Item 1. Item 2. Item 3. Item 4. Item 2. Current assets: Cash and cash equivalents Inventories Receivables Prepaid expenses and other current assets Deferred tax assets Total current assets Property and equipment, net of accumulated depreciation of $149,872 and $144,413, respectively Goodwill Other intangible assets, net Other assets, net Total Assets Current liabilities: Accounts payable Accrued expenses Gift cards and customer deposits Deferred revenue Total current liabilities Deferred franchise revenue Deferred rent Other liabilities Stockholders’ equity: Preferred stock, par value $0.01, Shares authorized: 15,000,000; No shares issued or outstanding at April 4, 2009 and January 3, 2009 Common stock, par value $0.01, Shares authorized: 50,000,000; Issued and outstanding: 20,532,061 and 20,447,343 shares, respectively Additional paid-in capital Accumulated other comprehensive loss Retained earnings Total stockholders’ equity Total Liabilities and Stockholders’ Equity Revenues: Net retail sales Franchise fees Licensing revenue Total revenues Costs and expenses: Cost of merchandise sold Selling, general and administrative Store preopening Store closing Interest expense (income), net Total costs and expenses Income (loss) before income taxes Income tax expense (benefit) Net income (loss) Earnings (loss) per common share: Basic Diluted Shares used in computing common per share amounts: Basic Diluted Cash flows from operating activities: Net income (loss) Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization Deferred taxes Loss on disposal of property and equipment Stock-based compensation Change in assets and liabilities: Inventories Receivables Prepaid expenses and other assets Accounts payable Accrued expenses and other liabilities Net cash used in operating activities Cash flows from investing activities: Purchases of property and equipment, net Purchases of other assets and other intangible assets Investment in affiliate Net cash used in investing activities Cash flows from financing activities: Purchases of Company’s common stock Net cash used in financing activities Effect of exchange rates on cash Net decrease in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period Supplemental disclosure of cash flow information: Cash paid during the period for: Income taxes Noncash Transactions: Return of common stock in lieu of tax withholdings and option exercises $0.6 million and $1.4 million, respectively. Prepaid rent Prepaid income taxes Other Balance as of January 2, 2010 Effect of foreign currency translation Balance as of April 3, 2010 Incentive Plan, and in 2009, the Company amended and restated the Build-A-Bear Workshop, Inc. 2004 Stock Incentive Plan (collectively, the Plans). Outstanding, January 2, 2010 Granted Exercised Forfeited Outstanding, April 3, 2010 Options Exercisable As Of: April 3, 2010 Outstanding, January 2, 2010 Granted Vested Canceled or expired Outstanding, April 3, 2010 Net income (loss) Weighted average number of common shares outstanding Effect of dilutive securities: Stock options Restricted stock Weighted average number of common shares outstanding—dilutive Earnings (loss) per share: Basic: Diluted limitations expired. Thirteen weeks ended April 3, 2010 Net sales to external customers Income before income taxes Capital expenditures, net Depreciation and amortization Thirteen weeks ended April 4, 2009 Net sales to external customers Income (loss) before income taxes Capital expenditures, net Depreciation and amortization Total Assets as of: April 3, 2010 April 4, 2009 Thirteen weeks ended April 3, 2010 Net sales to external customers Property and equipment, net Thirteen weeks ended April 4, 2009 Net sales to external customers Property and equipment, net prior period. North America Europe Consolidated Stores: Beginning of period Opened Closed End of period Locations: Revenue: Beginning of period Opened Closed End of period Revenues: Net retail sales Franchise fees Licensing revenue Total revenues Costs and expenses: Cost of merchandise sold Selling, general and administrative Store preopening Store closing Interest expense (income), net Total costs and expenses Income (loss) before income taxes Income tax expense (benefit) Net income (loss) Retail Gross Margin % (1) GAAP. Net income (loss) Income tax expense (benefit) Interest expense (income) Store depreciation, amortization and impairment (1) Store preopening expense Store closing (2) General and administrative expense (3) Franchising and licensing contribution (4) Non-store activity contribution (5) Store contribution Total revenues Franchising and licensing revenues from external customers Revenues from non-store activities from external customers (5) Store location net retail sales Store contribution as a percentage of store location net retail sales Total net income (loss) as a percentage of total revenues credit. store construction costs. two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Period Jan. 3, 2010 – Jan. 30, 2010 Jan. 31, 2010 – Feb. 27, 2010 Feb. 28, 2010 – Apr. 3, 2010 Total Exhibit No. Description 2.1 3.1 3.2 4.1 4.2 31.2 32.1 32.2x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 April 3,October 2, 2010¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Delaware 43-1883836 Delaware43-1883836 (IRS EmployerIdentification No.)63114 (Address of Principal Executive Offices) (Zip Code) Accelerated filerx(Do not check if a smaller reporting company) May 7,November 8, 2010, there were 20,481,07919,554,043 issued and outstanding shares of the registrant’s common stock.Page Part I Financial Information PageFinancial Statements (Unaudited) Consolidated Balance Sheets 3 3 4 5 6 6Management’s Discussion and Analysis of Financial Condition and Results of Operations 12 11Quantitative and Qualitative Disclosures About Market Risk 21 19Controls and Procedures 21 19 Item 1A. Risk Factors 22 Item 1A.Risk Factors20Unregistered Sales of Equity Securities and Use of Proceeds 22 Item 6. Exhibits 23 20 Signatures Item 6.Exhibits212224 April 3,
2010 January 2,
2010 ASSETS $ 53,240 $ 60,399 47,062 44,384 3,653 5,337 17,062 19,329 6,205 6,306 127,222 135,755 95,941 101,044 31,865 33,780 3,226 3,601 10,417 10,093 $ 268,671 $ 284,273 LIABILITIES AND STOCKHOLDERS’ EQUITY $ 31,298 $ 32,822 7,052 11,185 24,499 29,301 8,837 8,582 71,686 81,890 1,948 2,027 33,515 34,760 782 816 — — 205 204 78,820 80,122 (10,756 ) (6,336 ) 92,471 90,790 160,740 164,780 $ 268,671 $ 284,273 October 2, January 2, 2010 2010 ASSETS Current assets: Cash and cash equivalents $ 24,660 $ 60,399 Inventories 54,726 44,384 Receivables 5,790 5,337 Prepaid expenses and other current assets 19,247 19,329 Deferred tax assets 6,874 6,306 Total current assets 111,297 135,755 Property and equipment, net of accumulated depreciation of $160,162 and $144,413, respectively 90,397 101,044 Goodwill 33,044 33,780 Other intangible assets, net 2,657 3,601 Other assets, net 15,476 10,093 Total Assets $ 252,871 $ 284,273 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 32,369 $ 32,822 Accrued expenses 6,202 11,185 Gift cards and customer deposits 21,736 29,301 Deferred revenue 9,952 8,582 Total current liabilities 70,259 81,890 Deferred franchise revenue 1,604 2,027 Deferred rent 30,296 34,760 Other liabilities 794 816 Stockholders' equity: Preferred stock, par value $0.01, Shares authorized: 15,000,000; No shares issued or outstanding at October 2, 2010 and January 2, 2010 - - Common stock, par value $0.01, Shares authorized: 50,000,000; Issued and outstanding: 19,560,591 and 20,447,343 shares, respectively 196 204 Additional paid-in capital 75,349 80,122 Accumulated other comprehensive loss (8,242 ) (6,336 ) Retained earnings 82,615 90,790 Total stockholders' equity 149,918 164,780 Total Liabilities and Stockholders' Equity $ 252,871 $ 284,273 Thirteen weeks ended April 3,
