bgleft

bgright

FTD/Interflora announce further woes

FTD INT HERO 2Liquidity issues or a sale?  According to the latest SEC filing by FTD (owners of Interflora) their money could run out as early as June 2019.

Within days of announcing yet further losses, the March 18th SEC 10-K filing submitted by FTD (owners of Interflora UK and a regulatory document all companies are obliged to submit if they are listed on the US stock exchange) has disclosed that their financial position is now even more serious and could put the company in jeopardy unless they can find either a refinancing deal or sell the company.

The 155 page document – which includes all the financial intel on the company as well as predictions and views of the Board – is a mighty tome. However, as picked up by the Chicago Tribune, some of the headline points are worrying; especially for the many thousands of florists still paying membership fees and locked into contracts.

In fairness, the wording being highlighted in the US press is pretty much a repeat of the delayed SEC filing made in April '18 which also stated in the Risk Factors section the serious concerns about the company and its ability to meet debt requirements. However back in 2018 one option to resolve the situation was "To raise additional capital and/or pursue the sale of non-core assets to reduce existing debt."  A year down the line and the wording has become somewhat more robust with the 2019 filing saying; "The strategic alternatives under consideration include, but are not limited to, a sale or merger of the Company".  

Key to the problems, which have been growing since December 2017, is both the level of debt the company carries – currently in excess of $200 million dollars - and dwindling sales; the figures issued on 13th March showed a drop in worldwide sales to create a near $224 million loss; only slightly less than the $234 million loss in the previous year

Despite efforts on the part of management to reverse the company’s fortunes – a move that has seen many staff changes and cost cutting exercises - the strategy has failed and, having entered into an Amended Creditor Agreement, they now find themselves in the situation that unless things can be turned around or a buyer found by July 2019 the company may not have the ability to continue trading. 

We contacted Rhys Hughes, President of Interflora UK to see if there was any comment/reassurances for the UK members given they are already concerned over other changes going on in the UK with regard to order distribution.  We were supplied with the following statement from the USA headquarters in Downers Grove.  Our questions regarding a possible management buyout of the UK division and if there were any potential buyers already in place were not answered. 

"Our Board of Directors and management team continue to work on our previously announced strategic alternatives review process, which includes evaluating alternatives for the company as a whole, including, but not limited to, a sale or merger of the company, a sale of certain assets, and potential financings or other capital raising transactions.
With the support of our lenders, we are pleased to have recently entered into an additional amendment to our credit agreement that is designed to continue to align the requirements under the credit agreement with our current business plans. As part of the modifications to the requirements under the credit agreement, the Company is required to achieve certain milestones relating to the strategic alternatives review process by June 1st 2019.  We will continue to work proactively with our lenders in light of the September 2019 maturity of the credit agreement.
We believe the amendments to our credit agreement provide us with the flexibility to operate under our current business plan as we focus on the Mother's Day holiday period, while also enabling us to complete our strategic alternatives review process."

Below are the headline points relating to the core problems .. you can access all the reports here

You can read Caroline's thoughts in the Eds Blog here

As written in the Risk Factors section of the Year End 2018 the SEC 10K filing FTD/Interflora state:
Our management has concluded, and our independent registered public accounting firm has emphasized in their report on our financial statements as of and for the fiscal year ended December 31, 2018, that, due to uncertainties surrounding our ability to amend or refinance our current credit facility, our potential failure to satisfy covenant requirements during the remaining term of our credit facility and the uncertainty as to whether we will have sufficient liquidity to fund our business activities, substantial doubt exists as to our ability to continue as a going concern.

Our plans to alleviate the substantial doubt about our ability to continue as a going concern may not be successful and we may be forced to limit our business activities or be unable to continue as a going concern, which would have a material adverse effect on our results of operations and financial condition.

The consolidated financial statements included in this Form 10-K have been prepared assuming the Company will continue as a going concern. Our ability to continue as a going concern is dependent on our generating profitable operating results; having sufficient liquidity; maintaining compliance with the revised covenants and other requirements under the Amended Credit Agreement; and refinancing or repaying the indebtedness outstanding under the Amended Credit Agreement, including in connection with a sale or merger of the Company or other strategic transaction. We will need to refinance or repay the outstanding indebtedness under the Amended Credit Agreement no later than its September 2019 maturity.

In the financial statements for the year ended December 31, 2017 as well as every quarter since, management’s assessment has been that there is substantial doubt about the Company’s ability to continue as a going concern.

As part of our efforts to address these issues, as previously announced during the third quarter of 2018, our board of directors has initiated a review of strategic alternatives. The strategic alternatives under consideration include, but are not limited to, a sale or merger of the Company, our continuing to pursue value-enhancing initiatives as a standalone company, and potential financings or equity transactions. We also announced a corporate restructuring and cost savings plan, under which opportunities to optimize operations, drive efficiency, and reduce costs have been identified.

On March 13, 2019, we entered into the Amended Credit Agreement, which includes, among other terms, a minimum Consolidated Adjusted EBITDA covenant; further limitations on capital expenditures; a covenant requiring that, on or before June 1, 2019, the Company shall consummate one or more transactions (i) that would permit the Company and its subsidiaries to continue as a going concern, which must provide for the repayment in full of the obligations under the Amended Credit Agreement no later than June 1, 2019, or (ii) from which all or substantially all of the aggregate net cash proceeds are used to repay obligations and permanently reduce the commitments under the Amended Credit Agreement; and updated limits on our combined usage of the revolving credit facility portion of the Amended Credit Agreement throughout its remaining term.

In addition, the consolidated net leverage ratio and fixed charge coverage ratio covenants were deleted for the period ending March 31, 2019 and subsequent periods, as was the requirement that the auditor’s report on the Company’s financial statements for the year ended December 31, 2018 not contain a going concern explanatory paragraph.

Based on our 2019 year-to-date results of operations and outlook for the remainder of the term of the Amended Credit Agreement, we currently anticipate that we will be in compliance with the Consolidated Adjusted EBITDA covenant and will have sufficient liquidity to fund our operations into July 2019 but may not have sufficient liquidity to fund our operations beyond then.

In addition, there can be no assurances that we will be able to complete one or more transactions that will enable us to repay all or a portion of the outstanding indebtedness under our Amended Credit Agreement by June 1, 2019, or at all.

If we are unable to meet the revised covenants of the Amended Credit Agreement and we are unable to obtain waivers or further amendments from our lenders, the lenders could exercise remedies under the Amended Credit Agreement and repayment of the indebtedness outstanding under the Amended Credit Agreement could be accelerated. We may not have sufficient capital to repay the obligations due under the Amended Credit Agreement upon maturity, or earlier if called for repayment by the lenders following a failure to meet the revised covenants under the Amended Credit Agreement.


1contact

2facebook

3insta
 4twitter  

 

 

TOM-BROWN

fleurametz