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Item 9A. Controls and Procedures

2024-03-28 compared with 2023-03-29 · 36 added, 55 removed, 135 unchanged (40% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended).

Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that the information required to be disclosed by us in such reports is accumulated and communicated to our senior leadership team, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Our senior leadership team, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of January 28, 2023 as a result of the material weakness in our internal control over financial reporting described below that was identified in connection with the matter that caused the Restatement (defined below).

Our senior leadership team, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a 15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Annual Report.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of February 3, 2024, the end of the period covered by this report our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our senior leadership team, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting

Our senior leadership team is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a 15(f).

Our senior leadership team conducted an assessment of our internal control over financial reporting as of January 28, 2023 based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013).

Based on the assessment, our senior leadership team concluded that our internal control over financial reporting was not effective as of January 28, 2023 due to the existence of a material weakness.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

As previously disclosed in our Quarterly Reports on Form 10-Q/A for the fiscal periods ended April 30, 2022, July 30, 2022, and October 29, 2022, we identified the following material weakness:

We did not design and maintain an effective control activity over the presentation and disclosure of net income per share, specifically the application of authoritative guidance, including new accounting standards, to the net income per share computations.

This material weakness resulted in errors in the unaudited condensed consolidated financial statements for the fiscal periods ended April 30, 2022, July 30, 2022 and October 29, 2022 that were restated on Form 10-Q/A (the “Restatement”).

Additionally, this material weakness could result in misstatements of the related accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

The effectiveness of our internal control over financial reporting as of January 28, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Plan for Remediation of Material Weakness in Internal Control Over Financial Reporting

Our senior leadership team is committed to remediating the material weakness in our internal control over financial reporting in a timely manner and with oversight from the Audit Committee.

We have, among other actions, implemented a remediation plan to address the root cause of the material weakness in order to fully remediate the material weakness.

In conjunction with this remediation plan, during our fiscal quarter ended January 28, 2023, we designed and implemented an enhanced control activity related to the presentation and disclosure of net income per share, including the application of authoritative guidance and new accounting standards, to the net income per share computations.

118 | FORM 10-K

PART II — FINANCIAL STATEMENTS

While we believe the above remediation plan will address and remediate the material weakness, and we have enhanced our controls related to the net income per share computations, the material weakness will not be considered remediated until there has been appropriate time for us to conclude through testing that the controls are designed and operating effectively.

Such remediation is anticipated to be completed in the first half of fiscal 2023.

Our senior leadership team conducted an assessment of our internal control over financial reporting as of February 3, 2024 based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013).

Based on the assessment, our senior leadership team concluded that our internal control over financial reporting was effective as of February 3, 2024.

The effectiveness of our internal control over financial reporting as of February 3, 2024 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting, other than an enhanced control activity to address the material weakness identified above, that occurred during our fiscal quarter ended January 28, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter ended February 3, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Disclosure Controls and Procedures and Internal Control over Financial Reporting

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, our senior leadership team recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that our senior leadership team is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

OTHER INFORMATION

On March 24, 2023, we implemented a restructuring that includes workforce and expense reductions in order to improve and simplify our organizational structure, streamline certain aspects of our business operations and better position us for further growth.

As a result of the workforce reduction associated with the initiative, which affected approximately 440 roles, we expect to incur certain charges.

The reorganization and accompanying workforce reduction includes the elimination of numerous leadership and other positions throughout the organization.

We are currently unable to make a good faith determination of an estimate of the total amount or range of future amounts for each major type of cost expected to be incurred in connection with the reorganization, an estimate of the total amount or range of future amounts expected to be incurred in connection with the reorganization, or an estimate of the total amount or range of future amounts of the charges that will result in future cash expenditures.

We will provide additional information in a subsequent filing after we determine the costs and charges associated with this business reorganization.

During the three months ended February 3, 2024, none of our directors or executive officers adopted , modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K, except as follows:

On December 21, 2023 , Eri Chaya , President, Chief Creative & Merchandising Officer , adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 160,000 shares of RH’s common stock beginning April 2, 2024.

The arrangement’s expiration date is December 31, 2024 .

