1 800 FLOWERS COM INC 10-K

Item 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of June 30, 2024. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have each concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2024. Management ’ s Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effectuated by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), and includes those policies and procedures that: ● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; ● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made in accordance with authorization of management and directors of the Company; and ● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management, including the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, management concluded that the Company’s internal control over financial reporting was effective as of June 30, 2024. The Company’s independent registered public accounting firm, BDO USA, P.C., audited the effectiveness of the Company’s internal control over financial reporting as of June 30, 2024. BDO USA, P.C.’s report on the effectiveness of the Company’s internal control over financial reporting as of June 30, 2024 is set forth below. Limitations on Effectiveness of Controls and Procedures Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Changes in Internal Control Over Financial Reporting There was no change in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), during the three months ended June 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 39 Table of Contents Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders 1-800-FLOWERS.COM, Inc. Jericho, NY Opinion on Internal Control over Financial Reporting We have audited 1-800-FLOWERS.COM, Inc.'s (the “Company’s”) internal control over financial reporting as of June 30, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2024, based on the COSO criteria . We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of June 30, 2024 and July 2, 2023, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2024, and the related notes and schedule and our report dated September 6, 2024 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. De finition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ BDO USA, P.C. Melville, New York September 6, 2024 40 Table of Contents Item 9B. OTHER INFORMATION Rule 10b5 - 1 Plans During the three months ended June 30, 2024, none of the directors or executive officers adopted or terminated a "Rule 10b5 - 1 trading arrangement" or a "non-rule 10b5 - 1 trading arrangement", as defined in the item 408 of Regulation S-K. Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by Item 10 of Part III with respect to directors, executive officers, audit committee and audit committee financial experts of the Company and Section 16(a) beneficial ownership reporting compliance will be included in our Proxy Statement relating to our 2024 annual meeting of stockholders and is incorporated herein by reference. The Company maintains a Code of Business Conduct and Ethics, which is applicable to all directors, officers and employees on the Investor Relations-Corporate Governance tab of the Company’s investor relations website (investor.1800flowers.com), which is also accessible through a link at the bottom of the main Company page at www.1800flowers.com. Any amendment or waiver to the Code of Business Conduct and Ethics that applies to our directors or executive officers will be posted on our website or in a report filed with the SEC on Form 8-K to the extent required by applicable law or the regulations of any exchange applicable to the Company. A copy of the Code of Business Conduct and Ethics is available without charge upon written request to: Investor Relations, 1-800-FLOWERS.COM, Inc., Two Jericho Plaza, Suite 200, Jericho, New York 11753. Item 11. EXECUTIVE COMPENSATION The information required by Item 11 of Part III will be included in our Proxy Statement relating to our 2024 annual meeting of stockholders and is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by Item 12 of Part III will be included in our Proxy Statement relating to our 2024 annual meeting of stockholders and is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by Item 13 of Part III will be included in our Proxy Statement relating to our 2024 annual meeting of stockholders and is incorporated herein by reference. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by Item 14 of Part III will be included in our Proxy Statement relating to our 2024 annual meeting of stockholders and is incorporated herein by reference. 41 Table of Contents PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) (1) Index to Consolidated Financial Statements: Page Report of Independent Registered Public Accounting Firm ( BDO USA, P.C .; Melville, NY ; PCAOB ID# 243 ) F-1 Consolidated Balance Sheets as of June 30, 2024 and July 2, 2023 F-2 Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended June 30, 2024, July 2, 2023 and July 3, 2022 F-3 Consolidated Statements of Stockholders ’ Equity for the years ended June 30, 2024, July 2, 2023 and July 3, 2022 F-4 Consolidated Statements of Cash Flows for the years ended June 30, 2024, July 2, 2023 and July 3, 2022 F-5 Notes to Consolidated Financial Statements F-6 (a) (2) Index to Financial Statement Schedule: Schedule II- Valuation and Qualifying Accounts F-28 All other information and financial statement schedules are omitted because they are not applicable, or required, or because the required information is included in the consolidated financial statements or notes thereto. (a) (3) Index to Exhibits Exhibits marked with an asterisk (*) are incorporated by reference to exhibits or appendices previously filed with the SEC, as indicated by the reference in parentheses. All other exhibits are filed herewith. Exhibits 10.1, 10.2, 10.3, 10.4. 10.5, 10.6, 10.7, 10.8, 10.9, 10.10, 10.11, 10.14, 10.15, 10.16, and 10.17 are management contracts or compensatory plans or arrangements. Exhibit Description *2.1 Equity Purchase Agreement dated as of February 14, 2020, by an among 1-800-Flowers.com, Inc., 800-Flowers, Inc. PersonalizationMall.com, LLC, and Bed Bath & Beyond Inc. (Current Report on Form 8-K filed on February 18, 2020, Exhibit 2.1) *3.1 Third Amended and Restated Certificate of Incorporation. (Quarterly Report on Form 10-Q filed on February 10, 2017, Exhibit 3.1) *3.2 Amendment No. 1 to Third Amended and Restated Certificate of Incorporation. (Registration Statement on Form S-1/A (No. 333-78985) filed on July 22, 1999, Exhibit 3.2) *3.3 Amendment No. 2 to Third Amended and Restated Certificate of Incorporation. (Current Report on Form 8-K filed on December 15, 2016, Exhibit 3.1) *3.4 Second Amended and Restated By-laws. (Current Report on Form 8-K filed on April 29, 2019, Exhibit 3.2) *4.1 Specimen Class A common stock certificate. (Registration Statement on Form S-1/A (No. 333-78985 filed on July 9, 1999, Exhibit 4.1) *4.2 Description of Securities. (Annual Report on Form 10-K filed on September 13, 2019, Exhibit 4.2) *10.1 Employment Agreement made October 4, 2016, effective as of July 4, 2016, between 1-800-Flowers.com, Inc. and James F. McCann (Current report on form 8-K filed on October 6, 2016, Exhibit 10.1) *10.2 Employment Agreement made October 4, 2016, effective as of July 4, 2016, between 1-800-Flowers.com, Inc. and Christopher G. McCann (Current report on form 8-K filed on October 6, 2016, Exhibit 10.2) *10.3 Section 16 Executive Officer’s Bonus Plan (as amended and restated as of September 14, 2016) (Quarterly Report on Form 10-Q filed on February 10, 2017, Exhibit 10.2) *10.4 Nonqualified Supplemental Deferred Compensation Plan dated December 21, 2010 (Quarterly Report on Form 10-Q filed on November 14, 2016, Exhibit 10.24) *10.5 2003 Long Term Incentive and Share Award Plan (as amended and restated as of October 15, 2020) (Proxy Statement on Form 14(a) filed on December 9, 2020, Annex A). *10.6 Form of Restricted Share Agreement under 2003 Long Term Incentive and Share Award Plan. (Annual Report on Form 10-K for the fiscal year ended June 29, 2008 filed on September 12, 2008, Exhibit 10.15) *10.7 Form of Incentive Stock Option Agreement under 2003 Long Term Incentive and Share Award Plan. (Annual Report on Form 10-K for the fiscal year ended June 29, 2008 filed on September 12, 2008, Exhibit 10.16) *10.8 Form of Non-statutory Stock Option Agreement under 2003 Long Term Incentive and Share Award Plan. (Annual Report on Form 10-K for the fiscal year ended June 29, 2008 filed on September 12, 2008, Exhibit 10.17) *10.9 Form of Restricted Share Agreement under 2003 Long Term Incentive and Share Award Plan (Quarterly Report on Form 10-Q filed on February 10, 2012, Exhibit 10.20) *10.10 Form of Performance Restricted Share Agreement under 2003 Long Term Incentive and Share Award Plan (Quarterly Report on Form 10-Q filed on February 10, 2012, Exhibit 10.21) *10.11 Form of Non-Statutory Stock Option Agreement under 2003 Long Term Incentive and Share Award Plan (Quarterly Report on Form 10-Q filed on February 10, 2012, Exhibit 10.22) *10.12 Amendment to Equity Purchase Agreement dated July 20, 2020 (Current Report on Form 8-K filed on July 22, 2020, Exhibit 10.1) *10.13 Third Amended and Restated Credit Agreement, dated as of June 27, 2023, among 1-800-FLOWERS.COM, INC., the subsidiary borrowers party thereto, the subsidiary guarantors party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (Current Report on Form 8-K filed on June 28, 2023, Exhibit 10.1) *10.14 James F. McCann Consent Letter, dated June 29, 2023 (Annual Report on Form 10-K for the fiscal year ended July 2, 2023 filed on September 15, 2023, Exhibit 10.14) *10.15 Christopher G. McCann Resignation Letter, dated June 29, 2023 (Annual Report on Form 10-K for the fiscal year ended July 2, 2023 filed on September 15, 2023, Exhibit 10.15) *10.16 Consulting Agreement, dated as of December 20, 2023, between 1-800-FLOWERS.COM, Inc., and Hanft Ideas LLC and Adam Hanft. (Quarterly Report on Form 10-Q filed on February 8, 2024, Exhibit 10.1) *10.17 Appointment Letter from 1-800-FLOWERS.COM, Inc. to Christopher G. McCann, dated December 31, 2023 (Current Report on Form 8-K filed on January 2, 2024, Exhibit 99.1) 19.1 Policy on the Prevention of Insider Trading for 1-800-FLOWERS.COM, Inc. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Independent Registered Public Accounting Firm. 31.1 Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97.1 1-800-FLOWERS.COM, Inc. Clawback Policy 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Document 101.PRE Inline XBRL Taxonomy Definition Presentation Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) Item 16. FORM 10-K SUMMARY Not applicable. 