Pottery Barn 2007 Annual Report Download - page 26

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business. These laws will likely increase the costs of doing business and, if we fail to implement appropriate
safeguards or to detect and provide prompt notice of unauthorized access as required by some of these new laws,
we could be subject to potential claims for damages and other remedies, which could harm our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our gross leased store space, as of February 3, 2008, totaled approximately 5,739,000 square feet for 600 stores
compared to approximately 5,451,000 square feet for 588 stores, as of January 28, 2007. All of the existing stores
are leased by us with original terms ranging generally from 5 to 22 years. Certain leases contain renewal options
for periods of 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.
Distribution Centers
We lease distribution facility space in the following locations:
Location Square Footage (Approximate)
Olive Branch, Mississippi 3,275,000 square feet
Memphis, Tennessee 1,523,000 square feet
City of Industry, California 1,180,000 square feet
Cranbury, New Jersey 781,000 square feet
South Brunswick, New Jersey 418,000 square feet
Two of our distribution facilities in Memphis, Tennessee are leased from two partnerships whose partners
include W. Howard Lester, our Chairman of the Board of Directors and Chief Executive Officer, and James A.
McMahan, a Director Emeritus, both of whom are significant shareholders. Both partnerships are consolidated by
us. See Note F to our Consolidated Financial Statements for more information.
In September 2007, we terminated our agreement with a third party who provided furniture delivery and storage
facilities in a 662,000 square foot distribution facility in Ontario, California. As a result, in September 2007, we
entered into a 10-year agreement to lease 1,180,000 square feet of storage facility space in City of Industry,
California. As of February 3, 2008, we were occupying 950,000 square feet of this new facility.
In addition to the above long-term contracts, we enter into other agreements for such things as our offsite storage
needs both for our distribution centers and our retail store locations. As of February 3, 2008, we had
approximately 676,000 square feet of leased space relating to these agreements that is not included in the table
above. This compares to approximately 368,000 square feet of leased space as of January 28, 2007.
Call Center
We lease call center space in the following locations:
Location Square Footage (Approximate)
Camp Hill, Pennsylvania 38,000 square feet
Las Vegas, Nevada 36,000 square feet
Oklahoma City, Oklahoma 36,000 square feet
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