Restoration Hardware Holdings, Inc. Reports Third Quarter 2012 Financial Results
Net Revenues Increased 22%; Adjusted Net Income Increased 147%
Adjusted EPS of
Third Quarter Highlights
- Net revenues increased 22% on top of a 25% revenue increase last year
- Comparable store sales grew 29% on top of 36% comp growth last year
- Direct sales increased 24% on top of a 17% increase in direct sales last year
- Adjusted net income increased 147% to
$2.7 million ; GAAP net income increased to$1.7 million - Adjusted earnings per diluted share of
$0.07
“We are in the very early stages of transforming our legacy mall real estate into our new full line
Mr. Friedman continued, "Our new and developing businesses, RH Baby & Child, and RH Big Style/small spaces are gaining momentum as we refine the assortments and presentation. We opened our third and largest
Mr. Friedman concluded, "We are introducing three new businesses this Spring - RH Tableware, RH Objects of Curiosity, and RH Fine Art. RH Tableware and RH Objects of Curiosity will feature their own catalogs, with planned in-home dates in the first quarter of 2013. Many of the products from these new businesses will also be presented in our current galleries and create an opportunity to drive higher productivity in our existing retail square footage. RH Fine Art will launch with an innovative
Third Quarter Fiscal 2012 Financial Results
Revenue - Net revenues for the third quarter ended
- Comparable store sales increased 29% for the third quarter of fiscal 2012. This growth compares to an increase of 36% in comparable store sales for the third quarter of fiscal 2011.
- As of
October 27, 2012 , the Company operated a total of 73 retail stores, consisting of 71 Galleries and 2 full line Design Galleries, as well as 12 outlet stores throughoutthe United States andCanada . This compares to a total of 84 retail stores, consisting of 83 Galleries and 1 full lineDesign Gallery , and 10 outlet stores operated at the end of the third quarter of fiscal 2011. - Direct sales increased 24% to
$125.0 million for the third quarter of fiscal 2012. This growth is on top of the 17% year-over-year growth in direct sales for the third quarter of fiscal 2011.
EBITDA* - Adjusted EBITDA for the third quarter of fiscal 2012 increased 17% to
Net Income (Loss)* - Adjusted net income increased 147% to
Earnings Per Share* - Adjusted diluted EPS was
Nine Month Period Financial Highlights
Revenue - Net revenues for the nine months ended
- Comparable store sales grew 29% during the first nine months of fiscal 2012. This is on top of 25% growth in comparable store sales for the first nine months of fiscal 2011.
- Direct sales increased 25% to
$361.9 million for first nine months of fiscal 2012. This growth is on top of the 29% year-over-year growth in direct sales for the first nine months of fiscal 2011.
EBITDA* - Adjusted EBITDA for the nine-month period increased 23% to
Net Income (Loss)* - Adjusted net income for the nine-month period increased over 95% to
Earnings Per Share* - Year-to-date adjusted diluted EPS was
Conference Call and Webcast Information
About
*Non-GAAP Financial Measures
To supplement its 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 EBITDA, adjusted net income, pro forma EPS and adjusted EPS (collectively the "non-GAAP financial measures"). 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.
