1-800-Flowers.Com Inc (FLWS) 2011 Q2 法說會逐字稿

Good day, everyone, and welcome to the 1-800-FLOWERS.COM Inc. fiscal 2011 second quarter results conference call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Company's Vice President of Investor Relations, Joseph Pititto. Mr. Pititto, please go ahead, sir.

Thank you, Mary. Good morning, and thank you all for joining us this morning to discuss 1-800-FLOWERS.COM's financial results for our fiscal 2011 second quarter. For those of you who have not yet received a copy of the release issued earlier this morning, the release can be accessed at the Investor Relations section of our website at www.1800flowers.com. Or you can call Patty Altadonna at 516-237-6113to receive a copy of the release by email or fax.

In terms of structure, our call today will begin with brief formal remarks, and then we will open up 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 we will make today may be forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause 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 the quarterly reports on Form 10-Q.

In addition, this morning we will discuss certain supplemental financial measures that were not prepared in accordance with the generally accepted accounting principles. Reconciliation 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 issues this morning. The company expressly disclaims any intent or obligation to update any of the forward-looking statements made in today's call, any recordings of today's call, the press release issued earlier today, or any of its SEC filings except as may be otherwise stated by the Company.

I now turn the call over to Jim McCann.

Good morning, everyone.

As we discussed in our call back in October, we enter fiscal 2011 with specific areas of focus to improve our results, particularly in Consumer Floral. Through the first half of the fiscal year we have launched a number of initiatives in key areas. I will ask Chris to elaborate in his remarks later in the call, but I will say that we are pleased with the early results we are seeing. During our second quarter, we improved our gross profit margin through a combination of enhanced manufacturing efficiencies in our Gourmet Food and Gift Baskets and more efficient use of promotions in our Consumer Floral.

As we told you in past calls, gross margin is a key area of ongoing focus, and we expect improvements to accelerate during the second half of our fiscal year. Also during the quarter we further reduced our operating expenses across the enterprise. As a result, we were able to achieve solid bottom line results, including an increase in our EBITDA 7% to $30.4 million.

Revenue for the quarter -- revenues for the quarter were in line with our expectations and reflect several factors. In our Gourmet Food and Gift Basket product lines we were particularly pleased with the continued strong trends that we saw in our newest brand, 1-800-Baskets.com. Since its launch in our second quarter last year, 1-800-Baskets.com has seen steady increases in order volume, average order size, and gross margin. Importantly, the growth of 1-800-Baskets.com is being driven by our strategy to leveraged the strength our flagship 1-800-FLOWERS.COM brand, including a significant online traffic and customer database. This has enabled us to cost-effectively introduce millions of customer those the 1-800-Baskets brand, a growing number of whom are now coming directly to the site.

During the second quarter, the strong revenue growth in this area helped offset the lower wholesale basket demand in the mass market channel that we expected and discussed with you earlier this year. The best news is the fact that 1-800-Baskets.com is still this its very early stages, andwe believe that we have only scratched the surface on its growth potential.

During the second quarter we also saw solid growth in BloomNet. This is driving primarily by an increased penetration of our growing suite products and services.

In our Consumer Floral business, we are pleased with the improving trends that we saw in revenue, gross profit margin, and contribution margin. Revenues in this category were down less than 3% when adjusted for the loss of revenue associated with a third party marketing program that we ended back in December of 2009. Gross margin improved 30 basis points, and category contribution increased to $8.2 million. We believe that we are on track to achieve our stated objectives for our Consumer Floral category, to improve sales trends, to increase gross profit margin, and to enhance category contribution.

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

Thank you, Jim.

As our press release indicates, Q2 is characterized by improving trends in several key areas of our business that we outlined for you in past calls. We increased gross margin 20 base points and reduced operating expenses by $2.7 million. We saw the revenue trend in Consumer Floral improve. BloomNet continues to grow and increase its market penetration, and Gourmet Food and Gift Baskets continues to perform well, highlighted by strong growth in 1-800-Baskets.com. As a result we were able to deliver a solid EBITDA and EPS performance for the quarter.

