Form: SD

Specialized Disclosure Report filed pursuant to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to the use of conflict minerals (Rule 13p-1)

May 26, 2017

Exhibit 1.01

Conflict Minerals Report of RH in Accordance with Rule 13p-1 under the Securities and Exchange Act of 1934

I. Introduction

 

  1. Overview of our Conflict Minerals Report

This Conflict Minerals Report of RH (the “Company,” “ “us,” “we”) is prepared in accordance with Rule 13p-1 (the “Rule”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the reporting period January 1, 2016 to December 31, 2016 (the “reporting period”). RH is inclusive of its wholly-owned subsidiary Restoration Hardware, Inc. and its subsidiaries. During the reporting period, RH acquired a controlling interest in Design Investors WW Acquisition Company, LLC, which owns the business operating under the name “Waterworks”. The information provided in this report on behalf of RH is inclusive of Waterworks, its products and supply chain.

The Rule requires issuers that manufacture or contract to manufacture products that contain conflict minerals that are necessary to the functionality or production of those products to, among other things, disclose annually whether any of those conflict minerals originated in the Covered Countries and if so, to submit a report to the Securities and Exchange Commission (the “SEC”) that includes a description of the measures they took to exercise due diligence on the conflict minerals’ source and chain of custody. Conflict minerals are defined as columbite-tantalite (coltan), cassiterite, gold, wolframite, and their derivatives, which are limited to tantalum, tin, tungsten and gold (the “conflict minerals”). The “Covered Countries” for purposes of the Rule are the Democratic Republic of the Congo, the Republic of the Congo, the Central African Republic, South Sudan, Uganda, Rwanda, Burundi, Tanzania, Zambia and Angola.

 

  2. Overview of our Supply Chain, Verification Process and Conflict Minerals Policy

During the reporting period, RH did not own or operate any applicable manufacturing facilities but instead contracted and had relationships with third-party suppliers who manufacture our merchandise. The products that the Company “contracts to manufacture,” as such term is referred to by the Rule, are herein referred to as the “Subject Products.” The Subject Products are manufactured for the Company through such suppliers’ own factories or factories with which such suppliers have commercial relationships. The Company must therefore rely on its third-party suppliers to provide information regarding the existence of conflict minerals in the Subject Products and their origin.

The Company relied upon multi-stakeholder initiatives that provide verification processes for conflict-free minerals from the smelters or refiners who may provide those minerals to companies in our supply chain. The Company is many steps removed from the mining of conflict minerals. The Company does not purchase raw or unrefined conflict minerals, and conducts no purchasing activities directly in the Covered Countries. The statements herein are based on the activities performed to date, in good faith, by the Company and on the information available at the time of this filing. There are factors that could affect the accuracy of these statements. These factors include, but are not limited to, incomplete supplier data or available smelter data, errors or omissions in the information provided by suppliers or smelters, ongoing identification of smelters in our supply chain, and incomplete information from industry or other third-party sources, among other factors.

We adopted a Conflict Minerals Policy that is published on our supplier cloud platforms and is incorporated in our Vendor’s Operation Manual (the “Vendor Manual”).

II. Description of Products Covered by this Report

RH offers merchandise assortments across a growing number of categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, tableware and children’s furnishings. The Subject Products included products sold by the Company in the following categories: furniture, bathware, plumbing fixtures, lighting fixtures, kitchen and bath hardware, décor, outdoor and garden, and children’s furnishings.


III. Reasonable Country of Origin Inquiry

In accordance with the Rule, we conducted in good faith a reasonable country of origin inquiry (the “RCOI”) that was reasonably designed to determine whether any of the necessary conflict minerals in the Subject Products originated in the Covered Countries or were from recycled or scrap sources.

To conduct our RCOI, we used a conflict minerals reporting template developed by the Conflict-Free Sourcing Initiative (the “CFSI”), an initiative founded by members of the Electronic Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI). We requested this information from our direct suppliers who manufacture our Subject Products.

