Q2 2016 Net Revenues Increased 7% on Top of
a 17% Increase Last Year
Company Maintains Fiscal 2016 Net Revenues
and Adjusted Diluted EPS Guidance
RH (Restoration Hardware Holdings, Inc. - NYSE:RH) today
announced financial results for the second quarter ended July 30,
2016.
The Company will post a video presentation between
approximately 1:15 p.m. – 1:30 p.m. PT (4:15 p.m. – 4:30 p.m. ET)
today highlighting its continued evolution and recent performance
on the RH Investor Relations website at
ir.restorationhardware.com.
Second Quarter Highlights
- Net revenues increased 7% on top of a
17% increase last year
- Comparable brand revenues declined 3%
compared to a 16% increase last year
- GAAP net income of $6.9 million
compared to $29.9 million last year
- Adjusted net income of $17.9 million
compared to $36.0 million last year
- GAAP diluted earnings per share of
$0.17 compared to $0.71 last year
- Adjusted diluted earnings per share of
$0.44 compared to $0.85 last year
Gary Friedman, Chairman and Chief Executive Officer, commented,
“Net revenues of $543.4 million and adjusted diluted EPS of $0.44
were well ahead of our guidance for the quarter due to our ability
to ship products earlier than anticipated, resulting in a pull
forward of revenue and earnings into the second quarter from the
third quarter. We remain confident in our outlook for the remainder
of fiscal 2016 and are maintaining our net revenue and adjusted
diluted EPS guidance for the year.”
Mr. Friedman added, “As previously communicated, we are making
several strategic investments and changes to our business model in
fiscal 2016 that are temporarily depressing financial results in
the short term, which we believe will strengthen our brand and
position the business for accelerated revenue and earnings growth
in 2017 and beyond. These temporal issues include the costs related
to the launch of RH Modern; the timing of recognizing membership
revenues related to the transition from a promotional to a
membership model; efforts to reduce inventories and rationalize our
SKU count; and the decision to push our Source Book mailing from
the Spring to the Fall.”
Mr. Friedman continued, “This Fall, we will begin to unveil some
of the most significant initiatives in the history of our Company
that we believe will create an inflection point in our business
beginning in the fourth quarter of fiscal 2016, and build momentum
throughout fiscal 2017. One, we have completely redesigned and
rephotographed our entire collection of Source Books. The redesign,
led by famed art director Fabien Baron, who designed the RH Modern
book, presents the brand in a fresh and compelling new format. Two,
based on our successful test of RH Modern in several of our
Galleries, we will be introducing RH Modern across our entire
retail fleet this Fall. Three, we are making a significant
investment in our RH Interior Design business, including doubling
the size of our design team versus a year ago, arming our designers
with new tools and training, installing Design Ateliers - an
interactive space where designers, architects and customers can
work to imagine and execute their projects, and launching an
innovative multi-channel advertising campaign that will communicate
our unique and authentic design philosophy. Four, now armed with
data after the inaugural mailing, we are optimizing the second
edition of our RH Modern book, making significant changes to the
merchandising and presentation, plus adding new collections that we
believe will dramatically increase productivity. We plan to mail
the second edition of RH Modern sometime in the early Spring of
2017. Furthermore, our real estate transformation will continue to
generate incremental revenue as we complete the openings for fiscal
2016 in Kansas City, Austin, Las Vegas and Seattle and gain even
further momentum in fiscal 2017 as many of our Galleries will have
the added benefit of restaurants, wine vaults, and coffee bars,
building on the success of our first hospitality venture at the
Historic 3Arts Club in Chicago.”
Mr. Friedman concluded, “While the degree and pace of innovation
at RH might seem ambitious comparatively, it is the result of years
building a culture engineered to be, as Charles Darwin believed,
the one most responsive to change. In a world moving exponentially
faster, we are building one of the only true sustainable
competitive advantages - a culture of imagination and innovation. A
culture that is proving itself capable of imagining the future, and
an organization that is demonstrating it can build it."
Second Quarter Fiscal 2016
Results
Revenue - Net revenues for the second quarter of fiscal 2016
increased 7% to $543.4 million from $506.9 million in the second
quarter of fiscal 2015.
- Comparable brand revenue, which
includes direct, declined 3% in the second quarter of fiscal 2016
compared to 16% growth for the same period last year.
