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):
August
30, 2018
Build-A-Bear Workshop, Inc.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware |
001-32320 |
43-1883836 |
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
1954 Innerbelt Business Center Drive |
|
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ⃞
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ⃞
Item 2.02. Results of Operations and Financial Condition.
On August 30, 2018, Build-A-Bear Workshop, Inc. (the “Company”) issued a press release setting forth results for the Company’s 2018 fiscal second quarter and 26 weeks ended August 4, 2018. A copy of the Company’s press release is being furnished as Exhibit 99.1 and hereby incorporated by reference.
The information furnished in, contained, or incorporated by reference into 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.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number |
Description of Exhibit |
99.1 |
Press Release dated August 30, 2018 |
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: |
August 30, 2018 |
By: |
/s/ Voin Todorovic |
||
|
|
Name: |
Voin Todorovic |
||
|
Title: |
Chief Financial Officer |
EXHIBIT INDEX
Exhibit Number |
Description of Exhibit |
4
Exhibit 99.1
Build-A-Bear Workshop, Inc. Reiterates Annual Guidance as Profitable ‘Pay Your Age’ Events Positively Impact Business Trends
ST. LOUIS--(BUSINESS WIRE)--August 30, 2018--Build-A-Bear Workshop, Inc. (NYSE:BBW) today reported results for the fiscal 2018 second quarter and 26 weeks ended August 4, 2018. Given the Company’s previously announced fiscal year-end change, references to the prior year are based on the unaudited recast results for the fiscal year ended February 3, 2018.
Sharon Price John, Build-A-Bear Workshop President and Chief Executive Officer, commented, “To truly understand our second quarter results, it is important to realize that sales in the first nine weeks of the period were below expectations, negatively impacting profit, while the final four weeks, with the introduction of the ‘Pay Your Age’ events, including our ‘Count Your Candles’ birthday program, far surpassed our expectations. The surge of interest from the events delivered a meaningful profit, although it was not enough to offset the start of the quarter.
“The period also saw progress toward the transformation of our company as we continued to successfully leverage the power of our brand with the goal of diversifying our real estate portfolio and revenue streams. With that in mind, we are pleased to share that we are continuing our strategy of expanding into a variety of high-traffic tourist areas, including a new stand-alone location at Navy Pier in Chicago with plans to open at Fashion Show in Las Vegas later this year. We also expect to open a shop-in-shop location in New York City’s Rockefeller Center inside the FAO Schwarz store, which is slated to open in November. Separately, we expect to increase our global presence with the recent addition of a new franchisee in India. And, finally, we have secured several new outbound brand licensing arrangements covering various consumer categories, with product expected to be available across a number of retailers ahead of the holidays.
“I remain energized about the opportunities that lie ahead to capitalize on the brand strength of Build-A-Bear as we look to share our memorable experience with more consumers, more often, around the world,” concluded Ms. John.
Second Quarter 2018 Highlights (13 weeks ended August 4, 2018, compared to the 13 weeks ended July 29, 2017):
Store Activity:
In the second quarter of fiscal 2018, the Company opened 13 locations and remodeled or reformatted 11 stores into a Discovery format, ending the quarter with 34% of its store base in an updated Discovery design. As of August 4, 2018, the Company operated 365 corporately-managed locations, including 307 in North America and 58 outside of North America. The Company’s international franchisees ended the quarter with 96 stores in 10 countries.
Balance Sheet:
As of August 4, 2018, cash and cash equivalents totaled $20.4 million. The Company ended the quarter with no borrowings under its revolving credit facility. Total inventory at quarter-end was $47.8 million compared to $59.4 million at the end of the second quarter of 2017, a decrease of 19.4%, primarily due to the increase in sales resulting from the Pay Your Age events late in the quarter. In the second quarter of fiscal 2018, capital expenditures totaled $4.1 million and depreciation and amortization were $4.0 million.
Share Repurchase:
The Company repurchased nearly 91,000 shares of its common stock for $0.7 million during the second quarter of fiscal 2018. As of August 4, 2018, the Company had $9.3 million remaining on the share repurchase authorization that was adopted in August 2017.
Fiscal Year Change:
As previously disclosed, the Company's Board of Directors approved a change in the Company’s fiscal year-end, which previously ended on the Saturday closest to December 31, to the Saturday closest to January 31. This change was effective following the end of the Company’s 2017 fiscal year.
Accounting Changes Impacting Revenue Recognition:
On December 31, 2017, the Company adopted “Revenue from Contracts with Customers” (Accounting Standard Codification “Topic 606”), as required. While the majority of the Company’s revenues were not impacted by Topic 606, the timing of the recognition of breakage revenue for certain gift cards changed. Upon adoption, the Company recorded a pre-tax cumulative effect increase to retained earnings of approximately $12.3 million representing gift card breakage revenue not previously recognized that was accelerated due to Topic 606. The change will negatively impact the Company’s fiscal 2018 total revenue and pre-tax income by an estimated $3.9 million with the remaining balance of the cumulative effect adjustment predominantly impacting fiscal years 2019 and 2020.