Based on our RCOI, we have reason to believe that some of the necessary conflict minerals used in our Subject Products originated in the Covered Countries and may not have been from recycled or scrap sources. Accordingly, we conducted due diligence to determine the source and chain of custody of these conflict minerals.

IV. Due Diligence Process

We have designed our diligence efforts to generally conform to the Organization for Economic Cooperation and Development’s (the “OECD”) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas and accompanying supplements (the “OECD Guidance”).

The OECD Guidance identifies five due diligence steps: (i) Establish Strong Company Management Systems; (ii) Identify and Assess Risks in the Supply Chain; (iii) Design and Implement a Strategy to Respond to Identified Risks; (iv) Carry out Independent Third-Party Audit of Smelter/Refiner’s Due Diligence; and (v) Report Annually on Supply Chain Due Diligence.

The due diligence steps that we executed included the following:

 

Step

  

OECD Guidance
Steps

  

Due diligence activities performed by RH

1   

Establish Strong

Company

Management

Systems

  

Adopted Conflict

Minerals Policy

    

 

We adopted a Conflict Minerals Policy that is published on

our supplier cloud platforms and is incorporated in our

Vendor Manual

     

Created Conflict

Minerals

Compliance Team

    

 

We created an internal conflict minerals compliance team

composed of representatives from sourcing, internal audit and

legal departments (the “Conflict Minerals Compliance

Team”). The team was structured to ensure critical

information reached the relevant employees and suppliers

            

Our Conflict Minerals Compliance Team periodically

reported on its due diligence activities to the RH executive

team, the compliance committee and/or the audit committee

     

Internal

Engagement

      

We educated and continue educating relevant employees on

our conflict minerals program and reporting obligations

     

Supplier

Engagement

      

We provided our direct suppliers information on conflict

minerals, our disclosure requirements as well as

recommendations for developing and implementing a conflict

minerals compliance program

2   

Identify and

Assess Risks in

the Supply Chain

  

Identified

Products in Scope

      

Our Conflict Minerals Compliance Team conducted a review

of the products contracted to be manufactured during the

reporting period to identify product categories and Subject

Products that may contain conflict minerals

 

2


     

Inquired about

Due Diligence

Measures

Performed by

Direct Suppliers

    

 

We used the responses from our direct suppliers to the CFSI

reporting template to review their due diligence activities,

including whether they had adopted a conflict minerals

policy, required their own suppliers to source from processing

facilities validated by an independent audit firm, and

implemented a review process that includes corrective action

management

            

We analyzed the completed responses received from our

direct suppliers to identify incomplete responses, potential

errors and/or inaccuracies. As deemed appropriate by us, we

followed up by email or phone with the suppliers who did not

respond to our request to complete the CFSI reporting

template, or who submitted incomplete responses or

responses that we determined may have contained errors or

inaccuracies

            

We implemented a conflict minerals data management tool

that tracks end-to-end communication with direct suppliers

and consolidates suppliers responses to the CFSI template for

analysis and reporting

     

Identified

Smelters

      

We collected a list of smelters/processors that are in our

supply chain by utilizing the CFSI reporting template. We

determined if the processing facilities adhere to responsible

sourcing practices by reconciling that list to the list of smelter

facilities designated by the CFSI Conflict-Free Smelter

Program and the CFSI list of Active Smelters & Refiners that

have committed to undergo the Conflict-Free Smelter

Program audit. We have provided lists of smelters/processors

that are reported in our supply chain in Appendix A.

3   

Design and

Implement a

Strategy to

Respond to

Identified Risks

  

Designed Internal

Reporting System

      

Our Conflict Minerals Compliance Team periodically

reported on its due diligence activities to the RH executive

team, the compliance committee and/or the audit committee

     

Adopted Conflict

Minerals Policy

      

We adopted a Conflict Minerals Policy that is published on

our supplier cloud platforms and is incorporated in our

Vendor Manual

      Verified Smelters       

As part of our risk mitigation process, we determined if the

processing facilities identified in our supply chain adhere to

responsible sourcing practices by reconciling the list of

smelters collected from our direct suppliers to the list of

smelter facilities that have been verified as complying with

the CFSI Conflict-Free Smelter Program and the CFSI list of

Active Smelters & Refiners that have committed to undergo

the Conflict-Free Smelter Program audit

4   

Carry out

Independent

Third-Party Audit

of

Smelter/Refiner’s

Due Diligence

         

