Pottery Barn 2004 Annual Report Download - page 27

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LIQUIDITY AND CAPITAL RESOURCES
As of January 30, 2005, we held $239,210,000 in cash and cash equivalent funds. As is consistent with our
industry, our cash balances are seasonal in nature, with the fourth quarter representing a significantly higher level
of cash than other periods. Throughout the fiscal year we utilize our cash balances to build our inventory levels in
preparation for our fourth quarter holiday sales. In fiscal 2005, we plan to utilize our cash resources to fund our
inventory and inventory related purchases, catalog advertising and marketing initiatives, and to support current
store development and infrastructure strategies. In addition to the current cash balances on-hand, we had a
$200,000,000 credit facility available as of January 30, 2005. No amounts were borrowed by us under the credit
facility in either fiscal 2004 or fiscal 2003. However, as of January 30, 2005, $31,763,000 in issued but undrawn
standby letters of credit were outstanding under the credit facility. We believe our cash on-hand, in addition to
our available credit facilities, will provide adequate liquidity for our business operations and growth
opportunities during fiscal 2005.
In fiscal 2004, net cash provided by operating activities was $304,437,000 as compared to net cash provided by
operating activities of $209,351,000 in fiscal 2003. The cash provided by operating activities in fiscal 2004 was
primarily attributable to net earnings, an increase in our deferred rent and lease incentives due to an increase in
retail store openings, an increase in customer deposits due to an increase in unredeemed gift certificates and an
increase in accounts payable due to an increase in accrued freight and the timing of expenditures, offset primarily
by an increase in merchandise inventories. Our merchandise inventories increased in fiscal 2004 in order to
support the increase in sales in our core and emerging brands and an increase in our leased and selling square
footage of 11.4% and 10.9%, respectively.
In fiscal 2003, net cash provided by operating activities was $209,351,000 as compared to net cash provided by
operating activities of $310,160,000 in fiscal 2002. The cash provided by operating activities in fiscal 2003 was
primarily attributable to net earnings, an increase in our deferred rent and lease incentives due to an increase in
retail store openings, and an increase in customer deposits due to an increase in unredeemed gift certificates,
offset primarily by an increase in merchandise inventories. Our merchandise inventories increased in fiscal 2003
due to an increase in our leased and selling square footage of 11.8% and 11.4%, respectively, and our decision to
increase our in-stock position on core merchandise inventories.
Net cash used in investing activities was $181,453,000 for fiscal 2004 as compared to $211,979,000 in fiscal
2003. Fiscal 2004 purchases of property and equipment were $181,453,000, comprised of $83,272,000 for 43
new and 17 remodeled stores, $53,830,000 for systems development projects (including e-commerce websites)
and $44,351,000 for distribution, facility infrastructure and other projects (including the purchase of a corporate
aircraft for approximately $11,500,000, previously leased under an operating lease).
In fiscal 2005, we anticipate investing $160,000,000 to $180,000,000 in the purchase of property and equipment,
primarily for the construction of 28 new stores and 10 remodeled stores, systems development projects (including
e-commerce websites), and distribution, facility infrastructure and other projects.
Net cash used in investing activities was $211,979,000 for fiscal 2003 as compared to $155,450,000 in fiscal
2002. Fiscal 2003 purchases of property and equipment were $211,979,000, comprised of $109,145,000 for 46
new and 19 remodeled stores, $56,083,000 for systems development projects (including e-commerce websites)
and $46,751,000 for distribution, facility infrastructure and other projects (including the purchase of a corporate
aircraft for approximately $36,980,000). We invested in the corporate aircraft in response to the increasing
complexity of our global sourcing program, the continued expansion of our retail stores and distribution centers
and the increasing difficulty and risks associated with worldwide travel.
For fiscal 2004, cash used in financing activities was $48,207,000, comprised primarily of $79,320,000 for the
repurchase of common stock and $9,789,000 for the repayment of long-term obligations, including capital leases
and long-term debt, partially offset by $26,190,000 in proceeds from the exercise of stock options and
$15,000,000 in proceeds from the issuance of industrial development bonds associated with the Mississippi Debt
Transaction. See Note C to our Consolidated Financial Statements.
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