2018 Expectations (52 weeks ending February 2, 2019, compared to the 53 weeks ended February 3, 2018):
The Company is reiterating its guidance for fiscal year 2018. On a GAAP basis, the Company currently expects:
Today’s Conference Call Webcast:
Build-A-Bear Workshop will host a live internet webcast of its quarterly investor conference call at 9 a.m. ET today. The audio broadcast may be accessed at the Company’s investor relations website, http://IR.buildabear.com. The call is expected to conclude by 10 a.m. ET.
A replay of the conference call webcast will be available in the investor relations website for one year. A telephone replay will be available beginning at approximately noon ET today until midnight ET on September 6, 2018. The telephone replay is available by calling (844) 512-2921. The access code is 13682484.
About Build-A-Bear
Build-A-Bear is a global brand kids love and parents trust that seeks to add a little more heart to life. Build-A-Bear Workshop has over 400 stores worldwide where guests can create customizable furry friends, including corporately-managed stores in the United States, Canada, China, Denmark, Ireland, Puerto Rico, and the United Kingdom, and franchise stores in Africa, Asia, Australia, Europe, Mexico and the Middle East. In 2018, Build-A-Bear was named to the FORTUNE 100 Best Companies to Work For® list for the 10th year in a row. Build-A-Bear Workshop, Inc. (NYSE:BBW) posted total revenue of $357.9 million in fiscal 2017. For more information, visit the Investor Relations section of buildabear.com.
Forward-Looking Statements
This press release contains certain statements that are, or may be considered to be, “forward-looking statements” for the purpose of federal securities laws, including, but not limited to, statements that reflect our current views with respect to future events and financial performance. We generally identify these statements by words or phrases such as “may,” “might,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “predict,” “future,” “potential” or “continue,” the negative or any derivative of these terms and other comparable terminology. All of the information concerning the potential outcome of exploring strategic alternatives, our future liquidity, future revenues, margins and other future financial performance and results, achievement of operating of financial plans or forecasts for future periods, sources and availability of credit and liquidity, future cash flows and cash needs, success and results of strategic initiatives and other future financial performance or financial position, as well as our assumptions underlying such information, constitute forward-looking information.
These statements are based only on our current expectations and projections about future events. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements, including those factors discussed under the caption entitled “Risks Related to Our Business” and “Forward-Looking Statements” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 15, 2018 and other periodic reports filed with the SEC which are incorporated herein.
All of our forward-looking statements are as of the date of this Press Release only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or other risks and uncertainties referred to in this Press Release or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the SEC could materially and adversely affect our continuing operations and our future financial results, cash flows, available credit, prospects and liquidity. Except as required by law, the Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
All other brand names, product names, or trademarks belong to their respective holders.
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
Unaudited Condensed Consolidated Statements of Income | |||||||||||||||||||||||
(dollars in thousands, except share and per share data) | |||||||||||||||||||||||
13 Weeks | 13 Weeks | ||||||||||||||||||||||
Ended | Ended | ||||||||||||||||||||||
August 4, | % of Total | July 29, | % of Total | ||||||||||||||||||||
2018 | Revenues (1) | 2017 | Revenues (1) | ||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Net retail sales | $ | 81,037 | 97.4 | $ | 76,383 | 96.5 | |||||||||||||||||
Commercial revenue | 1,055 | 1.3 | 2,086 | 2.6 | |||||||||||||||||||
International franchising | 1,086 | 1.3 | 711 | 0.9 | |||||||||||||||||||
Total revenues | 83,178 | 100.0 | 79,180 | 100.0 | |||||||||||||||||||
