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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) October 20, 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
St. Louis, Missouri 63114
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(Address of Principal Executive Offices) (Zip Code)
(314) 423-8000
------------------------------------------
(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 October 20, 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 third quarter
of fiscal 2005. The press release also included expected earnings and diluted
earnings per share 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.
Item 9.01 Financial Statements and Exhibits.
- ----------------------------------------------
(d) Exhibits
Exhibit Number Description of Exhibit
- -------------- ----------------------
99.1 Press Release dated October 20, 2005
2
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: October 20, 2005 By: /s/ Tina Klocke
---------------------------------
Name: Tina Klocke
Title: Chief Financial Bear, Secretary
and Treasurer
3
EXHIBIT INDEX
Exhibit Number Description of Exhibit
- -------------- ----------------------
99.1 Press Release dated October 20, 2005
4
Exhibit 99.1
Build-A-Bear Workshop, Inc. Reports Fiscal 2005 Third Quarter Results
ST. LOUIS--(BUSINESS WIRE)--Oct. 20, 2005--Build-A-Bear Workshop,
Inc. (NYSE:BBW):
-- Net income increased 50.0% to $5.3 million and included $0.3
million for flagship store and cafe preopening costs.
-- Earnings per diluted share were $0.26, including $0.02 per
diluted share for flagship store and cafe preopening costs.
-- Net retail sales increased 25.7% to $83.2 million -- comp
store sales increased 1.3%.
-- Company expresses comfort with the mid to high-end of
previously stated net income growth range of 26% to 32% for
fiscal 2005.
Build-A-Bear Workshop, Inc. (NYSE:BBW), an interactive
entertainment retailer of customized stuffed animals, today announced
earnings results for the fiscal 2005 third quarter and confirmed its
earnings guidance for the full fiscal year.
Total revenue for the fiscal 2005 third quarter (13 weeks ended
October 1, 2005) was $84.0 million, compared to $66.5 million in the
prior year's third quarter (13 weeks ended October 2, 2004). Third
quarter net income of $5.3 million, or $0.26 per diluted share, on
20.2 million diluted shares outstanding, includes $0.02 per diluted
share of preopening costs related to the Company's new flagship store
and cafe in New York City.
In the third fiscal quarter of 2004, the Company reported net
income of $3.5 million, or $0.19 per diluted share, on 18.5 million
diluted shares outstanding. Fiscal 2004 third quarter results include
non-cash, stock-based compensation expense of $0.5 million pretax,
$0.4 million net of tax or $0.02 per diluted share.
The Company also revised its previous guidance for the full year
by stating that it is comfortable with the mid to high-end of its full
year net earnings guidance of $1.24 to $1.30 per diluted share.
"Our strong results this quarter highlight the strength and
quality of the Build-A-Bear Workshop business model. This performance
is not only based on the sale of an affordable, quality product, but
also an interactive, creative, fun entertainment experience that
appeals to a growing customer base," said Chairman and Chief Executive
Bear, Maxine Clark. "Revenue growth came via multiple drivers - strong
new store performance, growth in comparable store sales, and via a 54%
year over year increase in our Internet sales. We have also been
successful in leveraging our expenses against the higher revenues,
thus, our operating margin improvement reflected an increase in
merchandise margins and our highly productive store model. We are
excited about our upcoming holiday merchandise and marketing programs
that we expect to drive continued growth in the fourth quarter and
beyond."
Fiscal 2005 Third Quarter
Fiscal 2005 third quarter total revenue includes net retail sales
of $83.2 million, an increase of $17.0 million or 25.7% compared to
last year's third quarter. Net retail sales growth was driven
primarily by the addition of new stores opened during the past twelve
months, an increase in comparable store sales of 1.3% and an increase
in Internet sales of 54.2% to $1.4 million. Third quarter total
revenue includes international franchise fees and third-party
licensing revenue totaling $778,000, an increase of $485,000 compared
to last year's third quarter.
The third quarter net income reflected higher new store preopening
costs offset by the leverage of comparable store sales growth on costs
and expenses, higher new store sales, lower stock-based compensation
expense and increased interest income. Gross margin rate increased to
47.7% from 47.4% in the fiscal 2004 third quarter. Selling, general
and administrative expense as a percent of total revenue declined to
37.0% from 37.8% as expenses moderated as a percent of revenue. The
abovementioned store preopening expense included costs associated with
the New York City flagship store and cafe opening, totaling $0.5
million pretax, $0.3 million net of tax, or $0.02 per diluted share,
in the third quarter.
