchase Price Allocation | \n \n | \n | Measurement Period Adjustments (1) | \n \n | \n | Harry & David Final Purchase Price Allocation | \n \n | |||
| \n | \n | (in thousands) | \n \n | \n | (in thousands) | \n \n | \n | (in thousands) | \n \n | |||
| Current assets | \n \n | $ | \n124,245 | \n\n | \n | $ | \n2,023 | \n\n | \n | $ | \n126,268 | \n\n |
| Intangible assets | \n \n | \n | 17,209 | \n\n | \n | \n | 24,618 | \n\n | \n | \n | 41,827 | \n\n |
| Goodwill | \n \n | \n | 38,635 | \n\n | \n | \n | (22,593 | \n) | \n\n | \n | 16,042 | \n\n |
| Property, plant and equipment | \n \n | \n | 91,023 | \n\n | \n | \n | 14,056 | \n\n | \n | \n | 105,079 | \n\n |
| Other assets | \n \n | \n | 111 | \n\n | \n | \n | (242 | \n) | \n\n | \n | (131 | \n) | \n
| Total assets acquired | \n \n | \n | 271,223 | \n\n | \n | \n | 17,862 | \n\n | \n | \n | 289,085 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Current liabilities, including short-term debt | \n \n | \n | 104,335 | \n\n | \n | \n | 178 | \n\n | \n | \n | 104,513 | \n\n |
| Deferred tax liabilities | \n \n | \n | 23,252 | \n\n | \n | \n | 18,796 | \n\n | \n | \n | 42,048 | \n\n |
| Other liabilities assumed | \n \n | \n | 1,136 | \n\n | \n | \n | (1,112 | \n) | \n\n | \n | 24 | \n\n |
| Total liabilities assumed | \n \n | \n | 128,723 | \n\n | \n | \n | 17,862 | \n\n | \n | \n | 146,585 | \n\n |
| Net assets acquired | \n \n | $ | \n142,500 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n142,500 | \n\n |
| \n | (1) | \n The measurement period adjustments were due to the finalization of the valuations related to property plant and equipment and intangible assets and resulted in the following: an increase in property, plant and equipment and intangible assets, with the related increase in long-term deferred tax liabilities and corresponding decrease in goodwill. The measurement period adjustments did not have a significant impact on the Company’s condensed consolidated statements of income for the year ended June 28, 2015. | \n
The estimated fair value of the acquired work in process and finished goods inventory was determined utilizing the income approach. The income approach estimates the fair value of the inventory based on the net retail value of the inventory less operating expenses and a reasonable profit allowance. Raw materials inventory 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.
The estimated fair value of the deferred revenue was determined based on the costs to perform the remaining services and/or satisfy the Company’s remaining obligations, plus a reasonable profit for those activities. These remaining costs exclude sales and marketing expenses since the Deferred Revenue has already been “sold,” and no additional sales and marketing expenses will be incurred. The reasonable profit to be earned on the deferred revenue was estimated based on the profit mark-up that the Company earns on similar services.
The estimated fair value of property, plant and equipment was determined utilizing a combination of the cost, sales comparison, market, and excess earnings method approaches, as follows:
Under the cost approach a replacement cost of the asset is first determined based on replacing the real property with assets of equal utility and functionality, developed based on both the indirect and the direct cost methods. The indirect cost method includes multiplying the assets’ historical costs by industry specific inflationary trend factors to yield an estimated replacement cost. In applying this method, all direct and indirect costs including tax, freight, installation, engineering and other associated soft costs were considered. The direct cost method includes obtaining a current replacement cost estimate from the Company and equipment dealers, which includes all applicable direct and indirect costs. An appropriate depreciation allowance is then applied to the replacement cost based on the effective age of the assets relative to the expected normal useful lives of the assets, condition of the assets, and the planned future utilization of the assets. The determination of fair value also includes considerations of functional obsolescence and economic obsolescence, where applicable.
The sales comparison approach was considered for certain real estate property. Under the sales comparison approach, an estimate of fair value is determined by comparing the property being valued to similar properties that have been sold within a reasonable period from the valuation date, applying appropriate units of comparison.
The market approach was considered for certain assets with active secondary markets including agricultural equipment, automobiles, computer equipment, general equipment, mobile equipment, packaging machinery and semi-tractors. Under the market approach market, comparables for the assets are obtained from equipment dealers, resellers, industry databases, and published price guides. The market comparables are then adjusted to the subject assets based on age, condition or type of transaction. All applicable direct and indirect costs are also considered and reflected in the final fair value determination.
The fair value of orchards in production was determined based on the excess earnings method under the income approach. This valuation approach assumed that the orchards’ production could be sold independently through a wholesale market rather than Harry & David’s retail channel. The excess earnings method required calculating future crop revenue as determined by multiplying the future crop volume in tons to be produced by the projected price per ton based on the USDA “Agricultural Prices” report released January 31, 2015 by the National Agricultural Statistics Services. Appropriate expenses were deducted from the sales attributable to the orchards and economic rents were charged for the return on contributory assets. The after-tax cash flows attributable to the asset were discounted back to their net present value at an appropriate rate of return and summed to calculate the value of the orchards.
The estimated fair value of the acquired trademarks 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 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.
Operating results of Harry & David are reflected in the Company’s consolidated financial statements from the date of acquisition, within its Gourmet Food & Gift Baskets segment. Harry & David contributed net revenues of $359.7 million and operating income of approximately $24.6 million from September 30, 2014 through June 28, 2015. These amounts are not necessarily indicative of the results of operations that Harry & David would have realized had it continued to operate as a stand-alone company during the period presented due to integration activities since the acquisition date, and due to costs that are now reflected in the Company’s unallocated corporate costs which are not allocated to Harry & David.
As required by ASC 805, “Business Combinations,” the following unaudited pro forma financial information for the year ended June 28, 2015 and June 29, 2014, give effect to the Harry & David acquisition as if it had been completed on July 1, 2013. 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 may achieve with respect to the combined companies. The pro forma information has been adjusted to give effect to nonrecurring items that are directly attributable to the acquisition.
| \n | \n | Year Ended | \n \n | |||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||
| Net revenues from continuing operations | \n \n | $ | \n1,152,103 | \n\n | \n | $ | \n1,142,946 | \n\n |
| Income from continuing operations attributable to 1-800-FLOWERS.COM, Inc. | \n \n | $ | \n17,812 | \n\n | \n | $ | \n19,439 | \n\n |
| Diluted net income per common share attributable to 1-800-FLOWERS.COM, Inc. | \n \n | $ | \n0.26 | \n\n | \n | $ | \n0.29 | \n\n |
The unaudited pro forma amounts above include the following adjustments:
| \n | (1) | \n An increase of net revenues and a decrease of cost of sales by $1.6 million and $4.8 million, to reflect the impact of purchase accounting adjustments related to Harry & David’s deferred revenue and inventory fair value step-up in the year ended June 28, 2015. | \n
| \n | (2) | \n A decrease of operating expenses by $17.4 million during the year ended June 28, 2015, to eliminate non-recurring acquisition costs ($11.9 million during the year ended June 28, 2015), integration costs ($3.0 million during the year ended June 28, 2015) and severance costs ($2.5 million during the year ended June 28, 2015) directly related to the transaction. | \n
| \n | (3) | \n A decrease of operating expenses by $0.4 million during the year ended June 29, 2014, to eliminate non-recurring acquisition costs directly related to the transaction. | \n
| \n | (4) | \n An increase of operating expenses by $0.2 million during the year ended June 29, 2014, to reflect the additional amortization expense related to the increase in definite lived intangibles. | \n
| \n | (5) | \n An increase to interest expense by $1.1 million for the year ended June 28, 2015, and $4.8 million for the year ended June 29, 2014, respectively, to reflect the incremental impact of the 2014 Credit Facility utilized to finance the acquisition, assuming our new credit facility was in place on July 1, 2013. | \n
| \n | (6) | \n The adjustments above were tax effected at the combined entity’s assumed effective tax rate for the respective periods. | \n
Acquisition of Fannie May retail stores
On June 27, 2014, the Company and GB Chocolates LLC (GB Chocolates) entered into a settlement agreement, resulting in the termination of the GB Chocolates franchise agreement, and its exclusive area development rights. As a result, in fiscal 2014, the Company recognized the previously deferred non-refundable area development fees of $0.7 million. In addition, per the terms of the non-performance Promissory Note, GB Chocolates paid $1.2 million as a result of its failure to complete its development obligations under the 2011 Area Development Agreement (the 2011 ADA). As a result, during the fourth quarter of fiscal 2014, the Company recognized revenue of $1.0 million ($0.2 million had been previously recognized). The Company has no plans to market the territories covered in the 2011 ADA.
In conjunction with the settlement agreement, the Company and GB Chocolates entered into an asset purchase agreement whereby the Company repurchased 16 of the original 17 Fannie May retail stores sold to GB Chocolates in November 2011. The acquisition was accounted for using the purchase method of accounting in accordance with FASB guidance regarding business combinations. The purchase price of $6.4 million was financed utilizing available cash balances.
During the quarter ended June 28, 2015, the Company finalized the allocation of the purchase price to the identifiable assets acquired and liabilities assumed based on our estimates of their fair values on the acquisition date. There have been no measurement period adjustments. The following table summarizes the final allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed at the date of the acquisition:
| \n | \n | Final | \n \n | |
| \n | \n | (in thousands) | \n \n | |
| Current Assets | \n \n | $ | \n103 | \n\n |
| Property, plant and equipment | \n \n | \n | 487 | \n\n |
| Goodwill | \n \n | \n | 5,783 | \n\n |
| Net assets acquired | \n \n | $ | \n6,373 | \n\n |
Operating results of the acquired stores are reflected in the Company’s consolidated financial statements from the date of acquisition, within the Gourmet Food & Gift Baskets segment. Pro forma results of operations have not been presented, as the impact on the Company’s consolidated financial results would not have been material.
Acquisition of Colonial Gifts Limited
On December 3, 2013, the Company completed its acquisition of a controlling interest in Colonial Gifts Limited (iFlorist). iFlorist, located in the UK, is a direct-to-consumer marketer of floral and gift-related products sold and delivered throughout Europe. The acquisition was achieved in stages and was accounted for using the acquisition method of accounting in accordance with the Financial Accounting Standards Board’s (“FASB”) guidance regarding business combinations.
Prior to December 3, 2013, the Company maintained an investment in iFlorist in the amount of $1.6 million, which was included on the Company’s balance sheet within Other assets. This investment was accounted for under the cost method, as the Company’s ownership stake was 19.9%, and it did not have the ability to exercise significant influence.
On December 3, 2013, the Company acquired an additional interest in iFlorist, bringing the Company’s ownership interest to 56.2%. The acquisition of the additional interest was financed through the conversion of $2.0 million of notes owed by iFlorist to the Company, and a $1.6 million cash payment to iFlorist’s founders. Concurrent with the additional investment, the Company remeasured its initial equity investment in iFlorist, and determined that the acquisition date fair value approximated the Company’s carrying value of $1.6 million, and therefore no gain or loss was recognized. On the acquisition date, the Company also measured the fair value of the noncontrolling interest which amounted to $3.6 million. The acquisition-date fair values of the Company’s previously held equity interest in iFlorist and the noncontrolling interest were determined based on the market price the Company paid for its ownership interest in iFlorist on the acquisition date, assuming that a 20% control premium was paid to obtain the controlling interest. The following summarizes the fair values of the acquisition date purchase price components:
| \n | \n | iFlorist Fair Value of Purchase Price Components | \n \n | |
| \n | \n | (in thousands) | \n \n | |
| Cash | \n \n | $ | \n1,640 | \n\n |
| Converted debt | \n \n | \n | 1,964 | \n\n |
| Initial equity investment | \n \n | \n | 1,629 | \n\n |
| Noncontrolling interest | \n \n | \n | 3,616 | \n\n |
| Total purchase price | \n \n | $ | \n8,849 | \n\n |
During the quarter ended December 28, 2014, the Company finalized the allocation of the purchase price to the identifiable assets acquired and liabilities assumed based on our estimates of their fair values on the acquisition date. 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. Of the acquired intangible assets, $0.7 million was assigned to customer lists, which is being amortized over the estimated remaining life of 3 years, $0.7 million was assigned to trademarks, and $7.9 million was assigned to goodwill, which is not expected to be deductible for tax purposes. As a result of cumulative tax losses in the foreign jurisdiction, offset in part by the deferred tax liability arising from the amortizable customer lists which was considered a source of future income, the Company concluded that a full valuation allowance be recorded in such jurisdiction.
