Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Notice Regarding Forward-Looking Statements
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties, and we undertake no obligation to update these statements except as required by the federal securities laws. Our actual results may differ materially from the results discussed in the forward-looking statements. These risks and uncertainties include, without limitation, those detailed under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2017, as filed with the SEC, and include the following:
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we depend upon the shopping malls in which we are located to attract guests to our stores and a decline in mall traffic could adversely affect our financial performance and profitability;
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if we are unable to generate interest in and demand for our interactive retail experience and products, including being able to identify and respond to consumer preferences in a timely manner, our sales, financial condition and profitability could be adversely affected;
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consumer interests change rapidly and our success depends on the ongoing effectiveness of our marketing and online initiatives to build consumer affinity for our brand, drive consumer demand for key products and generate traffic for our stores;
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decline in general global economic conditions could lead to disproportionately reduced consumer demand for our products, which represent relatively discretionary spending, and have an adverse effect on our liquidity and profitability;
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we may not be able to operate our international corporately-managed locations profitably;
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our merchandise is manufactured by foreign manufacturers and we transact business in various foreign countries; therefore, the availability and costs of our products, as well as our product pricing, may be negatively affected by risks associated with international manufacturing and trade and foreign currency fluctuations;
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if we are unable to renew, renegotiate or replace our store leases or enter into leases for new stores on favorable terms, or if we violate any of the terms of our current leases, our growth and profitability could be harmed;
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we are subject to a number of risks related to disruptions, failures or security breaches of our information technology infrastructure. If we improperly obtain or are unable to protect our data or violate privacy or security laws or expectations, we could be subject to liability as well as damage to our reputation;
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we may not be able to evolve our store locations to align with market trends or to effectively manage our overall portfolio of stores which could adversely affect our ability to grow and could significantly harm our profitability;
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we may not be able to operate successfully if we lose key personnel, are unable to hire qualified additional personnel, or experience turnover of our management team;
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we may suffer negative publicity or be sued if the manufacturers of our merchandise or of Build-A-Bear branded merchandise sold by our licensees ship any products that do not meet current safety standards or production requirements or if such products are recalled or cause injuries;
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we are subject to risks associated with technology and digital operations;
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we rely on a few vendors to supply substantially all of our merchandise, and significant price increases or any disruption in their ability to deliver merchandise could harm our ability to source products and supply inventory to our stores;
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our company-owned distribution center which services the majority of our stores in North America and our third-party distribution center providers used in the western United States and Europe may experience disruptions in their ability to support our stores or may operate inefficiently;
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we may fail to renew, register or otherwise protect our trademarks or other intellectual property and may be sued by third parties for infringement or, misappropriation of their proprietary rights, which could be costly, distract our management and personnel and which could result in the diminution in value of our trademarks and other important intellectual property;
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we may suffer negative publicity or be sued if the manufacturers of our merchandise violate labor laws or engage in practices that consumers believe are unethical;
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our profitability could be adversely affected by fluctuations in petroleum products prices;
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if we are unable to effectively manage our international franchises, attract new franchisees or if the laws relating to our international franchises change, our growth and profitability could be adversely affected and we could be exposed to additional liability;
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our business may be adversely impacted at any time by a significant variety of competitive threats;
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we may suffer negative publicity or a decrease in sales or profitability if the products from other companies that we sell in our stores do not meet our quality standards or fail to achieve our sales expectations;
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we may be unsuccessful in acquiring businesses or engaging in other strategic transactions, which may negatively affect our financial condition and profitability;
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fluctuations in our operating results could reduce our cash flow and we may be unable to repurchase shares at all or at the times or in the amounts we desire or the results of our share repurchase program may not be as beneficial as we would like;
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fluctuations in our quarterly results of operations could cause the price of our common stock to substantially decline;
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limited public float and trading volume for our common stock may have an adverse impact and cause significant fluctuation of market price; and
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our certificate of incorporation and bylaws and Delaware law contain provisions that may prevent or frustrate attempts to replace or remove our current management by our stockholders, even if such replacement or removal may be in our stockholders’ best interests.