During the 2005 third quarter, the company opened seven new
Build-A-Bear Workshop(R) (BABW) retail stores in the United States and
Canada, as planned, compared with opening seven new stores during the
2004 third quarter. These new stores bring the total number of BABW
stores at the end of the third quarter to 186 in the United States and
seven in Canada. During the quarter the company opened one friends 2B
made store and now operates five stores in the U.S. International
franchisees opened four new international stores in the third quarter,
including the first store in Taiwan; international stores totaled 20
at the end of the third quarter.
Total revenue for the fiscal 2005 year-to-date (39 weeks ended
October 1, 2005) was $243.8 million, up 20.5% compared to $202.2
million in the same period in 2004 (39 weeks ended October 2, 2004).
Comparable store sales for the 39 weeks ended October 1, 2005 were
unchanged. Year-to-date net income of $16.7 million, or $0.83 per
diluted share, on 20.2 million diluted shares outstanding, includes
$0.06 per diluted share of flagship store and cafe preopening costs.
In the same period of 2004, the Company reported net income of $13.7
million, or $0.76 per diluted share, on 18.1 million diluted shares
outstanding.
Build-A-Bear Workshop expects to open an additional seven new BABW
stores in the fourth quarter. In total the company will open 30 new
BABW stores and three new friends 2B made stores in the United States
and Canada during fiscal 2005. International franchisees expect to
open a total of approximately 20 new stores in fiscal 2005.
Outlook
The Company also commented that based on its performance to date,
it is comfortable with the mid to high-end of its earnings guidance
for fiscal 2005 (52 weeks ended December 31, 2005). Previously
announced guidance includes net income in the range of $25.1 million
to $26.3 million, which represents net income growth of 26% to 32%
compared to fiscal 2004 and diluted earnings per share in the range of
$1.24 to $1.30. Earnings guidance assumes total revenue growth of 15%
to 20% and flat comparable store sales for the year.
The Company announced that, starting in fiscal 2006, it will begin
expensing stock-based compensation as required by SFAS 123R,
Share-Based Payment.
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 third 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., is the only global company that
offers an interactive make-you-own-stuffed animal retail-entertainment
experience. Founded in St. Louis in 1997, the company currently
operates more than 200 stores in the United States and Canada. The
addition of stores in Europe, Asia and Australia make Build-A-Bear
Workshop the leader in the teddy bear business. In November 2004, the
company expanded the make-your-own concept from stuffed animals to
dolls with the opening of its first friends 2B made(R) stores, which
feature doll making. Build-A-Bear Workshop (NYSE: BBW) posted total
revenue of $302 million in fiscal 2004. For more information, call
888.560.BEAR (2327) or visit the company's award-winning Web sites at
www.buildabear.com and www.friends2bmade.com.
Forward-Looking Statements
This press release contains "forward-looking statements" (within
the meaning of the federal securities laws) which represent the
Company's expectations or beliefs with respect to future events. These
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from those anticipated. Those factors include, without limitation: we
may be unable to generate comparable store sales growth; our marketing
initiatives may not generate sufficient brand awareness and sales; we
may be unable to effectively manage our international franchises or
comply with changing laws relating thereto; we may be unable to
generate demand for our retail experience, or to respond to consumer
preferences; customer mall traffic may decrease, as a result of
various factors, including a reduction of consumer confidence because
of terrorism or war; general economic conditions may worsen; our
market share could be adversely affected by competitors; we may lose
key personnel, or be unable to hire qualified additional personnel;
vendor deliveries may be disrupted; the availability and costs of our
products could be impacted by international manufacturing and trade
issues; our warehousing and distribution vendors may perform poorly;
we may fail to protect our intellectual property and may have
infringement, misappropriation or other disputes or litigation with
third parties; we may be unable to open new stores, renew or replace
our store leases, enter into leases for new stores on favorable terms,
or continue to comply with our current leases; we may experience
communications or information systems failures; we may suffer negative
publicity or be sued due to alleged violations of labor laws, employee
regulations or unethical practices, either by the Company or its
merchandise manufacturers; and we may violate or be accused of
violating privacy or security laws by reason of improperly obtaining
or failing to adequately protect Guest information. These and other
applicable risks, cautionary statements and factors that could cause
actual results to differ from the Company's forward-looking statements
are included in the Company's filings with the SEC, specifically as
described in the Company's annual report on Form 10-K for the fiscal
year ended December 31, 2004. The Company undertakes no obligation to
update or revise any forward- looking statements to reflect subsequent
events or circumstances even if experience or future changes make it
clear that any projected results expressed or implied therein will not
be realized.