- Stores revenues increased 15% to $309.8
million in the second quarter of fiscal 2016. This growth is on top
of a 21% increase in stores revenues in the second quarter of
fiscal 2015.
- Direct revenues decreased 2% to $233.6
million in the second quarter of fiscal 2016. Direct revenues
during the second quarter of fiscal 2016 represented 43% of total
net revenues.
Revenue Metrics* Three
Months Ended
July 30,2016
August 1,2015
Stores as a percentage of net revenues 57 % 53 % Direct as a
percentage of net revenues 43 % 47 % Growth in net revenues: Stores
15 % 21 % Direct -2 % 13 % Total 7 % 17 % Comparable brand revenue
growth (1) -3 % 16 % * See the Company’s most recent Form
10-K and Form 10-Q filings for the definitions of stores, direct,
and comparable brand revenue. (1) Waterworks is excluded from
comparable brand revenue growth and will be added in the first full
quarter following the anniversary of the acquisition.
Retail Galleries - As of July 30, 2016, the Company
operated a total of 84 retail galleries, consisting of 53 legacy
Galleries, 6 larger format Design Galleries, 4 next generation
Design Galleries, 1 RH Modern Gallery, and 5 RH Baby & Child
Galleries throughout the United States and Canada, as well as 15
Waterworks showrooms in the United States and UK. This compares to
a total of 67 retail galleries, consisting of 57 legacy Galleries,
6 larger format Design Galleries, 1 next generation Design Gallery,
and 3 RH Baby & Child Galleries throughout the United States
and Canada, as of August 1, 2015.
In addition, as of July 30, 2016, the Company operated 23 outlet
stores compared to 15 as of August 1, 2015.
Retail Gallery Metrics* Three Months
Ended
July 30,2016
August 1,2015
StoreCount
Total LeasedSelling
SquareFootage
StoreCount
Total LeasedSelling
SquareFootage
(in thousands) (in thousands)
Beginning of period 69
725 67 605 Waterworks Showrooms acquired
15 51 — —
End of period 84 776
67 605 % Growth 28 % 7 %
Weighted-average
leased selling
square footage
761 605 % Growth 26 % 9 % * See the Company’s
most recent Form 10-K and Form 10-Q filings for square footage
definitions. Total leased square footage as of July 30, 2016 and
August 1, 2015 was 1,084,000 and 855,000, respectively. As a result
of the Waterworks acquisition, we acquired 15 Waterworks showrooms
which increased our total leased square footage by approximately
73,000 as of July 30, 2016. Weighted-average leased square footage
for the three months ended July 30, 2016 and August 1, 2015 was
1,062,000 and 855,000, respectively. Retail sales per leased
selling square foot for the three months ended July 30, 2016 and
August 1, 2015 was $354 and $393, respectively.
Operating Income and Margin** - On an unadjusted basis,
GAAP operating income was $22.0 million in the second quarter of
fiscal 2016 compared to $56.4 million for the same period last year
and GAAP operating margin was 4.1% compared to 11.1% for the same
period last year.
Adjusted operating income in the second quarter of fiscal 2016
was $33.2 million compared to $61.9 million in the second quarter
of fiscal 2015. Adjusted operating margin in the second quarter of
fiscal 2016 was 6.1% compared to 12.2% for the same period last
year.
Net Income** - On an unadjusted basis, GAAP net income
for the second quarter of fiscal 2016 was $6.9 million compared to
$29.9 million for the same period last year.
Adjusted net income in the second quarter of fiscal 2016 was
$17.9 million compared to $36.0 million in the second quarter of
fiscal 2015.
Earnings Per Share** - On an unadjusted basis, GAAP
diluted earnings per share for the second quarter of fiscal 2016
was $0.17 compared to $0.71 for the same period last year.
Adjusted diluted earnings per share for the second quarter of
fiscal 2016 was $0.44 compared to $0.85 for the same period last
year.
A reconciliation of GAAP to non-GAAP financial measures is
provided in the tables accompanying this release.
Outlook
The Company’s results for fiscal 2016 will be impacted by
certain short term operational items including costs associated
with RH Modern production delays and investments to elevate the
customer experience, timing issues related to the transition from a
promotional to a membership model, and a more aggressive approach
to rationalizing its SKU count and optimizing inventory. These
factors are negatively impacting the Company’s fiscal 2016 adjusted
diluted EPS outlook by approximately $0.90 to $1.00.
