bbw20210407_8ka.htm
Form 8-K/A date of report 03-10-21 true 0001113809 0001113809 2021-03-10 2021-03-10
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K/A
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): March 10, 2021
 
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.)
 
 
415 South 18th St., St. Louis, Missouri
 
63103
(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.     ☐
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
BBW
New York Stock Exchange
 
 

 
Item 2.02.         Results of Operations and Financial Condition.
 
This Current Report Form 8-K/A of Build-A-Bear Workshop, Inc. (the “Company”) relates to the Current Report on Form 8-K filed on March 10, 2021 (the “Original Report”). In the Original Report, the Company furnished a press release (the “Press Release”) announcing its results for the Company’s 2020 fourth fiscal quarter and full 2020 fiscal year ended January 30, 2021. This amendment describes changes from the Original Report.
 
After the filing of the Original Report, and in connection with the finalization of its fiscal 2020 audit, the Company identified certain changes to the financial statements filed in the Original Report. These revisions affected the following items on the Company’s Consolidated Balance Sheets: Accounts payable, Accrued expenses, Total current liabilities, Other liabilities, Retained earnings, and Total stockholders’ equity. The revisions also affected the following items on the Company’s Consolidated Statements of Operations: Cost of merchandise sold – retail, Consolidated gross profit, Selling, general and administrative expense, income (loss) before income taxes, and, net (loss) income and (loss) income per common share for the quarter and year ended January 30, 2021. These changes also affected the Company’s Adjusted income (loss) before income taxes (adjusted pre-tax), Adjusted net (loss) income, and Adjusted net (loss) income per diluted share (adjusted EPS). A summary of the revised amounts is set forth below. Amended financial statements giving effect to these changes are reflected in this Report and replace those included in the Press Release. These adjustments have no effect on the Company's previously issued guidance for 2021.
 
The changes were primarily the result of the following:
 
 
A reduction in Selling, general and administrative expense of approximately $1.5 million, which was due to a change in estimate of incentive compensation expense because of the significant Loss before income taxes in fiscal 2020, largely driven by negative impact of the pandemic. This change in estimate resulted in a corresponding increase in income (loss) before income taxes, and (loss) income per common share within the Unaudited Condensed Consolidated Statement of Operations. This change also resulted in a decrease in Accrued expenses of the same amount within the Unaudited Condensed Consolidated Balance Sheets.
 
A reduction in Accrued expenses and an increase in Other liabilities of approximately $1.0 million within the Unaudited Condensed Consolidated Balance Sheets was due to a reclassification of the long-term portion of deferred FICA tax payments. This change had no effect on the Unaudited Condensed Consolidated Statements of Operations.
 
The aggregate effect of certain immaterial adjustments of $0.1 million affecting Cost of goods sold – retail and Selling, general and administrative expenses in the Unaudited Condensed Consolidated Statements of Operations and Accrued expenses and Accounts payable within the Unaudited Condensed Consolidated Balance Sheets.
 
 
Note Regarding Non-GAAP Financial Measures
In this Current Report on Form 8-K/A, the Company’s financial results are provided both in accordance with generally accepted accounting principles (GAAP) and using certain non-GAAP financial measures. In particular, the Company provides historic income and income per diluted share adjusted to exclude certain costs and accounting adjustments, which are non-GAAP financial measures. These results are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help identify underlying trends in the Company’s business and provide useful information to both management and investors by excluding certain items that may not be indicative of the Company’s core operating results. These measures should not be considered a substitute for or superior to GAAP results. These non-GAAP financial measures are defined and reconciled to the most comparable GAAP measure later in this document.
 
2

 
The information furnished in, contained, or incorporated by reference into this Item 2.02, 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 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.
 
 
Summary of Changes
(Dollars in thousands, except per share data or otherwise noted)
 
Original
Revised
Change
Consolidated Balance Sheet as of January 30, 2021
     
Accounts payable
$17,784
$17,901
$117
Accrued expenses
20,326
17,551
(2,775)
Other liabilities
1,323
2,354
1,031
Retained earnings
5,315
6,942
1,627
       
Companys Consolidated Statements of Operations for the 13 weeks ended January 30, 2021
     
Cost of merchandise sold – retail
$45,606
$45,483
($123)
Consolidated gross profit
46,925
47,048
123
Selling, general and administrative expense
37,757
36,253
(1,504)
(Loss) income before income taxes
9,164
10,791
1,627
Net (loss) income
8,843
10,470
1,627
(Loss) income per common share
     
