<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 1, 1998
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________.
Commission file number 333-51027
RESTORATION HARDWARE, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 68-0140361
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(State or Other Jurisdiction of (I.R.S. Employer ID No.)
Incorporation or Organization)
15 Koch Road, Suite J, Corte Madera, CA 94925
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (415) 924-1005
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Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Indicate by check [X] whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file for such reports), and (2) has been subject to
such filing requirement for the past 90 days [X] Yes [_] No
As of August 1, 1998, 16,201,809 shares of the Registrant's Common Stock
were outstanding.
<PAGE>
FORM 10-Q
FOR THE QUARTER ENDED AUGUST 1, 1998
INDEX
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<CAPTION>
PAGE
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PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
Balance Sheets (unaudited) as of August 1, 1998,
January 31, 1998 and August 2, 1997. 3
Statements of Operations (unaudited) for the
three and six months ended August 1, 1998 and
August 2, 1997 5
Statements of Cash Flows (unaudited) for the
six months ended August 1, 1998 and
August 2, 1997 6
Notes to Condensed Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 2. Changes in Securities and Use of Proceeds 12
ITEM 5. Other Information 13
ITEM 6. Exhibits and Reports on Form 8-K 13
SIGNATURE PAGE
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
RESTORATION HARDWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
August 1, January 31, August 2,
1998 1998 1997
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<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,340 $ 912 $ 585
Accounts receivable 9,149 3,820 3,669
Merchandise inventories 50,829 40,363 18,206
Prepaid expense and other 3,815 1,709 1,086
----------- ----------- ----------
Total current assets 68,133 46,804 23,546
Property and equipment, net 56,468 39,009 27,899
Long-term deferred tax asset 1,070 1,070 435
Goodwill 4,303 - 0
Other assets 508 350 165
---------- ---------- ----------
Total assets $ 130,482 $ 87,233 $ 52,045
========== ========== ==========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 26,174 $ 22,359 $ 12,090
Revolving line of credit and short-term debt 250 10,520 321
Current portion of deferred lease incentives 1,764 1,392 78
Other current liabilities 1,829 4,345 590
---------- ---------- ----------
Total current liabilities 30,017 38,616 13,079
Long-term debt 619 158 993
Long-term portion of deferred lease incentives 19,629 15,264 8,542
Deferred rent 2,760 1,910 1,171
---------- ---------- ----------
Total liabilities 53,025 55,948 23,785
Redeemable preferred stock
Series A, convertible, no par value, 2,634,415
authorized, 0, 2,492,686 and 2,492,686 issued and
outstanding respectively, liquidation preference
of $0, $1,656 and $1,656, respectively - 2,343 2,119
Series B, convertible, no par value, 2,596,825
authorized, 0, 2,218,370 and 2,218,370 issued and
outstanding, respectively, liquidation preference
of $0, $5,277 and $5,277, respectively - 5,172 5,172
Series C, convertible, no par value, 1,701,658
authorized, 0, 1,656,431 and 1,656,431 issued and
outstanding, respectively, liquidation preference
of $0, $5,840 and $5,840, respectively - 5,792 5,792
Series D, convertible, no par value, 2,783,795
authorized, 0, 2,783,795 and 2,783,795 issued and
outstanding, respectively, liquidation preference
of $0, $30,902 and $29,892, respectively - 29,726 28,606
---------- ---------- ----------
Total redeemable preferred stock - 43,033 41,689
Stockholders' equity
Common stock, $.0001 par value; 40,000,000, 24,500,000 and
24,500,000 shares authorized, respectively;
16,201,805, 4,171,223 and 4,171,223
issued and outstanding; respectively 2 -
Preferred stock, $.0001 par value; 5,000,000
shares authorized; none issued and outstanding - - -
Additional paid-in capital 92,061 541 541
Deficit (14,606) (12,289) (13,970)
---------- ---------- ----------
Total stockholders' equity 77,457 (11,748) (13,429)
---------- ---------- ----------
Total liabilities, redeemable preferred stock and $ 130,482 $ 87,233 $ 52,045
stockholders' equity ========== ========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
RESTORATION HARDWARE, INC.
CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS
(in thousands except per share and store data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
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August 1, 1998 August 2, 1997 August 1, 1998 August 2, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Sales $ 39,675 $ 15,461 $ 72,321 $ 27,369
Cost of sales and occupancy 27,880 10,837 51,958 19,588
--------- --------- --------- ---------
Gross profit 11,795 4,624 20,363 7,781
Selling, general and administrative 11,759 5,203 20,868 8,935
Preopening store expenses 558 644 855 898
--------- --------- --------- ---------
Income from operations (522) (1,223) (1,360) (2,052)
Interest income (expense) (419) 45 (845) (34)
--------- --------- --------- ---------
Income before income taxes (941) (1,178) (2,205) (2,086)
Provision for income taxes (386) (571) (904) (939)
--------- --------- --------- ---------
Net loss $ (555) $ (607) $ (1,301) $ (1,147)
========= ========= ========= =========
Loss per share:
Basic $ (0.06) $ (0.15) (0.19) (0.34)
Diluted $ (0.06) $ (0.15) (0.19) (0.34)
Weighted average shares
Basic 9,850 3,962 7,010 3,353
Diluted 9,850 3,962 7,010 3,353
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
Restoration Hardware, Inc.
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
------------------------------------
August 1, 1998 August 2, 1997
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,301) $ (1,147)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,433 1,102
Deferred income taxes - -
Changes in assets and liabilities:
Accounts receivable (2,574) (1,652)
Merchandise inventories (8,260) (4,114)
Prepaid expenses and other assets (2,082) (732)
Accounts payable and accrued expenses 638 4,881
Taxes payable (2,519) (1,730)
Deferred rent 850 536
Deferred lease incentives and other
long-term liabilities 4,766 3,504
-------------- --------------
Net cash provided by (used in)
operating activities (8,049) 648
Cash flows from investing activities:
Capital expenditures (18,458) (14,160)
Purchase of The Michaels Furniture Company (5,737) -
Cash collected on shareholder advance 508 -
-------------- --------------
Net cash used in
investing activities (23,687) (14,160)
Cash flows from financing activities:
Borrowings (repayments) under revolving
line of credit (11,884) (495)
Principal payments - capital lease obligations (110) (87)
Borrowings (repayments) under term loan (319) 316
Loan to stockholder - -
Issuance of redeemable preferred stock - 26,922
Issuance of common stock 47,477 (138)
Preferred and common stock repurchases - (12,746)
-------------- --------------
Net cash provided by financing
activities 35,164 13,772
Net increase in cash and cash equivalents 3,428 260
Cash and cash equivalents:
Beginning of period 912 325
-------------- --------------
End of period $ 4,340 $ 585
============== ==============
Supplemental schedule of non cash investing and
financing activities:
Equipment acquired through noncash capital lease
transactions - 681
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED AUGUST 1, 1998 AND AUGUST 2, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared from the records of the Company without audit and, in the opinion of
management, include all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position at August 1, 1998
and August 2, 1997; the interim results of operations for the three and six
months ended August 1, 1998 and August 2, 1997; and cash flows for the six
months then ended. The condensed consolidated balance sheet at January 31,
1998, presented herein, has been derived from the audited consolidated balance
sheet for the year then ended.
Accounting policies followed by the Company are described in Note 1 to the
audited consolidated financial statements for the year ended January 31, 1998.
Certain information and disclosures normally included in the notes to the
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted for purposes of the
condensed consolidated interim financial statements. The condensed
consolidated interim financial statements should be read in conjunction with
the audited consolidated financial statements, including notes thereto, for
the year ended January 31, 1998.
The results of operations for the three and six month periods herein presented
are not necessarily indicative of the results to be expected for the full year.
Impact of New Accounting Standard: Effective February 1, 1998 the Company
adopted Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income." This Statement requires that all items recognized under
accounting standards as components of comprehensive income be reported in an
annual financial statement that is displayed with the same prominence as other
annual financial statements. This Statement also requires that an entity
classify items of other comprehensive income by their nature in an annual
financial statement. For example, other comprehensive income may include foreign
currency translation adjustments, minimum pension liability adjustments, and
unrealized gains and losses on marketable securities classified as available-
for-sale. Comprehensive income does not differ from net income for the Company
for the three and six month periods ended August 1, 1998 and August 2, 1997.
