Build-A-Bear Workshop 2014 Annual Report Download - page 39

O-Balance Sheet Arrangements
None.
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 January 3, 2015 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 $0.7 million as of January 3, 2015.
During the next fiscal year, it is reasonably possible that the
unrecognized tax benefits will be reduced by $0.5 million either
because the positions are sustained on audit or expiration of the
statute of limitations. 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 aected 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 dier from our estimates. Such
dierences 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 diered 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:
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 dierence, and is included in cost
of merchandise sold as a component of net income (loss) before
income taxes in the Retail segment. Fair value is calculated as the
present value of estimated future cash flows for each asset group.
The calculation of fair value could increase or decrease depending
on changes in the inputs and assumptions used, such as changes in
the financial performance of the asset group, future growth rate and
discount rate.
For purposes of evaluating store assets for impairment, we have
determined that each store location is an asset group. Factors that we
consider important which could individually or in combination trigger
an impairment review include, but are not limited to, the following:
(1) significant underperformance relative to historical or projected
future operating results; (2) significant changes in the manner of our
use of the acquired assets or the strategy for our overall business;
and (3) significant changes in our business strategies and/or negative
industry or economic trends. We assess events and changes in
circumstances or strategy that could potentially indicate that the
carrying value of long-lived assets may not be recoverable as they
occur. Due to the significance of the fourth quarter to individual store
locations, we assess store performance annually, using the full year’s
results. We consider a historical and/or projected negative cash flow
trend for a store location to be an indicator that the carrying value of
that asset group may not be recoverable.
Additionally, we consider a more likely than not assessment that an
individual location will close prior to the end of its lease term as a
triggering event to review the store asset group for recoverability.
These assessments are reviewed on a quarterly basis. Asset
impairment charges resulting from this assessment are included
Payments due by Fiscal Period as of January 3, 2015
(In thousands) Total 2015 2016 2017 2018 2019 Beyond
Operating lease obligations $176,117 $39,853 $30,353 $ 23,122 $ 17,65 6 $15,190 $ 50,020
Purchase obligations 34,786 34,786 - - - - -
Total $ 210,903 $74,562 $30,353 $ 23,122 $ 17,656 $15,190 $ 50,020
BUILD-A-BEAR WORKSHOP, INC. 2014 ANNUAL REPORT 27