Pottery Barn 2010 Annual Report Download - page 30

requirements for at least the next 12 months. However, we might experience periods during which we encounter
additional cash needs and we might need additional external funding to support our operations. Although we
were able to amend our line of credit facility during fiscal 2010 on acceptable terms, in the event we require
additional liquidity from our lenders, such funds may not be available to us or may not be available to us on
acceptable terms in the future. For example, in the event we were to breach any of our financial covenants, our
banks would not be required to provide us with additional funding, or they may require us to renegotiate our
existing credit facility on less favorable terms. In addition, we may not be able to renew our letters of credit that
we use to help pay our suppliers on terms that are acceptable to us, or at all, as the availability of letter of credit
facilities may continue to be limited. Further, the providers of such credit may reallocate the available credit to
other borrowers. If we are unable to access credit at the levels we require, or the cost of credit is greater than
expected, it could adversely affect our operating results.
Disruptions in the financial markets may adversely affect our liquidity and capital resources and our business.
Disruptions in the global financial markets and banking systems have made credit and capital markets more
difficult for companies to access, even for some companies with established revolving or other credit facilities.
We have access to capital through our revolving line of credit facility. Each financial institution, which is part of
the syndicate for our revolving line of credit facility, is responsible for providing a portion of the loans to be
made under the facility. If any participant, or group of participants, with a significant portion of the commitments
in our revolving line of credit facility fails to satisfy its obligations to extend credit under the facility and we are
unable to find a replacement for such participant or group of participants on a timely basis (if at all), our liquidity
and our business may be materially adversely affected.
If we are unable to pay quarterly dividends or repurchase our stock at intended levels, our reputation and stock
price may be harmed.
During fiscal 2010, we repurchased $125,000,000 of our common stock and, in January 2011, our Board of
Directors authorized the repurchase of up to an additional $125,000,000 of our common stock. As of January 30,
2011, our quarterly cash dividend is $0.15 per common share and, in March 2011, our Board of Directors
authorized an increase in the quarterly cash dividend to $0.17 per common share, an indicated annual cash
dividend of approximately $71,000,000 in fiscal 2011 based on the current number of common shares
outstanding. The dividend and stock repurchase program may require the use of a significant portion of our cash
earnings. As a result, we may not retain a sufficient amount of cash to fund our operations or finance future
growth opportunities, new product development initiatives and unanticipated capital expenditures. Further, our
Board of Directors may, at its discretion, decrease the intended level of dividends or entirely discontinue the
payment of dividends at any time. The stock repurchase program does not have an expiration date and may be
limited at any time. Our ability to pay dividends and repurchase stock will depend on our ability to generate
sufficient cash flows from operations in the future. This ability may be subject to certain economic, financial,
competitive and other factors that are beyond our control. Any failure to pay dividends or repurchase stock after
we have announced our intention to do so may negatively impact our reputation and investor confidence in us
and may negatively impact our stock price.
If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial
statements could be impaired and our investors’ views of us could be harmed.
We have evaluated and tested our internal controls in order to allow management to report on, and our registered
independent public accounting firm to attest to, our internal controls, as required by Section 404 of the Sarbanes-
Oxley Act of 2002. If we are not able to continue to meet the requirements of Section 404 in a timely manner, or
with adequate compliance, we would be required to disclose material weaknesses if they develop or are uncovered
and we may be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange
Commission or the New York Stock Exchange. In addition, our internal controls may not prevent or detect all errors
and fraud. A control system, no matter how well designed and operated, is based upon certain assumptions and can
provide only reasonable assurance that the objectives of the control system will be met. If any of the above were to
occur, our business and the perception of us in the financial markets could be negatively impacted.
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