In April 1998, the Accounting Standards Executive Committee issued Statement of
Position ("SOP") 98-5, Reporting on the Costs of Start-Up Activities, which
requires costs of start-up activities and organization costs to be expensed as
incurred. The SOP requires entities to expense as incurred all start-up and
preopening costs that are not otherwise capitalizable as long-lived assets. The
SOP will be effective for fiscal years beginning after December 15, 1998. The
Company's adoption of the new accounting standard will involve the recognition
of the cumulative effect of the change in accounting principle required by SOP
as a one-time charge against earnings, net of any related income tax effect,
retroactive to the beginning of the fiscal year of adoption. The Company
believes that adoption of this standard will not have a material impact on the
Company's earnings or financial position.
2. REVOLVING LINE OF CREDIT
On August 12, 1998, the Company amended its revolving line of credit agreement.
The amended agreement allows for cash borrowings and letters of credit up to
$70.0 million, an increase of $12.0 million from the agreement dated April 30,
1998. The agreement has also been extended to June 30, 2000, from the previous
maturity date of December 22, 1999. Interest is paid monthly at the bank's
reference rate (8.50% at August 12, 1998) or LIBOR plus 1.25%, depending on the
nature of the borrowings and the Company's debt to tangible net worth position.
The amended agreement has eliminated certain restrictive covenants, leaving the
Company subject to debt to tangible net worth and minimum net income
requirements. At August 1, 1998, the Company was in compliance with all
applicable covenants and had no outstanding borrowings under the revolving line
of credit and $750,000 outstanding under letters of credit.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Restoration Hardware, Inc. operated 51 stores in 23 states and the District of
Columbia as of August 1, 1998, compared to 30 stores in 16 states as of August
2, 1997.
RESULTS OF OPERATIONS
THE THREE MONTHS (SECOND QUARTER) AND SIX MONTHS (YEAR-TO-DATE,FIRST HALF) ENDED
AUGUST 1, 1998 AS COMPARED TO THE THREE MONTHS (SECOND QUARTER) AND SIX MONTHS
(YEAR-TO-DATE, FIRST HALF) ENDED AUGUST 2, 1997
NET SALES. Net sales increased $24.2 million, or 156.1%, to $39.7 million in
the second quarter of 1998 from $15.5 million in the second quarter of 1997.
For the first half of 1998, net sales were $72.3 million compared to $27.4
million for the same period in 1997, an increase of $44.9 million, or 163.9%.
This increase in net sales was attributable to new stores, an increase in
comparable store sales and sales from the Company's wholly owned subsidiary,
acquired during the first quarter of 1998. At August 1, 1998, the Company
operated 51 stores as compared to 30 stores at August 2, 1997. These additional
21 stores contributed $19.6 million of the sales increase for the second quarter
of 1998 and $36.1 million of the sales increase for the first half of 1998.
Comparable store sales increased 16.4% in the second quarter of 1998 and 17.2%
for the first half of 1998 primarily as a result of increases in number of sales
transactions in the stores compared to the prior year.
GROSS PROFIT. Gross profit increased $7.2 million, or 156.5%, to $11.8 million
in the second quarter of 1998 from $4.6 million in the second quarter of the
prior year. Year-to-date gross profit was $20.4 million compared to $7.8
million in the prior year, an increase of $12.6 million, or 161.5%. As a
percentage of net sales, second quarter gross profit was 29.7% in 1998 compared
to 29.9% in 1997. Year-to-date gross profit as a percentage of net sales was
28.2% compared to 28.4% in the prior year. The decline in gross profit for the
second quarter, as a percentage of net sales, resulted from higher occupancy
costs in new stores and higher costs related to the procurement and distribution
of inventories over the prior year. Additionally, gross profit at the recently
acquired subsidiary is less than the Company's historical average and the net
result is a slightly lower combined gross profit percentage.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES. SG&A expense increased $6.6
million, or 126.9%, to $11.8 million in the second quarter of 1998 from $5.2
million in the second quarter of the prior year. Year-to-date SG&A expense was
$20.9 million compared to $8.9 million in the prior year, an increase of $12.0
million, or 134.8%. As a percentage of net sales, SG&A expenses declined to
29.6% in the second quarter of 1998 compared to 33.6% in the second quarter of
the prior year. Year-to-date SG&A expense, as a percentage of sales, was 28.9%
compared to 32.6% in the prior year. While store selling expenses and the cost
of the corporate office continue to increase in dollars due to store expansion
and the hiring of support staff, the Company has been able to leverage the
expense as a percentage of sales due to increasing sales volumes.
