Pottery Barn 2007 Annual Report Download - page 59

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In December 2007, the FASB issued SFAS No. 141(Revised 2007), Business Combinations (“SFAS 141(R)”).
SFAS 141(R) will significantly change the accounting for business combinations. Under SFAS 141(R), an
acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the
acquisition date fair value with limited exceptions. SFAS 141(R) will change the accounting treatment for certain
specific acquisition-related items, including expensing acquisition-related costs as incurred, valuing non-
controlling interests (minority interests) at fair value at the acquisition date, and expensing restructuring costs
associated with an acquired business. SFAS 141(R) applies prospectively to business combinations for which the
acquisition date is on or after the first fiscal period beginning on or after December 15, 2008, except for
adjustments to a previously acquired entity’s deferred tax assets and uncertain tax position balances occurring
outside the measurement period, which are recorded as a component of income tax expense in the period of
adjustment, rather than goodwill. Early adoption is not permitted. Generally, the effect of SFAS 141(R) will
depend on future acquisitions and, as such, we do not currently expect the adoption of this Statement to have a
material impact on our consolidated financial position, results of operations or cash flows.
Note B: Property and Equipment
Property and equipment consists of the following:
Dollars in thousands
Feb. 3, 2008
(53 Weeks)
Jan. 28, 2007
(52 Weeks)
Leasehold improvements $ 800,658 $ 720,927
Fixtures and equipment 544,152 479,012
Capitalized software 196,311 181,829
Land and buildings 133,435 132,464
Corporate systems projects in progress196,493 83,650
Corporate aircraft 48,668 48,670
Construction in progress223,384 16,799
Total 1,843,101 1,663,351
Accumulated depreciation and amortization (862,026) (750,769)
Property and equipment – net $ 981,075 $ 912,582
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,
expanded or remodeled retail stores where construction had not been completed as of year-end.
Note C: Borrowing Arrangements
Long-term debt consists of the following:
Dollars in thousands
Feb. 3, 2008
(53 Weeks)
Jan. 28, 2007
(52 Weeks)
Obligations under capital leases $ — $ 163
Memphis-based distribution facilities obligation 12,822 14,312
Mississippi industrial development bonds 13,150 14,200
Total debt 25,972 28,675
Less current maturities 14,734 15,853
Total long-term debt $11,238 $12,822
Capital Leases
In fiscal 2006, capital lease obligations of $163,000 consisted primarily of leases for distribution center
equipment used in our normal course of business, which expired in fiscal 2007. During fiscal 2007, we did not
enter into any new capital lease agreements.
49
Form 10-K