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 have more 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 contains forward-looking statements within the meaning of the federal securities laws including statements related to the performance of our full line
RESTORATION HARDWARE HOLDINGS, INC. | |||||
FINANCIAL STATEMENTS, OPERATING STATS, AND RECONCILIATION TABLES | |||||
TABLE OF CONTENTS | |||||
Page 6. | Condensed Consolidated Statements of Operations | ||||
Page 7. | Condensed Consolidated Balance Sheets | ||||
Page 8. | Condensed Consolidated Statements of Cash Flows | ||||
Page 9. | Operating Metrics and Other Data | ||||
Page 10. | Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA | ||||
Page 11. | Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income | ||||
Page 12. | Reconciliation of Pro Forma Net Income Per Share to Adjusted Net Income Per Share | ||||
RESTORATION HARDWARE HOLDINGS, INC. | |||||||||||||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||||||||||||||||||
(In thousands, except share and per share amounts) | |||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||
October 27, |
% of Net Revenues |
October 29, |
% of Net Revenues |
October 27, |
% of Net Revenues |
October 29, |
% of Net Revenues | ||||||||||||||||||||||||||||||||||
Net revenues | $ | 284,171 | 100.0 | % | $ | 232,459 | 100.0 | % | $ | 794,991 | 100.0 | % | $ | 652,842 | 100.0 | % | |||||||||||||||||||||||||
Cost of goods sold | 182,291 | 64.1 | % | 148,066 | 63.7 | % | 503,716 | 63.4 | % | 414,019 | 63.4 | % | |||||||||||||||||||||||||||||
Gross profit | 101,880 | 35.9 | % | 84,393 | 36.3 | % | 291,275 | 36.6 | % | 238,823 | 36.6 | % | |||||||||||||||||||||||||||||
Selling, general and administrative expenses | 99,886 | 35.2 | % | 88,496 | 38.1 | % | 271,716 | 34.1 | % | 238,891 | 36.6 | % | |||||||||||||||||||||||||||||
Income (loss) from operations | 1,994 | 0.7 | % | (4,103 | ) | -1.8 | % | 19,559 | 2.5 | % | (68 | ) | 0.0 | % | |||||||||||||||||||||||||||
Interest expense | (1,544 | ) | -0.5 | % | (1,598 | ) | -0.7 | % | (4,598 | ) | -0.6 | % | (3,486 | ) | -0.5 | % | |||||||||||||||||||||||||
Income (loss) before income taxes | 450 | 0.2 | % | (5,701 | ) | -2.5 | % | 14,961 | 1.9 | % | (3,554 | ) | -0.5 | % | |||||||||||||||||||||||||||
Income tax benefit | (1,235 | ) | -0.4 | % | (871 | ) | -0.4 | % | (612 | ) | -0.1 | % | (88 | ) | 0.0 | % | |||||||||||||||||||||||||
Net income (loss) | $ | 1,685 | 0.6 | % | $ | (4,830 | ) | -2.1 | % | $ | 15,573 | 2.0 | % | $ | (3,466 | ) | -0.5 | % | |||||||||||||||||||||||
Adjusted EBITDA [a] | $ | 12,973 | 4.6 | % | $ | 11,102 | 4.8 | % | $ | 47,870 | 6.0 | % | $ | 38,849 | 6.0 | % | |||||||||||||||||||||||||
Shares used in computing basic and diluted net income (loss) per share | 100 | 100 | 100 | 100 | |||||||||||||||||||||||||||||||||||||
Basic and diluted net income (loss) per share | $ | 16,850 | $ | (48,300 | ) | $ | 155,730 | $ | (34,660 | ) | |||||||||||||||||||||||||||||||
Pro forma shares used in computing basic and diluted net income (loss) per share [b] | 32,188,891 | 32,188,891 | |||||||||||||||||||||||||||||||||||||||
Pro forma basic and diluted net income (loss) per share | $ | 0.05 | $ | 0.48 | |||||||||||||||||||||||||||||||||||||
Adjusted net income [c] | $ | 2,662 | $ | 13,582 | |||||||||||||||||||||||||||||||||||||
Adjusted shares used in computing adjusted basic and diluted net income (loss) per share | 36,971,500 | 36,971,500 | |||||||||||||||||||||||||||||||||||||||
Adjusted basic and diluted net income per share [d] | $ | 0.07 | $ | 0.37 | |||||||||||||||||||||||||||||||||||||
Notes: | |||||||||||||||||||||||||||||||||||||||||
[a] EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, Generally Accepted Accounting Principles (GAAP). We define EBITDA as consolidated net income (loss) before depreciation and amortization, interest expense and provision for income taxes. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items including non-cash or other items that we do not consider representative of our ongoing financial performance. EBITDA and Adjusted EBITDA are included in this press release because they are key metrics used by management, our Board of Directors and our principal shareholders to assess our financial performance, and Adjusted EBITDA is used in connection with determining incentive compensation under our Management Incentive Program (MIP). Additionally, EBITDA is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We use EBITDA and Adjusted EBITDA, alongside other GAAP measures such as gross profit, operating income (loss) and net income (loss), to measure profitability, as a key profitability target in our annual and other budgets, and to compare our performance against that of peer companies. We believe that Adjusted EBITDA provides useful information facilitating operating performance comparisons from period to period and company to company. Please see the table titled “Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA” for further information. | |||||||||||||||||||||||||||||||||||||||||