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Overview
We are the only global company that offers an interactive “make your own stuffed animal” retail entertainment experience under the Build-A-Bear Workshop brand, in which guests participate in the stuffing, fluffing, dressing, accessorizing and naming of their own teddy bears and other stuffed animals. As of
November 3, 2018
, we operated 371 stores globally and had 94 franchised stores operating internationally under the Build-A-Bear Workshop brand. In addition to our stores, we sell products on our company-owned e-commerce sites, third party e-commerce marketplaces, franchisee sites and through third party retail locations under wholesale agreements.
We operate in three segments that share the same infrastructure, including management, systems, merchandising and marketing, and generate revenues as follows:
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Direct-to-consumer (“DTC”) – Corporately-managed retail stores located in the United States, the United Kingdom, Canada, China, Denmark, Ireland and Puerto Rico and two e-commerce sites;
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•
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Commercial – Transactions with other businesses, mainly comprised of wholesale product sales and licensing our intellectual property, including entertainment properties, for third-party use; and
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•
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International Franchising – Sales-based royalties and merchandise, including supplies and fixture sales, as well as development fees and other revenue from international operations under franchise agreements.
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Selected financial data attributable to each segment for the thirteen and thirty-nine week periods ended
November 3, 2018
and
October 28, 2017
are set forth in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Strategy
We expect to improve consolidated sales and profit through the following key initiatives:
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Development of our experiential retail model to diversify and expand the impact and reach of our brand globally:
We expect to continue to diversify our real estate portfolio to focus on places where families are increasingly going to shop or going for entertainment. We have been actively identifying and securing more tourist locations. We also expect to continue to diversify our store portfolio inclusive of a new, lower capital, more flexible “concourse shop” model. We expect to continue to make improvements to our aged store fleet by leveraging our new Discovery format in conjunction with select natural lease events such as lease renewals or terminations. Overall, these locations continue to perform ahead of heritage locations in both sales and profitability. In addition, we expect to continue to grow e-commerce sales. We expect to expand globally through existing and new franchise agreements including the recently added franchises in China and India.
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Leverage the power of our brand and intellectual properties to build margin accretive revenue streams:
To meet the needs of our core consumer base (girls and boys ages 3 to 12) while systematically building secondary consumer segments (including collectors, gift-givers and teen-plus), we expect to continue to develop and expand offerings of successful intellectual properties balanced with core products and a comprehensive program of key licensed products. We expect to leverage the power of both our Build-A-Bear brand as well as our other intellectual properties to further develop our outbound licensed programs and expand these and other margin accretive revenue streams. We also expect to build the entertainment aspects of our business model as we continue to develop content to connect with consumers beyond our retail stores including mobile apps, music videos and other entertainment opportunities to increase engagement, improve efficiency and lead to profitable sales growth.
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Long-Term Profitability Improvement:
We are focused on improving profitability through the execution of our stated strategies detailed above as well as disciplined expense management and on-going efforts in process and systems upgrades. While we continue to monitor consolidated comparable sales as an important metric in our business, we believe that total revenue growth and profitability improvement are more indicative of the progress in our business initiatives on a go forward basis.
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Retail Stores:
The table below sets forth the number of Build-A-Bear Workshop corporately-managed stores in North America, Europe and Asia for the periods presented:
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Thirty-nine weeks ended
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November 3, 2018
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October 28, 2017
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North
America
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Europe
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Asia
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Total
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North
America
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Europe
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Asia
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Total
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Beginning of period
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294
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59
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1
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354
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277
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60
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1
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338
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Opened
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27
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1
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28
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26
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1
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-
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27
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Closed
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(9
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)
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(2
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(11
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(11
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(3
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)
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-
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(14
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)
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End of period
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312
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58
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1
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371
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292
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58
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1
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351
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During 2018, we have continued to make improvements to our aged store fleet by leveraging the new Discovery format in conjunction with select natural lease events. As of
November 3, 2018
, 37% of our store base was in an updated Discovery design. We also expect to close certain stores in accordance with natural lease events as an ongoing part of our real estate management and day-to-day operational plans. Current plans include expansion into more non-traditional locations, made possible in part by concourse shops. Concourse shops are stand-alone retail units that occupy approximately 200 square feet designed to be operated in open, concourse areas of malls or other covered pedestrian areas.
International Franchise Revenue:
Our first franchisee location was opened in November 2003. All franchised stores have similar signage, store layout, merchandise characteristics and guest experience as our corporately-managed stores. As of November 3, 2018, we had eight master franchise agreements, which typically grant franchise rights for a particular country or group of countries, covering an aggregate of 14 countries.
