Good day, ladies and gentlemen, and welcome to the 1-800-FLOWERS.COM Incorporated Fiscal 2014 Fourth Quarter and Full Year Results Conference Call. At this time all participants are in a listen-only mode. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Joe Pititto, Vice President of Investor Relations. You may begin..

Thank you, Nicole. Good morning, and thank you all for joining us today to discuss 1-800-FLOWERS.COM's financial results for our fiscal 2014 fourth quarter and full year.

For those of you who have not received a copy of our press release issued earlier this morning, the release can be accessed at the Investor Relations section of our website, at 1800flowers.com, or you can call Patty Altadonna at 516-237-6113 to receive a copy of the release by e-mail or fax.

In terms of structure, our call today will begin with brief formal remarks, and then we'll open the call to your questions. Presenting today will be Jim McCann, CEO; Chris McCann, President; and Bill Shea, CFO.

Before we begin, I need to remind everyone that a number of the statements that we will make today maybe forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements.

For a detailed description of these risks and uncertainties, please refer to our press release issued this morning, as well as our SEC filings, including the company's annual report on Form 10-K and quarterly reports on Form 10-Q.

In addition, this morning, we will discuss certain supplemental financial measures that were not prepared in accordance with Generally Accepted Accounting Principles.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying the company's press release issued this morning.

The company expressly disclaims any intent or obligation to update any of the forward-looking statements made in today's call, and recordings of today's call, the press release issued earlier today or in any of its SEC filings, except as may be otherwise stated by the company. I'll now turn the call over to Jim McCann..

Good morning, everyone. Before we jump into a discussion of our results for the fiscal 2014 fourth quarter and full year, I think it’s appropriate for me to touch on the announcement we made early last week regarding the signing of a definitive agreement to acquire Harry & David Holdings.

As we say on last week’s release, we are very excited about adding this iconic Harry & David name to our extended family of existing brands. This combination will increase our total revenues to more than $1.1 billion and add it to our EBITDA, EPS, and free cash flow in fiscal 2015, this fiscal year.

This acquisition is consistent with the strategy we have outlined to you in the past to extend our position as a leading destination for all of our customer's celebratory and gifting occasions.

It is also consistent with the disciplined approach that we’ve always taken in leveraging our assets including our strong balance sheet and cash flows, to grow our top and bottom line through a combination of investments in our existing businesses as well as accretive acquisitions.

We are moving forward with the acquisition process and we anticipate closing next month. In time to capture the key holiday season and we look forward to providing you with more information on Harry & David in the months ahead.

Now on to our fiscal 2014 results, for the fourth quarter and the full year we grew revenues across all three of our business segments. That's despite the continued uneven consumer economy and the impact of the unusually severe winter weather across most of the country which had its impact on Valentine’s Day.

In terms of our bottom-line, we achieved solid year-over-year performance in our BloomNet Wire Service business and strong improvements in contribution margin in our Gourmet Food and Gift Baskets segment.

This result set by lower contribution margin in our Consumer Floral segment resulting from the lower returns on a month spending to the aforementioned consumer environment and more specifically the Valentine Holiday snow and ice storm.

We have a number of initiatives under way including enhanced marketing and merchandizing programs designed to drive improved top and bottom line performance this -– in this business for our fiscal 2015. I will ask Chris to touch on few of these initiatives in his remarks in just a few minutes.

In our BloomNet business we continued to expand our market position through increase penetration for all of our expanded suite of products and services.

In our Gourmet Foods and Gift Baskets segment, we achieved strong bottom line results in both fourth quarter and full year primarily reflecting the effectiveness of the measures we implemented to enhance our operations at Fannie May, Fine Chocolates business.

Importantly the changes we have made have positioned Fannie May for accelerated growth and profitability in the years ahead. We also invested to expand our Cheryl's bakery facility in Westerville, Ohio where we have doubled the physical space and more than doubled our production capacity in response to continued strong growth for the Cheryl’s brand.

Last year in terms of cash generation, during the fiscal 2014 we grew our free cash flow 34% to $19.6 million and finished the year debt free.

Overall, the top and bottom line results we achieved in fiscal 2014, the fourth quarter and full year reflect our continued focus on managing those aspects of our business that we can’t control and we can effectively expect positive improvements.

This focus combined with our strong balance sheet, growing cash flows positions us to grow our business and enhance shareholder value through a combination of interim investment and strategic accretive acquisitions such as the exciting addition of Harry & David.

I will now turn the call over to Bill for a review of the financial and operating metrics for the quarter..

Thank you, Jim. As we noted in our press release this morning, our fiscal 2014 fourth quarter results include the benefit of a shift of the Easter Holiday into the period compared with the prior year when the holiday fell into fiscal third quarter.

This shift primarily benefited our Gourmet Food and Gift Baskets business compared with the prior year period. Providing specific financial results and key metrics from continuing operations, for the fiscal fourth quarter total net revenues increased 8.3% to a $187.4 million compared with the $173 million in the prior year period.

The increase primarily reflects the shift of Easter holiday into the period compared with the prior year when it fell in our fiscal third quarter as well as the contributions from solid growth in BloomNet and our Gourmet Food and Gift Baskets segments. Gross profit margin increased 160 basis points to 42.6% compared with 41% in the prior year period.

With such strong growth in e-commerce and retail revenues in our Gourmet Food and Gift Baskets brands including the benefit of the aforementioned ease to shift.