The Company is providing the following outlook for the third
quarter of fiscal 2016 (including an approximate $0.15 adjusted
diluted EPS reduction per the short term operational items
described above):
- Net revenues in the range of $520
million to $530 million
- Adjusted net income in the range of $5
million to $7 million
- Adjusted diluted EPS in the range of
$0.13 to $0.18
- Income tax rate of approximately
39%
- Diluted shares outstanding of
approximately 40.9 million
The Company is maintaining its outlook for fiscal year 2016
(including an approximate $0.90 to $1.00 adjusted diluted EPS
reduction per the short term operational items described above) as
follows:
- Net revenues growth in the range of 1%
to 3%
- Adjusted diluted EPS in the range of
$1.60 to $1.80
- Capital expenditures in the range of
$180 million to $210 million
Note: The Company’s adjusted net income and adjusted diluted
earnings per share guidance does not include certain charges and
costs. The adjustments to net income and diluted earnings per share
in future periods are generally expected to be similar to the kinds
of charges and costs excluded from adjusted net income and adjusted
diluted earnings per share in prior quarters, such as non-cash and
other compensation expense; one-time income tax expense; legal
claim related expenses; reorganization costs including severance
costs and related taxes; and charges and costs in connection with
the acquisition of Waterworks, among others. The exclusion of these
charges and costs in future periods will have a significant impact
on the Company’s adjusted net income and adjusted diluted earnings.
The Company is not able to provide a reconciliation of the
Company’s non-GAAP financial guidance to the corresponding GAAP
measures without unreasonable effort because of the uncertainty and
variability of the nature and amount of these future charges and
costs.
Video Presentation and Q&A
Conference Call Information
Accompanying this release, RH will today post a video
presentation highlighting the Company’s second quarter fiscal 2016
performance and outlook on the Company’s Investor Relations
website, ir.restorationhardware.com. Management will then host a
live question and answer conference call at 2:30 p.m. PT (5:30 p.m.
ET). Interested parties may access the call by dialing (866)
394-6658 (United States/Canada) or (706) 679-9188 (International).
A live broadcast of the question and answer session conference call
will also be available online at the Company’s investor relations
website, ir.restorationhardware.com. A replay of the question and
answer session conference call will be available through September
21, 2016 by dialing (855) 859-2056 or (404) 537-3406 and entering
passcode 73789545, as well as on the Company’s investor relations
website.
About RH
RH (Restoration Hardware Holdings, Inc. - NYSE:RH) is a curator
of design, taste and style in the luxury lifestyle market. The
Company offers collections through its retail galleries, Source
Books, and online at RH.com.
**Non-GAAP Financial
Measures
To supplement its condensed consolidated financial statements,
which are prepared and presented in accordance with Generally
Accepted Accounting Principles (“GAAP”), the Company uses the
following non-GAAP financial measures: adjusted operating income,
adjusted operating margin, adjusted net income, and adjusted
diluted earnings per share (collectively, “non-GAAP financial
measures”). We compute these measures by adjusting the applicable
GAAP measures to remove the impact of certain recurring and
non-recurring charges and gains and the tax effect of these
adjustments. The presentation of this financial information is not
intended to be considered in isolation or as a substitute for, or
superior to, the financial information prepared and presented in
accordance with GAAP. The Company uses these non-GAAP financial
measures for financial and operational decision making and as a
means to evaluate period-to-period comparisons. The Company
believes that they provide useful information about operating
results, enhance the overall understanding of past financial
performance and future prospects, and allow for greater
transparency with respect to key metrics used by management in its
financial and operational decision making. The non-GAAP financial
measures used by the Company in this press release may be different
from the non-GAAP financial measures, including similarly titled
measures, used by other companies.
For more information on the non-GAAP financial measures, please
see the Reconciliation of GAAP to non-GAAP Financial Measures
tables in this press release. These accompanying tables include
details on the GAAP financial measures that are most directly
comparable to non-GAAP financial measures and the related
reconciliations between these financial measures.
