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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 18, 2007
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
- ---------------------------------------------------- ------------------
(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 18, 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 third
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 October 18, 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: October 18, 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 October 18, 2007
Exhibit 99.1
Build-A-Bear Workshop, Inc.
Reports Fiscal 2007 Third Quarter Results
-- Earnings per share are $0.15 vs. $0.13 in third quarter 2006.
-- Improved results from European operations -- loss of $0.5
million vs. loss of $2.1 million in third quarter 2006.
-- First company-owned stores in France opened during the
quarter; European operations now include stores in the United
Kingdom, Ireland and France.
ST. LOUIS--(BUSINESS WIRE)--Oct. 18, 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 third quarter (13 weeks ended September 29, 2007) increased 8.2%
to $109.8 million, compared to $101.5 million in the prior year's
third quarter (13 weeks ended September 30, 2006).
Fiscal 2007 third quarter net income was $3.0 million, or $0.15
per diluted share. These results include an operating loss from
European operations of $0.5 million, stock-based compensation expense
of $0.5 million net of tax, and costs associated with a review of
strategic alternatives of $0.3 million net of tax. Fiscal 2006 third
quarter net income was $2.7 million, or $0.13 per diluted share, and
included an operating loss from European operations of $2.1 million,
distribution center transition costs of $1.0 million net of tax, and
stock-based compensation expense of $0.4 million net of tax.
With the opening of the first company-owned stores in France
during the 2007 third quarter, the company's European operations now
number 45 stores located in the United Kingdom, Ireland and France.
"While the current economic environment is challenging for the
consumer, our profit performance underscores the fundamental strength
of our store model and the store experience we provide to our Guests,"
said Maxine Clark, chairman and chief executive bear. "Our stores are
highly productive, generating strong sales per square foot. In
addition, our business, despite difficult sales, continues to deliver
a high return on investment and strong cash flow. Our store experience
forms a powerful and lasting connection between our brand and our
Guests. With over 52 million stuffed animals sold and three million
Guests enrolled in our loyalty program in the past year, we are
positioned to communicate with our Guests and maintain that emotional
connection. By focusing on our core brand, in-store execution and
adding new products and experiences, both real and virtual, we believe
we will be strongly positioned to maximize and grow our business when
overall consumer spending moves in a positive direction."
Fiscal 2007 Third Quarter Financial Results
Fiscal 2007 third quarter total revenue includes net retail sales
of $108.4 million, an increase of $7.8 million, or 7.8% compared to
last year's third quarter. Net retail sales growth was driven by new
stores opened during the past 12 months in North America, an increase
in sales from European operations of $4.3 million, and an increase in
Internet sales of 10.2% to $1.9 million. Comparable store sales in
North America declined 10.1% compared to a decline of 5.8% in the 2006
third quarter. Fiscal 2007 third quarter total revenue also includes
revenue from international franchise fees and third-party licensing.
Sales from European operations totaled $13.7 million in the 2007 third
quarter, compared to $9.4 million in the 2006 third quarter, an
increase of 45.7%.
The 2007 third quarter net income growth of $0.3 million compared
to the 2006 third quarter was driven primarily by improved performance
from European operations and higher interest income, partially offset
by reduced sales leverage on costs and expenses in the North American
operations, and higher store preopening costs. Retail gross margin
increased to 43.3% from 42.2% in the fiscal 2006 third quarter, due
primarily to improvement in merchandise margin and lower warehouse and
distribution costs, partially offset by a lack of leverage on store
occupancy costs. Selling, general and administrative expenses as a
percent of total revenue increased to 38.8% from 37.5% in the fiscal
2006 third quarter, due primarily to higher advertising expenses and
costs associated with a review of strategic alternatives. These higher
costs offset modest efficiencies in the company's store payroll
expenses.
Included in the 2007 third quarter is stock-based compensation
expense of $0.8 million pretax ($0.5 million net of tax, or $0.02 per
diluted share) and costs associated with a review of strategic
alternatives of $0.5 million pretax ($0.3 million net of tax, or $0.01
per diluted share). Fiscal 2006 third quarter results include the
impact of stock-based compensation expense of $0.7 million pretax
($0.4 million net of tax, or $0.02 per diluted share) and distribution
center transition costs of $1.7 million pretax ($1.0 million net of
tax, or $0.05 per diluted share).
During the 2007 third quarter, the company opened 12 new
Build-A-Bear Workshop(R) retail stores in North America, as planned,
compared with opening 10 new stores during the 2006 third quarter. The
company also opened two new stores in the United Kingdom and two new
stores in France in the 2007 third quarter. Build-A-Bear Workshop
stores at the end of the third quarter totaled 264 in North America
and 45 company-owned stores in Europe.
