Good morning, and welcome to the 1-800 FLOWERS.COM Inc's Fiscal Year 2016 Fourth Quarter and Full Year Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Joe Pititto, Senior Vice President of Investor Relations. Please go ahead.

Thank you, William. Good morning and thank you all for joining us today to discuss 1-800 FLOWERS.COM's financial results for our fiscal 2016 fourth quarter and full year. For those of you who have not yet received a copy of our press release issued earlier this morning, the release can be accessed with the Investor Relations section of our Web site at investor.1800flowers.com. 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, Chairman; Chris McCann, CEO; and Bill Shea, CFO. Before we begin, I need to remind everyone that a number of the statements that 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 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 included in the company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. In addition, this morning, we will discuss certain supplementary 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, any 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.

Thanks, Joe. We are pleased to report another solid year of top and bottom line growth for our company. These results were achieved despite a number of headwinds that we faced during the year. Some anticipated, such as the Sunday placement of the Valentine holiday and lower store counts, and some unforeseen such as the significant increase in labor costs related to the tight employment market for seasonal workers and a rising in minimum wages. I believe it is a testament to the focus and execution of our management team led by Chris and Bill, along with our segment presidents and our brand leaders across the company that they were able to manage through both the anticipated and unanticipated headwinds during the year, and not just deliver another year of solid results, but also position our company for enhanced top and bottom line performance going forward. Along these lines, during the year we achieved a number of operational milestones. First, during the year, we continued to execute our integration program that we began with the acquisition of Harry & David, and has evolved into how we operate our entire company. Second, we continued to expand our multi-brand customer initiatives, a key ingredient in our strategy to enhance customer engagement and long-term growth. Third, we continued our focus on being good stewards of our shareholders' capital, further strengthening our balance sheet while continuing to invest in our business platform, our category-leading mobile and social efforts, and our innovations as a first mover in the fast evolving areas of artificial intelligence and conversational commerce. Combined with the flexibility of our credit facility and strong relationships we have with our syndicate of bank lenders, this enables us to continue to grow our business both organically as well as through strategic acquisitions. Last but certainly not least, we completed the transition of Chris to the role of CEO, something that I'm both very proud and excited about. As a result of these factors combined with the hard work and dedication of our thousands of associates across the company, we are well-positioned to deliver strong and top and bottom line growth in fiscal 2017. With that, I will turn the call over to Chris.

Thank you, Jim. Fiscal 2016 was a good year for our company on a number of fronts. We achieved solid revenue growth and drove increases in our margins and earnings despite some significant headwinds we faced during the year. Importantly, we also made excellent progress executing on our vision to build what we call our Celebratory Ecosystem, which includes our all-star collection of gifting brands, and an ever-increasing suite of products and services designed to help our customers deliver smiles to the important people in their lives. We also continue to make progress in our integration initiatives, which began with our acquisition of Harry & David, and has now evolved into a holistic approach to how we view and operate our entire company. A key feature of this approach is that we are focused on proactively identifying and serving best practices across all of our operations and key functional areas. This focus has already provided benefits, enabling us to exceed our original estimates for operating synergies, which is now at $20 million over three years, $10 million of which we have already captured. And we have now begun to pursue numerous revenue synergies in cross-brand marketing and merchandizing, through our customer databases and expanded suite of CRM tools, and in business gift services and wholesale channels. Also during the year, we enhanced our ability to increase multi-brand customers, a key long-term growth strategy by completing the migration of all of our brands on to the multi-brand Web site. This enables us to enhance our cross-brand marketing and merchandising programs, and begin to accelerate our marketing initiatives, including Celebrations Passport, our free shipping program; Celebrations Rewards; and Celebrations Reminders; programs that are all designed to enhance our customers' experience. In addition to the progress we achieved in these important areas, during…

Thank you, Chris. As Jim and Chris mentioned, we are pleased with our results for the fiscal fourth quarter and full year. For the fourth quarter, we increased revenues 2.7% driven by the 1-800 FLOWERS.COM Consumer Floral business which grew 4.6% for the period booking a strong Mother's Day as well as positive trends across the variety of everyday gifting occasions. This combined with 2% revenue growth achieved in the Gourmet Food and Gift Basket segment more than offset the 5.2% revenue decline in our BloomNet business. The BloomNet decline was over the top comp base for the prior year when it launched several new fee generating programs. For the year, total revenues grew 4.6%, with the inclusion of Harry & David's fiscal first quarter sales which were not included in fiscal '15 due to the timing of the close of the acquisition on September 30, 2014. Total revenue growth for the year also affect the impact of several others factors including the sale of two small non-core businesses, the U.K-based iFlorist business and the fine stationary.com brand that previously rolled up into our Consumer Floral segment. Our year-over-year reduction in Harry & David's store counts increase in the Valentine's Day. These revenue headwinds were somewhat offset by the 53rd week included in fiscal '16 versus the 52 weeks in fiscal '15. Gross profit margin for the fourth quarter is down slightly at 42.9% compared with the prior year. This reflects the lower gross profit margin on our Gourmet Food and Gift Basket segment with the shift of Easter holidays moved Fannie Mae's high margin retail store revenue into our fiscal third quarter. This impact was largely offset by the very strong margins in our Consumer Floral and BloomNet segments. The year gross profit margins increased 70 basis points to…

