Pottery Barn 2006 Annual Report Download - page 62

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Note B: Property and Equipment
Property and equipment consists of the following:
Dollars in thousands Jan. 28, 2007 Jan. 29, 2006
Leasehold improvements $ 720,927 $ 651,498
Fixtures and equipment 479,012 449,163
Land and buildings 132,464 131,484
Capitalized software 181,829 145,407
Corporate systems projects in progress183,650 98,398
Corporate aircraft 48,670 48,677
Construction in progress216,799 31,501
Total 1,663,351 1,556,128
Accumulated depreciation and amortization (750,769) (675,823)
Property and equipment – net $ 912,582 $ 880,305
1Corporate systems projects in progress is primarily comprised of a new merchandising, inventory management and order
management system currently under development.
2Construction in progress is primarily comprised of leasehold improvements and furniture and fixtures related to new,
unopened retail stores.
Note C: Borrowing Arrangements
Long-term debt consists of the following:
Dollars in thousands Jan. 28, 2007 Jan. 29, 2006
Obligations under capital leases $ 163 $ 3,458
Memphis-based distribution facilities obligation 14,312 15,696
Mississippi industrial development bonds 14,200 14,200
Total debt 28,675 33,354
Less current maturities 15,853 18,864
Total long-term debt $12,822 $14,490
Capital Leases
Our $163,000 of capital lease obligations consists primarily of leases for distribution center equipment used in
our normal course of business.
Memphis-Based Distribution Facilities Obligation
See Note F for a discussion on our bond-related debt pertaining to our Memphis-based distribution facilities.
Mississippi 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 Olive Branch distribution
center. 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 28, 2007 was 5.4%.
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 28, 2007, $14,200,000 remained
outstanding on these bonds and was classified as current debt. The bond proceeds were restricted for use in the
acquisition and installation of leasehold improvements and equipment located in our Olive Branch distribution
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