Pottery Barn 2010 Annual Report Download - page 69

We made annual rental payments in fiscal 2010, fiscal 2009 and fiscal 2008 of approximately $618,000, plus
interest on the bonds (through December 2010) calculated at a variable rate determined monthly, applicable
taxes, insurance and maintenance expenses. The terms of the lease automatically renewed until the bonds were
fully repaid in December 2010. We are currently operating the distribution center on a month-to-month lease and
expect to enter into a short-term lease agreement in fiscal 2011.
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 the estate 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
collateralized by the distribution facility and require us to maintain certain financial covenants. As of January 30,
2011, $8,338,000 was outstanding under the Partnership 2 industrial development bonds.
We made annual rental payments of approximately $2,567,000, $2,582,000 and $2,577,000 plus applicable taxes,
insurance and maintenance expenses in fiscal 2010, fiscal 2009 and fiscal 2008, respectively. The term of the
lease automatically renews on an annual basis until these bonds are fully repaid in August 2015.
Prior to December 2010, the two partnerships described above qualified as variable interest entities and were
consolidated by us due to their related party relationship and our obligation to renew the leases until the bonds were
fully repaid. As of December 2010, however, the bonds on the distribution center leased from Partnership 1 were
fully repaid and, accordingly, this facility is no longer consolidated by us. As such, as of January 30, 2011, our
consolidated balance sheet includes $12,414,000 in assets (primarily buildings), $8,338,000 in debt and $4,076,000
in other long-term liabilities related solely to the consolidation of the Partnership 2 distribution facility.
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
Earnings
Per-Share
2010
Basic $200,227 106,956 $1.87
Effect of dilutive stock-based awards 2,566
Diluted $200,227 109,522 $1.83
2009
Basic $ 77,442 105,763 $0.73
Effect of dilutive stock-based awards 1,610
Diluted $ 77,442 107,373 $0.72
2008
Basic $ 30,024 105,530 $0.28
Effect of dilutive stock-based awards 1,350
Diluted $ 30,024 106,880 $0.28
Stock-based awards of 1,488,000, 2,684,000 and 6,428,000 shares in fiscal 2010, fiscal 2009 and fiscal 2008,
respectively, were not included in the computation of diluted earnings per share, as their inclusion would be anti-
dilutive.
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Form 10-K