Thanks, Bill, as you have just heard fiscal 2016 was a good year for our company. We drove increases in revenue, margins and earnings despite some headwinds we faced. We made good progress in a number of key areas including extending our market-leading position in Consumer Floral successfully integrating Harry & David and capturing significant synergies and completing the migration of all of our brands on to the multi-brand Web site. Combined with our substantial cash flows and a strong balance sheet, we have an excellent foundation on which to continue building our business, accelerate our growth and achieve enhanced results going forward. We have numerous opportunities available to us that we will seize upon as we move into fiscal 2017. We will carry forward and build upon the momentum we have in our 1-800 Flowers, Harry & David, Cheryl's and 1-800-Baskets brands. We will execute against our initiatives to return Fannie Mae to its strong pre-fire performance levels. We will further expand on multi brands strategy to capture more of our customers gifting purchases and drive lifetime value. We will continue to invest in and implement innovative customer centric solutions to enhance our customer's experience. We will further expand best practice initiatives across the company to drive incremental cost and revenue synergies and we will continue to differentiate our company as the leading providing gifting solutions for all occasions. By executing against these opportunities we are confident that we will drive accelerated organic revenue growth, leverage accrual to further expand margins, deliver substantially higher free cash flow and continue to drive shareholder value. With that, we would be pleased to take your questions. Operator, could you please repeat the instruction for Q&A?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first questioner today is Dan Kurnos with Benchmark. Please go ahead.

Great, thanks. Good morning. I want to dive a little bit into the weeds here because the performance was good and I think that obviously you guys are being conservative with the guidance, but sort of the underlying trends might be misleading. So I guess maybe even just start with Bill, just to clarify, it seems to us that if we take out Harry & David in the quarter that GFGB was closer to flattish, which implies that the rest of the GFGB business performed particularly well. So maybe either Jim or Chris, if you wanted to address sort of the underlying strength outside of Fannie, and just, Bill, if you could confirm that our math is ballpark, and it sounds like Harry & David accelerated a couple of percentage points for the quarter?

Well, Dan, as we tried to indicate, the impact of Easter did have an impact on the GFGB segment. It represents probably about $6 million or so on that segment in top line, and close to $2 million in bottom line on the quarter. So if you obviously added those numbers back, you would have growth that was more significant and you'd have EBITDA that actually exceeded or contribution margin actually exceeded the prior year.

Right, and I think overall we see some really good things going on within our Gourmet Food segment. I referenced the positive momentum we're seeing with Cheryl's of 1-800-Baskets. We're very pleased with the progress we're making with Harry & David, and we're very confident that as we get Fannie Mae back on to its pre-fire trends, that category will be the performing category that we've expected it to be.

Before I get deeper again into Fannie, I do want to just switch to Consumer Floral and just ask; obviously your primary competitor has been challenged and/or struggling. And I think that their strategy is sort of maybe lacking in direction at the moment with the share shift back to lower margin brands. You clearly seem to be taking share, but how has that impacted the overall landscape? And if they do get more promotional with the lower margin brand, how does that possibly change the way that you guys react to the market place?

Dan, this is Jim. I think the way we look at the business, and we'd encourage you too as well, is that our floral businesses is a good solid business, but more than that, it's a business where we cost-effectively acquire customers who buy floral gifts from us once or twice a year. We're pleased that we're able to grow in a category that clearly isn't growing, but we're pleased that we're able to grow. But more important than that is that over the last few years we've been executing against the strategy of trying to optimize the capture of customers cost effectively that we're able to achieve with the 1-800-Flowers brand, and using a whole suite of tools, including our multi-branded portal, take that customer, and service them across more of their gifting needs throughout the year. These are affluent gifting customers who are coming to 1-800-Flowers in the first place. Again, we cost-effectively capture them there. And there's now a lot more we're going to expect to achieve in terms of more than a couple of times a year, on average, across the database of customers using us for our floral products. Clearly, we'll always innovate, we'll use new products, we'll use our access modality, innovations that Chris spoke about to enhance that. But the big opportunity is in capturing more of their gifting dollars that they're already spending with our Harry & David brand, with our Fannie Mae brand, et cetera. So Floral category, we've had good solid growth in, in what otherwise is clearly not a growth category, and we expect that growth to continue, but we expect the outside growth to come with the other product initiatives that we've been able to introduce.