We relied on the CFSI’s published lists to verify the CFSI

Conflict-Free Smelter Program compliance status of smelters/

processors that are reported in our supply chain

 

3


5   

Report Annually

on Supply Chain

Due Diligence

         

This Conflict Minerals Report is filed with the SEC and

publicly available on our website at

ir.restorationhardware.com, by clicking on “SEC Filings”

V. Review of Due Diligence Results

 

  1. Facilities Used to Process Conflict Minerals in Subject Products

Based on our due diligence process and the information received from our direct suppliers, we have identified, in Appendix A, facilities that may have been used to process conflict minerals used in the Subject Products.

 

  2. Country of Origin of Conflict Minerals in Subject Products

Based on the information provided by our direct suppliers, we have reason to believe that some of the products RH sold during the reporting year contain necessary conflict minerals that originated from the Covered Countries. Sixteen of our direct suppliers indicated that products supplied to RH contained intentionally added conflict minerals necessary to the function and/or production of the product. Two of these sixteen direct suppliers indicated that the products they sold to RH contained necessary conflict minerals originating in the covered countries. Both of these suppliers are divisions of a company subject to Rule 13p-1 under the Securities Exchange Act (17 CFR 240.13p-1), which we have been told will file a separate report. All smelters our suppliers identified as sources of necessary conflict minerals are certified under or participating in the CFSI Conflict-Free Smelter Program. However, 13% of our direct suppliers did not respond to our survey, and 2 direct suppliers did not know the country of origin of the necessary conflict minerals in their products, although one reported only using conflict minerals from 100% recycled or scrap sources. Accordingly, notwithstanding our due diligence efforts, we were unable to determine the origin of a portion of conflict minerals contained in certain of the Subject Products.

 

  3. Efforts to Identify the Mine or Location of Origin of the Conflict Minerals

Our reasonable country-of-origin inquiry and due diligence process described above represent our best efforts to identify the mine or location of origin for the conflict minerals contained in the Subject Products for this reporting period. We also reviewed publicly available information, including information made publicly available by or through CFSI, to try to identify the mine or location of origin.

VI. Steps To Be Taken To Mitigate Risk

RH intends to continue to communicate our expectations and information requirements to our direct suppliers. Over time, we anticipate that the amount of information available globally on the traceability and sourcing of conflict minerals will increase and improve our knowledge. We will continue to make inquiries to our direct suppliers and undertake additional risk assessments when potentially relevant changes in facts or circumstances are identified. We expect that our direct suppliers will comply with our Conflict Minerals Policy and partner with us to (i) provide appropriate information and conduct necessary due diligence to facilitate our compliance with the Rule, (ii) implement and communicate to their relevant personnel and suppliers policies that are consistent with the Policy, (iii) put in place procedures and contractual provisions for the traceability of Conflict Minerals, working with their suppliers as applicable, (iv) use reasonable efforts to source conflict minerals from smelters and refiners that have been validated by a recognized, independent third party as DRC conflict free, and (v) adopt a risk management strategy with respect to identified risks in the supply chain that is consistent with our Conflict Minerals Policy.

In addition to the due diligence steps that we took during the reporting period, which we intend to continue for 2017 as applicable, we intend to (i) engage with our suppliers that provided incomplete responses or failed to respond to requests, to ensure that they provide requested information for 2017, (ii) monitor the progress of traceability measures at suppliers that indicated for this reporting period that the source of conflict minerals was unknown or undeterminable; and (iii) communicate to new suppliers our sourcing expectations, including by disseminating our Conflict Minerals Policy to them.

VII. Independent Private Sector Audit

Not required for the reporting period.