2010 April 4,
2009 $ 99,786 $ 96,316 683 597 967 752 101,436 97,665 59,106 61,375 39,533 36,919 11 — — 501 (32 ) (24 ) 98,618 98,771 2,818 (1,106 ) 1,139 (280 ) $ 1,679 $ (826 ) $ 0.09 $ (0.04 ) $ 0.09 $ (0.04 ) 18,974,540 18,783,915 19,392,479 18,783,915 Thirteen weeks ended Thirty-nine weeks ended October 2, October 3, October 2, October 3, 2010 2009 2010 2009 Revenues: Net retail sales $ 91,689 $ 89,731 $ 263,963 $ 267,354 Commercial revenue 7,637 1,670 9,588 3,336 Franchise fees 767 945 2,112 2,153 Total revenues 100,093 92,346 275,663 272,843 Costs and expenses: Cost of merchandise sold 62,710 57,630 172,150 174,021 Selling, general and administrative 39,113 39,255 115,048 113,683 Store preopening 255 73 343 90 Store closing - 250 - 981 Equity losses from investment in affiliate - 4,592 - 5,125 Interest expense (income), net (83 ) (44 ) (191 ) (92 ) Total costs and expenses 101,995 101,756 287,350 293,808 Loss before income taxes (1,902 ) (9,410 ) (11,687 ) (20,965 ) Income tax benefit (524 ) (4,647 ) (3,511 ) (9,408 ) Net loss $ (1,378 ) $ (4,763 ) $ (8,176 ) $ (11,557 ) Loss per common share: Basic $ (0.07 ) $ (0.25 ) $ (0.44 ) $ (0.61 ) Diluted $ (0.07 ) $ (0.25 ) $ (0.44 ) $ (0.61 ) Shares used in computing common per share amounts: Basic 18,426,860 18,876,697 18,755,941 18,844,009 Diluted 18,426,860 18,876,697 18,755,941 18,844,009 Thirteen weeks ended April 3,
2010 April 4,
2009 $ 1,679 $ (826 ) 6,868 7,039 112 (575 ) 28 5 1,229 866 (2,998 ) 7,566 1,246 3,980 1,504 888 (372 ) (15,812 ) (10,279 ) (14,050 ) (983 ) (10,919 ) (2,916 ) (1,460 ) (341 ) (690 ) — (169 ) (3,257 ) (2,319 ) (1,359 ) — (1,359 ) — (1,560 ) 95 (7,159 ) (13,143 ) 60,399 47,000 $ 53,240 $ 33,857 $ 14 $ 378 $ 654 $ 308 Thirty-nine weeks ended October 2, 2010 October 3, 2009 Cash flows from operating activities: Net loss $ (8,176 ) $ (11,557 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 20,338 21,114 Impairment of store assets 306 312 Deferred taxes (1,877 ) (1,695 ) Equity losses from investment in affiliate - 5,125 Loss on disposal of property and equipment 404 138 Stock-based compensation 3,661 3,145 Change in assets and liabilities: Inventories (14,562 ) 2,435 Receivables (819 ) 3,224 Prepaid expenses and other assets (461 ) (5,114 ) Accounts payable 510 (8,616 ) Accrued expenses and other liabilities (16,615 ) (19,422 ) Net cash used in operating activities (17,291 ) (10,911 ) Cash flows from investing activities: Purchases of property and equipment (9,697 ) (4,384 ) Purchases of other assets and other intangible assets (511 ) (2,267 ) Investment in affiliate - (562 ) Cash flow used in investing activities (10,208 ) (7,213 ) Cash flows from financing activities: Exercise of employee stock options and employee stock purchases 46 - Purchases of Company's common stock (7,274 ) - Cash flow used in financing activities (7,228 ) - Effect of exchange rates on cash (1,012 ) (1,833 ) Net decrease in cash and cash equivalents (35,739 ) (19,957 ) Cash and cash equivalents, beginning of period 60,399 47,000 Cash and cash equivalents, end of period $ 24,660 $ 27,043 Supplemental disclosure of cash flow information: Cash received during the period for income taxes, net of taxes paid: $ 3,271 $ 1,277 Noncash Transactions: Return of common stock in lieu of tax witholdings and option exercises $ 706 $ 311 Exchange of inventory for media credits $ 4,277 $ - “Company”)Company) pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet of the Company as of January 2, 2010 was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and reflect all adjustments which are, in the opinion of management,mana gement, necessary to summarize fairly the financial position of the Company and the results of the Company’s operations and cash flows for the periods presented. All of these adjustments are of a normal recurring nature. All significant intercompany balances and transactions have been eliminated in consolidation. Because of the seasonal nature of the Company’s operations, results of operations of any single reporting period should not be considered as indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended January 2, 2010 which were included in the Company’s annual report on Form 10-K filed with the SEC on March 18, 2010.Licensing and EntertainmentCommercial segment were previously reported net of the related cost of sales and are now reported gross.on a gross revenue basis. Prior year amounts have been conformed to match the current year’s presentation. The impact for the periodthirteen and thirty-nine weeks ended April 4,October 3, 2009 was an increase to both licensingcommercial revenue and cost of sales of $0.3 million. April 3,
2010 January 2,
2010 $ 8,063 $ 8,334 5,062 6,600 3,937 4,395 $ 17,062 $ 19,329 October 2, January 2, 2010 2010 Prepaid rent $ 8,017 $ 8,334 Prepaid income taxes 4,373 6,600 Other 6,857 4,395 $ 19,247 $ 19,329 Financial Accounting Standards Board Accounting Standards Codification(ASC)ASC Section 350-20 and is reported as a component of the Company’s retail segment. The following table summarizes the changes in goodwill for the thirteenthirty-nine weeks ended April 3,October 2, 2010 (in thousands): $ 33,780 (1,915 ) $ 31,865 Balance as of January 2, 2010 $ 33,780 Effect of foreign currency translation (736 ) Balance as of October 2, 2010 $ 33,044 4.In the 2010 third quarter, certain other non-current assets were obtained through a single wholesale transactions whereby the Company exchanged $5.8 million of inventory, at cost, with a third-party vendor for $4.3 million of credits for future media purchases and $1.5 million in cash. The transaction was accounted for based upon the fair values of the assets involved in the transaction. In accordance with Accounting Standards Codification (ASC) Section 845-10, in an exchange transaction for advertising credits, the fair value of the asset being surrendered cannot exceed its carrying value, meaning that the sale of the inventory was recorded at its cost in the Commercial segment. The media credits expire in 2015.April 3,October 2, 2010, selling, general and administrative expenses includes $1.2 million ($0.7 million after tax) and $3.7 million ($2.2 million after tax), respectively, of stock-based compensation expense. For the thirteen and thirty-nine weeks ended April 4,October 3, 2009, selling, general and administrative expense includes $0.9$1.1 million ($0.50.7 million after tax) and $3.1 million ($1.9 million after tax), respectively, of stock-based compensation expense.April 3,October 2, 2010, there was $10.4$8.1 million of total unrecognized compensation expense related to nonvested restricted stock and option awards which is expected to be recognized over a weighted-average period of 1.81.6 years.5.shareshar e of stock awarded pursuant to an option or subject to the exercised portion of a SAR reduces the number of shares available by one share. Each share of stock awarded pursuant to any other stock-based awards, including restricted stock grants, reduces the number of shares available by 1.27 shares.thirteenthirty-nine weeks ended April 3,October 2, 2010: Number of
Shares Weighted
Average
Exercise Price Weighted
Average
Remaining
Contractual Term Aggregate
