Pottery Barn 2014 Annual Report Download - page 63

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;
rent based on a percentage of store sales; minimum rent plus additional 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
In thousands
Feb. 1, 2015
(52 Weeks)
Feb. 2, 2014
(52 Weeks)
Feb. 3, 2013
(53 Weeks)
Rent expense $ 215,221 $ 201,727 $ 189,060
Contingent rent expense 32,699 34,608 35,634
Rent expense before deferred lease incentive income 247,920 236,335 224,694
Deferred lease incentive income (24,420) (25,385) (26,694)
Less: sublease rental income (560) (536) (535)
Total rent expense1$ 222,940 $ 210,414 $ 197,465
1Excludes all other occupancy-related costs including depreciation, common area maintenance, utilities and property taxes.
The aggregate future minimum annual cash rental payments under non-cancelable operating leases (excluding the
Memphis-based distribution facility consolidated by us, see Note F) in effect at February 1, 2015 were as follows:
In thousands Lease Commitments1,2
Fiscal 2015 $ 237,975
Fiscal 2016 225,951
Fiscal 2017 198,483
Fiscal 2018 178,353
Fiscal 2019 158,431
Thereafter 595,132
Total $1,594,325
1
Represents future projected cash payments and, therefore, is not necessarily representative of future expected rental expense.
2Projected cash payments include only those amounts that are fixed and determinable as of the reporting date. We currently
pay rent for certain store locations based on a percentage of store sales. As future store sales cannot be predicted with
certainty, projected payments for these locations are based on minimum rent, which is generally higher than rent based on
a percentage of store sales. We incur other lease obligation expenses, such as common area maintenance and other
executory costs, which are not fixed in nature and are thus not included in the future projected cash payments reflected
above. In addition, projected cash payments do not include any benefit from deferred lease incentive income, which is
reflected within “Total rent expense” above.
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Form 10-K