Now regarding specific financial results and key metrics for the second quarter. Total net revenues were $235.4 million, down 1.3% compared with $238.5 million in the prior year period. During the quarter our ecommerce orders totaled $2.889 million, compared with $2.902 million in the year ago period. Average order size during the quarter was $53.51, up 2.4% compared with $52.26 in the prior period. As a result, ecommerce revenues for the quarter increased 2% compared with the prior year period.

During the quarter we added 636,000 new customers. This was achieved while concurrently stimulating the [preorders] from existing, who represented 61% of total revenues, compared with 60% in the prior year period.

Gross margin for the quarter increased 20 basis points to 42%, compared with 41.8% in the prior year period. This primarily reflects reduced promotional activities in Consumer Floral, combined with enhanced manufacturers efficiencies in Gourmet Food and Gift Baskets, that more than offsets an increase in commodity prices.

Operating expenses before depreciation amortization improved $2.7 million, to $68.5 million, compared with $71.2 millionin the prior year period, and operating expense ratio improved 70 basis points to 29.1%, compared to 29.8% in the prior period. Operating expenses also includes a non-cash operating expense of $1.1 million, compared with $1.2 millions in the prior period. For the quarter, depreciation and amortization was $5.3 million, essentially flat for the third period.

As a result of these factors, EBITDA was $30.4 million, compared with $28.5 million in the prior period. It should be noted that the increased EBITDA includes the financial impact of several items which impact the over year comparability. These include the loss of approximately $1.4 million associated with the aforementioned discontinued third party marketing program, the loss of approximately $8 million in wholesale basket revenue compared with the prior year, and the inclusion of a $900,000 expense in the prior year period relating to a litigation settlement.

Net income from continuing operations improved 6.3%, or approximately $800,000, to $13.5 million or $0.21 per share, compared with $12.7 million or $0.20 per share in the prior year period.

In terms of category results. In our 1-800-FLOWERS.COM Consumer Floral business, during the second quarter revenues in this category declined 3.9% to $82.6 million,compared with $89.5 millions in the prior year period. Gross profit margin for the quarter improved 30 basis points to 38.6%, compared with 38.3% in last year's fiscal second quarter. This improvement reflected the initiatives to reduce promotional pricing and enhance the effectiveness of our marketing programs. We expect to see additional benefits from these initiatives in the form of improved margins year-over-year gross profit margins throughout the second half of our fiscal year.

Category contribution margin increased 7.9% to $8.2 million, compared with $7.6 millions in the prior year period. And it should be noted that on a comparative basis, the prior year's revenue gross margin and category contribution all included an additional $1 million approximately associated with the aforementioned discontinued third party marketing program. The Company defines category contribution margin as earnings before interest, taxes, depreciation and amortization, and before the allocation of corporate overhead expenses.

In our BloomNet wire service business, revenues increased 9.9% to $16.2 million compared to $14.8 millionin the prior year period, primarily reflecting increased market penetration for our expanded suite of products and services, including our exclusive Yankee Candle line. Gross margin was 56%, compared with 58.1% in the prior year period, primarily reflecting product mix. Category contribution margin increased 14.3% to $5.4 million, compared with $4.7 millions in the prior year period.

In Gourmet Food and Gift Basket revenue was $136.7 million, down 1.1% compared with $138.2 million. This reflected reduced wholesale basket orders frommass-market customers, which was largely offset by strong increase in our ecommerce channel. Gross margin increased ten basis points to 42.2%, compared with 42.1%. And category contribution margin was $28.7 million, compared with $28.6 million in the prior year period. This year-over-year the increase was achieved despite the impact of the lower year-over-year wholesale basket order volume, and the fact that the prior year included approximately $400,000 in category contribution associated with the aforementioned discontinued third party marketing program.