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(dollars in thousands, except share and per share data)
13 Weeks % of 13 Weeks % of
Ended Total Ended Total
October 1, Revenues October 2, Revenues
2005 (1) 2004 (1)
----------- -------- ----------- ----------
Revenues: (restated)
Net retail sales $ 83,239 99.1% $ 66,213 99.6%
Franchise fees 507 0.6 191 0.3
Licensing revenue 271 0.3 102 0.2
----------- -------- ----------- ----------
Total revenues 84,017 100.0 66,506 100.0
----------- -------- ----------- ----------
Costs and expenses:
Cost of merchandise
sold 43,512 52.3 34,822 52.6
Selling, general and
administrative 31,113 37.0 25,144 37.8
Store preopening 1,281 1.5 767 1.2
Interest expense
(income), net (434) (0.5) (72) (0.1)
----------- -------- ----------- ----------
Total costs and
expenses 75,472 89.8 60,661 91.2
----------- -------- ----------- ----------
Income before income
taxes 8,545 10.2 5,845 8.8
Income tax expense 3,290 3.9 2,342 3.5
----------- -------- ----------- ----------
Net income 5,255 6.3 3,503 5.3
Cumulative dividends and
accretion of redeemable
preferred stock -- 152
Cumulative dividends of
nonredeemable preferred
stock -- 35
----------- -----------
Net income available
to common and
participating
preferred
stockholders $ 5,255 $ 3,316
=========== ===========
Net income allocated to
common stockholders $ 5,255 $ 140
=========== ===========
Net income allocated to
participating
preferred stockholders $ -- $ 3,176
=========== ===========
Earnings per common
share:
Basic $ 0.26 $ 0.34
=========== ===========
Diluted $ 0.26 $ 0.19
=========== ===========
Shares used in computing
common per share
amounts:
Basic 19,874,869 419,156
Diluted 20,234,749 18,528,825
(1) Selected statement of operations data expressed as a percentage
of total revenues, except cost of merchandise sold which is expressed
as a percentage of net retail sales. Percentages will not total due
to cost of merchandise sold being expressed as a percentage of net
retail sales and rounding.
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(dollars in thousands, except share and per share data)
39 Weeks % of 39 Weeks % of
Ended Total Ended Total
October 1, Revenue October 2, Revenue
2005 (1) 2004 (1)
----------- -------- ----------- ----------
Revenues: (restated)
Net retail sales $ 242,241 99.4% $ 201,633 99.7%
Franchise fees 1,147 0.5 498 0.2
Licensing revenue 387 0.2 102 0.1
----------- -------- ----------- ----------
Total revenues 243,775 100.0 202,233 100.0
----------- -------- ----------- ----------
Costs and expenses:
Cost of merchandise
sold 125,070 51.6 104,868 52.0
Selling, general and
administrative 88,303 36.2 73,776 36.5
Store preopening 4,398 1.8 1,472 0.7
Interest expense
(income), net (1,180) (0.5) (170) (0.1)
----------- -------- ----------- ----------
Total costs and
expenses 216,591 88.8 179,946 89.0
----------- -------- ----------- ----------
Income before income
taxes 27,184 11.2 22,287 11.0
Income tax expense 10,466 4.3 8,590 4.2
----------- -------- ----------- ----------
Net income 16,718 6.9 13,697 6.8
Cumulative dividends and
accretion of redeemable
preferred stock -- 1,137
Cumulative dividends of
nonredeemable preferred
stock -- 263
----------- -----------
Net income available
to common and
participating
preferred
stockholders $ 16,718 $ 12,297
=========== ===========
Net income allocated to
common stockholders $ 16,718 $ 412
=========== ===========
Net income allocated to
participating
preferred stockholders $ -- $ 11,885
=========== ===========
Earnings per common
share:
Basic $ 0.85 $ 1.25
=========== ===========
Diluted $ 0.83 $ 0.76
=========== ===========
Shares used in computing
common per share
amounts:
Basic 19,650,364 329,560
Diluted 20,194,093 18,099,867
(1) Selected statement of operations data expressed as a percentage
of total revenues, except cost of merchandise sold which is expressed
as a percentage of net retail sales. Percentages will not total due