The company plans to open eight new North America stores in the
2007 fourth quarter, compared with six new stores opened during the
2006 fourth quarter. Additionally, the company plans to open three new
stores in the United Kingdom and one new store in France in the 2007
fourth quarter. In fiscal 2007, Build-A-Bear Workshop expects to open
a total of 39 new stores in North America, eight new stores in the
United Kingdom and three new stores in France.
Year-to-Date Financial Results
Total revenue for the first nine months of fiscal 2007 (39 weeks
ended September 29, 2007) increased 11.3% to $327.0 million, compared
to $293.8 million in the first nine months of fiscal 2006 (39 weeks
ended September 30, 2006). Total revenue for the first nine months of
fiscal 2007 includes net retail sales of $323.3 million, an increase
of $32.1 million, or 11.0% compared to the first nine months of fiscal
2006. Comparable store sales in North America declined 8.7% compared
to a decline of 4.6% in the first nine months of 2006. Total revenue
for the first nine months of fiscal 2007 also includes revenue from
international franchise fees and third-party licensing. Sales from
European operations totaled $35.5 million in the first nine months of
fiscal 2007, compared to $16.9 million in the first nine months of
fiscal 2006.
Net income for the first nine months of fiscal 2007 was $12.6
million, or $0.62 per diluted share, and included an operating loss of
$4.4 million from European operations, stock-based compensation
expense of $1.4 million net of tax, costs associated with the
company's review of strategic alternatives of $0.4 million net of tax,
and the benefit of an adjustment to the frequent shopper program of
$0.2 million net of tax. Net income for the first nine months of
fiscal 2006 was $14.1 million, or $0.69 per diluted share, and
included an operating loss of $4.8 million from European operations,
distribution center transition costs of $1.0 million net of tax, and
stock-based compensation expense of $1.1 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 former franchisee in
the United Kingdom. Therefore, the company's results for the first
nine months of 2006 reflect the impact of this acquisition for only a
portion of the period. Furthermore, during the 2007 third quarter the
company opened the first company-owned stores in France.
International Franchising
During the fiscal 2007 third quarter, international franchisees
opened six new stores and closed one. Openings include the first
stores in South Africa (3 stores) along with additional stores in
India (1 store) Germany (1 store) and Thailand (1 store).
International stores totaled 46 at the end of the third quarter.
Build-A-Bear Workshop currently has agreements with franchisees in 21
countries. International franchisees expect to open a total of 19 new
stores in 2007.
Strategic Alternatives Review
As announced on June 28, 2007, the company is presently conducting
a review of strategic alternatives, and while this process is
underway, will not provide earnings guidance nor will it update or
comment further upon the earnings guidance provided prior to the
review. There is no assurance that the company's consideration of
strategic alternatives will result in any changes to the company's
current business plans or lead to any specific action or transaction,
and, as announced on June 28, the company does not expect to disclose
further developments regarding the process until the board's review of
strategic alternatives is complete.
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 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-your-own stuffed animal retail-entertainment
experience. Founded in St. Louis in 1997, the company currently
operates more than 300 stores in the United States, Puerto Rico,
Canada, the United Kingdom, Ireland and France. 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
Build-A-Bear Workshop 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; we do not know the results of the strategic
alternatives evaluation process announced on June 28, 2007 or whether
the process will result in any changes to the company's current
business plans or lead to any specific action or transaction; 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; 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 publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
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
September 29, % of Total September 30, % of Total
2007 Revenue(1) 2006 Revenue(1)
------------- ---------- ------------- ----------
Revenues:
Net retail sales $ 108,357 98.7 $ 100,582 99.1
Franchise fees 934 0.9 649 0.6
Licensing revenue 474 0.4 288 0.3
------------- ---------- ------------- ----------
Total revenues 109,765 100.0 101,519 100.0
------------- ---------- ------------- ----------
Costs and expenses:
Cost of
merchandise sold 61,387 56.7 58,130 57.8
Selling, general
and
administrative 42,547 38.8 38,073 37.5
