Build-A-Bear Workshop 2014 Annual Report Download - page 54

recorded in cost of merchandise sold as a component of income or
loss before income taxes in the Retail segment. Impairment charges
related to this analysis in 2014 were immaterial. The inputs used to
determine the fair value of the assets are Level 3 fair value inputs
as defined by ASC section 820-10. In the event that we decide to
close any or all of these stores in the future, we may be required
to record additional impairments, lease termination charges,
severance charges and other charges. The Company recorded asset
impairment charges of $0.1 million in the fourth quarter of fiscal 2013
and $1.4 million in the fourth quarter of fiscal 2012.
(5) Other Tangible Assets
Other intangible assets consist of the following (in thousands):
Trademarks and intellectual property are amortized over three years.
Amortization expense related to trademarks and intellectual property
was $0.3 million, $0.4 million and $0.7 million in 2014, 2013 and 2012,
respectively.
(6) Other Non-current Assets
In 2010, certain other non-current assets were obtained through a
series of wholesale transactions whereby the Company exchanged
$6.4 million of inventory, at cost, with a third-party vendor for $4.9
million of trade credits and $1.5 million in cash. The transaction was
accounted for based upon the fair values of the assets involved in the
transaction. In accordance with Accounting Standards Codification
(ASC) Section 845-10, in an exchange transaction for trade credits,
the fair value of the asset being surrendered cannot exceed its
carrying value, meaning that the sale of the inventory was recorded
at its cost in the Commercial segment. The trade credits expire in
2015.
The Company evaluated its trade credits to determine if an
impairment existed at January 3, 2015. Based on current utilization
expectations, the Company determined that the full value of the asset
was not recoverable. Accordingly, the carrying value of the trade
credits was reduced to fair value, calculated as the expected present
value of estimated future utilization. An impairment charge of $0.3
million was recorded in the fiscal 2014 fourth quarter and is included
in selling, general and administrative expenses as a component of
income (loss) before income taxes in the Commercial segment. The
inputs used to determine the fair value of the asset are level 3 fair
value inputs as defined by ASC 820-10. As of January 3, 2015 and
December 28, 2013, $0.2 million and $0.7 million, respectively was
included in prepaid expenses and other current assets and $-0-
and $0.4 million, respectively, was included in other assets, net,
related to these credits. Impairment charges of $0.3 million and $2.2
million were recorded in the fourth quarter of fiscal 2013 and 2012,
respectively.
(7) Accrued Expenses
Accrued expenses consist of the following (in thousands)
(8) Income Taxes
The components of the provision for income taxes are as follows
(in thousands):
2014 2013
Trademarks and other intellectual property $ 12,517 $ 12,389
Less accumulated amortization 12,213 11,871
Total, net $ 304 $ 518
2014 2013
Accrued wages, bonuses and related expenses $ 11,858 $9,745
Sales tax payable 7,694 5,979
Accrued rent and related expenses 3,365 429
Current income taxes payable 1,141 227
$24,058 $16,380
2014 2013 2012
Current:
Federal $ - $ - $ -
State 304 (68)165
Foreign 3,293 6 790
Deferred:
Federal - - -
State 26 56 (928)
Foreign (1,961 ) - 839
Income tax expense (benefit) $1,662 $(6) $ 866
A reconciliation between the statutory federal income tax rate and
the eective income tax rate is as follows (in thousands):
2014 2013 2012
Income (loss) before income taxes $16,024 $(2,118)$(48,429)
Statutory federal income tax rate 34%34%34%
Income tax expense (benefit)
at statutory federal rate
5,448 (720)(16,466)
State income taxes, net of federal tax
benefit
310 151 124
Permanent dierence - Goodwill
impairment
- - 11,448
Valuation allowance (5,415 )386 4,739
Eect of lower foreign taxes (372 )497 296
Adjustment for unrecognized tax
positions 397 (70)(23)
Other items, net 1,294 (250)748
Income tax expense (benefit) $1,662 $(6)$866
Eective tax rate 10.4%0.3%(1.8)%
Notes to Consolidated Financial Statements (continued)
42 BUILD-A-BEAR WORKSHOP, INC. 2014 ANNUAL REPORT