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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) November 9, 2004
(November 9, 2004)
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))
Item 2.02. Results of Operations and Financial Condition.
- ---------------------------------------------------------
On November 9, 2004, Build-A-Bear Workshop, Inc. (the "Company") issued
a press release announcing results for the third quarter (13 weeks) and
year-to-date (39 week) periods ending October 2, 2004. 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.
(c) Exhibits
Exhibit Number Description of Exhibit
- -------------- ----------------------
99.1 Press Release dated November 9, 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.
(Registrant)
Date: November 9, 2004 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 November 9, 2004
Exhibit 99.1
Build-A-Bear Workshop, Inc. Reports Strong
Sales and Earnings Growth in the Third Quarter of Fiscal 2004
ST. LOUIS--(BUSINESS WIRE)--Nov. 9, 2004-Build-A-Bear Workshop, Inc. (NYSE:
BBW):
-- Third quarter total revenues grew 38.7%; comparable store
sales grew 18.8%
-- Company reports net income of $3.6 million for the third
quarter, including stock-based compensation expense of $0.4
million net of tax
-- Diluted EPS were $0.19, including stock-based compensation
expense of $0.02 per share, compared to $0.03 in the year ago
period
Build-A-Bear Workshop, Inc. (NYSE:BBW), an interactive,
entertainment retailer of customized stuffed animals, today announced
that total revenues for the fiscal 2004 third quarter, the 13 week
period ending October 2, 2004, were $66.5 million, up 38.7% compared
to $48.0 million in the prior year's third quarter. Net income was
$3.6 million for the third quarter, compared to $0.9 million for last
year's third quarter.
Diluted earnings per share (EPS) were $0.19 for the fiscal 2004
third quarter compared to $0.03 for last year's third quarter. Fiscal
2004 third quarter results include a non-cash, stock-based
compensation expense of $0.5 million pre-tax ($0.4 million net of tax
or $0.02 per share).
"We are very pleased with our third quarter performance," said
Maxine Clark, Build-A-Bear Workshop's chairman and chief executive
bear. "We believe our results reflect the success of our brand
building efforts, excellent performance by our store associates, and
the fundamental strength of our store economic model."
For the thirty-nine weeks ended October 2, 2004, the company
reported net income of $13.8 million or $0.76 per diluted share, on
total revenues of $202.2 million, compared to net income of $2.7
million, or $0.09 per diluted share, on total revenues of $140.5
million for the thirty-nine week period ended September 27, 2003. For
the fiscal 2004 thirty-nine week period comparable store sales
increased 15.6%.
During the fiscal 2004 third quarter, and included as a component
of selling, general and administrative expenses, the company
recognized a non-cash, stock-based compensation expense of $0.5
million ($0.4 million net of tax or $0.02 per diluted share). The
expense relates to stock options granted during the first half of 2004
at $8.78 per share, which an independent appraisal had determined was
a fair value at the time. Subsequently, it was determined that the
fair value of the underlying common stock should have been $15.00 per
share. Accordingly, a $1.9 million pre-tax total stock-based
compensation expense will be recorded over the vesting period of the
options. As a result of the initial public offering, all of these
option grants became fully vested. The company will record the balance
of this expense or $1.4 million pre tax ($1.0 million net of tax or
$0.05 per diluted share), in the fourth quarter of fiscal 2004.
During the third quarter, the company opened seven new
Build-A-Bear Workshop retail stores in the United States and Canada,
as compared with opening 20 stores during the same period last year.
Through the first nine months of fiscal 2004, the company opened 15
stores and closed one store increasing total square footage to 497,385
as compared with opening 36 stores and closing one store during the
same period last year.
Fiscal 2004 third quarter total revenues include net retail sales
of $66.2 million, an increase of $18.3 million or 38.2% compared to
last year's third quarter. Net retail sales growth was primarily
driven by comparable store sales growth of 18.8% and the addition of
new stores opened during the past twelve months. Third quarter total
revenues also include revenues from international franchise fees
totaling $0.2 million, up $0.1 million compared to last year's third
quarter, and licensing revenue totaling $0.1 million.
Third quarter net income growth of $2.7 million, compared to the
year ago third quarter, resulted primarily from increased revenues and
improved leverage on costs and expenses. Gross margin percent improved
4.7% in this year's third quarter as compared to the fiscal 2003 third
quarter. Selling, general and administrative expense as a percent of
total revenues increased 0.6% in this year's third quarter as compared
to the year ago quarter, as a result of a non-cash, stock-based
compensation expense of $0.5 million pre-tax. Store pre-opening
expenses declined $0.6 million in the third quarter compared to the
year ago quarter due to fewer new store openings.