Operating expense ratio for the quarter improved 70 basis points to 40% of total net sales compared with 40.7% in the prior year period reflecting higher revenues in the period and our continued focus on leveraging our operating platform.

As a result of these factors EBITDA for the quarter excluding stock based compensation expense increased 80% to $11.3 million compared with $6.3 million in the prior year period.

Net income from continuing operations for the quarter increased to $3.1 million or $0.05 per fully diluted share compared with $538,000 or $0.01 per fully diluted share in the prior year period.

Consolidating net income for the quarter including the results of discontinued operations was $3.4 million, or $0.05 per fully-diluted share, compared with a loss of $1.7 million or a loss of $0.03 per share, in the prior year period. For the full year revenues was 2.8% to $756.3 million, compared with $735.5 million in the prior year.

Gross profit margin increased 20 basis points to 41.7%, compared with 41.5% in the prior year. Operating expense ratio for the year was 38.6% of net revenues compared with 38% in the prior year period. Operating expenses for the year increased 4.5% to $292 million compared with $279.4 million in the prior year.

The higher operating expense ratio for the year resulted from a planned increase in marketing spending to support the solid growth we have been seeing in our Consumer Floral segment for the past several years. In the fiscal third quarter these marketing investments were derailed by the Valentine's holiday snow and ice storm.

In Q4, consumer demand did not recover as we had anticipated and our increased marketing spend for the period did not induce the growth we had expected. As a result adjusted EBITDA for the year which excludes stock based compensation expense of $4.7 million was $48.2 million compared with $48.9 million in the prior year.

Net income from continuing operations was $14.6 million or $0.22 per fully diluted share compared with $15.7 million or $0.24 per fully diluted share in the prior year.

A slightly low EBITDA and net income for the year is primarily attributable to the impact of the aforementioned severe winter weather particularly the winter weather that occurred during the key Valentine holiday in our fiscal third quarter. Adjusted for the weather impact, EBITDA and net income would have been up for the year.

Consolidated net income for the year including results from discontinued operations was $15.4 million or $0.23 per fully diluted shares compared with $12.3 million or $0.19 per fully diluted share in the prior year. Free cash flow for the year increased 34% to $19.6 million compared with $14.6 million in the prior year.

This primarily reflected our focus on managing working capital which more than offset the additional $3 million in capital expenditures that we incurred during the year for the expansion of our Cheryl's bakery facility where we have more than doubled production capacity in response to the continued strong e-commerce growth of the Cheryl's brand.

In terms of customer metrics from continuing operations, for the quarter e-commerce orders increased 10.4% to $2,388,000 compared with $2,163,000 in the prior year period.

And for the year e-commerce orders increased 3% to $9,123,000 compared with $8,856,000 in the prior year Average order value for the quarter was $62.01 compared with $64.32 in the prior year period and average order value for the year was $60.09 compared with $60.59 in fiscal 2013.

Slightly lower AOB for the quarter and for the year primarily reflects the market shift in GFGB category including the growth of our popular Cheryl's Cookie Card without which our AOB increase -- our AOB would have increased for the quarter and for the year.

During the fourth quarter we added 675,000 new customers up 4.3% year-over-year while concurrently stimulating repeat orders from existing customers who represented 60.2% of total customers. And for the year we added 2.4 million new customers representing an increase of 1% compared with the prior year the shortage representing 52% of total customers.

Turning to category results, in 1-800-FLOWERS.COM Consumer Floral business fourth quarter revenues grew 3.6% to $130.4 million and full year revenues was 2.4% to $421.3 million compared with $125.9 million and $411.5 million in the respective prior year periods.

Gross profit margin was 39.6% for the quarter and 39.1% for the full year compared with 40.5% and 39.8% in the respective prior year periods, while down slightly we are still nearing store price.

With that said the lower gross margin results were probably attributable to the consolidation of the operating results of iFlorist our UK based floral and gift provider in which we increased our investment to a majority position in December 2013.

Additionally the lower gross margin results for the full year reflect the aforementioned impact of the severe winter weather particularly the effect of the Valentine’s Day holiday winter storm.

Category contribution margin was $14 million for the quarter and $40.3 million for the full year compared with $16.1 million and $47.2 million in the respective prior year periods.

The lower contribution for both the quarter and the year looks like the aforementioned lower gross margin for the period as well as the increased marketing investments particularly during the second half that did not generate sufficient revenue growth.

The company defined category contribution margin and earnings for interest, taxes, depreciation, and amortization and before the allocation of corporate overhead expenses.

In our BloomNet Wire Service business, fourth quarter revenues increased 4.2% to $21.4 million and full year revenues increased 2.9% to $84.2 million compared with $20.5 million and $81.8 million in the respective prior year periods.

Gross profit margin increased 80 basis points to 53% in the fourth quarter and 240 basis points to 53.3% for the year compared with 52.2% and 50.9% in the respective prior year periods primarily looks like in product mix.

Contribution margin was $6.7 million in the fourth quarter and $26.7 million for the full year compared with $6.8 million and $25.6 million in the respective prior year periods.

In Gourmet Food and Gift Baskets segment fourth quarter revenues increased 34% to $35.8 million and full year revenues grew 3.6% to $252 million compared with $26.7 million and $243.2 million in the respective prior year periods.