42 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: September 6, 2024 1-800-FLOWERS.COM, Inc. By : /s/ James F. McCann James F. McCann Executive Chairman, Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated below: Dated: September 6, 2024 By : /s/ James F. McCann James F. McCann Executive Chairman, Chief Executive Officer (Principal Executive Officer) Dated: September 6, 2024 By : /s/ William E. Shea William E. Shea Senior Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) Dated: September 6, 2024 By : /s/ Christopher G. McCann Christopher G. McCann Director Dated: September 6, 2024 By : /s/ Celia R. Brown Celia R. Brown Director Dated: September 6, 2024 By : /s/ James A. Cannavino James A. Cannavino Director Dated: September 6, 2024 By : /s/ Dina M. Colombo Dina Colombo Director Dated: September 6, 2024 By : /s/ Eugene F. DeMark Eugene F. DeMark Director Dated: September 6, 2024 By : /s/ Leonard J. Elmore Leonard J. Elmore Director Dated: September 6, 2024 By : /s/ Adam Hanft Adam Hanft Director Dated: September 6, 2024 By : /s/ Stephanie Redish Hofmann Stephanie Redish Hofmann Director Dated: September 6, 2024 By : /s/ Christina Shim Christina Shim Director Dated: September 6, 2024 By : /s/ Larry Zarin Larry Zarin Director 43 Table of Contents Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders 1-800-FLOWERS.COM, Inc. Jericho, NY Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of 1-800-FLOWERS.COM, Inc. (the “Company”) as of June 30, 2024 and July 2, 2023, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2024, and the related notes and schedule (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2024 and July 2, 2023 and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2024 , in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of June 30, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated September 6, 2024 expressed an unqualified opinion thereon. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Indefinite-lived Intangible Asset – PersonalizationMall Tradename As described in Note 2 and Note 6 to the consolidated financial statements, the Company’s consolidated balance for trademarks with indefinite lives was $111.5 million as of June 30, 2024. During its quarterly assessment in the second quarter of fiscal year 2024, as a result of a decline in the actual and projected revenue for the Company’s PersonalizationMall tradename (an indefinite-lived intangible asset), as well as a higher discount rate resulting from the higher interest rate environment, the Company determined that an impairment assessment was required for this tradename. The Company’s impairment test for its PersonalizationMall tradename encompassed calculating the fair value of the asset and comparing that result to its carrying value. To determine the fair value, the Company used an income approach, the relief-from-royalty method. The quarterly assessment resulted in the Company recording a non-cash impairment charge of $19.8 million to reduce the recorded carrying value of the PersonalizationMall tradename. The Company also performed a quantitative test during the fourth quarter of fiscal year 2024, which determined that the estimated fair value of the PersonalizationMall tradename exceeded its carrying value. We identified the forecasted long-term terminal growth rate, discount rate, and royalty rate included in the relief-from-royalty method for the valuation of the PersonalizationMall tradename during the second and fourth quarter of fiscal year 2024 as a critical audit matter. The principal considerations for our determination included the subjectivity and judgment required to determine the forecasted long term terminal growth rate, discount rate and royalty rate. Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skills or knowledge needed. The primary procedure we performed to address this critical audit matter included: ● Utilizing personnel with specialized skills and knowledge in valuation to assist in evaluating the reasonableness of the forecasted long-term terminal growth rate, discount rate and royalty rate. We have served as the Company's auditor since 2014. /s/ BDO USA, P.C. Melville, NY September 6, 2024 F-1 Table of Contents 1-800-FLOWERS.COM, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except share data) June 30, 2024 July 2, 2023 Assets Current assets: Cash and cash equivalents $ 159,437 $ 126,807 Trade receivables, net 18,024 20,419 Inventories 176,591 191,334 Prepaid and other 31,680 34,583 Total current assets 385,732 373,143 Property, plant and equipment, net 223,789 234,569 Operating lease right-of-use assets 113,926 124,715 Goodwill 156,537 153,376 Other intangibles, net 116,216 139,888 Other assets 36,448 25,739 Total assets $ 1,032,648 $ 1,051,430 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 80,005 $ 52,588 Accrued expenses 121,303 141,914 Current maturities of long-term debt 10,000 10,000 Current portion of long-term operating lease liabilities 16,511 15,759 Total current liabilities 227,819 220,261 Long-term debt, net 177,113 186,391 Long-term operating lease liabilities 105,866 117,330 Deferred tax liabilities, net 19,402 31,134 Other liabilities 36,106 24,471 Total liabilities 566,306 579,587 Commitments and contingencies (Note 17) Stockholders' equity: Preferred stock, $ .01 par value, 10,000,000 shares authorized, none issued - - Class A common stock, $ .01 par value, 200,000,000 shares authorized, 58,792,695 and 58,273,747 shares issued in 2024 and 2023, respectively 588 583 Class B common stock, $ .01 par value, 200,000,000 shares authorized, 32,348,221 shares issued in 2024 and 2023 323 323 Additional paid-in capital 399,165 388,215 Retained earnings 264,978 271,083 Accumulated other comprehensive loss ( 127 ) ( 170 ) Treasury stock, at cost, 21,645,290 and 20,565,875 Class A shares in 2024 and 2023, respectively, and 5,280,000 Class B shares in 2024 and 2023 ( 198,585 ) ( 188,191 ) Total stockholders’ equity 466,342 471,843 Total liabilities and stockholders’ equity $ 1,032,648 $ 1,051,430 See accompanying Notes to Consolidated Financial Statements. F-2 Table of Contents 1-800-FLOWERS.COM, Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands, except per share data) Years ended June 30, 2024 July 2, 2023 July 3, 2022 Net revenues $ 1,831,421 $ 2,017,853 $ 2,207,885 Cost of revenues (excludes depreciation and amortization) 1,096,668 1,260,327 1,386,147 Gross profit 734,753 757,526 821,738 Operating expenses: Marketing and sales 485,016 500,840 571,661 Technology and development 60,235 60,691 56,561 General and administrative 118,060 112,747 102,337 Depreciation and amortization 53,752 53,673 49,078 Goodwill and intangible impairment 19,762 64,586 - Total operating expenses 736,825 792,537 779,637 Operating income (loss) ( 2,072 ) ( 35,011 ) 42,101 Interest expense, net 10,623 10,946 5,667 Other expense (income), net ( 6,793 ) 805 5,332 Income (loss) before income taxes ( 5,902 ) ( 46,762 ) 31,102 Income tax (benefit) expense 203 ( 2,060 ) 1,492 Net income (loss) ( 6,105 ) ( 44,702 ) 29,610 Other comprehensive income (currency translation) 43 41 107 Comprehensive income (loss) $ ( 6,062 ) $ ( 44,661 ) $ 29,717 Basic net income (loss) per common share $ ( 0.09 ) $ ( 0.69 ) $ 0.46 Diluted net income (loss) per common share $ ( 0.09 ) $ ( 0.69 ) $ 0.45 Weighted average shares used in the calculation of net income (loss) per common share: Basic 64,586 64,688 64,977 Diluted 64,586 64,688 65,617 See accompanying Notes to Consolidated Financial Statements. F-3 Table of Contents 1-800-FLOWERS.COM, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity Years ended June 30, 2024, July 2, 2023, and July 3, 2022 (in thousands, except share data) Accumulated Common Stock Additional Retained Other Total Class A Class B Paid-in Earnings Comprehensive Treasury Stock Stockholders’ Shares Amount Shares Amount Capital (Deficit) Loss Shares Amount Equity Balance at June 27, 2021 55,675,661 $ 557 33,433,614 $ 334 $ 371,103 $ 286,175 $ ( 318 ) 24,105,841 $ ( 148,781 ) $ 509,070 Net income - - - - - 29,610 - - - 29,610 Translation adjustment - - - - - - 107 - - 107 Stock-based compensation 805,028 8 - - 7,939 - - - - 7,947 Exercise of stock options 321,700 3 - - 843 - - - - 846 Conversion of Class B stock into Class A stock 904,000 9 ( 904,000 ) ( 9 ) - - - - - - Acquisition of Class A treasury stock - - - - - - - 1,592,555 ( 38,171 ) ( 38,171 ) Balance at July 3, 2022 57,706,389 $ 577 32,529,614 $ 325 $ 379,885 $ 315,785 $ ( 211 ) 25,698,396 $ ( 186,952 ) $ 509,409 Net loss - - - - - ( 44,702 ) - - - ( 44,702 ) Translation adjustment - - - - - - 41 - - 41 Stock-based compensation 385,965 4 - - 8,330 - - - - 8,334 Conversion of Class B stock into Class A stock 181,393 2 ( 181,393 ) ( 2 ) - - - - - - Acquisition of Class A treasury stock - - - - - - - 147,479 ( 1,239 ) ( 1,239 ) Balance at July 2, 2023 58,273,747 $ 583 32,348,221 $ 323 $ 388,215 $ 271,083 $ ( 170 ) 25,845,875 $ ( 188,191 ) $ 471,843 Net loss - - - - - ( 6,105 ) - - - ( 6,105 ) Translation adjustment - - - - - - 43 - - 43 Stock-based compensation 480,708 5 - - 10,683 - - - - 10,688 Exercise of stock options 38,240 - - - 329 - - - - 329 Acquisition of Class A treasury stock - - - - ( 62 ) - - 1,079,415 ( 10,394 ) ( 10,456 ) Balance at June 30, 2024 58,792,695 $ 588 32,348,221 $ 323 $ 399,165 $ 264,978 $ ( 127 ) 26,925,290 $ ( 198,585 ) $ 466,342 See accompanying Notes to Consolidated Financial Statements. F-4 Table of Contents 1-800-FLOWERS.COM, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) Years ended June 30, 2024 July 2, 2023 July 3, 2022 Operating activities: Net income (loss) $ ( 6,105 ) $ ( 44,702 ) $ 29,610 Reconciliation of net income (loss) to net cash provided by operating activities net of acquisitions: Goodwill and intangible impairment 19,762 64,586 - Depreciation and amortization 53,752 53,673 49,078 Amortization of deferred financing costs 724 1,834 1,269 Deferred income taxes ( 11,732 ) ( 4,608 ) 1,579 Bad debt expense (recoveries) 251 3,991 ( 411 ) Stock-based compensation 10,688 8,334 7,947 Other non-cash items 310 95 3,194 Changes in operating items: Trade receivables 2,143 ( 597 ) ( 2,452 ) Inventories 14,572 57,591 ( 85,047 ) Prepaid and other 2,913 12,554 6,731 Accounts payable and accrued expenses 6,404 ( 38,623 ) ( 6,595 ) Other assets and other liabilities 1,317 1,223 286 Net cash provided by operating activities 94,999 115,351 5,189 Investing activities: Acquisitions, net of cash acquired ( 3,672 ) ( 6,151 ) ( 21,280 ) Capital expenditures ( 38,632 ) ( 44,646 ) ( 66,408 ) Purchase of equity investments - ( 32 ) ( 2,000 ) Net cash used in investing activities ( 42,304 ) ( 50,829 ) ( 89,688 ) Financing activities: Acquisition of treasury stock ( 10,394 ) ( 1,239 ) ( 38,171 ) Proceeds from exercise of employee stock options 329 - 846 Proceeds from bank borrowings 82,000 395,900 125,000 Repayment of bank borrowings ( 92,000 ) ( 360,900 ) ( 145,000 ) Debt issuance costs - ( 2,941 ) ( 284 ) Net cash (used in) provided by financing activities ( 20,065 ) 30,820 ( 57,609 ) Net change in cash and cash equivalents 32,630 95,342 ( 142,108 ) Cash and cash equivalents: Beginning of year 126,807 31,465 173,573 End of year $ 159,437 $ 126,807 $ 31,465 Supplemental Cash Flow Information: - Interest paid amounted to $ 16.3 million, $ 12.8 million, and $ 4.6 million for the years ended June 30, 2024 , July 2, 2023 , and July 3, 2022 , respectively. - The Company paid income taxes of approximately $ 8.0 million, and $ 1.4 million, net of tax refunds, for the years ended June 30, 2024 and July 3, 2022 , respectively and received refunds of approximately $ 8.8 million, net of tax payments, for the year ended July 2, 2023 . See accompanying Notes to Consolidated Financial Statements. F- 5 Table of Contents 1 - 800 -FLOWERS.COM, Inc. and Subsidiaries Notes to Consolidated Financial Statements Note 1. Description of Business 1 - 800 -FLOWERS.COM, Inc. is a leading provider of gifts designed to help inspire customers to give more, connect more, and build more and better relationships. The Company’s e-commerce business platform features our all-star family of brands, including: 1 - 800 -Flowers.com®, 1 - 800 -Baskets.com®, Cheryl’s Cookies®, Harry & David®, PersonalizationMall.com®, Shari’s Berries®, FruitBouquets.com®, Things Remembered®, Moose Munch®, The Popcorn Factory®, Wolferman’s Bakery®, Vital Choice®, Scharffen Berger® and Simply Chocolate®. Through the Celebrations Passport® loyalty program, which provides members with free standard shipping and no service charge on eligible products across our portfolio of brands, 1 - 800 -FLOWERS.COM, Inc. strives to deepen relationships with customers. The Company also operates BloomNet®, an international floral and gift industry service provider offering a broad-range of products and services designed to help its members grow their businesses profitably; Napco℠, a resource for floral gifts and seasonal décor; DesignPac Gifts, LLC, a manufacturer of gift baskets and towers; Alice’s Table®, a lifestyle business offering fully digital on demand floral, culinary and other experiences to guests across the country and Card Isle®, an e-commerce greeting card service. Note 2. Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of 1 - 800 -FLOWERS.COM, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company’s net revenues from international sources were not material during fiscal years 2024 , 2023 and 2022 . Fiscal Year The Company’s fiscal year is a 52 - or 53 -week period ending on the Sunday nearest to June 30. Fiscal years 2024 and 2023 , which ended on June 30, 2024 and July 2, 2023 , respectively, each consisted of 52 weeks. Fiscal year 2022, which ended on July 3, 2022, consisted of 53 weeks. 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 net realizable value. Inventories are accounted for using a standard costing methodology, which approximates cost on a first -in, first -out basis. 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 or 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, at which time they are reclassified to orchards in production. Estimated useful lives are periodically reviewed, and where appropriate, changes are made prospectively. F- 6 Table of Contents The Company’s property, plant and equipment are depreciated using the following estimated lives: Building and building improvements (years) 10 - 40 Leasehold improvements (years) 3 - 10 Furniture, fixtures and production equipment (years) 3 - 20 Software (years) 3 - 7 Orchards in production and land improvements (years) 15 - 45 Property, plant and equipment 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. In applying the goodwill impairment test, the Company has the option to perform a qualitative test (also known as “Step 0” ) or a quantitative test (“Step 1” ). Under the Step 0 test, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of the reporting units is less than its carrying value. Qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting unit and other entity and reporting unit specific events. If after assessing these qualitative factors, the Company determines it is “more-likely-than- not” that the fair value of the reporting unit is less than the carrying value, then performing the Step 1 quantitative test is necessary. Step 1 of the quantitative test 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. Otherwise, the Company would recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit. 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. 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. During Fiscal 2022, as a result of changes within the macroeconomic environment, geopolitical pressures and the Company’s financial performance and market capitalization, the Company performed a Step 1 analysis, which indicated that the fair values of the Consumer Floral & Gifts and Gourmet Foods & Gift Baskets reporting units exceeded their respective carrying amounts. F- 7 Table of Contents During its quarterly assessment in the third quarter of Fiscal 2023, the Company concluded that a triggering event had occurred for its Gourmet Foods & Gift Baskets reporting unit. As such, the Company performed a Step 1 analysis of the reporting unit’s goodwill, intangibles and long-lived assets as of April 2, 2023, and fully impaired the related goodwill, and partially impaired certain tradenames within the reporting unit. The Company concluded that the definite-lived and other long-lived assets of the reporting unit were not impaired. As of its annual impairment testing date during the fourth quarter of Fiscal 2023, the Company completed a step 0 analysis of its Consumer Floral & Gifts reporting unit, the only reporting unit with goodwill at the time, and concluded that it was not "more likely than not" that the fair value of its reporting unit was less than its carrying value. As of its annual impairment testing date during the fourth quarter of Fiscal 2024 , the Company completed a step 0 analysis of its Consumer Floral & Gifts and BloomNet reporting units, the only reporting units with goodwill, and concluded that it was not "more likely than not" that the fair values of its reporting units were less than their carrying values. See Note 6 – Goodwill and Intangible Assets for further information. 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. Definite-lived intangibles 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. In applying the impairment test, the Company has the option to perform a qualitative test (also known as “Step 0” ) or a quantitative test. Under the Step 0 test, the Company assesses qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. Qualitative factors may include, but are not limited to economic conditions, industry and market considerations, cost factors, financial performance, legal and other entity and asset specific events. If, after assessing these qualitative factors, the Company determines it is “more-likely-than- not” that the indefinite-lived intangible asset is impaired, then performing the quantitative test is necessary. The quantitative 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. During Fiscal 2022, the Company performed a quantitative test, which determined that the estimated fair value of the Company's intangibles exceeded their respective carrying value. As noted in the Goodwill section above, during the third quarter of Fiscal 2023, the Company concluded that a triggering event had occurred within its Gourmet Foods & Gift Baskets reporting unit and, as such, performed an impairment test of the indefinite lived intangibles, which resulted in a partial impairment of certain tradenames within the reporting unit. During the fourth quarter of Fiscal 2023, the Company performed a Step 0 analysis and determined that it was not “more likely than not” that the fair values of its indefinite-lived intangibles were less than their carrying amounts. During its quarterly assessment in the second quarter of fiscal year 2024, as a result of a decline in the actual and projected revenue for the Company’s PersonalizationMall tradename (an indefinite-lived intangible asset), as well as a higher discount rate resulting from the higher interest rate environment, the Company determined that an impairment assessment was required for this tradename. This assessment resulted in a partial impairment of this tradename. During the fourth quarter of fiscal year 2024, the Company performed a Step 0 analysis for its indefinite-lived intangible assets, excluding its PersonalizationMall tradename, and determined that it was not “more likely than not” that the fair values of its indefinite-lived intangibles were less than their carrying amounts. For the Company's PersonalizationMall tradename, the Company performed a quantitative test, which determined that the estimated fair value of the Company's intangible asset exceeded its respective carrying amount. See Note 6 – Goodwill and Intangible Assets for further information. F- 8 Table of Contents Business Combinations The Company accounts for business combinations in accordance with Accounting Standards Codification ("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 that 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 and expenses them upon mailing. Included within prepaid and other current assets were $ 1.5 million and $ 2.4 million at June 30, 2024 and July 2, 2023 , respectively, relating to prepaid catalog expenses. Investments Equity investments without a readily determinable fair value Investments in non-marketable equity instruments of private companies, where the Company does not possess the ability to exercise significant influence, are accounted for at cost, less impairment (assessed qualitatively at each reporting period), adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer. These investments are included within “Other assets” in the Company’s consolidated balance sheets. The aggregate carrying amount of the Company’s cost method investments was $ 2.4 million as of June 30, 2024 and $ 2.6 million as of July 2, 2023 . Equity investments with a readily determinable fair value The Company also holds certain trading securities associated with its Non-Qualified Deferred Compensation Plan (“NQDC Plan”). These investments are measured using quoted market prices at the reporting date and are included within the “Other assets” line item in the consolidated balance sheets (see Note 10 - Fair Value Measurements ). 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, although bank deposits, at times, may exceed federally insured limits. 