to cost 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)
October 1, January 1,
2005 2005
------------ ----------
ASSETS
Current assets:
Cash and cash equivalents $51,564 $67,327
Inventories 34,123 30,791
Receivables 6,240 3,792
Prepaid expenses and other current
assets 9,395 5,320
Deferred tax assets 3,142 2,725
------------ ----------
Total current assets 104,464 109,955
Property and equipment, net 86,207 75,815
Other intangible assets, net 1,329 1,411
Other assets, net 4,695 2,056
------------ ----------
Total Assets $196,695 $189,237
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $17,706 $25,767
Accrued expenses 6,065 13,966
Other current liabilities 17,579 22,222
------------ ----------
Total current liabilities 41,350 61,955
------------ ----------
Deferred franchise revenue 2,095 2,075
Deferred rent 31,350 26,426
Other liabilities 623 732
Deferred tax liabilities 3,508 2,539
Stockholders' equity:
Common stock, par value $0.01 per share 200 196
Additional paid-in capital 82,430 77,708
Retained earnings 36,104 19,386
Notes receivable from officers (149) (1,770)
Unearned compensation (816) (10)
------------ ----------
Total stockholders' equity 117,769 95,510
------------ ----------
Total Liabilities and Stockholders' Equity $196,695 $189,237
============ ==========
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
39 Weeks 39 Weeks
Ended Ended
October 1, October 2,
2005 2004
------------ ----------
(restated)
Cash flows from operating activities:
Net income $16,718 $13,697
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 12,821 10,817
Deferred taxes 552 (478)
Tax benefit from exercise of non-
qualified options 2,444 410
Loss on disposal of property and
equipment 322 269
Stock-based compensation 358 584
Change in assets and liabilities:
Inventories (3,332) (6,862)
Receivables (2,432) (961)
Prepaid expenses and other
current assets (4,086) (965)
Accounts payable (8,158) (4,128)
Accrued expenses and other
liabilities (10,120) 4,994
------------ ----------
Net cash provided (used) by
operating activities 5,087 17,377
------------ ----------
Cash flows from investing activities:
Purchases of property and equipment (22,599) (11,278)
Proceeds from sale of property and
equipment 24 -
Purchases of other assets (885) (955)
Loan to franchisee (2,540) -
------------ ----------
Net cash used in investing
activities (26,000) (12,233)
------------ ----------
Cash flows from financing activities:
Payment of cash dividend - (10,000)
Exercise of employee stock options and
employee stock purchases 3,505 -
Collection of note receivable from
officer 1,645 -
------------ ----------
Net cash provided by
financing activities 5,150 (10,000)
------------ ----------
Net increase (decrease) in cash and cash
equivalents (15,763) (4,856)
Cash and cash equivalents, beginning of
period 67,327 20,601
------------ ----------
Cash and cash equivalents, end of period $51,564 $15,745
============ ==========
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Selected Financial and Store Data
(dollars in thousands, except square foot data)
13 13 39 39
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
October October October October
1, 2, 1, 2,
2005 2004 2005 2004
---------- ------- ------------ ----------
Other financial data:
Gross margin ($) (1) $ 39,727 31,391 $ 117,171 96,765
Gross Margin (%) (1) 47.7% 47.4% 48.4% 48.0%
Capital expenditures
(2) $ 6,508 5,146 $ 22,599 11,278
Depreciation and
amortization $ 4,304 3,692 $ 12,821 10,817
Store data (3):
Number of stores at
end of period 193 164
Store square footage
at end of period 599,341 497,385
Comparable store
sales change (%) (4) 1.3% 18.8% 0.0% 15.6%
(1)Gross margin represents net retail sales less cost of merchandise
sold. Gross margin percentage represents gross margin divided by
net retail sales.
(2)Capital expenditures consist 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.
Investors:
Molly Salky, 314-423-8000 x5353
or
Media:
Jill Saunders, 314-423-8000 x5293