 

4


Forward-Looking Statements

This Conflict Minerals Report contains forward-looking statements within the meaning of the federal securities laws including statements related to our business, products and conflict mineral efforts, including steps we intend to take in the future to mitigate the risk that the conflict minerals used in the Subject Products benefit the armed groups on the Covered Countries, our ability to monitor the progress of our suppliers or that our suppliers would comply with our Conflict Mineral Policy and our requests for timely and accurate information, our suppliers’ ability to source conflict minerals from smelters and refiners that have been validated by a recognized, independent third party as DRC conflict free, and the effectiveness of any of our risk management strategies to identify risks in the supply chain consistent with our Conflict Minerals Policy. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future events. We cannot assure you that future developments affecting us will be those that we have anticipated. Important risks and uncertainties that may cause these forward-looking statements to differ materially from our expectations include, among others: failure to carry out our plans in a timely manner or at all; lack of cooperation or progress by our suppliers, their respective suppliers and smelters; implementation of satisfactory traceability and other compliance measures by our direct and indirect suppliers; lack of progress by smelter or refiner validation programs for conflict minerals (including the possibility of inaccurate information, fraud and other irregularities); internal and external resource constraints; political developments in the Covered Countries and regulatory developments in the United States, as well as those risks and uncertainties disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in RH Form 10-K filed with the SEC on March 29, 2017, and similar disclosures in subsequent reports filed with the SEC, which are available on our investor relations website at ir.restorationhardware.com and on the SEC website at www.sec.gov. Any forward-looking statement made by us in this Conflict Minerals Report speaks only as of the date on which we make it. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

 

5


Appendix A

Processing Facilities

Table 1. CFSP-compliant processing facilities as listed by CFSI as of May 23, 2017

Processing facilities and their locations reported in our supply chain that are reported by CFSI as compliant with the CFSI Conflict-Free Smelter Program.

 

Mineral

   Facility ID   

Processing Facility Name

   Country
TIN    CID000292    Alpha—United States, 2USA001    United States
TIN    CID001070    China Tin Group Co., Ltd. -2CHN015    China
TIN    CID000295    Cooper Santa—2BRA063    Brazil
TIN    CID002570    CV Ayi Jaya    Indonesia
TIN    CID002592    CV Dua Sekawan    Indonesia
TIN    CID000306    CV Gita Pesona— 2IDN056    Indonesia
TIN    CID000313    CV Serumpun Sebalai—2IDN008    Indonesia
TIN    CID002593    CV Tiga Sekawan    Indonesia
TIN    CID000315    CV United Smelting, 2IDN009    Indonesia
TIN    CID002455    CV Venus Inti Perkasa    Indonesia
TIN    CID000402    Dowa    Japan
TIN    CID002774    Elmet S.L.U. (Metallo Group)    Spain
TIN    CID000438    EM Vinto—2BOL010    Bolivia
TIN    CID000468    Fenix Metals—2POL064    Poland
TIN    CID002848    Gejiu Fengming Metallurgy Chemical Plant    China
TIN    CID002849    Guanyang Guida Nonferrous Metal Smelting Plant    China
TIN    CID002844    HuiChang Hill Tin Industry Co., Ltd.    China
TIN    CID000244    Jiangxi Ketai Advanced Material Co., Ltd.    China
TIN    CID002468    Magnu’s Minerais Metais e Ligas LTDA    Brazil
TIN    CID001105    Malaysia Smelting Corporation (MSC)— 2MYS016    Malaysia
TIN    CID002500    Melt Metais e Ligas LTDA    Brazil
TIN    CID001142    Metallic Resources, Inc.    United States
TIN    CID002773    Metallo-Chimique N.V.    Belgium
TIN    CID001173    Mineracao Taboca S.A.—2BRA018    Brazil
TIN    CID001182    Minsur—Peru, 2PER019/    Peru
TIN    CID001191    Mistubishi Materials Corporation -2JPN020    Japan
TIN    CID2517    O.M. Manufacturing Philippines, Inc.    Phillipines
TIN    CID001314    O.M. Manufacturing (Thailand) Co., Ltd.    Thailand
TIN    CID001337    OMSA— 2BOL022    Bolivia
TIN    CID000309    PT Aries Kencana Sejahtera    Indonesia
TIN    CID001399    PT Artha Cipta Langgeng—2IDN024    Indonesia
TIN    CID002503    PT ATD Makmur Mandiri Jaya    Indonesia