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 ( $ 2.8 million at June 30, 2024 and $ 5.8 million at July 2, 2023 ) have been recorded based upon previous experience and management’s evaluation. Revenue Recognition Net revenue is measured based on the amount of consideration that we expect to receive, reduced by discounts and estimates for credits and returns (calculated based upon previous experience and management’s evaluation). Service and outbound shipping charged to customers are recognized at the time the related merchandise revenues are recognized and are included in net revenues. Inbound and outbound shipping and delivery costs are included in cost of revenues. Net revenues exclude sales and other similar taxes collected from customers. F- 9 Table of Contents A description of our principal revenue generating activities is as follows: - E-commerce revenues - consumer products sold through our online and telephonic channels. Revenue is recognized when control of the merchandise is transferred to the customer, which generally occurs upon shipment. Payment is typically due prior to the date of shipment. - Retail revenues - consumer products sold through our retail stores. Revenue is recognized when control of the goods is transferred to the customer at the point of sale, at which time payment is received. - Wholesale revenues - products sold to our wholesale customers for subsequent resale. Revenue is recognized when control of the goods is transferred to the customer, in accordance with the terms of the applicable agreement. Payment terms are typically 30 days from the date control over the product is transferred to the customer. - BloomNet services - membership fees as well as other service offerings to florists. Membership and other subscription-based fees are recognized monthly as earned. Services revenues related to orders sent through the floral network are variable, based on either the number of orders or the value of orders, and are recognized in the period in which the orders are delivered. The contracts within BloomNet services are typically month-to-month and as a result no consideration allocation is necessary across multiple reporting periods. Payment is typically due less than 30 days from the date the services were performed. Deferred Revenues Deferred revenues are recorded when the Company has received consideration (i.e., advance payment) before satisfying its performance obligations. As such, customer orders are recorded as deferred revenue prior to shipment or rendering of product or services. Deferred revenues primarily relate to e-commerce orders placed, but not shipped, prior to the end of the fiscal period, as well as for subscription programs, including our various food, wine, and plant-of-the-month clubs and our Celebrations Passport® program. Our total deferred revenue, included in "Accrued expenses" on our consolidated balance sheets, as of July 3, 2022, was $ 33.7 million, of which $ 33.1 million was recognized during the year ended July 2, 2023. Our total deferred revenue as of July 2, 2023 was $ 30.8 million of which, $ 30.2 million was recognized as revenue during the year ended June 30, 2024 . The deferred revenue balance as of June 30, 2024 was $ 25.0 million. 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 expenses, 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 $ 283.6 million, $ 291.9 million and $ 347.7 million for the years ended June 30, 2024 , July 2, 2023 , and July 3, 2022 , 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 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. F- 10 Table of Contents 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 periodically 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 30, 2024 and July 2, 2023 . 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 also has net operating loss carryforwards and credit carryforwards in multiple jurisdictions and has recognized deferred assets for those losses and credits. The Company evaluates the realizability of its deferred tax assets on a quarterly basis and establishes valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized. In completing this evaluation, the Company considers available positive and negative evidence. Such evidence includes historical operating results, the existence of cumulative earnings and losses in the most recent fiscal years, taxable income in prior carryback year(s) if permitted under the tax law, the time period over which our temporary differences will reverse, the implementation of feasible and prudent tax planning strategies, and expectations for future pre-tax operating income. Estimating future taxable income is inherently uncertain and requires judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of this evidence, it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized in future periods. 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 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 by dividing the net income during the period by the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing the net income during the period by the sum of the weighted-average number of common shares outstanding during the period and the potential dilutive common shares (consisting of employee stock options and unvested restricted stock awards). Diluted net loss per common share is computed using the weighted-average number of common shares outstanding during the period and excludes the dilutive potential common shares (consisting of unvested restricted stock awards), as their inclusion would be antidilutive. As a result of the net loss for the years ended June 30, 2024 and July 2, 2023 , there is no dilutive impact to the net loss per share calculation. Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023 - 07 Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures . ASU 2023 - 07 requires enhanced disclosures about significant segment expenses, includes enhanced interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. The amendments in ASU 2023 - 07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. ASU 2023 - 07 is to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of ASU 2023 - 07 on its consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures . ASU 2023 - 09 requires the disclosure of additional information with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes and requires greater detail about significant reconciling items in the reconciliation. Additionally, the amendment requires disaggregated information pertaining to taxes paid, net of refunds received, for federal, state, and foreign income taxes. The amendments in ASU 2023 - 09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and allows for either a prospective or retrospective approach on adoption. The Company is currently evaluating the impact of ASU 2023 - 09 on its consolidated financial statements and related disclosures. F- 11 Table of Contents Note 3 – Net Income (Loss) Per Common Share The following table sets forth the computation of basic and diluted net income (loss): Years Ended June 30, 2024 July 2, 2023 July 3, 2022 (in thousands, except per share data) Numerator: Net income (loss) $ ( 6,105 ) $ ( 44,702 ) $ 29,610 Denominator: Weighted average shares outstanding 64,586 64,688 64,977 Effect of dilutive securities: Employee stock options - - 45 Employee restricted stock awards - - 595 Total effect of dilutive securities - - 640 Adjusted weighted-average shares and assumed conversions 64,586 64,688 65,617 Net income (loss) per common share: Basic $ ( 0.09 ) $ ( 0.69 ) $ 0.46 Diluted $ ( 0.09 ) $ ( 0.69 ) $ 0.45 Due to our net loss for the years ended June 30, 2024, and July 2, 2023, all common stock equivalents including stock options and unvested restricted stock awards have been excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive to the computation. There were 212,178 and 7,762 restricted stock awards and stock options, respectively, excluded from the Company's calculation of diluted net income (loss) per common share for the year ended July 3, 2022, as such awards were anti-dilutive. Note 4. Acquisitions Acquisition of Card Isle On April 3, 2024, the Company, within its BloomNet segment, completed its acquisition of certain assets of Card Isle, an e-commerce greeting card company, expanding the Company’s presence in the greeting card category across all brands. The Company used cash on hand to fund the purchase. The total consideration of $ 3.6 million was primarily allocated to the identifiable assets acquired and liabilities assumed based on the preliminary estimates of their fair values on the acquisition date, including: goodwill of $ 3.0 million (deductible for income tax purposes) and artist contracts of $ 0.6 million ( 5 -year life). The Company is in the process of finalizing its allocation and this may result in potential adjustments to the carrying value of the respective recorded assets and liabilities, establishment of certain additional intangible assets, revisions of useful lives of intangible assets, and the determination of any residual amount that will be allocated to goodwill. Card Isle annual revenue and profit, based on its most recently available financial information, is deemed immaterial to the Company's consolidated financial statements, and as such pro forma results of operations have not been presented. F- 12 Table of Contents Acquisition of Things Remembered On January 10, 2023, the Company completed its acquisition of certain assets of the Things Remembered brand, a provider of personalized gifts, whose operations have been integrated within the PersonalizationMall.com brand, in the Consumer Floral & Gifts segment. The Company used cash on hand to fund the $ 5.0 million purchase, which included the intellectual property, customer list, certain inventory, and equipment. The acquisition did not include Things Remembered retail stores. Things Remembered’s annual revenues from its e-commerce operations, based on its most recently available unaudited financial information was $ 30.4 million for the twelve months ended November 30, 2022. The total consideration of $ 5.0 million was preliminarily allocated to the identifiable assets acquired and liabilities assumed based on our preliminary estimates of their fair values, as a result of information that was available as of the date of acquisition. During the quarter ended December 31, 2023, the Company finalized its purchase price allocation, resulting in immaterial adjustments to the preliminary carrying value of the respective recorded assets and the residual amount that was allocated to goodwill. The consideration transferred was allocated to goodwill of $ 1.9 million (deductible for income tax purposes), trademarks of $ 0.8 million (indefinite life), customer lists of $ 0.8 million ( 3 -year life), inventory of $ 1.1 million, and equipment of $ 0.4 million. Operating results of the Things Remembered business are reflected in the Company’s consolidated financial statements from the date of acquisition within the Consumer Floral & Gifts segment. Pro forma results of operations have not been presented, as the impact on the Company’s consolidated financial results was not material. Acquisition of Alice ’ s Table On December 31, 2021 , the Company completed its acquisition of Alice’s Table, Inc. (“Alice’s Table”), a lifestyle business offering fully digital livestreaming and on demand floral, culinary and other experiences to guests across the country. The Company utilized existing cash of $ 0.8 million, contributed accounts receivable due from Alice’s Table of $ 0.3 million, and converted its cost method investment in Alice’s Table of $ 0.3 million, in order to acquire 100 % ownership in Alice’s Table, which included tradenames, customer lists, websites and operations. Immediately prior to completing the acquisition, the Company wrote down its previous cost method investment in Alice’s Table to its $ 0.3 million fair value, on the date of the acquisition, resulting in an impairment of $ 0.7 million, which is recorded in the “Other expense (income), net” line item on the Statement of Operations for the fiscal year ended July 3, 2022. Alice’s Table revenues were approximately $ 3.8 million during its most recent fiscal year ended September 30, 2021. The resulting total consideration of $ 1.3 million was preliminarily allocated to the identifiable assets acquired and liabilities assumed based on our preliminary estimates of their fair values, as a result of information that was available as of the date of acquisition. During the quarter ended January 1, 2023, the Company finalized its purchase price allocation, resulting in immaterial adjustments to the preliminary carrying value of the respective recorded assets and the residual