Dan, I would just add…

Go ahead.

Dan, I would just add that we're very proud and very happy with the performance of the Flowers brand management team. They've stayed focused on the customer experience; they've stayed focused on continuing to differentiate our brand. The 1-800 Flowers brand is not and never will be a price competitor. It really is a class-of-the mass brand in the floral category driven by our truly original product designs, and we're very happy with the results we're having there that feeds our longer term growth strategy that Jim just kind of demonstrated.

So, Chris, I mean, so let's take -- so Consumer Floral grows some low single-digit number next year. And then that means that embedded within the guidance, I'm just trying to get sort of a sense of what you guys are expecting for Fannie Mae, and just to drill down a little bit there, you gave some good color on some of the initiatives that you're doing to sort of right-size Fannie. I get the cost aspect of it, but could you talk about trying to accelerate the e-commerce aspect given that foot traffic has been a challenging topic and certainly is relevant in so much as the retail store is concerned. But getting more e-com without worrying about cross-sell opportunities or multi-brands?

Sure, Dan. And you know, as we look at Fannie Mae, I think you're right. First and foremost, the first thing we're doing is mitigating risk and taking risk out of the model by really addressing its cost structure as we move into this year, but more importantly it's our omni-channel approach to the marketplace, then again how we return it to those pre-fire trends that we had which were seeing good trends on e-commerce, and then also good trends of retail store sales right prior to that fire. What we've seen so far, I think we even referenced this in our last quarter. We've seen the return on the e-commerce business. We're building our customer file there now. We're getting good growth. And we're starting to see very slightly, and we'll see it more as we move into the full length of the holiday season improvements in the retail stores. We're seeing improvement in our margins, we're seeing improvements in some traffic, and we're seeing by -- from those improvements that are being driven by good results, we're seeing feedback from our customers on the product innovations. And again, one of the new product introductions we had was this kind of -- what we call the Chicago line. And then good product and then packaging in Chicago skyline tins, and wraps, and things like that getting great response in the consumer marketplace, adjusting our merchandizing mix in the stores. This summer, I spent some time in the stores and speaking to our store managers and going through and speaking to customers coming in, I think we had made a shift, and we referenced this previously of trying to introduce too much new product, and took away some of the product of the core product line that the traditional customers of Fannie Mae is always looking for. As we've made those adjustments we're seeing that response. We think those responses will benefit and manifest themselves as we move forward into Q2. So reduce the risk, introduce the products that customers want, merchandizing the stores appropriately, and make sure we're delivering a good customer experience all throughout each channel.

And so would it be fair to say that if Fannie was performing as you were expecting that that is somewhat weighing at least on your initial guidance for '17?

Yes.

Yes, that's…

All right, thanks guys.

Thank you, Dan.

Our next question comes from Eric Beder with Wunderlich. Please go ahead.

Yes, good morning. This is Bryan Caronia on for Eric. Our first question is looking into the holiday season, which we're quickly approaching here. What are your thoughts on the initial trends you've seen in terms of which brands and types of products overall that will really be driving your business in the latter half of the calendar year during the peak season there?

Bryan, this is Jim. What you've seen from our performance in the past, the fourth calendar quarter, our second fiscal quarter very, very important for us as a company. And that's because of our emphasis on food gift products during the important Christmas Holiday. Floral, it's a good quarter for Floral, but not an outstanding opportunity for sales gains there. Although I will tell you the merchandizing line for holiday for baskets, and flowers, and for fruit bouquets all look very exciting. I think our customers will respond well to it. But the fourth quarter is all about GFGB, our Gift Food category, in particular Harry & David. Harry & David does I would say about 70% of their sales of the year in that quarter, and about 100, Bill, a 100 more percent of bottom line?

More than a 100.

More than 100, it does more than all of its profits. So obviously the Harry & David brand being, let's call it, a $400 million or so brand, it does 70% of sales and more than all of their profits for the year in the fourth quarter. So that's an important quarter for us. And if you dig down below that, the trends in Harry & David are quite good. The trends a couple of things, for the first time in a dozen years it's had two years of positive growth now -- of growth in the last two years. The first year we owned this, the first year we're responsible for its operating budget. The other trends we see there are a good customer feedback we're getting, the product introductions, lots of innovation at Harry & David. The new products are really high quality products, and the overall trend around food gifts is very positive and have one of the leading brands and leading businesses in the whole gourmet food gift category. In addition, they have a lot of incubated kinds of tests and projects going on. So, while their trends are positive on the sales line, innovation is coming, a broader assortment, great feedback from customers from those, and they also have a half-a-dozen or so incubated test that have been eventual [ph] and real promise, we'll put some weight behind it and that will further enhance its category. So, for the fourth quarter for us, Harry & David and the great trends we've been seeing in Cheryl's and 1-800-Baskets, that will make the quarter and that's where we are focused and frankly excited about it.