In terms of corporate expense. As I stated earlier, our category contribution margin results exclude costs associated with the Company's enterprise shared services platform, which includes among other services, IT, HR, finance, legal, and executive. These functions are operated under a centralized management platform, providing supports service to the entire organization. For the fiscal second quarter, corporate expense from continuing operations, including stock-based compensation, was $11.8 million, compared with $12.4 millions in the prior year period.

Now turning to our balance sheet. At the end of the second quarter, our cash and investments positions was $17.7 million. Receivables were $40.2 million, compared withapproximately $14 million at the end of fiscal 2010. This increase reflects the seasonal build due to the Christmas holiday being the last business day of our fiscal quarter and the seasonal nature of our wholesale channel within the Gourmet Food and Gift Baskets. Essentially all of this turns into cash this quarter. Inventory was approximately $50.4 million was in line with management's expectation and reflects the build up for the Valentine line holiday. And borrowings under our credit facility were $53.3 million in term loan debt, and we zero outstanding under our revolving credit line.

Regarding guidance. As we have stated previously, we are not providing specific guidance for revenues, EPS, EBITDA, and free cash flow. In terms of the second half of the fiscal year, due to the Valentine and Mother's Day holidays, among other spring occasions, our business is largely floral in nature. With this in mind, we will continue to focus on enhancing gross profit and contribution margins in our Consumer Floral business through the initiatives we have outlined earlier in this call. Specifically, regarding this year's Valentines holiday. Historically the Monday placement for this holiday has had a significant negative effect on floral sales due to the fact that the two biggest selling days, the 12th and 13th of February, fall on a weekend. As a result, we anticipate our top line for the holiday will be impacted. However, as I said, we will continue to execute on our initiatives to enhance the effectiveness of our programs, and we believe these efforts will enable us to deliver year-over-year improvement in our Consumer Floral bottom-line contribution, and therefore benefit our consolidated results.

I now turn the call to our president, Chris McCann.

Thank you, Bill.

As we told you back in the beginning of this fiscal year, there are several specific areas that we are focusing on to improve our overall performance, particularly in our Consumer Floral. Among these are our initiatives to improve gross profit margin, as well as a number of programs designed to enhance our already industry-leading customer service. During the second quarter we saw evidence of good progress in these areas. Jim and Bill have touched on gross profit margin where we believe we will continue to see improvements going forward. In the customer service area, I described in our last call how we have significantly stepped up the training of our sales and service specialists. Based on the positive trends that we are seeing in our internal metrics, we are making excellent progress toward building a cultural that is obsessed with providing the very best service in the industry.

As pleased as we are with the direction of our internal metrics, it is gratifying to see the external recognition we are receiving for our efforts. Adding to our number one rating versus competitors for customer satisfaction by STELLAService, which we received just prior to the holiday period, we were very pleased with the most recent accolade we received from the E-Tailing Group, which named 1-800-FLOWERS.COM asone of only nine online retailers out of 100 benchmarked to meet the criteria for excellence in online customer service.

In addition to our focus on customer service, we have also launched several initiatives to reinvigorate our product development efforts, an area where 1-800-FLOWERS.COM has always been the floral industry leader. As I told you in our last conference call, we have made investments in new talent in this area, as well as forging a close working relationship with our BloomNet professional florists through our Florist Design Council. Our focus is on developing truly original floral designs which help our customers express themselves perfectly. I believe we are making excellent progress in this area, as we saw the new product offerings that we featured for the holiday season, and the great new Valentine collection that you can see when you visit 1-800-FLOWERS.COM today.

Overall, we are confidence that our initiatives in marketing, merchandising and customer service will enable us to improve the performance of the Consumer Floral segment this quarter and this year, as well as position us for renewed growth in the years ahead.

On the subject of growth, it is important to look at the combined performance of 1-800-Baskets and www.1-800-FLOWERS.COM. As Jim noted earlier, the successful launch and strong growth of 1-800-Baskets has been driven by our strategy of leveraging our flagship 1-800-FLOWERS.COM brand through the dual-branded website as well as in our product offerings and marketing programs. The key element of our efforts to maximize our marketing and merchandising effectiveness is to stand behind the products that are much relevant to our customers for the season and the occasion they are shopping for. This was illustrated during the recent year-end holiday period involving the merchandising of gift baskets on the www.1-800-FLOWERS.COM site and the Baskets messaging in our marketing programs. As a result, we saw positive year over year revenue growth for the combined 1-800-Baskets and 1-800-FLOWERSbrands during the fiscal second quarter.