The following table summarizes the final allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed at the date of the acquisition, as well as adjustments made during the measurement period:
| \n | \n | iFlorist Preliminary Purchase Price Allocation | \n \n | \n | Measurement Period Adjustments (1) | \n \n | \n | iFlorist Final Purchase Price Allocation | \n \n | |||
| \n | \n | (in thousands) | \n \n | \n | (in thousands) | \n \n | \n | (in thousands) | \n \n | |||
| Current assets | \n \n | $ | \n856 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n856 | \n\n |
| Intangible assets | \n \n | \n | 3,177 | \n\n | \n | \n | (1,709 | \n) | \n\n | \n | 1,468 | \n\n |
| Goodwill | \n \n | \n | 6,537 | \n\n | \n | \n | 1,320 | \n\n | \n | \n | 7,857 | \n\n |
| Property, plant and equipment | \n \n | \n | 2,006 | \n\n | \n | \n | - | \n\n | \n | \n | 2,006 | \n\n |
| Other assets | \n \n | \n | 30 | \n\n | \n | \n | - | \n\n | \n | \n | 30 | \n\n |
| Total assets acquired | \n \n | \n | 12,606 | \n\n | \n | \n | (389 | \n) | \n\n | \n | 12,217 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Current liabilities, including current maturities of long-term debt | \n \n | \n | 3,014 | \n\n | \n | \n | - | \n\n | \n | \n | 3,014 | \n\n |
| Deferred tax liabilities | \n \n | \n | 648 | \n\n | \n | \n | (389 | \n) | \n\n | \n | 259 | \n\n |
| Other liabilities assumed | \n \n | \n | 95 | \n\n | \n | \n | - | \n\n | \n | \n | 95 | \n\n |
| Total liabilities assumed | \n \n | \n | 3,757 | \n\n | \n | \n | (389 | \n) | \n\n | \n | 3,368 | \n\n |
| Net assets acquired | \n \n | $ | \n8,849 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n8,849 | \n\n |
| \n | (2) | \n The measurement period adjustments were due to the finalization of valuations related to intangible assets and resulted in the following: a decrease to intangible assets and the related long-term deferred tax liabilities and an increase to goodwill. The measurement period adjustments did not have a significant impact on our condensed consolidated statements of income for the three and nine months ended March 29, 2015. In addition, these adjustments did not have a significant impact on our condensed consolidated balance sheet as of June 29, 2014. Therefore, we have not retrospectively adjusted this financial information. | \n
The estimated fair value of the acquired trademarks 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 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 with and without method. This method calculates the debt-free cash flows generated under two scenarios: the with and without. Under the with scenario, it is assumed that the Company achieves full projections and includes both existing customers as of the valuation date as well as new customers acquired during the course of normal business. The without scenario, assumes that the Company has no existing customers, but rather builds to management projections as new customers are acquired. The differential between the cash flows under the two scenarios is then discounted to present value to determine the value of the customer lists as of the valuation date.
Operating results of the Company’s membership interest in iFlorist are reflected in the Company’s consolidated financial statements from the date of acquisition, essentially all of which is included within the 1-800-Flowers.com Consumer Floral segment. iFlorist’s operations are not material to the Company’s consolidated financial statements and as such pro forma results of operations have not been presented.
Acquisition of 1-800-Flowers’ European trademarks
On March 11, 2013, the Company acquired the European rights to various derivations of the 1-800-Flowers’ tradename, trademark, URL’s and telephone numbers from Flowerscorp Pty Ltd. for a purchase price of $4.0 million, which is included within Other intangibles, net.
| \n | \n | Harry & David Preliminary Purchase Price Allocation | \n \n | \n | Measurement Period Adjustments (1) | \n \n | \n | Harry & David Final Purchase Price Allocation | \n \n | |||
| \n | \n | (in thousands) | \n \n | \n | (in thousands) | \n \n | \n | (in thousands) | \n \n | |||
| Current assets | \n \n | $ | \n124,245 | \n\n | \n | $ | \n2,023 | \n\n | \n | $ | \n126,268 | \n\n |
| Intangible assets | \n \n | \n | 17,209 | \n\n | \n | \n | 24,618 | \n\n | \n | \n | 41,827 | \n\n |
| Goodwill | \n \n | \n | 38,635 | \n\n | \n | \n | (22,593 | \n) | \n\n | \n | 16,042 | \n\n |
| Property, plant and equipment | \n \n | \n | 91,023 | \n\n | \n | \n | 14,056 | \n\n | \n | \n | 105,079 | \n\n |
| Other assets | \n \n | \n | 111 | \n\n | \n | \n | (242 | \n) | \n\n | \n | (131 | \n) | \n
| Total assets acquired | \n \n | \n | 271,223 | \n\n | \n | \n | 17,862 | \n\n | \n | \n | 289,085 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Current liabilities, including short-term debt | \n \n | \n | 104,335 | \n\n | \n | \n | 178 | \n\n | \n | \n | 104,513 | \n\n |
| Deferred tax liabilities | \n \n | \n | 23,252 | \n\n | \n | \n | 18,796 | \n\n | \n | \n | 42,048 | \n\n |
| Other liabilities assumed | \n \n | \n | 1,136 | \n\n | \n | \n | (1,112 | \n) | \n\n | \n | 24 | \n\n |
| Total liabilities assumed | \n \n | \n | 128,723 | \n\n | \n | \n | 17,862 | \n\n | \n | \n | 146,585 | \n\n |
| Net assets acquired | \n \n | $ | \n142,500 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n142,500 | \n\n |
| \n | \n | Year Ended | \n \n | |||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||
| Net revenues from continuing operations | \n \n | $ | \n1,152,103 | \n\n | \n | $ | \n1,142,946 | \n\n |
| Income from continuing operations attributable to 1-800-FLOWERS.COM, Inc. | \n \n | $ | \n17,812 | \n\n | \n | $ | \n19,439 | \n\n |
| Diluted net income per common share attributable to 1-800-FLOWERS.COM, Inc. | \n \n | $ | \n0.26 | \n\n | \n | $ | \n0.29 | \n\n |
| \n | \n | Final | \n \n | |
| \n | \n | (in thousands) | \n \n | |
| Current Assets | \n \n | $ | \n103 | \n\n |
| Property, plant and equipment | \n \n | \n | 487 | \n\n |
| Goodwill | \n \n | \n | 5,783 | \n\n |
| Net assets acquired | \n \n | $ | \n6,373 | \n\n |
| \n | \n | iFlorist Fair Value of Purchase Price Components | \n \n | |
| \n | \n | (in thousands) | \n \n | |
| Cash | \n \n | $ | \n1,640 | \n\n |
| Converted debt | \n \n | \n | 1,964 | \n\n |
| Initial equity investment | \n \n | \n | 1,629 | \n\n |
| Noncontrolling interest | \n \n | \n | 3,616 | \n\n |
| Total purchase price | \n \n | $ | \n8,849 | \n\n |
| \n | \n | iFlorist Preliminary Purchase Price Allocation | \n \n | \n | Measurement Period Adjustments (1) | \n \n | \n | iFlorist Final Purchase Price Allocation | \n \n | |||
| \n | \n | (in thousands) | \n \n | \n | (in thousands) | \n \n | \n | (in thousands) | \n \n | |||
| Current assets | \n \n | $ | \n856 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n856 | \n\n |
| Intangible assets | \n \n | \n | 3,177 | \n\n | \n | \n | (1,709 | \n) | \n\n | \n | 1,468 | \n\n |
| Goodwill | \n \n | \n | 6,537 | \n\n | \n | \n | 1,320 | \n\n | \n | \n | 7,857 | \n\n |
| Property, plant and equipment | \n \n | \n | 2,006 | \n\n | \n | \n | - | \n\n | \n | \n | 2,006 | \n\n |
| Other assets | \n \n | \n | 30 | \n\n | \n | \n | - | \n\n | \n | \n | 30 | \n\n |
| Total assets acquired | \n \n | \n | 12,606 | \n\n | \n | \n | (389 | \n) | \n\n | \n | 12,217 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Current liabilities, including current maturities of long-term debt | \n \n | \n | 3,014 | \n\n | \n | \n | - | \n\n | \n | \n | 3,014 | \n\n |
| Deferred tax liabilities | \n \n | \n | 648 | \n\n | \n | \n | (389 | \n) | \n\n | \n | 259 | \n\n |
| Other liabilities assumed | \n \n | \n | 95 | \n\n | \n | \n | - | \n\n | \n | \n | 95 | \n\n |
| Total liabilities assumed | \n \n | \n | 3,757 | \n\n | \n | \n | (389 | \n) | \n\n | \n | 3,368 | \n\n |
| Net assets acquired | \n \n | $ | \n8,849 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n8,849 | \n\n |
Note 5. Inventory
The Company’s inventory, stated at cost, which is not in excess of market, includes purchased and manufactured finished goods for sale, packaging supplies, raw material ingredients for manufactured products and associated manufacturing labor, growing crops and is classified as follows:
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||
| \n | \n | (in thousands) | \n \n | |||||
| Finished goods | \n \n | $ | \n43,254 | \n\n | \n | $ | \n30,859 | \n\n |
| Work-in-process | \n \n | \n | 16,020 | \n\n | \n | \n | 8,566 | \n\n |
| Raw materials | \n \n | \n | 33,889 | \n\n | \n | \n | 19,095 | \n\n |
| \n | \n | $ | \n93,163 | \n\n | \n | $ | \n58,520 | \n\n |
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||
| \n | \n | (in thousands) | \n \n | |||||
| Finished goods | \n \n | $ | \n43,254 | \n\n | \n | $ | \n30,859 | \n\n |
| Work-in-process | \n \n | \n | 16,020 | \n\n | \n | \n | 8,566 | \n\n |
| Raw materials | \n \n | \n | 33,889 | \n\n | \n | \n | 19,095 | \n\n |
| \n | \n | $ | \n93,163 | \n\n | \n | $ | \n58,520 | \n\n |
Note 6. Goodwill and Intangible Assets
The following table presents goodwill by segment and the related change in the net carrying amount:
| \n | \n |
Consumer Floral | \n \n | \n |
BloomNet Wire Service | \n \n | \n |
Gourmet Food and Gift Baskets (1) | \n \n | \n |
Total | \n \n | ||||
| \n | \n | \n | \n | \n | \n | (in thousands) | \n \n | \n | \n | \n | \n | |||||
| Balance at June 30, 2013 | \n \n | $ | \n10,251 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n37,692 | \n\n | \n | $ | \n47,943 | \n\n |
| Acquisition of Fannie May franchise stores | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | 5,783 | \n\n | \n | \n | 5,783 | \n\n |
| Adjustments | \n \n | \n | (97 | \n) | \n\n | \n | - | \n\n | \n | \n | - | \n\n | \n | \n | (97 | \n) | \n
| Acquisition of iFlorist | \n \n | \n | 6,537 | \n\n | \n | \n | - | \n\n | \n | \n | - | \n\n | \n | \n | 6,537 | \n\n |
| Balance at June 29, 2014 | \n \n | $ | \n16,691 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n43,475 | \n\n | \n | $ | \n60,166 | \n\n |
| Harry & David acquisition | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | 16,042 | \n\n | \n | \n | 16,042 | \n\n |
| iFlorist measurement period adjustment | \n \n | \n | 1,320 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | 1,320 | \n\n |
| iFlorist translation adjustment | \n \n | \n | (429 | \n) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | (429 | \n) | \n
| Other | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | (2 | \n) | \n\n | \n | (2 | \n) | \n
| Balance at June 28, 2015 | \n \n | $ | \n17,582 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n59,515 | \n\n | \n | $ | \n77,097 | \n\n |
| \n | (1) | \n The total carrying amount of goodwill for all periods in the table above is reflected net of $71.1 million of accumulated impairment charges, which were recorded in the GFGB segment during fiscal 2009. | \n
There were no goodwill impairment charges in any segment during the years ended June 28, 2015, June 29, 2014 and June 30, 2013.