Revenue growth for the quarter primarily looks like the aforementioned shift of the Easter holiday into the fourth quarter. In addition, full year revenue growth benefitted from the increase gift basket sales into the mass channel where both fourth and the year revenues benefitted from the continued strong e-commerce growth in our Cheryl’s brand.

Gross profit margin for the quarter increased 1290 basis points to 46.8% and 110 basis points to 41.7% for the year compared with 32.9% and 40.6% in the respective prior year periods.

The significant increase in the fourth quarter primarily reflected the increased revenues associated with the aforementioned shift of the Easter holiday as well as the benefits from the improved performance at Fannie May which also benefitted full year gross margin Reflecting the revenue growth, gross margin improvements contribution margin was $1.3 million for the quarter and $27.1 million for the full year compared with the loss of $6.6 million and a gain of $20.3 million in the respective prior year periods.

In terms of corporate expenses, as I stated earlier our category contribution margin excludes costs associated with the company’s enterprise shared services platform which includes among other services IT, Human resources, Finance, Legal, and Executive.

These functions are operated under a centralized management platform providing services to the entire organization. For the fiscal fourth quarter corporate expense from continuing operations including stock based compensation was $11.8 million compared with $10.9 million in the prior year period.

And for the full year, corporate expense from continuing operations including stock based compensation was $50.5 million compared with $48.6 million in the prior year. Turning to our balance sheet, at year-end our balance sheet was debt free with cash and cash equivalents of $5.2 million and no borrowings under our revolving bank credit facility.

During fiscal 2014 we also used approximately $8.3 million in cash buying back approximately 1.6 million shares of our stock. Inventory at year end was $58.5 million compared with $55.8 million in fiscal 2013. This includes inventory of pre-billed in our Gourmet Food and Gift Baskets segment for the upcoming holiday season.

Capital expense for the year was approximately $23 million including the aforementioned spend for the expansion of our Cheryl facility. We anticipate CAPEX for fiscal 2015 to return to historical levels of $17 million to $20 million range.

Now regarding other guidance, for fiscal 2015 we expect to grow revenues across all three of our business segments with consolidated revenue growth for the year in the mid single digit range.

We expect to grow EBITDA and EPS at rates in excess of expected revenue growth reflecting anticipated continued improvements in gross profit margin and operating leverage. We also anticipate generating free cash flow for the year of approximately $25 million.

Importantly this guidance does not include any benefits from the recently announced planned acquisition of Harry & David. We planned to provide additional guidance for the combined businesses after we closed that acquisition. I will now turn the call over to our President, Chris McCann..

Thanks Bill. During fiscal 2014 we saw solid top and bottom line performance in our BloomNet wired service business where we continued to expand our market position versus the legacy competitors.

Through an uncompromising focus on quality and a continual stream of new products and services all designed to help our florists grow their businesses profitability, BloomNet has established itself as the industry's leading innovator.

A perfect example of this commitment is our local exclusive program, a unique showcase for our florists that enables them to shine a huge spotlight on their shops and reach an audience of millions of customers by featuring their exclusive product designs on the 1-800-FLOWERS.COM website.

We are very excited by the reaction we have seen both from our local florists and most importantly from our customers for this program.

Through initiatives like the local exclusive program, BloomNet is positioned to further extend its market position, particularly in light of some of the recent changes in the competitive landscape that frankly helped illustrate BloomNet's unique commitment to our florists.

We also saw solid growth and strong bottom line improvements in our Gourmet Food and Gift Baskets category where our Cheryl's brand continues to build on its reputation with customers as a truly one of a kind bakery gift company.

The expansion of our production facility increasing capacity more than two fold to address growing customer demand, positions us to double Cheryl's sales yet again in the years ahead.

In our Fannie May Fine Chocolate business, the changes we implemented last year to improve operating performance have proven very effective as illustrated by a significantly enhanced bottom line results in fiscal 2014.

Fannie May is now positioned to increase its focus on accelerating revenue growth as it rolls out some innovative marketing and merchandising programs online in the mobile and social arenas and its retail stores and through its wholesale customers.

As Jim mentioned earlier, we have also developed a number of new marketing and merchandising initiatives designed to enhance the performance in our 1-800-FLOWERS.COM consumer business.

On the merchandising front we expect to benefit from the aforementioned local exclusive program which taps into the growing trend for locally produced seasonal products. Our exclusive partnerships was real simple, Isaac Mizrahi and Sandra Magsamen great highly relevant brands that resonate with our customers.

The expansion of our FruitBouquets product offering, including new party style arrangements, milestone birthday designs and keepsake containers, and continued expansion of our speciality and personalized gifts including our hit message in a bottle as well as exclusive gifts from Waterfruit (ph), Lennox Gunn (ph), and Yankee Candle.

On the marketing front we expect to benefit from new marketing initiatives for FruitBouquets business leveraging our expanded geographic coverage for this great product line.

Enhancements to our mobile commerce platform including our new tablet applications, expansion of our social commerce efforts partnering with Instagram, Facebook, Google, and others to increase customer engagement, and enhancements through our loyalty and reminder programs where we have seen very positive customer response.

Based on these initiatives and others we have underway we are confident that we can enhance revenue growth for everyday in holiday gifting and mitigate the expected impact of the Saturday placement of the Valentine holiday in 2015. As we head into the key holiday season we are very excited about the introduction of our new multi-branded website.