As previously announced, Build-A-Bear Workshop priced its initial
public offering of 8,604,300 shares of common stock on October 27,
2004 at $20.00 per share, consisting of 1,500,000 shares from the
company and 7,104,300 shares from selling stockholders, and included
shares covered by the underwriters' over-allotment option. The
offering closed on November 2, 2004. Following the offering, and the
mandatory conversion of all preferred stock into common stock,
19,551,651 shares of common stock were outstanding. The company
received net proceeds of $25.7 million from the offering.
Build-A-Bear Workshop began trading on October 28, 2004. The
company is still in its 'quiet period' following the initial public
offering and, as a result, is not able to provide forward guidance in
this press release. The quiet period extends until November 22, 2004.
In the future, the company expects to report sales, including
comparable store sales, on a quarterly basis.
Other News
During the fourth quarter, the company expects to continue with
its planned increased spending on its integrated marketing program.
With the opening of six new stores in the fourth quarter, Build-A-Bear
Workshop has accomplished its planned store openings for the year in
the United States and Canada. These new stores bring the total number
of Build-A-Bear Workshop stores in the United States to 165 and in
Canada to five. During the fourth quarter, the company plans to open
its first two Friends 2B Made(R) stores, a new interactive retail
concept focused on the doll making experience. Also in the fourth
quarter, the company plans to open a temporary holiday store in
Rockefeller Center in New York City. Planned international franchise
store openings during the fourth quarter include two stores in
Australia, one store in Japan and two stores in the United Kingdom.
In October, the company signed a franchise agreement to open
Build-A-Bear Workshop stores in Sweden. This agreement brings the
total number of international countries with franchise agreements to
eight. Those countries include the United Kingdom, Japan, Denmark,
Australia, South Korea, France, Republic of China (Taiwan) and Sweden.
Today's Conference Call Webcast
Today, at 10:00 a.m. Eastern Time, Build-A-Bear Workshop, will
host a live audio webcast of its discussion with the investment
community regarding the company's fiscal 2004 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 our
next quarterly conference call.
About Build-A-Bear Workshop, Inc.
Build-A-Bear Workshop is the leading and only national, company
providing a "make your own stuffed animal" interactive
retail-entertainment experience. As of November 5, 2004, the company
operated 170 stores in 40 states and Canada and had ten franchised
stores internationally, all under the Build-A-Bear Workshop brand.
Build-A-Bear Workshop is headquartered in St. Louis, Missouri. For
more information about our company and its products call (888)
560-BEAR (2327).
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 final
prospectus dated October 28, 2004 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
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
13 weeks ended
-----------------------------------------------
Sept. 27, % of Total Oct. 2, % of Total
2003 Revenues(1) 2004 Revenues(1)
--------- ------------- ---------- ------------
Revenues:
Net retail sales $ 47,904 99.9% $ 66,214 99.6%
Franchise fees 59 0.1 191 0.3
Licensing revenue -- 0.0 102 0.2
--------- ------------ ---------- ------------
Total revenues 47,963 100.0 66,507 100.0
--------- ------------ ---------- ------------
Costs and expenses:
Costs of merchandise
sold 27,479 57.4 34,906 52.7
Selling, general, and
administrative 17,846 37.2 25,145 37.8
Store preopening 1,211 2.5 576 0.9
Interest expense 1 0.0 -- 0.0
Interest income (8) 0.0 (72) (0.1)
--------- ------------ ---------- ------------
Total costs and
expenses 46,529 97.0 60,555 91.1
--------- ------------ ---------- ------------
Income before
income taxes 1,434 3.0 5,952 8.9
Income tax expense 559 1.2 2,383 3.6
--------- ------------ ---------- ------------
Net income 875 1.8 3,569 5.4
Cumulative dividends
and accretion of
redeemable preferred
stock 493 152
Cumulative dividends
of nonredeemable
preferred stock 114 35
--------- ----------
Net income
available to
common and
participating
preferred
stockholders $ 268 $ 3,382
========= ==========
Net income allocated
to common
stockholders $ 6 $ 143
========= ==========
Net income allocated
to participating
preferred
stockholders $ 262 $ 3,239
========= ==========
Earnings per share:
Basic $ 0.03 $ 0.34
Diluted $ 0.03 $ 0.19
Shares used in
computing per
share amounts:
Basic 217,519 419,156
Diluted 9,365,119 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
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
39 weeks ended
-----------------------------------------------
Sept. 27, % of Total Oct. 2, % of Total
