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 29, 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
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))

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 November 29, 2018, Build-A-Bear Workshop, Inc. (the “Company”) issued a press release setting forth results for the Company’s 2018 fiscal third quarter and 39 weeks ended November 3, 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.

2

Item 9.01           Financial Statements and Exhibits.

(d)  Exhibits

Exhibit Number

Description of Exhibit

 
99.1 Press Release dated November 29, 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:

November 29, 2018

By:

/s/ Voin Todorovic

 

Name:

Voin Todorovic

 

Title:

Chief Financial Officer

3

EXHIBIT INDEX

Exhibit Number

Description of Exhibit

 

99.1

Press Release dated November 29, 2018


4

Exhibit 99.1

Build-A-Bear Workshop, Inc. Reports Fiscal 2018 Third Quarter Results

ST. LOUIS--(BUSINESS WIRE)--November 29, 2018--Build-A-Bear Workshop, Inc. (NYSE: BBW) today reported results for the fiscal 2018 third quarter and 39 weeks ended November 3, 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, “In a seasonably small third quarter in which we had forecasted a loss, we ultimately delivered sales and profitability below expectations. The majority of the shortfall was driven by three circumstances. First, we chose to strategically deemphasize our historically successful National Teddy Bear Day promotion to avoid the potential of long lines and frustrated guests on the heels of the Pay Your Age Day events. Second, our U.K. business continued to decline beyond expectations due to a challenging retail environment brought on by Brexit and the implementation of new privacy laws that have significantly inhibited our ability to build our contact database and market directly to our guests. And finally, organic family traffic to traditional malls continued to struggle which we believe was exacerbated by the comparative lack of high impact animated films that tend to bring our target demographic to malls with co-located theaters. Historically, we have seen increased traffic and sales associated with child-friendly film releases.

“In response, we have plans in place to recoup a portion of the lost sales from National Teddy Bear Day with a like promotion planned later this fiscal year. We are actively working to rebuild our U.K. consumer loyalty base and communication plans within the parameters of the new privacy laws. We are also intently focused on managing expenses through what we believe to be a temporary market disruption pending the resolution of Brexit and related issues. While we look forward to a strong and continuous 2019 family movie slate to help buoy traditional mall traffic with co-located theaters with expected benefits starting in January, we recognize that macro shopping habits have fundamentally changed in our core markets. We expect the strategies we have been implementing with our long-range real estate and e-commerce plans to ultimately lead to profitable growth.


Ms. John continued, “We believe we are taking the necessary steps to address the current business while our long-term focus remains on driving the strategies intended to transform the company to better monetize the equity of the Build-A-Bear brand. We have laid substantial groundwork and are beginning to see results on a number of fronts such as outbound licensing and the evolution and diversification of our real estate portfolio to include more tourist, seasonal, and shop-in-shop venues designed to broaden our consumer reach beyond traditional malls. Examples range from the recently opened location inside FAO Schwarz in New York City to six new pilot locations inside of a large national retailer. Additionally, our e-commerce business has consistently delivered double-digit quarterly growth following the upgrade of our website last October as we continue to add capabilities. In fact, even with a number of changes and disruptions in market dynamics, we believe many of the puzzle pieces of our overarching strategy from retail diversification to international franchising to out-bound licensing, are beginning to fall into place. With that in mind, we continue to systematically work toward our goal of a being a company that can consistently and profitably monetize the power of one of the most trusted, recognized and beloved kids’ brands today,” concluded Ms. John.

Third Quarter 2018 Highlights (13 weeks ended November 3, 2018, compared to the 13 weeks ended October 28, 2017):


Store Activity:

In the third quarter of fiscal 2018, the Company opened 12 locations and reformatted one store into a Discovery format, ending the quarter with 37% of its store base in an updated Discovery design. As of November 3, 2018, the Company operated 371 corporately-managed locations, including 312 in North America and 59 outside of North America. The Company’s international franchisees ended the quarter with 94 stores in 11 countries.

Balance Sheet:

As of November 3, 2018, cash and cash equivalents totaled $8.6 million. The Company ended the quarter with $7.3 million in borrowings under its revolving credit facility. Total inventory at quarter-end was $57.3 million compared to $62.9 million at the end of the third quarter of 2017, a decrease of 8.8%. In the third quarter of fiscal 2018, capital expenditures were $1.7 million, and depreciation and amortization totaled $4.0 million.

Share Repurchase:

The Company repurchased nearly 60,000 shares of its common stock for $0.5 million during the third quarter of fiscal 2018. As of November 3, 2018, the Company had $8.8 million remaining of 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 the adoption of 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 revising its guidance for fiscal year 2018 and 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 December 6, 2018. The telephone replay is available by calling (844) 512-2921. The access code is 13684751.

