Pottery Barn 2011 Annual Report Download - page 30

If our operating and financial performance in any given period does not meet the extensive guidance that we
have provided to the public, our stock price may decline.
We provide extensive public guidance on our expected operating and financial results for future periods.
Although we believe that this guidance provides investors and analysts with a better understanding of
management’s expectations for the future and is useful to our stockholders and potential stockholders, such
guidance is comprised of forward-looking statements subject to the risks and uncertainties described in this
report and in our other public filings and public statements. Our actual results may not always be in line with or
exceed the guidance we have provided, especially in times of economic uncertainty. In the past, when we have
reduced our previously provided guidance, the market price of our common stock has declined. If, in the future,
our operating or financial results for a particular period do not meet our guidance or the expectations of
investment analysts or if we reduce our guidance for future periods, the market price of our common stock may
decline as well.
A variety of factors, including seasonality and the economic environment, may cause our quarterly operating
results to fluctuate, leading to volatility in our stock price.
Our quarterly results have fluctuated in the past and may fluctuate in the future, depending upon a variety of
factors, including shifts in the timing of holiday selling seasons, including Valentine’s Day, Easter, Halloween,
Thanksgiving and Christmas, as well as changes in economic conditions. Historically, a significant portion of our
revenues and net earnings have typically been realized during the period from October through December each
year. In anticipation of increased holiday sales activity, we incur certain significant incremental expenses prior to
and during peak selling seasons, particularly October through December, including fixed catalog production and
mailing costs and the costs associated with hiring a substantial number of temporary employees to supplement
our existing workforce.
We may require external funding sources for operating funds, which may cost more than we expect, or not be
available at the levels we require and, as a consequence, our expenses and operating results could be negatively
affected.
We regularly review and evaluate our liquidity and capital needs. We currently believe that our available cash,
cash equivalents and cash flow from operations will be sufficient to finance our operations and expected capital
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 become 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.
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