Forward-Looking
Statements
This release and the accompanying video presentation contain
forward-looking statements within the meaning of the federal
securities laws including statements related to our future
financial guidance, including for the third and fourth quarters of
fiscal 2016 and the fiscal year ended January 28, 2017, including
net revenues, adjusted net income, adjusted EPS and capital
expenditures; statements regarding the Company’s confidence in its
outlook for the remainder of fiscal 2016; the belief that the
Company’s strategic investments and changes to its business model
that are temporarily depressing financial results in the short term
will strengthen the Company’s brand and position the business for
accelerated revenue and earnings growth in 2017 and beyond as well
as the specific factors that the Company believes will drive such
results, including initiatives that the Company believes will
create an inflection point in the Company’s business beginning in
the fourth quarter of fiscal 2016 and build momentum through fiscal
2017, such as the redesigned and rephotographed Source Books, the
introduction of RH Modern across the Company’s entire retail fleet
this Fall, the significant investments in the Company’s RH Interior
Design business including doubling the size of the Company’s design
team versus a year ago, arming designers with new tools and
training, installing Design Ateliers and launching an innovative
multi-channel adverting campaign, the optimization of the second
edition of the Company’s RH Modern Book and the changes to the
merchandising, presentation and collections that the Company
believes will dramatically increase productivity, the planned
mailing of the second edition of RH Modern in early Spring 2017,
the store openings for fiscal 2016 in Kansas City, Austin, Las
Vegas and Seattle, and the addition of restaurants, wine vaults and
coffee bars to many of the Company’s Galleries; statements
regarding the belief that the Company is building a sustainable
competitive advantage of a culture of imagination and innovation;
statements regarding the impact on the Company’s results for fiscal
2016 of certain temporal issues including costs associated with the
launch of RH Modern, the timing of recognizing membership revenues
relating to the transition from a promotional to a membership
model, efforts to reduce inventories and rationalize the Company’s
SKU count, and the decision to push the Source Book mailing from
the Spring to the Fall; and any statements or assumptions
underlying any of the foregoing. These forward-looking statements
include factors having a temporary or temporal impact on the
Company’s business and results of operation, and there is inherent
uncertainty and risks relating to the impact of such factors on the
Company’s business and results of operation, whether such factors
and impact will be recurring and the exact timing of any such
impact on the Company’s business and results of operation. 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 could cause actual results to differ materially from our
expectations include, among others, our ability to retain key
personnel; successful implementation of our growth strategy; our
ability to take advantage of the transaction with Waterworks;
uncertainties in the current performance of our business including
a range of risks related to our operations as well as external
economic factors; general economic conditions and the impact on
consumer confidence and spending; changes in customer demand for
our products; factors affecting our outstanding convertible senior
notes; our ability to anticipate consumer preferences and buying
trends, and maintaining our brand promise to customers; changes in
consumer spending based on weather and other conditions beyond our
control; risks related to the number of new business initiatives we
are undertaking; strikes and work stoppages affecting port workers
and other industries involved in the transportation of our
products; our ability to obtain our products in a timely fashion or
in the quantities required; our ability to employ reasonable and
appropriate security measures to protect personal information that
we collect; our ability to support our growth with appropriate
information technology systems; risks related to “conflict
minerals” compliance and its impact on sourcing, if any, 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 Restoration
Hardware Holdings’ most recent Form 10-K and Form 10-Q filed with
the Securities and Exchange Commission, 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 press release 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.
