Build-A-Bear Workshop 2011 Annual Report Download - page 57

BUILD-A-BEAR WORKSHOP, INC. 2011 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
December 31, 2011, the Company operated 346 stores
located in the United States, Canada, Puerto Rico, the
United Kingdom and Ireland. 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 December 31, 2011,
79 Build-A-Bear Workshop franchise stores are open and
operating in 14 countries.
Also during 2002, the Company formed Build-A-Bear
Workshop Canada Ltd. (BAB Canada) for the purpose of
operating Build-A-Bear Workshop stores in Canada. BAB
Canada is a wholly-owned subsidiary of the Company.
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. In February 2003, BABRM purchased the minority
interest in BABE, which became a wholly-owned subsidiary.
On April 2, 2006, the Company acquired all of the
outstanding shares of The Bear Factory Limited, a stuffed
animal retailer in the United Kingdom, and Amsbra Limited,
its former United Kingdom 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. In 2010, all Company-owned stores in France were
closed. The Company currently has 58 stores in the
United Kingdom and Ireland.
Certain reclassifications of prior year amounts have been
made to conform to current year presentation.
(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 December 31, 2011 (fiscal 2011), January 1, 2011
(fiscal 2010) and January 2, 2010 (fiscal 2009). All fiscal
years presented included 52 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 $3.7 million and $5.3 million as of December 31
and January 1, 2011, 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 December 31, 2011 or
January 1, 2011.
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