The Company’s other intangible assets consist of the following:
| \n | \n | \n | \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||||||||||||||||||
| \n |
Amortization Period (in years) | \n \n | Gross Carrying Amount | \n \n | \n |
Accumulated Amortization | \n \n | \n |
Net | \n \n | \n | Gross Carrying Amount | \n \n | \n |
Accumulated Amortization | \n \n | \n |
Net | \n \n | ||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | (in thousands) | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | |||||||||
| Intangible assets with determinable lives | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Investment in licenses | \n 14 | \n - | \n16 | \n\n | $ | \n7,420 | \n\n | \n | $ | \n5,727 | \n\n | \n | $ | \n1,693 | \n\n | \n | $ | \n7,420 | \n\n | \n | $ | \n5,621 | \n\n | \n | $ | \n1,799 | \n\n |
| Customer lists | \n 3 | \n - | \n10 | \n\n | \n | 21,815 | \n\n | \n | \n | 14,595 | \n\n | \n | \n | 7,220 | \n\n | \n | \n | 17,313 | \n\n | \n | \n | 12,818 | \n\n | \n | \n | 4,495 | \n\n |
| Other | \n 5 | \n - | \n8 | \n\n | \n | 3,665 | \n\n | \n | \n | 2,597 | \n\n | \n | \n | 1,068 | \n\n | \n | \n | 2,538 | \n\n | \n | \n | 2,538 | \n\n | \n | \n | - | \n\n |
| \n | \n | \n | \n | \n | \n | 32,900 | \n\n | \n | \n | 22,919 | \n\n | \n | \n | 9,981 | \n\n | \n | \n | 27,271 | \n\n | \n | \n | 20,977 | \n\n | \n | \n | 6,294 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Trademarks with indefinite lives | \n
| \n \n | \n | \n | \n | 72,144 | \n\n | \n | \n | - | \n\n | \n | \n | 72,144 | \n\n | \n | \n | 38,322 | \n\n | \n | \n | - | \n\n | \n | \n | 38,322 | \n\n |
| Total identifiable intangible assets | \n \n | \n | \n | \n | $ | \n105,044 | \n\n | \n | $ | \n22,919 | \n\n | \n | $ | \n82,125 | \n\n | \n | $ | \n65,593 | \n\n | \n | $ | \n20,977 | \n\n | \n | $ | \n44,616 | \n\n |
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. No material impairments were recognized for the years ended June 28, 2015, June 29, 2014 and June 30, 2013.
The amortization of intangible assets for the years ended June 28, 2015, June 29, 2014 and June 30, 2013 was $.2.1 million, $1.6 million and $1.8 million, respectively. Future estimated amortization expense is as follows: 2016 - $2.1 million, 2017 - $1.5 million, 2018 – $1.3 million, 2019 - $0.7 million, 2020 - $0.6 million and thereafter - $3.8 million.
| \n | \n |
Consumer Floral | \n \n | \n |
BloomNet Wire Service | \n \n | \n |
Gourmet Food and Gift Baskets (1) | \n \n | \n |
Total | \n \n | ||||
| \n | \n | \n | \n | \n | \n | (in thousands) | \n \n | \n | \n | \n | \n | |||||
| Balance at June 30, 2013 | \n \n | $ | \n10,251 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n37,692 | \n\n | \n | $ | \n47,943 | \n\n |
| Acquisition of Fannie May franchise stores | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | 5,783 | \n\n | \n | \n | 5,783 | \n\n |
| Adjustments | \n \n | \n | (97 | \n) | \n\n | \n | - | \n\n | \n | \n | - | \n\n | \n | \n | (97 | \n) | \n
| Acquisition of iFlorist | \n \n | \n | 6,537 | \n\n | \n | \n | - | \n\n | \n | \n | - | \n\n | \n | \n | 6,537 | \n\n |
| Balance at June 29, 2014 | \n \n | $ | \n16,691 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n43,475 | \n\n | \n | $ | \n60,166 | \n\n |
| Harry & David acquisition | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | 16,042 | \n\n | \n | \n | 16,042 | \n\n |
| iFlorist measurement period adjustment | \n \n | \n | 1,320 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | 1,320 | \n\n |
| iFlorist translation adjustment | \n \n | \n | (429 | \n) | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | (429 | \n) | \n
| Other | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | (2 | \n) | \n\n | \n | (2 | \n) | \n
| Balance at June 28, 2015 | \n \n | $ | \n17,582 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n59,515 | \n\n | \n | $ | \n77,097 | \n\n |
| \n | \n | \n | \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||||||||||||||||||
| \n |
Amortization Period (in years) | \n \n | Gross Carrying Amount | \n \n | \n |
Accumulated Amortization | \n \n | \n |
Net | \n \n | \n | Gross Carrying Amount | \n \n | \n |
Accumulated Amortization | \n \n | \n |
Net | \n \n | ||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | (in thousands) | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | |||||||||
| Intangible assets with determinable lives | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Investment in licenses | \n 14 | \n - | \n16 | \n\n | $ | \n7,420 | \n\n | \n | $ | \n5,727 | \n\n | \n | $ | \n1,693 | \n\n | \n | $ | \n7,420 | \n\n | \n | $ | \n5,621 | \n\n | \n | $ | \n1,799 | \n\n |
| Customer lists | \n 3 | \n - | \n10 | \n\n | \n | 21,815 | \n\n | \n | \n | 14,595 | \n\n | \n | \n | 7,220 | \n\n | \n | \n | 17,313 | \n\n | \n | \n | 12,818 | \n\n | \n | \n | 4,495 | \n\n |
| Other | \n 5 | \n - | \n8 | \n\n | \n | 3,665 | \n\n | \n | \n | 2,597 | \n\n | \n | \n | 1,068 | \n\n | \n | \n | 2,538 | \n\n | \n | \n | 2,538 | \n\n | \n | \n | - | \n\n |
| \n | \n | \n | \n | \n | \n | 32,900 | \n\n | \n | \n | 22,919 | \n\n | \n | \n | 9,981 | \n\n | \n | \n | 27,271 | \n\n | \n | \n | 20,977 | \n\n | \n | \n | 6,294 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Trademarks with indefinite lives | \n
| \n \n | \n | \n | \n | 72,144 | \n\n | \n | \n | - | \n\n | \n | \n | 72,144 | \n\n | \n | \n | 38,322 | \n\n | \n | \n | - | \n\n | \n | \n | 38,322 | \n\n |
| Total identifiable intangible assets | \n \n | \n | \n | \n | $ | \n105,044 | \n\n | \n | $ | \n22,919 | \n\n | \n | $ | \n82,125 | \n\n | \n | $ | \n65,593 | \n\n | \n | $ | \n20,977 | \n\n | \n | $ | \n44,616 | \n\n |
Note 7. Property, Plant and Equipment
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||
| \n | \n | (in thousands) | \n \n | |||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Land | \n \n | $ | \n31,077 | \n\n | \n | $ | \n2,907 | \n\n |
| Orchards in production and land improvements | \n \n | \n | 9,028 | \n\n | \n | \n | - | \n\n |
| Building and building improvements | \n \n | \n | 55,121 | \n\n | \n | \n | 12,551 | \n\n |
| Leasehold improvements | \n \n | \n | 19,459 | \n\n | \n | \n | 18,504 | \n\n |
| Production equipment and furniture and fixtures | \n \n | \n | 63,132 | \n\n | \n | \n | 40,582 | \n\n |
| Computer and telecommunication equipment | \n \n | \n | 56,582 | \n\n | \n | \n | 57,488 | \n\n |
| Software | \n \n | \n | 150,695 | \n\n | \n | \n | 136,226 | \n\n |
| Capital projects in progress - orchards | \n \n | \n | 7,335 | \n\n | \n | \n | - | \n\n |
| \n | \n | \n | 392,429 | \n\n | \n | \n | 268,258 | \n\n |
| Accumulated depreciation and amortization | \n \n | \n | 222,329 | \n\n | \n | \n | 208,111 | \n\n |
| \n | \n | $ | \n170,100 | \n\n | \n | $ | \n60,147 | \n\n |
Depreciation expense for the years ended June 28, 2015, June 29, 2014 and June 30, 2013 was $27.0 million, $18.2 million, and $17.0 million, respectively.
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||
| \n | \n | (in thousands) | \n \n | |||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Land | \n \n | $ | \n31,077 | \n\n | \n | $ | \n2,907 | \n\n |
| Orchards in production and land improvements | \n \n | \n | 9,028 | \n\n | \n | \n | - | \n\n |
| Building and building improvements | \n \n | \n | 55,121 | \n\n | \n | \n | 12,551 | \n\n |
| Leasehold improvements | \n \n | \n | 19,459 | \n\n | \n | \n | 18,504 | \n\n |
| Production equipment and furniture and fixtures | \n \n | \n | 63,132 | \n\n | \n | \n | 40,582 | \n\n |
| Computer and telecommunication equipment | \n \n | \n | 56,582 | \n\n | \n | \n | 57,488 | \n\n |
| Software | \n \n | \n | 150,695 | \n\n | \n | \n | 136,226 | \n\n |
| Capital projects in progress - orchards | \n \n | \n | 7,335 | \n\n | \n | \n | - | \n\n |
| \n | \n | \n | 392,429 | \n\n | \n | \n | 268,258 | \n\n |
| Accumulated depreciation and amortization | \n \n | \n | 222,329 | \n\n | \n | \n | 208,111 | \n\n |
| \n | \n | $ | \n170,100 | \n\n | \n | $ | \n60,147 | \n\n |
Note 8. Accrued Expenses
Accrued expenses consisted of the following:
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||
| \n | \n | (in thousands) | \n \n | |||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Payroll and employee benefits | \n \n | $ | \n36,370 | \n\n | \n | $ | \n22,601 | \n\n |
| Advertising and marketing | \n \n | \n | 11,923 | \n\n | \n | \n | 11,803 | \n\n |
| Other | \n \n | \n | 25,346 | \n\n | \n | \n | 15,113 | \n\n |
| \n | \n | $ | \n73,639 | \n\n | \n | $ | \n49,517 | \n\n |
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||
| \n | \n | (in thousands) | \n \n | |||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Payroll and employee benefits | \n \n | $ | \n36,370 | \n\n | \n | $ | \n22,601 | \n\n |
| Advertising and marketing | \n \n | \n | 11,923 | \n\n | \n | \n | 11,803 | \n\n |
| Other | \n \n | \n | 25,346 | \n\n | \n | \n | 15,113 | \n\n |
| \n | \n | $ | \n73,639 | \n\n | \n | $ | \n49,517 | \n\n |
Note 9. Long-Term Debt
The Company’s current and long-term debt consists of the following:
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||
| \n | \n | (in thousands) | \n \n | |||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Revolver (1) | \n \n | $ | \n- | \n\n | \n | $ | \n- | \n\n |
| Term Loan (1) | \n \n | \n | 131,813 | \n\n | \n | \n | - | \n\n |
| Bank loan (2) | \n \n | \n | 293 | \n\n | \n | \n | 343 | \n\n |
| Total debt | \n \n | \n | 132,106 | \n\n | \n | \n | 343 | \n\n |
| Less: current maturities of long-term debt | \n \n | \n | 14,543 | \n\n | \n | \n | 343 | \n\n |
| Long-term debt | \n \n | $ | \n117,563 | \n\n | \n | $ | \n- | \n\n |
| \n | (1) | \n In order to finance the Harry & David acquisition, on September 30, 2014, the Company entered into a Credit Agreement with JPMorgan Chase Bank as administrative agent, and a group of lenders (the “2014 Credit Facility”), consisting of a $142.5 million five-year term loan (the “Term Loan”) with a maturity date of September 30, 2019, and a co-terminus revolving credit facility (the “Revolver”), with a seasonally adjusted limit ranging from $100.0 to $200.0 million, which may be used for working capital (subject to applicable sublimits) and general corporate purposes. The Term Loan is payable in 20 quarterly installments of principal and interest beginning in December 2014, with escalating principal payments at the rate of 10% in years one and two, 15% in years three and four, and 20% in year five, with the remaining balance of $42.75 million due upon maturity. Upon closing of the acquisition, the Company borrowed $136.7 million under the Revolver to repay amounts outstanding under the Company’s and Harry & David’s previous credit agreements, as well as to pay acquisition-related transaction costs. There are no amounts outstanding under the Revolver as of June 28, 2015. | \n
The 2014 Credit Facility requires that while any borrowings are outstanding the Company comply with certain financial and non-financial covenants, including the maintenance of certain financial ratios. The Company was in compliance with these covenants as of June 28, 2015. Outstanding amounts under the 2014 Credit Facility bear interest at the Company’s option at either: (i) LIBOR, plus a spread of 175 to 250 basis points, as determined by the Company’s leverage ratio, or (ii) ABR, plus a spread of 75 to 150 basis points. The 2014 Credit Agreement is secured by substantially all of the assets of the Company and the Subsidiary Guarantors.
