View:
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) July 27, 2006
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
------------------------------------------
(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))
Build-A-Bear Workshop, Inc. Reports Q1 F2005 Earnings 04.28.05 Page 2 of 4
Item 2.02. Results of Operations and Financial Condition.
- -------------------------------------------------------------
On July 27, 2006, 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 second quarter
of fiscal 2006. The press release also included expected earnings per diluted
share for the full year of fiscal 2006. 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.
This information furnished in this Item 2.02, including Exhibit 99.1
attached hereto, is being furnished and shall not be deemed "filed" for purposes
of Section 18 of the Securities and Exchange Act of 1934 (the "Exchange Act") or
otherwise subject to the liabilities of that section, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, regardless of any general incorporation language
in such filing. In addition, this report (including Exhibit 99.1) shall not be
deemed an admission as to the materiality of any information contained herein
that is required to be disclosed solely as a requirement of this Item 2.02.
Item 9.01 Financial Statements and Exhibits.
- ------------------------------------------------
(d) Exhibits
Exhibit Number Description of Exhibit
- -------------- ----------------------
99.1 Press Release dated July 27, 2006
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: July 27, 2006 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 July 27, 2006
Exhibit 99.1
Build-A-Bear Workshop, Inc. Reports Fiscal 2006 Second Quarter Results
ST. LOUIS--(BUSINESS WIRE)--July 27, 2006--Build-A-Bear Workshop,
Inc. (NYSE: BBW):
-- Earnings per diluted share were $0.15, including U.K.
acquisition dilution of $0.15 and stock-based compensation
expense of $0.02, vs. $0.17 in 2005.
-- Company confirms previously announced guidance for 2006
earnings at the low end of the $1.44 to $1.53 range. Guidance
includes U.K. acquisition dilution of approximately $0.13,
stock-based compensation expense of approximately $0.08 and
distribution center transition cost of approximately $0.04.
-- Company updates investors on strategic initiatives including
U.K. acquisition integration and company-owned distribution
center.
Build-A-Bear Workshop, Inc. (NYSE: BBW), an interactive
entertainment retailer of customized stuffed animals, today announced
that total revenue for the fiscal 2006 second quarter (13 weeks ended
July 1, 2006) increased 27.1% to $93.7 million, compared to $73.7
million in the prior year's second quarter (13 weeks ended July 2,
2005).
Fiscal 2006 second quarter results reflect the company's
acquisition of The Bear Factory Limited, a United Kingdom-based
stuffed animal retailer, and the acquisition of Amsbra, Ltd., its
franchisee in the U.K.
Second quarter net income was $3.0 million or $0.15 per share.
These results, which include the impact of $0.15 per share for U.K.
acquisition dilution and $0.02 per share for stock-based compensation
expenses, compare to net income of $3.5 million, or $0.17 per diluted
share in last year's second quarter.
"We are encouraged by our core North American earnings performance
this quarter and remain confident in our full year earnings outlook,"
said Chairman and Chief Executive Bear, Maxine Clark. "While our comp
store sales results in the second quarter did not meet our
expectations, our profitable business model, which includes strong and
consistent merchandise margins, profitable store operations and
disciplined expense control efforts, gives us confidence in our
ability to deliver earnings growth even in this difficult consumer
environment. We continue to make positive progress with our U.K. store
conversions, systems integration and marketing plans. I am also
pleased to report that we are on track with our Ohio distribution
center, and expect it to become fully operational in September. These
strategic initiatives are building blocks for the long term growth of
our business. We remain focused on managing our business for long term
growth and shareholder value."
Fiscal 2006 Second Quarter
Fiscal 2006 second quarter total revenue includes net retail sales
of $93.0 million, an increase of $19.7 million or 27.0% compared to
last year's second quarter. Net retail sales growth was driven by new
stores opened during the past twelve months in North America, U.K.
acquisition sales, and an increase in Internet sales of 32.3% to $1.7
million. Comparable store sales in North America declined 4.4%. Second
quarter total revenue also includes revenue from international
franchise fees and third-party licensing.
The second quarter net income of $3.0 million reflects several
items directly related to the U.K. acquisition, including an operating
loss of $2.7 million, lost interest income and lost franchise revenue,
as well as, stock-based compensation expense of $0.8 million pretax
($0.4 million net of tax). As anticipated, retail gross margin rate
decreased to 43.9%, from 47.1% in the fiscal 2005 second quarter, due
to higher store occupancy costs in the U.K. Fiscal 2006 second quarter
results also reflect a higher effective tax rate compared to last year
resulting from the impact of the U.K. acquisition.
During the 2006 second quarter, the company opened 14 new
Build-A-Bear Workshop(R) (BABW) retail stores in North America, as
planned, compared with opening 13 new BABW stores during the 2005
second quarter. In addition, the company opened two new friends 2B
made stores inside new BABW stores located in Riverside, Calif.