Great. And I guess as an extension in value had addled to it, I believe right at the beginning of your prepared comments, but are your thoughts moving towards the end of the summer here about, the progress and the expectations for the wholesales gets back Baskets business so that holiday season is well somewhere trends to the traditional direct to consumer, just overall thoughts there?

Bryan, Bill will comment on this.

Yes, Bryan, we do have some insights into where that the wholesale Gift Basket business is, we had a very strong year, last year where we had double-digit growth in that category, which you're going to see some growth this year but not at that levels.

So that's -- we close at the advanced lead on that, we had some good insights where it looks like not completely big - so have the manufacturing deliver, but we know - we have a good idea of what the book of business looks like with some adjustment to the end. So as Bill said, terrific year last year, another strong year this year.

Great. And then lastly taking a step back for a sort of long term, do you in the Food and Gift Baskets, what are your thoughts on and have you had conversation and long term expectations about adding more brand to the gifting segment and I guess on a more overall basis both financially and sort of operationally where you could see different segments sitting in as well as sort of how it relates to your long-term capital allocation strategy and capital structure?

Chris, let me ask you to answer the first question, Bryan, has about our brands, the brands we have that developed and our intention to add new ones. I will talk about the capital piece.

Yes. So I think for the most part, our long-term view is that in a short amount of time, we build a leadership position in the Gourmet Food gifting category and we think this is a good opportunity and good growth opportunity for us there in both the build and buy mechanisms that we have deployed in the past. So first and foremost result looking at businesses we are and the categories, Jim started to reference some of incumbent tests that we have, kind of Harry & David family we are very excited about. And we've kind of reorganized and restructured a little bit to put more focus behind a couple of other brands in the family, specifically Wolferman's, which we think is a good goods grand and we think it is good long-term growth opportunities behind Wolferman's. Moose Munch, we said in this past and we have a new focus on how to go-to-market with them, Moose Munch brand and we have a good long-term growth prospects there. And then we're looking at our stockyards and what we call protein or prepared meals category, that we may even do some different things that kind of post holiday but that's been a good growth category for the Harry & David brand itself, and now coupled with -- if you remember, we've moved stockyards into that management team. So we're making some changes to that category. So that's more in a build which we think will provide some significant opportunity and of course we'll always be looking for the appropriate acquisitions that can add to our ability to solve our customer's gifting needs.

We are very pleased what our balance sheet is and we see our debt at $117 million, net debt at about $90 million versus the EBITDA we just reported which is in the upper 80s. So we're just about 1:1 leverage ratio. We have great relationships with our bank lenders, so we have the ability to execute if an opportunity were to arise.

I think it would be fair to say, Bryan, just in closing on this topic, if we're looked it as a five and 10 kind of company, that is five organic growth rate and 10% growth in our bottom line metrics across our bottom line metrics, that's an attractive profile in this day and age, but with our ability to jazz, both from an organic birthing opportunity of a new business, or through the use of our balance sheet to append another product or service of the company that will enhance our offering to our customers, we are uniquely well-positioned to do that.

Fantastic. That's all I had. Congratulations on a great end of the fiscal year, and good luck moving forward.

Thank you, Bryan.

Our next questioner is Alex Fuhrman with Craig Hallum. Please go ahead.

Great, thank you for taking my question and I will certainly add my congratulations on strong year. I just want to ask about your passport free shipping program, curious to sign up rates you have seen on that and more specifically if you could talk to perhaps some of the customers spending patterns you have seen from people who have signed on to passport, are they shopping across the multiple brands as you hope they would, and curious to who is really signing up for passport? Is it the customer's who you would have logically expected to based on, how much they were purchasing in the cash and how much they could stand to save in the future based on those patterns on shipping, or is it a different customer or perhaps someone who might have been shopping with some of your competitors for those occasions? Just curious what your earnings have really been with that program?

Alex, this is Jim, I will ask Chris to answer that question but in fact I will ask you not to answer it at all. The best you can, Chris.