Intrinsic
Value (in
thousands) 805,347 $ 9.51 379,892 6.59 26,000 0.47 19,454 7.81 1,139,785 $ 8.77 7.8 $ 1,260 422,949 $ 13.73 5.0 $ 315 Weighted Aggregate Weighted Average Intrinsic Number of Average Remaining Value Shares Exercise Price Contractual Term (in thousands) Outstanding, January 2, 2010 805,347 $ 9.51 Granted 390,088 6.62 Exercised 28,484 0.87 Forfeited 40,332 8.98 Outstanding, October 2, 2010 1,126,619 $ 8.75 7.3 $ 382 Options Exercisable As Of: October 2, 2010 419,132 $ 13.59 4.5 $ 96 April 3,October 2, 2010 was determined using the Black-Scholes option pricing model and the provisions of Staff Accounting Bulletin (SAB) 107 and 110, which allow the use of a simplified method to estimate the expected term of “plain vanilla” options. The assumptions used in the option pricing model for the thirteen weeks ended April 3, 2010 were: (a) dividend yield of 0%; (b) volatility of 65%; (c) risk-free interest rates of 3.0%ranging from 2.1% to 3.4%; and (d) an expected life of 6.25 years.April 4,October 3, 2009 was determined using the Black-Scholes option pricing model and the provisions of SABStaff Accounting Bulletin (SAB) 107 and 110, which allow the use of a simplified method to estimate the expected term of “plain vanilla” options. The assumptions used in the option pricing model for the thirteen weeks ended April 4, 2009 were: (a) dividend yield of 0%; (b) volatility of 65%; (c) risk-free interest rates ranging from 2.3% to 2.4%3.1%; and (d) an expected life of 6.25 years.thirteenthirty-nine weeks ended April 3,October 2, 2010: Number of
Shares Weighted
Average Grant
Date Fair Value
per Award 1,450,313 $ 7.23 396,340 6.59 259,968 11.97 24,822 6.88 1,561,863 $ 6.29 Weighted Average Grant Number of Date Fair Value Shares per Award Outstanding, January 2, 2010 1,450,313 $ 7.23 Granted 401,976 6.61 Vested 283,302 11.68 Canceled or expired 79,674 6.69 Outstanding, October 2, 2010 1,489,313 $ 6.25 thirteenthirty-nine weeks ended April 3,October 2, 2010 and April 4,October 3, 2009 was $1.7$1.9 million and $0.9 million, respectively.6. Thirteen weeks ended April 3,
2010 April 4,
2009 $ 1,679 $ (826 ) 18,974,540 18,783,915 100,995 — 316,944 — 19,392,479 18,783,915 $ 0.09 $ (0.04 ) $ 0.09 $ (0.04 ) Thirteen weeks ended Thirty-nine weeks ended October 2, October 3, October 2, October 3, 2010 2009 2010 2009 Net loss $ (1,378 ) $ (4,763 ) $ (8,176 ) $ (11,557 ) Weighted average number of common shares outstanding 18,426,860 18,876,697 18,755,941 18,844,009 Effect of dilutive securities: Stock options - - - - Restricted stock - - - - Weighted average number of common shares - dilutive 18,426,860 18,876,697 18,755,941 18,844,009 Loss per share: Basic $ (0.07 ) $ (0.25 ) $ (0.44 ) $ (0.61 ) Diluted $ (0.07 ) $ (0.25 ) $ (0.44 ) $ (0.61 ) earningsloss per share for the thirteen and thirty-nine weeks ended April 3,October 2, 2010, options to purchase 1,123,6411,126,619 shares of common stock were outstanding as of the end of the period, but were not included in the computation of diluted earningsloss per share due to their anti-dilutive effect. An additional 592,4921,489,313 shares of restricted common stock were outstanding at the end of the period, but excluded from the calculation of diluted earningsloss per share for the thirteen and thirty-nine weeks ended October 2, 2010 due to their anti-dilutive effect.earningsloss per share for the thirteen and thirty-nine weeks ended April 4,October 3, 2009, options to purchase 819,537814,253 shares of common stock were outstanding as of the end of the period, but were not included in the computation of diluted earningsloss per share due to their anti-dilutive effect. An additional 1,031,2361,493,243 shares of restricted common stock were outstanding at the end of the period, but excluded from the calculation of diluted earningsloss per share for the thirteen and thirty-nine weeks ended October 3, 2009 due to their anti-dilutive effect.7. Comprehensive LossComprehensive loss was $2.7 million and $0.3 million for the thirteen weeks ended April 3, 2010 and April 4, 2009, respectively. The difference between comprehensive income and net income resulted from foreign currency translation adjustments on the balance sheets of subsidiaries whose functional currency is not the US Dollar.8.April 3,October 2, 2010 and January 2, 2010, there werethe Company had approximately $0.5 million and $0.6 million, respectively, of unrecognized tax benefits. During the next twelve months, it is reasonably possible to reduce unrecognized tax benefits by $0.3$0.2 million either because the tax positions are sustained on audit, settlements are reached or expiration of the statute of limitations.April 3,October 2, 2010 and January 2, 2010, there was approximately $0.1 million of accrued interest related to uncertain tax positions.9.licensing and entertainment.commercial. The retail segment includes the operating activities of company-owned stores in the United States, including Puerto Rico, Canada, the United Kingdom, Ireland, France and other retail delivery operations, including the Company’s webWeb store and non-traditional store locations such as baseball ballparks. The international franchising segment includes the licensing activities of the Company’s franchise agreements with store locations in Europe, outside of France, Asia, Australia and Africa. The commercial segment, formerly referred to as the licensing and entertainment segment, has been established to marketincludes the naming and branding rightsCompany’s transactions with other business partners, mainly comprised of the licensing of the Company’s intellectual property, including entertainment properties, for third party use.use and wholesale product sales. No changes to prior year licensing and entertainment segment amounts were required to conform to the current year commercial segment presentation. This segment has historically included an immaterial amount of wholesale transactions. In the 2010 third quarter, the wholesale revenue became significant. Accordingly, the name and description of the segment has been revised to more fully describe the activities of the segment. The operating segments have discrete sources of revenue, different capital structures and different cost structures. These operating segments represent the basis on which the Company’s chief operating decision maker regularly evaluates the business in assessing performance, determining the allocation of resources and the pursuit of future growth opportunities. Accordingly, the Company has determined that each of its operating segments represent one reportable segment. The reportable segments follow the same accounting policies used for the Company’s consolidated financialsfinancial statements. Retail International
Franchising Licensing &