Future payments under the term loan are as follows: $14.2 million – 2016, $19.6 million – 2017, $21.4 million – 2018, $26.7 million – 2019 and $49.9 million – 2020.
| \n | (2) | \n Bank loan assumed through the Company’s acquisition of a majority interest in iFlorist. | \n
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||
| \n | \n | (in thousands) | \n \n | |||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Revolver (1) | \n \n | $ | \n- | \n\n | \n | $ | \n- | \n\n |
| Term Loan (1) | \n \n | \n | 131,813 | \n\n | \n | \n | - | \n\n |
| Bank loan (2) | \n \n | \n | 293 | \n\n | \n | \n | 343 | \n\n |
| Total debt | \n \n | \n | 132,106 | \n\n | \n | \n | 343 | \n\n |
| Less: current maturities of long-term debt | \n \n | \n | 14,543 | \n\n | \n | \n | 343 | \n\n |
| Long-term debt | \n \n | $ | \n117,563 | \n\n | \n | $ | \n- | \n\n |
Note 10. Fair Value Measurements
Cash and cash equivalents, receivables, 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 | \n Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. | \n
| \n | \n |
| Level 2 | \n 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. | \n
| \n | \n |
| Level 3 | \n Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | \n
The following table presents by level, within the fair value hierarchy, financial assets and liabilities measured at fair value on a recurring basis:
| \n | \n | Carrying Value | \n \n | \n | Fair Value Measurements Assets (Liabilities) | \n \n | ||||||||||
| \n | \n | \n | \n | \n | \n | Level 1 | \n \n | \n | Level 2 | \n \n | \n | Level 3 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | (in thousands) | \n\n | ||||||||
| Assets (liabilities) as of June 28, 2015: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Trading securities held in a “rabbi trust” (1) | \n \n | $ | \n3,118 | \n\n | \n | $ | \n3,118 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n- | \n\n |
| \n | \n | $ | \n3,118 | \n\n | \n | $ | \n3,118 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n- | \n\n |
| \n | \n | Carrying Value | \n \n | \n | Fair Value Measurements Assets (Liabilities) | \n \n | ||||||||||
| \n | \n | \n | \n | \n | \n | Level 1 | \n \n | \n | Level 2 | \n \n | \n | Level 3 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | (in thousands) | \n\n | ||||||||
| Assets (liabilities) as of June 29, 2014: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Trading securities held in a “rabbi trust” (1) | \n \n | $ | \n2,146 | \n\n | \n | $ | \n2,146 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n- | \n\n |
| \n | \n | $ | \n2,146 | \n\n | \n | $ | \n2,146 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n- | \n\n |
| \n | (1) | \n The Company has established a Non-qualified Deferred Compensation Plan (Note 14 – Employee Retirement Plans) for certain members of senior management. Deferred compensation plan assets are invested in mutual funds held in a “rabbi trust” which is restricted for payment to participants of the NQDC Plan Trading securities held in the rabbi trust are measured using quoted market prices at the reporting date and are included in Other assets, with the corresponding liability included in Other liabilities, in the consolidated balance sheets. | \n
| \n | \n | Carrying Value | \n \n | \n | Fair Value Measurements Assets (Liabilities) | \n \n | ||||||||||
| \n | \n | \n | \n | \n | \n | Level 1 | \n \n | \n | Level 2 | \n \n | \n | Level 3 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | (in thousands) | \n\n | ||||||||
| Assets (liabilities) as of June 28, 2015: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Trading securities held in a “rabbi trust” (1) | \n \n | $ | \n3,118 | \n\n | \n | $ | \n3,118 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n- | \n\n |
| \n | \n | $ | \n3,118 | \n\n | \n | $ | \n3,118 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n- | \n\n |
| \n | \n | Carrying Value | \n \n | \n | Fair Value Measurements Assets (Liabilities) | \n \n | ||||||||||
| \n | \n | \n | \n | \n | \n | Level 1 | \n \n | \n | Level 2 | \n \n | \n | Level 3 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | (in thousands) | \n\n | ||||||||
| Assets (liabilities) as of June 29, 2014: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Trading securities held in a “rabbi trust” (1) | \n \n | $ | \n2,146 | \n\n | \n | $ | \n2,146 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n- | \n\n |
| \n | \n | $ | \n2,146 | \n\n | \n | $ | \n2,146 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n- | \n\n |
Note 11. Income Taxes
The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company concluded its federal examination by the Internal Revenue Service for fiscal year 2011, however, fiscal years 2012 through 2014 remain subject to federal examination. Due to ongoing state examinations and non-conformity with the federal statute of limitations for assessment, certain states also remain open from fiscal 2011. The Company commenced operations in foreign jurisdictions in 2012. The Company’s foreign income tax filings are open for examination by its respective foreign tax authorities in Canada and the United Kingdom
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At June 28, 2015, the Company has an unrecognized tax position of approximately $0.6 million, including accrued interest and penalties of $0.1 million. The Company believes that no additional significant unrecognized tax positions will be resolved over the next twelve months.
Significant components of the income tax provision from continuing operations are as follows:
| \n | \n | Years ended | \n \n | |||||||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | (in thousands) | \n \n | |||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Current provision (benefit): | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Federal | \n \n | $ | \n6,630 | \n\n | \n | $ | \n6,439 | \n\n | \n | $ | \n7,983 | \n\n |
| State | \n \n | \n | 1,840 | \n\n | \n | \n | 1,247 | \n\n | \n | \n | 1,845 | \n\n |
| Foreign | \n \n | \n | (11 | \n) | \n\n | \n | 11 | \n\n | \n | \n | - | \n\n |
| \n | \n | \n | 8,459 | \n\n | \n | \n | 7,697 | \n\n | \n | \n | 9,828 | \n\n |
| Deferred provision (benefit): | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Federal | \n \n | \n | 1,970 | \n\n | \n | \n | 773 | \n\n | \n | \n | (730 | \n) | \n
| State | \n \n | \n | 631 | \n\n | \n | \n | 28 | \n\n | \n | \n | (25 | \n) | \n
| Foreign | \n \n | \n | (130 | \n) | \n\n | \n | (95 | \n) | \n\n | \n | - | \n\n |
| \n | \n | \n | 2,471 | \n\n | \n | \n | 706 | \n\n | \n | \n | (755 | \n) | \n
| Income tax expense | \n \n | $ | \n10,930 | \n\n | \n | $ | \n8,403 | \n\n | \n | $ | \n9,073 | \n\n |
A reconciliation of the U.S. federal statutory tax rate to the Company’s effective tax rate is as follows:
| \n | \n | Years ended | \n \n | |||||||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Tax at U.S. statutory rates | \n \n | \n | 35.0 | \n% | \n\n | \n | 35.0 | \n% | \n\n | \n | 35.0 | \n% | \n
| State income taxes, net of federal tax benefit | \n \n | \n | 3.8 | \n\n | \n | \n | 3.7 | \n\n | \n | \n | 3.3 | \n\n |
| Valuation allowance change | \n \n | \n | 2.6 | \n\n | \n | \n | 1.5 | \n\n | \n | \n | - | \n\n |
| Rate differences | \n \n | \n | 1.1 | \n\n | \n | \n | 1.2 | \n\n | \n | \n | (0.3 | \n) | \n
| Tax settlements | \n \n | \n | 1.4 | \n\n | \n | \n | (1.0 | \n) | \n\n | \n | 1.1 | \n\n |
| Deductible stock-based compensation | \n \n | \n | (1.3 | \n) | \n\n | \n | (0.2 | \n) | \n\n | \n | (0.1 | \n) | \n
| Domestic production deduction | \n \n | \n | (2.2 | \n) | \n\n | \n | (1.9 | \n) | \n\n | \n | (1.8 | \n) | \n
| Tax credits | \n \n | \n | (3.9 | \n) | \n\n | \n | (1.7 | \n) | \n\n | \n | (1.2 | \n) | \n
| Other, net | \n \n | \n | (0.4 | \n) | \n\n | \n | 1.0 | \n\n | \n | \n | 0.6 | \n\n |
| \n | \n | \n | 36.1 | \n% | \n\n | \n | 37.6 | \n% | \n\n | \n | 36.6 | \n% | \n
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company's deferred income tax assets (liabilities) are as follows:
| \n | \n | Years ended | \n \n | |||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||
| \n | \n | (in thousands) | \n \n | |||||
| Deferred income tax assets: | \n \n | \n | \n | \n | \n | \n | \n | \n |
| Net operating loss and credit carryforwards | \n \n | $ | \n6,743 | \n\n | \n | $ | \n4,342 | \n\n |
| Accrued expenses and reserves | \n \n | \n | 5,921 | \n\n | \n | \n | 6,178 | \n\n |
| Stock-based compensation | \n \n | \n | 3,622 | \n\n | \n | \n | 3,420 | \n\n |
| Book in excess of tax depreciation | \n \n | \n | - | \n\n | \n | \n | 1,322 | \n\n |
| Gross deferred income tax assets | \n \n | \n | 16,286 | \n\n | \n | \n | 15,262 | \n\n |
| Less: Valuation allowance | \n \n | \n | (4,589 | \n) | \n\n | \n | (2,241 | \n) | \n
| \n | \n | \n | 11,697 | \n\n | \n | \n | 13,021 | \n\n |
| Deferred income tax liabilities: | \n \n | \n | \n | \n | \n | \n | \n | \n |
| Other intangibles | \n \n | \n | (23,307 | \n) | \n\n | \n | (6,512 | \n) | \n
| Tax in excess of book depreciation | \n \n | \n | (26,197 | \n) | \n\n | \n | - | \n\n |
| \n | \n | \n | (49,504 | \n) | \n\n | \n | (6,512 | \n) | \n
| Net deferred income tax assets (liabilities) | \n \n | $ | \n(37,807 | \n) | \n\n | $ | \n6,509 | \n\n |
A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The Company has established valuation allowances primarily for net operating loss carryforwards in certain states and its United Kingdom and Canada subsidiaries. At June 28, 2015 the Company’s federal net operating loss carryforwards were $2.5 million, which if not utilized, will begin to expire in fiscal year 2025. The federal net operating loss is subject to Section 382 limitations of $0.3 million per year. The Company’s foreign net operating loss carryforward was $7.5 million, while the state net operating losses were $6.2 million, before federal benefit, which if not utilized, will begin to expire in fiscal year 2016.