Basic
$0.59
$0.70
$0.11
Diluted
0.57
0.67
0.10
       
Companys Consolidated Statements of Operations for the 52 weeks ended January 30, 2021
     
Cost of merchandise sold – retail
$147,906
$147,783
($123)
Consolidated gross profit
97,286
97,409
123
Selling, general and administrative expense
119,089
117,585
(1,504)
(Loss) income before income taxes
(21,813)
(20,186)
1,627
Net (loss) income
(24,610)
(22,983)
1,627
(Loss) income per common share
     
Basic
($1.65)
($1.54)
$0.11
Diluted
(1.65)
(1.54)
0.11
 
3

 
 
Original
Revised
Change
Selected Financial and Store data  Other financial data for 13 weeks ended January 30, 2021
     
Retail gross margin ($)
$46,250
$46,373
$123
Retail gross margin (%)
50.4%
50.5%
0.1%
       
Selected Financial and Store data  Other financial data for 52 weeks ended January 30, 2021
     
Retail gross margin ($)
$101,304
$101,427
$123
       
Reconciliation of GAAP to Non-GAAP Results for 13 weeks ended
January 30, 2021
     
Income (loss) before income taxes (pre-tax)
$9,164
$10,791
$1,627
Adjusted income (loss) before income taxes (adjusted pre-tax)
7,638
9,265
1,627
       
Net (loss) income
$8,843
$10,470
$1,627
Adjusted net (loss) income
7,317
8,944
1,627
       
Net (loss) income per diluted share (EPS)
$0.57
$0.67
$0.10
Adjusted net (loss) income per diluted share (adjusted EPS)
0.47
0.58
0.11
       
Reconciliation of GAAP to Non-GAAP Results for 52 weeks ended
January 30, 2021
     
Income (loss) before income taxes (pre-tax)
($21,813)
($20,186)
$1,627
Adjusted income (loss) before income taxes (adjusted pre-tax)
(15,068)
(13,441)
1,627
       
Net (loss) income
($24,610)
($22,983)
$1,627
Adjusted net (loss) income
(15,366)
(13,739)
1,627
       
Net (loss) income per diluted share (EPS)
($1.65)
($1.54)
$0.11
Adjusted net (loss) income per diluted share (adjusted EPS)
($1.03)
(0.92)
0.11
 
4

 
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
         
   
January 30,
   
% of Total
   
February 1,
   
% of Total
 
   
2021
   
Revenues (1)
   
2020
   
Revenues (1)
 
Revenues:
                               
Net retail sales
  $ 91,856       98.1     $ 100,654       96.3  
Commercial revenue
    1,370       1.5       3,385       3.2  
International franchising
    434       0.4       544       0.5  
Total revenues
    93,660       100.0       104,583       100.0  
Cost of merchandise sold:
                               
Cost of merchandise sold - retail (1)
    45,483       49.5       49,930       49.6  
Store asset impairment
    302       0.3             0.0  
Cost of merchandise sold - commercial (1)
    528       38.5       1,545       45.6  
Cost of merchandise sold - international franchising (1)
    299       68.9       419       77.0  
Total cost of merchandise sold
    46,612       49.8       51,894       49.6  
Consolidated gross profit
    47,048       50.2       52,689       50.4  
                                 
Selling, general and administrative expense
    36,253       38.7       45,107       43.1  
Interest (income) expense, net
    4       0.0       (6 )     (0.0 )
(Loss) income before income taxes
    10,791       11.5       7,588       7.3  
Income tax expense
    321       0.3       1,426       1.4  
Net (loss) income
  $ 10,470       11.2     $ 6,162       5.9  
                                 
(Loss) Income per common share:
                               
Basic
  $ 0.70             $ 0.42          
Diluted
  $ 0.67             $ 0.42          
Shares used in computing common per share amounts:
                               
Basic
    14,999,786               14,752,560          
Diluted
    15,524,340               14,808,984          
 
(1)
Selected statement of operations 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.           
 