Entertainment Total $ 99,786 $ 683 $ 967 $ 101,436 1,909 339 570 2,818 3,221 36 — 3,257 6,765 103 — 6,868 $ 96,316 $ 597 $ 752 $ 97,665 (1,692 ) 244 342 (1,106 ) 2,089 61 — 2,150 6,925 114 — 7,039 $ 261,903 $ 3,436 $ 3,332 $ 268,671 $ 263,305 $ 2,804 $ 2,936 $ 269,045 International Retail Franchising Commercial Total Thirteen weeks ended October 2, 2010 Net sales to external customers $ 91,689 $ 767 $ 7,637 $ 100,093 Income (loss) before income taxes (3,342 ) 411 1,029 (1,902 ) Capital expenditures, net 3,724 74 - 3,798 Depreciation and amortization 6,530 179 - 6,709 Thirteen weeks ended October 3, 2009 Net sales to external customers $ 89,731 $ 945 $ 1,670 $ 92,346 Income (loss) before income taxes (10,764 ) 515 839 (9,410 ) Capital expenditures, net 2,805 133 - 2,938 Depreciation and amortization 6,906 119 - 7,025 Thirty-nine weeks ended October 2, 2010 Net sales to external customers $ 263,963 $ 2,112 $ 9,588 $ 275,663 Income (loss) before income taxes (14,915 ) 1,005 2,222 (11,687 ) Capital expenditures, net 10,072 136 - 10,208 Depreciation and amortization 19,938 400 - 20,338 Thirty-nine weeks ended October 3, 2009 Net sales to external customers $ 267,354 $ 2,153 $ 3,336 $ 272,843 Income (loss) before income taxes (23,597 ) 1,042 1,590 (20,965 ) Capital expenditures, net 6,422 229 - 6,651 Depreciation and amortization 20,773 341 - 21,114 Total Assets as of: October 2, 2010 $ 239,672 $ 2,817 $ 10,382 $ 252,871 October 3, 2009 $ 258,403 $ 3,222 $ 3,430 $ 265,055 North
America (1) Europe (2) Other (3) Total $ 84,968 $ 15,785 $ 683 $ 101,436 84,083 11,858 — 95,941 $ 82,960 $ 14,108 $ 597 $ 97,665 103,931 13,399 1 117,331 North America (1) Europe (2) Other (3) Total Thirteen weeks ended October 2, 2010 Net sales to external customers $ 83,333 $ 15,993 $ 767 $ 100,093 Property and equipment, net 78,082 12,315 - 90,397 Thirteen weeks ended October 3, 2009 Net sales to external customers $ 73,830 $ 17,571 $ 945 $ 92,346 Property and equipment, net 94,239 13,377 - 107,616 Thirty-nine weeks ended October 2, 2010 Net sales to external customers $ 229,627 $ 43,924 $ 2,112 $ 275,663 Property and equipment, net 78,082 12,315 - 90,397 Thirty-nine weeks ended October 3, 2009 Net sales to external customers $ 224,838 $ 45,852 $ 2,153 $ 272,843 Property and equipment, net 94,239 13,377 - 107,616 (1) North America includes company-owned stores in the United States, Canada and Puerto Rico.Rico(2) Europe includes company-owned stores in the United Kingdom, Ireland and France.France(3) Other includes franchise businesses outside of the United States, Canada, Puerto Rico, the United Kingdom, Ireland and France.France10.site.site. During the thirteen and thirty-nine weeks ended April 4,October 3, 2009, the Company recorded pre-tax charges of $0.5$0.2 and $1.0 million, respectively, related to the closures, which consisted of lease termination charges and construction costs, and are included in “Store closing” expenses in the Consolidated Statements of Operations. As of October 3, 2009, all nine locations were closed and the fixtures had been removed from all Build-A-Bear Workshop stores.company-ownedCompany-owned stores; we may be unable to effectively manage our international franchises or laws relating to those franchises may change; the availability and costs of our products could be adversely affected by risks associated with international manufacturing and trade, including foreign currency fluctuation; we are susceptible to disruption in our inventory flow due to our reliance on a few vendors; high petroleum products prices could increase our inventory transportation costs and adversely affect our profitability; we may be unable to operate our European company-ownedCompany-owned stores profitably; fluctuations in our quarterly results of operations could cause the price of our common stock to substantially decline; we may be unable to repurchase shares at all or at the times or in the amounts we currently anticipate or the results of the share repurchase program may not be as beneficial as we currently anticipate; we may improperly obtain or be unable to protect information from our guests in violation of privacy or security laws or expectations; we may suffer negative publicity or be sued due to violations of labor laws or unethical practices by manufacturers of our merchandise; we may suffer negative publicity or negative sales if the non-proprietary toy products we sell in our stores do not meet our quality or sales expectations; our products could become subject to recalls or product liability claimscla ims that could adversely impact our financial performance and harm our reputation among consumers; we may lose key personnel, be unable to hire qualified additional personnel, or experience turnover of our management team; we may be unable operate our company-ownedCompany-owned distribution center efficiently or our third-party distribution center providers may perform poorly; our market share could be adversely affected by a significant, or increased, number of competitors; we may fail to renew, register or otherwise protect our trademarks or other intellectual property; we may have disputes with, or be sued by, third parties for infringement or misappropriation of their proprietary rights; poor global economic conditions could have a material adverse effect on our liquidity and capital resources; and we may be unable to recover amounts due to us from our affiliate, Ridemakerz, LLC. These risks, uncertainties and other factors may adversely affect our business, growth, financial condition or profitability, or subject us to potential liability, and cause our actual results, performance or achievements to be materially different from those expressed or implied by our forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.April 3,October 2, 2010, we operated 291 stores in the United States, Canada, and Puerto Rico, 5456 stores in the United Kingdom, Ireland and France, and had 6358 franchised stores operating internationally under the Build-A-Bear Workshop brand. We alsoIn addition to our stores, we market our products and build our brand through our website,multiple websites, which simulates our interactive shopping experience, as well as non-traditional store locations in four Major League Baseball® parks,ballparks, one location in a zoo and one location in a science center. Seasonal locations, such as ballparks, pop-up locations and zoos, are excluded from our store count.5456 stores, including threetwo in France. We have adopted internal best practices in the areas of merchandising, marketing, purchasing and store operations, across the acquired store base that resulted in improved sales and earnings from the acquisition.licensing and entertainment)commercial) that share the same infrastructure, including management, systems, merchandising and marketing, and generate revenues as follows:threemultiple e-commerce websitesWeb sites or “webstores”“Web stores”;License arrangementsparties that manufactureparty use and sell to other retailers merchandise carrying the Build-A-Bear Workshop brand.wholesale product sales.April 3,October 2, 2010 and April 4,October 3, 2009 are set forth in the notes to our condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.16.8%11.7% for the thirteenthirty-nine weeks ended April 3,October 2, 2010 and 13.6%10.1% for the thirteenthirty-nine weeks ended April 4,October 3, 2009 and consolidated net income as a percentage of total revenues was 1.7% for the thirteen weeks ended April 3, 2010 and consolidated net loss as a percentage of total revenues was 0.8%3.0% for the thirteenthirty-nine weeks ended April 4,October 2, 2010 and 4.3% for the thirty-nine weeks ended October 3, 2009. See “— Non-GAAP“Non-GAAP Financial Measures” for a definition of store contribution and a reconciliation of store contribution to net income or loss. The increase in our store contribution over the prior year was primarily due to the increase in comparable store sales and the corresponding increase in gross margins as we were able to leverage our fixed occupancy costs in our North American operations. Additional improvements in gross margin that were driven by increasedincreases in merchandise margin, resulting fromimproved sales leverage on fixed store occupancy costs and decreases in marketing spend and store payroll as compared to the change in product mix. Thirteen Weeks