amount that was allocated to goodwill. The consideration transferred was allocated to: goodwill of $ 0.8 million, trademarks of $ 0.5 million (indefinite life), customer lists of $ 0.2 million ( 4 -year life), and liabilities of $ 0.2 million. Operating results of the Alice’s Table business are reflected in the Company’s consolidated financial statements from the date of acquisition within the Consumer Floral & Gifts segment. Pro forma results of operations have not been presented, as the impact on the Company’s consolidated financial results was not material. Acquisition of Vital Choice On October 27, 2021, the Company completed its acquisition of all of the membership interests in Vital Choice Seafood LLC (“Vital Choice”), a provider of wild-caught seafood and sustainably farmed shellfish, pastured proteins, organic foods, and marine-sourced nutritional supplements. The Company utilized its existing credit facility to fund the $ 20.0 million purchase (subject to certain working capital and other adjustments), which included tradenames, customer lists, websites and operations. Vital Choice revenues were approximately $ 27.8 million during its most recent year ended December 31, 2020. After working capital and related adjustments, total consideration was approximately $ 20.0 million and was preliminarily allocated to the identifiable assets acquired and liabilities assumed based on our preliminary estimates of their fair values, as a result of information that was available as of the date of acquisition. During the quarter ended January 1, 2023, the Company finalized its purchase price allocation, resulting in immaterial adjustments to the preliminary carrying value of the respective recorded assets and the residual amount that was allocated to goodwill. F- 13 Table of Contents The following table summarizes the allocation of the purchase price to the fair values of assets acquired and liabilities assumed: Vital Choice Preliminary Vital Choice Purchase Price Purchase Price Allocation Measurement Period Allocation October 27, 2021 Interim Adjustments January 1, 2023 (in thousands) Inventory $ 8,653 $ - $ 8,653 Other current assets 929 ( 474 ) 455 Property, plant and equipment 205 ( 205 ) - Intangible assets 9,800 ( 600 ) 9,200 Goodwill 4,383 634 5,017 Total assets acquired 23,970 ( 645 ) 23,325 Current liabilities 3,621 ( 256 ) 3,365 Net assets acquired $ 20,349 $ ( 389 ) $ 19,960 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. Of the acquired intangible assets, $ 4.3 million was assigned to customer lists, which is being amortized over the estimated remaining life of 5 years, $ 4.9 million was assigned to tradenames (indefinite life), and $ 5.0 million was assigned to goodwill (indefinite life), which is expected to be deductible for tax purposes. The goodwill recognized 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. The estimated fair value of the acquired tradenames was determined using the relief from royalty method, which is a risk-adjusted discounted cash flow approach. The relief from royalty method values an intangible asset by estimating the royalties saved through ownership of the asset. The relief from royalty method requires identifying the future revenue that would be generated by the trademark, multiplying it by a royalty rate deemed to be avoided through ownership of the asset and discounting the projected royalty savings amounts back to the acquisition date. The royalty rate used in the valuation was based on a consideration of market rates for similar categories of assets. The discount rate used in the valuation was based on the Company’s weighted average cost of capital, the riskiness of the earnings stream associated with the trademarks and the overall composition of the acquired assets. The estimated fair value of the acquired customer lists was determined using the excess earnings method under the income approach. This method requires identifying the future revenue that would be generated by existing customers at the time of the acquisition, considering an appropriate attrition rate based on the historical experience of the Company. Appropriate expenses are then deducted from the revenues and economic rents are charged for the return on contributory assets. The after-tax cash flows attributable to the asset are discounted back to their net present value at an appropriate intangible asset rate of return and summed to calculate the value of the customer lists. Operating results of the Vital Choice business are reflected in the Company’s consolidated financial statements from the date of acquisition within the Gourmet Foods & Gift Baskets segment. Pro forma results of operations have not been presented, as the impact on the Company’s consolidated financial results was not material. Note 5. Inventory The Company’s inventory, valued at the lower of cost or net realizable value, includes purchased and manufactured finished goods for sale, packaging supplies, crops, raw material ingredients for manufactured products and associated manufacturing labor and is classified as follows: June 30, 2024 July 2, 2023 (in thousands) Finished goods $ 94,590 $ 92,582 Work-in-process 25,849 33,818 Raw materials 56,152 64,934 Total inventory $ 176,591 $ 191,334 F- 14 Table of Contents Note 6. Goodwill and Intangible Assets The following table presents goodwill by segment and the related change in the net carrying amount: Gourmet Consumer Foods & Floral & Gift Gifts BloomNet Baskets Total (in thousands) Balance at July 3, 2022 $ 151,600 $ - $ 61,687 $ 213,287 Measurement period adjustment for Vital Choice Acquisition - - 600 600 Measurement period adjustment for Alice's Table Acquisition 112 - - 112 Acquisition of Things Remembered 1,664 - - 1,664 Goodwill impairment - - ( 62,287 ) ( 62,287 ) Balance at July 2, 2023 $ 153,376 $ - $ - $ 153,376 Measurement period adjustment for Things Remembered 201 - - 201 Acquisition of Card Isle - 2,960 - 2,960 Balance at June 30, 2024 $ 153,577 $ 2,960 $ - $ 156,537 The Company’s other intangible assets consist of the following: June 30, 2024 July 2, 2023 Gross Gross Amortization Carrying Accumulated Carrying Accumulated Period (1) Amount Amortization Net Amount Amortization Net (in years) (in thousands) Intangible assets with determinable lives Investment in licenses 14 - 16 $ 7,420 $ 6,674 $ 746 $ 7,420 $ 6,569 $ 851 Customer lists 3 - 10 29,647 25,932 3,715 29,071 21,611 7,460 Other 5 - 14 2,946 2,664 282 2,946 2,604 342 Total intangible assets with determinable lives 40,013 35,270 4,743 39,437 30,784 8,653 Trademarks with indefinite lives 111,473 - 111,473 131,235 - 131,235 Total identifiable intangible assets $ 151,486 $ 35,270 $ 116,216 $ 170,672 $ 30,784 $ 139,888 ( 1 ) The amortization of intangible assets for the years ended June 30, 2024 , July 2, 2023 and July 3, 2022 was $ 4.4 million, $ 4.2 million and $ 3.9 million, respectively. Future estimated amortization expense is as follows: 2025 - $ 2.1 million, 2026 - $ 1.4 m illion, 2027 - $ 0.6 million, 2028 -$ 0.3 million, 2029 -$ 0.2 million, and thereafter -$ 0.1 million. During the year ended July 3, 2022 , the Company experienced a sustained decline in its share price and a resulting decrease in its market capitalization, primarily due to the overall macroeconomic environment. Inflationary cost increases, which began during the first half of the fiscal year, were exacerbated by geopolitical events, further pressuring the Company’s gross margin and operating expenses. Due to this overall market decline and the Company’s operating performance, the Company completed impairment assessments of the goodwill and intangible assets of its three reporting units. The quantitative impairment tests as of July 3, 2022, did not indicate an impairment. F- 15 Table of Contents Although originally projected to be transitory, through the nine months ended April 2, 2023, the trend of adverse macroeconomic conditions and geopolitical pressures continued, and there was a sustained decline in the Company’s market capitalization. As the expected duration of these factors changed during the three months ended April 2, 2023, the Company made downward projections to its business forecasts, and therefore determined a triggering event had occurred that required an interim impairment assessment of the goodwill, intangibles and other long-lived assets of the Gourmet Foods & Gift Baskets reporting unit as of April 2, 2023. The Company performed its goodwill impairment test by comparing the fair value of its Gourmet Foods & Gift Baskets reporting unit to its respective carrying value. The Company estimated the fair value of the Gourmet Foods & Gift Baskets reporting unit using an equal weighting of the income and market approaches, and a discount rate of 13 %. The Company used industry accepted valuation models and set criteria that were reviewed and approved by various levels of management. Under the income approach, the Company used a discounted cash flow methodology which required 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 used the guideline public company method. Under this method, the Company utilized information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that were applied to the operating performance of the reporting unit being tested, in order to obtain their respective fair values. The Company also reconciled the aggregate fair values of its reporting units to its current market capitalization. The Company’s impairment test for indefinite-lived intangible assets encompassed calculating a fair value of the indefinite-lived intangible asset and comparing that result to its carrying value. To determine fair value of indefinite-lived intangible assets, the Company used 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. 