| \n | \n | Years ended | \n \n | |||||||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | (in thousands) | \n \n | |||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Current provision (benefit): | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Federal | \n \n | $ | \n6,630 | \n\n | \n | $ | \n6,439 | \n\n | \n | $ | \n7,983 | \n\n |
| State | \n \n | \n | 1,840 | \n\n | \n | \n | 1,247 | \n\n | \n | \n | 1,845 | \n\n |
| Foreign | \n \n | \n | (11 | \n) | \n\n | \n | 11 | \n\n | \n | \n | - | \n\n |
| \n | \n | \n | 8,459 | \n\n | \n | \n | 7,697 | \n\n | \n | \n | 9,828 | \n\n |
| Deferred provision (benefit): | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Federal | \n \n | \n | 1,970 | \n\n | \n | \n | 773 | \n\n | \n | \n | (730 | \n) | \n
| State | \n \n | \n | 631 | \n\n | \n | \n | 28 | \n\n | \n | \n | (25 | \n) | \n
| Foreign | \n \n | \n | (130 | \n) | \n\n | \n | (95 | \n) | \n\n | \n | - | \n\n |
| \n | \n | \n | 2,471 | \n\n | \n | \n | 706 | \n\n | \n | \n | (755 | \n) | \n
| Income tax expense | \n \n | $ | \n10,930 | \n\n | \n | $ | \n8,403 | \n\n | \n | $ | \n9,073 | \n\n |
| \n | \n | Years ended | \n \n | |||||||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Tax at U.S. statutory rates | \n \n | \n | 35.0 | \n% | \n\n | \n | 35.0 | \n% | \n\n | \n | 35.0 | \n% | \n
| State income taxes, net of federal tax benefit | \n \n | \n | 3.8 | \n\n | \n | \n | 3.7 | \n\n | \n | \n | 3.3 | \n\n |
| Valuation allowance change | \n \n | \n | 2.6 | \n\n | \n | \n | 1.5 | \n\n | \n | \n | - | \n\n |
| Rate differences | \n \n | \n | 1.1 | \n\n | \n | \n | 1.2 | \n\n | \n | \n | (0.3 | \n) | \n
| Tax settlements | \n \n | \n | 1.4 | \n\n | \n | \n | (1.0 | \n) | \n\n | \n | 1.1 | \n\n |
| Deductible stock-based compensation | \n \n | \n | (1.3 | \n) | \n\n | \n | (0.2 | \n) | \n\n | \n | (0.1 | \n) | \n
| Domestic production deduction | \n \n | \n | (2.2 | \n) | \n\n | \n | (1.9 | \n) | \n\n | \n | (1.8 | \n) | \n
| Tax credits | \n \n | \n | (3.9 | \n) | \n\n | \n | (1.7 | \n) | \n\n | \n | (1.2 | \n) | \n
| Other, net | \n \n | \n | (0.4 | \n) | \n\n | \n | 1.0 | \n\n | \n | \n | 0.6 | \n\n |
| \n | \n | \n | 36.1 | \n% | \n\n | \n | 37.6 | \n% | \n\n | \n | 36.6 | \n% | \n
| \n | \n | Years ended | \n \n | |||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | ||
| \n | \n | (in thousands) | \n \n | |||||
| Deferred income tax assets: | \n \n | \n | \n | \n | \n | \n | \n | \n |
| Net operating loss and credit carryforwards | \n \n | $ | \n6,743 | \n\n | \n | $ | \n4,342 | \n\n |
| Accrued expenses and reserves | \n \n | \n | 5,921 | \n\n | \n | \n | 6,178 | \n\n |
| Stock-based compensation | \n \n | \n | 3,622 | \n\n | \n | \n | 3,420 | \n\n |
| Book in excess of tax depreciation | \n \n | \n | - | \n\n | \n | \n | 1,322 | \n\n |
| Gross deferred income tax assets | \n \n | \n | 16,286 | \n\n | \n | \n | 15,262 | \n\n |
| Less: Valuation allowance | \n \n | \n | (4,589 | \n) | \n\n | \n | (2,241 | \n) | \n
| \n | \n | \n | 11,697 | \n\n | \n | \n | 13,021 | \n\n |
| Deferred income tax liabilities: | \n \n | \n | \n | \n | \n | \n | \n | \n |
| Other intangibles | \n \n | \n | (23,307 | \n) | \n\n | \n | (6,512 | \n) | \n
| Tax in excess of book depreciation | \n \n | \n | (26,197 | \n) | \n\n | \n | - | \n\n |
| \n | \n | \n | (49,504 | \n) | \n\n | \n | (6,512 | \n) | \n
| Net deferred income tax assets (liabilities) | \n \n | $ | \n(37,807 | \n) | \n\n | $ | \n6,509 | \n\n |
Note 12. Capital Stock
Holders of Class A common stock generally have the same rights as the holders of Class B common stock, except that holders of Class A common stock have one vote per share and holders of Class B common stock have 10 votes per share on all matters submitted to the vote of stockholders. Holders of Class A common stock and Class B common stock generally vote together as a single class on all matters presented to the stockholders for their vote or approval, except as may be required by Delaware law. Class B common stock may be converted into Class A common stock at any time on a one-for-one share basis. Each share of Class B common stock will automatically convert into one share of Class A common stock upon its transfer, with limited exceptions. During fiscal 2015, 2,748,550 shares of Class B common stock were converted into shares of Class A common stock.
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. In June 2015, the Company’s Board of Directors authorized an increase of $25 million to its stock repurchase plan. The Company repurchased a total of $8.4 million (1,056,038 shares), $8.3 million (1,561,206 shares) and $9.6 million (2,490,065 shares) during the fiscal years ended June 28, 2015, June 29, 2014 and June 30, 2013, respectively, under this program. As of June 28, 2015, $27.3 million remains authorized under the plan.
The Company has stock options and restricted stock awards outstanding to participants under the 1-800-FLOWERS.COM 2003 Long Term Incentive and Share Award Plan (the “Plan”). The Plan is a broad-based, long-term incentive program that is intended to attract, retain and motivate employees, consultants and directors to achieve the Company’s long-term growth and profitability objectives, and therefore align stockholder and employee interests. The Plan provides for the grant to eligible employees, consultants and directors of stock options, share appreciation rights (“SARs”), restricted shares, restricted share units, performance shares, performance units, dividend equivalents, and other share-based awards (collectively “Awards”).
Note 13. Stock Based Compensation
The Plan is administered by the Compensation Committee or such other Board committee (or the entire Board) as may be designated by the Board (the “Committee”). At June 28, 2015, the Company has reserved approximately 12.5 million shares of common stock for issuance, including options previously authorized for issuance under the 1999 Stock Incentive Plan.
The amounts of stock-based compensation expense recognized in the periods presented are as follows:
| \n | \n | Years Ended | \n \n | |||||||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | (in thousands, except per share data) | \n \n | |||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Stock options | \n \n | $ | \n459 | \n\n | \n | $ | \n420 | \n\n | \n | $ | \n477 | \n\n |
| Restricted stock awards | \n \n | \n | 5,503 | \n\n | \n | \n | 4,244 | \n\n | \n | \n | 3,806 | \n\n |
| Total | \n \n | \n | 5,962 | \n\n | \n | \n | 4,664 | \n\n | \n | \n | 4,283 | \n\n |
| Deferred income tax benefit | \n \n | \n | 2,087 | \n\n | \n | \n | 1,738 | \n\n | \n | \n | 1,555 | \n\n |
| Stock-based compensation expense, net | \n \n | $ | \n3,875 | \n\n | \n | $ | \n2,926 | \n\n | \n | $ | \n2,728 | \n\n |
Stock based compensation expense is recorded within the following line items of operating expenses:
| \n | \n | Years Ended | \n \n | |||||||||
| \n | \n | June 28, 2015 | \n \n | \n | July 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | (in thousands) | \n \n | |||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Marketing and sales | \n \n | $ | \n1,866 | \n\n | \n | $ | \n1,261 | \n\n | \n | $ | \n1,499 | \n\n |
| Technology and development | \n \n | \n | 392 | \n\n | \n | \n | 298 | \n\n | \n | \n | 428 | \n\n |
| General and administrative | \n \n | \n | 3,704 | \n\n | \n | \n | 3,105 | \n\n | \n | \n | 2,356 | \n\n |
| Total | \n \n | $ | \n5,962 | \n\n | \n | $ | \n4,664 | \n\n | \n | $ | \n4,283 | \n\n |
Stock-based compensation expense has not been allocated between business segments, but is reflected as part of Corporate overhead. (Refer to Note 15. Business Segments).
Stock Options
The weighted average fair value of stock options on the date of grant, and the assumptions used to estimate the fair value of the stock options using the Black-Scholes option valuation model, were as follows:
| \n | \n | Years ended | \n \n | |||||||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Weighted average fair value of options granted | \n \n | $ | \n4.86 | \n\n | \n | $ | \n3.16 | \n\n | \n | $ | \n2.95 | \n\n |
| Expected volatility | \n \n | \n | 52 | \n% | \n\n | \n | 61 | \n% | \n\n | \n | 72 | \n% | \n
| Expected life (in years) | \n \n | \n | 7.3 | \n\n | \n | \n | 6.6 | \n\n | \n | \n | 6.4 | \n\n |
| Risk-free interest rate | \n \n | \n | 1.9 | \n% | \n\n | \n | 1.6 | \n% | \n\n | \n | 0.7 | \n% | \n
| Expected dividend yield | \n \n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n
The expected volatility of the option is determined using historical volatilities based on historical stock prices. The Company estimated the expected life of options granted based upon the historical weighted average. The risk-free interest rate is determined using the yield available for zero-coupon U.S. government issues with a remaining term equal to the expected life of the option. The Company has never paid a dividend, and as such the dividend yield is 0.0%.
The following table summarizes stock option activity during the year ended June 28, 2015:
| \n | \n | Options | \n \n | \n | Weighted Average Exercise Price | \n \n | Weighted Average Remaining Contractual Term (in years) | \n \n | Aggregate Intrinsic Value (000s) | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Outstanding beginning of period | \n \n | \n | 4,339,790 | \n\n | \n | $ | \n3.80 | \n\n | \n | \n | \n | \n | \n |
| Granted | \n \n | \n | 75,000 | \n\n | \n | $ | \n8.83 | \n\n | \n | \n | \n | \n | \n |
| Exercised | \n \n | \n | (853,170 | \n) | \n\n | $ | \n6.44 | \n\n | \n | \n | \n | \n | \n |
| Forfeited/Expired | \n \n | \n | (216,474 | \n) | \n\n | $ | \n8.44 | \n\n | \n | \n | \n | \n | \n |
| Outstanding end of period | \n \n | \n | 3,345,146 | \n\n | \n | $ | \n2.93 | \n\n | 4.3 | \n \n | $ | \n24,910 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Options vested or expected to vest at end of period | \n \n | \n | 3,241,485 | \n\n | \n | $ | \n2.93 | \n\n | 4.2 | \n \n | $ | \n24,141 | \n\n |
| Exercisable at June 28, 2015 | \n \n | \n | 2,095,246 | \n\n | \n | $ | \n3.04 | \n\n | 3.1 | \n \n | $ | \n15,371 | \n\n |
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of fiscal 2015 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 28, 2015. This amount changes based on the fair market value of the Company’s stock. The total intrinsic value of options exercised for the years ended June 28, 2015, June 29, 2014 and June 30, 2013 was $3.6 million, $0.4 million, and $0.6 million, respectively.