Ended April 3,
2010 April 4,
2009 1.9 % (20.5 )% 3.2 % 5.6 % 2.1 % (17.8 )% Thirteen weeks ended Thirty-nine weeks ended October 2, October 3, October 2, October 3, 2010 2009 2010 2009 North America 5.3 % (16.0 )% (0.5 )% (18.2 )% Europe (6.6 )% 2.5 % (4.7 )% 5.3 % Consolidated 3.1 % (12.9 )% (1.2 )% (15.0 )% the increase inour comparable store sales for the period presented is primarily attributable towere impacted by the following factors:sales.sales in the third quarter. With this integratedfocused message, we believe that we were able to capitalize on increased mall traffic associated with the shift of the Easter holiday with a slight4.6% increase in the number of transactions and a 2%slight increase in average transaction value;value, andcalendar shift of the Easter holidayeconomic recession and associated school breaks from the fiscal 2009 second quarterdecline in consumer confidence continue to the fiscal 2010 first quarter positively impactedimpact consumer spending and our comparable store sales.sales, particularly in Europe.The Company is working to continue this positive trend inStorescompany-ownedCompany-owned stores in the United States, Canada, Puerto Rico (collectively, North America), the United Kingdom, Ireland, and France (collectively, Europe) for the periods presented: Thirteen weeks
ended April 3,
2010 April 4,
2009 345 346 — — — — 345 346 Thirty-nine weeks ended October 2, October 3, 2010 2009 Beginning of period 345 346 Opened 4 1 Closed (2 ) (2 ) End of period 347 345 anticipate openingopened one Build-A-Bear Workshop store in North America and twothree new stores in Europe. We have plans to close a small number of stores and open no permanent locations in the United Kingdom.2010 fourth quarter. We believe there is a market potential for at least 350 Build-A-Bear Workshop stores in the United States and CanadaNorth America, and approximately 70 to 75 stores in the United Kingdom and Ireland.inrelated products. All remaining closures were completed during the fiscal 2009 third quarter,quarter. Other than the closure was completed. Oneone stand-alone store, these Friends 2B Made location wasstores were not included in our store count, but rather were considered a store; the other eight locations were expansions of existing Build-A-Bear Workshop stores. Accordingly, the closures of the eight expansions are not included in the number of store closings noted above.Locationsavailability and the financial terms associated with the venue.availability. As of April 3,October 2, 2010, we had a total of four ballpark locations, one store within a zoo and one store within a science center. Seasonal locations, such as ballparks, pop-up locations and zoos, are excluded from our store count.Revenue Thirteen weeks ended April 3,
2010 April 4,
2009 65 62 2 1 (4 ) (3 ) 63 60 Thirty-nine weeks ended October 2, October 3, 2010 2009 Beginning of period 65 62 Opened 5 6 Closed (12 ) (7 ) End of period 58 61 April 3,October 2, 2010, we had master franchise agreements, which typically grant franchise rights for a particular country or countries, covering 1715 countries. In the ordinary course of business, weWe anticipate signing additional master franchise agreements in the future and terminating other such agreements.future. We expect our current and future franchisees to open approximately three to five stores in the fourth quarter of fiscal 2010, net of closures.2010. We believe there is a market potential for approximately 300 franchised stores outside of the United States, Canada, Puerto Rico, the United Kingdom, Ireland and France.willmay not total due to the cost of merchandise sold being expressed as a percentage of net retail sales and immaterial rounding: Thirteen weeks ended April 3,
2010 April 4,
2009 98.4 % 98.9 % 0.7 0.6 1.0 0.8 100.0 100.0 58.2 62.8 39.0 37.8 0.0 — — 0.5 (0.0 ) (0.0 ) 97.2 101.1 2.8 (1.1 ) 1.1 (0.3 ) 1.7 (0.8 )% 41.1 % 36.6 % Thirteen weeks ended Thirty-nine weeks ended October 2, October 3, October 2, October 3, 2010 2009 2010 2009 Revenues: Net retail sales 91.6 % 97.2 % 95.8 % 98.0 % Licensing revenue 7.6 1.8 3.5 1.2 Franchise fees 0.8 1.0 0.8 0.8 Total revenues 100.0 100.0 100.0 100.0 Costs and expenses: Cost of merchandise sold 62.7 62.4 62.4 63.8 Selling, general and administrative 39.1 42.5 41.7 41.7 Store preopening 0.3 0.1 0.1 0.0 Store closing - 0.3 - 0.4 Equity losses from investment in affiliate - 5.0 - 1.9 Interest expense (income), net (0.1 ) (0.0 ) (0.1 ) (0.0 ) Total costs and expenses 101.9 110.2 104.2 107.7 Loss before income taxes (1.9 ) (10.2 ) (4.2 ) (7.7 ) Income tax benefit (0.5 ) (5.0 ) (1.3 ) (3.4 ) Net loss (1.4 ) (5.2 ) (3.0 ) (4.2 ) 38.6 % 36.5 % 37.4 % 35.4 % (1) Retail gross margin represents net retail sales less retail cost of retail merchandise sold, which excludes cost of wholesale merchandise sold. Retail gross margin was $ 35.4 million and $98.8 million for the thirteen and thirty-nine weeks ended October 2, 2010, respectively, and $32.7 million and $94.7 million for the thirteen and thirty-nine weeks ended October 3, 2009, respectively. Retail gross margin percentage represents retail gross margin divided by net retail sales.April 3,October 2, 2010 compared to thirteen weeks ended April 4,October 3, 2009$99.8$91.7 million for the thirteen weeks ended April 3,October 2, 2010 from $96.3$89.7 million for the thirteen weeks ended April 4,October 3, 2009, an increase of $3.5$2.0 million, or 3.6%2.2%. This increase was primarily attributable to a $1.9$2.6 million increase in comparable store sales, a $1.7$0.8 million positive impact of foreign currency translationincrease in other non-store locations and $0.6a $0.4 million increase in sales from non-store locations.new stores. These increases were partially offset by decreasesa $0.7 million negative impact of $0.8foreign currency translation, $0.6 million which includedin changes in deferred revenue adjustment and $0.5 million decreased sales from non-comparable store locations.the increase inour comparable store sales for the periods presented is primarily attributable towere impacted by the following factors:sales.sales in the third quarter. With this integratedfocused message, we believe that we were able to capitalize on increased mall traffic associated with the shift in the Easter holiday with a slight4.6% increase in the number of transactions and a 2%slight increase in average transaction value;value, andcalendar shift of the Easter holidayeconomic recession and associated school breaks from the fiscal 2009 second quarterdecline in consumer confidence continue to the fiscal 2010 first quarter positively impactedimpact consumer spending and our comparable store sales.sales, particularly in Europe.Revenue from franchise fees$0.7$7.6 million for the thirteen weeks ended April 3,October 2, 2010 from $0.6$1.7 million for the thirteen weeks ended April 4, 2009.October 3, 2009, an increase of $6.0 million. This increase was primarily duerelated to having three more locations in the 2010 first quarter as compared to the same period in 2009.a single $5.8 million wholesale transaction with no associated gross margin. We also increased revenues through our collaboration with Michael’s Stores and Borders. Revenue from licensing increasedfranchise fees decreased to $1.0 million for the thirteen weeks ended April 3, 2010 from $0.8 million for the thirteen weeks ended April 4, 