The number of franchised stores opened and closed for the periods presented below are summarized as follows:
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Thirty-nine weeks ended
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November 3, 2018
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October 28, 2017
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Beginning of period
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100
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92
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Opened
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11
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11
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Closed
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(17
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)
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(14
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End of period
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94
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89
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In the ordinary course of business, we anticipate signing additional master franchise agreements and terminating other such agreements. We believe there is a market potential for approximately 300 international stores outside of the United States, Canada, the United Kingdom and Ireland. We continue to expect franchisees to leverage the new formats that have been developed for our corporately-managed operations and sourcing changes that have significantly reduced the capital and expenses required to open stores. We expect to continue to develop market expansion through both new and existing franchisees in 2018 and beyond. For example, our new China franchise partner operates four locations and plans to open up to 10 locations by the end of fiscal year 2018. In addition, we have made progress to open our first stores in India by the end of fiscal year 2018.
Results of Operations
The following table sets forth, for the periods indicated, selected income statement data expressed as a percentage of total revenues, except where otherwise indicated. Percentages will not total due to cost of merchandise sold being expressed as a percentage of net retail sales, commercial revenue, international franchising as well as immaterial rounding:
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Thirteen weeks ended
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Thirty-nine weeks ended
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November 3,
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October 28,
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November 3,
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October 28,
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2018
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2017
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2018
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2017
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Revenues:
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Net retail sales
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95.0
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%
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97.7
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%
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96.9
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%
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97.2
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%
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Commercial revenue
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3.2
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1.6
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1.8
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2.2
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International franchising
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1.8
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0.7
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1.3
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0.7
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Total revenues
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100.0
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100.0
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100.0
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100.0
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Costs and expenses:
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Cost of merchandise sold - retail
(1)
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64.5
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58.1
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58.9
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55.1
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Cost of merchandise sold - commercial
(1)
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35.6
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42.0
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43.4
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48.5
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Cost of merchandise sold - international franchising
(1)
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59.7
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10.9
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54.1
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19.0
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Total cost of merchandise sold
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63.5
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57.6
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58.5
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54.7
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Consolidated gross profit
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36.5
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42.4
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41.5
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45.3
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Selling, general and administrative
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51.1
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47.5
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46.5
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45.1
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Interest expense (income), net
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(0.0
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)
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0.0
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0.0
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(0.0
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)
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Income before income taxes
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(14.5
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)
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(5.1
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)
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(5.1
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)
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0.2
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Income tax (benefit) expense
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(5.7
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)
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(1.8
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)
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(1.8
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)
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0.1
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Net income (loss)
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(8.8
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)
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(3.3
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)
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(3.2
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)
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0.1
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Retail Gross Margin
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35.5
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%
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41.9
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%
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41.1
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%
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44.9
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%
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(1)
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Cost of merchandise sold – retail is expressed as a percentage of net retail sales. Cost of merchandise sold – commercial is expressed as a percentage of commercial revenue. Cost of merchandise sold – international franchising is expressed as a percentage of international franchising revenue.
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(2)
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Retail gross margin represents net retail sales less cost of merchandise sold - retail; retail gross margin percentage represents retail gross margin divided by net retail sales.
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Thirteen weeks ended
November 3, 2018
compared to thirteen weeks ended
October 28, 2017
Total revenues.
Consolidated revenues decreased 9.8%, including a 7.4% decrease in North America and a 23.1% decrease in Europe, and also inclusive of a 17.8% increase in consolidated e-commerce sales. European results continue to reflect the impact of the ongoing uncertainty surrounding Brexit, as well as the May 2018 implementation of new privacy laws, which severely inhibited the Company’s ability to directly market to guests.