RESTORATION HARDWARE HOLDINGS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except share and per share
amounts)(Unaudited)
Three Months Ended Six Months
Ended July 30,
2016
% of Net
Revenues
August 1,
2015
% of Net
Revenues
July 30,
2016
% of Net
Revenues
August 1,
2015
% of Net
Revenues
Net revenues $ 543,381 100.0 % $ 506,942 100.0 % $
998,837 100.0 % $ 929,387 100.0 % Cost of goods sold
363,542 66.9 % 312,679 61.7 %
691,523 69.2 % 591,706 63.7 % Gross profit
179,839 33.1 % 194,263 38.3 % 307,314 30.8 % 337,681 36.3 %
Selling, general and administrative
expenses
157,824 29.0 % 137,840 27.2 %
296,774 29.7 % 264,229 28.4 % Income from
operations 22,015 4.1 % 56,423 11.1 % 10,540 1.1 % 73,452 7.9 %
Interest expense—net 10,909 2.1 % 7,406
1.4 % 21,437 2.2 % 13,055 1.4 % Income
(loss) before income taxes 11,106 2.0 % 49,017 9.7 % (10,897 ) -1.1
% 60,397 6.5 % Income tax expense (benefit) 4,188 0.7
% 19,082 3.8 % (4,345 ) -0.4 %
23,306 2.5 % Net income (loss) $ 6,918 1.3 % $ 29,935
5.9 % $ (6,552 ) -0.7 % $ 37,091 4.0 %
Weighted-average shares used in
computing basic net income
(loss) per share
40,646,124 40,045,850 40,617,102 39,979,898 Basic net income (loss)
per share $ 0.17 $ 0.75 $ (0.16 ) $ 0.93 Weighted-average
shares used in
computing diluted net income
(loss) per share
40,820,495 42,243,910 40,617,102 42,117,215 Diluted net income
(loss) per share $ 0.17 $ 0.71 $ (0.16 ) $ 0.88
RESTORATION HARDWARE HOLDINGS,
INC.RECONCILIATION OF GAAP NET INCOME (LOSS) TO ADJUSTED NET
INCOME(In thousands)(Unaudited)
Three Months Ended Six Months Ended
July 30,2016
August 1,2015
July 30,2016
August 1,2015
GAAP net income (loss) $ 6,918 $ 29,935 $ (6,552 ) $ 37,091
Adjustments (pre-tax):
Cost of goods sold:
Impact of inventory step-up [a]
3,401 —
3,401
— Legal claim [b] — 4,844 7,729 6,223 Selling, general and
administrative expenses: Reorganization related costs [c] 3,309 —
4,724 — Non-cash compensation [d] 3,672 — 3,672 — Acquisition
related costs [e] 778 — 2,847 — Legal claim [b] — 630 972 819
Interest expense—net: Amortization of debt discount [f]
6,479 4,493 12,921 7,195 Subtotal adjusted
items 17,639 9,967 36,266 14,237 Impact of income tax on adjusted
items [g] (6,649 ) (3,880 ) (13,872 )
(5,464 ) Adjusted net income [h] $ 17,908 $ 36,022 $ 15,842 $
45,864 [a] Represents the non-cash amortization of
the inventory fair value adjustment recorded in connection with our
acquisition of Waterworks. [b] Represents the estimated cumulative
impact of coupons redeemed in connection with a legal claim
alleging that the Company violated California’s Song-Beverly Credit
Card Act of 1971 by requesting and recording ZIP codes from
customers paying with credit cards. [c] Represents costs associated
with a reorganization, which include severance costs and related
taxes, partially offset by a reversal of stock-based compensation
expense related to unvested equity awards. [d] Represents a
non-cash compensation charge related to one-time, fully vested
option grants made in connection with our acquisition of
Waterworks. [e] Represents costs incurred in connection with our
acquisition of Waterworks including professional fees. [f] Under
GAAP, certain convertible debt instruments that may be settled in
cash on conversion are required to be separately accounted for as
liability and equity components of the instrument in a manner that
reflects the issuer’s non-convertible debt borrowing rate.
Accordingly, in accounting for GAAP purposes for the $350 million
aggregate principal amount of convertible senior notes that were
issued in June 2014 (the “2019 Notes”) and for the $300 million
aggregate principal amount of convertible senior notes that were
issued in June and July 2015 (the “2020 Notes”), we separated the
2019 Notes and 2020 Notes into liability (debt) and equity
(conversion option) components and we are amortizing as debt
discount an amount equal to the fair value of the equity components
as interest expense on the 2019 Notes and 2020 Notes over their
expected lives. The equity components represent the difference
between the proceeds from the issuance of the 2019 Notes and 2020
Notes and the fair value of the liability components of the 2019
Notes and 2020 Notes, respectively. Amounts are presented net of
interest capitalized for capital projects of $0.7 million and $0.6
million during the three months ended July 30, 2016 and August 1,
2015, respectively. Amounts are presented net of interest
capitalized for capital projects of $1.3 million and $1.1 million
during the six months ended July 30, 2016 and August 1, 2015,
respectively. [g] The adjustments for the three months ended July
30, 2016 and August 1, 2015 represent the tax effect of the
adjusted items based on our effective tax rates of 37.7% and 38.9%,
respectively. The adjustments for the six months ended July 30,
2016 and August 1, 2015 represent the tax effect of the adjusted
items based on our adjusted effective tax rates of 37.6% and 38.6%,
respectively. [h] Adjusted net income is a supplemental measure of
financial performance that is not required by, or presented in
accordance with, GAAP. We define adjusted net income as net income
(loss), adjusted for the impact of certain non-recurring and other
items that we do not consider representative of our underlying
operating performance. Adjusted net income is included in this
filing because management believes that adjusted net income
provides meaningful supplemental information for investors
regarding the performance of our business and facilitates a
meaningful evaluation of actual results on a comparable basis with
historical results. Our management uses this non-GAAP financial
measure in order to have comparable financial results to analyze
changes in our underlying business from quarter to quarter.