2009, an increase of $0.2 million. This increase was primarily related to the launch of new Wii and Nintendo DS games in theOctober 2, 2010 first quarter.Gross margin. Totalgross margin increased to $42.3from $0.9 million for the thirteen weeks ended AprilOctober 3, 2010 from $36.32009, a decrease of $0.1 million. This decrease was primarily due to the decline in the number of franchised locations and in franchisee store sales reflecting the global economic slowdown.April 4,October 2, 2010 from $34.7 million for the thirteen weeks ended October 3, 2009, an increase of $6.0$2.7 million, or 16.6%7.7%. Retail gross margin increased to $41.0$35.4 million for the thirteen weeks ended April 3,October 2, 2010 from $35.3$32.7 million for the thirteen weeks ended April 4,October 3, 2009, an increase of $5.7$2.7 million, or 16.1%8.3%. As a percentage of net retail sales, retail gross margin increased to 41.1%38.6% for the thirteen weeks ended April 3,October 2, 2010 from 36.6%36.5% for the thirteen weeks ended April 4,October 3, 2009, an increase of 450210 basis points as a percentage of net retail sales (bps). OurThis increase resulted primarily from improved sales le verage on store occupancy costs and a slight improvement in merchandise margin.expansion wasincreased to $103.5 million for the thirty-nine weeks ended October 2, 2010 from $98.8 million for the thirty-nine weeks ended October 3, 2009, an increase of $4.7 million, or 4.7%. Retail gross margin increased to $98.8 million for the thirty-nine weeks ended October 2, 2010 from $94.7 million for the thirty-nine weeks ended October 3, 2009, an increase of $4.1 million, or 4.3%. As a percentage of net retail sales, retail gross margin increased to 37.4% for the thirty-nine weeks ended October 2, 2010 from 35.4% for the thirty-nine weeks ended October 3, 2009, an increase of 200 bps. This increase resulted primarily driven byfrom a 20090 bps increaseimprovement in merchandise margin, 70 bps impr oved sales leverage on store occupancy costs and a 40 bps improvement in leverage inon buying and occupancy of 210 bps.distribution costs.$39.5$115.0 million for the thirteenthirty-nine weeks ended April 3,October 2, 2010 as compared to $36.9$113.7 million for the thirteenthirty-nine weeks ended April 4,October 3, 2009, an increase of $2.6$1.4 million, or 7.1%1.2%. As a percentage of total revenues, excluding the single wholesale transaction, selling, general and administrative expenses increased to 39.0%43.6% for the thirteenthirty-nine weeks ended April 3,October 2, 2010 as compared to 37.8%41.7% for the thirteenthirty-nine weeks ended April 4,October 3, 2009, an increase of 120190 bps. TheBoth the dollar increase and the increase as a percent of revenue were primarily due to increases in suppliescentral office payroll and depreciation, charges related to supportthe decision to close a small number of stores within the fiscal year as well as having three more stores in operation as compared to the same period last year. These increases were partially offset by reductions in marketing expenses.themes and increasespreopening for the period was the result of four store openings in salaries and incentive compensation.fiscal 2010 as compared to one store opening in the last fiscal year. Additionally, we plan to open 11 pop-up stores in the 2010 fourth quarter. Preopening expenses include expenses for stores that opened in the current period as well as expenses incurred for stores that will open in future periods.closing. closing. Store closing expense was $0.5$1.0 million for the thirteenthirty-nine weeks ended April 4,October 3, 2009 and consisted primarily of lease termination charges, inventory write-offs and construction costs incurred to reformat locations for return to the landlord related to the closure of the Friends 2B Made concept.$32,000 and $24,000 for the thirteen weeks ended April 3, 2010 and April 4, 2009, respectively.Provision for income taxes. The provision for income taxes was $1.1$0.2 million for the thirteenthirty-nine weeks ended April 3,October 2, 2010 as compared to $0.1 million for the thirty-nine weeks ended October 3, 2009.of $0.3was $3.5 million for the thirteenthirty-nine weeks ended April 4,October 2, 2010 as compared to $9.4 million for the thirty-nine weeks ended October 3, 2009. The effective tax rate was 40.4%30.0% for the thirteenthirty-nine weeks ended April 3,October 2, 2010 compared to 25.4%44.9% for the thirteenthirty-nine weeks ended April 4,October 3, 2009. The increasedecrease in the effective tax rate was primarily attributable to the impact of recording a valuation allowanceallowances recorded for losses incurred in onecertain tax jurisdictions and lower tax rates in foreign tax jurisdiction in a profitable quarter in 2010 as compared to losses in the same period in 2009.jurisdictions. amortization,impairment, store preopening expense, store closing expense and equity losses from investment in affiliate and general and administrative expense, excluding franchise fees, income from licensingcommercial 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). a supplement to, and not 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 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.(in(Dollars in thousands): Thirteen weeks ended
April 3, 2010 Thirteen weeks ended
April 4, 2009 North
America Europe Total North
America Europe Total $ 1,461 $ 218 $ 1,679 $ (104 ) $ (722 ) $ (826 ) 1,044 95 1,139 (120 ) (160 ) (280 ) (1 ) (31 ) (32 ) (4 ) (20 ) (24 ) 4,045 609 4,654 4,373 637 5,010 11 — 11 — — — — — — 501 — 501 9,938 754 10,692 8,890 879 9,769 (1,012 ) — (1,012 ) (700 ) — (700 ) (727 ) (154 ) (881 ) (615 ) (117 ) (732 ) $ 14,759 $ 1,491 $ 16,250 $ 12,221 $ 497 $ 12,718 $ 85,651 $ 15,785 $ 101,436 $ 83,557 $ 14,108 $ 97,665 (1,650 ) — (1,650 ) (1,349 ) — (1,349 ) (2,688 ) (485 ) (3,173 ) (2,638 ) (432 ) (3,070 ) $ 81,313 $ 15,300 $ 96,613 $ 79,570 $ 13,676 $ 93,246 18.2 % 9.7 % 16.8 % 15.4 % 3.6 % 13.6 % 1.7 % 1.4 % 1.7 % (0.1 )% (5.1 )% (0.8 )% Thirty-nine weeks ended Thirty-nine weeks ended October 2, 2010 October 3, 2009 North North America Europe Total America Europe Total Net loss $ (6,417 ) $ (1,759 ) $ (8,176 ) $ (10,854 ) $ (703 ) $ (11,557 ) Income tax expense (benefit) (3,531 ) 20 (3,511 ) (9,530 ) 122 (9,408 ) Interest expense (income) (65 ) (126 ) (191 ) (54 ) (38 ) (92 ) Store depreciation, amortization and impairment (1) 11,848 2,082 13,930 13,243 1,975 15,218 Store preopening expense 162 181 343 90 - 90 Store closing expense (2) - - - 981 - 981 Equity losses from investment in affiliate (3) - - - 5,125 - 5,125 General and administrative expense (4) 30,184 2,956 33,140 28,397 2,440 30,837 Franchising and commercial contribution (5) (3,399 ) - (3,399 ) (2,972 ) - (2,972 ) Non-store activity contribution (6) (1,807 ) (472 ) (2,279 ) (1,846 ) (322 ) (2,168 ) Store contribution $ 26,975 $ 2,882 $ 29,857 $ 22,580 $ 3,474 $ 26,054 Total revenues from external customers $ 231,739 $ 43,924 $ 275,663 $ 226,991 $ 45,852 $ 272,843 Franchising and commercial revenues (11,700 ) - (11,700 ) (5,489 ) - (5,489 ) Revenues from non-store activities (6) (7,926 ) (1,273 ) (9,199 ) (8,179 ) (1,213 ) (9,392 ) Store location net retail sales $ 212,113 $ 42,651 $ 254,764 $ 213,323 $ 44,639 $ 257,962 Store contribution as a percentage of store location net retail sales 12.7 % 6.8 % 11.7 % 10.6 % 7.8 % 10.1 % Total net loss as a percentage of total revenues -2.8 % -4.0 % -3.0 % -4.8 % -1.5 % -4.2 % (1) Store depreciation, amortization and impairment