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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event
reported) April 28, 2005
Build-A-Bear Workshop, Inc.
--------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 001-32320 43-1883836
----------------- -------------- -------------------
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
1954 Innerbelt Business Center Drive 63114
St. Louis, Missouri ------------
- ---------------------------------------- (Zip Code)
(Address of Principal Executive Offices)
(314) 423-8000
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(Registrant's Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
- ---------------------------------------------------------
On April 28, 2005, Build-A-Bear Workshop, Inc. (the "Company") issued a
press release announcing, among other things, total revenue, net income, net
retail sales, gross margin and diluted earnings per share for the first quarter
of fiscal 2005. The press release also included expected earnings and diluted
earnings per share for the second quarter of fiscal 2005 and for the full year
of fiscal 2005. A copy of the press release is furnished as Exhibit 99.1 hereto
and is incorporated by reference herein. The description of the press release
contained herein is qualified in its entirety by the full text of such exhibit.
In addition, the Company is hereby furnishing certain balance sheet
information for the first quarter of 2004 as Exhibit 99.2 hereto.
Item 9.01 Financial Statements and Exhibits.
- --------------------------------------------
(c) Exhibits
Exhibit Number Description of Exhibit
- -------------- ----------------------
99.1 Press Release dated April 28, 2005
99.2 Unaudited Condensed Consolidated Balance Sheet of the Company
as of April 3, 2004
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BUILD-A-BEAR WORKSHOP, INC.
Date: April 28, 2005 By: /s/ Tina Klocke
-------------------------------
Name: Tina Klocke
Title: Chief Financial Bear, Secretary
and Treasurer
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
99.1 Press Release dated April 28, 2005
99.2 Unaudited Condensed Consolidated Balance Sheet of the Company
as of April 3, 2004
Exhibit 99.1
Build-A-Bear Workshop, Inc. Reports Net Income Growth of 51 Percent in Fiscal
2005 First Quarter
ST. LOUIS--(BUSINESS WIRE)--April 28, 2005--Build-A-Bear Workshop, Inc.
(NYSE: BBW):
-- First quarter revenue increased 23.6%, net income increased 50.8%.
-- Earnings per diluted share were $0.40 vs. $0.30 in fiscal 2004, an
increase of 33.3%, and include $0.02 per diluted share for flagship
store preopening costs.
-- Fiscal 2005 earnings guidance remains $1.35 to $1.41 per diluted
share, representing net income growth of 37% to 43% compared to fiscal
2004. Guidance includes $0.06 per diluted share for flagship store
preopening costs.
-- New franchise agreement with Norway completed in April - international
franchisees to now open 20 to 25 new stores in 2005
Build-A-Bear Workshop, Inc. (NYSE: BBW), an interactive entertainment
retailer of customized stuffed animals, announced earnings results for the
fiscal 2005 first quarter, the addition of Norway as an international franchisee
and reiterated fiscal 2005 earnings guidance.
Total revenue for the fiscal 2005 first quarter (13 weeks ended April 2,
2005) increased 23.6% to $86.1 million, compared to $69.6 million in the prior
year's first quarter (13 weeks ended April 3, 2004). First quarter net income
increased 50.8% to $8.0 million, or $0.40 per diluted share, on 20.12 million
diluted shares outstanding. These results compare to net income of $5.3 million,
or $0.30 per diluted share, on 17.86 million diluted shares outstanding in last
year's first quarter.
The company now expects European franchisees to open 16 to 18 new stores in
2005. Including these European new stores, total international franchisee new
stores are now targeted at 20 to 25 in 2005.
The company reiterates fiscal 2005 earnings guidance of $1.35 to $1.41 per
diluted share and second quarter earnings guidance of $0.23 to $0.25 per diluted
share.
"Our earnings growth in the first quarter was outstanding and illustrates
the power of our business and store model to deliver growth and improvement,"
said Chairman and Chief Executive Bear Maxine Clark. "Our strategy of raising
brand awareness, taking our creative merchandise and "hands-on" shopping
experience to wherever families go to have fun, and growing our highly
productive and profitable store base is paying off.
