Restoration Hardware 2014 Annual Report Download - page 33

Our reporting obligations as a public company place a significant strain on our management and our
operational and financial resources and systems and will continue to do so for the foreseeable future. If we fail to
timely achieve and maintain the adequacy of our internal control over financial reporting, we may not be able to
produce reliable financial reports. Our failure to achieve and maintain effective internal control over financial
reporting could prevent us from filing our periodic reports on a timely basis, which could result in the loss of
investor confidence in the reliability of our financial statements, harm our business, and negatively impact the
trading price of our common stock.
We incur costs as a public company, and our management is required to devote substantial time to compliance
matters.
As a public company, we incur significant legal, accounting, and other expenses, including costs resulting
from public company reporting obligations under the Exchange Act and the rules and regulations regarding
corporate governance practices, including those under the Sarbanes-Oxley Act, the Dodd-Frank Act, and the
listing requirements of the stock exchange on which our securities are listed. Our management and other
personnel need to devote a substantial amount of time to ensure that we comply with all of these requirements.
The reporting requirements, rules, and regulations increase our legal and financial compliance costs and make
some activities more time-consuming and costly.
These rules and regulations make it more difficult and more expensive for us to obtain director and officer
liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage. These factors could also make it more difficult for us to
attract and retain qualified persons to serve on our board of directors, particularly to serve on our audit and
compensation committees, or as executive officers.
New regulations related to “conflict minerals” may force us to incur additional expenses, may make the
sourcing of our products more complex and may result in damage to our reputation with customers.
On August 22, 2012, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
(“Dodd-Frank”), the SEC adopted new requirements for companies that use certain minerals and metals in their
products, known as “conflict minerals,” whether or not these products are manufactured by third parties. Some of
these minerals are commonly used in many products and may be used in some of the products we offer. These
requirements require companies to diligence, disclose, and report whether such minerals, if used in the products
of the company, originate from the Democratic Republic of Congo and adjoining countries. The implementation
of these new requirements could adversely affect the sourcing, availability, and pricing of such minerals if they
are found to be used in our products and necessary for their functionality.
We have incurred and expect to continue to incur additional costs to comply with the rules, including costs
related to the determination of the origin of the conflict minerals used in our products and the adoption of conflict
minerals-related governance policies, processes and controls. We may also encounter customers who require that
all of the components of our products be certified as conflict free. If we are not able to meet customer
requirements, such customers may choose to not purchase our products, which could impact our sales and harm
our reputation. In addition, since we source substantially all of our products abroad, we may not be able to
sufficiently verify the origins of these minerals and metals used in our products through the due diligence
procedures that we implement, which may harm our reputation and affect our compliance with the SEC
regulations.
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