Pottery Barn 2005 Annual Report Download - page 43

Capital Leases
Our $3,458,000 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.
Subsequent to year-end, we exercised the early purchase option on three of these leases and expect to exercise
this option on the remaining computer equipment leases during fiscal 2006.
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 2006 which are included in our current liabilities as of January 29, 2006.
Commercial Commitments
The following table provides summary information concerning our outstanding commercial commitments as of
January 29, 2006.
Amount of Outstanding Commitment Expiration By Period
Dollars in thousands Fiscal 2006
Fiscal 2007
to Fiscal 2009
Fiscal 2010
to Fiscal 2011 Thereafter Total
Credit facility — — — — —
Letter of credit facilities $105,260 — — — $105,260
Standby letters of credit 36,073 — — — 36,073
Total $141,333 — — — $141,333
Credit Facility
As of January 29, 2006, we have a credit facility that provides for a $300,000,000 unsecured revolving line of
credit that may be used for loans or letters of credit and contains certain financial covenants, including a
maximum leverage ratio (funded debt adjusted for lease and rent expense to EBITDAR), and a minimum fixed
charge coverage ratio. Prior to August 22, 2009, we may, upon notice to the lenders, request an increase in the
credit facility of up to $100,000,000, to provide for a total of $400,000,000 of unsecured revolving credit. The
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 credit facility, and an obligation of any or all of our U.S. subsidiaries to
pay the full amount of our obligations under the credit facility. The 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. No
amounts were borrowed under the credit facility during fiscal 2005 or fiscal 2004. However, as of January 29,
2006, $36,073,000 in issued but undrawn standby letters of credit were outstanding under the credit facility. The
standby letters of credit were issued to secure the liabilities associated with workers’ compensation, other
insurance programs and certain debt transactions. As of January 29, 2006, we were in compliance with our
financial covenants under the credit facility.
Letter of Credit Facilities
We have three unsecured commercial letter of credit reimbursement facilities for an aggregate of $145,000,000,
each of which expires on September 9, 2006. As of January 29, 2006, an aggregate of $105,260,000 was
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Form 10-K