Net retail sales for the thirteen weeks ended November 3, 2018 were $65.3 million, compared to $74.4 million for the thirteen weeks ended October 29, 2017, a decrease of $9.1 million, or 12.3%. The components of this decrease are as follows:
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Thirteen Weeks Ended
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|
|
November 3, 2018
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(dollars in millions)
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Decrease in existing store and ecommerce sales
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$
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(8.1
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)
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Increase from new stores
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3.0
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Impact of store closures
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(3.3
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)
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Impact of foreign currency translation
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(0.3
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)
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Change in deferred revenue estimates, including gift card breakage
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(0.4
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)
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$
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(9.1
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)
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The revenue decrease was driven primarily by the strategic de-emphasis of our historically successful National Teddy Bear Day promotion to avoid the potential of long lines and frustrated guests on the heels of the Pay Your Age Day events in mid-July 2018. Second, our U.K. business continued to decline due to a challenging retail environment brought on by Brexit and the May 2018 implementation of new privacy laws that have significantly inhibited our ability to build our contact database and market directly to our guests. Third, we had a negative $2.5 million impact from the January 2018 closure of our previously most productive store and the adoption of the new revenue recognition standard (See Note 1 — Basis of Presentation and Note 2 — Revenue for additional information). Finally, organic family traffic to traditional malls continued to struggle which we believe was exacerbated by the comparative lack of high impact animated films that tend to bring our target demographic to malls with co-located theaters. Historically, we have seen increased traffic and sales associated with child-friendly film releases.
Commercial revenue was $2.2 million for the thirteen weeks ended
November 3, 2018
compared to $1.2 million for the thirteen weeks ended
October 28, 2017
. The $1.0 million increase related primarily to outbound brand licensing activity.
Retail gross margin.
Retail gross margin dollars decreased $8.0 million to $23.2 million compared to the fiscal 2017 third quarter. The retail gross margin rate declined 640 basis points to 35.5% including approximately 150 basis points related to non-cash store impairment charges outside of the U.S. and the adoption of the new revenue recognition standard as well as approximately 370 basis points related to the deleverage of fixed occupancy costs. The remaining decline was driven primarily by higher promotional activity related to the residual effects of Pay Your Age Day as well as the deleverage of warehouse distribution costs in the quarter. Notably, total occupancy and distribution costs were flat even with a higher store count resulting in a lower average cost per store.
Selling, general and administrative.
Selling, general and administrative expenses (“SGA”) were $35.1 million for the thirteen weeks ended
November 3, 2018
, a decline of $1.1 million compared to the thirteen weeks ended
October 28, 2017
. The decrease was primarily driven by lower payroll and advertising costs.
Interest expense (income), net.
Interest expense (income) was less than $0.1 million for both the thirteen weeks ended
November 3, 2018
and
October 28, 2017
, respectively.
Provision for income taxes
. The income tax provision was a benefit of $3.9 million with a tax rate of 39.3% for the thirteen weeks ended
November 3, 2018
as compared to an income tax benefit of $1.4 million with a tax rate of 34.8% for the thirteen weeks ended
October 28, 2017
. In the third quarter of fiscal 2018, the effective tax rate differed from the statutory rate of 21% primarily due to the jurisdictional mix of earnings. In the third quarter of fiscal 2017, the effective tax rate differed from the statutory rate of 34% primarily due to the effect of discrete items.
Thirty-nine weeks ended
November 3, 2018
compared to thirty-nine weeks ended
October 28, 2017
Total revenues.
Net retail sales for the thirty-nine weeks ended
November 3, 2018
were $227.8 million, compared to $239.6 million for the thirty-nine weeks ended
October 28, 2017
, a decrease of $11.8 million, or 4.9%. The components of this decrease are as follows:
|
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Thirty-nine weeks ended
|
|
|
|
November 3, 2018
|
|
|
|
(dollars in millions)
|
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Decrease in existing store and ecommerce sales
|
|
$
|
(10.2
|
)
|
Increase from new stores
|
|
|
10.4
|
|
Impact of store closures
|
|
|
(11.5
|
)
|
Impact of foreign currency translation
|
|
|
1.9
|
|
Change in deferred revenue estimates, including gift card breakage
|
|
|
(2.4
|
)
|
|
|
$
|
(11.8
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)
|
The decrease in net retail sales included the $2.1 million impact from the adoption of the new revenue recognition standard (See Note 1 — Basis of Presentation and Note 2 — Revenue for additional information). In addition, our previously most productive store closed in January 2018 and Toys“R”Us conducted liquidation proceedings which we believe negatively impacted sales at our stores, particularly those in closer proximity to a liquidating Toys“R”Us location, during the first twenty-six weeks of fiscal 2018.
