Build-A-Bear Workshop 2012 Annual Report Download - page 45

BUILD-A-BEAR WORKSHOP, INC. 2012 FORM 10-K
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Our market risks relate primarily to changes in interest rates,
and we bear this risk in two specific ways. First, our revolving
credit facility carries a variable interest rate that is tied to
market indices and, therefore, our results of operations and
our cash flows can be impacted by changes in interest rates.
Outstanding balances under our credit facility bear interest at
LIBOR plus 1.8%. We had no borrowings during fiscal 2012.
Accordingly, a 100 basis point change in interest rates would
result in no material change to our annual interest expense.
The second component of interest rate risk involves the short
term investment of excess cash in short term, investment grade
interest-bearing securities. If there are changes in interest
rates, those changes would affect the investment income we
earn on these investments and, therefore, impact our cash
flows and results of operations.
We conduct operations in various countries, which
expose us to changes in foreign exchange rates. The financial
results of our foreign subsidiaries and franchisees may be
materially impacted by exposure to fluctuating exchange
rates. Reported sales, costs and expenses at our foreign
subsidiaries, when translated into U.S. dollars for financial
reporting purposes, can fluctuate due to exchange rate
movement. While exchange rate fluctuations can have a
material impact on reported revenues, costs and expenses,
and earnings, this impact is principally the result of the
translation effect and does not materially impact our short-term
cash flows.
Although we enter into a significant amount of purchase
obligations outside of the U.S., these obligations are settled
primarily in U.S. dollars and, therefore, we believe we have
only minimal exposure at present to foreign currency
exchange risks for our purchase obligations. Historically,
we have not hedged our currency risk and do not currently
anticipate doing so in the future.
We do not engage in financial transactions for trading
or speculative purposes.
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
The financial statements and schedules are listed under Item
15(a) and filed as part of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management, with the participation of our Chief
Executive Bear and Chief Operations and Financial Bear,
has evaluated the effectiveness of our disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)), as of the end of the period
covered by this report. Our disclosure controls and
procedures are designed ensure that information required
to be disclosed by us in the reports filed or submitted under
the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules
and forms and is accumulated and communicated to
management, including our certifying officers, as appropriate
to allow timely decisions regarding required disclosure. Based
on the foregoing evaluation, our management, including the
Chief Executive Bear and Chief Operations and Financial
Bear, concluded that our disclosure controls and procedures
were effective as of December 29, 2012, the end of the
period covered by this Annual Report.
It should be noted that our management, including the
Chief Executive Bear and the Chief Operations and Financial
Bear, do not expect that our disclosure controls and
procedures or internal controls will prevent all error and all
fraud. A control system, no matter how well conceived or
operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are
met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more
people, or by management override of the controls. The
design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions;
over time, controls may become inadequate because of
changes in conditions, or the degree of compliance with
the policies or procedures may deteriorate. Because of
the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not
be detected.
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