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 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
November 3, % of Total October 28, % of Total
2018 Revenues (1) 2017 Revenues (1)
Revenues:
Net retail sales $ 65,298 95.0 $ 74,441 97.7
Commercial revenue 2,171 3.2 1,196 1.6
International franchising 1,225 1.8 514 0.7
Total revenues 68,694 100.0 76,151 100.0
Cost of merchandise sold:
Cost of merchandise sold - retail (1) 42,129 64.5 43,267 58.1
Cost of merchandise sold - commercial (1) 773 35.6 502 42.0
Cost of merchandise sold - international franchising (1) 731 59.7 56 10.9
Total cost of merchandise sold 43,633 63.5 43,825 57.6
Consolidated gross profit 25,061 36.5 32,326 42.4
 
Selling, general and administrative expense 35,069 51.1 36,196 47.5
Interest expense (income), net (16) (0.0) 7 0.0
Loss before income taxes (9,992) (14.5) (3,877) (5.1)
Income tax benefit (3,928) (5.7) (1,350) (1.8)
Net income (loss) $ (6,064) (8.8) $ (2,527) (3.3)
 
Income (loss) per common share:
Basic $ (0.42) $ (0.16)
Diluted $ (0.42) $ (0.16)
Shares used in computing common per share amounts:
Basic 14,590,614 15,599,675
Diluted 14,590,614 15,599,675
 
(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)
 
39 Weeks 39 Weeks
Ended Ended
November 3, % of Total October 28, % of Total
2018 Revenues (1) 2017 Revenues (1)
Revenues:
Net retail sales $ 227,760 96.9 $ 239,567 97.2
Commercial revenue 4,245 1.8 5,320 2.1
International franchising 3,051 1.3 1,647 0.7
Total revenues 235,056 100.0 246,534 100.0
Costs and expenses:
Cost of merchandise sold - retail (1) 134,115 58.9 132,062 55.1
Cost of merchandise sold - commercial (1) 1,843 43.4 2,581 48.5
Cost of merchandise sold - international franchising (1) 1,650 54.1 313 19.0

Total cost of merchandise sold

 

137,608 58.5 134,956 54.7
Consolidated gross profit 97,448 41.5 111,578 45.3
 
Selling, general and administrative expense 109,334 46.5 111,204 45.1
Interest expense (income), net 5 0.0 (9) (0.0)
Income (loss) before income taxes (11,891) (5.1) 383 0.2
Income tax expense (benefit) (4,381) (1.9) 237 0.1
Net income (loss) $ (7,510) (3.2) $ 146 0.1
 
Income (loss) per common share:
Basic $ (0.51) $ 0.01
Diluted $ (0.51) $ 0.01
Shares used in computing common per share amounts:
Basic 14,597,255 15,602,498
Diluted 14,597,255 15,780,253
 
(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)

 
November 3, December 30, October 28,
2018 2017 2017
ASSETS
Current assets:
Cash and cash equivalents $ 8,631 $ 30,445 $ 11,381
Inventories 57,309 53,136 62,854
Receivables 12,962 13,302 8,717
Prepaid expenses and other current assets   16,848     13,346     9,102  
Total current assets 95,750 110,229 92,054
 
Property and equipment, net 73,343 77,751 76,876
Deferred tax assets 6,783 6,381 11,391
Other intangible assets, net 887 995 1,182
Other assets, net   2,091     2,633     2,546  
Total Assets $ 178,854   $ 197,989   $ 184,049  
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,179 $ 18,942 $ 18,595
Accrued expenses 7,559 15,189 12,839
Gift cards and customer deposits 18,580 33,926 29,198
Short-term borrowings 7,250 - -
Deferred revenue and other   2,006     1,806     2,208  
Total current liabilities   53,574     69,863     62,840  
 
Deferred rent 18,066 17,906 17,904
Deferred franchise revenue 1,557 1,208 492
Other liabilities 1,765 1,697 1,280
 
 
Stockholders' equity:
Common stock, par value $0.01 per share 150 155 159
Additional paid-in capital 68,274 68,962 70,215
Accumulated other comprehensive loss (12,049 ) (11,562 ) (11,973 )
Retained earnings   47,517     49,760     43,132  
Total stockholders' equity   103,892     107,315     101,533  
Total Liabilities and Stockholders' Equity $ 178,854   $ 197,989   $ 184,049  
 

                 
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Selected Financial and Store Data
(dollars in thousands)
 
13 Weeks 13 Weeks 39 Weeks 39 Weeks
Ended Ended Ended Ended
November 3, October 28, November 3, October 28,
2018 2017 2018 2017
 
Other financial data:
Retail gross margin ($) (1) $ 23,169 $ 31,174 $ 93,645 $ 107,505
Retail gross margin (%) (1) 35.5% 41.9% 41.1% 44.9%
Capital expenditures (2) $ 1,742 $ 5,185 $ 8,853 $ 14,511
Depreciation and amortization $ 4,048 $ 4,165 $ 12,186 $ 12,057
 
Store data (3):
Number of corporately-managed retail locations at end of period
North America 312 292
Europe 58 58
Asia 1 1
Total corporately-managed retail locations 371 351
 
Number of franchised stores at end of period 94 89
 
Corporately-managed store square footage at end of period (4)
North America 729,445 727,822
Europe 81,198 80,901
Asia 1,750 1,750
Total square footage 812,393 810,473
 
(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:
Voin Todorovic
Build-A-Bear Workshop
314.423.8000 x5221
or
Media:
Beth Kerley
Build-A-Bear Workshop
bethk@buildabear.com