Build-A-Bear Workshop 2011 Annual Report Download - page 35

BUILD-A-BEAR WORKSHOP, INC. 2011 FORM 10-K
Selling, general and administrative expense: These
expenses include store payroll and benefits, advertising, credit
card fees, and store supplies, as well as central office general
and administrative expenses, including costs for virtual world
maintenance, management payroll, benefits, stock-based
compensation, travel, information systems, accounting,
insurance, normal store closings, legal and public
relations. These expenses also include depreciation and
amortization of central office leasehold improvements,
furniture, fixtures and equipment as well as the amortization of
intellectual property costs.
In 2009, we achieved $22 million in savings in selling,
general and administrative expenses including marketing,
central office payroll and outside services. We were able to
maintain these savings in 2010 and 2011. We anticipate an
additional $9 million in savings in 2012, which we expect to
offset expected product cost increases. Other store expenses
such as credit card fees and supplies historically have
increased or decreased proportionately with net retail sales.
We have share-based compensation plans covering the
majority of our management groups and our Board of
Directors. We account for share-based payments utilizing the
fair value recognition provisions of Accounting Standards
Codification (ASC) Section 718 – Stock Compensation. We
recognize compensation cost for equity awards on a straight-
line basis over the requisite service period for the entire
award. In 2011, 2010 and 2009, we recorded stock based
compensation of approximately $4.6 million, $4.8 million
and $4.3 million, respectively.
Store preopening: Preopening costs are expensed as
incurred and include store set-up, certain labor and hiring
costs, and rental charges incurred prior to a store’s opening.
Losses from investment in affiliate. Equity losses from
investment in affiliate are the result of the allocation of losses
related to our investment in Ridemakerz, LLC. Ridemakerz,
while still in its start-up phase, had incurred substantial losses
including charges resulting from a major restructuring of its
operations that included store closings. Under the agreements
in place in 2009, we were the sole member of an equity class
that is allocated losses only following the allocation of losses
to all other common and preferred equity holders to the extent
of their capital contributions. All of the priority equity
members’ capital was reduced to zero in the fiscal 2009
second quarter. We continued to provide services to
Ridemakerz in exchange for equity in 2010. The book value
of our investment was $-0- at December 31, 2011 and
January 1, 2011.
EXPANSION AND GROWTH POTENTIAL
Company-owned stores: The number of Build-A-Bear
Workshop stores in the United States, Canada, Puerto Rico,
the United Kingdom, Ireland and France for the last three
fiscal years can be summarized as follows:
Fiscal
2011
Fiscal
2010
Fiscal
2009
Beginning of period 344 345 346
Opened 841
Closed (6) (5) (2)
End of period 346 344 345
The Friends 2B Made stores are not included in the
number of store openings or closures in fiscal 2009 as noted
above but rather are considered remodels of Build-A-Bear
Workshop stores. In the fiscal 2008 third quarter, we
announced plans to close the Friends 2B Made concept;
concept closure was completed in the fiscal 2009
third quarter.
In fiscal 2011, we opened three Build-A-Bear Workshop
stores in North America and five in the United Kingdom. In
fiscal 2012, we anticipate opening four to six Build-A-Bear
Workshop stores and closing 15 to 20 stores, in accordance
with natural lease events such as expirations and lease
termination options. We will also relocate and downsize ten
to fifteen stores within existing malls which will lead to higher
productivity metrics in these locations. We believe there is a
market potential for approximately 300 to 325 Build-A-Bear
Workshop stores in the United States, Puerto Rico and
Canada and 70 stores in the United Kingdom and Ireland.
Non-store Locations: In 2004 we began offering
merchandise in seasonal, event-based locations such as Major
League Baseball ballparks. We expect to expand our future
presence at select seasonal and non-traditional locations
contingent on their availability. As of December 31, 2011,
we had a total of three ballpark locations. We opened our
first store in a zoo during fiscal 2006, our first store in a
science center during fiscal 2007 and our first store in an
airport in 2011. In 2010, we opened our first temporary
stores, which generally have lease terms of six to eighteen
months and are excluded from our store count. These
locations are intended to capitalize on short-term opportunities
in specific locations. As of December 31, 2011, six
temporary stores were open.
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