Pottery Barn 2004 Annual Report Download - page 54

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.
The aggregate maturities of long-term debt at January 30, 2005 were as follows:
Dollars in thousands
Fiscal 20051$23,435
Fiscal 2006 4,679
Fiscal 2007 1,653
Fiscal 2008 1,584
Fiscal 2009
Thereafter
1,438
9,800
Total $42,589
1Includes $14.2 million related to the Mississippi Debt Transaction classified as current debt.
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
may be used for loans or letters of credit. Prior to August 22, 2009, we may, upon notice to the lenders, request
an increase in the new credit facility of up to $100,000,000, to provide for a total of $400,000,000 of unsecured
revolving credit. The new credit facility contains events of default that include, among others, non-payment of
principal, interest or fees, inaccuracy of representations and warranties, violation of covenants, bankruptcy and
insolvency events, material judgments, cross defaults to certain other indebtedness and events constituting a
change of control. The occurrence of an event of default will increase the applicable rate of interest by 2.0% and
could result in the acceleration of our obligations under the new credit facility, and an obligation of any or all of
our U.S. subsidiaries to pay the full amount of our obligations under the new credit facility. The new credit
facility matures on February 22, 2010, at which time all outstanding borrowings must be repaid and all
outstanding letters of credit must be cash collateralized.
We may elect interest rates calculated at Bank of America’s prime rate (or, if greater, the average rate on
overnight federal funds plus one-half of one percent) or LIBOR plus a margin based on our leverage ratio.
During fiscal 2004 and fiscal 2003, no amounts were borrowed under the credit facility, however, as of January
30, 2005, $31,763,000 in issued but undrawn standby letters of credit were outstanding under the credit facility.
As of January 30, 2005, we were in compliance with our financial covenants under the credit facility.
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Form 10-K