Build-A-Bear Workshop 2014 Annual Report Download - page 56

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):
(9) Long-Term Debt
As of January 3, 2015, 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 expires on December 31, 2016 and contains
various restrictions on indebtedness, liens, guarantees, redemptions,
mergers, acquisitions or sale of assets, loans, transactions with
aliates, 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. As of January 3, 2015: (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 eect 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 oces 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 oce
and retail store base rent expense was $46.7 million, $46.5 million
and $48.2 million, and contingent rents were $1.8 million, $1.3 million
and $1.2 million for 2014, 2013 and 2012, respectively.
Future minimum lease payments at January 3, 2015, 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 eect
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
aected 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 January
3, 2015, $3.2 million had been paid in respect of the disputed duty and
is included in receivables in the Retail segment.
Notes to Consolidated Financial Statements (continued)
2014 2013 2012
Domestic $12,973 $(1,134)$(11,550)
Foreign 3,051 (984)(36,879)
Total $16,024 $(2,118)$(48,429)
The following tax years remain open in the Company’s major taxing
jurisdictions as of January 3, 2015:
United States (Federal) 2011 through 2014
United Kingdom 2008 through 2014
Canada 2011 through 2014
Ireland 2007 through 2014
2015 $39,776
2016 30,353
2017 23,122
2018 17,656
2019 15,190
Subsequent to 2019 50,020
$176,117
44 BUILD-A-BEAR WORKSHOP, INC. 2014 ANNUAL REPORT