Pottery Barn 2013 Annual Report Download - page 47

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Other Contractual Obligations
We have other liabilities reflected in our Consolidated Balance Sheet. 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 2014, which are
included in our current liabilities as of February 2, 2014.
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.
Commercial Commitments
The following table provides summary information concerning our outstanding commercial commitments as of
February 2, 2014:
Amount of Outstanding Commitment Expiration By Period1
Dollars in thousands Fiscal 2014
Fiscal 2015
to Fiscal 2017
Fiscal 2018
to Fiscal 2019 Thereafter Total
Letter of credit facilities $ 15,283 — — — $15,283
Standby letters of credit 3,070 — — — 3,070
Credit facility — — — — —
Total $ 18,353 — — — $18,353
1See Note C to our Consolidated Financial Statements for discussion of our borrowing arrangements.
IMPACT OF INFLATION
The impact of inflation (or deflation) on our results of operations for the past three fiscal years has not been
significant. In light of the recent economic environment, however, we cannot be certain of the effect inflation (or
deflation) may have on our results of operations in the future.
CRITICAL ACCOUNTING POLICIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our
Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these Consolidated Financial Statements requires us
to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses
and related disclosures of contingent assets and liabilities. These estimates and assumptions are evaluated on an
ongoing basis and are based on historical experience and various other factors that we believe to be reasonable
under the circumstances. Actual results could differ from these estimates.
We believe the following critical accounting policies used in the preparation of our Consolidated Financial
Statements include significant estimates and assumptions.
Merchandise Inventories
Merchandise inventories, net of an allowance for excess quantities and obsolescence, are stated at the lower of
cost (weighted average method) or market. To determine if the value of our inventory should be marked down
below cost, we consider current and anticipated demand, customer preferences and age of the merchandise. The
significant estimates used in inventory valuation are obsolescence (including excess and slow-moving inventory
and lower of cost or market reserves) and estimates of inventory shrinkage. We reserve for obsolescence based
on historical trends, aging reports, specific identification and our estimates of future sales and selling prices.
33
Form 10-K