I will now turn the call back to gym for a wrap up.

Chris makes an important point, one I would like to expand on. When we look at our business, we look at the total product offering. All of the gift product lines that we provide to help our customers deliver smiles and help us deepen our relationship with them for all of their celebratory occasions. As our customers' florists and gift shop, it is our job to merchandise our store with all the appropriate gifts that we would expect to find; our flowers, our plants, our plush, candles, balloons, fine chocolates, gourmet gifts and gift baskets. And depending on the season, and the occasion, our mix will expand and exchange.

In fact, in terms of our gourmet gifts and gift baskets, we have always offered these product lines. We did it first through a network of third party drop shippers. Then several years ago when we saw the tremendous growth opportunity in this area, we made the strategic decision to become vertically integrated through a combination of acquiring strong, global brands, and by birthing new brands internally, such as 1-800-Baskets.com. This strategy has enabled us to capture the significantly stronger manufacturing margins while controlling quality and supply consistency. In turn, we were able to spend behind the brands and to build recognition, and thereby benefit both top and bottom line from the significant growth that we have achieved in our gourmet food/gift category.

So what we have built is a customer-facing florist and gift shop that includes all of our floral and gourmet food and gift basket product lines, which aligns with significant growth opportunities as we serve the gifting needs of our customers. And you can add to this our growing BloomNet B2B business, with its market share and strong contribution margins. We believe this combination of products and services offers us an excellent top and bottom line growth opportunity and positions us to enhance shareholder value for the long term.

That concludes our formal remarks , and I now ask Mary if you could please restate the instructions for the Q&A portion of the call.

Certainly. (Operator Instructions.) Our first question comes from the line of Ingrid Chung from Goldman Sachs.

Thanks. Good morning. So just a few questions. First, I was wondering if you could talk about the community price increases that you experienced? Which products specifically does this impact, and what kind of increases from you seen, and what do you expect to see for the rest of the year?

Secondly, I was wondering if you could talk about the potential uses of cash. Beyond debt pay-downs, how are you thinking about share repurchases versuspotential acquisitions in the food and gift baskets business.

And then finally just a housekeeping question. I was wondering if you could give us a outlook in tempts of the tax rate going forward?Thanks.

Well, we'll ask -- Ingrid, nice to chat with you. We will ask Bill to start with the commodities question.

Okay.

I'm sorry. Ingrid, primarily the increases that we saw affected our bake goods; so butter, flour, in that area. Cocoa to a less extent. While that is a big product of ours, we have been able to lock in some prices, and so we haven't seen the impact of that. While you have seen it -- in the papers you may have seen cocoa having some issues. We think going forward it will stabilize a little bit in most of these areas, but it was obviously a concern of ours, because they're important ingredients in our baked goods.

But we were able to offset it. Maybe you want to give color there.

What we have been focusing on is manufacturing efficiencies within our -- all of our manufacturing facilities. So we have implemented a number of lean initiatives. We just [got a] Six Sigma process to take cost out of our margins, and we have been able to offset this as well.

And the second piece, in terms of cash, Ingrid, on the cash piece, clearly our emphasis has been on improving our balance sheet. And as we get to a point now where you see at the end of the year where our net debt position is going to be quite small, it gives us even more flexibility. And the way we are thinking about it is simply continuing to improve the balance sheet with excess pay down on our debt. Secondly, if there are strategic opportunities to grow our business, either through internal initiatives or through expert acquisitions, we would consider those. And then we have a range of possibilities like those you mentioned in your question. But we feel good about our conservative posture in terms of using our cash first and foremost to make sure we have a very solid balance sheet.