Our progress remains positive -- new store expansion activity is on-plan
and on-schedule, including our New York City flagship store; our oldest stores
continued to show comparable store sales growth higher than the total store
average; we look forward to a winning season with three ballpark stores now open
for business; we've added the National Football League to our line-up of
licensed sports apparel partners; and Build-A-Bear Workshop On Tour, our mobile
store, is spreading smiles across the country."
Fiscal 2005 First Quarter
Fiscal 2005 first quarter total revenue includes net retail sales of $85.7
million, an increase of $16.2 million or 23.4% compared to last year's first
quarter. Net retail sales growth was primarily driven by the addition of new
stores opened during the past twelve months and comparable store sales growth of
5.4%. First quarter total revenue includes revenue from international franchise
fees and third-party licensing totaling $336,000, an increase of $219,000
compared to last year's first quarter.
First quarter net income growth of $2.7 million, compared to the fiscal
2004 first quarter, was driven primarily by increased revenue and improved
leverage on costs and expenses, and higher interest income, partially offset by
higher store preopening costs. Gross margin rate improved to 50.3% up from 48.3%
in the fiscal 2004 first quarter, as sales volume leveraged store occupancy
costs and produced purchasing cost efficiencies. Selling, general and
administrative expense as a percent of total revenue decreased to 34.4% from
35.9% as efficiencies were realized in store payroll expense, marketing spending
and corporate office expense. Store preopening costs increased primarily due to
higher store preopening costs associated with the New York City flagship store,
which totaled $580,000 pretax, or $0.02 per diluted share, in the first quarter.
Beginning in February 2005, the company began to 'anniversary' the start of
its national television advertising campaign. Sales in the 2004 first quarter
benefited from the company being featured in one segment of a nationally
syndicated television show. Sales in the 2005 first quarter benefited from a
shift in the Easter holiday from the second quarter in fiscal 2004 to the first
quarter in 2005.
During the 2005 first quarter, the company opened three new Build-A-Bear
Workshop(R) retail stores in the United States and Canada, as planned. This
compares to opening one new Build-A-Bear Workshop store during the 2004 first
quarter. With these new stores, Build-A-Bear Workshop stores at the end of the
first quarter totaled 167 in the United States and six in Canada. During the
quarter the international franchisees opened no new international stores;
international stores totaled 12 at the end of the first quarter.
International Expansion Plan
On April 8, 2005, the company signed a franchise agreement to open
Build-A-Bear Workshop stores in Norway. In March, the company entered into a
franchise agreement for the Netherlands, Belgium and Luxembourg (Benelux
countries). These recent agreements bring the total number of international
countries with franchise agreements to twelve. Those countries include
Australia, Belgium, Denmark, France, Japan, Luxembourg, the Netherlands, Norway,
the Republic of China (Taiwan), South Korea, Sweden and the United Kingdom. In
fiscal 2004, revenue from international franchise fees totaled $846,000. The
company expects fiscal 2005 international franchise fee revenue to total
approximately $2.0 million.
"With the addition of four new European countries, we are expanding our
European new store growth outlook," said President and Chief Operating Officer
Bear, Barry Erdos. "Our franchisees in Europe now look to open 16 to 18 stores
this year, including 8 to 10 stores in the United Kingdom, two in Denmark, two
in France - the first to open in May in the world famous Galeries Lafayette
department store in Paris - one store in Sweden, two stores in the Netherlands,
and one store in Norway."
IPO Lock-up Expiration
Build-A-Bear Workshop(R) priced its initial public offering on October 27,
2004. The offering closed on November 2, 2004. A mandatory 180-day lock-up
period, and 18-day lock-up extension, applicable to shares held by executive
officers and directors, and the selling stockholders, is expected to expire on
May 16, 2005.
Outlook
At this time, the company expects fiscal 2005 (52 weeks ended Dec. 31,
2005) net income in the range of $27.3 million to $28.5 million, representing
net income growth of 37% to 43% compared to fiscal 2004. Diluted earnings per
share (EPS) are expected to be in the range of $1.35 to $1.41. Comparable store
sales growth is expected to be approximately 3%.
The company plans to open a flagship store in New York City in July 2005.