Store preopening 1,430 1.3 1,127 1.1
Interest expense
(income), net (388) (0.4) (192) (0.2)
------------- ---------- ------------- ----------
Total costs
and expenses 104,976 95.6 97,138 95.7
------------- ---------- ------------- ----------
Income before
income taxes 4,789 4.4 4,381 4.3
Income tax expense 1,812 1.7 1,668 1.6
------------- ---------- ------------- ----------
Net income $ 2,977 2.7 $ 2,713 2.7
============= =============
Earnings per common
share:
Basic $ 0.15 $ 0.13
============= =============
Diluted $ 0.15 $ 0.13
============= =============
Shares used in
computing common
per share amounts:
Basic 20,242,402 20,176,642
Diluted 20,412,616 20,438,226
(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 39 Weeks
Ended Ended
September 29, % of Total September 30, % of Total
2007 Revenue(1) 2006 Revenue(1)
------------- ---------- ------------- ----------
Revenues:
Net retail sales $ 323,342 98.9 $ 291,274 99.1
Franchise fees 2,306 0.7 1,975 0.7
Licensing revenue 1,314 0.4 558 0.2
------------- ---------- ------------- ----------
Total revenues 326,962 100.0 293,807 100.0
------------- ---------- ------------- ----------
Costs and expenses:
Cost of
merchandise sold 181,176 56.0 160,180 55.0
Selling, general
and
administrative 123,374 37.7 108,307 36.9
Store preopening 3,487 1.1 3,324 1.1
Interest expense
(income), net (1,289) (0.4) (1,357) (0.5)
------------- ---------- ------------- ----------
Total costs
and expenses 306,748 93.8 270,454 92.1
------------- ---------- ------------- ----------
Income before
income taxes 20,214 6.2 23,353 7.9
Income tax expense 7,580 2.3 9,295 3.2
------------- ---------- ------------- ----------
Net income $ 12,634 3.9 $ 14,058 4.7
============= =============
Earnings per common
share:
Basic $ 0.62 $ 0.70
============= =============
Diluted $ 0.62 $ 0.69
============= =============
Shares used in
computing common
per share amounts:
Basic 20,248,949 20,135,944
Diluted 20,455,274 20,429,034
(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)
September 29, December 30,
2007 2006
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 16,990 $ 53,109
Inventories 54,532 50,905
Receivables 8,791 7,389
Prepaid expenses and other current
assets 16,302 11,805
Deferred tax assets 2,690 2,388
------------- -------------
Total current assets 99,305 125,596
Property and equipment, net 137,414 130,347
Goodwill 43,068 36,927
Other intangible assets, net 2,799 2,873
Other assets, net 12,455 4,027
------------- -------------
Total Assets $ 295,041 $ 299,770
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 35,761 $ 46,761
Accrued expenses 7,281 16,301
Gift cards and customer deposits 18,610 28,128
Deferred revenue 7,350 6,454
------------- -------------
Total current liabilities 69,002 97,644
------------- -------------
Deferred franchise revenue 2,568 2,297
Deferred rent 39,160 34,754
Other liabilities 221 352
Deferred tax liabilities 476 459
Stockholders' equity:
Common stock, par value $0.01 per share 207 205
Additional paid-in capital 87,138 88,866
Other comprehensive income (loss) 7,447 (997)
Retained earnings 88,822 76,190
------------- -------------
Total stockholders' equity 183,614 164,264
------------- -------------
Total Liabilities and Stockholders' Equity $ 295,041 $ 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
Ended Ended
September 29, September 30,
2007 2006
------------- -------------
Other financial data:
Gross margin($)(1) $ 46,970 $ 42,452
Gross Margin(%)(1) 43.3% 42.2%
Capital expenditures $ 10,871 $ 12,555
Depreciation and amortization $ 6,588 $ 5,151
Sales over the Internet $ 1,874 $ 1,700
Store data(2):
Number of stores at end of period
North America 264 226
Europe 45 38
------------- -------------
Total stores 309 264
Store square footage at end of period
North America 794,415 694,454
Europe(3) 65,541 53,351
------------- -------------
Total square footage 859,956 747,805
North America comparable store sales
change(%)(4) (10.1)% (5.8)%
39 Weeks 39 Weeks
Ended Ended
September 29, September 30,
2007 2006
------------- -------------
Other financial data:
Gross margin($)(1) $ 142,166 $ 131,094
Gross Margin(%)(1) 44.0% 45.0%
Capital expenditures $ 26,088 $ 47,501
Depreciation and amortization $ 19,207 $ 15,734
Sales over the Internet $ 6,992 $ 6,015
Store data(2):
Number of stores at end of period
North America 264 226
Europe 45 38
------------- -------------
Total stores 309 264
Store square footage at end of period
North America 794,415 694,454
Europe(3) 65,541 53,351
------------- -------------
Total square footage 859,956 747,805
North America comparable store sales
change(%)(4) (8.7)% (4.6)%
(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) Square footage for stores located in Europe is estimated
selling square footage and includes stores in the United Kingdom,
Ireland and France.
(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, ext. 5353
or
Media:
Jill Saunders, 314-423-8000, ext. 5379