[b] On a GAAP basis, the Company reported 100 basic and diluted shares outstanding. On a pro forma basis, basic and diluted shares outstanding include the impact of the Company’s “reorganization”, as further described in the Company’s final prospectus filed with the Securities and Exchange Commission on November 5, 2012. As a result of the reorganization, and before giving effect to the Company's initial public offering, 32,188,891 vested shares of our common stock were outstanding. | |||||||||||||||||||||||||||||||||||||||||
[c] Adjusted net income is used in calculating our adjusted basic and diluted net income per share and excludes the impact of certain unusual and non-recurring items. See table titled "Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income" for additional details. | |||||||||||||||||||||||||||||||||||||||||
[d] Adjusted basic and diluted net income per share is calculated based on dividing adjusted net income by 36,971,500 diluted shares. Such adjusted shares include the 32,188,891 shares in [b] as well as the 4,782,609 shares of common stock that the Company issued and sold on November 7, 2012 in its initial public offering. | |||||||||||||||||||||||||||||||||||||||||
6 |
RESTORATION HARDWARE HOLDINGS, INC. | ||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||
(In thousands) | ||||||||||||
(Unaudited) | ||||||||||||
October 27, | January 28, | |||||||||||
2012 | 2012 | |||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | $ | 15,568 | $ | 8,511 | ||||||||
Merchandise inventories | 333,825 | 245,876 | ||||||||||
Other current assets | 110,952 | 68,490 | ||||||||||
Total current assets | 460,345 | 322,877 | ||||||||||
Property and equipment—net | 93,663 | 83,558 | ||||||||||
Goodwill and other intangibles | 173,509 | 175,121 | ||||||||||
Other assets | 14,715 | 5,253 | ||||||||||
Total assets | $ | 742,232 | $ | 586,809 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Accounts payable and accrued expenses | $ | 156,382 | $ | 105,694 | ||||||||
Other current liabilities | 73,203 | 56,280 | ||||||||||
Total current liabilities | 229,585 | 161,974 | ||||||||||
Revolving line of credit and term loan | 187,529 | 122,300 | ||||||||||
Other long term liabilities | 57,880 | 52,073 | ||||||||||
Total liabilities | 474,994 | 336,347 | ||||||||||
Stockholders’ equity | 267,238 | 250,462 | ||||||||||
Total liabilities and stockholders’ equity | $ | 742,232 | $ | 586,809 | ||||||||
7 |
RESTORATION HARDWARE HOLDINGS, INC. | ||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
(In thousands) | ||||||||||||||
(Unaudited) | ||||||||||||||
Nine Months Ended | ||||||||||||||
October 27, | October 29, | |||||||||||||
2012 | 2011 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||
Net income (loss) | $ | 15,573 | $ | (3,466 | ) | |||||||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||||
Depreciation and amortization | 19,485 | 22,356 | ||||||||||||
Stock-based compensation expense and other non-cash compensation | 1,102 | 7,563 | ||||||||||||
Other non-cash items | 212 | 1,080 | ||||||||||||
Change in assets and liabilities: | ||||||||||||||
Merchandise inventories | (87,933 | ) | (73,089 | ) | ||||||||||
Accounts payable, accrued expenses, and other | 31,543 | (2,768 | ) | |||||||||||
Net cash used in operating activities | (20,018 | ) | (48,324 | ) | ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||
Capital expenditures | (25,631 | ) | (19,837 | ) | ||||||||||
Purchase of domain name | (310 | ) | — | |||||||||||
Net cash used in investing activities | (25,941 | ) | (19,837 | ) | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||
Gross borrowings under line of credit | 910,551 | 759,575 | ||||||||||||
Gross repayments under line of credit | (845,357 | ) | (689,354 | ) | ||||||||||
Debt issuance costs | — | (2,516 | ) | |||||||||||
Payments on capital leases | (3,088 | ) | (3,073 | ) | ||||||||||
Capitalized initial public offering costs | (9,118 | ) | — | |||||||||||
Net cash provided by financing activities | 52,988 | 64,632 | ||||||||||||
Effects of foreign currency exchange rate translation | 28 | 124 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 7,057 | (3,405 | ) | |||||||||||
Cash and cash equivalents | ||||||||||||||
Beginning of period | 8,511 | 13,364 | ||||||||||||
End of period | $ | 15,568 | $ | 9,959 | ||||||||||
8 |
RESTORATION HARDWARE HOLDINGS, INC. | |||||||||||||||||||
