Build-A-Bear Workshop 2011 Annual Report Download - page 62

BUILD-A-BEAR WORKSHOP, INC. 2011 FORM 10-K
Notes to Consolidated Financial Statements (continued)
in prepaid expenses and other current assets and $3.9 million
was included in other assets, net, related to these credits. As
of January 1, 2011, $0.7 million was included in prepaid
expenses and other current assets and $4.2 million was
included in other assets, net, related to these credits. The
Company evaluated its trade credits to determine whether an
impairment existed as of December 31, 2011. Because it is
not probable the entity will not use all the remaining barter
credits based on current utilization expectations, no
impairment loss was recognized.
(8) ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
2011 2010
Accrued wages, bonuses and related
expenses $ 5,200 $ 8,227
Sales tax payable 5,678 6,343
Accrued rent and related expenses 454 470
Current income taxes payable 796 448
$12,128 $15,488
(9) INCOME TAXES
The components of the provision for income taxes are as
follows (in thousands):
2011 2010 2009
Current:
Federal $—$ (171) $ (6,272)
State (439) 31 (410)
Foreign 906 859 405
Deferred:
Federal 11,592 (1,965) (2,610)
State 2,281 (1,205) (332)
Foreign 70 (125) (2,148)
Income tax
expense (benefit) $14,410 $(2,576) $(11,367)
A reconciliation between the statutory federal income tax
rate and the effective income tax rate is as follows
(in thousands):
2011 2010 2009
Loss before income taxes $ (2,652) $(2,472) $(23,840)
Statutory federal income tax rate 34% 34% 35%
Income tax expense (benefit)
at statutory federal rate (902) (840) (8,344)
State income taxes, net of
federal tax benefit 2(74) (482)
Valuation allowance 15,565 (1,249) (1,758)
Effect of lower foreign taxes (231) (174) (154)
Release of state tax reserves (47) (174) (595)
Other items, net 23 (65) (34)
Income tax expense (benefit) $14,410 $(2,576) $(11,367)
Effective tax rate (543.4)% 104.2% 47.7%
Temporary differences that gave rise to deferred tax
assets and liabilities are as follows (in thousands):
2011 2010
Deferred tax assets:
Deferred revenue $ 4,711 $ 4,481
Accrued rents 2,414 2,743
Net operating loss carryforwards 1,770 2,229
Intangible assets 1,837 1,794
Deferred compensation 2,218 1,768
Accrued bonuses 91 1,012
Carryforward of tax credits 2,251 931
Receivable and investment write-offs 840 619
Stock compensation 179 179
Depreciation 743 —
Other 1,834 1,730
18,888 17,486
Less: Valuation allowance 16,126 561
Total deferred tax assets 2,762 16,925
Deferred tax liabilities:
Depreciation —(1,515)
Other (1,925) (586)
Total deferred tax liabilities (1,925) (2,101)
Net deferred tax asset $ 837 $14,824
We evaluate the realizability of our deferred tax assets
on a quarterly basis. As the Company has incurred a
cumulative book loss over the three year period ended
December 31, 2011, management evaluated the realizability
of the Company’s deferred tax assets. The Company
performed an analysis of all available evidence, both positive
and negative, consistent with the provisions of
ASC 740-10-30-17. Some of the evidence evaluated includes
our historical operating performance, the macroeconomic
factors contributing to the recent fiscal loss for which the tax
benefits have been fully realized by the carryback availability,
and our forecast of future taxable income, including the
availability of prudent and feasible tax planning strategies.
The three-year cumulative loss is a significant piece of
negative evidence and while management believes that it is
primarily a result of losses that were primarily attributable to
the significant economic conditions experienced in 2009 and
not an indication of continuing operations, ASC 740 requires
that objective historical evidence be given more weight than
subjective evidence, such as forecasts of future income.
Accordingly, in the fiscal 2011 fourth quarter, the Company
recorded a $15.6 million valuation allowance on its
US deferred tax assets.
Included in the deferred tax asset is $0.6 million related
to state net operating loss carryforwards for which a valuation
allowance of $0.6 million has been recorded and
$1.2 million related to net operating loss carryforwards in
foreign jurisdictions. Net operating loss carryforwards in
foreign jurisdictions total $4.3 million and $5.7 million as of
December 31, 2011 and January 1, 2011, respectively.
54