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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) July 26, 2007
Build-A-Bear Workshop, Inc.
-------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 001-32320 43-1883836
- ---------------------------- ------------------------ --------------------
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
1954 Innerbelt Business Center Drive 63114
St. Louis, Missouri
- ---------------------------------------------------- ------------------
(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 July 26, 2007, Build-A-Bear Workshop, Inc. (the "Company") issued a
press release announcing, among other things, total revenue, net income, net
retail sales, retail gross margin, and diluted earnings per share for the second
quarter of fiscal 2007. 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 26, 2007
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 26, 2007 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 26, 2007
Exhibit 99.1
Build-A-Bear Workshop, Inc. Reports Fiscal 2007 Second Quarter Results
ST. LOUIS--(BUSINESS WIRE)--July 26, 2007--Build-A-Bear Workshop,
Inc. (NYSE: BBW), an interactive entertainment retailer of customized
stuffed animals, today announced that total revenue for the fiscal
2007 second quarter (13 weeks ended June 30, 2007) increased 7.2% to
$100.4 million, compared to $93.7 million in the prior year's second
quarter (13 weeks ended July 1, 2006).
Second quarter net income was $1.6 million or $0.08 per diluted
share. These results include the operating loss from U.K. operations
of $1.7 million, stock-based compensation expense of $0.5 million net
of tax, and the benefit of an adjustment to the frequent shopper
program of $0.2 million net of tax. Fiscal 2006 second quarter net
income was $3.0 million or $0.15 per diluted share and included an
operating loss from U.K. operations of $2.7 million and stock-based
compensation expense of $0.5 million net of tax.
"Our new store openings this quarter, including our first stores
in Alaska, Montana and Puerto Rico, continue to drive our retail sales
growth," said Maxine Clark, chairman and chief executive bear. "New
stores in particular are an important driver of our overall
profitability, while our older stores continue to contribute to our
earnings. This is because new stores generally generate sales per
square foot that are above our chain-wide average. Our comparable
store sales trends have been disappointing, however our brand outlook
remains positive, and we continue to concentrate on reversing the
current trend. As we approach our company's 10th anniversary this
October and revenues of about half-a-billion this year, we are
building on our successful platform to become a billion-dollar global
company through the expansion of company-owned stores in North
America, the United Kingdom and France, franchise partnerships in
international locations, and other growth initiatives."
Fiscal 2007 Second Quarter Financial Results
Fiscal 2007 second quarter total revenue includes net retail sales
of $99.1 million, an increase of $6.1 million or 6.6% 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, an
increase in sales from our U.K. operations of $3.5 million, an
adjustment to the frequent shopper program of $0.3 million, and an
increase in Internet sales of 8.6% to $1.8 million. Comparable store
sales in North America declined 9.4% compared to a decline of 4.4% in
the 2006 second quarter. Fiscal 2007 second quarter total revenue also
includes revenue from international franchise fees and third-party
licensing. Sales from U.K. operations totaled $11.0 million in the
2007 second quarter, compared to $7.5 million in the 2006 second
quarter, an increase of 46.3%.
The 2007 second quarter net income decline of $1.4 million,
compared to the 2006 second quarter was driven primarily by reduced
sales leverage on costs and expenses, partially offset by a lower
effective tax rate, lower store preopening costs and higher interest
income. Retail gross margin declined to 41.8%, from 43.9% in the
fiscal 2006 second quarter, due primarily to a lack of sales leverage
on store occupancy costs, offsetting a slight improvement in the
merchandise margin rate. Selling, general and administrative expenses
as a percent of total revenue increased to 39.1% from 37.1% in the
fiscal 2006 second quarter, reflecting higher advertising expenses and
language translation costs associated with the company's store
openings in Montreal and Puerto Rico this year. These higher costs
offset improved efficiencies in the company's store payroll expenses.
Included in the 2007 second quarter is stock-based compensation
expense of $0.8 million pretax ($0.5 million net of tax or $0.03 per
diluted share). Fiscal 2006 second quarter results include the impact
of stock-based compensation expense of $0.8 million pre tax ($0.05
million net of tax or $0.02 per diluted share).
During the 2007 second quarter, the company opened 15 new
Build-A-Bear Workshop(R) retail stores in North America, as planned,
compared with opening 14 new stores during the 2006 second quarter. In
the United Kingdom, the company opened one new store in Warrington,
England. Build-A-Bear Workshop stores at the end of the second quarter
totaled 252 in North America and 41 in the United Kingdom and Ireland.
We plan to open twelve new North America stores in the 2007 third
quarter, compared with ten new stores opened during the 2006 third
quarter. Additionally, the company plans to open two new stores in the
United Kingdom and two new stores in France in the 2007 third quarter.
In fiscal 2007, Build-A-Bear Workshop expects to open a total of
39 new stores in North America, eight new stores the United Kingdom
and three new stores in France.