This unique gifting website unites our growing family of great gift brands on one unified platform with a shared shopping cart, shared address book, shared rewards program, and much more. And provides our customers with a single destination where they can truly find original gifts for all of their celebratory occasions.

We believe the multi-branded website is a true game changer in terms of enhancing our cross brand marketing and merchandising efforts and expanding national awareness for all of our great gifting brands.

In addition we believe this strategy will help enhance the effectiveness and efficiency of our marketing investments across all brands and channels by driving customer traffic to one website creating a network effect that will benefit all of our brands.

As we roll out the multi-branded site this holiday season, we expect to gain valuable earnings about what works and what perhaps doesn’t work as well, and we will make adjustments accordingly along the way.

We are also looking forward to gaining valuable insights into our customer’s behaviours and interest, which will help us tailor our marketing and merchandizing programs going forward.

Overall we believe the initiatives we have in place including the new multi brand website positions us well to deepen our customer relationships and drives top and bottom line growth in our key fiscal second quarter and throughout the year. I’ll now turn the call back to Jim..

I just want to second Chris's regarding the roll out of our multi-branded website for this holiday season.

In particular what we are most excited about is the enhanced stability to introduce our customers to our growing family of gift brands as well as our innovative features designed to help make it easier for them to act on their thoughtfulness for all of the celebratory gifting occasions they have.

To sum up, in addition to the new website we have a number of initiatives in place that we believe will enable us to drive enhanced top and bottom line growth for the year. Now these include our FruitBouquets.com which we are building momentum and continuing to see tremendous customer reception to our great product design and quality.

Our growing market position for BloomNet through its innovative products, services, and technology offerings that continues to outpace the competition. Our expanded production capacity at Cheryl’s will enable us to build on what is already a strong growth trend in that business.

And we have regulated Fannie May operations where we are focused on driving growth. Lastly while we are excited about the planned addition of the iconic Harry & David name to our family of gifting brands and a very talented Harry & David team of employees which we think will enhance our overall management and team capabilities.

As I eluded earlier this combination will increase our total annual revenues to over $1 billion and add to our EBITDA EPS and free cash flows for this fiscal 2015. In addition we see some significant synergies in terms of both operations and growth that will further enhance the value of the combined business in the years ahead.

Most important, the addition of Harry & David will further extend our position as a leading destination of all of our customer’s celebratory and gifting occasions. And that concludes our formal remarks. Nicole I’ll now ask you to please restate the instructions for the Q&A portion of our call.

Nicole?.

Thank You. (Operator Instructions). Our first question comes from Jeff Stein of Northcoast Research your line is now open..

Good morning guys.

Couple of questions for you, first of all on the multi-brand portal, wondering if you could talk a little bit about where your cross brand penetration has been historically and any thoughts in terms of what you might expect in terms of what kind of an increase you might see in the first season?.

Well Jeff I’ll answer your question but you know we’ve only been working on this multi-branded portal for a couple of weeks now so it’s a long time. Chris..

So I think you know first of all the back end efforts that we have done on kind of creating multi brand customers revealed somewhat average results.

What we have seen really and historically we’ve talked about this in the past through example a combination of the 1-800-Baskets and 1-800-Flowers website together where we first launched it a couple of years ago.

When we do that, we see significantly enhanced customer retention and frequency metrics ultimately the higher average spend for the year and higher lifetime value of the customers..

So it will be fair to say that there has also been no capitalization so it is owned by our Flowers customers, see if we have the Gift Basket -- by the Gift Baskets number of flower orders hasn’t gone down at all?.

No, no, it’s hard to say exactly if there is cannibalization in there but if you just measure it by the average spend per year you see incremental value right. So we are excited about that. We are where we expected to be Jeff, in terms of development of the site right now.

We are on plan, we are migrating our brands and traffic onto the new platform, and that will continue throughout this next upcoming few months. We are very excited by the holiday season where we expect to gain valuable insights as we test different marketing and merchandizing strategies to enhance that multi-brand customer value..

So Chris when are we going to -- when I go to Cheryl’s, when I go to Fannie May when are we going to be able to actually as consumers see the new platform, will it be this month or where are we there?.

Yes, it should be right in the next 30 or so days really. You know some of the brands are getting along the new code base already, right. And now as we migrate them onto existing and into combined effort we are doing so in a diligent fashion. We have to make sure we manage SEO implications as we move forward on that but --.

So it is already in progress..

It is in progress and I expect you will see more and more of it during the next let's say 30 days or so..

Okay, and just couple of questions on the gift brands specifically Cheryl's is the new baking line up and running and I am a little confused, have you actually doubled your capacity or is that a multi-year process to double the capacity..

Well, we have doubled the facility Jeff. This is Jim, we have doubled the facility and over the next two or three years we will more than double its capacity as we add lines as needed. So, it didn’t make sense to put all the lines until you need them. They are about a $1 million per line.

So, yes so you see we spent $3 million, that's for the building and that's coming online shortly and then we will add capacity in a regimented fashion over the next couple of years to more than double its overall capacity..

So the timing of that will be as needed. We had about $20 million of capacity for each baking line. So, the current structure is we can spend at the facility, we added one baking line and then we add the second and third baking lines to double the capacity of the facility as needed as we grow into that demand..

And Bill can you, I was wondering if you could just talk a little bit about commodity prices, I know price of butter is up, price of coco is up, what if any impact you see from those commodity price increase on current holiday season and then looking beyond holiday..