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. The Company’s impairment test for definite-lived intangibles was performed through a recoverability test, comparing projected undiscounted cash flows from the use and eventual disposition of the asset or asset group to its carrying value. Based on the impairment assessment performed during the quarter ended April 2, 2023, the Company recorded a non-cash goodwill and intangible impairment charge against its Gourmet Foods & Gift Baskets reporting unit of $ 64.6 million, comprised of $ 62.3 million, which was attributable to goodwill, and $ 2.3 million, which was attributable to certain tradenames within the same reporting unit. The Company concluded that the definite-lived and other long-lived assets of the reporting unit were not impaired. As of its annual impairment testing date during the fourth quarter of Fiscal 2023, the Company completed a step 0 analysis of its Consumer Floral & Gift reporting unit, the only reporting unit with goodwill at that time, and its indefinite-lived intangibles and concluded that it was not “more likely than not” that the fair values were less than their carrying values. During its quarterly assessment in the second quarter of fiscal year 2024, as a result of a decline in the actual and projected revenue for the Company’s PersonalizationMall tradename (an indefinite-lived intangible asset), as well as a higher discount rate resulting from the higher interest rate environment, the Company determined that an impairment assessment was required for this tradename. The Company’s impairment test for its PersonalizationMall tradename encompassed calculating the fair value of the asset and comparing that result to its carrying value. To determine fair value the Company used an income approach, the relief-from-royalty method. As discussed above, 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. This assessment resulted in the Company recording a non-cash impairment charge of $ 19.8 million to reduce the recorded carrying value of the PersonalizationMall tradename. During the fourth quarter of fiscal year 2024, the Company performed a Step 0 analysis for its Consumer Floral & Gift and BloomNet reporting units, the only reporting units with goodwill, and its indefinite-lived intangible assets, excluding its PersonalizationMall tradename, and determined that it was not “more likely than not” that the fair values were less than their carrying amounts. For the Company’s PersonalizationMall tradename, the Company performed a quantitative test, which determined that the estimated fair value of the Company's intangible asset exceeded its respective carrying value. Note 7. Property, Plant and Equipment June 30, 2024 July 2, 2023 (in thousands) Land $ 33,827 $ 33,866 Orchards in production and land improvements 20,604 20,401 Building and building improvements 69,089 67,647 Leasehold improvements 31,289 29,524 Production equipment 131,664 125,297 Furniture and fixtures 9,325 9,102 Computer and telecommunication equipment 42,159 41,859 Software 176,160 181,085 Capital projects in progress 23,172 18,205 Property, plant and equipment, gross 537,289 526,986 Accumulated depreciation and amortization ( 313,500 ) ( 292,417 ) Property, plant and equipment, net $ 223,789 $ 234,569 Depreciation expense for the years ended June 30, 2024 , July 2, 2023 , and July 3, 2022 was $ 49.3 million, $ 49.5 million, and $ 45.2 million, respectively. F- 16 Table of Contents Note 8. Accrued Expenses Accrued expenses consisted of the following: June 30, 2024 July 2, 2023 (in thousands) Payroll and employee benefits $ 29,954 $ 33,927 Deferred revenue 25,009 30,811 Accrued marketing expenses 10,709 13,679 Accrued florist payout 9,526 13,437 Accrued purchases 15,338 18,351 Other 30,767 31,709 Accrued expenses $ 121,303 $ 141,914 Note 9. Long-Term Debt The Company’s current and long-term debt consists of the following: June 30, 2024 July 2, 2023 (in thousands) Revolver (1) $ - $ - Term Loan (1) 190,000 200,000 Deferred financing costs ( 2,887 ) ( 3,609 ) Total debt 187,113 196,391 Less: current maturities of long-term debt 10,000 10,000 Long-term debt, net $ 177,113 $ 186,391 ( 1 ) On May 31, 2019, the Company and certain of its U.S. subsidiaries entered into a Second Amended and Restated Credit Agreement (the “2019 Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent, and a group of lenders. The 2019 Credit Agreement amended and restated the Company’s existing amended and restated credit agreement dated as of December 23, 2016 to, among other modifications: (i) increase the amount of the outstanding term loan (“Term Loan”) from approximately $ 97 million to $ 100 million, (ii) extend the maturity date of the outstanding Term Loan and the revolving credit facility (“Revolver”) by approximately 29 months to May 31, 2024, and (iii) decrease the applicable interest rate margins for LIBOR and base rate loans by 25 basis points. The Term Loan was payable in 19 quarterly installments of principal and interest beginning on September 29, 2019, with escalating principal payments, at the rate of 5.0 % per annum for the first eight payments, and 10.0 % per annum for the remaining 11 payments, with the remaining balance of $ 62.5 million due upon maturity. The Revolver, in the aggregate amount of $ 200 million, subject to seasonal reduction to an aggregate amount of $ 100 million for the period from January 1 through August 1, was able to be used for working capital and general corporate purposes, subject to certain restrictions. For each borrowing under the Existing Credit Agreement (as defined below), the Company was able to elect that such borrowing bear interest at an annual rate equal to either: ( 1 ) a base rate plus an applicable margin varying based on the Company’s consolidated leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the New York fed bank rate plus 0.5 %, and (c) a LIBOR rate plus 1 %, or ( 2 ) an adjusted LIBOR rate plus an applicable margin varying based on the Company’s consolidated leverage ratio. On August 20, 2020, the Company, the Subsidiary Guarantors, JPMorgan Chase Bank, N.A. as administrative agent, and a group of lenders entered into a First Amendment (the “First Amendment”) to the 2019 Credit Agreement. The First Amendment amended the 2019 Credit Agreement to, among other modifications: (i) increase the aggregate principal amount of the existing Revolver commitments from $ 200.0 million to $ 250.0 million, (ii) establish a new tranche of term A- 1 loans in an aggregate principal amount of $ 100.0 million (the “2020 Term Loan”), (iii) increase the working capital sublimit with respect to the Revolver from $ 175.0 million to $ 200.0 million, and (iv) increase the seasonally-reduced Revolver commitments from $ 100.0 million to $ 125.0 million for the period from January 1 through August 1 for each fiscal year of the Company. The 2020 Term Loan was payable in 15 quarterly installments of principal and interest beginning on September 27, 2020, with escalating principal payments, at the rate of 5.0 % per annum for the first four payments, and 10.0 % per annum for the remaining 11 payments, with the remaining balance of $ 67.5 million due upon maturity on May 31, 2024. On November 8, 2021, the Company, certain of its U.S. subsidiaries, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, entered into a Second Amendment (the “Second Amendment”) to the 2019 Credit Agreement. The Second Amendment amended the 2019 Credit Agreement to, among other modifications, decrease the interest margins and LIBOR floor applicable to the 2020 Term Loan. F- 17 Table of Contents On August 29, 2022, the Company, certain of its U.S. subsidiaries, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, entered into a Third Amendment (the “Third Amendment”) to the 2019 Credit Agreement. The Third Amendment amended the 2019 Credit Agreement (the 2019 Credit Agreement, as amended by the First Amendment, the Second Amendment, and the Third Amendment, the “Existing Credit Agreement”) to modify certain financial covenants. On June 27, 2023, the Company, certain of its U.S. subsidiaries, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent entered into a Third Amended and Restated Credit Agreement (the “Third Amended Credit Agreement”) to, among other modifications: (i) increase the amount of the outstanding term loan from approximately $ 150 million to $ 200 million, (ii) decrease the amount of the commitments in respect of the revolving credit facility from $ 250 million to $ 225 million, (iii) extend the maturity date of the outstanding term loan and the revolving credit facilities by approximately 48 months to June 27, 2028, and (iv) increase the applicable interest rate margins for SOFR and base rate loans by 25 basis points. For each borrowing under the Third Amended Credit Agreement, the Company may elect that such borrowing bear interest at an annual rate equal to either: ( 1 ) a base rate plus an applicable margin varying based on the Company’s consolidated leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the New York fed bank rate plus 0.5 %, and (c) an adjusted SOFR rate plus an applicable margin varying based on the Company’s consolidated leverage ratio. The adjusted SOFR rate includes a credit spread adjustment of 0.10 % for all interest periods. The Third Amended Credit Agreement requires that while any borrowings or commitments are outstanding the Company comply with certain financial covenants and affirmative covenants as well as certain negative covenants that, subject to certain exceptions, limit the Company’s ability to, among other things, incur additional indebtedness, make certain investments and make certain restricted payments. The Company was in compliance with these covenants as of June 30, 2024 . The Third Amended Credit Agreement is secured by substantially all of the assets of the Company. Future principal term loan payments under the Third Amended Credit Agreement are as follows: $ 10.0 million – Fiscal 2025, $ 20.0 million – Fiscal 2026, $ 20.0 million – Fiscal 2027, and $ 140.0 million – Fiscal 2028. Note 10. Fair Value Measurements Cash and cash equivalents, trade and other receivables, prepaids, accounts payable and accrued expenses are reflected in the consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments. Although no trading market exists, the Company believes that the carrying amount of its debt approximates fair value due to its variable nature (these are level 2 investments). The Company’s investments in non-marketable equity instruments of private companies are carried at cost and are periodically assessed for other-than-temporary impairment, when an event or circumstances indicate that an other-than-temporary decline in value may have occurred. The Company’s remaining financial assets and liabilities are measured and recorded at fair value (see table below). The Company’s non-financial assets, such as definite lived intangible assets and property, plant and equipment, are recorded at cost and are assessed for impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred. Goodwill and indefinite lived intangibles are tested for impairment annually, or more frequently, if events occur or circumstances change such that it is more likely than not that an impairment may exist, as required under the accounting standards. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the guidance are described below: Level 1 Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. Level 2 Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. Level 3 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. F- 18 Table of Contents The following table presents by level, within the fair value hierarchy, financial assets and liabilities measured at fair value on a recurring basis: Carrying Fair Value Measurements Value Assets (Liabilities) Level 1 Level 2 Level 3 (in thousands) Assets (liabilities) as of June 30, 2024: Trading securities held in a “rabbi trust” (1) $ 32,805 $ 32,805 $ - $ - $ 32,805 $ 32,805 $ - $ - Assets (liabilities) as of July 2, 2023: Trading securities held in a “rabbi trust” (1) $ 22,617 $ 22,617 $ - $ - $ 22,617 $ 22,617 $ - $ - ( 1 ) The Company has established a NQDC Plan 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 the “Other assets” line item, with the corresponding liability included in the “Other liabilities” line item in the consolidated balance sheets. Note 11. Income Taxes Significant components of the income tax provision are as follows: Years ended June 30, 2024 July 2, 2023 July 3, 2022 (in thousands) Current provision (benefit): Federal $ 11,774 $ 976 $ ( 1,676 ) State 161 1,572 1,589 Current income tax expense (benefit) 11,935 2,548 ( 87 ) Deferred provision (benefit): Federal ( 14,246 ) ( 3,145 ) 2,679 State 2,514 ( 1,463 ) ( 1,100 ) Deferred income tax expense (benefit) ( 11,732 ) ( 4,608 ) 1,579 Income tax expense (benefit) $ 203 $ ( 2,060 ) $ 1,492 F- 19 Table of Contents A reconciliation of the U.S. federal statutory tax rate to the Company’s effective tax rate is as follows: Years ended June 30, 2024 July 2, 2023 July 3, 2022 Tax at U.S. statutory rates 21.0 % 21.0 % 21.0 % State income taxes, net of federal tax benefit ( 8.1 ) ( 0.2 ) 4.2 Capital loss expiration - - 15.5 Non-deductible impairment charge - ( 16.8 ) - Valuation allowance change ( 28.5 ) ( 0.2 ) ( 19.8 ) Non-deductible compensation ( 0.6 ) ( 2.1 ) 5.3 Excess tax benefit/shortfalls from stock-based compensation ( 11.9 ) ( 1.7 ) ( 16.1 ) Tax credits 16.9 2.7 ( 3.9 ) Enhanced deductions 11.8 2.6 ( 2.1 ) Other, net ( 4.0 ) ( 0.9 ) 0.7 Effective tax rate ( 3.4 )% 4.4 % 4.8 % 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: June 30, 2024 July 2, 2023 (in thousands) Deferred income tax assets: Loss and carryforwards $ 8,096 $ 13,598 Accrued expenses and reserves 3,146 3,531 Inventory 5,417 4,422 Stock-based compensation 1,767 1,549 Deferred compensation 6,815 3,602 Operating lease liability 30,763 33,186 Gross deferred income tax assets 56,004 59,888 Less: Valuation allowance ( 4,868 ) ( 3,182 ) Deferred tax assets, net 51,136 56,706 Deferred income tax liabilities: Other intangibles ( 10,693 ) ( 14,916 ) Tax in excess of book depreciation ( 31,206 ) ( 41,826 ) Operating lease right-of-use asset ( 28,639 ) ( 31,098 ) Deferred tax liabilities ( 70,538 ) ( 87,840 ) Net deferred income tax liabilities $ ( 19,402 ) $ ( 31,134 ) At June 30, 2024 , the Company’s federal enhanced deduction and carryforwards were $ 3.6 million, tax effected, which if not utilized will begin to expire in 2027. At June 30, 2024 , the Company’s state and foreign net operating loss carryforwards were $ 2.9 million and $ 1.3 million, tax effected, respectively, which if not utilized will begin to expire in Fiscal 2025 and Fiscal 2034, respectively. The Company evaluates the realizability of its deferred tax assets on a quarterly basis and establishes valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized. In completing this evaluation, the Company considers available positive and negative evidence. Such evidence includes historical operating results, the existence of cumulative earnings and losses in the most recent fiscal years, taxable income in prior carryback year(s) if permitted under the tax law, the time period over which our temporary differences will reverse, the implementation of feasible and prudent tax planning strategies, and expectations for future pre-tax operating income. Estimating future taxable income is inherently uncertain and requires judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of this evidence, it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized in future periods. During Fiscal 2024, the Company recorded valuation allowances of $ 1.7 million relating to certain state and foreign jurisdictions and concluded no further valuation allowances were necessary despite a three -year cumulative loss. This is based on a detailed analysis of future taxable income, with a particular focus on the scheduling of temporary differences that are expected to reverse in periods where the Company anticipates taxable income. Specifically, the timing and amount of future reversals of deferred tax liabilities are expected to fully offset the Company’s deferred tax assets, allowing it to realize their value without relying on additional sources of taxable income. At June 30, 2024 and July 2, 2023, the Company had valuation allowances of approximately $ 4.9 million and $ 3.2 million, respectively, primarily related to certain state and foreign net operating losses. The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign countries. The Company’s last completed U.S. federal examination was for Fiscal 2018. Fiscal 2021, Fiscal 2022, and Fiscal 2023 remain subject to U.S. federal examination. Due to nonconformity with the U.S. federal statute of limitations for assessment, certain states remain open from Fiscal 2020. The Company's foreign income tax filings from Fiscal 2017 forward are open for examination by its respective foreign tax authorities, mainly Canada and Brazil. F- 20 Table of Contents 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 30, 2024 , the Company has an unrecognized tax benefit, including accrued interest and penalties, of approximately $ 3.2 million all of which if fully recognized would impact our effective tax rate. The Company believes that $ 0.4 million of the unrecognized tax positions will be resolved over the next twelve months. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Years ended June 30, 2024 July 2, 2023 July 3, 2022 (in thousands) Beginning balance $ 1,724 $ 1,374 $ 1,134 Increases on tax positions for prior years 1,100 30 21 Increases on tax positions for current year 387 320 267 Settlements - - ( 19 ) Statute of limitation expirations ( 431 ) - ( 29 ) Ending balance $ 2,780 $ 1,724 $ 1,374 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 2023 and 2022 , 181,393 and 904,000 shares of Class B common stock, respectively, were converted into shares of Class A common stock. During Fiscal 2024, no 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. On April 22, 2021, the Company’s Board of Directors authorized an increase to its stock repurchase plan of up to $ 40.0 million. On February 3, 2022, the Company’s Board of Directors authorized an additional increase to its stock repurchase plan of up to $ 40.0 million. The Company repurchased a total of $ 10.4 million ( 1,079,415 shares), $ 1.2 million ( 147,479 shares), and $ 38.2 million ( 1,592,555 shares) during the fiscal years ended June 30, 2024 , July 2, 2023 , and July 3, 2022 , respectively, under this program. Included in the repurchase is stock withheld to cover required employee withholdings, upon vesting of restricted stock awards. As of June 30, 2024 , $ 21.6 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 (as amended and restated as of October 22, 2009, October 28, 2011, September 14, 2016, October 15, 2020, and October 3, 2023, the “Plan”). The Plan is a broad-based, long-term incentive program that is intended to provide incentives to attract, retain and motivate employees, consultants and directors in order to achieve the Company’s long-term growth and profitability objectives. 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 amounts of stock-based compensation expense recognized within operating income ( 1 ) in the periods presented are as follows: Years Ended June 30, 2024 July 2, 2023 July 3, 2022 (in thousands) Stock options $ 4,422 $ 2,536 $ ( 41 ) Restricted stock awards 6,266 5,798 7,988 Total 10,688 8,334 7,947 Deferred income tax benefit 2,571 2,042 1,943 Stock-based compensation expense, net $ 8,117 $ 6,292 $ 6,004 ( 1 ) Stock-based compensation expense has not been allocated between business segments, but is reflected as part of Corporate overhead (See Note 15 - Business Segments for details). F- 21 Table of Contents Stock-based compensation expense is recorded within the following line items of operating expenses: Years Ended June 30, 2024 July 2, 2023 July 3, 2022 (in thousands) Marketing and sales $ 4,916 $ 3,818 $ 3,414 Technology and development 855 698 319 General and administrative 4,917 3,818 4,214 Total $ 10,688 $ 8,334 $ 7,947 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: Years ended June 30, 2024 July 2, 2023 July 3, 2022 (1) Weighted average fair value of options granted $ 6.09 $ 5.13 n/a Expected volatility 56 % 52 % n/a Expected life (in years) 7.0 7.5 n/a Risk-free interest rate 3.9 % 4.3 % n/a Expected dividend yield 0.0 % 0.0 % n/a ( 1 ) No options were granted during the fiscal year ended July 3, 2022. 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 30, 2024 : Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Options Price Term Value (in years) (in thousands) Outstanding beginning of period 2,285,608 $ 8.59 Granted 1,000,000 $ 10.13 Exercised ( 38,240 ) $ 8.59 Forfeited/Expired ( 61,831 ) $ 8.59 Outstanding end of period 3,185,537 $ 9.07 8.34 $ 2,033 Exercisable at June 30, 2024 707,806 $ 8.59 7.80 $ 658 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 2024 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 30, 2024 . This amount changes based on the fair market value of the Company’s stock. The total intrinsic value of options exercised during the years ended June 30, 2024, July 2, 2023, July 3, 2022, were $ 0.1 million, $ 0.0 million, and $ 9.2 million , respectively. F- 22 Table of Contents The following table summarizes information about stock options outstanding at June 30, 2024 : Options Outstanding Options Exercisable Weighted‑ Average Weighted‑ Weighted‑ Remaining Average Average Options Contractual Life Exercise Options Exercise Exercise Price Outstanding (years) Price Exercisable Price $ 8.59 2,185,537 7.8 $ 8.59 707,806 $ 8.59 $ 10.13 1,000,000 9.5 $ 10.13 - $ - 3,185,537 8.3 $ 9.07 707,806 $ 8.59 As of June 30, 2024 , the total future compensation cost related to non-vested options not yet recognized in the statement of operations was $ 10.6 million and the weighted average period over which these awards are expected to be recognized was 2.6 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 30, 2024 : Weighted Average Grant Date Shares Fair Value Non-vested – beginning of period 1,231,634 $ 15.01 Granted 1,396,457 $ 10.02 Vested ( 480,708 ) $ 15.22 Forfeited ( 442,934 ) $ 10.26 Non-vested - end of period 1,704,449 $ 12.09 The fair value of non-vested shares is determined based on the closing stock price on the grant date. As of June 30, 2024 , there was $ 13.9 million of total unrecognized compensation cost related to non-vested, restricted, stock-based compensation to be recognized over a weighted-average period of 2.3 years. 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 contributed $ 1.7 million, $ 1.9 million, and $ 1.9 million during Fiscal 2024 , 2023 , and 2022 , respectively. 