So I think first of all our passport is one of our marketing initiatives underneath our multi-brand customer strategy which combines of all of our brand marketing in this. And all things are contributing to our confidence and our ability to accelerate our growth rate going forward. As we look at the passport program specifically Alex, and to your point we tested passport extensively for rather long period of time I'd say probably 18 to 24 months really with just in the flower brand before we started introducing it to our other food brands, to make sure that we had a appropriate percentage mix of customers signing up for it. By that I mean we knew we would get some of our most frequent customers to buy anyway and it necessarily wouldn't modify their behavior, then we knew we would get a certain ones at the low end that might purchase things again not modify behavior. On balance we are seeing it does modify behavior to both increased frequency and to increase cross brand shopping. So we are very pleased, again keep in mind very early stages with our passport program. So we are very comfortable with that. But from looking at the multi-brand customer strategy overall, we are continuing to see make good progress. We are very happy with the progress we made from a technology effect point of view having David, Wolferman, Stockyards, onto our multi-brand portal which now enables us to bring passport to them, to bring celebrations rewards to those customers, those business, celebrations, reminders. All of these programs are really focused on enhancing the long-term lifetime value of our customers. All early indicators that we see from these multi-brand customer initiatives passport among them are showing us that as we migrate more and more customers into seeing us as the total gifting solution, their frequency, their average spend per year and their lifetime value increases. So it's a long term goal strategy for us. We are very excited even you know the early results we are seeing from the additions to the multi-brand e-commerce tax that we did in April with close to 3 brands that I just mentioned. So it all continues to make us focus on constantly enhancing that customer experience that drives them to be a multi-branded customer.

Great, that's really helpful. Thanks. Chris.

Thank you.

Our next question comes from Linda Bolton Weiser with B. Riley. Please go ahead.

Good morning, Linda.

Hi, so just to delve in a little bit more on the numbers on the GFGB segment, can you say if you had to split it up between Harry & David versus the rest of the business would the contribution margin, the loss in the quarter have got bigger for each of the two pieces?

Bill?

Out in glass for having David than the rest of the GFGB, I mean I think the highest margin impact of Easter is Fannie Mae because we are pulling forward the actual brick and mortar retail which is 75% margins and those got pushed into the third quarter. So that's why the impact number of gross margin and the biggest impact on contribution margin in the quarter by the timing of Easter.

That's why we always encourage you to look at the two quarters together. An early holiday pulls it forward and also retards business a little bit. A later holiday puts the margins back in the fourth quarter and it's usually a better holiday when Easter has moved back more because people aren't surprised by sneaking up on them as easily but it's in March, early April, this is if it's back further in May Day like normally is.

So, next year the entire Easter holiday will be in the fourth quarter.

So, it sounds like Harry & David's revenue in the quarter was kind of down a little bit year-over-year, is that accurate or…

No, that's not accurate. I think revenue was up in the quarter.

Okay. So they had up revenue, but higher marketing spending and a slightly higher loss?

Yes, but really because you had some of having David pull forward into the third quarter, on an apples to apples basis, it is just comparing having David would have been up both top and bottom line for the quarter.

Okay. And then in Fannie Mae, it sounds like you are not expecting revenues to be up in the December quarter or you are? I am a little unclear about the timing of when you expect the turnaround to show up in the results in terms of returning to growth for Fannie Mae

No, we have built into our guidance an improvement from both top and bottom line for Fannie Mae this year.

But you won't really see much of that until the fourth quarter because that's when the sales, you know the biggest percentage of sales increases come in the holiday quarter?

Okay. You mean the fiscal second quarter we should see…

Fiscal second, fourth calendar, yes.

Okay. And then just in terms of sales cadence through the quarters of the next year, I mean in the first fiscal quarter starting out September quarter I mean we should start right out seeing 4% sales growth, revenue growth in the first quarter is that how we should think about it or you are going to have that big growth in the big quarter, the second fiscal quarter and that's where you are going to have the higher growth to drive the year. How should we think about that?

Yes, I think the opportunity is always the first quarter is always the tough quarter, if everything is small percentage of overall revenue and there is always timing issues on wholesale piece of the businesses between September and October. So it is hard to pin down Q1s exact growth rate. The opportunities are for the second quarter, certainly the third quarter we have a better day placement for Valentine's Day and the impact of that and then in the fourth quarter you have Easter shifting back to the fourth quarter.

That's why we always encourage people because of the disproportionate amount of sales we have, Linda, as you know so well in the second fiscal fourth calendar quarter around the Christmas holidays. We are going to look at as an annual company and then break down further because of the bakeries around, the first and second quarter beginning in start and third and fourth quarter would be Easter shift look at this not only as an annual company but then there is two halves because you will see some peculiarities at the end of the first quarter depending on shipments of our wholesale product to our customers when they want that'll change. And this year you saw a frankly year end when we moved essentially cash would have been on our free cash flow line into inventory to mitigate some of the challenges we would anticipate from seasonal labor by being able to pre-produce, pre-manufacture so that we have a little bit of an overlap at the yearend too.