2003 Revenue(1) 2004 Revenue(1)
--------- ------------ ---------- ------------
Revenues:
Net retail sales $140,392 99.9% $ 201,633 99.7%
Franchise fees 155 0.1 498 0.2
Licensing revenue -- 0.0 102 0.1
--------- ------------ ---------- ------------
Total revenues 140,547 100.0 202,233 100.0
--------- ------------ ---------- ------------
Costs and expenses:
Costs of merchandise
sold 79,408 56.6 105,052 52.1
Selling, general, and
administrative 53,930 38.4 73,777 36.5
Store preopening 2,702 1.9 1,156 0.6
Interest expense 1 0.0 -- 0.0
Interest income (62) 0.0 (170) (0.1)
--------- ------------ ---------- ------------
Total costs and
expenses 135,979 96.7 179,815 88.9
--------- ------------ ---------- ------------
Income before
income taxes 4,568 3.3 22,418 11.1
Income tax expense 1,844 1.3 8,640 4.3
--------- ------------ ---------- ------------
Net income 2,724 1.9 13,778 6.8
Cumulative dividends
and accretion of
redeemable preferred
stock 1,478 1,137
Cumulative dividends
of nonredeemable
preferred stock 342 263
--------- ----------
Net income
available to
common and
participating
preferred
stockholders $ 904 $ 12,378
========= ==========
Net income allocated
to common
stockholders $ 20 $ 415
========= ==========
Net income allocated
to participating
preferred
stockholders $ 884 $ 11,963
========= ==========
Earnings per share:
Basic $ 0.09 $ 1.26
Diluted $ 0.09 $ 0.76
Shares used in
computing per
share amounts:
Basic 217,519 329,560
Diluted 9,365,119 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
Consolidated Balance Sheets
(Dollars in thousands, except share data)
January 3, October 2,
Assets 2004 2004
---------- ----------
Current assets:
Cash and cash equivalents $ 20,601 $ 15,745
Inventories 22,573 29,435
Receivable for tenant allowances 1,678 2,028
Prepaid expenses and other 7,261 9,527
---------- ----------
Total current assets 52,113 56,735
Property and equipment, net 56,358 56,211
Other assets, net 3,493 3,580
---------- ----------
$ 111,964 $ 116,526
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 22,187 $ 17,896
Accrued expenses 9,769 13,991
Other liabilities 12,433 12,485
---------- ----------
Total current liabilities 44,389 44,372
---------- ----------
Deferred revenue 1,957 2,152
Other liabilities 877 768
Deferred tax liabilities 5,312 5,573
Preferred stock, par value $0.01. Authorized
25,000,000 and 25,000,000 and shares at
January 3, 2004, and October 2, 2004,
respectively; issuable in series:
Redeemable preferred stock, at redemption
price:
Class A convertible, issued and outstanding
1,061,986 shares (liquidation value of
$7,575 and $7,820 at January 3, 2004 and
October 2, 2004, respectively) 7,532 7,782
Class B convertible, issued and outstanding
1,604,680 shares (liquidation value of
$6,000 at January 3, 2004 and October 2,
2004) 5,958 5,972
Class D convertible, issued and outstanding
3,467,337 shares (liquidation value of
$24,471 and $25,332 at January 3, 2004 and
October 2, 2004, respectively) 24,400 25,278
---------- ----------
37,890 39,032
---------- ----------
Stockholders' equity:
Preferred stock, par value $0.01. Authorized
25,000,000 and 25,000,000 shares at January
3, 2004 and October 2, 2004, respectively;
issuable in series:
Nonredeemable preferred stock, at par value:
Class A convertible, issued and outstanding
2,444,966 shares 24 24
Class B convertible, issued and outstanding
2,039,427 shares 20 20
Class C convertible, issued and outstanding
4,998,089 shares 50 50
Common stock, par value $0.01. Authorized
25,000,000 and 25,000,000 shares at January
3, 2004 and October 2, 2004, respectively;
issued and outstanding 533,316 and 734,953
shares at January 3, 2004, and October 2,
2004, respectively 5 7
Additional paid-in capital 10,918 12,831
Retained earnings 12,343 14,979
Notes Receivable (1,821) (1,892)
Unearned compensation -- (1,390)
---------- ----------
Total stockholders' equity 21,539 24,629
---------- ----------
$ 111,964 $ 116,526
========== ==========
Selected Financial and Store Data
(Dollars in thousands, except square foot data)
13 weeks ended 39 weeks ended
------------------ ------------------
Sept. 27, Oct. 2 Sept. 27, Oct. 2,
2003 2004 2003 2004
--------- -------- --------- --------
Other financial data:
Gross margin ($) (1) $ 20,425 31,308 $ 60,984 96,581
Gross Margin (%) (1) 42.6% 47.3% 43.4% 47.9%
Capital expenditures (2) $ 5,000 4,324 $ 15,338 8,762
Depreciation and amortization $ 2,794 3,111 $ 7,733 9,141
Store data (3):
Number of stores at end of
period 143 164 143 164
Store square footage 443,152 497,385 443,152 497,385
Comparable store sales change
(%) (4) (19.0)% 18.8% (17.4)% 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 consists of leasehold improvements, net of
tenant allowances received from landlords, 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 and Analysts:
Molly Salky, 314-423-8000 x5353
invest@buildabear.com
or
Media:
Jill Saunders, 314-423-8000x5293
jills@buildabear.com