And finally, on the tax rate, our year to date tax rate is 41.5%. A year ago it was just under 41%. It's really a result of where our pretax income is right now, so you don't get the full leverage of -- on state taxes or certain deductions or stock-based compensation. Had some influence on these. As our income continues to grow, we expect to get back to a more normalized rate between 39% and 40%.

Okay. Great, excellent, thank you.

Thank you.

Thank you, our next question comes from the line of Anthony Lebiedzinski have Sidoti.

Good morning. I just wanted to follow up on the previous question about the manufacturing efficiencies. Can you give us some maybe more specific examples, and do you expect to further get some additional efficiencies going forward?

I think we can say yes, Anthony, that we expect they will be continuing efficiencies. I'm really impressed with the team's efforts embracing the lean manufacturing, how it has become a part of our culture. Therefore you have seen benefits this past quarter, the strongest quarter for our food and gourmet gift businesses. Those with the vertical nature to them with the manufacturing. They have done a terrific job. So we largely offset all of the commodity issues that we would have otherwise faced. But I think you can expect that going forward that will continue, because it has now become a part of our process, where we are just always looking to improve our operating efficiencies. And I have [purvey] to the list of new projects they have in front of them, and I think they'll yield similar results going forward.

Okay, that's good to hear. And also, aside from Yankee Candle, and you talk about any other products in BloomNet here in the quarter and also going forward?

Yes, Anthony, we -- in BloomNet there are a number of new product lines and services that we've implemented, and we're getting good penetration rate. So Yankee Candle was a new product line. The [Glass] product line we introduced last year is gaining more traction. Our whole Napco business line is doing well, getting more traction into the BloomNet florists, as we continue to enhance our relationship and deepen our relationship, and then leverage the products and services for our florists to help them be more profitable. So on a go-forward basis we can -- we just continue to work with our florists to find out what other products and services they need, and that also helps us serve our customers. So I think we'll just continue to see the penetration increase.

One product -- so we have a road map of products and a road map of services, Anthony. This is Jim. And on the products side we just introduced this week our new line of plush products called Lotsa Love. There's a case where we test the marketplace; we know it's something that our customers want. We work a third party where appropriate or if there's a brand that matters. In this category brands didn't matter much, so we created our own brand. We developed our own characters. And that product just launched this week, and the early reception is fantastic.

So it will take a while to get that into the system, and then the 1-800-FLOWERS brand will push those products -- will be able to create more pull for those products. So it's a process against each one of those product lines. So last -- so we just introduced Yankee Candle. That's been well received. The florists like that they have access to a branded product line. And increasingly you'll see 1-800-FLOWERS incorporate those products -- Yankee Candle products -- into our flower arrangements during the next holiday season. So that -- it takes a while to get them going. And of course we announced last quarter that we introduced our new balloon program with Anagram, a division of AMSCAN.

So we have a whole suite and a product road map on the products piece and the service piece, so it will just be a constant interruption.

Okay, good. And lastly, just to clarify as far as the third party marketing program, was this the last quarter that we an unfavorable impact from that?

Yes.

Okay. All right, thank you.

Thank you, our next question comes from the line of Eric Beder from Brean Murray.

Hi, this is Jennifer. I'm just filling in for Eric Beder today. I just wanted to start off -- you gave guidance about the negative impact on the top line sales because of Valentines day landing on a Monday. Can you just give more color on what extent that negative impact has historically been, or how we should think about that?

Yes, I think mainly it is just, Bill pointed out, the impact comes from the fact that two key selling days related to Valentines are on a weekend. When you have a weekend, that demand is generally down.

And it's a holiday weekend. So that you have people leave the office even earlier. So it has a overall negative effect. I wouldn't quantify it in terms of what (inaudible) the pass, because we are just projecting,but our focus here is on servicing our customers, having the right breadth of products, making sure we're taking care of our margins, and not reaching silly -- in silly fashion to try and get that last order on that last night, and doing it in a very expensive fashion.

And we view this more as giving some color on the quarter versus actually giving guidance.