Estimated flagship store pre-opening costs of approximately $1.9 million pretax,
or $0.06 per diluted share, are significantly higher than for a typical store
and are included in the fiscal 2005 earnings guidance.
The company expects fiscal 2005 second quarter (13 weeks ended July 2,
2005) net income in the range of $4.7 million to $5.1 million, and diluted EPS
in the range of $0.23 to $0.25 on 20.3 million diluted shares outstanding. These
expected results include flagship store pre-opening costs of approximately $1.3
million pretax or $0.04 per diluted share. Comparable store sales growth is
expected to be in the range of 2% to 3% in the second quarter. The 2004 second
quarter included the Easter holiday. These expected results compare to fiscal
2004 second quarter net income of $4.9 million, and diluted EPS of $0.27 on 18.0
million diluted shares outstanding.
Build-A-Bear Workshop expects to open 28 to 30 new Build-A-Bear Workshop
stores in the United States and Canada, including the flagship store in New York
City, and three new friends 2B made(R) stores in fiscal 2005. Twelve of the new
stores are planned to open in the second quarter. International franchisees
expect to open 20 to 25 new stores in fiscal 2005.
The company expects to begin expensing stock-based compensation in the
first quarter of fiscal 2006 as required by the SEC's recently released
amendment to the required effective dates for SFAS 123R, Share-Based Payment.
Other News
Build-A-Bear Workshop will host its Annual Meeting of Shareholders in St.
Louis, Missouri, on Thursday, May 12, 2005, at 10:00 a.m. local time (CDT). The
company will broadcast the meeting over the Internet via webcast. The webcast
will be accessible through the Investor Relations page of the corporate web
site, http://ir.buildabear.com. Following the live meeting, a replay of the
webcast will be available until the next annual meeting.
Today's Conference Call Webcast
Today at 10:00 a.m. EDT, Build-A-Bear Workshop(R) will host a live audio
webcast of its discussion with the investment community regarding the company's
fiscal 2005 first quarter results. The webcast can be accessed at
http://ir.buildabear.com. Following the live discussion, a replay of the webcast
will be available until the next quarterly conference call.
About Build-A-Bear Workshop, Inc.
Build-A-Bear Workshop, Inc. (NYSE: BBW), with fiscal 2004 total revenue of
$302 million, is the only national company that offers Guests an interactive
make-your-own-stuffed animal retail-entertainment experience. The first store
opened in St. Louis in 1997; at the end of 2004 the company operated 170 stores
in 40 states and Canada. With the opening of its store in Sheffield, England, in
the fall of 2003 and the addition of international stores in Japan, Denmark and
Australia in 2004, Build-A-Bear Workshop has become the global leader in the
teddy bear business. In November 2004, the company opened two friends 2B made(R)
stores, the newest concept based on the doll-making experience. For more
information about the company and its products, call 888.560.BEAR (2327) or
visit the company's award-winning Web site at www.buildabear.com.
Forward-Looking Statements
Statements in this news release expressing or indicating the beliefs and
expectations of management regarding future performance are forward-looking
statements including, without limitation, company financial performance, sales
growth, new store openings, any other plans, objectives, expectations and
intentions contained in this release that are not historical facts. These
statements reflect our current views with respect to future events and are based
on assumptions and subject to risks and uncertainties. These risks and
uncertainties include, without limitation, those detailed in our 2004 annual
report on Form 10-K filed with the SEC on March 29, 2005 under the caption "Risk
Factors" and the following: (1) we may be unable to maintain our current
comparable store sales growth; (2) our marketing initiatives may not be
effective in generating sufficient levels of brand awareness and Guest traffic;
(3) we may be unable open new stores to effectively manage our growth; (4) we
may be unable to effectively manage our international franchises or laws
relating to those franchises may change; (5) we may be unable to generate
interest in and demand for our interactive retail experience, or to identify and
respond to consumer preferences in a timely fashion; (6) customer traffic may
decrease in the shopping malls where we are located, on which we depend to
attract Guests to our stores; (7) general economic conditions may decrease,
which could lead to reduced consumer demand for our products; (8) our market
share could be adversely affected by a significant number of competitors; (9) we
may lose key personnel, be unable to hire qualified additional personnel, or
experience turnover of our management team; (10) the ability of our principal
vendors to deliver merchandise may be disrupted; (11) the availability and costs
of our products could be adversely affected by risks associated with
international manufacturing and trade; (12) third parties that manage our
warehousing and distribution functions may perform poorly; (13) we may fail to
renew, register or otherwise protect our trademarks or other intellectual
property; (14) we may have disputes with, or be sued by, third parties for
infringement or misappropriation of their proprietary rights; (15) we may be
unable to renew or replace our store leases, or enter into leases for new stores
on favorable terms, or may violate the terms of our current leases; (16) we may
experience failures in our communications or information systems; (17) terrorism
or the uncertainty of future terrorist attacks or war could reduce consumer
confidence and mall traffic; (18) we may become subject to challenges relating
to overtime pay or other regulations relating to our employees; (19) we may
suffer negative publicity or be sued due to violations of labor laws or
unethical practices by manufacturers of our merchandise, and (20) we may
improperly obtain or be unable to protect information from our Guests in
violation of privacy or security laws or expectations.
