Restoration Hardware 2015 Annual Report Download - page 84

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NOTE 8—OTHER NON-CURRENT OBLIGATIONS
Other non-current obligations consist of the following (in thousands):
January 30, January 31,
2016 2015
N
otes payable for share repurchases .......................................... $ 19,523 $ 19,285
Capital lease obligations—non-current ...................................... 7,399 7,487
Unrecognized tax benefits .......................................................... 1,125 1,108
Other non-current obligations .................................................... 1,302 1,064
Total other non-current obligations ...................................... $ 29,349 $ 28,944
NOTE 9—CONVERTIBLE SENIOR NOTES
0.00% Convertible Senior Notes due 2020
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”). The 2020 Notes are governed
by the terms of an indenture between the Company and U.S. Bank National Association, as the Trustee. The 2020 Notes will mature
on July 15, 2020, unless earlier purchased by the Company or converted. The 2020 Notes will not bear interest, except that the 2020
Notes will be subject to “special interest” in certain limited circumstances in the event of the failure of the Company to perform
certain of its obligations under the indenture governing the 2020 Notes. The 2020 Notes are unsecured obligations and do not contain
any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of
securities by the Company or any of its subsidiaries. Certain events are also considered “events of default” under the 2020 Notes,
which may result in the acceleration of the maturity of the 2020 Notes, as described in the indenture governing the 2020 Notes. The
2020 Notes are guaranteed by the Company’s primary operating subsidiary, Restoration Hardware, Inc., as Guarantor. The guarantee
is the unsecured obligation of the Guarantor and is subordinated to the Guarantor’s obligations from time to time with respect to its
credit agreement and ranks equal in right of payment with respect to Guarantor’s other obligations.
The initial conversion rate applicable to the 2020 Notes is 8.4656 shares of common stock per $1,000 principal amount of 2020
Notes, which is equivalent to an initial conversion price of approximately $118.13 per share. The conversion rate will be subject to
adjustment upon the occurrence of certain specified events, but will not be adjusted for any accrued and unpaid special interest. In
addition, upon the occurrence of a “make-whole fundamental change” as defined in the indenture, the Company will, in certain
circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2020 Notes in
connection with such make-whole fundamental change.
Prior to March 15, 2020, the 2020 Notes will be convertible only under the following circumstances: (1) during any calendar
quarter commencing after September 30, 2015, if, for at least 20 trading days (whether or not consecutive) during the 30 consecutive
trading day period ending on the last trading day of the immediately preceding fiscal quarter, the last reported sale price of the
Company’s common stock on such trading day is greater than or equal to 130% of the applicable conversion price on such trading
day; (2) during the five consecutive business day period after any ten consecutive trading day period in which, for each day of that
period, the trading price per $1,000 principal amount of 2020 Notes for such trading day was less than 98% of the product of the last
reported sale price of the Company’s common stock and the applicable conversion rate on such trading day; or (3) upon the
occurrence of specified corporate transactions. As of January 30, 2016, none of these conditions have occurred and, as a result, the
2020 Notes are not convertible as of January 30, 2016. On and after March 15, 2020, until the close of business on the second
scheduled trading day immediately preceding the maturity date, holders may convert all or a portion of their 2020 Notes at any time,
regardless of the foregoing circumstances. Upon conversion, the 2020 Notes will be settled, at the Company’s election, in cash, shares
of the Company’s common stock, or a combination of cash and shares of the Company’s common stock. If the Company has not
delivered a notice of its election of settlement method prior to the final conversion period it will be deemed to have elected
combination settlement with a dollar amount per note to be received upon conversion of $1,000.
The Company may not redeem the 2020 Notes; however, upon the occurrence of a fundamental change (as defined in the
indenture governing the notes), holders may require the Company to purchase all or a portion of their 2020 Notes for cash at a price
equal to 100% of the principal amount of the 2020 Notes to be purchased plus any accrued and unpaid special interest to, but
excluding, the fundamental change purchase date.