Pottery Barn 2011 Annual Report Download - page 49

based on a percentage of sales, cannot be predicted with certainty at the onset of the lease term. Accordingly, any
contingent rental payments are recorded as incurred each period when the sales threshold is probable of being
met and are excluded from our calculation of deferred rent liability. See Notes A and E to our Consolidated
Financial Statements.
We are party to a variety of contractual agreements under which we may be obligated to indemnify the other
party for certain matters. These contracts primarily relate to our commercial contracts, operating leases,
trademarks, intellectual property, financial agreements and various other agreements. Under these contracts, we
may provide certain routine indemnification relating to representations and warranties or personal injury matters.
The terms of these indemnifications range in duration and may not be explicitly defined. Historically, we have
not made significant payments for these indemnifications. We believe that if we were to incur a loss in any of
these matters, the loss would not have a material effect on our financial condition or results of operations.
Other Contractual Obligations
We have other liabilities reflected in our Consolidated Balance Sheets. The payment obligations associated with
these liabilities are not reflected in the table above due to the absence of scheduled maturities. The timing of
these payments cannot be determined, except for amounts estimated to be payable in fiscal 2012 which are
included in our current liabilities as of January 29, 2012.
Commercial Commitments
The following table provides summary information concerning our outstanding commercial commitments as of
January 29, 2012:
Amount of Outstanding Commitment Expiration By Period
Dollars in thousands Fiscal 2012
Fiscal 2013
to Fiscal 2015
Fiscal 2016
to Fiscal 2017 Thereafter Total
Credit facility $ — — — — $ —
Letter of credit facilities 23,544 — — — 23,544
Standby letters of credit 9,420 — — — 9,420
Total $32,964 — — — $32,964
Credit Facility
We have a credit facility that provides for a $300,000,000 unsecured revolving line of credit that may be used for
loans or letters of credit. Prior to March 23, 2015, we may, upon notice to the lenders, request an increase in the
credit facility of up to $200,000,000, to provide for a total of $500,000,000 of unsecured revolving credit. The
credit facility contains certain financial covenants, including a maximum leverage ratio (funded debt adjusted for
lease and rent expense to earnings before interest, income tax, depreciation, amortization and rent expense
“EBITDAR”), and covenants limiting our ability to dispose of assets, make acquisitions, be acquired (if a default
would result from the acquisition), incur indebtedness, grant liens and make investments. The credit facility
contains events of default that include, among others, non-payment of principal, interest or fees, violation of
covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments,
cross-defaults to material indebtedness and events constituting a change of control. The occurrence of an event of
default will increase the applicable rate of interest by 2.0% and could result in the acceleration of our obligations
under the credit facility and an obligation of any or all of our U.S. subsidiaries that have guaranteed the credit
facility to pay the full amount of our obligations under the credit facility. As of January 29, 2012, we were in
compliance with our financial covenants under the credit facility and, based on current projections, we expect to
be in compliance throughout fiscal 2012. The credit facility matures on September 23, 2015, at which time all
outstanding borrowings must be repaid and all outstanding letters of credit must be cash collateralized.
We may elect interest rates calculated at (i) Bank of America’s prime rate (or, if greater, the average rate on
overnight federal funds plus one-half of one percent, or a rate based on LIBOR plus one percent) plus a margin
based on our leverage ratio or (ii) LIBOR plus a margin based on our leverage ratio. During fiscal 2011 and fiscal
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Form 10-K