5

 
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(dollars in thousands, except share and per share data)
 
   
52 Weeks
           
52 Weeks
         
   
Ended
           
Ended
         
   
January 30,
   
% of Total
   
February 1,
   
% of Total
 
   
2021
   
Revenues (1)
   
2020
   
Revenues (1)
 
Revenues:
                               
Net retail sales
  $ 249,210       97.6     $ 323,491       95.6  
Commercial revenue
    4,426       1.7       11,892       3.5  
International franchising
    1,674       0.7       3,160       0.9  
Total revenues
    255,310       100.0       338,543       100.0  
Costs and expenses:
                               
Cost of merchandise sold - retail (1)
    147,783       59.3       176,652       54.6  
Store asset impairment (2)
    7,346       2.9              
Cost of merchandise sold - commercial (1)
    1,837       41.5       5,432       45.7  
Cost of merchandise sold - international franchising (1)
    935       55.9       2,836       89.7  
Total cost of merchandise sold
    157,901       61.8       184,920       54.6  
Consolidated gross profit
    97,409       38.2       153,623       45.4  
                                 
Selling, general and administrative expense
    117,585       46.1       152,047       44.9  
Interest expense, net
    10       0.0       15       0.0  
Income (loss) before income taxes
    (20,186 )     (7.9 )     1,561       0.5  
Income tax expense (benefit)
    2,797       1.1       1,300       0.4  
Net income (loss)
  $ (22,983 )     (9.0 )   $ 261       0.1  
                                 
Income (loss) per common share:
                               
Basic
  $ (1.54 )           $ 0.02          
Diluted
  $ (1.54 )           $ 0.02          
Shares used in computing common per share amounts:
                               
Basic
    14,923,304               14,711,334          
Diluted
    14,923,304               14,759,810          
 
(1)
Selected statement of operations 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.
 
(2)
Due to the charges primarily in the 52 weeks ended January 30, 2021, a separate line item was disclosed and expressed as a percentage of net retail sales.
 
6

 
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(dollars in thousands, except per share data)
 
   
January 30,
   
February 1,
 
   
2021
   
2020
 
ASSETS
 
Current assets:
               
Cash and cash equivalents
  $ 34,840     $ 26,726  
Inventories, net
    46,947       53,381  
Receivables, net
    8,295       11,526  
Prepaid expenses and other current assets
    10,111       7,117  
Total current assets
    100,193       98,750  
                 
Operating lease right-of-use asset
    104,825       126,144  
Property and equipment, net
    52,973       65,855  
Deferred tax assets
    -       3,411  
Other assets, net
    3,381       3,102  
Total Assets
  $ 261,372     $ 297,262  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
               
Accounts payable
  $ 17,901     $ 15,680  
Accrued expenses
    17,551       16,536  
Operating lease liability short term
    32,402       30,912  
Gift cards and customer deposits
    19,029       20,231  
Deferred revenue and other
    2,445       2,605  
Total current liabilities
    89,328       85,964  
                 
Operating lease liability long term
    101,462       119,625  
Deferred franchise revenue
    920       1,325  
Other liabilities
    2,354       1,717  
                 
Stockholders' equity:
               
Common stock, par value $0.01 per share
    159       152  
Additional paid-in capital
    72,822       70,633  
Accumulated other comprehensive loss
    (12,615 )     (12,079 )
Retained earnings
    6,942       29,925  
Total stockholders' equity
    67,308       88,631  
Total Liabilities and Stockholders' Equity
  $ 261,372     $ 297,262  
 
7

 
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Selected Financial and Store Data
(dollars in thousands)
 
   
13 Weeks
   
13 Weeks
   
52 Weeks
   
52 Weeks
 
   
Ended
   
Ended
   
Ended
   
Ended
 
   
January 30,
   
February 1,
   
January 30,
   
February 1,
 
   
2021
   
2020
   
2021
   
2020
 
                                 
Other financial data:
                               
                                 
Retail gross margin ($) (1)
  $ 46,373     $ 50,724     $ 101,427     $ 146,839  
Retail gross margin (%) (1)
    50.5 %     50.4 %     40.7 %     45.4 %
Capital expenditures (2)
  $ 1,017     $ 2,285     $ 5,046     $ 12,384  
Depreciation and amortization
  $ 3,332     $ 3,346     $ 13,237     $ 13,705  
                                 
Store data (3):
                               
Number of corporately-managed retail locations at end of period
                               
North America
                    305       316  
Europe
                    48       55  
Asia
                    1       1  
Total corporately-managed retail locations
                    354       372  
                                 
Number of franchised stores at end of period
                    71       92  
                                 
Corporately-managed store square footage at end of period (4)
                               
North America
                    712,287       719,078  
Europe
                    71,609       78,786  
Asia
                    1,750       1,750  
Total square footage
                    785,646       799,614  
 
(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. Store impairment is excluded from retail gross margin.
(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. Seasonal locations not included in store count.
(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. Seasonal locations not included in the store count.
 