includes depreciation and amortization of all capitalized assets in store locations, including leasehold improvements, furniture and fixtures, and computer hardware and software and store asset impairment charges, included in cost of merchandise sold. (2) Store closing expense represents asset impairment and other charges related to the closure of the Friends 2B Made concept. (3) Equity losses from investment in affiliate represent the Company’s portion of losses of Ridemakerz. (4) General and administrative expenses consist of non-store, central office general and administrative functions such as management payroll and related benefits, travel, information systems, accounting, purchasing and legal costs as well as the depreciation and amortization of central office leasehold improvements, furniture and fixtures, computer hardware and software, including assets related to the virtual world, and intellectual property. General and administrative expenses also include a central office marketing department, primarily payroll and related benefits expense, but exclude advertising expenses, such as direct mail catalogs and television advertising, which are included in store contribution. (4)(5)Franchising and licensingcommercial contribution includes franchising and licensingcommercial revenues and all expenses attributable to the international franchising and licensing and entertainmentcommercial segments other than depreciation, amortization and interest expense/income. Depreciation and amortization related to the franchising and licensingcommercial segments is included in the general and administrative expense caption. Interest expense/income related to the franchising and licensingcommercial segments is included in the interest expense (income) caption.(5)(6)Non-store activities include our webstores, and seasonal and event-based locations as well as intercompany transfer pricing charges. and closings and related expenses; (7) changes in consumer preferences; (8) the effectiveness of our inventory management; (9) the actions of our competitors or mall anchors and co-tenants; (10) seasonal shopping patterns and holiday and vacation schedules; and (11) weather conditions.assure youensure that this will continue to be the case. European-based store sales have historically been weighted more heavily in the fourth quarter as compared to North American stores. In addition, 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 2008 fiscal fourth quarter had 14 weeks.Over the past several years,Historically, we have met these requirements through capital generated from cash flow provided by operations. We have accessoperations, capital generated from the sale and issuance of our securities to additional cashprivate investors and through our initial public offering, and our revolving line of credit that has been in place since 2000.$1.0$17.3 million for the thirteenthirty-nine weeks ended April 3,October 2, 2010 as compared with cash used in operating activities of $10.9 million for the thirteenthirty-nine weeks ended April 4,October 3, 2009, or a decreasean increase of $9.9$6.4 million. This decreaseGenerally, changes in cash from operating activities are driven by changes in net income or loss and changes in operating assets and liabilities. In 2010, the use of cash was driven primarily by the net loss for the first nine months of 2010, the decrease in accrued expenses and other liabilities, specifically sales taxes and gift cards, and increased inventory. The increase in cash used fo r inventory relates primarily to purchases of incremental inventory necessary to launch new proprietary and non-proprietary product lines. Additional increases resulted from earlier receipt of holiday product, inventory for pop-up store openings and increased in-transit inventory due to longer required lead times. In 2009, the use of cash in operating activities overwas driven primarily by the net loss for the first nine months of 2009, which was primarily due to a decline in sales in the same period. In 2009, the change in operating assets and liabilities was driven by decreases in accounts payable and accrued expenses and offsetting decreases in inventory, primarily attributable to overall cost reductions as compared to the year ago period, was primarily due to the timing of payments for inventory purchases and the netan increase in prepaid expenses, specifically income of $1.7 million in the thirteen weeks ended April 3, 2010 as compared to net loss of $0.8 million in the thirteen weeks ended April 4, 2009.taxes.Activities. Activities. Cash used in investing activities was $3.3$10.2 million for the thirteenthirty-nine weeks ended April 3,October 2, 2010 as compared to $2.3$7.2 million for the thirteenthirty-nine weeks ended April 4,October 3, 2009. Cash used in investing activities during the thirteenthirty-nine weeks ended April 3,October 2, 2010 primarily relates to investments in software and equipment upgrades to the Company’s e-commerce platform and purchases of central office information technology systems and equipment.new store construction costs. Cash used in investing activities during the thirteenthirty-nine weeks ended April 4,October 3, 2009 primarily relates to investments in buildabearville.comcentral office information technology systems and the acquisition of trademarks and other intellectual property.Activities.Activities. Cash flows used in financing activities of $1.4was $7.2 million forin the thirteenthirty-nine weeks ended April 3,October 2, 2010 which consisted primarily of cash spentused for the repurchaserepurchases of the Company’s common stock. We had no cash flows from financing activities in the thirteenthirty-nine weeks ended April 4,October 3, 2009. No borrowings were made under our line of credit in either the thirteenthirty-nine weeks ended April 3,October 2, 2010 or the thirteen weeks ended April 4,October 3, 2009.April 3,October 2, 2010, we had a consolidated cash balance of $53.2$24.7 million, approximately halfnearly 60% of which was domiciled outside ofheld in the United States.Kingdom. 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 declaring dividends without the bank’s prior consent, unless such payment of dividends would not violate any terms of the credit agreement. Borrowings bear interest at LIBOR plus 2.05%. Financial covenants include maintaining a minimum tangible net worth, maintaining a minimum fixed charge coveragecover ratio (as defined in the credit agreement) and not exceeding a maximum funded debt to earnings before interest, depreciation and amortization ratio. As of April 3, 2010: (i)October 2, 2010 we were in compliance with these covenants;covenants, (ii) there were no borrowings under our line of credit;credit, (iii) there was a standby letter of credit of approximately $1.1 million outstanding under the credit agreement and (iv) there was approximately $38.9$48.9 million available for borrowing under thet he line of credit. upwards to reflect the current market rates. The leases typically provide the lessee with the first right for renewal at the end of the lease. We may also be required to make deposits and rent guarantees to secure new leases as we expand. Real estate taxes also change according to government time schedules to reflect current market rental rates for the locations we lease. Rents are charged quarterly and paid in advance.a total of $12 toapproximately $15 million on capital expenditures. Capital spending through the thirteenthirty-nine weeks ended April 3,October 