Published on May 25, 2012
May 25, 2012
VIA EDGAR AND HAND DELIVERY
Mara L. Ransom
Assistant Director
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-7010
| Re: | Restoration Hardware Holdings, Inc. |
Amendment No. 2 to Registration Statement on Form S-1
Filed December 9, 2011
File No. 333-176767
Dear Ms. Ransom:
On behalf of Restoration Hardware Holdings, Inc. (the Company), this letter responds to your letter, dated December 21, 2011 (the Comment Letter), regarding the above-referenced Amendment No. 2 (Amendment No. 2) to Registration Statement on Form S-1 (the Registration Statement), filed on December 9, 2011. Each of your comments is set forth below, followed by the corresponding response. For ease of reference, the headings and numbered paragraphs below correspond to the headings and numbered comments in the Comment Letter. Each response of the Company is set forth in ordinary type beneath the corresponding comment of the Staff of the Division of Corporation Finance (the Staff) from the Comment Letter appearing in bold type. The page references in our responses are to the revised prospectus included in Amendment No. 3 to the Registration Statement (Amendment No. 3), which is being filed today by electronic submission. References herein to we and our refer to Restoration Hardware Holdings, Inc. and its consolidated subsidiaries unless otherwise noted. In addition, on behalf of the Company we confirm the Companys emerging growth company status and note that Amendment No. 3 contains revisions to various sections, including the Executive Compensation disclosures, related to the Jumpstart Our Business Startups Act of 2012 (the JOBS Act).
Ms. Mara L. Ransom
Securities and Exchange Commission
May 25, 2012
Page 2
Prospectus Summary, page 1
| 1. | We note your response to comment three in our letter dated November 10, 2011 and the supplemental materials provided to us. The supplemental materials do not appear to support your statement at the top of page 4 that the top 20 companies comprised 30% of the home furnishings market in 2008. Based upon the supplemental materials, this figure appears to be closer to 20%. Please revise or advise. |
Answer: We have revised the disclosure on pages 5 and 85 of Amendment No. 3 in response to the Staffs comment.
Our Growth Strategy, page 2
| 2. | We note your response to comment four in our letter dated November 10, 2011. Please revise your references to the $143 billion home furnishings market on pages 3 and 82 to indicate that it is your belief, based on your research, that the market for home furnishings in the U.S. is $143 billion. Please also revise your disclosure on page 85 to indicate that it is your belief that there are seven major categories in the housewares and home furnishings market. |
Answer: We have revised the disclosure on pages 3, 4, 80 and 84 of Amendment No. 3 in response to the Staffs comment.
Executive Compensation, page 105
| 3. | We note your response to comment 19 in our letter dated November 19, 2011 and the related revisions to your disclosure. Please also disclose on page 107 where you discuss the increase in Mr. Alberinis salary effective July 1, 2011, that this increase was due to the findings of your compensation consultant and the compensation committees determination that cash compensation for Mr. Alberini should be above the median, as you state on page 113. |
Answer: We acknowledge the Staffs comment and respectfully advise the Staff that we have revised our executive compensation disclosures in accordance with the disclosure provisions made available to emerging growth companies under the JOBS Act, as that term is defined under the JOBS Act. As such, we have removed the discussion of the findings of our compensation consultant, because this disclosure is not required for emerging growth companies.
Ms. Mara L. Ransom
Securities and Exchange Commission
May 25, 2012
Page 3
In addition, we wanted to highlight additional disclosure we have included in Amendment No. 3 in response to Staff comments made in prior comment letters. Each of your prior comments is set forth below, followed by our corresponding response. For ease of reference, the headings and numbered paragraphs below correspond to the headings and numbered comments in the applicable prior comment letter.
Risks Related to Our Business, page 14
Fluctuations in our tax obligations and effective tax rate, page 28
| 23. | We note your disclosure that transactions you have completed in the past and this offering may limit your ability to utilize your net operating loss carry-forwards. Please revise this risk factor to briefly describe the possible impact of any such limitation, including quantifiable information, if possible. (Comment Letter dated October 7, 2011) |
Answer: The Company has not obtained additional specific, quantifiable information regarding any potential limitation on its ability to utilize net operating loss carry-forwards and, as a result, has not revised the disclosure in Amendment 3.
Managements Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
| 46. | We note your indication that funds generated from operations and the availability of borrowings under your line of credit or other financing arrangements will be sufficient to meet your working capital needs, anticipated capital expenditures and payments due under your revolving line of credit for the next 12 24 months. Please disclose your material commitments for capital expenditures as of the end of the latest fiscal period, the purpose of such commitments and the anticipated sources of funds necessary to fulfill such commitments. Please also discuss the nature of and amounts needed for future capital expenditure requirements. Please discuss any amounts you have budgeted for purposes of expanding into new product categories or geographic areas and expanding into your new Design Gallery format, as your plans disclosed elsewhere indicate, and the source(s) of liquidity you intend to use to finance such expansions. (Comment Letter dated October 7, 2011) |
Answer: We have revised the disclosure on page 64 of Amendment No. 3 in response to the Staffs comment.
