Build-A-Bear Workshop 2013 Annual Report Download - page 32

Fiscal Year Ended December 29, 2012 (52 weeks)
Compared to Fiscal Year Ended December 31, 2011 (52 weeks)
Total revenues. Net retail sales were $374.6 million for fiscal 2012,
compared to $387.0 million for fiscal 2011, a decrease of $12.5 million.
The components of this decrease are as follows:
Revenue from international franchise fees increased to $3.6 million
for fiscal 2012 from $3.4 million for fiscal 2011, an increase of $0.2
million. This increase was primarily due to the increase in the
number of franchise locations from 79 at the end of fiscal 2011 to 91
at the end of fiscal 2012. Commercial revenue was $2.8 million in
fiscal 2012 compared to $3.9 million in fiscal 2011, a decrease of $1.2
million. This decrease was primarily due to an overall decrease in
licensing activity in 2012.
Gross margin. Total gross margin, calculated as net retail sales
and commercial revenues less cost of merchandise sold, was $147.2
million for fiscal 2012 compared to $156.8 million for fiscal 2011,
a decrease of $9.6 million, or 6.1%. Retail gross margin was $145.7
million in fiscal 2012 compared to $154.5 million in fiscal 2011, a
decrease of $8.8 million, or 5.7%. As a percentage of net retail sales,
retail gross margin decreased to 38.9% for fiscal 2012 from 39.9%
for fiscal 2011, a decrease of 100 bps. This decline in margin was
primarily attributable to decreased leverage on fixed occupancy
costs, including store asset impairment charges and decreased
merchandise margin, partially offset by cost savings in distribution
and packaging costs.
Selling, general and administrative. Selling, general and
administrative expenses were $165.5 million for fiscal 2012 as
compared to $162.9 million for fiscal 2011, an increase of $2.6 million,
or 1.6%. As a percentage of total revenues, selling, general and
administrative expenses were 43.4% for fiscal 2012, compared to
41.3% in fiscal 2011. The dollar increase was primarily attributable to
$3 million in asset impairment charges and investment in marketing
and store-related costs as part of our long-term initiatives. Excluding
the impairment charges, selling general and administrative expenses
were 42.6% of total revenues.
Goodwill impairment. In 2012, the goodwill associated with the UK
business was fully impaired, resulting in a $33.7 million non-cash
charge.
Interest expense (income), net. Interest expense, net of interest
income, was $3,000 for fiscal 2012 as compared to $0.1 million of
income for fiscal 2011.
Provision for income taxes. Income tax expense was $0.9 million in
fiscal 2012, compared to $14.4 million for fiscal 2011. The effective
rate was (1.8)% in 2012 and (543.4)% in 2011. The fluctuation in
the effective rate was primarily attributable to the recording of a
valuation allowance in 2011 on the US deferred tax assets.
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, amortization and
impairment, goodwill impairment, general and administrative
expense, excluding franchise fees, income from licensing activities
and contribution from our web store and temporary and seasonal
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.
The following table sets forth a reconciliation of store contribution to
net (loss) income for our company-owned stores located in the United
States, Canada and Puerto Rico (North America), stores located in the
United Kingdom and Ireland (Europe) and for our consolidated store
base (dollars in thousands):
(dollars in millions) Fiscal 2012
Impact of store closures $ (4.8)
Decrease in comparable store sales (11.6)
Increase in non-comparable stores, primarily remodels
and relocations 7.1
Increase from new stores 5.0
Change in deferred revenue estimate (1.0)
Decrease from non-traditional locations,
including web sales (6.3)
Impact of foreign currency translation (0.9)
$ (12.5)
22 BUILD- A-BEAR WORKSHOP, INC. 2013 FORM 10 -K