TIN    CID001402    PT Babel Inti Perkasa -2IDN025    Indonesia
TIN    CID002776    PT Bangka Prima Tin    Indonesia
TIN    CID001419    PT Bangka Tin Industry— 2IDN058    Indonesia
TIN    CID001421    PT Belitung Industri Sejahtera— 2IDN030    Indonesia
TIN    CID001428    PT Bukit Timah -2IDN032    Indonesia
TIN    CID002696    PT Cipta Persada Mulia    Indonesia
TIN    CID001434    PT DS Jaya Abadi—2IDN059    Indonesia
TIN    CID001438    PT Eunindo Usaha Mandiri—2IDN033    Indonesia
TIN    CID002530    PT Inti Stania Prima    Indonesia
TIN    CID000307    PT Justindo    Indonesia
TIN    CID002829    PT Kijang Jaya Mandiri    Indonesia
TIN    CID001453    PT Mitra Stania Prima—2IDN037    Indonesia
TIN    CID001453    PT Panca Mega Persada—2IDN060    Indonesia
TIN    CID001458    PT Prima Timah Utama—2IDN007/    Indonesia
TIN    CID001460    PT REFINED BANGKA TIN— 2IDN038/    Indonesia
TIN    CID001463    PT Sariwiguna Binasentosa -2IDN039    Indonesia
TIN    CID001468    PT Stanindo Inti Perkasa—2IDN040    Indonesia
TIN    CID002816    PT Sukses Inti Makmur    Indonesia
TIN    CID001471    PT Sumber Jaya Indah—2IDN041    Indonesia
TIN    CID001477    PT Tambang Timah—2IDN049    Indonesia
TIN    CID001482    PT Timah (Persero) Tbk Mentok    Indonesia
TIN    CID001490    PT Tinindo Inter Nusa -2IDN044    Indonesia
TIN    CID001493    PT Tommy Utama—2IDN057    Indonesia
TIN    CID002706    Resind Indústria e Comércio Ltda.    Brazil
TIN    CID001539    Rui Da Hung    Taiwan
TIN    CID001758    Soft Metais, Ltda.—2BRA066    Brazil
TIN    CID001898    Thaisarco—2THA046    Thailand
TIN    CID002016    VQB Mineral and Trading Group JSC    Vietnam
TIN    CID002036    White Solder Metalurgia e Mineração Ltda.—2BRA054    Brazil
TIN    CID002180    Yunnan Tin Company, Ltd.—2CHN048    China
TANTALUM    CID000211    Changsha South Tantalum Niobium Co., Ltd.    China
TANTALUM    CID002557    Global Advanced Metals Boyertown    United States
TANTALUM    CID000291    Conghua Tantalum and Niobium Smeltry    China
TANTALUM    CID002504    D Block Metals, LLC    United States
GOLD    CID000015    Advanced Chemical Company    United States
GOLD    CID000019    Aida Chemical Industries Co., Ltd.    Japan
GOLD    CID000035    Allgemeine Gold-und Silberscheideanstalt A.G.    Germany
TUNGSTEN    CID000004    A.L.M.T. TUNGSTEN Corp.    Japan
TUNGSTEN    CID002502    Asia Tungsten Products Vietnam Ltd.    Vietnam

 

2


Table 2. CFSP-participating processing facilities as listed by CFSI as of May 23, 2017

Processing facilities and their locations reported in our supply chain that are reported by CFSI to have agreed to participate in the CFSI Conflict-Free Smelter Program but have not yet completed the program.

 

Mineral

   Facility ID   

Processing Facility Name

   Country
TUNGSTEN    CID002833    ACL Metais Eireli    Brazil

Table 3. CFSP-non-participating processing facilities as of May 23, 2017

Processing facilities and their locations reported in our supply chain that are not reported as either compliant with or participating in the CFSI Conflict-Free Smelter Program.

 

Mineral

   Facility ID   

Processing Facility Name

   Country
        

 

3