Build-A-Bear Workshop 2009 Annual Report Download - page 42

BUILD-A-BEAR WORKSHOP, INC. 2009 FORM 10-K
SEASONALITY AND QUARTERLY RESULTS
The following is a summary of certain unaudited quarterly results of operations data for each of the last two fiscal years.
Fiscal 2009 Fiscal 2008
(Dollars in millions, except per share data)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total revenues $ 97.3 $ 82.4 $ 91.7 $123.0 $123.8 $ 94.7 $107.2 $142.2
Gross margin(1) 35.3 26.7 32.7 47.9 53.1 34.0 42.3 61.1
Losses from investment in affiliate — 0.5 4.6 4.5 ————
Net income (loss) (0.8) (6.0) (4.8) (0.9) 6.4 (4.8) (2.0) 5.0
Earnings (loss) per common share:
Basic (0.04) (0.32) (0.25) (0.05) 0.32 (0.25) (0.11) 0.28
Diluted (0.04) (0.32) (0.25) (0.05) 0.32 (0.25) (0.11) 0.28
Number of stores (end of quarter) 346 345 345 345 325 330 341 346
(1) Gross margin represents net retail sales less cost of merchandise sold.
Our operating results for one period may not be
indicative of results for other periods, and may fluctuate
significantly because of a variety of factors, including those
discussed under “Risk Factors — Risks Related to Owning Our
Common Stock - Fluctuations in our quarterly results of
operations could cause the price of our common stock to
substantially decline.”
The timing of new store openings may result in fluctuations
in quarterly results as a result of the revenues and expenses
associated with each new store location. We typically incur
most preopening costs for a new store in the three months
immediately preceding the store’s opening. We expect our
growth, operating results and profitability to depend in some
degree on our ability to increase our number of stores.
For accounting purposes, the quarters of each fiscal year
consist of 13 weeks, although we will have a 14-week quarter
approximately once every six years. The fiscal 2008 fourth
quarter was a 14-week quarter. Quarterly fluctuations and
seasonality may cause our operating results to fall below the
expectations of securities analysts and investors, which could
cause our stock price to fall.
LIQUIDITY AND CAPITAL RESOURCES
Our cash requirements are primarily for the opening of new
stores, information systems and working capital. Over the past
several years, we have met these requirements through capital
generated from cash flow provided by operations. We have
access to additional cash through our revolving line of credit
that has been in place since 2000. From our inception to
December 2001, we raised at various times a total of
$44.9 million in capital from several private investors. In
2004, we raised $25.7 million from the initial public offering
of our common stock.
Operating Activities. Cash flows provided by operating
activities were $24.0 million in fiscal 2009, $23.6 million in
fiscal 2008 and $56.4 million in fiscal 2007. Cash flows
from operating activities increased slightly in fiscal 2009 as
compared to 2008 as net losses were offset by cost
reductions. Cash flows from operating activities decreased in
fiscal 2008 as compared to 2007 primarily due to the
decrease in net income, higher redemption of gift cards
during the 53rd week of fiscal 2008 and increases in
inventory due to the larger store base.
Investing Activities. Cash flows used in investing activities
were $8.9 million in fiscal 2009, $26.6 million in fiscal
2008 and $40.9 million in fiscal 2007. Cash used in
investing activities in 2009 related primarily to the continued
installation and upgrades of central office information
technology systems, acquisition of intangible assets,
repurposing existing Friends 2B Made locations to
Build-A-Bear Workshop stores, the opening of one new store
and the relocation of one store. Cash used in investing
activities in fiscal 2008 and 2007 relates primarily to
opening 25 and 50 new stores, respectively, and additional
investments in Ridemakerz.
Financing Activities. There was no cash from financing
activities in 2009. Financing activities used cash of $14.0
million in fiscal 2008 and $3.1 million in fiscal 2007.
Purchases of our stock in fiscal 2008 and 2007 used cash of
$14.3 million and $4.7 million, respectively. In fiscal 2007,
exercises of employee stock options and employee stock
purchases and related tax benefits provided cash of $1.6
million. No employee stock options were exercised in fiscal
2009 or fiscal 2008.
Capital Resources. As of January 2, 2010, we had a
cash balance of $60.4 million, approximately half of which
was domiciled outside of the United States. We also have a
line of credit, which we can use to finance capital
expenditures and working capital needs throughout the year.
The credit agreement is with U.S. Bank, National Association
and was amended effective October 28, 2009. The bank line
continues to provide availability of $40 million for the first half
of the fiscal year and a seasonal overline of $50 million. The
seasonal overline is in effect from July 1 to December 31 each
year. Borrowings under the credit agreement are secured by
our assets and a pledge of 65% of our ownership interest in
our foreign subsidiaries. The credit agreement expires on
December 31, 2011 and contains various restrictions on
indebtedness, liens, guarantees, redemptions, mergers,
acquisitions or sale of assets, loans, transactions with
affiliates, and investments. It also prohibits us from
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