Pottery Barn 2007 Annual Report Download - page 63

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Total rental expense for all operating leases was as follows:
Fiscal Year Ended
Dollars in thousands
Feb. 3, 2008
(53 Weeks)
Jan. 28, 2007
(52 Weeks)
Jan. 29, 2006
(52 Weeks)
Minimum rent expense $146,226 $130,870 $119,440
Contingent rent expense 35,731 35,020 33,529
Less: sublease rental income (46) (39) (62)
Total rent expense $181,911 $165,851 $152,907
The aggregate minimum annual rental payments under noncancelable operating leases (excluding the Memphis-
based distribution facilities) in effect at February 3, 2008 were as follows:
Dollars in thousands
Minimum Lease
Commitments1
Fiscal 2008 $ 214,502
Fiscal 2009 210,168
Fiscal 2010 198,564
Fiscal 2011 180,600
Fiscal 2012 164,939
Thereafter 763,326
Total $ 1,732,099
1Projected payments include only those amounts that are fixed and determinable as of the reporting date. We currently pay
rent for certain store locations based on a percentage of store sales if a specified store sales threshold or contractual
obligations of the landlord has not been met. Projected payments for these locations are based on minimum rent, as future
store sales cannot be predicted with certainty.
Note F: Consolidation of Memphis-Based Distribution Facilities
Our Memphis-based distribution facilities include an operating lease entered into in July 1983 for a distribution
facility in Memphis, Tennessee. The lessor is a general partnership (“Partnership 1”) comprised of 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. Partnership 1 does not have operations separate from the
leasing of this distribution facility and does not have lease agreements with any unrelated third parties.
Partnership 1 financed the construction of this distribution facility through the sale of a total of $9,200,000 of
industrial development bonds in 1983 and 1985. Annual principal payments and monthly interest payments are
required through maturity in December 2010. The Partnership 1 industrial development bonds are collateralized
by the distribution facility and the individual partners guarantee the bond repayments. As of February 3, 2008,
$929,000 was outstanding under the Partnership 1 industrial development bonds.
We made annual rental payments in fiscal 2007, fiscal 2006 and fiscal 2005 of approximately $618,000, plus
interest on the bonds calculated at a variable rate determined monthly (approximately 3.4% on February 3, 2008),
applicable taxes, insurance and maintenance expenses. Although the current term of the lease expires in August
2008, we are obligated to renew the operating lease on an annual basis until these bonds are fully repaid.
Our other Memphis-based distribution facility includes an operating lease entered into in August 1990 for
another distribution facility that is adjoined to the Partnership 1 facility in Memphis, Tennessee. The lessor is a
general partnership (“Partnership 2”) comprised of W. Howard Lester, James A. McMahan and two unrelated
parties. Partnership 2 does not have operations separate from the leasing of this distribution facility and does not
have lease agreements with any unrelated third parties.
Partnership 2 financed the construction of this distribution facility and related addition through the sale of a total
of $24,000,000 of industrial development bonds in 1990 and 1994. Quarterly interest and annual principal
payments are required through maturity in August 2015. The Partnership 2 industrial development bonds are
53
Form 10-K