Cost of merchandise sold: | |||||||||||||||||||||||
Cost of merchandise sold - retail (1) | 46,601 | 57.5 | 42,339 | 55.4 | |||||||||||||||||||
Cost of merchandise sold - commercial (1) | 591 | 56.0 | 978 | 46.9 | |||||||||||||||||||
Cost of merchandise sold - international franchising (1) | 587 | 54.1 | 257 | 36.1 | |||||||||||||||||||
Total cost of merchandise sold | 47,779 | 57.4 | 43,574 | 55.0 | |||||||||||||||||||
Consolidated gross profit | 35,399 | 42.6 | 35,606 | 45.0 | |||||||||||||||||||
Selling, general and administrative expense | 37,928 | 45.6 | 35,780 | 45.2 | |||||||||||||||||||
Interest expense (income), net | 16 | 0.0 | (10 | ) | (0.0 | ) | |||||||||||||||||
Loss before income taxes | (2,545 | ) | (3.1 | ) | (164 | ) | (0.2 | ) | |||||||||||||||
Income tax benefit | (745 | ) | (0.9 | ) | (208 | ) | (0.3 | ) | |||||||||||||||
Net income (loss) | $ | (1,800 | ) | (2.2 | ) | $ | 44 | 0.1 | |||||||||||||||
Income (loss) per common share: | |||||||||||||||||||||||
Basic | $ | (0.12 | ) | $ | 0.00 | ||||||||||||||||||
Diluted | $ | (0.12 | ) | $ | 0.00 | ||||||||||||||||||
Shares used in computing common per share amounts: | |||||||||||||||||||||||
Basic | 14,618,582 | 15,646,014 | |||||||||||||||||||||
Diluted | 14,618,582 | 15,871,274 | |||||||||||||||||||||
(1) | Selected statement of income data expressed as a percentage of total revenues, except cost of merchandise sold - retail, cost of merchandise sold - commercial and cost of merchandise sold - international franchising that are expressed as a percentage of net retail sales, commercial revenue and international franchising, respectively. Percentages will not total due to cost of merchandise sold being expressed as a percentage of net retail sales, commercial revenue or international franchising and immaterial rounding. | |||
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
Unaudited Condensed Consolidated Statements of Income | |||||||||||||||||||||||
(dollars in thousands, except share and per share data) | |||||||||||||||||||||||
26 Weeks | 26 Weeks | ||||||||||||||||||||||
Ended | Ended | ||||||||||||||||||||||
August 4, | % of Total | July 29, | % of Total | ||||||||||||||||||||
2018 | Revenues (1) | 2017 | Revenues (1) | ||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Net retail sales | $ | 162,462 | 97.7 | $ | 165,126 | 96.9 | |||||||||||||||||
Commercial revenue | 2,074 | 1.2 | 4,124 | 2.4 | |||||||||||||||||||
International franchising | 1,826 | 1.1 | 1,133 | 0.7 | |||||||||||||||||||
Total revenues | 166,362 | 100.0 | 170,383 | 100.0 | |||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||
Cost of merchandise sold - retail (1) | 91,986 | 56.6 | 88,795 | 53.8 | |||||||||||||||||||
Cost of merchandise sold - commercial (1) | 1,070 | 51.6 | 2,079 | 50.4 | |||||||||||||||||||
Cost of merchandise sold - international franchising (1) | 919 | 50.3 | 257 | 22.7 | |||||||||||||||||||
Total cost of merchandise sold | 93,975 | 56.5 | 91,131 | 53.5 | |||||||||||||||||||
Consolidated gross profit | 72,387 | 43.5 | 79,252 | 46.5 | |||||||||||||||||||
Selling, general and administrative expense | 74,265 | 44.6 | 75,008 | 44.0 | |||||||||||||||||||
Interest expense (income), net | 21 | 0.0 | (16 | ) | (0.0 | ) | |||||||||||||||||
Income (loss) before income taxes | (1,899 | ) | (1.1 | ) | 4,260 | 2.5 | |||||||||||||||||
Income tax expense (benefit) | (453 | ) | (0.2 | ) | 1,587 | 0.9 | |||||||||||||||||
Net income (loss) | $ | (1,446 | ) | (0.9 | ) | $ | 2,673 | 1.6 | |||||||||||||||
Income (loss) per common share: | |||||||||||||||||||||||
Basic | $ | (0.10 | ) | $ | 0.17 | ||||||||||||||||||
Diluted | $ | (0.10 | ) | $ | 0.17 | ||||||||||||||||||
Shares used in computing common per share amounts: | |||||||||||||||||||||||
Basic | 14,600,578 | 15,603,909 | |||||||||||||||||||||
Diluted | 14,600,578 | 15,785,939 | |||||||||||||||||||||
(1) | Selected statement of income data expressed as a percentage of total revenues, except cost of merchandise sold - retail, cost of merchandise sold - commercial and cost of merchandise sold - international franchising that are expressed as a percentage of net retail sales, commercial revenue and international franchising, respectively. Percentages will not total due to cost of merchandise sold being expressed as a percentage of net retail sales, commercial revenue or international franchising and immaterial rounding. | |||
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES | |||||||||||||||||||