Right. Also, just over the last several quarters now you've tested different levels of promotions, and I was wondering if you could share how effective the changes that you've made have been to drive sales? Can you call out any specific types of promotions that have been particularly effective, or just how people are responding to them in general now that you have reduced them?

So, Jennifer, from a competitive pint of view, we need to make sure we are always competing appropriately in the marketplace. As a retailer there's a plethora or a quiver of arrows that we have of offers that we constantly use to try to stimulate the consumer demand. So it runs the gamut, so I can't really point to anything specific, because it all so different according to different segments of our customer base on who responds to what type of offer. But I think you'll continue to see us utilize and optimize our marketing efforts to increase our gross profit margin at the same time.

Okay. The other question is also just about the Popcorn Factory. I noticed that you have like a third tab on the site, which you added during the quarter. Just your thoughts on that, and have you seen any incremental benefit?

Yes, we added that in, as you pointed out, for the holiday season. It's a product line that we think is very relative for that quarter, for that holiday. It worked well for us. It was a bit of a test. We're pleased with the results of the increased sales in Popcorn Factory products, which certainly helps us to get operating leverage as well our of our manufacturing capabilities there. So we were pleased with the introduction.

And as we stated, as a flower -- as your florist and gift shop, it is our job to merchandise our shop with the appropriate mix of product and services, and that will change from season to season. So as Chris said, it was appropriate at that season to have those products at those price points, but from season to season we'll change that tab.

Okay, thank you.

Thank you, Jennifer.

Thank you. (Operator Instructions.)And our next question comes from the line of David Kanen from First Midwest.

Good morning. Congratulations, guys.

Thank you.

First question. In the prepared remarks, Jim said that you expect gross margin improvements to accelerate in the second half of the year. Could you give me a little bit more color on that? Are we talking about 100 basis points or more? Give me a little better sense as to what you mean?

David, what we mentioned before -- this is Joe Pititto -- just wanted to be clear. We are not providing quantitative guidance on this, so we really couldn't tell you that. But you can see how we have improved gross margins, we like that trend, and we think that trend will increase. If you look at last year's margins, wethink we can continue to do a good job there.

And I think the only color to give you on that is what I did say in our remarks is that the second half of the year there's more in terms of the mix of products in our flowers -- florist and gift shop, there's more disproportion floral. That's where Chris and his team have been able to improve margins even more, becausewe have more opportunity, frankly. So that's why we said we'd expected to accelerate.

Okay. Question for Bill. What was cash flow from operations for the quarter, and also CapEx?

CapEx, having it shown right on our cash flow statement, about a little over $7.5 million for the quarter. Up from last year. I think we were about $6 million -- a little over $6 million the first half of last year, butour guidance was around $15 million for this year, as it was last year.

With regard to free cash flow, free cash flow is something we really need to measure on an annual basis, because of the fluctuations in working capital that we have due to the seasonal nature of our business. Last year, if you remember, the free cash flow was -- benefited from the seasonality of a business that we discontinued. So we had about $16 million worth of free cash flow associated with the first half of the year with the discontinued operation. And then that turned in the month subsequent to that. So you really need to look at it for on the whole -- for the whole year, and we didn't provide specific guidance for the year on free cash flow.

Just wanted to know, though, for the quarter, Bill, if I can interrupt you briefly? Your -- CapEx was $7.6 million for the --

For the first half of the year.

first months six months -- I know, I know. I just want to know for the quarter what was CapEx, and what was cash flow just for the quarter. Just for the three month period.

The way to do that, David, is just take our first quarter and our second quarter statement of cash flows, and you can add that, and you can compute it.

Okay. I will go back and do it, I was just looking for an easy way. I thought you had it handy. No problem. As far as the tax rate, for the quarter I see was 43.1%, up from a little over 38% a year ago. Why was that? Where should we be for the full year? And then also on a cash basis, approximately what is going to be your tax rate?