Okay. And then finally on your new SCI partnership, you know FCD actually mentioned that in your guidance for the second half that it would reduce sales by about 1%. I guess that is about 4 million-5 million of sales loss. Is that going to be your benefit, is that what you are going to get from that new partnership in terms of incremental revenue, would that be eight to ten million annual revenue lift from that?

The SCI contract is one component of multi-pronged sympathy approach that we have been pursuing. We are very, very happy to partner with SCI because not only is it that the sales revenue that exist from their channels that comes to us now, but it is also the bigger relationship that could help us really optimize our service to our customers around the sympathy events. That's what we are really excited about, yes indeed there is lot of business in the SCI channel. I wouldn't want to quantify it, if others have that's fine. But we see that opportunity and more it is a bigger opportunity for us to really enhance our offering for our customers to help them properly express themselves. SCI is just one component of that and quite a very important one because of the relationships and capabilities beyond the actual sales numbers they have with previous vendor before.

Okay. Thanks a lot.

Thank you, Linda.

The next questioner is Jeff Stein with North Coast Research. Please go ahead.

Hey, good morning guys, and great job in the fourth quarter and particularly in Floral. It's a great job. So my question relates to the guidance, and I know you're trying to be conservative, but what I will add up all of the plots and try to take a look at all the puts and takes, I just got more -- many more pluses than minuses. You've got a better day placement on Valentine's Day. You've got momentum in Floral coming out of the fourth quarter, gaining share. You've got the SCI contract. You've got easy compares with Fannie Mae. You've got Harry & David on the multi-brand portal. You've got synergies incremental, synergy cost savings I know there's some labor cost increases but net-net still looks like you've got some synergy savings. So what am I missing that only gets you to 10% EBITDA growth on the top end? It just looks like you're setting a very, very low bar for yourself.

Well, as you've entered that list there, Jeff, I think we just agree we're going to redo all. It's a compelling story and there are a couple of things that do cause us to be more cautious that are fairly obvious, and I don't want to be okay, you gave us all the good news; Bill, give us some of the bad news tax-wise for example.

Yes, certainly from an EPS perspective and from the guidance on EPS we're still giving guidance to at the high end basically doubling our top line growth rate, but fiscal '16 clearly had a benefit in our tax rate. We had some kind of the one-time tax credits related to R&D credits and related to our iFlorist subsidiary and divesting of average floral effective tax rate down to 30%. We got back to a normalized tax rate next year, so that's kind of the…

Oh, 35?

Thirty five, so that kind of does have an impact on the EPS growth rate, but with respect to EBITDA, some of the headwinds we do face is the continual -- we are mitigating some of that with the early build of some inventory but the seasonal work force, you know that cost us several million dollars on top of what we expected in fiscal '16 and that's not going away. The minimum wages and the seasonal work force and the lower employment the low unemployment rate is causing incremental costs associated with that.

That's good news from a macro point of view because more and more people are working, but it does put challenges with the natural wage pressure. Bill?

Commodity cost with regards to cocoa, we do a good job with managing our cocoa and we're blocked in our cocoa pricing for this year and it's below where current market is but it's above last year. And these just have normal contractual increases that you have, so you know as well as we negotiate our contracts go whether it be our print contract or whether it be our carrier contract we are built in 3% increase into those. So there are no general cost increases that we have to manage to them.

But there's no -- but there's no denying guys right that the things that Jeff enumerated are the positives that we see in there and you're saying some of the things that caused us to be cautious in assuming that everything will go well.

I was just going to say, in Jim's opening remarks he was very kind to give the management team some nice compliments of how we managed 2016 and I think we did a great job in managing 2016 through some of those headwind and to really position the company where we are now. So keep in mind, with what we've been saying throughout the year that we're trying to position the company to accelerate top line growth, organically we're going to do that from about a 1.5% organic growth rate up into the 4%-5% range. We are very proud of that coupled with the fact that we're going to call EBITDA by 2X to top line growth. We're very proud of that position that we are in as a company.

What kind of growth did Harry & David show from the revenue stand point or the fiscal year? I think you were around 3% for the nine months, where did you come in for the year?

Bill?

In that same range.

3%?

Yes.

Okay. And you know the one thing, okay; I will call up one negative thing at least my perception, when I looked at your consumer metrics here, you did attract many more new customers in the fourth quarter than you did compared to the prior year, but when you look at some of the other matrix such as a percent of repeat customers, the number of customers you attracted, the number of customers placed in e-commerce orders, some of those metrics were down or flat compared to the prior year and I am wondering are you getting the kind of traction with the multi-brand portal that you would hope?

