Pottery Barn 2012 Annual Report Download - page 64
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As of February 3, 2013, January 29, 2012 and January 30, 2011, we had $8,990,000, $10,023,000, and
$11,619,000, respectively, of gross unrecognized tax benefits, of which $6,101,000, $6,738,000, and $7,812,000,
respectively, would, if recognized, affect the effective tax rate.
We accrue interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of
February 3, 2013 and January 29, 2012, our accruals, entirely for the payment of interest, totaled $2,508,000 and
$3,983,000, respectively.
Due to the potential resolution of state issues, it is reasonably possible that the balance of our gross unrecognized
tax benefits could decrease within the next twelve months by a range of zero to $3,100,000.
We file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. We have
concluded all U.S. federal income tax examinations through fiscal 2008. Substantially all material state, local and
foreign income tax examinations have been concluded through fiscal 2001.
Note E: Accounting for Leases
Operating Leases
We lease store locations, distribution centers, customer care centers, corporate facilities and certain equipment
for original terms ranging generally from 3 to 22 years. Certain leases contain renewal options for periods up to
20 years. The rental payment requirements in our store leases are typically structured as either: minimum rent;
minimum rent plus additional rent based on a percentage of store sales; rent based on a percentage of store sales;
or rent based on a percentage of store sales if a specified store sales threshold or contractual obligation of the
landlord has not been met. Contingent rental payments, including rental payments that are based on a percentage
of sales, cannot be predicted with certainty at the onset of the lease term. Accordingly, such contingent rental
payments are recorded as incurred each period and are excluded from our calculation of deferred rent liability.
Total rental expense for all operating leases was as follows:
Fiscal Year Ended
Dollars in thousands
Feb. 3, 2013
(53 Weeks)
Jan. 29, 2012
(52 Weeks)
Jan. 30, 2011
(52 Weeks)
Rent expense $ 189,060 $ 186,346 $ 185,979
Contingent rent expense 35,634 34,390 34,856
Rent expense before deferred lease incentive income 224,694 220,736 220,835
Deferred lease incentive income (26,694) (27,547) (37,115)
Less: sublease rental income (535) (382) (329)
Total rent expense1$ 197,465 $ 192,807 $ 183,391
1Excludes all other occupancy-related costs including depreciation, common area maintenance, utilities and property taxes.
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