8

 
* Non-GAAP Financial Measures
 
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Results
(dollars in thousands, except per share data)
 
   
13 Weeks
   
13 Weeks
   
52 Weeks
   
52 Weeks
 
   
Ended
   
Ended
   
Ended
   
Ended
 
   
January 30,
   
February 1,
   
January 30,
   
February 1,
 
   
2021
   
2020
   
2021
   
2020
 
Income (loss) before income taxes (pre-tax)
  $ 10,791     $ 7,588     $ (20,186 )   $ 1,561  
Income (loss) before income tax adjustments:
                               
United Kingdom Lockdown Business Grants (1)
    (756 )     -       (756 )     -  
COVID-19 activity (2)
    30       -       142       -  
Ohio Bureau of Workers' Compensation dividend (3)
    (332 )     -       (332 )     -  
Impairment, bad debt, and lease modification (4)(5)
    328       (244 )     7,956       (1,016 )
Foreign exchange (gains) losses (6)
    (798 )     (261 )     (601 )     71  
Other (7)
    2       202       336       370  
Adjusted income (loss) before income taxes (adjusted pre-tax)
    9,265       7,285       (13,441 )     986  
                                 
                                 
Income tax (expense) benefit
    (321 )     (1,426 )     (2,797 )     (1,300 )
Tax adjustments:
                               
Income tax impact: adjustments (8)(9)
    -       64       -       121  
Income tax impact: CARES Act (10)
    -       -       (773 )     -  
Valuation allowance (11)
    -       -       3,272       449  
Adjusted income tax (expense) benefit
    (321 )     (1,362 )     (298 )     (730 )
                                 
Net (loss) income
    10,470       6,162       (22,983 )     261  
Adjustments
    (1,526 )     (239 )     9,244       (5 )
Adjusted net (loss) income
  $ 8,944     $ 5,923     $ (13,739 )   $ 256  
                                 
                                 
                                 
Net (loss) income per diluted share (EPS)
  $ 0.67     $ 0.42     $ (1.54 )   $ 0.02  
                                 
Adjusted net (loss) income per diluted share (adjusted EPS)
  $ 0.58     $ 0.40     $ (0.92 )   $ 0.02  
 
Fiscal 2023 forecast reconciliation of Non-GAAP figure
 
(dollars in millions)
 
 
Income before before income taxes (pre-tax)
 
$7 - $17
                         
Interest
    -                          
Depreciation and Amortization
    13                          
Earnings before interest, taxes, depreciation and amortization (EBITDA)
 
$20 - $30
                         
 
(1)
Represents the business grants received from the United Kingdom government for business in the retail, hospitality and leisure sectors. These grants were provided on a per-property basis to support businesses through the latest lockdown restrictions as a result of the COVID-19 pandemic.
(2)
Represents COVID-19 related expenses at our stores, warehouse, and headquarters.
(3)
Represent a dividend distribution received from the Ohio Bureau of Workers' Compensation in the fourth quarter.
(4)
Represents non-cash adjustments including asset impairment charges related to store fixed assets and right-of-use operating lease assets and bad debt expense in the 13 and 52 weeks ending January 30, 2021 and February 1, 2020.
(5)
Represents the lease modification impacts of exercising early termination options in leases offset by non-cash impairment charges related to store fixed assets, receivables, and inventory in the 13 and 52 weeks ended February 1, 2020
(6)
Represents the consolidated impact of foreign exchange rates on the re-measurement of balance sheet items not denominated in functional currency recorded under the provisions of U.S. GAAP.  This does not include any impact on margin associated with the translation of revenues or the foreign subsidiaries' purchase of inventory in U.S. dollars.
(7)
Represents severance and other non-recurring changes in reserves and charges.
(8)
As a result of the Company's full, global valuation allowance, the Company cannot realize an income tax benefit on these adjustments for the fourth quarter or full year fiscal 2020.
(9)
Represents the aggregate tax impact of the pre-tax adjustments for the fourth quarter and full year fiscal 2019.
(10)
Represents the impact of the technical correction related to qualified leasehold improvements resulting from the CARES Act occurring in the first quarter of fiscal 2020
(11)
Represents the valuation allowance recorded on its net deferred tax assets in North America in the first quarter of fiscal 2020 and the United Kingdom in the fourth quarter of fiscal 2019.
 
9

 
Item 9.01          Financial Statements and Exhibits.
 
(d) Exhibits
 
Exhibit
Number
Description of Exhibit
   
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
 
 
 
 
 
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: April 8, 2021
By:
/s/ Voin Todorovic
Name:
Voin Todorovic
Title: Chief Financial Officer
 
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