Unaudited Condensed Consolidated Balance Sheets | |||||||||||||||||||
(dollars in thousands, except per share data) | |||||||||||||||||||
August 4, | December 30, | July 29, | |||||||||||||||||
2018 | 2017 | 2017 | |||||||||||||||||
ASSETS | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 20,398 | $ | 30,445 | $ | 12,236 | |||||||||||||
Inventories | 47,833 | 53,136 | 59,368 | ||||||||||||||||
Receivables | 8,693 | 13,302 | 8,357 | ||||||||||||||||
Prepaid expenses and other current assets | 13,686 | 13,346 | 12,789 | ||||||||||||||||
Total current assets | 90,610 | 110,229 | 92,750 | ||||||||||||||||
Property and equipment, net | 76,157 | 77,751 | 75,854 | ||||||||||||||||
Deferred tax assets | 4,847 | 6,381 | 9,879 | ||||||||||||||||
Other intangible assets, net | 1,013 | 995 | 1,302 | ||||||||||||||||
Other assets, net | 2,182 | 2,633 | 2,500 | ||||||||||||||||
Total Assets | $ | 174,809 | $ | 197,989 | $ | 182,285 | |||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Accounts payable | $ | 15,046 | $ | 18,942 | $ | 16,388 | |||||||||||||
Accrued expenses | 12,482 | 15,189 | 10,806 | ||||||||||||||||
Gift cards and customer deposits | 14,502 | 33,926 | 28,919 | ||||||||||||||||
Deferred revenue and other | 2,154 | 1,806 | 1,887 | ||||||||||||||||
Total current liabilities | 44,184 | 69,863 | 58,000 | ||||||||||||||||
Deferred rent | 18,342 | 17,906 | 17,838 | ||||||||||||||||
Deferred franchise revenue | 1,100 | 1,208 | 529 | ||||||||||||||||
Other liabilities | 1,854 | 1,697 | 1,554 | ||||||||||||||||
Stockholders' equity: | |||||||||||||||||||
Common stock, par value $0.01 per share | 150 | 155 | 160 | ||||||||||||||||
Additional paid-in capital | 67,383 | 68,962 | 69,936 | ||||||||||||||||
Accumulated other comprehensive loss | (12,015 | ) | (11,562 | ) | (11,901 | ) | |||||||||||||
Retained earnings | 53,811 | 49,760 | 46,169 | ||||||||||||||||
Total stockholders' equity | 109,329 | 107,315 | 104,364 | ||||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 174,809 | $ | 197,989 | $ | 182,285 | |||||||||||||
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
Unaudited Selected Financial and Store Data | |||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||
13 Weeks | 13 Weeks | 26 Weeks | 26 Weeks | ||||||||||||||||||||
Ended | Ended | Ended | Ended | ||||||||||||||||||||
August 4, | July 29, | August 4, | July 29, | ||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||
Other financial data: | |||||||||||||||||||||||
Retail gross margin ($) (1) | $ | 34,436 | $ | 34,044 | 70,476 | $ | 76,331 | ||||||||||||||||
Retail gross margin (%) (1) | 42.5 | % | 44.6 | % | 43.4 | % | 46.2 | % | |||||||||||||||
Capital expenditures (2) | $ | 4,081 | $ | 5,518 | $ | 7,111 | $ | 9,326 | |||||||||||||||
Depreciation and amortization | $ | 4,023 | $ | 3,985 | $ | 8,138 | $ | 7,892 | |||||||||||||||
Store data (3): | |||||||||||||||||||||||
Number of corporately-managed retail locations at end of period | |||||||||||||||||||||||
North America |
307 | 294 | |||||||||||||||||||||
Europe | 57 | 58 | |||||||||||||||||||||
Asia | 1 | 1 | |||||||||||||||||||||
Total corporately-managed retail locations | 365 | 353 | |||||||||||||||||||||
Number of franchised stores at end of period | 96 | 89 | |||||||||||||||||||||
Corporately-managed store square footage at end of period (4) | |||||||||||||||||||||||
North America | 721,374 | 730,134 | |||||||||||||||||||||
Europe | 79,236 | 82,585 | |||||||||||||||||||||
Asia | 1,750 | 1,750 | |||||||||||||||||||||
Total square footage | 802,360 | 814,469 | |||||||||||||||||||||
(1) | Retail gross margin represents net retail sales less cost of merchandise sold - retail. Retail gross margin percentage represents retail gross margin divided by net retail sales. | |||
(2) | Capital expenditures represents cash paid for property, equipment, other assets and other intangible assets. | |||
(3) | Excludes e-commerce. North American stores are located in the United States, Canada and Puerto Rico. In Europe, stores are located in the United Kingdom, Ireland and Denmark. In Asia, the store is located in China. | |||
(4) | Square footage for stores located in North America is leased square footage. Square footage for stores located in Europe is estimated selling square footage. | |||
CONTACT:
Investors:
Build-A-Bear Workshop
Voin Todorovic,
314-423-8000 x5221
or
Media:
Build-A-Bear Workshop
Beth
Kerley
bethk@buildabear.com