These risks, uncertainties and other factors may adversely affect our
business, growth, financial condition or profitability, or subject us to
potential liability, and cause our actual results, performance or achievements
to be materially different from those expressed or implied by our
forward-looking statements. We do not undertake any obligation or plan to update
these forward-looking statements, even though our situation may change.
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(dollars in thousands, except share and per share data)
13 Weeks 13 Weeks
Ended % of Ended % of
April 2, Total April 3, Total
2005 Revenues(1) 2004 Revenues(1)
----------- ----------- ----------- -----------
Revenues:
Net retail sales $ 85,723 99.6 % $ 69,495 99.8 %
Franchise fees 306 0.4 117 0.2
Licensing revenue 30 0.0 -- 0.0
----------- ----------- ----------- -----------
Total revenues 86,059 100.0 69,612 100.0
----------- ----------- ----------- -----------
Costs and expenses:
Costs of merchandise
sold 42,607 49.7 35,922 51.7
Selling, general
and administrative 29,635 34.4 24,993 35.9
Store preopening 1,188 1.4 212 0.3
Interest expense
(income), net (368) (0.4) (39) (0.1)
----------- ----------- ----------- -----------
Total costs and
expenses 73,062 84.9 61,088 87.8
----------- ----------- ----------- -----------
Income before
income taxes 12,997 15.1 8,524 12.2
Income tax expense 5,029 5.8 3,239 4.7
----------- ----------- ----------- -----------
Net income 7,968 9.3 5,285 7.6
Cumulative dividends
and accretion of
redeemable preferred
stock -- 492
Cumulative dividends
of nonredeemable
preferred stock -- 114
----------- -----------
Net income
available to
common and
participating
preferred
stockholders $ 7,968 $ 4,679
=========== ===========
Net income allocated
to common
stockholders $ 7,968 $ 104
=========== ===========
Net income allocated
to participating
preferred
stockholders $ -- $ 4,575
=========== ===========
Earnings per
common share:
Basic $ 0.41 $ 0.48
=========== ===========
Diluted $ 0.40 $ 0.30
=========== ===========
Shares used in
computing common
per share amounts:
Basic 19,274,625 217,519
Diluted 20,123,927 17,858,276
(1) Selected statement of operations data expressed as a
percentage of total revenues, except costs of merchandise sold
which is expressed as a percentage of net retail sales.
Percentages will not total due to costs of merchandise sold
being expressed as a percentage of net retail sales and
rounding.