<PAGE>
PREOPENING STORE EXPENSE. Preopening store expense, which includes payroll and
benefit expense, facility supplies, occupancy and travel expenses incurred prior
to the store opening date, was $558,000 for the second quarter of 1998 compared
to $644,000 in the prior year. As a percentage of net sales, preopening store
expense was 1.4% for the second quarter of 1998 compared to 4.2% in the prior
year. Year-to-date preopening store expense was $855,000 in 1998 compared to
$898,000 in the prior year. Year-to-date, as a percentage of net sales,
preopening store expense was 1.2% for 1998 compared to 3.3% in the prior year.
The expense was lower in the second quarter of 1998 than in the second quarter
of the prior year as seven new stores were opened in the current year compared
to ten new stores opened in the prior year.
NET INTEREST EXPENSE. Net interest expense, which includes capital lease
interest and interest expense net of interest income, was $419,000 for the
second quarter of 1998 compared to interest income of $45,000 in the second
quarter of the prior year. Year-to-date net interest expense was $845,000 in
1998 compare to $34,000 in the prior year. The increase in expense was
attributable to higher borrowings under the Company's revolving line of credit
over prior year primarily due to higher inventory balances in the first half
of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses for cash, other than to fund operating expenses, are
to support inventory requirements and for store expansion. Historically, the
Company has financed its operations primarily with internally generated funds,
borrowings under the Company's credit facility and privately invested funds, and
most recently through an initial public offering completed on June 19, 1998.
The Company believes that its cash and cash equivalents, available borrowings
under its revolving line of credit and internally generated funds will be
sufficient to finance its working capital and capital expenditure requirements
for the next 12 months.
On August 12, 1998, the Company amended its revolving line of credit agreement.
The amended agreement allows for cash borrowing and letters of credit up to
$70.0 million, an increase of $12.0 million from the agreement dated April 30,
1998. The agreement has also been extended to June 30, 2000, from the previous
maturity date of December 22, 1999. Interest is paid monthly at the bank's
reference rate (8.50% at August 12, 1998) or LIBOR plus 1.25%, depending on the
nature of the borrowings and the company's debt to tangible net worth position.
The amended agreement has eliminated certain restrictive covenants, leaving the
Company subject to debt to tangible net worth and minimum net income
requirements. At August 1, 1998, the Company was in compliance with all
applicable covenants and had no outstanding borrowings under the revolving line
of credit and $750,000 outstanding under letters of credit.
<PAGE>
Net cash used in operating activities in the first half of 1998 was $8.0
million, an increase of $8.7 million over cash provided of $648,000 in the prior
year. This increase resulted primarily from higher inventory purchases, higher
accounts receivable, prepaid and other asset balances offset by a lower change
in accounts payable and accrued liability balances.
Net cash used in investing activities was $23.7 million in the first half of
1998, an increase of $9.5 million over cash used in investing activities of
$14.2 million in the prior year. Historically, cash used in investing
activities has been primarily related to capital expenditures for new store
expansion. Such expenditures totaled $18.5 million in the first half of 1998
compared to $14.2 million in the prior year. Additionally, in the first half
of 1998 the Company used $5.7 million to purchase The Michaels Furniture
Company.
Net cash provided by financing activities was $35.2 million in the first half of
1998, an increase of $21.4 million over cash provided by financing activities of
$13.8 million in the prior year. The Company paid down $11.9 million on its
revolving line of credit during the first half of 1998 compared to payments of
$495,000 in the prior year. Net cash provided by financing activities also
include $47.5 million received in June 1998 as a result of the Company's initial
public offering, less related expenses. The proceeds were used to pay down
balances on the Company's revolving line of credit and term loan. Remaining
unused proceeds were used for working capital and other general corporate
purposes. In the first half of 1997, the Company issued Series D Preferred
Stock and received $14.0 million, net of Preferred and Common Stock repurchased,
in proceeds used for store expansion during the latter half of 1997.
YEAR 2000
The Company has created a Year 2000 (Y2K) task force to review its internal
information systems and those of significant third parties which would affect
the Company's business operations. From preliminary research the task force
does not expect any significant modifications will be required for such
systems to comply with the Y2K requirements. The task force, which utilizes
the expertise of an outside consultant, is currently preparing a plan which
will identify and address vendor issues and compliance with regards to the Y2K
requirements. If results from the task force efforts indicate vendor
deficiencies related to Y2K compliance the Company will formulate a contigency
plan to minimize the potential adverse effects on the Company's business,
financial condition and results of operations.