116 | FORM 10-K

PART II — FINANCIAL STATEMENTS

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Annual Report on Form 10-K:

(a) The following documents are filed as part of this Annual Report:

Consolidated Financial Statements

The following financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K:

The following financial statements are included in Part II, Item 8 of this Annual Report:

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

Consolidated Balance Sheets as of January 28, 2023 and January 29, 2022

Consolidated Statements of Income for the fiscal years ended January 28, 2023, January 29, 2022 and January 30, 2021

Consolidated Statements of Comprehensive Income for the fiscal years ended January 28, 2023, January 29, 2022 and January 30, 2021

Consolidated Statements of Stockholders’ Equity for the fiscal years ended January 28, 2023, January 29, 2022 and January 30, 2021

Consolidated Statements of Cash Flows for the fiscal years ended January 28, 2023, January 29, 2022 and January 30, 2021

Consolidated Balance Sheets as of February 3, 2024 and January 28, 2023

Consolidated Statements of Income for the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022

Consolidated Statements of Comprehensive Income for the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022

Consolidated Statements of Stockholders’ Equity (Deficit) for the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022

Consolidated Statements of Cash Flows for the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022

Notes to the Consolidated Financial Statements

1 unchanged sentence

Separate financial statement schedules have been omitted either because they are not applicable or because the required information is included in the consolidated financial statements or notes described in Item 15(a)(1) above.

The Exhibits listed in the Index to Exhibits, which appears immediately before the signature page and is incorporated herein by reference, are filed or incorporated by reference as part of this Annual Report on Form 10-K.

FORM 10-K SUMMARY

9 unchanged sentences

Description of Securities of Registrant .

March 30, 2020

Form of RH Common Stock Certificate.

March 29, 2017

Indenture dated June 18, 2018, between RH and U.S.

Bank National Association, as Trustee, including form of 0.00% Convertible Senior Note due 2023 .

June 19, 2018

First Supplemental Indenture dated as of August 31, 2018, between RH and U.S.

Bank National Association, as Trustee, relating to the 0.00% Convertible Senior Note due 2023.

September 5, 2018

Indenture dated September 17, 2019, between RH and U.S.

22 unchanged sentences

Amended and Restated Aircraft Time Sharing Agreement entered into on March 29, 2016 by and between Restoration Hardware, Inc.

and Gary Friedman.

March 30, 2016

Credit Agreement, dated as of July 7, 2017, among Restoration Hardware, Inc., as lead borrower, various other subsidiaries of RH named therein as borrowers, the guarantors party thereto, the lenders party thereto and Wilmington Trust, National Association as administrative agent and collateral agent.

July 13, 2017

120 | FORM 10-K

2 unchanged sentences

EXHIBIT DESCRIPTION

July 13, 2017

Credit Agreement, dated as of April 9, 2019 and effective as of April 10, 2019, among Restoration Hardware, Inc., as lead borrower, various other subsidiaries of RH named therein as borrowers, the guarantors party thereto, the lenders party thereto and BSP Agency, LLC, as administrative agent and collateral agent.

11 unchanged sentences

October 21, 2020

Form of Partial Warrant Termination Agreement by and between RH and the applicable Hedge Counterparty

April 13, 2022

Form of Partial Warrant Termination Agreement by and between RH and the applicable Hedge Counterparty

Term Loan Credit Agreement dated as of October 20, 2021, as amended by the 2022 Incremental Amendment, dated as of May 13, 2022, by and among Restoration Hardware, Inc.

as the borrower, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent.

RH 2023 Stock Incentive Plan.

April 5, 2023

Form of Remaining Warrant Termination Agreement by and between RH and the applicable Hedge Counterparty.

Form of Restricted Stock Unit Award Agreement under RH 2023 Stock Incentive Plan .

April 24, 2023

Form of Bond Hedge Termination Agreement by and between RH and the applicable Hedge Counterparty.

Form of Option Award Agreement under RH 2023 Stock Incentive Plan .

April 24, 2023

Term Loan Credit Agreement dated as of October 20, 2021, as amended by the 2022 Incremental Amendment, dated as of May 13, 2022, by and among Restoration Hardware, Inc.

as the borrower, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent.

EXHIBIT INDEX

FORM 10-K | 123

INCORPORATED BY REFERENCE

EXHIBIT DESCRIPTION

Subsidiary List

3 unchanged sentences

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

EXHIBIT INDEX

FORM 10-K | 121

INCORPORATED BY REFERENCE

EXHIBIT DESCRIPTION

Certification of Chief Executive Officer pursuant to 18 U.S.C.

2 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Policy for Recoupment of Incentive Compensation .

XBRL Instance Document––the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

14 unchanged sentences

POWER OF ATTORNEY

Know all persons by these presents, that each person whose signature appears below constitutes and appoints Gary Friedman and Jack Preston, and each of them, as such person’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign any and all amendments to this annual report on Form 10-K, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or such person’s substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

Know all persons by these presents, that each person whose signature appears below constitutes and appoints Gary Friedman and Jack Preston, and each of them, as such person’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or such person’s substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on March 28 th , 2024.

24 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures