Restoration Hardware 2015 Annual Report Download - page 70

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RESTORATION HARDWARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—NATURE OF BUSINESS
Restoration Hardware Holdings, Inc., a Delaware corporation, together with its subsidiaries (collectively, the “Company”), is a
luxury home furnishings retailer that offers a growing number of categories, including furniture, lighting, textiles, bathware, décor,
outdoor and garden, tableware, and child and teen furnishings. These products are sold through the Company’s stores, catalogs and
websites. As of January 30, 2016, the Company operated a total of 69 retail stores and 17 outlet stores in 28 states, the District of
Columbia and Canada, and had sourcing operations in Shanghai and Hong Kong.
NOTE 2—ORGANIZATION
The Company was formed on August 18, 2011 and capitalized on September 2, 2011 as a holding company for the purposes of
facilitating an initial public offering of common equity and was at such time a direct subsidiary of Home Holdings, LLC, a Delaware
limited liability company (“Home Holdings”).
On November 1, 2012, the Company acquired all of the outstanding shares of capital stock of Restoration Hardware, Inc., a
Delaware corporation, and Restoration Hardware, Inc. became a direct, wholly owned subsidiary of the Company. Restoration
Hardware, Inc. was a direct, wholly owned subsidiary of Home Holdings LLC, a Delaware limited liability company (“Home
Holdings”) prior to the Company’s initial public offering. Outstanding units issued by Home Holdings under its equity compensation
plan, referred to as the Team Resto Ownership Plan, were replaced with common stock of the Company at the time of its initial public
offering. These transactions are referred to as the “Reorganization.” On November 7, 2012, the Company completed its initial public
offering.
On May 20, 2013, the Company completed a follow-on offering of 9,974,985 shares of common stock at an offering price of
$50.00 per share, which included 1,301,085 shares sold in connection with the full exercise of the option to purchase additional shares
granted to the underwriters. All of the shares sold in the offering were sold by existing stockholders of the Company. No shares were
sold by the Company in the offering, and, as such, the Company did not receive any of the proceeds from such sales. Effective May
20, 2013, the Company ceased being a subsidiary of Home Holdings, as a result of the sale, by Home Holdings, of a portion of its
shares of the Company’s voting common stock, which resulted in Home Holdings owning less than a majority of the Company’s
voting common stock after such sale.
On July 17, 2013, the Company completed a second follow-on offering of 8,000,000 shares of common stock at an offering
price of $70.00 per share. On August 14, 2013, in connection with the full exercise of the option to purchase additional shares granted
to the underwriters, an additional 1,200,000 shares were sold at a price of $70.00 per share. All of the shares sold in the offering were
sold by existing stockholders of the Company. No shares were sold by the Company in the offering, and, as such, the Company did
not receive any of the proceeds from such sales.
Convertible Senior Notes
In June 2015, the Company issued in a private offering $250 million principal amount of 0.00% convertible senior notes due
2020 and, in July 2015, the Company issued an additional $50 million principal amount pursuant to the exercise of the overallotment
option granted to the initial purchasers as part of its June 2015 offering (collectively, the “2020 Notes”). In connection with the
issuance of these notes, the Company entered into convertible note hedge transactions for which it paid an aggregate amount of $68.3
million. In addition, the Company sold warrants for which it received aggregate proceeds of $30.4 million. Taken together, the
Company received total cash proceeds of $256.0 million, net of discounts upon original issuance and offering costs of $6.1 million.
Refer to Note 9—Convertible Senior Notes.
In June 2014, the Company issued $350 million principal amount of 0.00% convertible senior notes due 2019 in a private
offering. In connection with the issuance of these notes, the Company entered into convertible note hedge transactions for which it
paid an aggregate $73.3 million. In addition, the Company sold warrants for which it received aggregate proceeds of $40.4 million.
Taken together, the Company received total cash proceeds of $311.7 million, net of the initial purchasers’ discounts and commissions
and offering costs of $5.4 million. Refer to Note 9—Convertible Senior Notes.