The Company has not yet assessed the total cost of potential modifications, if
any, to its operating systems. The Company has identified that it will need to
upgrade its manufacturing operation's inventory management system to the next
vendor version in order to become Y2K compliant. At this time the Company is
also reviewing new software packages for the manufacturing operation to replace
the existing inventory management system. Should a suitable replacement package
not be selected by the end of 1998, the Company will proceed with the upgrade on
the existing system and will be Y2K compliant in mid 1999.
There can be no assurance that the Company or its vendors will be able to
modify timely and successfully their respective systems to comply with Y2K
requirements. The resulting risks to the Company's business are very difficult
to assess. Any failure to become Y2K compliant on the part of the Company or
its vendors or the occurrence of any costs associated with related litigation
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company is in the process of
assessing these risks and uncertainties and developing appropriated contigency
plans and procedures in an attempt to minimize the effects of such a scenario.
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's business is highly seasonal, reflecting the general pattern
associated with the retail industry of peak sales and earnings during the
holiday season. Due to the importance of the holiday selling season, the
fourth quarter of each year has historically contributed, and the Company
expects it will continue to contribute, a disproportionate percentage of the
Company's net sales and most of its net income for the entire year. In
anticipation of increased sales activity, any factors negatively affecting the
Company during the holiday selling season in any year, including unfavorable
economic conditions, could have a material adverse effect on the Company's
financial condition and results of operations. The Company generally
experiences lower sales and earnings during the first three quarters and, as
is typical in the retail industry, has incurred and may continue to incur
losses in these quarters. The results of operations for these interim periods
are not necessarily indicative of the results for the full year. In addition,
the Company makes decisions regarding merchandise well in advance of the
season in which it will be sold, particularly for the holiday selling season.
Significant deviations from projected demand for products could have a
material adverse effect on the Company's financial condition and results of
operations, either by lost sales due to insufficient inventory or lost sales
due to declined customer demand.
The Company's quarterly results of operations may also fluctuate based upon a
variety of other factors such as the number and timing of store openings and
related preopening store expenses, the amount of net sales contributed by new
and existing stores, the mix of products sold, the timing and level of
markdowns, store closings, refurbishments or relocations, competitive factors
and general economic conditions.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: Certain statements contained in this quarterly report on Form 10-Q
contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve risks and uncertainties. Among the important factors which could cause
actual results to differ materially from those in the forward-looking
statements are competition, new product offerings by competitors and price
pressures; seasonality, fluctuations in operating results and economic
cyclicality; effects of weather; changes in consumer preferences; the
Company's ability to implement its growth strategy, including management of
growth and expansion of its distribution facility; dependence on key
personnel, independent manufacturers and key suppliers; international sources
of merchandise, and other factors set forth under the "Factors That May Affect
Future Results" herein and those factors detailed in the Company's filings
with the Securities and Exchange Commission including its recent filing on
Form S-1, including those described in "Risk Factors", "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
under the captions "Quarterly Results of Operations and Seasonality" and
"Liquidity and Capital Resources" and in "Business" under the captions
"Business Strategy", "Competition" and "Government Regulation" therein.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Company. The
Company is, however, involved in routine litigation arising in ordinary course
of its business, and, while the results of the proceedings cannot be predicted
with certainty, the Company believes that the final outcome of such matters
will not have a material adverse effect on the Company's consolidated
financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(d) Use of Proceeds. Paragraph references herein refer to the respective
paragraphs of Item 701(f) of Regulations S-K.
1.) Effective date of the Registration Statement and Commission File
No.: June 17, 1998; 333-51027.
2.) Offering Date: June 18, 1998.
3.) N/A.
4.) Information regarding the offering.
(i) The offering has terminated.
(ii) Managing Underwriters: Goldman Sachs & Co., BancAmerica
Robertson Stephens, NationsBanc Montgomery Securities LLC
and Piper Jaffray Inc.
(iii) Title of Securities Registered: Common Stock
(iv) 3,829,500 shares were registered (2,777,775 on behalf of
the Company and 1,051,725 on behalf of selling
stockholders); all shares were sold for an aggregate
offering price of $72,760,500 ($52,777,725 with respect to
the Company shares and $19,928,775 with respect to the
selling stockholder shares).
