Restoration Hardware 2014 Annual Report Download - page 20

Francisco, but to date we have principally relied upon leases with landlords for our other locations. As we
develop new Galleries in the future, we may explore other models for our real estate which could include joint
ventures or other forms of equity ownership in the real estate interests associated with new sites and buildings.
These approaches might require greater capital investment than a traditional store lease with a landlord.
We have generally depended on our ability to generate cash flows from operating activities, as well as
revolving borrowings under the Restoration Hardware, Inc. revolving line of credit and other sources of
additional external funding, to finance the carrying costs of our inventory, to pay for capital expenditures and
operating expenses and to support our growth strategy. If the cash flows from our operating activities are not
sufficient to finance the carrying costs of inventory and to pay for capital expenditures and operating costs, and if
we do not otherwise have sufficient cash on hand or are unable to borrow a sufficient amount under the revolving
line of credit to finance or pay for such expenditures and costs, it could have a significant negative effect on our
business.
As of January 31, 2015, we had no amounts borrowed under the revolving line of credit and had $401.3
million available for borrowing. Various factors may impact our lenders’ willingness to provide funds to us,
including:
• our continuing compliance with the terms of our revolving line of credit;
• the amount of availability under the revolving line of credit, which depends on various factors,
including the amount of collateral available under the revolving line of credit, which relies on a
borrowing base formula tied principally to the value of our assets, including our inventory; and
• our lenders’ financial strength and ability to perform under the revolving line of credit.
We currently believe that our cash flow from operations, net cash proceeds available to us from the issuance
of the convertible senior notes and funds available under the revolving line of credit will satisfy our capital and
operating requirements for the next twelve months. However, any weakening of, or other adverse developments
concerning our sales performance or adverse developments concerning the availability of credit under the
revolving line of credit, could limit the overall amount of funds available to us.
In addition, we may experience cash flow shortfalls in the future, and we may otherwise require additional
external funding, or we may need to raise funds to take advantage of unanticipated opportunities, to make
acquisitions of other businesses or companies or to respond to changing business conditions or unanticipated
competitive pressures. However, we cannot assure you that we will be able to raise funds on favorable terms, if at
all, or that future financing requirements would not be dilutive to holders of our capital stock. If we fail to raise
sufficient additional funds, we may be required to delay or abandon some of our planned future expenditures or
aspects of our current operations.
Our operating results are subject to quarterly fluctuations, and results for any quarter may not necessarily be
indicative of the results that may be achieved for the full fiscal year.
Our quarterly results have historically varied depending upon a variety of factors, including our product
offerings, promotional events, store openings, shifts in the timing of holidays and timing of Source Book
releases, among other things. As a result of these factors, our working capital requirements and demands on our
product distribution and delivery network may fluctuate during the year.
Our results of operation vary relative to corresponding periods in prior years. We may take certain pricing,
merchandising or marketing actions that could have a disproportionate effect on our business, financial condition
and results of operations in a particular quarter or selling season. For example, we periodically engage in sales
promotional activities that may disproportionately impact results in a particular quarter and we believe that
period to period comparisons of our operating results are not necessarily meaningful and cannot be relied upon as
indicators of future performance.
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