RESTORATION HARDWARE HOLDINGS,
INC.RECONCILIATION OF DILUTED NET INCOME (LOSS) PER SHARE
TOADJUSTED DILUTED NET INCOME PER
SHARE(Unaudited)
Three Months Ended
Six Months Ended
July 30,2016
August 1,2015
July 30,2016
August 1,2015
Diluted net income (loss) per share $ 0.17 $ 0.71 $ (0.16 ) $ 0.88
Pro forma diluted net income (loss) per share [a] $ 0.17 $
0.71 $ (0.16 ) $ 0.88
EPS impact of adjustments (pre-tax)
[b]: Amortization of debt discount $ 0.16 $ 0.11 $
0.32 $ 0.18 Legal claim — 0.13 0.21 0.17 Reorganization related
costs 0.08 — 0.12 — Non-cash compensation 0.09 — 0.09 — Impact of
inventory step-up 0.08 — 0.08 — Acquisition related costs
0.02 — 0.07 — Subtotal adjusted items 0.43
0.24 0.89 0.34 Impact of income tax on adjusted items [b]
(0.16 ) (0.10 ) (0.34 ) (0.13 ) Adjusted
diluted net income per share [c] $ 0.44 $ 0.85 $ 0.39 $ 1.09
[a] Pro forma diluted net loss per share for the six months
ended July 30, 2016 is calculated based on GAAP net loss and
diluted weighted-average shares of 40,870,588. [b] Refer to table
titled “Reconciliation of GAAP Net Income (Loss) to Adjusted Net
Income” and the related footnotes for additional information. [c]
Adjusted diluted net income per share is a supplemental measure of
financial performance that is not required by, or presented in
accordance with, GAAP. We define adjusted diluted net income per
share as net income (loss), adjusted for the impact of certain
non-recurring and other items that we do not consider
representative of our underlying operating performance divided by
the Company’s share count. Adjusted diluted net income per share is
included in this press release because management believes that
adjusted diluted net income per share provides meaningful
supplemental information for investors regarding the performance of
our business and facilitates a meaningful evaluation of operating
results on a comparable basis with historical results. Our
management uses this non-GAAP financial measure in order to have
comparable financial results to analyze changes in our underlying
business from quarter to quarter.
RESTORATION HARDWARE HOLDINGS,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
OPERATINGINCOME AND ADJUSTED OPERATING INCOME(In
thousands)(Unaudited)
Three Months Ended
Six Months Ended July 30,
2016
August 1,
2015
July 30,
2016
August 1,
2015
Net income (loss) $ 6,918 $ 29,935 $ (6,552 ) $ 37,091 Interest
expense—net 10,909 7,406 21,437 13,055 Income tax expense (benefit)
4,188 19,082 (4,345 ) 23,306 Operating
income 22,015 56,423 10,540 73,452 Legal claim [a] — 5,474 8,701
7,042 Reorganization related costs [a] 3,309 — 4,724 — Non-cash
compensation [a] 3,672 — 3,672 — Impact of inventory step-up [a]
3,401 — 3,401 — Acquisition related costs [a] 778 —
2,847 — Adjusted operating income $ 33,175 $ 61,897 $ 33,885 $
80,494 Net revenues $ 543,381 $ 506,942 $ 998,837 $ 929,387
Operating margin [b] 4.1 % 11.1 % 1.1 %
7.9 % Adjusted operating margin [b] 6.1 % 12.2 %
3.4 % 8.7 % [a] Refer to table titled
“Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income”
and the related footnotes for additional information. [b] Operating
margin is defined as operating income divided by net revenues.