(v) Amount of expenses incurred for the Company's account:
- underwriting discount: $3,694,441
- other expenses: $1,700,000
- total expenses: $5,394,441
A. All of such total expenses were payments to others
(i.e., not to directors, officers, and 10%
stockholders of the Company.)
(vi) Net proceeds: $47,383,000
(vii) Actual amount of net proceeds used for:
- construction of plant, building and facilities:
$ 0
- purchase and installation of machinery and equipment:
$ 0
- purchases of real estate: $0
- acquisition of other businesses: $0
- repayment of indebtedness: $36,420,000
- working capital: $10,963,000
- temporary short-term investments: $ 0
Total: $47,383,000
All such payments were payments to others.
(viii) N/A
ITEM 5. OTHER INFORMATION
Millard S. Drexler joined the Company's Board of Directors on August 27, 1998.
Mr. Drexler is currently the President and Chief Executive Officer of The Gap,
Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement
*3.1 Amended and Restated Certificate of Incorporation
*3.2 Bylaws, as amended to date
*4.1 Reference is made to Exhibit 3.1
*4.2 Reference is made to Exhibit 3.2
*4.3 Specimen Common Stock Certificate
*5.1 Opinion of Brobeck, Phleger & Harrison LLP
*10.1 Form of 1995 Stock Option Plan
*10.2 Form of 1998 Stock Incentive Plan
*10.3 Form of 1998 Employee Stock Purchase Plan
*10.4 Form of Indemnity Agreement for Officers and Directors
*10.5 Restated Investors Rights Agreement dated May 16, 1997 among the
Company, the founders and Common Stock Warrantholders, Series D
Warrantholders and Common Stock holders and Investors.
*10.6 Stock Purchase Agreement dated March 20, 1998 between the Company
and Michael Vermillion.
*10.7 Supply Agreement dated March 20, 1998 between the Company, Michaels
Concepts in Wood, Inc. and Michael Vermillion.
*10.8 Lease Agreement dated May 4, 1994 between the Company and Stephen
and Christine Gordon.
*10.9 Commercial Lease and Deposit Receipt dated October 18, 1994 and
Addendums dated October 20, 1994 and November 21, 1994 between the
Company and H. Koch and Sons.
*10.10 Office Lease dated February 21, 1997 between the Company and
Paradise Point Partners.
*10.11 Standard Industrial/Commercial Multi-Tenant Lease dated May 12, 1997
between the Company and Mortimer B. Zuckerman.
*10.12 Fourth Amended and Restated Loan and Security Agreement dated April,
1998
*21.1 Subsidiaries of the Registrant
*23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1)
*24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>
- --------
* Incorporated by reference to Form S-1 (File No. 333-51027) filed on June 17,
1998.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the three month
period ended August 1, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
RESTORATION HARDWARE, INC.
------------------------------
Date: September 15, 1998 /s/ Stephen Gordon
------------------------------
By: Stephen Gordon
Chief Executive Officer
and Chairman
RESTORATION HARDWARE, INC.
------------------------------
Date: September 15, 1998 /s/ Thomas Low
------------------------------
By: Thomas Low
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> MAY-03-1998
<PERIOD-END> AUG-01-1998
<CASH> 4,340,000
<SECURITIES> 0
<RECEIVABLES> 9,149,000
<ALLOWANCES> 0
<INVENTORY> 50,829,000
<CURRENT-ASSETS> 68,133,000
<PP&E> 65,323,000
<DEPRECIATION> (8,855,000)
<TOTAL-ASSETS> 130,482,000
<CURRENT-LIABILITIES> 30,017,000
<BONDS> 0
0
0
<COMMON> 2,000
<OTHER-SE> 77,455,000
<TOTAL-LIABILITY-AND-EQUITY> 130,482,000
<SALES> 39,675,000
<TOTAL-REVENUES> 39,675,000
<CGS> 27,880,000
<TOTAL-COSTS> 27,880,000
<OTHER-EXPENSES> 12,317,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 419,000
<INCOME-PRETAX> (941,000)
<INCOME-TAX> (386,000)
<INCOME-CONTINUING> (555,000)
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<EXTRAORDINARY> 0
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<NET-INCOME> (555,000)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
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