The following table summarizes information about stock options outstanding at June 28, 2015:
| \n | \n | Options Outstanding | \n \n | \n | Options Exercisable | \n \n | ||||||||||||||
|
Exercise Price | \n \n |
Options Outstanding | \n \n | \n | Weighted- Average Remaining Contractual Life (years) | \n \n | \n | Weighted- Average Exercise Price | \n \n | \n |
Options Exercisable | \n \n | \n | Weighted- Average Exercise Price | \n \n | |||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| $1.69 – 1.79 | \n \n | \n | 1,003,500 | \n\n | \n | \n | 5.3 | \n\n | \n | $ | \n1.79 | \n\n | \n | \n | 501,000 | \n\n | \n | $ | \n1.79 | \n\n |
| $2.22 – 2.88 | \n \n | \n | 1,053,000 | \n\n | \n | \n | 6.3 | \n\n | \n | $ | \n2.62 | \n\n | \n | \n | 422,600 | \n\n | \n | $ | \n2.61 | \n\n |
| $3.11 – 3.11 | \n \n | \n | 959,755 | \n\n | \n | \n | 0.9 | \n\n | \n | $ | \n3.11 | \n\n | \n | \n | 959,755 | \n\n | \n | $ | \n3.11 | \n\n |
| $3.26 – 9.25 | \n \n | \n | 276,391 | \n\n | \n | \n | 4.2 | \n\n | \n | $ | \n6.32 | \n\n | \n | \n | 184,391 | \n\n | \n | $ | \n6.09 | \n\n |
| $9.74 – 10.20 | \n \n | \n | 52,500 | \n\n | \n | \n | 5.9 | \n\n | \n | $ | \n9.99 | \n\n | \n | \n | 27,500 | \n\n | \n | $ | \n9.80 | \n\n |
| \n | \n | \n | 3,345,146 | \n\n | \n | \n | 4.3 | \n\n | \n | $ | \n2.93 | \n\n | \n | \n | 2,095,246 | \n\n | \n | $ | \n3.04 | \n\n |
As of June 28, 2015, the total future compensation cost related to non-vested options not yet recognized in the statement of operations was $1.8 million and the weighted average period over which these awards are expected to be recognized was 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 conditions and, in certain cases, holding periods (Restricted Stock).
The following table summarizes the activity of non-vested restricted stock during the year ended June 28, 2015:
| \n | \n |
Shares | \n \n | \n | Weighted Average Grant Date Fair Value | \n \n | ||
| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Non-vested – beginning of period | \n \n | \n | 2,686,685 | \n\n | \n | $ | \n3.90 | \n\n |
| Granted | \n \n | \n | 976,882 | \n\n | \n | $ | \n8.09 | \n\n |
| Vested | \n \n | \n | (1,154,173 | \n) | \n\n | $ | \n3.48 | \n\n |
| Forfeited | \n \n | \n | (167,342 | \n) | \n\n | $ | \n7.14 | \n\n |
| Non-vested - end of period | \n \n | \n | 2,342,052 | \n\n | \n | $ | \n5.62 | \n\n |
The fair value of non-vested shares is determined based on the closing stock price on the grant date. As of June 28, 2015, there was $8.1 million of total unrecognized compensation cost related to non-vested restricted stock-based compensation to be recognized over a weighted-average period of 2.6 years.
| \n | \n | Years Ended | \n \n | |||||||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | (in thousands, except per share data) | \n \n | |||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Stock options | \n \n | $ | \n459 | \n\n | \n | $ | \n420 | \n\n | \n | $ | \n477 | \n\n |
| Restricted stock awards | \n \n | \n | 5,503 | \n\n | \n | \n | 4,244 | \n\n | \n | \n | 3,806 | \n\n |
| Total | \n \n | \n | 5,962 | \n\n | \n | \n | 4,664 | \n\n | \n | \n | 4,283 | \n\n |
| Deferred income tax benefit | \n \n | \n | 2,087 | \n\n | \n | \n | 1,738 | \n\n | \n | \n | 1,555 | \n\n |
| Stock-based compensation expense, net | \n \n | $ | \n3,875 | \n\n | \n | $ | \n2,926 | \n\n | \n | $ | \n2,728 | \n\n |
| \n | \n | Years Ended | \n \n | |||||||||
| \n | \n | June 28, 2015 | \n \n | \n | July 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | (in thousands) | \n \n | |||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Marketing and sales | \n \n | $ | \n1,866 | \n\n | \n | $ | \n1,261 | \n\n | \n | $ | \n1,499 | \n\n |
| Technology and development | \n \n | \n | 392 | \n\n | \n | \n | 298 | \n\n | \n | \n | 428 | \n\n |
| General and administrative | \n \n | \n | 3,704 | \n\n | \n | \n | 3,105 | \n\n | \n | \n | 2,356 | \n\n |
| Total | \n \n | $ | \n5,962 | \n\n | \n | $ | \n4,664 | \n\n | \n | $ | \n4,283 | \n\n |
| \n | \n | Years ended | \n \n | |||||||||
| \n | \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Weighted average fair value of options granted | \n \n | $ | \n4.86 | \n\n | \n | $ | \n3.16 | \n\n | \n | $ | \n2.95 | \n\n |
| Expected volatility | \n \n | \n | 52 | \n% | \n\n | \n | 61 | \n% | \n\n | \n | 72 | \n% | \n
| Expected life (in years) | \n \n | \n | 7.3 | \n\n | \n | \n | 6.6 | \n\n | \n | \n | 6.4 | \n\n |
| Risk-free interest rate | \n \n | \n | 1.9 | \n% | \n\n | \n | 1.6 | \n% | \n\n | \n | 0.7 | \n% | \n
| Expected dividend yield | \n \n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n\n | \n | 0.0 | \n% | \n
| \n | \n | Options | \n \n | \n | Weighted Average Exercise Price | \n \n | Weighted Average Remaining Contractual Term (in years) | \n \n | Aggregate Intrinsic Value (000s) | \n \n | |||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Outstanding beginning of period | \n \n | \n | 4,339,790 | \n\n | \n | $ | \n3.80 | \n\n | \n | \n | \n | \n | \n |
| Granted | \n \n | \n | 75,000 | \n\n | \n | $ | \n8.83 | \n\n | \n | \n | \n | \n | \n |
| Exercised | \n \n | \n | (853,170 | \n) | \n\n | $ | \n6.44 | \n\n | \n | \n | \n | \n | \n |
| Forfeited/Expired | \n \n | \n | (216,474 | \n) | \n\n | $ | \n8.44 | \n\n | \n | \n | \n | \n | \n |
| Outstanding end of period | \n \n | \n | 3,345,146 | \n\n | \n | $ | \n2.93 | \n\n | 4.3 | \n \n | $ | \n24,910 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Options vested or expected to vest at end of period | \n \n | \n | 3,241,485 | \n\n | \n | $ | \n2.93 | \n\n | 4.2 | \n \n | $ | \n24,141 | \n\n |
| Exercisable at June 28, 2015 | \n \n | \n | 2,095,246 | \n\n | \n | $ | \n3.04 | \n\n | 3.1 | \n \n | $ | \n15,371 | \n\n |
| \n | \n | Options Outstanding | \n \n | \n | Options Exercisable | \n \n | ||||||||||||||
|
Exercise Price | \n \n |
Options Outstanding | \n \n | \n | Weighted- Average Remaining Contractual Life (years) | \n \n | \n | Weighted- Average Exercise Price | \n \n | \n |
Options Exercisable | \n \n | \n | Weighted- Average Exercise Price | \n \n | |||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| $1.69 – 1.79 | \n \n | \n | 1,003,500 | \n\n | \n | \n | 5.3 | \n\n | \n | $ | \n1.79 | \n\n | \n | \n | 501,000 | \n\n | \n | $ | \n1.79 | \n\n |
| $2.22 – 2.88 | \n \n | \n | 1,053,000 | \n\n | \n | \n | 6.3 | \n\n | \n | $ | \n2.62 | \n\n | \n | \n | 422,600 | \n\n | \n | $ | \n2.61 | \n\n |
| $3.11 – 3.11 | \n \n | \n | 959,755 | \n\n | \n | \n | 0.9 | \n\n | \n | $ | \n3.11 | \n\n | \n | \n | 959,755 | \n\n | \n | $ | \n3.11 | \n\n |
| $3.26 – 9.25 | \n \n | \n | 276,391 | \n\n | \n | \n | 4.2 | \n\n | \n | $ | \n6.32 | \n\n | \n | \n | 184,391 | \n\n | \n | $ | \n6.09 | \n\n |
| $9.74 – 10.20 | \n \n | \n | 52,500 | \n\n | \n | \n | 5.9 | \n\n | \n | $ | \n9.99 | \n\n | \n | \n | 27,500 | \n\n | \n | $ | \n9.80 | \n\n |
| \n | \n | \n | 3,345,146 | \n\n | \n | \n | 4.3 | \n\n | \n | $ | \n2.93 | \n\n | \n | \n | 2,095,246 | \n\n | \n | $ | \n3.04 | \n\n |
| \n | \n |
Shares | \n \n | \n | Weighted Average Grant Date Fair Value | \n \n | ||
| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Non-vested – beginning of period | \n \n | \n | 2,686,685 | \n\n | \n | $ | \n3.90 | \n\n |
| Granted | \n \n | \n | 976,882 | \n\n | \n | $ | \n8.09 | \n\n |
| Vested | \n \n | \n | (1,154,173 | \n) | \n\n | $ | \n3.48 | \n\n |
| Forfeited | \n \n | \n | (167,342 | \n) | \n\n | $ | \n7.14 | \n\n |
| Non-vested - end of period | \n \n | \n | 2,342,052 | \n\n | \n | $ | \n5.62 | \n\n |
Note 14. Employee Retirement Plans
The Company has a 401(k) Profit Sharing Plan covering substantially all of its eligible employees. All employees who have attained the age of 21 are eligible to participate upon completion of one month of service. Participants may elect to make voluntary contributions to the 401(k) plan in amounts not exceeding federal guidelines. On an annual basis the Company, as determined by its board of directors, may make certain discretionary contributions. Employees are vested in the Company's contributions based upon years of service. The Company suspended all contributions during fiscal years 2015, 2014 and 2013.
The Company also has a nonqualified supplemental deferred compensation plan for certain executives pursuant to Section 409A of the Internal Revenue Code. Participants can defer from 1% up to a maximum of 100% of salary and performance and non-performance based bonus. The Company will match 50% of the deferrals made by each participant during the applicable period, up to a maximum of $2,500. Employees are vested in the Company's contributions based upon years of participation in the plan. Distributions will be made to participants upon termination of employment or death in a lump sum, unless installments are selected. As of June 28, 2015 and June 29, 2014, these plan liabilities, which are included in Other liabilities within the Company’s Consolidated Balance Sheet, totaled $3.1 million and $2.1 million, respectively. The associated plan assets, which are subject to the claims of the creditors, are primarily invested in mutual funds and are included in Other assets-long term. Company contributions during the years ended June 28, 2015, June 29, 2014 and June 30, 2013 were less than $0.1 million. Gains and losses on these investments, were $0.2 million, $0.3 million and $0.2 million for the years ended June 28, 2015, June 29, 2014 and June 30, 2013, are included in Interest expense and other, net, within the Company’s Consolidated Statements of Income.