Ms. Mara L. Ransom
Securities and Exchange Commission
May 25, 2012
Page 4
Business, page 81
Our Growth Strategy, page 83
| 17. | We note your response to comment 57 in our letter dated October 7, 2011. Please revise your disclosure to include the basis for your conclusion that you believe there is a substantial opportunity to continue to increase [y]our market share. Please also disclose any recent increases in market share, with a view towards explaining to investors how your market share has changed in recent periods. Please also include an estimate as to when you expect to open the Greenwich, Connecticut and Boston Design Galleries for which you have recently signed leases. (Comment Letter dated November 10, 2011) |
Answer: We have revised the disclosure on page 80 of Amendment No. 3 in response to the Staffs comment and have provided disclosure regarding the approximate timing of the anticipated openings of our stores in Boston and Greenwich.
Notes to Consolidated Financial Statements
Subsequent Events
| 78. | We note your disclosure that certain executives had loans outstanding due to the Parent to finance the purchase of units in the Parent. We further note that the loans were paid [t]hrough reclassification . . . of the units. Please clarify the following regarding the units: |
| | Please explain and provide us your journal entries to show how the loans were repaid by reclassification, that is, substituting one form of unit for another. |
| | If the executives that repaid their loans through reclassification are forgoing distributions until their loan amounts have been effectively repaid, please clarify this fact. |
| | If distributions are expected to be paid from the initial public offering proceeds, please state so. |
| | To the extent that all awards will vest with an initial public offering, please clarify this fact. |
Please update your disclosure to state the amount of compensation charge recorded in connection with the reclassification. (Comment Letter dated October 7, 2011; discussed further in Comment 23 of Comment Letter dated November 10, 2011)
Answer: We have revised the disclosure on pages F-30 and F-31 of Amendment No. 3 in response to the Staffs comments. As disclosed in Amendment 3, the loans were between the executives and Home Holdings, LLC (Parent) and, as a result, the Company did not record any journal entries to show repayment via reclassification because these loans were accounted for at the Parent level. The Company did, however, record a compensation charge related to the loan reclassification for Gary Friedmans loan, as
Ms. Mara L. Ransom
Securities and Exchange Commission
May 25, 2012
Page 5
described on page F-30 of Amendment 3, and the journal entry is being provided supplementally to the Staff. The Company did not record a compensation charge for Ken Dunajs loan, as further discussed on page F-31 of Amendment 3.
Segment Reporting
| 22. | We read your response to comment 76. Refer to your disclosure on page 86 where you state, We believe we are viewed as a design authority, and offer dominant merchandise assortments across a growing number of categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, as well as baby and child products. We also note your website provides these comparable product categories. Further, for example, refer to your net revenues and gross profit discussion on page 58 where you state that the increase in sales was due primarily to your customers favorable reaction to new and expanded product categories and that higher freight costs resulted from a higher percentage of furniture in your product mix. In this regard, it appears your product mix significantly impacts your results of operations and therefore we are uncertain why an investor would not derive a meaningful benefit from such enterprise revenue disclosures. Please revise as previously requested. (Comment Letter dated November 10, 2011; referring to Comment 76 of Comment Letter dated October 7, 2011) |
Answer: In response to the Staffs comment, we previously advised the Staff that we would provide details of the Companys net revenues broken down between furniture and non-furniture sales. We have provided this disclosure on page F-33 of Amendment No. 3 in response to the Staffs comment.
We will provide you with marked copies of Amendment No. 3 to expedite your review.
If you have any questions, please do not hesitate to call Gavin Grover at (415) 268-7113 or Stewart McDowell at (415) 393-8322.
| Very truly yours, |
| /s/ Gavin B. Grover |
/s/ Stewart L. McDowell | |
| Gavin B. Grover |
Stewart L. McDowell |
Ms. Mara L. Ransom
Securities and Exchange Commission
May 25, 2012
Page 6
| cc: | Gary G. Friedman, Restoration Hardware Holdings, Inc. |
Carlos E. Alberini, Restoration Hardware Holdings, Inc.
Frederick G. Silny, Restoration Hardware Holdings, Inc.
Robert Babula, Securities and Exchange Commission
Donna Di Silvio, Securities and Exchange Commission
Lisa Kohl, Securities and Exchange Commission