Build-A-Bear Workshop 2013 Annual Report Download - page 54

The following tax years remain open in the Company’s major taxing
jurisdictions as of December 28, 2013:
(9) Long-Term Debt
As of December 28, 2013, the Company has a bank line of credit that
provides borrowing capacity of $35 million. Borrowings under the
credit agreement are secured by our assets and a pledge of 65% of
the Company’s ownership interest in foreign subsidiaries. The credit
agreement contains various restrictions on indebtedness, liens,
guarantees, redemptions, mergers, acquisitions or sale of assets,
loans, transactions with affiliates, and investments. It prohibits the
Company from declaring dividends without the bank’s prior consent,
unless such payment of dividends would not violate any terms of the
credit agreement. The Company is also prohibited from repurchasing
shares of its common stock unless such purchase would not violate
any terms of the credit agreement; the Company may not use
proceeds of the line of credit to repurchase shares. Borrowings bear
interest at LIBOR plus 1.8%. Financial covenants include maintaining
a minimum tangible net worth, maintaining a minimum fixed charge
coverage ratio (as defined in the credit agreement) and not exceeding
a maximum funded debt to earnings before interest, depreciation and
amortization ratio. On January 22, 2014, the Company amended the
existing credit agreement, extending the term to December 31, 2015
and increasing the fixed charge coverage ratio. As of December 28,
2013: (i) the Company was in compliance with these covenants; (ii)
there were no borrowings under the line of credit; and (iii) there was
a standby letter of credit of approximately $1.1 million outstanding
under the credit agreement. Giving effect to this standby letter of
credit, there was approximately $33.9 million available for borrowing
under the line of credit.
(10) Commitments and Contingencies
(a) Operating Leases
The Company leases its retail stores and corporate offices under
agreements which expire at various dates through 2030. The majority
of leases contain provisions for base rent plus contingent payments
based on defined sales as well as scheduled escalations. Total office
and retail store base rent expense was $46.5 million, $48.2 million
and $48.2 million, and contingent rents were $1.3 million, $1.2 million
and $1.2 million for 2013, 2012 and 2011, respectively.
Future minimum lease payments at December 28, 2013, were as
follows (in thousands):
(b) Litigation
In the normal course of business, the Company is subject to certain
claims or lawsuits. Except as noted below, management is not aware
of any claims or lawsuits that may have a material adverse effect on
the consolidated financial position or results of operations of the
Company.
In the normal course of business, the Company is subject to regular
examination by various taxing authorities for years not closed by
the statute of limitations, including an ongoing customs audit in the
United Kingdom in which the Company is contesting audit findings.
The Company accrues a liability for this type of contingency when
it believes that it is both probable that a liability has been incurred
and that it can reasonably estimate the amount of the loss. In 2012,
the Company received notification from the customs authority
that it intended to make an assessment for unpaid duty, penalties
and interest. The assessment was made in 2013. The Company
has appealed this determination and continues to believe that the
ultimate outcome of these matters will not have a material adverse
impact on the results of operations, liquidity or financial position
of the Company. However, if one or more of these examinations has
an unfavorable resolution, it is possible that the results of operation,
liquidity or financial position of the Company could be materially
affected in any particular period. Since the date of the notification in
the third quarter of fiscal 2012, the Company has been required to pay
the disputed duty, pending resolution of the appeal. As of December
28, 2013, $2.9 million had been paid in respect of the disputed duty
and is included in receivables in the Retail segment.
The Company’s income before income taxes from domestic and foreign
operations (which include the United Kingdom, Canada, France and Ireland),
are as follows (in thousands):
2013 2012 2011
Domestic $(1,134)$(11,550)$(6,200)
Foreign (984)(36,879) 3,548
Tota l $(2,118)$(48,429)$(2,652)
The following tax years remain open in the Company’s major taxing jurisdictions
as of December 28, 2013:
United States (Federal) 2010 through 2013
United Kingdom 2007 through 2013
Canada 2010 through 2013
Ireland 2008 through 2013
2014 $43,551
2015 37,617
2016 28,809
2017 21,573
2018 15,889
Subsequent to 2018 53,330
$ 200,769
Notes to Consolidated Financial Statements (continued)
44 BUILD-A -BEAR WORKSHOP, INC. 2013 FORM 10- K