Yes, Jeff we have been dealing with commodity pricing increase in a number of areas you mentioned. Some of them -- our biggest commodity is coco and we are covered through to this holiday season, so that's comforting. But we have been facing increases in butter and other ingredients.

These are the kind of operational issues we deal with, we deal with all the time. Just like few price swings that we have to deal with as an add-on or surcharge from our third party carriers. We are dealing with the bottleneck issues of the ports around the country that have been, many of you have been reading about.

So this is part of what we do, quarter in and quarter out. We do what we can do to mitigate the impact of that, what we think we will be able to get to the top without much impact on it but we continue to monitor these type of items..

It is all events that make life interesting Jeff..

Okay, thanks a lot guys..

Thank you..

Thank you Jeff..

Thank you. Our next question comes from the line of Dan Kurnos from the Benchmark Company. Your line is now open..

Great, thanks. Good morning. I have got a whole slew of questions but for everyone's sake I will ask a few high level ones and step back in the queue here. First, let me just congratulate you guys on the Harry & David acquisition, very sound strategically. But let me just dig down a first bit on guidance.

Bill I know you talk a lot about the weather impact from Valentine's Day and I think a lot of people are trying to sort of looking at 2015 where you guys have given your typical vague, it will be better than top line growth guidance, although you can kind of back into it from the cash flow number.

Just give us a sense of where margins would have panned out for the year. I know you said EBITDA would have been up, where would it have panned out for the year if you exclude the weather impact, and maybe some of the areas that you think that you still have some operating leverage going forward? Thanks..

You know what I will be too specific, it certainly caused us several million dollars plus the multiple of that on top line we actually spend dollars behind the consumer, particularly the consumer flow of brand and demand was actually very strong leading up to the Valentine's Day holiday and then obviously the storm on the 13th kind of created a host of issues.

From a demand standpoint we had to turn off the demand cycle for that period and then there was parts of the country where we had taken orders that we had difficulties delivering and we had to take under margin hits on that.

It was several million dollars and again if we were to add those back our overall EBITDA and our EPS would be up, you know it would be up for the year. I think we have talked about this in the past with respect to our view of operating expenses. We think it is in our DNA to continue to drive force out of our business.

We saw the OPEX ratio go up slightly this year. That was the result of a planned increasing spend on marketing. We saw the momentum we were building behind the consumer floral brand for several years now and we decided we were going to invest behind that growth. That defiled the Valentine's Day because of the storm..

Was on track right up until then..

That's right. And then we just do not see the demand pickup in the fourth quarter and around the Mother's Day holiday we spent behind that and that's what created some of the margin pressure..

So to give colour for next year Bill to Dan’s questions, with asset impact going forward we have -- we think our -– we can manage our operating expenses lower. We think that the….

Lower as a percent of revenues..

Lower as percent of revenues. We don’t think -- we are not planning on having a catastrophically strong, I would be dead then. We do have Valentine’s Day moving this Saturday. Next year Dan which retard demand it always does on a weekend.

So we built that into our plan but, we do anticipate having a better bottom line performance during the holiday with the marketing scheme that we had in place for Valentine’s Day. So we think we can control our expenses and reduce them as a percentage of our revenue.

We think that if there is some retardation on the growth side of Valentine’s Day because of day placement we anticipate that, it’s in our plan and we expect to have even better than a normal Valentine period from a bottom line point-of-view..

Great that’s really helpful colour and then just sticking with guidance again, I know you just answered a question about the multi-branded platform but, are you assuming any accelerated growth particularly in GFGB from the launch of the multi-branding or guidance?.

No we aren’t. The multi branded -- we had anticipations of what the multi-branded platform will do for customer penetration, for share revolving, no, we have catered into that. That’s why we spent quite a bit of capital to get to the point where we were introducing it now. But in our plan we are not.

Nothing is based in terms of improved performance on our per customer basis, on an average order we are expecting the same. Do anything that improves performance will give us some upside potential..

Great and then and Chris you mentioned change in the landscape.

I would be curious to hear if you guys are actually -- what you guys are seeing or maybe some colour from florists that you have been hearing since H&D acquired provide?.

I think it's not to be disturbed discussed since there are combination coming to play. I think Flowers are concerned. I think there is some element of concern I think it continues to shine a light on BloomNet and BloomNet is positioned at – Wire Service four blocks right.

So believe the combination really of those two serves to highlight the benefits of our planned combination quite frankly with Harry & David. And combining the two leaders in the floral and Gourmet Food and Gift Baskets categories where we see significant growth opportunities.

Shines the light I think on our strategy and it also shines the light on BloomNet’s positions in the marketplace as the Wire Service dependent at the florist..

And then speaking of Harry & David last one from me and then I’ll step aside Jim, you did talk a little bit about synergies I know you guys are not go into numbers now but could you just maybe elaborate on where you see both revenue and cost synergies coming into play and how quickly you might be able to recognize them?.

I will ask Bill to give a little bit more colour on that but we are excited about the growth possibilities here.

Harry & David we have been obviously watching for a long time, interested in for a long time, and our interest was piqued recently because we think that the management team there are in place, the employee base led by a really good management team have done a good job since they emerged from their experience in 2011 to really put the company on the right path.