Commercial revenue was $4.2 million for the thirty-nine weeks ended
November 3, 2018
compared to $5.3 million for the thirty-nine weeks ended
October 28, 2017
. The $1.1 million decrease related primarily to the nature and timing of the prior year's wholesale orders.
Retail gross margin.
Retail gross margin was $93.6 million for the thirty-nine weeks ended
November 3, 2018
compared to $107.5 million for the thirty-nine weeks ended
October 28, 2017
, a decrease of $13.9 million, or 12.9%. As a percentage of net retail sales, retail gross margin was 41.1% for the thirty-nine weeks ended
November 3, 2018
compared to 44.9% for the thirty-nine weeks ended
October 28, 2017
. This 380 basis-point gross margin decrease was largely driven by
the deleverage in fixed occupancy and distributions costs, contraction in merchandise margin due to the higher promotional activity associated with the Pay Your Age events and approximately 70 basis points related to non-cash store impairment charges outside of the U.S. and the adoption of the new revenue recognition standard
.
Selling, general and administrative
(“SGA”). SGA was $109.3 million for the thirty-nine weeks ended
November 3, 2018
, compared to $111.2 million for the thirty-nine weeks ended
October 28, 2017
, a decrease of $1.9 million, or 1.7%. The decrease in SGA was primarily due to reduced advertising spend and lower payroll costs.
Interest expense (income), net.
Interest expense (income) was less than $0.1 million for both the thirty-nine weeks ended
November 3, 2018
and
October 28, 2017
, respectively.
Provision for income taxes
. The income tax provision was a benefit of $4.4 million with a tax rate of 36.8% for the thirty-nine weeks ended
November 3, 2018
as compared to income tax expense of $0.2 million with a tax rate of 61.9% for the thirty-nine weeks ended
October 28, 2017
. In the first thirty-nine weeks of fiscal 2018, the effective tax rate differed from the statutory rate of 21% primarily due to the jurisdictional mix of earnings. In the first thirty-nine weeks of fiscal 2017, the effective tax rate differed from the statutory rate of 34% primarily due to the effect of discrete tax items. The statutory rate decreased to 21% as a result of the enactment of the Tax Cut and Jobs Act on December 22, 2017.
Seasonality and Quarterly Results
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, but not limited to: (1) changes in general economic conditions and consumer spending patterns; (2) increases or decreases in our existing store and e-commerce sales; (3) fluctuations in the profitability of our stores; (4) the timing and frequency of the sales of licensed products tied to major theatrical releases, our marketing initiatives, including national media and other public relations events; (5) changes in foreign currency exchange rates; (6) the timing of our store openings 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.
The timing of store closures, remodels and openings may result in fluctuations in quarterly results based on the revenues and expenses associated with each store location. Expenses related to store closings are typically incurred in stages: when the decision is made to close the store typically associated with a lease event such as an expiration or lease triggered clause; when the closure is communicated to store associates; and at the time of closure. We typically incur most preopening costs for a new store in the three months immediately preceding the store’s opening.
As a retailer that has toy products as part of our revenue model, our sales are highest in our fourth quarter. The timing of holidays and school vacations can impact our quarterly results. We cannot assure you that this will continue to be the case. 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. For example, the 2014 fiscal fourth quarter had 14 weeks and the transition period ended February 3, 2018 had five weeks.
Liquidity and Capital Resources
Our cash requirements are primarily for the relocation and remodeling of existing stores in our new design, opening of new stores, investments in information technology infrastructure 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.
A summary of our operating, investing and financing activities are shown in the following table (dollars in thousands):
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|
Thirty-nine weeks ended
|
|
|
|
November 3,
|
|
|
October 28,
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|
|
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2018
|
|
|
2017
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|
Net cash used in operating activities
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|
$
|
(8,955
|
)
|
|
$
|
(230
|
)
|
Net cash used in investing activities
|
|
|
(8,769
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)
|
|
|
(14,201
|
)
|
Net cash provided by (used in) financing activities
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|
|
5,117
|
|
|
|
(1,525
|
)
|
Effect of exchange rates on cash
|
|
|
(261
|
)
|
|
|
(359
|
)
|
Net decrease in cash and cash equivalents
|
|
$
|
(12,868
|
)
|
|
$
|
(16,315
|
)
|
Operating Activities.