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. There were no Company contributions to the plan during Fiscal 2024 , 2023 and 2022 . Distributions will be made to participants upon termination of employment or death in a lump sum, unless installments are selected by the participant. As of June 30, 2024 and July 2, 2023 , these plan liabilities, which are included in “Other liabilities” within the Company’s consolidated balance sheets, totaled $ 32.8 million and $ 22.6 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” within the Company’s consolidated balance sheets. The gains (losses) on these investments, which were $ 6.9 million, ($ 0.8 million), and ($ 3.6 million), for the years ended June 30, 2024 , July 2, 2023 , and July 3, 2022 , respectively, are included in “Other expense (income), net", with a corresponding offset in "General and administrative" expenses, within the Company’s consolidated statements of operations. F- 23 Table of Contents Note 15. Business Segments The Company’s management reviews the results of the Company’s operations by the following three business segments: • Consumer Floral & Gifts, • BloomNet, and • Gourmet Foods & Gift Baskets 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 (a) below), nor does it include depreciation and amortization, other expense (income), net and income taxes, or stock-based compensation, which are included within corporate overhead. Assets and liabilities are reviewed at the consolidated level by management and not accounted for by segment. Years ended Net revenues June 30, 2024 July 2, 2023 July 3, 2022 (in thousands) Segment Net revenues: Consumer Floral & Gifts $ 849,791 $ 920,510 $ 1,059,570 BloomNet 107,802 133,183 145,702 Gourmet Foods & Gift Baskets 874,262 965,191 1,004,272 Corporate 796 375 201 Intercompany eliminations ( 1,230 ) ( 1,406 ) ( 1,860 ) Total net revenues $ 1,831,421 $ 2,017,853 $ 2,207,885 Years ended Operating Income (Loss) June 30, 2024 July 2, 2023 July 3, 2022 (in thousands) Segment Contribution Margin: Consumer Floral & Gifts $ 67,278 $ 95,535 $ 104,319 BloomNet 33,766 37,197 42,515 Gourmet Foods & Gift Baskets 84,508 12,895 62,021 Segment Contribution Margin Subtotal 185,552 145,627 208,855 Corporate (a) ( 133,872 ) ( 126,965 ) ( 117,676 ) Depreciation and amortization ( 53,752 ) ( 53,673 ) ( 49,078 ) Operating income (loss) $ ( 2,072 ) $ ( 35,011 ) $ 42,101 (a) Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as stock-based compensation. In order to leverage the Company’s infrastructure, these functions are operated under a centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center, which are allocated directly to the above categories based upon usage, are included within corporate expenses as they are not directly allocable to a specific segment. F- 24 Table of Contents The following tables represent a disaggregation of revenue from contracts with customers, by channel: Years Ended Consumer Floral & Gifts BloomNet Gourmet Foods & Gift Baskets Corporate and Eliminations Consolidated June 30, July 2, July 3, June 30, July 2, July 3, June 30, July 2, July 3, June 30, July 2, July 3, June 30, July 2, July 3, 2024 2023 2022 2024 2023 2022 2024 2023 2022 2024 2023 2022 2024 2023 2022 (in thousands) Net revenues E-commerce $ 840,569 $ 911,302 $ 1,049,821 $ - $ - $ - $ 773,630 $ 833,320 $ 884,827 $ - $ - $ - $ 1,614,199 $ 1,744,622 $ 1,934,648 Other 9,222 9,208 9,749 107,802 133,183 145,702 100,632 131,871 119,445 ( 434 ) ( 1,031 ) ( 1,659 ) 217,222 273,231 273,237 Total net revenues $ 849,791 $ 920,510 $ 1,059,570 $ 107,802 $ 133,183 $ 145,702 $ 874,262 $ 965,191 $ 1,004,272 $ ( 434 ) $ ( 1,031 ) $ ( 1,659 ) $ 1,831,421 $ 2,017,853 $ 2,207,885 Other revenues detail Retail and other 9,222 9,208 9,749 - - - 9,534 9,751 10,134 - - - 18,756 18,959 19,883 Wholesale - - - 42,362 50,075 53,957 91,098 122,120 109,311 - - - 133,460 172,195 163,268 BloomNet services - - - 65,440 83,108 91,745 - - - - - - 65,440 83,108 91,745 Corporate - - - - - - - - - 796 375 201 796 375 201 Eliminations - - - - - - - - - ( 1,230 ) ( 1,406 ) ( 1,860 ) ( 1,230 ) ( 1,406 ) ( 1,860 ) Total other revenues $ 9,222 $ 9,208 $ 9,749 $ 107,802 $ 133,183 $ 145,702 $ 100,632 $ 131,871 $ 119,445 $ ( 434 ) $ ( 1,031 ) $ ( 1,659 ) $ 217,222 $ 273,231 $ 273,237 F- 25 Table of Contents Note 16. Leases The Company currently leases plants, warehouses, offices, store facilities, and equipment under various leases through Fiscal 2036. While most lease agreements are of a long-term nature (over a year), the Company also enters into short-term leases, primarily for seasonal needs. Lease agreements may contain renewal options and rent escalation clauses and require the Company to pay real estate taxes, insurance, common area maintenance and operating expenses applicable to the leased properties. The Company accounts for its leases in accordance with ASC 842. At contract inception, the Company determines whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time, by assessing whether the Company has the right to obtain substantially all of the economic benefits from the use of the identified asset, and the right to direct the use of the identified asset. At the lease commencement date, the Company determines if a lease should be classified as an operating or a finance lease (the Company currently has no finance leases) and recognizes a corresponding lease liability and a right-of-use asset on its Consolidated Balance Sheet. The lease liability is initially and subsequently measured as the present value of the remaining fixed minimum rental payments (including base rent and fixed common area maintenance) using discount rates as of the commencement date. Variable payments (including most utilities, real estate taxes, insurance and variable common area maintenance) are expensed as incurred. Further, the Company elected a short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component for certain classes of assets. The right-of-use asset is initially and subsequently measured at the carrying amount of the lease liability adjusted for any prepaid or accrued lease payments, remaining balance of lease incentives received, unamortized initial direct costs, or impairment charges relating to the right-of-use asset. Right-of-use assets are assessed for impairment using the long-lived assets impairment guidance. The discount rate used to determine the present value of lease payments is the Company’s estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, as the Company generally cannot determine the interest rate implicit in the lease. The Company recognizes expense for its operating leases on a straight-line basis over the lease term. As these leases expire, it can be expected that in the normal course of business they will be renewed or replaced. Renewal option periods are included in the measurement of lease liability, where the exercise is reasonably certain to occur. Key estimates and judgments in accounting for leases include how the Company determines: ( 1 ) lease payments, ( 2 ) lease term, and ( 3 ) the discount rate used in calculating the lease liability. Additional information related to our leases is as follows: Years Ended June 30, 2024 July 2, 2023 (in thousands) Lease costs: Operating lease costs $ 22,775 $ 22,208 Variable lease costs 26,326 24,582 Short-term lease cost 4,144 5,307 Sublease income ( 999 ) ( 988 ) Total lease costs $ 52,246 $ 51,109 Years Ended June 30, 2024 July 2, 2023 (in thousands) Cash paid for amounts included in measurement of operating lease liabilities $ 22,699 $ 21,020 Right-of-use assets obtained in exchange for new operating lease liabilities $ 6,799 $ 12,040 June 30, 2024 July 2, 2023 Weighted-average remaining lease term - operating leases (in years) 7.9 8.7 Weighted-discount rate - operating leases 4.3 % 4.0 % F- 26 Table of Contents Maturities of lease liabilities in accordance with ASC 842 as of June 30, 2024 and reconciliation to balance sheet are as follows (in thousands): 2025 $ 21,344 2026 20,487 2027 17,591 2028 16,596 2029 16,017 Thereafter 52,798 Total Future Minimum Lease Payments 144,833 Less: Imputed Remaining Interest 22,456 Total Operating Lease Liabilities 122,377 Less: Current portion of long-term operating lease liabilities 16,511 Long-term operating lease liabilities $ 105,866 Note 17. Commitments and Contingencies Other Commitments The Company’s purchase commitments consist primarily of inventory, equipment and technology (hardware and software) purchase orders made in the ordinary course of business, most of which have terms less than one year. As of June 30, 2024 , the Company had fixed and determinable off-balance sheet purchase commitments with remaining terms in excess of one year of approximately $ 21.8 million, primarily related to the Company’s technology infrastructure and inventory commitments. The Company had approximately $ 1.5 million and $ 2.7 million in unused stand-by letters of credit as of June 30, 2024 and July 2, 2023 , respectively. Litigation Call Center Worker Claim: In March of 2018, a putative class action lawsuit was filed against a subsidiary of the Company (the “Subsidiary”) in the U.S. District Court for the District of Oregon, Medford Division (the “Court”), alleging violations of the federal Fair Labor Standards Act (“FLSA”) and Oregon state law. The complaint was brought on behalf of a putative class of call center workers and alleged that certain Subsidiary policies and practices resulted in class members’ performance of unpaid work. The plaintiff sought class certification, compensation for alleged unpaid and underpaid wages, civil penalties, prejudgment interest, liquidated damages, litigation costs, and attorneys’ fees. Following mediation, the parties reached an agreement in April 2022 to resolve all claims. In September 2022, the Court granted final approval of the settlement agreement, and in November 2022, the Company remitted payment of approximately $ 2.9 million, which was previously accrued during the quarter ended March 27, 2022, and was included in "Accrued expenses" in the consolidated balance sheets at July 3, 2022. In entering into the settlement agreement, the Subsidiary made no admission of liability. Subsequent to June 30, 2024, the Company settled a pre-existing litigation matter for $ 1.2 million, which was accrued as of June 30, 2024. In addition, there are various claims, lawsuits, and pending actions against the Company and its subsidiaries incident to the operations of its businesses. It is the opinion of management, after consultation with counsel, that the final resolution of such claims, lawsuits and pending actions will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. Note 18. Subsequent Events Acquisition of Scharffen Berger On July 1, 2024, the Company completed its acquisition of Scharffen Berger, a chocolate manufacturing company, expanding the Company's product offerings in the Gourmet Foods & Gift Baskets Segment. The Company used cash on its balance sheet to fund the approximately $3.3 million purchase. Scharffen Berger annual revenue, based on its most recent available financial information, is deemed immaterial to the Company's consolidated financial statements. F- 27 Table of Contents 1 - 800 -FLOWERS.COM, Inc. and Subsidiaries Schedule II - Valuation and Qualifying Accounts Additions Charged to Charged to Balance at Costs Other Balance at Beginning and Accounts- Deductions- End of Description of Period Expenses Describe Describe (a) Period Reserves and allowances deducted from asset accounts: Reserve for estimated credit losses-accounts/notes receivable Year Ended June 30, 2024 $ 5,836,000 $ 251,000 $ - $ ( 3,330,000 ) $ 2,757,000 Year Ended July 2, 2023 $ 2,396,000 $ 3,991,000 $ - $ ( 551,000 ) $ 5,836,000 Year Ended July 3, 2022 $ 4,032,000 $ ( 411,000 ) $ - $ ( 1,225,000 ) $ 2,396,000 Valuation allowance for deferred tax assets Year Ended June 30, 2024 $ 3,182,000 $ 1,882,000 $ - $ ( 196,000 ) $ 4,868,000 Year Ended July 2, 2023 $ 3,096,000 $ 86,000 $ - $ - $ 3,182,000 Year Ended July 3, 2022 $ 9,258,000 $ 58,000 $ - $ ( 6,220,000 ) $ 3,096,000 Valuation allowance for inventory Year Ended June 30, 2024 $ 9,910,000 $ 8,980,000 $ - $ ( 10,900,000 ) $ 7,990,000 Year Ended July 2, 2023 $ 11,370,000 $ 3,010,000 $ - $ ( 4,470,000 ) $ 9,910,000 Year Ended July 3, 2022 $ 8,680,000 $ 4,670,000 $ - $ ( 1,980,000 ) $ 11,370,000 (a) Reduction in reserve due to amounts written off/recovered. F-28