Note 15. Business Segments
The Company’s management reviews the results of the Company’s operations by the following three business segments:
| • | \n 1-800-Flowers.com Consumer Floral, | \n
| • | \n BloomNet Wire Service, and | \n
| • | \n Gourmet Food and Gift Baskets | \n
Segment performance is measured based on contribution margin, which includes only the direct controllable revenue and operating expenses of the segments. As such, management’s measure of profitability for these segments does not include the effect of corporate overhead (see (2) below), nor does it include depreciation and amortization, other income/expense and income taxes, or stock-based compensation and certain Harry & David transaction/integration costs, both of which are included within corporate overhead. Assets and liabilities are reviewed at the consolidated level by management and not accounted for by segment.
| \n | \n | Years ended | \n \n | |||||||||
|
Net revenues | \n \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | (in thousands) | \n\n | |||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Net revenues: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| 1-800-Flowers.com Consumer Floral | \n \n | $ | \n422,199 | \n\n | \n | $ | \n421,336 | \n\n | \n | $ | \n411,526 | \n\n |
| BloomNet Wire Service (1) | \n \n | \n | 85,968 | \n\n | \n | \n | 84,199 | \n\n | \n | \n | 81,822 | \n\n |
| Gourmet Food & Gift Baskets (1) | \n \n | \n | 613,953 | \n\n | \n | \n | 251,990 | \n\n | \n | \n | 243,225 | \n\n |
| Corporate | \n \n | \n | 1,020 | \n\n | \n | \n | 797 | \n\n | \n | \n | 789 | \n\n |
| Intercompany eliminations | \n \n | \n | (1,634 | \n) | \n\n | \n | (1,977 | \n) | \n\n | \n | (1,865 | \n) | \n
| Total net revenues | \n \n | $ | \n1,121,506 | \n\n | \n | $ | \n756,345 | \n\n | \n | $ | \n735,497 | \n\n |
| \n | \n | Years ended | \n \n | |||||||||
|
Operating Income from Continuing Operations | \n \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | (in thousands) | \n\n | |||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Segment Contribution Margin: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| 1-800-Flowers.com Consumer Floral | \n \n | $ | \n43,529 | \n\n | \n | $ | \n40,252 | \n\n | \n | $ | \n47,193 | \n\n |
| BloomNet Wire Service (1) | \n \n | \n | 29,398 | \n\n | \n | \n | 26,715 | \n\n | \n | \n | 25,611 | \n\n |
| Gourmet Food & Gift Baskets (1) | \n \n | \n | 74,889 | \n\n | \n | \n | 27,122 | \n\n | \n | \n | 20,345 | \n\n |
| Segment Contribution Margin Subtotal | \n \n | \n | 147,816 | \n\n | \n | \n | 94,089 | \n\n | \n | \n | 93,149 | \n\n |
| Corporate (2) | \n \n | \n | (81,075 | \n) | \n\n | \n | (50,535 | \n) | \n\n | \n | (48,565 | \n) | \n
| Depreciation and amortization | \n \n | \n | (29,124 | \n) | \n\n | \n | (19,848 | \n) | \n\n | \n | (18,798 | \n) | \n
| Operating income | \n \n | $ | \n37,617 | \n\n | \n | $ | \n23,706 | \n\n | \n | $ | \n25,786 | \n\n |
|
| \n (1) | \n Refer to Note 18 - Fire at the Fannie May warehouse and distribution facility. On November 27, 2014, a fire occurred at the Company's Maple Heights, Ohio warehouse and distribution facility. As a result of the fire, the Company had limited supplies of its Fannie May Fine Chocolates and Harry London Chocolates products available in its retail stores as well as for its ecommerce and wholesale channels during its fiscal second and third quarter. As a result, the Company’s revenues and income from operations were negatively impacted. The Company does not believe that there will be any further significant impact from this issue beyond the year ended June 28, 2015. | \n
|
| \n (2) | \n 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, and during the year ended June 28, 2015 acquisition and integration costs (including severance) related to the acquisition of Harry & David, in the amount of $9.6 million. 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 segments based upon usage, are included within corporate expenses, as they are not directly allocable to a specific segment. The Company has commenced integrating Harry & David into its operating platforms, and as such, their operating costs have been classified in a similar manner. | \n
| \n | \n | Years ended | \n \n | |||||||||
|
Net revenues | \n \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | (in thousands) | \n\n | |||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Net revenues: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| 1-800-Flowers.com Consumer Floral | \n \n | $ | \n422,199 | \n\n | \n | $ | \n421,336 | \n\n | \n | $ | \n411,526 | \n\n |
| BloomNet Wire Service (1) | \n \n | \n | 85,968 | \n\n | \n | \n | 84,199 | \n\n | \n | \n | 81,822 | \n\n |
| Gourmet Food & Gift Baskets (1) | \n \n | \n | 613,953 | \n\n | \n | \n | 251,990 | \n\n | \n | \n | 243,225 | \n\n |
| Corporate | \n \n | \n | 1,020 | \n\n | \n | \n | 797 | \n\n | \n | \n | 789 | \n\n |
| Intercompany eliminations | \n \n | \n | (1,634 | \n) | \n\n | \n | (1,977 | \n) | \n\n | \n | (1,865 | \n) | \n
| Total net revenues | \n \n | $ | \n1,121,506 | \n\n | \n | $ | \n756,345 | \n\n | \n | $ | \n735,497 | \n\n |
| \n | \n | Years ended | \n \n | |||||||||
|
Operating Income from Continuing Operations | \n \n | June 28, 2015 | \n \n | \n | June 29, 2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | (in thousands) | \n\n | |||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Segment Contribution Margin: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| 1-800-Flowers.com Consumer Floral | \n \n | $ | \n43,529 | \n\n | \n | $ | \n40,252 | \n\n | \n | $ | \n47,193 | \n\n |
| BloomNet Wire Service (1) | \n \n | \n | 29,398 | \n\n | \n | \n | 26,715 | \n\n | \n | \n | 25,611 | \n\n |
| Gourmet Food & Gift Baskets (1) | \n \n | \n | 74,889 | \n\n | \n | \n | 27,122 | \n\n | \n | \n | 20,345 | \n\n |
| Segment Contribution Margin Subtotal | \n \n | \n | 147,816 | \n\n | \n | \n | 94,089 | \n\n | \n | \n | 93,149 | \n\n |
| Corporate (2) | \n \n | \n | (81,075 | \n) | \n\n | \n | (50,535 | \n) | \n\n | \n | (48,565 | \n) | \n
| Depreciation and amortization | \n \n | \n | (29,124 | \n) | \n\n | \n | (19,848 | \n) | \n\n | \n | (18,798 | \n) | \n
| Operating income | \n \n | $ | \n37,617 | \n\n | \n | $ | \n23,706 | \n\n | \n | $ | \n25,786 | \n\n |
Note 16. Discontinued Operations
During the fourth quarter of fiscal 2013, the Company made the strategic decision to divest the e-commerce and procurement businesses of its Winetasting Network subsidiary in order to focus on growth opportunities in its Gourmet Foods and Gift Baskets business segment. The Company closed on the sale of its e-commerce and procurement businesses on December 31, 2013. The Company had originally estimated a loss of $2.3 million ($1.5 million, net of tax), which was provided for during the fourth quarter of fiscal 2013, but the loss was reduced to $1.0 million, upon finalization of terms and closing on the sale. As a result, the Company reversed $1.3 million ($0.8 million, net of tax) of its accrual for the estimated loss during the fiscal year ended June 29, 2014. The Company has classified the results of the e-commerce and procurement business of The Winetasting Network as a discontinued operation for the fiscal years 2014 and 2013.
Results for discontinued operations are as follows:
| \n | \n | \n | \n | \n | \n | Years Ended | \n \n | \n | \n | \n | \n | |
| \n | \n | June 28, 2015 | \n \n | \n | June 29,2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | (in thousands, except per share data) | \n \n | |||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Net revenues from discontinued operations | \n \n | $ | \n- | \n\n | \n | $ | \n1,669 | \n\n | \n | $ | \n5,154 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Loss from discontinued operations, net of tax | \n \n | $ | \n- | \n\n | \n | $ | \n(86 | \n) | \n\n | $ | \n(1,889 | \n) | \n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Gain (loss) on sale of discontinued operations, net of tax | \n \n | $ | \n- | \n\n | \n | $ | \n815 | \n\n | \n | $ | \n(1,512 | \n) | \n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Income (loss) from discontinued operations | \n \n | $ | \n- | \n\n | \n | $ | \n729 | \n\n | \n | $ | \n(3,401 | \n) | \n
| \n | \n | \n | \n | \n | \n | Years Ended | \n \n | \n | \n | \n | \n | |
| \n | \n | June 28, 2015 | \n \n | \n | June 29,2014 | \n \n | \n | June 30, 2013 | \n \n | |||
| \n | \n | (in thousands, except per share data) | \n \n | |||||||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Net revenues from discontinued operations | \n \n | $ | \n- | \n\n | \n | $ | \n1,669 | \n\n | \n | $ | \n5,154 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Loss from discontinued operations, net of tax | \n \n | $ | \n- | \n\n | \n | $ | \n(86 | \n) | \n\n | $ | \n(1,889 | \n) | \n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Gain (loss) on sale of discontinued operations, net of tax | \n \n | $ | \n- | \n\n | \n | $ | \n815 | \n\n | \n | $ | \n(1,512 | \n) | \n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Income (loss) from discontinued operations | \n \n | $ | \n- | \n\n | \n | $ | \n729 | \n\n | \n | $ | \n(3,401 | \n) | \n
Note 17. Commitments and Contingencies
Leases
The Company currently leases office, store facilities, and equipment under various leases through fiscal 2030. As these leases expire, it can be expected that in the normal course of business they will be renewed or replaced. Most lease agreements 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 has also entered into leases that are on a month-to-month basis. These leases are classified as either capital leases, operating leases or subleases, as appropriate.
As of June 28, 2015 future minimum rental payments under non-cancelable operating leases with initial terms of one year or more consist of the following:
| \n | \n | Operating Leases | \n \n | |
| \n | \n | (in thousands) | \n \n | |
| \n | \n | \n | \n | \n |
| 2016 | \n \n | $ | \n24,338 | \n\n |
| 2017 | \n \n | \n | 20,940 | \n\n |
| 2018 | \n \n | \n | 15,980 | \n\n |
| 2019 | \n \n | \n | 12,658 | \n\n |
| 2020 | \n \n | \n | 9,826 | \n\n |
| Thereafter | \n \n | \n | 52,195 | \n\n |
| Total minimum lease payments | \n \n | $ | \n135,937 | \n\n |
At June 28, 2015, the total future minimum sublease rentals under non-cancelable operating sub-leases for land and buildings were $3.0 million.
Rent expense was approximately $28.3 million, $17.7 million and $17.7 million for the years ended June 28, 2015, June 29, 2014 and June 30, 2013, respectively.
Other Commitments
The Company’s purchase commitments consist primarily of inventory, equipment and technology purchase orders made in the ordinary course of business, most of which have terms less than one year. As of June 28, 2015, the Company had fixed and determinable off-balance sheet purchase commitments with remaining terms in excess of one year of approximately $4.9 million, primarily related to the Company’s technology infrastructure.
The Company had approximately $2.5 million in unused stand-by letters of credit as of June 28, 2015.
Litigation
From time to time, the Company is subject to legal proceedings and claims arising in the ordinary course of business:
In re Trilegiant Corporation, Inc. (Frank v.Trilegiant Corporation, Inc., et al):
On November 10, 2010, a purported class action complaint was filed in the United States District Court for the Eastern District of New York naming the Company (along with Trilegiant Corporation, Inc., Affinion, Inc. and Chase Bank USA, N.A.) as defendants in an action purporting to assert claims against the Company alleging violations arising under the Connecticut Unfair Trade Practices Act (\"CUTPA\") among other statutes, and for breach of contract and unjust enrichment in connection with certain post-transaction marketing practices in which certain of the Company's subsidiaries previously engaged in with certain third-party vendors. On December 23, 2011, plaintiff filed a notice of voluntary dismissal seeking to dismiss the entire action without prejudice. The court entered an Order on November 28, 2012, dismissing the case in its entirety. This case was subsequently refiled in the United States District Court for the District of Connecticut.