So the essence of your question of the multi-brand portal are we getting attraction that we hold, so the answer is yes, then but again I will reminded that's a slow long term build, we all seen the benefits of it. As we look at the customer metrics, I think clearly we have had some businesses that have not performed well on the customer file, Fannie Mae specifically. I am proud to see that we are getting a recovery in the e-commerce business there.

And a lot of that recovery in e-commerce business, Jeff, is a result of it now being on a multi-branded portal.

Right

Correct. So I think I can hold the law, we see good customer metrics going forward and again that and as well as other things are helping to contribute to look items of accelerated top line growth.

Okay, and when you look at your wholesale business, I am wondering if you could be any more specific in terms of, is the gift basket business for this year and the business that you have via Fannie Mae with your Fairy London brand, you see that being up on a year on year basis and you see it being in line below or above the trend line that you are looking for, for the entire company?

Bill, correct me if I am wrong here, but I think just to point out on a wholesalers, wholesale business is a way for us to extend our brand, it's a way for us to optimize our manufacturing, distribution capabilities, build other relationships. So, yes we anticipate growth this year in that business, it's not a big focus of ours but good news is it will continue to grow but our wholesale business will not be growing to pace of our retail businesses primarily ecommerce. That will be a better growth rate than our wholesale growth rate will be, and it's some degree by design.

Got it. And finally on the SCI agreement, my understanding is that one of the main reasons why they have moved over to you is that you got a much broader product offering so, the annualized benefit of like $10 million is primarily coming over from floral. You should see some incremental benefit above and beyond that from your food gifts, would that be your expectations?

Chris?

Yes, so what the SCI business exchanged really was the prior competitor of floral business. So first of all most as we might be that business over, it is floral and remains floral. One of the benefits that we bring to the table and that we also see for our partner SCI and also see really the path of the trend in the industry is the trends of more sympathy gifts to the home which are more and more sympathy gifts to the home of gourmet food gifts. So we believe that that is a growth area for us, how much of that will get in the first year I think will be somewhat limited, it will take time to continually introduce those products and educate the customer base that we have that product offering but you are right, Jeff, that is a growth category for us.

The early anecdotal feedback from our SCI partners is that the team of directors are find out to be a real positive because it's something they knew they were missing in the past. So that's anecdotal, we are only in our first several weeks of our relationship with them but it's good to hear.

Well, just anecdotally, I actually there is a local funeral home here that is part of the SCI network and I clicked on their website and actually you guys are leading with food gifts and I don't know if its uniform across all of the funeral homes that SCI serves but that's the first thing that pops up. So it would seem to me that you might even get a bigger uptake from food gifts than you are anticipating.

It maybe, it's not universal, clearly it's a marketing effort that's what Chris just talked about, that will take us a full year to get this program rolled out and our growth initiatives sold into the community but we are excited about that because we are uniquely positioned to deliver and help the customer in their expressive needs there.

Okay, and one final question for Bill, Bill, can you tell us what your annualized cost reduction are at Fannie Mae for the upcoming fiscal year?

Yes we have taken out several million dollars and overhead costs out of the Fannie Mae business, so again as Chris was eluding to earlier, so first thing was to make sure we were comfortable that we can deliver on the bottom line for Fannie Mae. We are taking certain costs out of the whole, but the opportunity here really is to get it back on track and get it growing back to its pre-fire level.

Sure. Okay, thanks a lot guys.

Thank you, Jeff.

Thank you.

Our next questioner is Anthony Lebiedzinski with Sidoti. Please go ahead.

Yes, good morning, and thank you for taking the questions. So yes, first a just quick follow-up on the SCI deal. Is that a five-year contract or if you could just provide the length of time for that that'll be great?

I think it's a three-year contract, Anthony.

A three-year, okay, got it. Okay. And just want to touch on BloomNet. I may have missed this, but revenue there was down by 5%. Anything there to call out there specifically what happened?

Anthony, I think it really relates to -- if you remember, we had a very, very strong fourth quarter results last year as we introduced some new fee programs to the network and got the…

Fourth quarter was a tough comp.

And got the benefit of that, so it was a tough comp in the quarter. For the year we're flat. We're looking to introduce new initiatives to stimulate growth for BloomNet. BloomNet has always been very good at delivering its bottom line, and will continue its contribution margin, but we do have some initiatives in place to help stimulate some top line growth.

So for the quarter, tough comp, for the year flat, bottom line improved, our programs coming that should even rev up the top line.

That's right.

Correct.

Good. Can you share with us what some of those new initiatives are?

You'll see them…

It was some of the things that I mentioned earlier, some new product line extensions, especially again into the Sympathy category, some products we're adding there, memorial garden type products that we're adding into that category, technology enhancements, some delivery capabilities for our BloomNet business management system, new directory service features, Google-esque banner type advertising. So this constant group of initiatives that we believe will help grow the top line in BloomNet.