Adjusted operating margin is defined as adjusted operating income
divided by net revenues.
RESTORATION HARDWARE HOLDINGS,
INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In
thousands)(Unaudited)
July 30,2016
January 30,2016
August 1,2015
ASSETS Cash and cash equivalents $ 37,677 $ 349,897 $
304,948 Short-term investments 170,854 130,801 149,692 Merchandise
inventories 807,389 725,392 707,516 Other current assets
133,244 107,587 104,456 Total current assets
1,149,164 1,313,677 1,266,612 Long-term investments 9,102 22,054 —
Property and equipment—net 600,685 515,605 503,456 Goodwill and
intangible assets 276,626 172,837 172,919 Other non-current assets
53,064 62,201 45,665 Total assets $ 2,088,641
$ 2,086,374 $ 1,988,652
LIABILITIES AND STOCKHOLDERS’
EQUITY Liabilities Accounts payable and accrued expenses $
222,812 $ 280,714 $ 291,381 Other current liabilities
182,437 171,841 134,111 Total current liabilities
405,249 452,555 425,492 Convertible senior notes due 2019—net
304,959 297,703 290,608 Convertible senior notes due 2020—net
227,854 220,000 212,396 Financing obligations under build-to-suit
lease transactions 156,930 146,621 186,367 Other non-current
obligations 100,691 83,335 71,511 Total
liabilities 1,195,683 1,200,214 1,186,374
Stockholders’ equity 892,958 886,160
802,278 Total liabilities and stockholders’ equity $ 2,088,641 $
2,086,374 $ 1,988,652
RESTORATION HARDWARE HOLDINGS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(In thousands)(Unaudited)
Six Months Ended
July 30,2016
August 1,2015
CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $
(6,552 ) $ 37,091 Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities:
Depreciation and amortization 26,212 20,874 Other non-cash items
32,507 17,380 Change in assets and liabilities—net of acquisition:
Merchandise inventories (48,718 ) (148,310 ) Accounts payable,
accrued expenses and other (95,014 ) 86,585 Net cash
provided by (used in) operating activities (91,565 )
13,620
CASH FLOWS FROM INVESTING ACTIVITIES Capital
expenditures—including construction related deposits and purchase
of
trademarks and domain names
(74,824 ) (46,429 ) Acquisition of building and land — (9,875 ) Net
proceeds (purchases) of investments (27,590 ) (69,607 ) Acquisition
of business—net of cash acquired (116,100 ) — Net cash used
in investing activities (218,514 ) (125,911 )
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance
of convertible senior notes — 296,250 Proceeds from issuance of
warrants — 30,390 Purchase of convertible notes hedges — (68,250 )
Debt issuance costs related to convertible senior notes — (2,382 )
Payments on capital leases (166 ) (137 ) Net equity related
transactions (2,427 ) 12,456 Net cash provided by
(used in) financing activities (2,593 ) 268,327
Effects of foreign currency exchange rate translation 452
(22 ) Net increase (decrease) in cash and cash equivalents
(312,220 ) 156,014 Cash and cash equivalents Beginning of period
349,897 148,934 End of period $ 37,677 $ 304,948
RESTORATION HARDWARE HOLDINGS,
INC.CALCULATION OF FREE CASH FLOW(In
thousands)(Unaudited)
Six Months Ended July 30,
2016
August 1,
2015
Net cash provided by (used in) operating activities $ (91,565 ) $
13,620 Capital expenditures—including construction related deposits
and purchase of
trademarks and domain names
(74,824 ) (46,429 ) Acquisition of building and land — (9,875 )
Payments on capital leases (166 ) (137 ) Free cash
flow [a] $ (166,555 ) $ (42,821 ) [a] Free cash flow
is calculated as net cash provided by (used in) operating
activities less capital expenditures, construction related
deposits, acquisition of building and land, purchase of trademarks
and domain names, and payments on capital leases. Free cash flow
excludes all non-cash items, such as the non-cash additions of
property and equipment due to build-to-suit lease transactions.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160908006616/en/
Restoration Hardware Holdings, Inc.Cammeron McLaughlin,
415-945-4998SVP, Investor Relations and
Strategycmclaughlin@rh.com
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