Pottery Barn 2011 Annual Report Download - page 31

If we are unable to pay quarterly dividends or repurchase our stock at intended levels, our reputation and stock
price may be harmed.
As of January 29, 2012, we had completed our $125,000,000 stock repurchase program authorized by our Board
of Directors in January 2011 and, in January 2012, our Board of Directors authorized the repurchase of up to an
additional $225,000,000 of our common stock. In addition, in January 2012, our Board of Directors authorized an
increase in our quarterly cash dividend from $0.17 to $0.22 per common share for an annual cash dividend of
$0.88 per share. 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, the effectiveness of 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.
Changes to accounting rules or regulations may adversely affect our operating results.
Changes to existing accounting rules or regulations may impact our future operating results. A change in
accounting rules or regulations may even affect our reporting of transactions completed before the change is
effective. The introduction of new accounting rules or regulations and varying interpretations of existing
accounting rules or regulations have occurred and may occur in the future. Future changes to accounting rules or
regulations, or the questioning of current accounting practices, may adversely affect our operating results.
Changes to estimates related to our property and equipment, including information technology systems, or
operating results that are lower than our current estimates at certain store locations, may cause us to incur
impairment charges.
We make estimates and projections in connection with impairment analyses for certain of our store locations and
other property and equipment, including information technology systems. Our impairment analyses determine
whether projected cash flows from operations are sufficient to recover the carrying value of these assets.
Impairment results when the carrying value of the asset exceeds the estimated undiscounted future cash flows
over its remaining useful life. These calculations require us to make a number of estimates and projections of
future results. If these estimates or projections change or prove incorrect, we may be, and have been, required to
record impairment charges on certain store locations and other property and equipment, including information
technology systems. These impairment charges have been significant in the past and may be significant in the
future and, as a result of these charges, our operating results have been and may, in the future, be adversely
affected.
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Form 10-K