Okay. If you look at the year to date number, it is 41.5%. So that's a good barometer what it would be for the year. You are always looking to adjust the quarterlies to get your year to date to what you think the year to date would be. So it's 41.5% year to date versus40.6% a year ago. That's a good barometer where it is. It fluctuates a little bit as I mentioned in answer to an earlier call, because of the where the pretax income is, it does get influenced by state income taxes, the utilization of some deductions, and stock-based compensation, which is not fully deductible. From a cash basis, however, we continue to have NOLs, and we aren't paying any taxes.

Okay.

That's why you see the reduction in the deferred tax asset on our books.

Okay. I quickly computed cash flow from operations. It looks -- tell me if this sounds right -- for the quarter I think it was about $44 million? Does that sounds right?

David, we prefer to take the calculations off line. We'd be happy to go through your (inaudible -- multiple speakers).

Okay. The last question is on the wholesale basket business. What was the decline year over year?

We stated that earlier, last quarter -- but just to give you the specifics on it, it was about an $8 million reduction in our wholesale account business year over year, which we pointed out was almost completely made up for by an increase in our direct to consumer business in the ecommerce space.

Does that comp better going forward, or are there still difficult comps on the next quarter or two?

It remains to be seen. There are a couple of quarters it has no difference at all. The next time it shows up, frankly, is in the fourth quarter of the calendar year, our second fiscal year of 2012. And we are in that selling season now. So we hope to do better than we did this year, but -- and clearly we didn't want to go backwards like it did this past year, but we'll -- you won't see the effect of that again until the holiday quarter of this calendar year, our second fiscal quarter of next year.

Okay. This is my final question. This might be a difficult one for you to answer, but you -- Bill said that this is a good cash collection quarter. You ended with a fairly high receivable balance. Probably we're going to be close to debt free pretty soon on a net basis. If the stocks in theory were to remain at these levels, would you guys entertain the idea of doing a meaningful Dutch tender while your stock price is still cheap, and allocate capital that way as opposed to acquisitions?

David, you said that it might be a difficult question to answer? Let me just state that what I said in answer to the cash question Ingrid asked, which is, we have learned during the last few years that caution is the best way to proceed. Conservative monitoring of our own resources and our own ability to steer our own boat has been important.

So we are proud of the fact that we've paid down in the last two and a half years all the $75 million in debt. That the debt that we acquired to make these acquisitions has worked out to be good for us. We haven't made any acquisitions in the last few years, but that doesn't mean there won't be opportunities in the future. So we are being open minded and we're listening to all the suggestions, as we should as good stewards of a company and of course of our balance sheet. But you can see behaviorally what we have done is pay down debt; improve our balance sheet; invest for the future even in a tough time in, launching two different businesses in the last year and a half, 1-800-Baskets and Celebrations. We are happy -- very happy with how both of gone.

So even though it has been a tough environment, we are still planning on being here for a long, long time, and not holding back on investments in the future, especially in those areas where they think they have great yield for us. So we look at all the appropriate alternatives, but we are pleased we are getting to the point that we have those kind of questions to answer, and we will be doing that behaviorally in the months ahead.

Thank you, good month.

Thank you, David.

Thank you. That's all the time we have for questions today, and I would like to turn the conference back to Mr. Jim McCann for closing remarks.

Thank you, Mary, and thank you all for your time and your attention today. I know it is a difficult day for many people on the East Coast to conduct business in a regular way, and we do have a lot of business to conduct around here in the next few weeks as Valentines Day approached. And I encourage you to visit our website to place your orders for Valentines Day and to check our new promotion with ESPN. It's the ESPN 1-800-FLOWERS War of the Roses Sweepstakes. You can vote there for the radio host at W -- at ESPN to see who is the best at getting romance advice, and check out the video that I was able to do with Mike Golic recently, off of the Mike & Mike Show, which we are having a lot of fun with. So good things in store for the future, and we hope all of the Valentines in your life receive a wonderful gift from 1-800-FLOWERS and our family of brands here at our florist and gift shop. Thanks again.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may disconnect at this time.