Okay, that's helpful. And also…

I think it's good to point out what Chris did there, Anthony. That the Sympathy categories critically employ florists, because on a floral side it's not something you could ship in a box, so the competitors are in the artists' community of all florists. So our big push on the Sympathy business would clearly benefit our partner florists, which will have a blowback benefit to BloomNet in general. And allowing them to access the food initiatives for their customer base will be a good opportunity when we roll that out as well. So the Sympathy push, our partnership with SCI; very, very good for the BloomNet florist.

Got it. And just wanted to touch base on Valentine's Day, so this past Valentine's Day your revenue was essentially flat for that even with the Sunday date placement now with the holiday moving to a Tuesday, how much of a revenue pickup will that be you think?

Still, I'll give that to you, Anthony, but just to clarify. We were flat for the quarter. We're still down a little bit for Valentine's Day, much better than we anticipated we could do based on the historical information available to us about the Sunday date placement. But we were flat for the quarter because the everyday business was up. Bill, anymore?

Yes, we were going through some modeling with respect to when Valentine's Day moves from a Sunday to a Tuesday, and we do expect a lift and kind of a tailwind within the Consumer Floral brand by that change. We're estimating it in the $7 million to $8 million range.

Okay, got it. Okay, and lastly, a quick housekeeping question. What is your CapEx expectation for fiscal '17?

Bill?

It should be down slightly from where you saw the numbers for this year. This year we incurred about $34 million in CapEx, and we're targeting $32 million to $33 million.

Okay. Thank you very much.

Thank you, Anthony.

[Operator Instructions] Our next questioner is Michael Kupinski with Noble Financial. Please go ahead.

Thank you. And first I want to add my congratulations. In terms of…

Thank you, Michael.

Yes, thanks. So just in terms of a couple of things, and please pardon me if you already addressed this. But did you buy back stock in the quarter, and what is left on your share repurchase authorization?

We did buy, this is Jim, Michael. We did continue as we did all year long to buy stock at a very judicious pace. We have an authorization of 25 million, Bill, I think we're 15 million into it now?

That's correct. And for the year we used 15 million and we bought back 1.7 million shares for the quarter. And we bought back about 300,000 shares and $2.3 million.

Okay. And then in terms of your Consumer Floral, I wanted to follow-up on that. If I monitored the -- your Web site over the course of the last quarter, it seemed to me that the pricing had increased like in the range between 5% and 10%, and the lower price items may have dropped off. That might be a seasonal thing, I'm not sure. But can you just comment on whether or not you saw in Consumer Floral a little pricing built-in there, which may have accounted for maybe some improved margins in that business?

No, Michael. We look at the Consumer Floral, just making sure that we're delivering good value there. So there's no real price increase strategy there.

We haven't really had any price increases.

And I'm not sure what you're seeing there, because we are focused on also enhancing the lower priced items that we offer to the consumer. Again, some of them might be in Floral some of them might be in our Gifts category as well, again, helping us to deepen the relation with the customer, so, no price increase there.

Could it may have been just a seasonal thing where the florals are -- that maybe your price points were a little different. It's possible. And like is said, I just monitored over the last couple of months. So it might be just a seasonal thing. In terms of Fannie Mae, I know that you guys were looking at updating our Chicago-based stores, maybe a potential concept store. Do you have any thoughts on what you've done there or what you might potentially rollout?

The redesign of our Waba [ph] store?

Yes.

The Michigan store? So yes, kind of our flagship store is our Michigan Avenue store. We are going to do a redesign of that store. It's kind of in process right now. We're just waiting on some permits so we don't even have the construction scheduled on that yet. But we are doing a redesign of that store to show off some of our new product designs that we have, some of the new merchandizing that we have. But also as I said earlier, recognizing what we've learned from the customer base that we need to also make sure we're delivering the traditional product, the traditional Fannie Mae products they're used to. So that's still to come as we move forward.

Do you have when that might open, or when you at least have the plans or thoughts when it might open?

Plans are done. We're in the permitting process. As soon as we have our permits we'll build the construction cycle so it doesn't have any impact on our holiday sales.

Got you. Okay, that's all I have. Congratulations again.

Thank you, Michael.

[Operator Instructions] I'm seeing no further questions at this time. So this will conclude our question-and-answer session. I would now like to turn the conference back over to CEO, Chris McCann, for any closing remarks.

So thank you everyone for your questions and your interest in our company. If you have any additional questions please don't hesitate to contact us. And for those of you who are registered for our investor day in Columbus, Ohio next week, we're looking forward to seeing you at dinner, Monday evening. And if any others of you are interested in joining us please contact Joe Pititto directly by email or phone; we'd love to see you there. Thank you very much.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.