Build-A-Bear Workshop 2009 Annual Report Download - page 40

BUILD-A-BEAR WORKSHOP, INC. 2009 FORM 10-K
selling, general and administrative expenses increased to
39.7% for fiscal 2008 as compared to 37.4% for fiscal
2007, an increase of 230 bps. The dollar increase was
primarily due to 25 more stores in operation at January 3,
2009 as compared to December 29, 2007 with the
increased salaries at the stores and central office to support
the larger store base, severance costs related to central office
staff reductions, as well as additional costs related to the
virtual world, partially offset by a decrease in advertising.
Selling, general and administrative expense as a percentage
of total revenues was higher primarily due to lack of leverage
on store and central office salaries including stock-based
compensation expense.
Store preopening. Store preopening expense was $2.4
million for fiscal 2008 as compared to $4.4 million for fiscal
2007. The $2.0 million decrease was primarily due to
opening 25 stores in fiscal 2008 as compared to 50 in
2007. These amounts include preopening rent expense of
$0.4 million for fiscal 2008 and $1.0 million for fiscal 2007.
Preopening expenses include expenses for stores that have
opened as well as some expenses incurred for stores that will
be opened at a later date.
Store closing. Store closing expense was $3.0 million for
fiscal 2008 and consisted primarily of asset impairment
charges related to the closure of the Friends 2B Made
concept.
Interest expense (income), net. Interest income, net of
interest expense, was $0.8 million for fiscal 2008 as
compared to $1.5 million for fiscal 2007.
Provision for income taxes. The provision for income
taxes was $2.7 million for fiscal 2008 as compared to $12.5
million for fiscal 2007. The effective rate was 36.8% in 2008
and 35.7% for fiscal 2007. The increase in the effective tax
rate was primarily attributable to an increase of valuation
allowances on net operating loss carryforwards offset by the
release of tax reserves and the favorable impact of lower
foreign taxes.
NON-GAAP FINANCIAL MEASURES
We use the term “store contribution” throughout this Annual
Report on Form 10-K. Store contribution consists of income
before income tax expense, interest, store depreciation and
amortization, store preopening expense, store closing
expense and general and administrative expense, excluding
franchise fees, income from licensing activities and
contribution from our webstore and seasonal and event-based
locations. This term, as we define it, may not be comparable
to similarly titled measures used by other companies and is
not a measure of performance presented in accordance with
U.S. generally accepted accounting principles (GAAP).
We use store contribution as a measure of our stores’
operating performance. Store contribution should not be
considered a substitute for net income, net income per store,
cash flows provided by operating activities, cash flows
provided by operating activities per store, or other income or
cash flow data prepared in accordance with U.S. GAAP.
We believe store contribution is useful to investors in
evaluating our operating performance because it, along with
the number of stores in operation, directly impacts our
profitability.
30