(Promenade at Temecula) and in Boston's historic Faneuil Hall. Also
during the quarter the company opened one new ballpark store at the
new Busch Stadium - home of the St. Louis Cardinals - in St. Louis and
reopened three ballpark stores in Philadelphia, Cincinnati and
Cleveland.
Build-A-Bear Workshop stores at the end of the second quarter
totaled 205 in the United States and 11 in Canada (excluding ballpark
and zoo stores).
U.K. Acquisition
On April 3, 2006, the company announced that it had completed the
acquisitions of The Bear Factory Limited and Amsbra, Ltd. The company
ended the quarter with 40 stores in the U.K. and Ireland and is in the
process of converting and rebranding 25 Bear Factory stores. The
company began converting the Bear Factory stores to Build-A-Bear
Workshop stores in May and expects to complete the store conversions
in time for the 2006 holiday season.
As previously disclosed, the company anticipates U.K. acquisition
dilution of approximately $0.10 -$0.12 per share in the fiscal 2006
third quarter (13 weeks ended September 30, 2006) and accretion of
approximately $0.11 - $0.15 per share in the fiscal 2006 fourth
quarter (13 weeks ended December 30, 2006).
The company further expects the acquisition to be accretive to
earnings per share in fiscal 2007.
International Franchising
During the quarter international franchisees opened three new
international stores; international stores totaled 21 at the end of
the second quarter. The company recently signed a franchise agreement
to open Build-A-Bear Workshop stores in Russia. This agreement brings
the total number of international countries with franchise agreements
to 15.
In fiscal 2006 the company expects international franchise fee
revenue to total approximately $3.0 million. International franchise
fee revenue excludes the company's U.K.-based stores which are now
reflected in retail sales following the acquisition of Amsbra, Ltd.
Outlook
The company also reaffirmed its previously disclosed guidance for
fiscal 2006 (52 weeks ended Dec. 30, 2006) earnings per share (EPS) to
be at the low end of the range of $1.44 - $1.53. This guidance
includes the anticipated U.K. acquisition dilution of approximately
$0.13 per diluted share, stock-based compensation expense of
approximately $0.08 per diluted share ($2.7 million pretax, $1.6
million net of tax) and distribution center transition costs of
approximately $0.04 per diluted share ($1.4 million pretax, $0.8
million net of tax). The company expects fiscal 2006 North American
comparable store sales will be in the flat to negative low single
digit range.
The guidance also assumes that earnings per diluted share for the
third quarter will be between $0.09 - $0.12, which includes U.K.
acquisition dilution of approximately $0.10-$0.12 per diluted share,
stock-based compensation expense of approximately $0.02 per diluted
share, and distribution center transition costs of $0.04 per diluted
share. North American comp store sales in the fiscal 2006 third
quarter are expected to decline in the mid-single digit range, while
fourth quarter North American comparable store sales are expected to
be in the flat to negative low single digit range.
In North America, Build-A-Bear Workshop expects to open a total of
31 new BABW stores and four new friends 2B made stores, one that will
be separate from BABW stores, in fiscal 2006. In the U.K., the company
plans to open approximately three new Build-A-Bear Workshop stores in
fiscal 2006; we expect international franchisees to open 10 to 12 new
stores.
Ten new North America BABW stores are planned to open in the third
quarter, compared with opening seven new BABW stores during the 2005
third quarter.