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(dollars in thousands, except share and per share data)
April 2, January 1,
2005 2005
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $70,609 $67,327
Inventories 30,819 30,791
Receivables 3,473 3,792
Prepaid expenses and other current assets 5,031 5,320
Deferred tax assets 2,836 2,725
--------- ---------
Total current assets 112,768 109,955
Property and equipment, net 77,321 75,815
Other intangible assets 1,300 1,411
Other assets, net 2,155 2,056
--------- ---------
Total Assets $193,544 $189,237
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $21,883 $25,767
Accrued expenses 13,321 13,966
Other current liabilities 17,750 22,222
--------- ---------
Total current liabilities 52,954 61,955
--------- ---------
Deferred franchise revenue 2,047 2,075
Deferred rent 28,578 26,426
Other liabilities 695 732
Deferred tax liabilities 1,964 2,539
Stockholders' equity:
Common stock, par value $0.01 per share. 199 196
Additional paid-in capital 81,441 77,708
Retained earnings 27,354 19,386
Notes receivable from officers (146) (1,770)
Unearned compensation (1,542) (10)
--------- ---------
Total stockholders' equity 107,306 95,510
--------- ---------
Total Liabilities and Stockholders' Equity $193,544 $189,237
========= =========
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
13 Weeks 13 Weeks
Ended Ended
April 2, April 3,
2005 2004
-------- --------
Cash flows from operating activities:
Net income $7,968 $5,285
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 4,165 3,543
Deferred taxes (686) (268)
Tax benefit from exercise of non-qualified options 2,095 -
Loss on disposal of property and equipment 112 -
Stock-based compensation 61 26
Change in assets and liabilities:
Inventories (28) 3,089
Receivables 319 1,102
Prepaid expenses and other current assets 289 598
Accounts payable (3,884) (3,734)
Accrued expenses and other liabilities (5,240) 1,083
-------- --------
Net cash provided by operating activities 5,171 10,724
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (5,501) (2,403)
Purchases of other assets (270) (299)
-------- --------
Net cash used in investing activities (5,771) (2,702)
-------- --------
Cash flows from financing activities:
Exercise of employee stock options and employee
stock purchases 2,237 -
Collection of note receivable from officer 1,645 -
-------- --------
Net cash provided by financing activities 3,882 -
-------- --------
Net increase in cash and cash equivalents 3,282 8,022
Cash and cash equivalents, beginning of period 67,327 20,601
-------- --------
Cash and cash equivalents, end of period $70,609 $28,623
======== ========
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Selected Financial and Store Data
(dollars in thousands, except square foot data)
13 Weeks 13 Weeks
Ended Ended
April 2, April 3,
2005 2004
-------- --------
Other financial data:
Gross margin ($) (1) $ 43,116 33,573
Gross Margin (%) (1) 50.3% 48.3%
Capital expenditures (2) $ 5,501 2,403
Depreciation and amortization $ 4,165 3,543
Store data (3):
Number of stores at end of period 173 151
Store square footage at end of period 522,630 464,972
Comparable store sales change (%) (4) 5.4% 14.8%
(1) Gross margin represents net retail sales less costs of
merchandise sold. Gross margin percentage represents gross
margin divided by net retail sales.
(2) Capital expenditures consists of leasehold improvements,
furniture and fixtures, and computer equipment and software
purchases.
(3) Excludes our webstore and seasonal and event-based locations.
(4) Comparable store sales percentage changes are based on net
retail sales and stores are considered comparable beginning in
their thirteenth full month of operation.
CONTACT: Build-A-Bear Workshop, Inc., St. Louis
Investors:
Molly Salky, 314-423-8000, Ext. 5353
or
Media:
Jill Saunders, 314-423-8000, Ext. 5293
www.buildabear.com
Exhibit 99.2
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(dollars in thousands, except share and per share data)
April 3,
2004
----------
ASSETS
Current assets:
Cash and cash equivalents $ 28,623
Inventories 19,484
Receivables 1,061
Prepaid expenses and other current assets 3,617
Deferred tax assets 1,754
----------
Total current assets 54,539
Property and equipment, net 72,777
Goodwill 97
Other intangible assets 1,486
Other assets, net 1,926
----------
Total Assets $ 130,825
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,088
Accrued expenses 10,111
Other current liabilities 11,473
----------
Total current liabilities 39,672
----------
Deferred franchise revenue 1,905
Deferred rent 22,187
Other liabilities 840
Deferred tax liabilities 3,175
Redeemable preferred stock, at redemption price 38,382
Stockholders' equity:
Nonredeemable preferred stock, at par value 94
Common stock, par value $0.01 per share. 5
Additional paid-in capital 10,967
Retained earnings 15,442
Notes receivable from officers (1,844)
Unearned compensation -
----------
Total stockholders' equity 24,664
----------
Total Liabilities and Stockholders' Equity $ 130,825
==========