Year-to-Date Financial Results
Total revenue for the first six months of fiscal 2007 (26 weeks
ended June 30, 2007) increased 13.0% to $217.2 million, compared to
$192.3 million in the first six month of fiscal 2006 (26 weeks ended
July 1, 2006). Total revenue for the first six months of fiscal 2007
includes net retail sales of $215.0 million, an increased of $24.3
million of 12.7% compared to last year's first six months. Sales from
U.K. operations totaled $21.8 million in the first six months of
fiscal 2007, compared to $7.5 million in the first six months of
fiscal 2006.
Net income for the first six months of fiscal 2007 was $9.7
million, or $0.47 per diluted share, and included an operating loss of
$3.9 million from U.K. operations, stock-based compensation expense of
$0.9 million net of tax, and the benefit of adjustment to the frequent
shopper program of $0.2 million net of tax. Net income for the first
six months of fiscal 2006 was $11.3 million, or $0.56 per diluted
share, and included an operating loss of $2.7 million from U.K.
operations, and stock-based compensation expense of $0.8 million net
of tax.
On April 2, 2006, the company completed the acquisition of The
Bear Factory Limited, a United Kingdom-based stuffed animal retailer,
and the acquisition of Amsbra, Ltd., the company's franchisee in the
United Kingdom. Therefore, the company's results for the first six
months of 2006 reflect the impact of this acquisition for only a
portion of the period.
International Franchising
During the quarter international franchisees opened five new
stores. Openings include the first stores in India and Belgium along
with additional stores in Denmark and Singapore. International stores
totaled 42 at the end of the second quarter. The company recently
signed a franchise agreement to open Build-A-Bear Workshop stores in
the Middle East Gulf States of Qatar, Oman, Kuwait, Bahrain and the
United Arab Emirates. This agreement brings the total number of
international countries with franchise agreements to 21. International
franchisees expect to open a total of 20 to 25 new stores in 2007.
Other News
As previously announced on June 28, 2007, the company retained
Lehman Brothers to assist it and the board of directors in an analysis
and consideration of a broad range of potential strategic alternatives
to enhance long-term shareholder value. While the process is underway,
the company does not expect to disclose further developments regarding
the process until the Board's review of strategic alternatives has
been completed. Also, during the process, the company will not provide
any new earnings guidance, nor will the company update or comment
further upon the earnings guidance previously provided. There is no
assurance that the process will result in any changes to the company's
current business plans or lead to any specific action or transaction
Today's Conference Call Webcast
Today at 9:00 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 2007 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 290 stores in the United States, Canada, the United
Kingdom and Ireland. The addition of franchise stores in Europe, Asia,
Africa 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 $437 million in fiscal 2006. 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 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; our marketing initiatives may not be effective in
generating sufficient levels of brand awareness and guest traffic; we
may be unable to generate comparable store sales growth; we may be
unable to open new stores or may be unable to effectively manage our
growth; we may be unable to effectively manage our international
franchises or laws relating to those franchises may change; we may be
unable to realize some of the expected benefits of the acquisition of
Amsbra and Bear Factory including making these operations profitable;
we do not know the results of the strategic alternatives evaluation
process announced on June 28, 2007; customer traffic may decrease in
the shopping malls where we are located, on which we depend to attract
guests to our stores; general economic conditions may deteriorate,
which could lead to disproportionately reduced consumer demand for our
products, which represent relatively discretionary spending; our
market share could be adversely affected by a significant, or
increased, number of competitors; we may lose key personnel, be unable
to hire qualified additional personnel, or experience turnover of our
management team; the ability of our principal vendors to deliver
merchandise may be disrupted; the availability and costs of our
products could be adversely affected by risks associated with
international manufacturing and trade; high petroleum products prices
could increase our inventory transportation costs and adversely affect
our profitability; we may be unable to realize the anticipated
benefits from our company-owned distribution center; fluctuations in
our quarterly results of operations could cause the price of our
common stock to substantially decline; we may fail to renew, register
or otherwise protect our trademarks or other intellectual property; we
may have disputes with, or be sued by, third parties for infringement
or misappropriation of their proprietary rights; we may be unable to
renew or replace our store leases, or enter into leases for new stores
on favorable terms or in favorable locations, or may violate the terms
of our current leases; we may suffer negative publicity or be sued due