On March 6, 2012 and March 15, 2012, two additional purported class action complaints were filed in the United States District Court for the District of Connecticut naming the Company and numerous other parties as defendants in actions purporting to assert claims substantially similar to those asserted in the lawsuit filed on November 10, 2010. In each case, plaintiffs seek to have the respective case certified as a class action and seek restitution and other damages, each in an amount in excess of $5.0 million. On April 26, 2012, the two Connecticut cases were consolidated with a third case previously pending in the United States District Court for the District of Connecticut in which the Company is not a party (the \"Consolidated Action\"). A consolidated amended complaint was filed by plaintiffs on September 7, 2012, purporting to assert claims substantially similar to those originally asserted. The Company moved to dismiss the consolidated amended complaint on December 7, 2012, which was subsequently refiled at the direction of the Court on January 16, 2013.
On December 5, 2012, the same plaintiff from the action voluntarily dismissed in the United States District Court for the Eastern District of New York filed a purported class action complaint in the United States District Court for the District of Connecticut naming the Company and numerous other parties as defendants, purporting to assert claims substantially similar to those asserted in the consolidated amended complaint (the “Frank Action”). On January 23, 2013, plaintiffs in the Consolidated Action filed a motion to transfer and consolidate the action filed on December 5, 2012 with the Consolidated Action. The Company intends to defend each of these actions vigorously.
On January 31, 2013, the court issued an order to show cause directing plaintiffs' counsel in the Frank Action, also counsel for plaintiffs in the Consolidated Action, to show cause why the Frank Action is distinguishable from the Consolidated Action such that it may be maintained despite the prior-pending action doctrine. On June 13, 2013, the court issued an order in the Frank Action suspending deadlines to answer or to otherwise respond to the complaint until 21 days after the court decides whether the Frank Action should be consolidated with the Consolidated Action. On July 24, 2013 the Frank Action was reassigned to Judge Vanessa Bryant, before whom the Consolidated Action is currently pending, for all further proceedings. On August 14, 2013, other defendants filed a motion for clarification in the Frank Action requesting that Judge Bryant clarify the order suspending deadlines.
On March 28, 2014, the Court issued a series of rulings disposing of all the pending motions in both the Consolidated Action and the Frank Action. Among other things, the Court dismissed several causes of action, leaving pending a claim for CUTPA violations stemming from Trilegiant’s refund mitigation strategy and a claim for unjust enrichment. Thereafter, the Court consolidated the Frank case into the Consolidated Action. On April 28, 2014 plaintiffs moved for leave to appeal the various rulings against them to the United States Court of Appeals for the Second Circuit and to have a partial final judgment entered dismissing those claims that the Court had ordered dismissed. The Company filed its Answer to the Complaint on May 12, 2014. On March 26, 2015, the Court denied plaintiffs’ motions and the parties are now engaged in discovery.
Edible Arrangements:
On November 20, 2014, a complaint was filed in the United States District Court for the District of Connecticut by Edible Arrangements LLC and Edible Arrangements International, LLC, alleging that the Company’s use of the terms “Fruit Bouquets,” “Edible,” “Bouquet,” “Edible Fruit Arrangements,” Edible Arrangements,” and “DoFruit” and its use of a six petal pineapple slice design in connection with marketing and selling edible fruit arrangements constitutes trademark infringement, false designation of origin, dilution, and contributory infringement under the federal Lanham Act, 29 USC § 1114 and 1125(a), common law unfair competition, and a violation of the Connecticut Unfair Trade Practices Act, Connecticut General Statutes § 42-110b (a). The Complaint alleges Edible Arrangements has been damaged in the amount of $97,411,000. The Complaint requests a declaratory judgment in favor of Edible Arrangements, an injunction against the Company’s use of the terms and design, an accounting and payment of the Company’s profits from its sale of edible fruit arrangements, a trebling of the Company’s profits from such sales or of any damages sustained by Edible Arrangements, punitive damages, and attorneys’ fees. On November 24, 2014, the Complaint was amended to add a breach of contract claim for use of these terms and the design, based on a contract that had been entered by one of the Company’s remote subsidiaries prior to its acquisition by the Company.
On January 29, 2015, the Plaintiffs amended the Complaint to add one of the Company’s subsidiaries and to claim its damages were $ 101,436,000. The Company filed an Answer and a Counterclaim on February 27, 2015. The Answer asserts substantial defenses, including fair use by the Company of generic and descriptive terms, as expressly permitted under the Lanham Act, invalidity of Edible Arrangements’ trademark registrations on grounds of fraud and trademark misuse, lack of exclusive rights on the part of Edible Arrangements, functionality of the claimed design mark, acquiescence, estoppel, and Edible Arrangements’ use of the claimed trademarks in violation of the antitrust laws.
The Counterclaim seeks a declaratory judgment of lack of infringement and invalidity of claimed marks, cancellation of Edible Arrangements’ registrations due to its fraud and misuse, genericism, and lack of secondary meaning as to any terms deemed descriptive, and damages in an amount to be determined for violation of the antitrust provisions of the federal Sherman Act and the Connecticut Unfair Trade Practices Act.
Discovery has begun and Edible Arrangements filed a motion to dismiss the Company’s Sherman Act and Connecticut Unfair Trade Practices Act claims. The Company filed its brief in opposition to the motion to dismiss on July 10, 2015. The parties are awaiting a decision from the Court. By Order dated May 4, 2015, the court ordered a phasing of the case and bifurcated the antitrust Counterclaim from the infringement claims.
The Company believes its Counterclaims to the Edible Arrangements’ claims are meritorious and that there are substantial defenses to both of the claims above and expects to defend the claims vigorously.
There are no assurances that additional legal actions will not be instituted in connection with the Company’s former post-transaction marketing practices involving third party vendors nor can we predict the outcome of any such legal action. At this time, we are unable to estimate a possible loss or range of possible loss for the aforementioned actions for various reasons, including, among others: (i) the damages sought are indeterminate, (ii) the proceedings are in the very early stages and in the Frank v. Trilegiant Corporation, Inc. matter, the court has not yet ruled as to whether the classes will be certified, and (iii) there is uncertainty as to the outcome of pending motions. As a result of the foregoing, we have determined that the amount of possible loss or range of loss is not reasonably estimable. However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which may be beyond our control.
| \n | \n | Operating Leases | \n \n | |
| \n | \n | (in thousands) | \n \n | |
| \n | \n | \n | \n | \n |
| 2016 | \n \n | $ | \n24,338 | \n\n |
| 2017 | \n \n | \n | 20,940 | \n\n |
| 2018 | \n \n | \n | 15,980 | \n\n |
| 2019 | \n \n | \n | 12,658 | \n\n |
| 2020 | \n \n | \n | 9,826 | \n\n |
| Thereafter | \n \n | \n | 52,195 | \n\n |
| Total minimum lease payments | \n \n | $ | \n135,937 | \n\n |
Note 18. Fire at the Fannie May Warehouse and Distribution Facility
On November 27, 2014, a fire occurred at the Company's Maple Heights, Ohio warehouse and distribution facility. While the fire did not cause any injuries, the building was severely damaged, rendering it inoperable for the key calendar 2014 holiday season, and all Fannie May and Harry London confections in the facility were destroyed. As a result, the Company had limited supplies of its Fannie May Fine Chocolates and Harry London Chocolates products available in its retail stores as well as for its ecommerce and wholesale channels during the holiday season. While the Company implemented contingency plans to increase production for Fannie May Fine Chocolates and Harry London Chocolates products at its production facility in Canton, Ohio and to shift warehousing and distribution operations to alternate Company facilities, product availability was severely limited, impacting revenue and earnings during the fiscal second and third quarters of fiscal 2015. The Company does not believe that there will be any further significant impact on revenues from this issue beyond the year ended June 28, 2015.
While no insurance recoveries have been recorded to date related to lost sales, the Company expects that its property and business interruption insurance will cover these losses.
The following table reflects the incremental costs related to the fire and related insurance recovery for the year ended June 28, 2015:
| Loss on inventory | \n \n | $ | \n29,522 | \n\n |
| Other fire related costs | \n \n | \n | 3,487 | \n\n |
| \n | \n | \n | 33,009 | \n\n |
| Less: Fire related recoveries | \n \n | \n | (33,009 | \n ) | \n
| Fire related charges, net | \n \n | $ | \n— | \n\n |
Through June 28, 2015, the Company has incurred fire related costs totaling $33.0 million, including a $29.5 million write-down of inventory. Based on the provisions of the Company's insurance policies and management's estimates, the losses incurred have been reduced by the estimated insurance recoveries. The Company has determined that recovery of the incurred losses, including amounts related to the retentions described above, is probable and recorded $33.0 million of insurance recoveries through June 28, 2015. Through June 28, 2015, the Company received $30.0 million of insurance proceeds, representing an advance of funds. As a result, the insurance receivable balance was $3.0 million as of June 28, 2015.
| Loss on inventory | \n \n | $ | \n29,522 | \n\n |
| Other fire related costs | \n \n | \n | 3,487 | \n\n |
| \n | \n | \n | 33,009 | \n\n |
| Less: Fire related recoveries | \n \n | \n | (33,009 | \n ) | \n
| Fire related charges, net | \n \n | $ | \n— | \n\n |
Schedule II - Valuation and Qualifying Accounts
| \n | \n | \n | \n | \n | \n | Additions | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | |||||
| Description | \n \n | Balance at Beginning of Period | \n \n | \n | Charged to Costs and Expenses | \n \n | \n | Charged to Other Accounts- Describe | \n \n | \n |
Deductions- Describe (a) | \n \n | \n | Balance at End of Period | \n \n | |||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Reserves and allowances deducted from asset accounts: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Reserve for estimated doubtful accounts-accounts/notes receivable | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Year Ended June 28, 2015 | \n \n | $ | \n2,443,000 | \n\n | \n | $ | \n1,295,000 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n(1,503,000 | \n) | \n\n | $ | \n2,235,000 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Year Ended June 29, 2014 | \n \n | $ | \n2,488,000 | \n\n | \n | $ | \n1,656,000 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n(1,701,000 | \n) | \n\n | $ | \n2,443,000 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Year Ended June 30, 2013 | \n \n | $ | \n2,408,000 | \n\n | \n | $ | \n1,085,000 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n(1,005,000 | \n) | \n\n | $ | \n2,488,000 | \n\n |
(a) Reduction in reserve due to write-off of accounts/notes receivable balances.
| \n | \n | \n | \n | \n | \n | Additions | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | |||||
| Description | \n \n | Balance at Beginning of Period | \n \n | \n | Charged to Costs and Expenses | \n \n | \n | Charged to Other Accounts- Describe | \n \n | \n |
Deductions- Describe (a) | \n \n | \n | Balance at End of Period | \n \n | |||||
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Reserves and allowances deducted from asset accounts: | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Reserve for estimated doubtful accounts-accounts/notes receivable | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Year Ended June 28, 2015 | \n \n | $ | \n2,443,000 | \n\n | \n | $ | \n1,295,000 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n(1,503,000 | \n) | \n\n | $ | \n2,235,000 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Year Ended June 29, 2014 | \n \n | $ | \n2,488,000 | \n\n | \n | $ | \n1,656,000 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n(1,701,000 | \n) | \n\n | $ | \n2,443,000 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Year Ended June 30, 2013 | \n \n | $ | \n2,408,000 | \n\n | \n | $ | \n1,085,000 | \n\n | \n | $ | \n- | \n\n | \n | $ | \n(1,005,000 | \n) | \n\n | $ | \n2,488,000 | \n\n |