We think that the team is – a good team is in place for us, for us to come together now is the right timing for us and for them. When we get together which we have done a lot over the last many months is that we get excited about the opportunities that grow together. Things we can do from a database point of view.

So obviously we think there is operating efficiencies we can achieve working together and more importantly we think there are growth synergies. Bill what would you add..

I think Dan I think we are going to get into a lot more detail after we close the deal next month on it. But as Jim stated I think we believe it’s twofold. There are growth synergies that we can realize both on the e-commerce side of the business as well as the wholesale side of the business as we bring these entities together.

And we think there is operating cost synergies..

This benefits are operating platforms and they combines entity going forward clearly on several different fronts.

But first of all I think with any mergers of two companies, the first thing you do is make sure we don’t mess up the existing businesses and our focus here is to lead the plan in place for this holiday season that Harry & David has which we are very confident in.

So I think with this holiday season we’ll run as is and then we will start making some implementation on the growth side beyond that..

Got it, very helpful, thanks guys I’ll jump back in the queue..

Thank You Dan..

Thank You our next question comes from the line of Michael Kupinski of Nobel Financial, Your line is now open..

Hi, good morning. This is for Michael Kempinsky and thank you for taking our questions.

Just in terms of FruitBouquets, I know, you discussed it a little bit but can you maybe update us on the courage there and can you maybe leverage some of the retail stores from Harry & David that you are going to acquire? And I know you have used some Fannie May stores to do that and how soon will you be ready to advertise on national level?.

So, I thing Warren (ph), in terms of FruitBouquets we are making good steady progress in terms of expanding availability across the country. Today we are at approximately 50% coverage of where our deliveries go. So, we can now begin some targeted geographic marketing tests to help drive sales and increase coverage.

We continue to be bullied by our customers in markets where FruitBouquet is available. It had an overwhelming response, positive response to the product. We continue to believe there is a significant opportunity for incremental sales and growth in this category and we are excited about the early response we are getting from our florists and customers.

Looking to integrate this with Harry & David, I think, we will take a look at whether the stores have the capability to do that or not. And overall I think Harry & David could be a good sales channel, good sales outlet for the FruitBouquet product as a natural fit..

Okay, thank you. And then we have been seeing a few retailers, they are showing some softness and they are cutting back on advertising.

What are you seeing in terms of trends for the balance of the year, are you seeing softness or something similar to last year?.

I think while the retailers or primarily an e-commerce retailer and we are certainly sensitive to one the consumer confidence index. The good news is we have seen a slight uptick recently which we think is beneficial for all of us but we are not quite subject to the normal wins that impact retail operatives particularly in fashion space.

So we see pretty much different from that, so we have not seen that challenge. We feel very comfortable to give the guidance that we did and we feel very optimistic about this holiday season..

Great, thank you. That's it for me..

Thank you Warren..

Thank you. (Operator Instructions). Our next question comes from the line of Anthony Lebiedzinski of Sidoti & Company. Your line is now open..

Good morning. I first had a couple of questions about the quarter and then couple of other questions about the forward-looking commentary.

So, as far as the Easter shift, can you just quantify and remind us how much that was in the quarter?.

It is about $10 million or so of revenues..

Got it, okay.

And also looking at the gross margin, you mentioned that the gross margin for Consumer Floral was down primarily because of iFlorist, so can you give us a sense of if we were to exclude that, how much was that a drag on your margin?.

Anthony I don’t think that was the primary reason but integral..

I think it is really two fold. I think we said it was probably due to the iFlorist. But iFlorist is still very small revenue contributor in the quarter. It does have a lower revenue, it does have a lower margin base. It really does impact more of the holiday for the Q2 you know as part of the mix.

And I think for the full year with Consumer Floral we felt the impact of higher credits as a result of the Valentine's Day holiday and the continuous promotional environment that we all play in. I think we are better than most in dealing with that but it does impact to some degree.

But I think we feel really comfortable that we are going to get to be able to achieve gross margin improvement as we move into fiscal 2015..

And Anthony even with those factors the holiday storm, the (inaudible) we still had solid margins near an all time high. So, we feel very comfortable that we can get those back to them..

Okay, that's good to hear.

And I think Chris you had mentioned in your prepared remarks about the Fannie May, some merchandising programs that are new, can you just give us some examples of those?.

Well, just overall in Fannie May I think the change is major seat of benefit of the operating performance that we have done and now with the continued enhancement of the team there, bringing in some new visual emergence , some new marketing people focused on the store performance. So we are continuing to roll out marketing and merchandising progress.

Nothing specific that I could point to that you would see today but as we roll into the holiday I think you will see the performance of those efforts..

Okay, great..

I would like just one more colour on Fannie May, Anthony, we stated in the last quarter and this quarter, it is still a hangover effect in terms of how it impacts Fannie May, the poor operational results we had during that second half of last year.

So they are fixed but I think you can count normally on improvement this year but into next year too as we get ourselves out of the penalty box with some of the third parties we prepare to outperform..

Okay, great and I know as far as Harry & David under their present management team they shrunk the store base from I believe about 150 locations. I believe its 47 now.

So do you have any thoughts as to the store base now, do you expect to keep as it is or possibly expand or possibly shrink it, any kind of early thoughts on that, that will be helpful?.

When we close we’ll be happy to give you more colour on that. Just to point out, I think the management team there has done a good job rationalizing their store count and shrinking down the store count from over 150 to the 48 or so that they have now. I think there are some interesting options that we are excited about, talking to them about.

