Build-A-Bear Workshop 2013 Annual Report Download - page 36

Contractual Obligations and Commercial Commitments
Our contractual obligations and commercial commitments include future minimum obligations under operating leases and purchase
obligations. Our purchase obligations primarily consist of purchase orders for merchandise inventory. The future minimum payments for these
obligations as of December 28, 2013 for periods subsequent to this date are as follows:
Our total liability for uncertain tax positions under the Financial
Accounting Standards Board Accounting Standards Codification
(ASC) section 740-10-25 was $0.2 million as of December 28, 2013.
During the next fiscal year, unrecognized tax benefits are expected
to remain unchanged. At this time, we do not expect a significant
payment related to these obligations within the next year. See Note 8 -
Income Taxes to the Consolidated Financial Statements for additional
information.
Inflation
We do not believe that inflation has had a material adverse impact on
our business or operating results during the periods presented. We
cannot assure you, however, that our business will not be affected by
inflation in the future.
Critical Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the appropriate application
of certain accounting policies, which require us to make estimates
and assumptions about future events and their impact on amounts
reported in our financial statements and related notes. Since future
events and their impact cannot be determined with certainty,
the actual results will inevitably differ from our estimates. Such
differences could be material to the financial statements.
We believe application of accounting policies, and the estimates
inherently required therein, are reasonable. These accounting
policies and estimates are periodically reevaluated, and adjustments
are made when facts and circumstances dictate a change.
Historically, we have found our application of accounting policies to
be appropriate, and actual results have not differed materially from
those determined using necessary estimates.
Our accounting policies are more fully described in Note 2 to our
Consolidated Financial Statements, which appear elsewhere in this
Annual Report on Form 10-K. We have identified the following critical
accounting estimates:
Inventory
Inventory is stated at the lower of cost or market, with cost
determined on an average cost basis. Historically, we have not
conducted sales whereby we offer products below cost and,
accordingly, have no significant lower of cost or market reserve
recorded.
Throughout the year we record an estimated cost of shortage
based on past experience. The amount accrued for shortage each
period is based on detailed historical averages. The accrual rate
remained unchanged for fiscal 2013, 2012 and 2011. Periodic physical
inventories are taken and any difference between the actual physical
count of merchandise and the recorded amount in our records are
adjusted and recorded as shortage. Historically, including fiscal years
2013, 2012 and 2011, the timing of the physical inventory has been
in the fourth quarter so that no material amount of shortage was
required to be estimated on activity between the date of the physical
count and year-end. However, future physical counts of merchandise
may not be at times at or near the end of a fiscal quarter or fiscal
year-end, and our estimate of shortage for the intervening period
may be material based on the amount of time between the date of the
physical inventory and the date of the fiscal quarter or year-end.
Long-Lived Assets
In accordance with ASC section 360-10-35 we assess the potential
impairment of long-lived assets annually or when events or changes
in circumstances indicate that the carrying value may not be
recoverable. Recoverability is measured by comparing the carrying
amount of an asset, or asset group, to expected future net cash flows
generated by the asset, or asset group. If the carrying amount exceeds
its estimated undiscounted future cash flows, the carrying amount
is compared to its fair value and an impairment charge is recognized
to the extent of the difference. For purposes of evaluating store
assets for impairment, we have determined that each store location
is an asset group. As of December 28, 2013, store assets represented
approximately $47.1 million, or approximately 67% of total property,
plant and equipment, net. Factors that we consider important which
could individually or in combination trigger an impairment review
Payments due by Fiscal Period as of December 28, 2013
(In thousands) Total 2014 2015 2016 2017 2018 Beyond
Operating lease obligations $ 200,769 $43,551 $37,617 $28,809 $21,573 $15,889 $ 53,330
Purchase obligations 31,032 31,032 - - - - -
Total $231,801 $74,583 $37,617 $28,809 $21,573 $15,889 $ 53,330
26 BUILD-A -BEAR WORKSHOP, INC. 2013 FORM 10 -K