Cash used in operating activities increased $8.7 million for the thirty-nine weeks ended
November 3, 2018
, as compared to the thirty-nine weeks ended
October 28, 2017
. This decrease in cash from operating activities was primarily driven by the higher net loss for the thirty-nine weeks ended
November 3, 2018
as compared to the thirty-nine weeks ended
October 28, 2017
.
Investing Activities.
Cash used in investing activities decreased $5.4 million for the thirty-nine weeks ended
November 3, 2018
, as compared to the thirty-nine weeks ended
October 28, 2017
. This decrease in cash from investing activities was primarily driven by a lower use of cash related to store construction and upgrades, and purchases of information technology infrastructure for the thirty-nine weeks ended
November 3, 2018
as compared to the thirty-nine weeks ended
October 28, 2017
.
Financing Activities.
Cash provided by financing activities increased $6.6 million for the thirty-nine weeks ended
November 3, 2018
, as compared to the thirty-nine weeks ended
October 28, 2017
. This increase in cash from financing activities was primarily driven by short-term borrowings of $7.3 million from our line of credit, partially offset by $0.9 million of additional purchases of our common stock for the thirty-nine weeks ended
November 3, 2018
as compared to the thirty-nine weeks ended
October 28, 2017
.
Capital Resources.
As of
November 3, 2018
, we had a consolidated cash balance of $8.6 million and approximately 50% of this balance was domiciled within 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. On May 4, 2017, we amended the credit agreement, extending the expiration date to December 31, 2018 and increasing the amount of permitted lease and rental payments for personal property from $100,000 to $1.0 million. The bank line provides availability of $35.0 million. Borrowings under the credit agreement are secured by our assets and a pledge of 66% of our ownership interest in certain of our foreign subsidiaries. The credit agreement 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. We are also prohibited from repurchasing shares of our common stock unless such repurchase of shares would not violate any terms of the credit agreement, and we may not use the proceeds of the line of credit to repurchase shares. Borrowings bear interest at LIBOR plus 1.8%. Financial covenants include maintaining a minimum tangible net worth, maintaining a minimum fixed charge coverage ratio (as defined in the credit agreement) and not exceeding a maximum funded debt to earnings before interest, depreciation and amortization ratio. As of
November 3, 2018
: (i) we were in compliance with all covenants; (ii) there were $7.25 million in borrowings under our line of credit; and (iii) there was approximately $27.75 million available for borrowing under the line of credit. We may incur borrowings in amounts that are expected to fluctuate throughout the remainder of the year and all of which we expect to repay before the end of the fiscal year.
In fiscal 2018, we expect to spend a total of $14 to $15 million on capital expenditures. Capital spending through the thirty-nine weeks ended November 3, 2018 totaled $8.9 million, on track with our full year plans. Capital spending in fiscal 2018 is expected to primarily support our store activity, including both remodels and new stores, and investments in information technology infrastructure.
We believe that cash generated from operations and borrowings under our credit agreement will be sufficient to fund our working capital and other cash flow requirements for the near future. Our credit agreement expires on December 31, 2018.
In August 2017, our Board of Directors authorized a share repurchase program of up to $20 million. This program authorized us to purchase up to $20 million of our common stock in the open market (including through 10b5-1 trading plans), or through privately negotiated transactions. The primary source of funding for the program is expected to 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 authorizes us to repurchase shares through September 30, 2020, and 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. From the date of such authorization through
November 3, 2018
, we have repurchased 1.3 million shares at an average price of $8.75 per share for an aggregate amount of $11.2 million.
Off-Balance Sheet Arrangements
None.
Inflation
We 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.
Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the appropriate application of certain accounting policies, which require us to make estimates and assumptions about future events and their impact on amounts reported in our financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the financial statements.
We believe application of accounting policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates, including those related to inventory, long-lived assets, revenue recognition and income taxes, are reevaluated on an ongoing basis, and adjustments are made when facts and circumstances dictate a change. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.
Our critical accounting policies and estimates are discussed in and should be read in conjunction with our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (SEC) on March 15, 2018, which includes audited consolidated financial statements for our 2017, 2016 and 2015 fiscal years. There have been no material changes to the critical accounting estimates disclosed in the 2017 Form 10-K.
Recent Accounting Pronouncements
See Note 1 to the Condensed Consolidated Financial Statements — Basis of Presentation — Recently Issued Accounting Pronouncements