Pottery Barn 2006 Annual Report Download - page 65

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Significant components of our deferred tax accounts are as follows:
Dollars in thousands Jan. 28, 2007 Jan. 29, 2006
Deferred tax asset (liability)
Current:
Compensation $ 11,977 $ 15,362
Inventory 16,210 11,580
Accrued liabilities 16,821 14,186
Customer deposits 47,969 36,079
Deferred catalog costs (22,878) (20,696)
Other 738 756
Total current 70,837 57,267
Non-current:
Depreciation 11,803 (11,559)
Deferred rent 10,718 8,683
Stock-based compensation 9,972 —
Deferred lease incentives (20,070) (16,506)
Executive deferral plan 5,113 —
Other 1,134 927
Total non-current 18,670 (18,455)
Total $ 89,507 $ 38,812
Note E: Accounting for Leases
Operating Leases
We lease store locations, warehouses, corporate facilities, call centers and certain equipment for original terms
ranging generally from 3 to 22 years. Certain leases contain renewal options for periods up to 20 years. The
rental payment requirements in our store leases are typically structured as either minimum rent, minimum rent
plus additional rent based on a percentage of store sales if a specified store sales threshold is exceeded, or rent
based on a percentage of store sales if a specified store sales threshold or contractual obligations of the landlord
has not been met. Contingent rental payments, including rental payments that are based on a percentage of sales,
cannot be predicted with certainty at the onset of the lease term. Accordingly, any contingent rental payments are
recorded as incurred each period when the sales threshold is probable and are excluded from our calculation of
deferred rent liability.
We have an operating lease for a 1,002,000 square foot retail distribution facility located in Olive Branch,
Mississippi. The lease has an initial term of 22.5 years, expiring January 2022, with two optional five-year
renewals. The lessor, an unrelated party, is a limited liability company. The construction and expansion of the
distribution facility was financed by the original lessor through the sale of $39,200,000 Taxable Industrial
Development Revenue Bonds, Series 1998 and 1999, issued by the Mississippi Business Finance Corporation.
The bonds are collateralized by the distribution facility. As of January 28, 2007, approximately $30,301,000 was
outstanding on the bonds. During fiscal 2006, we made annual rental payments of approximately $3,693,000,
plus applicable taxes, insurance and maintenance expenses.
We have an operating lease for an additional 1,103,000 square foot retail distribution facility located in Olive
Branch, Mississippi. The lease has an initial term of 22.5 years, expiring January 2023, with two optional five-
year renewals. The lessor, an unrelated party, is a limited liability company. The construction of the distribution
facility was financed by the original lessor through the sale of $42,500,000 Taxable Industrial Development
Revenue Bonds, Series 1999, issued by the Mississippi Business Finance Corporation. The bonds are
collateralized by the distribution facility. As of January 28, 2007, approximately $33,481,000 was outstanding on
the bonds. During fiscal 2006, we made annual rental payments of approximately $4,180,000, plus applicable
taxes, insurance and maintenance expenses.
53
Form 10-K