Pottery Barn 2007 Annual Report Download - page 64

collateralized by the distribution facility and require us to maintain certain financial covenants. As of February 3,
2008, $11,893,000 was outstanding under the Partnership 2 industrial development bonds.
We made annual rental payments of approximately $2,591,000, $2,585,000 and $2,600,000 plus applicable taxes,
insurance and maintenance expenses in fiscal 2007, fiscal 2006 and fiscal 2005, respectively. 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.
The two partnerships described above qualify as variable interest entities under FIN 46R due to their related
party relationship to us and our obligation to renew the leases until the bonds are fully repaid. Accordingly, the
two related party variable interest entity partnerships from which we lease our Memphis-based distribution
facilities are consolidated by us. As of February 3, 2008, our consolidated balance sheet includes $16,995,000 in
assets (primarily buildings), $12,822,000 in debt and $4,173,000 in other long-term liabilities. Consolidation of
these partnerships does not have an impact on our net income.
Note G: Earnings Per Share
The following is a reconciliation of net earnings and the number of shares used in the basic and diluted earnings
per share computations:
Dollars and amounts in thousands, except per share amounts
Net
Earnings
Weighted
Average Shares
Per-Share
Amount
2007 (53 Weeks)
Basic $195,757 109,273 $1.79
Effect of dilutive stock-based awards 2,174
Diluted $195,757 111,447 $1.76
2006 (52 Weeks)
Basic $208,868 114,020 $1.83
Effect of dilutive stock-based awards 2,753
Diluted $208,868 116,773 $1.79
2005 (52 Weeks)
Basic $214,866 115,616 $1.86
Effect of dilutive stock-based awards 2,811
Diluted $214,866 118,427 $1.81
Stock-based awards of 5,612,000, 4,181,000 and 320,000 in fiscal 2007, fiscal 2006 and fiscal 2005 respectively,
were not included in the computation of diluted earnings per share, as their inclusion would be anti-dilutive.
Note H: Common Stock
Authorized preferred stock consists of 7,500,000 shares at $0.01 par value of which none was outstanding during
fiscal 2007 or fiscal 2006. Authorized common stock consists of 253,125,000 shares at $0.01 par value. Common
stock outstanding at the end of fiscal 2007 and fiscal 2006 was 105,349,000 and 109,868,000 shares,
respectively. Our Board of Directors is authorized to issue equity awards for up to the total number of shares
authorized and remaining available for grant under our 2001 Amended and Restated Long-Term Incentive Plan.
During fiscal 2007, we repurchased and retired a total of 6,195,500 shares of common stock completing all
programs previously authorized, at a weighted average cost of $30.73 per share and an aggregate cost of
approximately $190,378,000.
In January 2008, our Board of Directors authorized the repurchase of up to an additional $150,000,000 of our common
stock through open market and privately negotiated transactions, at times and in such amounts as management deems
appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price,
corporate and regulatory requirements, capital availability and other market conditions. The stock repurchase program
does not have an expiration date and may be limited or terminated at any time without prior notice.
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