Restoration Hardware 2012 Annual Report Download - page 152

November 1, 2012, as described below), of which $10.0 million is available to Restoration Hardware Canada,
Inc. The credit agreement was further amended in January 2012 to add a $15.0 million term loan facility with a
maturity date of July 6, 2015, which was repaid in full on November 7, 2012, as described below.
Under the credit agreement’s commitment increase provision, Restoration Hardware, Inc. had the option to
increase the amount of the revolving line of credit by up to an additional $100.0 million, provided that, among
other things, the existing lenders or additional lenders agreed to participate in the increased loan commitments
under the revolving line of credit, no default under the credit agreement then existed or would result from such
increase and sufficient borrowing base collateral was available to support increased loan amounts. On
November 1, 2012, Restoration Hardware, Inc. increased the amount of the revolving line of credit by $100.0
million pursuant to this commitment increase provision.
On November 7, 2012, Restoration Hardware, Inc. made payments of $75.7 million on its revolving line of
credit and repaid its outstanding term loan of $15.0 million in full. Such payments were funded from the
proceeds received as a result of the Company’s initial public offering. Upon the repayment of the term loan in
full, the Company expensed the remaining debt issuance costs of $0.2 million related to the term loan.
The availability of credit at any given time under the revolving line of credit is limited by reference to a
borrowing base formula based upon numerous factors, including the value of eligible inventory, eligible accounts
receivable, eligible real estate, and, in the case of the term loan, registered trade names and reserves established
by the administrative agent. As a result of the borrowing base formula, the actual borrowing availability under
the revolving line of credit could be less than the stated amount of the revolving line of credit (as reduced by the
actual borrowings and outstanding letters of credit under the revolving line of credit). All obligations under the
credit agreement are secured by substantially all of Restoration Hardware, Inc.’s assets, including accounts
receivable, inventory, intangible assets, property, equipment, goods and fixtures.
Borrowings under the revolving line of credit are subject to interest, at the borrowers’ option, at either the
bank’s reference rate or LIBOR (or the BA Rate or the Canadian Prime Rate, as such terms are defined in the
credit agreement, for Canadian borrowings denominated in Canadian dollars or the United States Index Rate or
LIBOR for Canadian borrowings denominated in United States dollars) plus an applicable margin rate, in each
case. The weighted-average interest rate for the revolving line of credit was 2.5% as of February 2, 2013.
As of February 2, 2013, $82.5 million was outstanding under the revolving line of credit and the undrawn
borrowing availability under the revolving line of credit was $188.5 million. There were $19.5 million and $6.9
million in outstanding letters of credit as of February 2, 2013, and January 28, 2012, respectively.
The credit agreement contains various restrictive covenants, including, among others, limitations on the
ability to incur liens, make loans or other investments, incur additional debt, issue additional equity, merge or
consolidate with or into another person, sell assets, pay dividends or make other distributions or enter into
transactions with affiliates, along with other restrictions and limitations typical to credit agreements of this type
and size. The credit agreement does not contain any significant financial or coverage ratio covenants unless the
availability under the revolving line of credit is less than the greater of (i) $17.5 million and (ii) 10% of the lesser
of (A) the aggregate maximum commitments under the revolving line of credit and (B) the domestic borrowing
base. If the availability under the revolving line of credit is less than the foregoing amount, then Restoration
Hardware, Inc. is required to maintain a consolidated fixed charge coverage ratio of at least one to one. Such
ratio is approximately the ratio on the last day of each month on a trailing twelve-month basis of
(a) (i) consolidated EBITDA (as defined in the agreement) minus (ii) capital expenditures, minus (iii) the income
taxes paid in cash to (b) the sum of (i) debt service charges plus (ii) certain dividends and distributions paid. As
of February 2, 2013, Restoration Hardware, Inc. was in compliance with all covenants, and if the availability
under the revolving line of credit were less than the amount described above, Restoration Hardware, Inc. would
have been in compliance with the consolidated fixed charge coverage ratio described in the previous sentence.
The credit agreement requires a daily sweep of cash to prepay the loans under the credit agreement while (i) an
96