I don’t think -- we know that the management team there doesn’t have any growth plans for the stores but they do have an enhancement plan to improve the performance of the stores and our teams are very excited about the things they have begun to discuss on how we can work together with the breadth of all of our brands now.

To make the current store compliment even better for us so, more colour when we close but our teams are very excited about what they can do with the existing store footprint..

Okay, terrific. Thank you very much..

You bet..

Thank you. (Operator Instructions). Our next question comes from the line of Dan Krunos of the Benchmark Company. Your line is now open..

Hey, thanks. I guess I’ll ask my follow-ups I’ll try to keep them brief for you guys.

Just on the Consumer Floral front, I know we have the Valentine storm but then -- looks like we had some persistent weakness, I don’t know if you quantified how Mother’s Day did but, you know, what gives you confidence that there is going to be a recovery or an uptick in Consumer Floral going forward and what do you think that sustainable growth is?.

I think as we look at overall for the year we still have good growth in the Consumer Floral space and especially vis-à-vis what we are seeing from the competitors. (Multiple Speaker) Again the Valentines the quarter was 3.6% growth, I think of it as 2.5% for the year.

So based on our customer metrics and our continued performance of our customers metrics and as I mentioned previously based on the marketing and merchandizing initiatives that we have in place, we are very confident that the consumer floral will come back, this next year we’ll perform as it has successfully for the past several years..

If you look at the combined company for the last it's called five years now, we’ve been at mid single digits with double digit bottom line growth and we have every confidence that that will continue and the main driver of that is in the floral brand..

And then Jim if you could talk a little bit about Fannie, some additional colour will be helpful.

Just how did e-commerce growth pace in the quarter and what’s it looking like heading into the holiday period if you have any visibility on that?.

I think overall as a whole Gourmet Food and Gift Baskets channel performed very well in the fourth quarter. It grew 34%, obviously a big factor of that was the shift in Easter.

And that's primarily e-commerce..

E-commerce and the retail stores, you know, both benefitted from the shift in Easter. But we did see very nice comp store growth in the retail stores as well as nice growth in ecommerce. So again with the new management team that we have, some of the new members of the management team that we have within Fannie May were very bullish on Fannie May..

We’re bullish again on whole -– greatly as the Gift Food and Gift Basket area had a very good strong year. Recovering on the Fannie May issues from a year ago, Cheryl continuing to be strong, Popcorn is strong, Gift Basket business growing, Gift baskets is hitting the wholesale sign so all of it seems to be working.

Now you have the additional capacities for Cheryl, you have the improved store performance that we’re seeing on the Fannie May side but they still have retail stores, e-commerce improvements. So it seems like instead of target hitting on founders it’s been driving our growth.

We mentioned in the past, we thought that the gift -- the Food Gift area would continue to be a growth engine for us and now you combine that with the wonderful assets and management and employee teams at Harry & David with the (inaudible) trend we just feel like the timing is so good for us because of the good solid brick on brick kind of performance that we’ve seen developing in the gift food area.

Yet Harry & David does it at the right time, we don’t know how they have got their act together and done really well over the last two or three years. Just seem like the stars are lining for us..

And certainly with the addition of the multi-branded platform we’d expect all of that to improve.

And then Bill just quick question, just on the gross margin for GFGB, what would they have been if you exclude the Easter benefit do you know?.

You can't really exclude it because you have the expense in one quarter and revenue in another..

You know I mean, again it still would have been nicely up on revenue perspective. Again profitability would still have been very strong in the fourth quarter even without the Easter benefit..

I think that's evidenced by the increase in the -- on the annual number for gross margin..

Okay and then… sorry..

If you look at the second half of the year you would see that the contribution margin from the Gourmet Food and Gift Baskets categories are up $3 million in the second half of the year. So that eliminates the Easter shift..

$7 million for the year..

Okay, that's helpful.

And then just two more quick ones, on the FruitBouquet side, are you guys willing to maybe quantify a little bit the impact that you are expecting for the top line in 2015 from FruitBouquets or at least give us some directional sense of that?.

I don’t think we are at an advantage. It is still not a very big business for us. But it is all depending on coverage and as Chris said as we approach this 50% coverage mark now. Now we can stop that targeted testing on a direct marketing basis where we can really delve into our customer base.

What we hear from the customers who had the opportunity to try the product, loved the product.

High grades in terms of design, high grades in terms of quality, our florists who are participating in this new program that has been channeled are seeing great increases in their business with outside margin contribution because they already have the fixed overhead, they already have the delivery expansion, the personnel.

So, it is training, it is some additional facilities but they are having great experience with this. So, we are frustrated that we aren’t able to tell you more than that, but I think you will see as we roll into the second half of this fiscal year after we get the big holiday period behind us so, we will be able to put more and more light on it.

But we think we keep mentioning it because we think and know that it is going to be important part of our business going forward. And it is complimentary to what we are likely to do in terms of the growth synergies with Harry & David..

Yes, that makes sense.

And just very last from me, maybe a bit too granular, but since you guys brought this up on the call you talked about optimizing for SEO, just curious how you have been managing through the algorithm changes that we have seen and particularly as it relates to doorway pages and whether or not you had to spend additional to improve content before you launched the multi-branded, thanks?.