to violations of labor laws or unethical practices by manufacturers of
our merchandise; and we may improperly obtain or be unable to protect
information from our guests in violation of privacy or security laws
or expectations. 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 30, 2006. 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 13 Weeks
Ended Ended
June 30, % of Total July 1, % of Total
2007 Revenues (1) 2006 Revenues (1)
------------ ------------ ------------ ------------
Revenues:
Net retail sales $ 99,102 98.7 $ 92,962 99.2
Franchise fees 677 0.7 636 0.7
Licensing
revenue 604 0.6 59 0.1
------------ ------------ ------------ ------------
Total revenues 100,383 100.0 93,657 100.0
------------ ------------ ------------ ------------
Costs and
expenses:
Cost of
merchandise
sold 57,649 58.2 52,190 56.1
Selling, general
and
administrative 39,283 39.1 34,783 37.1
Store preopening 1,369 1.4 1,582 1.7
Interest expense
(income), net (356) (0.4) (299) (0.3)
------------ ------------ ------------ ------------
Total costs
and expenses 97,945 97.6 88,256 94.2
------------ ------------ ------------ ------------
Income before
income taxes 2,438 2.4 5,401 5.8
Income tax expense 846 0.8 2,402 2.6
------------ ------------ ------------ ------------
Net income $ 1,592 1.6 $ 2,999 3.2
============ ============
Earnings per
common share:
Basic $ 0.08 $ 0.15
============ ============
Diluted $ 0.08 $ 0.15
============ ============
Shares used in
computing common
per share
amounts:
Basic 20,222,624 20,152,761
Diluted 20,427,858 20,425,749
(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)
26 Weeks 26 Weeks
Ended Ended
June 30, % of Total July 1, % of Total
2007 Revenue (1) 2006 Revenue (1)
------------ ------------ ------------ ------------
Revenues:
Net retail sales $ 214,985 99.0 $ 190,692 99.2
Franchise fees 1,372 0.6 1,326 0.7
Licensing
revenue 840 0.4 270 0.1
------------ ------------ ------------ ------------
Total revenues 217,197 100.0 192,288 100.0
------------ ------------ ------------ ------------
Costs and
expenses:
Cost of
merchandise
sold 119,789 55.7 102,050 53.5
Selling, general
and
administrative 80,827 37.2 70,234 36.5
Store preopening 2,057 0.9 2,197 1.1
Interest expense
(income), net (901) (0.4) (1,165) (0.6)
------------ ------------ ------------ ------------
Total costs
and expenses 201,772 92.9 173,316 90.1
------------ ------------ ------------ ------------
Income before
income taxes 15,425 7.1 18,972 9.9
Income tax expense 5,768 2.7 7,627 4.0
------------ ------------ ------------ ------------
Net income 9,657 4.4 11,345 5.9
Earnings per
common share:
Basic $ 0.48 $ 0.56
============ ============
Diluted $ 0.47 $ 0.56
============ ============
Shares used in
computing common
per share
amounts:
Basic 20,252,222 20,115,818
Diluted 20,476,603 20,413,563
(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)
June 30, December 30,
2007 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 17,205 $ 53,109
Inventories 55,665 50,905
Receivables 7,101 7,389
Prepaid expenses and other current
assets 21,541 11,805
Deferred tax assets 2,529 2,388
------------ ------------
Total current assets 104,041 125,596
Property and equipment, net 133,002 130,347
Goodwill 42,500 36,927
Other intangible assets, net 2,863 2,873
Other assets, net 10,254 4,027
------------ ------------
Total Assets $292,660 $299,770
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 40,491 $ 46,761
Accrued expenses 5,932 16,301
Gift cards and customer deposits 18,636 28,128
Deferred revenue 6,686 6,454
------------ ------------
Total current liabilities 71,745 97,644
------------ ------------
Deferred franchise revenue 2,645 2,297
Deferred rent 38,004 34,754
Other liabilities 1,363 352
Deferred tax liabilities 470 459
Stockholders' equity:
Common stock, par value $0.01 per
share 206 205
Additional paid-in capital 86,016 88,866
Other comprehensive income (loss) 6,364 (997)
Retained earnings 85,847 76,190
------------ ------------
Total stockholders' equity 178,433 164,264
------------ ------------
Total Liabilities and Stockholders'
Equity $292,660 $299,770
============ ============
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Selected Financial and Store Data
(dollars in thousands, except square foot data)
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
June 30, July 1, June 30, July 1,
2007 2006 2007 2006
---------- ---------- ---------- ----------
Other financial data:
Gross margin ($) (1) $ 41,452 $ 40,772 $ 95,195 $ 88,642
Gross Margin (%) (1) 41.8% 43.9% 44.3% 46.5%
Capital expenditures $ 10,273 $ 21,416 $ 15,217 $ 31,082
Depreciation and
amortization $ 7,705 $ 5,801 $ 13,965 $ 10,583
Sales over the Internet $ 1,847 $ 1,700 $ 4,727 $ 4,179
Store data (2):
Number of stores at end
of period
North America 252 216 252 216
United Kingdom and
Ireland 41 40 41 40
---------- ---------- ---------- ----------
Total stores 293 256 293 256
Store square footage at
end of period
North America 761,633 667,258 761,633 667,258
United Kingdom and
Ireland (3) 59,351 53,351 61,243 53,351
---------- ---------- ---------- ----------
Total square
footage 820,984 720,609 822,876 720,609
North America
comparable store sales
change (%) (4) (9.4)% (4.4)% (8.1)% (4.1)%
(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.
Square footage in the United Kingdom and Ireland is estimated
(3) selling square footage
(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.
Investor Relations:
Molly Salky, 314.423.8000 x5353
or
Media Relations:
Jill Saunders, 314.423.8000 x5379
www.buildabear.com