Build-A-Bear Workshop 2009 Annual Report Download - page 60

BUILD-A-BEAR WORKSHOP, INC. 2009 FORM 10-K
Notes to Consolidated Financial Statements (continued)
be required to record additional impairment, lease
termination charges, severance charges and other charges.
The Company recorded asset impairment charges of $1.8
million in the fourth quarter of fiscal 2008.
(5) GOODWILL
Goodwill is accounted for in accordance with ASC
Section 350-20 and is reported as a component of the
Company’s retail segment. The following table summarizes
the Company’s goodwill (in thousands):
Balance as of December 29, 2007 $ 42,840
Reversal of valuation allowance on pre-acquisition net
operating loss carryforwards (817)
Effect of foreign currency translation (11,543)
Balance as of January 3, 2009 $ 30,480
Effect of foreign currency translation 3,300
Balance as of January 2, 2010 $ 33,780
There was no tax-deductible goodwill as of January 2,
2010 or January 3, 2009.
(6) OTHER INTANGIBLE ASSETS
Other intangible assets consist of the following (in thousands):
2009 2008
Trademarks, customer relationships and other
intellectual property $11,659 $9,499
Key money deposits 1,002 2,089
Less accumulated amortization 9,060 7,685
Total, net $ 3,601 $3,903
Trademarks and intellectual property are amortized over
three years. Amortization expense related to trademarks and
intellectual property was $1.3 million, $1.3 million and $0.9
million in 2009, 2008 and 2007, respectively. Estimated
amortization expense related to other intangible assets as of
January 2, 2010, for each of the years in the subsequent five
year period and thereafter is: 2010—$1.3 million; 2011—
$0.9 million; 2012— $0.4 million-; 2013— -0- and
2014—-0-.
During 2009, the Company reviewed the operating
performance and forecasts of future performance for the stores
in its Retail segment. As a result of that review, it was
determined that certain stores would not be able to recover
the carrying value of certain key money deposits, included in
other intangible assets and other store deposits, included in
other assets, net, through expected undiscounted cash flows
over the remaining life of the related assets. Accordingly, the
carrying value of the assets was reduced to fair value,
calculated as the net present value of estimated future cash
flows for each asset group, and asset impairment charges of
$1.8 million were recorded in the fourth quarter of fiscal
2009, which are included in cost of merchandise sold as a
component of net loss before income taxes in the Retail
segment. The inputs used to determine the fair value of the
assets are Level 3 inputs as defined by ASC section 820-10.
In the event that we decide to close any or all of these stores
in the future, we may be required to record additional
impairment, lease termination charges, severance charges
and other charges.
(7) ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
2009 2008
Accrued wages, bonuses and related
expenses $ 4,881 $ 4,957
Sales tax payable 5,812 6,947
Accrued rent and related expenses 492 689
$11,185 $12,593
(8) INCOME TAXES
The components of the provision for income taxes are as
follows (in thousands):
2009 2008 2007
Current:
Federal $ (6,272) $ 1,303 $11,484
State (410) 567 1,868
Foreign 405 1,316 2,043
Deferred:
Federal (2,610) (1,389) (2,345)
State (332) (93) (350)
Foreign (2,148) 959 (186)
Income tax expense $(11,367) $ 2,663 $12,514
A reconciliation between the statutory federal income tax
rate and the effective income tax rate is as follows (in
thousands):
2009 2008 2007
Income (loss) before income
taxes $(23,840) $7,227 $35,023
Statutory federal income tax rate 35% 34% 35%
Income tax expense (benefit)
at statutory federal rate (8,344) 2,457 12,258
State income taxes, net of federal
tax benefit (482) 313 987
Valuation allowance on net
operating loss carryforwards (1,758) 613 (181)
Effect of lower foreign taxes (154) (286) (96)
Release of state tax reserves (595) (405) —
Other items, net (34) (29) (454)
Income tax expense (benefit) $(11,367) $2,663 $12,514
Effective tax rate 47.7% 36.8% 35.7%
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