Yes, I think the good news is we are very diligent and it does require a good diligent focus on the algorithm changes and staying in pace with that. We have a good team that's been managing that well, we are seeing that in our results. If you look at some of the key words, you see where flower shows up as an example. We are doing a good job there.

We haven’t had to increase expense related to the multi-brand portal because we have already put those capabilities in place across the brands. But we do just have to manage this as we increase this different temp structure because we don’t break anything. And we make sure we maintain our SEO positions.

So it’s more from the technical point of view then from a content point of view..

Alright, thanks for bearing with me guys..

Not at all. Thanks Dan..

Thank you. Our next question comes from the line of Wolfe Joffe, RC Management. Your line is now open..

Gentlemen, how are you?.

Good, how are you doing?.

Just fine, couple of quick questions on Harry & David, in looking at the financials that are out there for this business it looks like CapEx was actually brought up to around $10 million which was roughly in line with the D&A of that company.

So I guess given the restructurings that have been taking place there and the direction of CapEx, I guess what do you perceive to be the likely CapEx level for that business and will there be sort of further cash needs beyond the $10 million that were spent for continued restructurings?.

It will be very difficult for us right now, Wolfe, to give you that. That would be too granular. But just generally speaking I think they have done a very good job of managing their CapEx spend.

The team has been disciplined and balanced there, and frankly they spent some on the store base which they don’t have in the current and the go forward plan to do.

So, without really having to put a firm grip on myself I don’t think we could give you any further color and I expect that it's in the -- we don’t expect it to increase significantly or increase at all frankly -- when we come together..

Okay and then question about pretax flow through, do you think their business has a similar pretax flow through profile to the core florist business or rather maybe not the core flowers business but your business in total?.

Yes, I mean you can look at their historical financial statement. You can see the trend lines from their EBITDA what they’ve had sort of EBITDA percentages are in a similar range to ours, getting these opportunities for them to be enhanced.

From a cash flow standpoint because they’ve had to pay off certain obligations with regard to an old pension plan, with regard to their reorganization proceedings that's impacted their cash flow impact, that will obviously -- those are behind them now so that cash flows will kind of materialize….

But we think that the two businesses are complimentary. The challenge for the Harry & David business often has been in the past a factor they make more than 100% of their profits in the fourth calendar quarter or second fiscal quarter.

But we are looking forward to staff utilization capabilities, our mix of different holidays where we have different compliments, all of those things we get into in more detail when we close the transaction but we think that as Bill said, if you look at their EBITDA performance, if you look at the things they have got behind them they are complimentary and we think their one plus one equals something more than two here..

And along those lines, when you think about over the next two years or three years, do you perceive the revenue synergies to be three to four times greater than the cost synergies or is just sort of five to six times greater?.

We are not at all in a position to quantify that now.

We are excited about the acquisition, we are excited about the possibilities that we’ve identified in the process leading up to announcing this transaction, and even since then just in the last couple of weeks a lot more work has been done and a ton more to do for us to really be able to quantify the growth synergies.

But we are -– with what we have done in our work up to this point I can just play for this we are very excited..

Okay and one more question on this if I may.

Clearly some folks have been talking about savings on the logistic side on a combined basis, the company was obviously got used to third party logistics providers in some circumstances, is that opportunity sort of a 4% to 5% savings or is that 8% to 10% neighborhood, how do you think about that?.

I think as we look at it and we said we see operational synergies and we see growth synergies. Operational synergies will include all of the things that you mentioned. They have a very big facility in the Greater Columbus, Ohio area, so do we. So, we are excited about our teams working together there.

We had distribution logistics around the country so to date. So from a growth perspective we think we have assets in place that will sustain our growth without really having to add to that just by optimizing the footprint we already have.

But after we close we will be happy to give you our best color estimates then and that’s exactly what’s coming together as we speak..

Okay, great and on the FruitBouquets, did I correctly understand that you have reached the 50% coverage mark or your still working toward that like I was expressed two ways on the call?.

We are right around 50% fiscal –- right around that 50% market penetration point of view from a coverage delivery coverage point of view. And that enables us now to start doing I referenced and Jim referenced, some real geographic targeted marketing.

We will utilize our direct marketing capability email to start test to see how we can start to influence the business, the growth rate from those markets where we have coverage and that will help us on a go forward basis as we continue to expand our coverage capabilities..

That’s fantastic. I know you guys have been looking forward to continue to be able to do that and then on the….

Frankly those efforts can be leveraged now with the additional assets we have in place, gives us increased flexibility..

Can you extend on that?.

Well if we have FruitBouquets available from our FruitBouquets program, if -- and now we have Fannie May FruitBouquets available. It is not inconceivable that the Harry & David team would want to have FruitBouquets available as well. The same infrastructure can be leveraged..

Got you, interesting. Okay, thanks very much..

Thank You.

Thank you. I am showing no further questions at this time..

Well thank you for your time and your interest today. As you hear we’re pleased with all the circumstances with the fourth quarter. We are pleased with how the year came out especially on relative basis.

We are positive on the existing business and we are happy to give the guidance we have for the upcoming fiscal year which we have already began, fiscal 2015. And we are very excited to be partnering with a very talented team at Harry & David. So, we are pleased with what we have been able to deliver. We are very excited about what we hope to deliver.

So thank you for your time and interest and we look forward to you visiting that multi-branded portal over the weeks and months ahead and becoming a more frequent customer. Thank you..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Have a great day everyone..