2, 2010 totaled $3.3$10.2 million, on track with our full year plans. Capital spending in fiscal 2010 is primarily forrelates to investments in software and equipment upgrades to the continued installationCompany’s e-commerce platform and upgrades of central office information technology systems, the opening of three new stores and the relocation of one store.tot o be cash on hand. The timing and amount of share repurchases, if any, will depend on price, market conditions, applicable regulatory requirements, and other factors. The program does not require us to repurchase any specific number of shares and may be modified, suspended or terminated at any time without prior notice. Shares repurchased under the program will be subsequently retired.AsMay 7,our share repurchase program in 2007 through November 8, 2010, we have repurchased approximately 2.13.0 million shares of our common stock at an average price of $9.79$8.78 per share have been repurchased under this program for an aggregate amount of $20.7$26.3 million.April 3,October 2, 2010, the book value of our investment in Ridemakerz had been reduced to zero. We still retained an ownership interest of approximately 25%26%. Under the current agreements, we could own up to approximately 33%27% of fully diluted equityequit y in Ridemakerz.InflationWe do not believe that inflation has had a material adverse impact on our business or operating results during the periods presented. We cannot provide assurance, however, that our business will not be affected by inflation in the future.Securities and Exchange CommissionSEC on March 18, 2010, which includes audited consolidated financial statements for our 2009, 2008 and 2007 fiscal years. There have been no material changes to the critical accounting policies and estimates disclosed in the 2009 Form 10-K.at LIBOR plus 2.05%. We had no borrowings outstanding during the first nine months of fiscal 2010 first quarter.2010. Accordingly, a 100 basis point change in interest rates would result in no material change to our annual interest expense. The second component of interest rate risk involves the short term investment of excess cash in short term, investment grade interest-bearing securities. These investments are considered to be cash equivalents and are shown that way on our balance sheet. If there are changes in interest rates, those changes would affect the investment income we earn on these investments and, therefore, impact our cash flows and results of operations.Procedures.Procedures: The Company’s management, with the participation of the Company’s Chief Executive Bear and Chief Operations and Financial Bear, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of the period covered by this report. Based on such evaluation, the Company’s management, including the Chief Executive Bear and Chief Operations and Financial Bear, have concluded that the Company’s disclosure controls and procedures were effective as of April 3,October 2, 2010, the end of the period covered by this quarterly report.Reporting.Reporting: The Company’s management, with the participation of the Company’s Chief Executive Bear and Chief Operations and Financial Bear, also conducted an evaluation of the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) to determine whether any changes occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation, there has been no such change during the period covered by this report.Securities and Exchange CommissionSEC on March 18, 2010. (a)
Total Number of
Shares (or Units)
Purchased (1) (b)
Average
Price Paid
Per Share
(or Unit) (c)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs (2) (d)
Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units)
that May Yet Be
Purchased Under the
Plans or Programs 447 $ 5.03 — $ 30,987,972 8,896 $ 5.74 — $ 30,987,972 299,580 $ 6.62 210,133 $ 29,628,734 308,923 $ 6.59 210,133 $ 29,628,734 Period Jul. 4, 2010 – Jul. 31, 2010 - $ - - $ 27,701,610 Aug 1, 2010 – Aug. 28, 2010 442,501 $ 6.02 442,501 $ 25,037,959 Aug. 29 2010 – Oct. 2, 2010 237,431 $ 5.58 237,201 $ 23,714,009 Total 679,932 $ 5.87 679,702 $ 23,714,009 (1) Includes shares of our common stock delivered to us in satisfaction of the tax withholding obligation of holders of restricted shares which vested during the quarter.applicable period. Our equity incentive plans provide that the value of shares delivered to us to pay the withheld to cover tax obligations is calculated as the average of the high and low trading price of our common stock on the date the relevant transaction occurs.(2) On March 3, 2010, we announced the further extension of our $50 million share repurchase program of our outstanding common stock until March 31, 2011. The program was authorized by our board of directors. Purchases may be made in the open market or in privately negotiated transactions, with the level and timing of activity depending on market conditions, applicable regulatory requirements, and other factors. Purchase activity may be increased, decreased or discontinued at any time without notice. Shares purchased under the program are subsequently retired. Agreement and Plan of Merger dated April 3, 2000 between Build-A-Bear Workshop, L.L.C. and the Registrant (incorporated by reference from Exhibit 2.1 to our Registration Statement on Form S-1, filed on August 12, 2004, Registration No. 333-118142) Third Amended and Restated Certificate of Incorporation (incorporated by reference from Exhibit 3.1 of our Current Report on Form 8-K, filed on November 11,8, 2004) Amended and Restated Bylaws (incorporated by reference from Exhibit 3.43.2 to our Registration Statement on Form S-1, filed on August 12, 2004, Registration No. 333-118142) Specimen Stock Certificate (incorporated by reference from Exhibit 4.1 to Amendment No. 3 to our Registration Statement on Form S-1, filed on October 1, 2004, Registration No. 333-118142) Stock Purchase Agreement by and among the Registrant, Catterton Partners IV, L.P., Catterton Partners IV Offshore, L.P. and Catterton Partners IV Special Purpose, L.P. and the Purchasers named therein dated as of April 3, 2000 (incorporated by reference from Exhibit 4.2 to our Registration Statement on Form S-1, filed on August 12, 2004, Registration No. 333-118142) 4.3 Stock Purchase Agreement by and among the Registrant and the other Purchasers named therein dated as of September 21, 2001 (incorporated by reference from Exhibit 4.3 to our Registration Statement on Form S-1, filed on August 12, 2004, Registration No. 333-118142) 4.4 Amended and Restated Registration Rights Agreement, dated September 21, 2001 by and among Registrant and certain stockholders named therein (incorporated by reference from Exhibit 4.5 to our Registration Statement on Form S-1, filed on August 12, 2004, Registration No. 333-118142) 31.1 Rule 13a-14(a)/15d-14(a) certification (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed by the Chief Executive Bear) Rule 13a-14(a)/15d-14(a) certification (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed by the Chief Operations and Financial Bear) Section 1350 Certification (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Chief Executive Bear) Section 1350 Certification (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Chief Operations and Financial Bear)May 13,November 11, 2010(Registrant)By: By: /s/ Maxine Clark Maxine Clark Chairman of the Board and Chief Executive Bear By: By: /s/ Tina Klocke Tina Klocke Chief Operations and Financial Bear, Treasurer and Secretary 22