Pottery Barn 2004 Annual Report Download - page 29

Industrial Development Bonds
In June 2004, in an effort to utilize tax incentives offered to us by the state of Mississippi, we entered into an
agreement whereby the Mississippi Business Finance Corporation issued $15,000,000 in long-term variable rate
industrial development bonds, the proceeds, net of debt issuance costs, of which were loaned to us to finance the
acquisition and installation of leasehold improvements and equipment located in our newly leased Olive Branch
distribution center (the “Mississippi Debt Transaction”). The bonds are marketed through a remarketing agent
and are secured by a letter of credit issued under our $200,000,000 line of credit facility. The bonds mature on
June 1, 2024. The bond rate resets each week based upon current market rates. The rate in effect at January 30,
2005 was 2.6%.
The bond agreement allows for each bondholder to tender their bonds to the trustee for repurchase, on demand,
with seven days advance notice. In the event the remarketing agent fails to remarket the bonds, the trustee will
draw upon the letter of credit to fund the purchase of the bonds. As of January 30, 2005, these bonds were
classified as current debt. The bond proceeds are restricted for use in the acquisition and installation of leasehold
improvements and equipment located in our Olive Branch, Mississippi facility. As of January 30, 2005, we had
acquired and installed $9,546,000 of leasehold improvements and equipment associated with the facility.
Capital Leases
Our $5,673,000 of capital lease obligations consist primarily of in-store computer equipment leases with a term
of 60 months. The in-store computer equipment leases include an early purchase option at 54 months for
$2,496,000, which is approximately 25% of the acquisition cost. We have an end of lease purchase option to
acquire the equipment at the greater of fair market value or 15% of the acquisition cost.
Other Contractual Obligations
We have other long-term liabilities reflected in our consolidated balance sheets, including deferred income taxes
and insurance accruals. The payment obligations associated with these liabilities are not reflected in the table
above due to the absence of scheduled maturities. The timing of these payments cannot be determined, except for
amounts estimated to be payable in fiscal 2005 which are included in our current liabilities as of January 30,
2005.
Commercial Commitments
The following table provides summary information concerning our outstanding commercial commitments as of
January 30, 2005.
Amount of Outstanding Commitment Expiration By Period
Dollars in thousands Fiscal 2005
Fiscal 2006
to Fiscal 2008
Fiscal 2009
to Fiscal 2010 Thereafter Total
Credit facility — — — — —
Letter of credit facilities $100,552 — — — $100,552
Standby letters of credit 31,763 — — — 31,763
Total $132,315 — — — $132,315
Credit Facility
As of January 30, 2005, we had a credit facility that provided for $200,000,000 of unsecured revolving credit and
contained certain financial covenants, including a minimum tangible net worth covenant, a maximum leverage
ratio (funded debt adjusted for lease and rent expense to EBITDAR), a minimum fixed charge coverage ratio and
a maximum annual capital expenditures covenant. The credit facility was due to expire on October 22, 2005. On
February 22, 2005, we entered into the Third Amended and Restated Credit Agreement that amends and replaces
our credit facility. The new credit facility provides for a $300,000,000 unsecured revolving line of credit that
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