Pottery Barn 2005 Annual Report Download - page 61
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Note C: Borrowing Arrangements
Long-term debt consists of the following:
Dollars in thousands Jan. 29, 2006 Jan. 30, 2005
Senior notes — $ 5,716
Obligations under capital leases $ 3,458 5,673
Memphis-based distribution facilities obligation 15,696 17,000
Industrial development bonds 14,200 14,200
Total debt 33,354 42,589
Less current maturities 18,864 23,435
Total long-term debt $14,490 $19,154
Senior Notes
In August, 2005, we repaid the remaining outstanding balance of $5,716,000 on our unsecured senior notes, with
interest payable semi-annually at 7.2% per annum.
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.
See Note F for a discussion on our bond-related debt pertaining to our Memphis-based distribution facilities.
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 $300,000,000 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 29,
2006 was 4.5%.
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 29, 2006, $14,200,000 remained
outstanding on these bonds and was 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 29, 2006, we had acquired and installed $14,700,000 of leasehold improvements and
equipment associated with the facility.
49
Form 10-K