Today's Conference Call Webcast
Today at 8:30 a.m. EST, Build-A-Bear Workshop(R) will host a live
audio webcast of its discussion with the investment community
regarding the company's fiscal 2006 second 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-your-own stuffed animal retail-entertainment
experience. Founded in St. Louis in 1997, the company currently
operates more than 255 stores in the United States, Canada, the United
Kingdom and Ireland. The addition of franchise stores in Europe, Asia
and Australia make Build-A-Bear Workshop the leader in interactive
retail. 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, where Guests can make their own doll
friends. In April 2006, Build-A-Bear Workshop acquired The Bear
Factory Limited and Amsbra, Ltd. adding company-owned stores in the
United Kingdom and Ireland. Build-A-Bear Workshop (NYSE: BBW) posted
total revenue of $362 million in fiscal 2005. 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
Build-A-Bear Workshop'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 not realize some of the expected benefits of the acquisition of
Amsbra and The Bear Factory; 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, including as
described in the Company's annual report on Form 10-K for the fiscal
year ended December 31, 2005. 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
July 1, Revenues July 2, Revenues
2006 (1) 2005 (1)
----------- -------- ----------- --------
Revenues:
Net retail sales $ 92,962 99.3 $ 73,279 99.4
Franchise fees 636 0.7 334 0.5
Licensing revenue 59 0.1 86 0.1
----------- ------- ----------- --------
Total revenues 93,656 100.0 73,699 100.0
----------- ------- ----------- --------
Costs and expenses:
Cost of merchandise sold 52,190 56.1 38,778 52.9
Selling, general and
administrative 34,783 37.1 27,728 37.6
Store preopening 1,582 1.7 1,929 2.6
Interest expense
(income), net (299) (0.3) (378) (0.5)
----------- ------- ----------- --------
Total costs and
expenses 88,256 94.2 68,057 92.3
----------- ------- ----------- --------
Income before income
taxes 5,400 5.8 5,642 7.7
Income tax expense 2,402 2.6 2,147 2.9
----------- ------- ----------- --------
Net income $ 2,999 3.2 $ 3,495 4.7
=========== ===========
Earnings per common share:
Basic $ 0.15 $ 0.18
=========== ===========
Diluted $ 0.15 $ 0.17
=========== ===========
Shares used in computing
common per share amounts:
Basic 20,152,761 19,801,598
Diluted 20,425,749 20,223,601
(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)
% of % of
26 Weeks Total 26 Weeks Total
Ended July Revenue Ended July Revenue
1, 2006 (1) 2, 2005 (1)
----------- ------- ----------- -------
Revenues:
Net retail sales $ 190,692 99.2 $ 159,002 99.5
Franchise fees 1,326 0.7 640 0.4
Licensing revenue 270 0.1 116 0.1
----------- ------ ----------- -------
Total revenues 192,287 100.0 159,758 100.0
----------- ------ ----------- -------
Costs and expenses:
Cost of merchandise sold 102,050 53.5 81,175 51.1
Selling, general and
administrative 70,234 36.5 57,573 36.0
Store preopening 2,197 1.1 3,117 2.0
Interest expense (income),
net (1,165) -0.6 (746) -0.5
----------- ------ ----------- -------
Total costs and expenses 173,316 90.1 141,119 88.3
----------- ------ ----------- -------
Income before income taxes 18,971 9.9 18,639 11.7
Income tax expense 7,627 4.0 7,176 4.5
----------- ------ ----------- -------
Net income 11,345 5.9 11,463 7.2
Earnings per common share:
Basic $ 0.56 $ 0.59
=========== ===========
Diluted $ 0.56 $ 0.57
=========== ===========
Shares used in computing
common per share amounts:
Basic 20,115,818 19,538,111
Diluted 20,413,563 20,173,764
(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)
July 1 December 31,
2006 2005
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 10,554 $ 90,950
Inventories 48,029 40,157
Receivables 10,781 6,629
Prepaid expenses and other current assets 14,174 6,839
Deferred tax assets 3,636 3,232
----------- -----------
Total current assets 87,174 147,807
Property and equipment, net 117,504 89,973
Note receivable from franchisee - 4,518
Goodwill 31,074 -
Other intangible assets, net 3,301 1,454
Other assets, net 3,715 2,356
----------- -----------
Total Assets $ 242,768 $ 246,108
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31,069 $ 34,996
Accrued expenses 5,712 15,792
Gift cards and customer deposits 15,201 22,865
Deferred revenue 8,362 7,508
----------- -----------
Total current liabilities 60,343 81,161
----------- -----------
Deferred franchise revenue 2,764 2,306
Deferred rent 34,399 30,687
Other liabilities 529 586
Deferred tax liabilities 426 1,011
Stockholders' equity:
Common stock, par value $0.01 per share 205 201
Additional paid-in capital 86,595 85,259
Other comprehensive income (98) -
Retained earnings 57,759 46,700
Notes receivable from officers (154) (151)
Unearned compensation - (1,652)
----------- -----------
Total stockholders' equity 144,307 130,357
----------- -----------
Total Liabilities and Stockholders' Equity $ 242,768 $ 246,108
=========== ===========
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Selected Financial and Store Data
(dollars in thousands, except square foot data)
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
July 1, July 2, July 1, July 2,
2006 2005 2006 2005
-------- -------- -------- --------
Other financial data:
Gross margin ($) (1) $ 40,772 34,501 $ 88,642 77,827
Gross Margin (%) (1) 43.9% 47.1% 46.5% 48.9%
Capital expenditures $ 21,416 10,590 $ 31,082 16,091
Depreciation and amortization $ 5,801 4,352 $ 10,583 8,517
Store data (2):
Number of stores at end of
period 256 186 256 186
Store square footage at end of
period 732,620 575,682 732,620 575,682
Comparable store sales change
(%) (3) -4.4% -6.9% -4.1% -0.6%
(1)Gross margin represents net retail sales less cost of merchandise
sold. Gross margin percentage represents gross margin divided by
net retail sales.
(2)Excludes our webstore and seasonal and event-based locations.
(3)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 x5379