Build-A-Bear Workshop 2009 Annual Report Download - page 56

BUILD-A-BEAR WORKSHOP, INC. 2009 FORM 10-K
Notes to Consolidated Financial Statements
(1) DESCRIPTION OF BUSINESS AND BASIS OF PREPARATION
Build-A-Bear Workshop, Inc. (the Company) is a specialty
retailer of plush animals and related products. At January 2,
2010, the Company operated 345 stores (unaudited) located
in the United States, Canada, Puerto Rico, the United
Kingdom, Ireland and France. The Company was formed in
September 1997 and began operations in October 1997.
The Company changed to a Delaware C Corporation on
April 3, 2000. The Company previously operated as a
Missouri limited liability company.
During 2001, the Company and a third party formed
Build-A-Bear Entertainment, LLC (BABE) for the purpose of
promoting the Build-A-Bear Workshop brand and characters
of the Company through certain entertainment media. Prior to
February 2003, the Company owned 51% and was the
managing member.
During 2002, the Company formed Build-A-Bear
Workshop Franchise Holdings, Inc. (Holdings) for the purpose
of entering into franchise agreements with companies in
foreign countries where Build-A-Bear Workshop, Inc. does not
have company-owned stores. Holdings is a wholly-owned
subsidiary of the Company. As of January 2, 2010, 65
Build-A-Bear Workshop franchise stores are open and
operating in 13 countries (unaudited).
During 2003, the Company formed Build-A-Bear Retail
Management, Inc. (BABRM) for the purpose of providing
purchasing, legal, information technology, accounting, and
other general management services for Build-A-Bear
Workshop stores. BABRM is a wholly-owned subsidiary of the
Company.
On April 2, 2006, we acquired all of the outstanding
shares of The Bear Factory Limited, a stuffed animal retailer in
the United Kingdom, and Amsbra Limited, our former U.K.
franchisee (the UK Acquisition). During 2006, the Company
formed Build-A-Bear Workshop UK Holdings, Ltd (UK
Holdings) as the parent company to The Bear Factory and
Amsbra. UK Holdings is a wholly-owned subsidiary of
Holdings. The results of the acquisitions’ operations have been
included in the consolidated financial statements since the
date of acquisition. Also during 2006, the Company formed
Build-A-Bear Workshop Ireland, Ltd. and Build-A-Bear
Workshop France SAS as wholly-owned subsidiaries of
Holdings. We currently operate 36 of the acquired stores,
having permanently closed four locations during transition.
The Company currently has 54 stores in the United Kingdom,
Ireland and France.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company’s significant accounting policies
applied in the preparation of the accompanying consolidated
financial statements follows:
(a) Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of Build-A-Bear Workshop, Inc. and its
wholly-owned subsidiaries: Holdings, BAB Canada, BABE,
and BABRM. All significant intercompany accounts are
eliminated in consolidation.
(b) Fiscal Year
The Company operates on a 52- or 53-week fiscal year
ending on the Saturday closest to December 31. The periods
presented in these financial statements are the fiscal years
ended January 2, 2010 (fiscal 2009), January 3, 2009
(fiscal 2008), and December 29, 2007 (fiscal 2007). Fiscal
years 2009 and 2007 included 52 weeks while fiscal year
2008 included 53 weeks. References to years in these
financial statements relate to fiscal years or year ends rather
than calendar years.
(c) Cash and Cash Equivalents
Cash and cash equivalents include cash and short-term
highly liquid investments with an original maturity of three
months or less held in both domestic and foreign financial
institutions.
The majority of the Company’s cash and cash equivalents
exceed federal deposit insurance limits. The Company has not
experienced any losses in such accounts and management
believes that the Company is not exposed to any significant
credit risk on cash and cash equivalents.
(d) Inventories
Inventories are stated at the lower of cost or market, with
cost determined on an average-cost basis. Inventory includes
supplies of $4.2 million and $8.3 million as of January 2,
2010 and January 3, 2009, respectively.
(e) Receivables
Receivables consist primarily of amounts due to the
Company in relation to tenant allowances, corporate product
sales, franchisee royalties and product sales, and licensing
revenue. The Company assesses the collectability of all
receivables on an ongoing basis by considering its historical
credit loss experience, current economic conditions, and other
relevant factors. Based on this analysis, the Company has
determined that no material allowance for doubtful accounts
was necessary at either January 2, 2010 or January 3, 2009.
46