OPERATING METRICS AND OTHER DATA | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||
October 27, | October 29, | October 27, | October 29, | ||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||||
Growth in net revenues: | |||||||||||||||||||
Stores (a) | 21 | % | 32 | % | 19 | % | 25 | % | |||||||||||
Direct | 24 | % | 17 | % | 25 | % | 29 | % | |||||||||||
Total | 22 | % | 25 | % | 22 | % | 26 | % | |||||||||||
Retail (b): | |||||||||||||||||||
Comparable store sales change (c) | 29 | % | 36 | % | 29 | % | 25 | % | |||||||||||
Retail stores open at beginning of period | 73 | 87 | 74 | 91 | |||||||||||||||
Stores opened | — | — | 3 | 3 | |||||||||||||||
Stores closed | — | 3 | 4 | 10 | |||||||||||||||
Retail stores open at end of period | 73 | 84 | 73 | 84 | |||||||||||||||
Retail sales per selling square foot (d) | $ | 282 | $ | 210 | $ | 763 | $ | 560 | |||||||||||
Total gross square footage at end of period (in thousands) | 792 | 896 | 792 | 896 | |||||||||||||||
Total selling square footage at end of period (in thousands) | 516 | 570 | 516 | 570 | |||||||||||||||
Direct: | |||||||||||||||||||
Catalogs circulated (in thousands) (e) | 11,721 | 8,356 | 26,851 | 21,079 | |||||||||||||||
Catalog pages circulated (in millions) (e) | 7,944 | 4,832 | 15,360 | 8,121 | |||||||||||||||
Direct as a percentage of net revenues (f) | 44 | % | 43 | % | 46 | % | 44 | % | |||||||||||
Notes: | |||||||||||||||||||
[a] Store data represent retail stores plus outlet stores. Net revenues for outlet stores for the three months ended October 27, 2012 and October 29, 2011 were $13.9 million and $10.7 million, respectively. Net revenues for outlet stores for the nine months ended October 27, 2012 and October 29, 2011 were $38.2 million and $31.2 million, respectively. | |||||||||||||||||||
[b] Retail data have been calculated based upon retail stores, which include our Baby & Child stores, and exclude outlet stores. | |||||||||||||||||||
[c] Comparable store sales have been calculated based upon retail stores that were open at least fourteen full months as of the end of the reporting period and did not change square footage by more than 20% between periods. Comparable store net revenues exclude revenues from outlet stores. | |||||||||||||||||||
[d] Retail sales per selling square foot is calculated by dividing total net revenues for all retail stores, comparable and non-comparable, by the average selling square footage for the period. | |||||||||||||||||||
[e] The catalogs and catalog pages circulated from period to period do not take into account different page sizes per catalog distributed. Page sizes and page counts vary for different catalog mailings and we sometimes mail different versions of a catalog at the same time. Accordingly, period to period comparisons of catalogs circulated and catalog pages circulated do not take these variations into account. | |||||||||||||||||||
[f] Direct revenues include sales through our catalogs and websites. | |||||||||||||||||||
9 |
RESTORATION HARDWARE HOLDINGS, INC. | |||||||||||||||||||
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA | |||||||||||||||||||
(In thousands) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||
October 27, | October 29, | October 27, | October 29, | ||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||||
Net income (loss) | $ | 1,685 | $ | (4,830 | ) | $ | 15,573 | $ | (3,466 | ) | |||||||||
Depreciation and amortization | 6,593 | 7,373 | 19,485 | 22,356 | |||||||||||||||
Interest expense | 1,544 | 1,598 | 4,598 | 3,486 | |||||||||||||||
Income tax benefit | (1,235 | ) | (871 | ) | (612 | ) | (88 | ) | |||||||||||
EBITDA [a] | 8,587 | 3,270 | 39,044 | 22,288 | |||||||||||||||
Management and pre-IPO board fees [b] | 1,198 | 1,149 | 3,285 | 3,545 | |||||||||||||||
Non-cash compensation [c] | 364 | 6,687 | 1,102 | 7,563 | |||||||||||||||
Terminated operations [d] | — | 14 | — | 1,680 | |||||||||||||||
Severance and other transaction costs [e] | — | 443 | — | 471 | |||||||||||||||
Lease termination costs [f] | — | (461 | ) | (386 | ) | 3,110 | |||||||||||||
Special committee investigation and remediation [g] | 2,789 | - | 4,778 | — | |||||||||||||||
Other [h] | 35 | - | 47 | 192 | |||||||||||||||
Adjusted EBITDA [a] | $ | 12,973 | $ | 11,102 | $ | 47,870 | $ | 38,849 | |||||||||||
Notes: | |||||||||||||||||||
[a] EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with GAAP. We define EBITDA as consolidated net income (loss) before depreciation and amortization, interest expense and provision for income taxes. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items including non-cash or other items that we do not consider representative of our ongoing financial performance. EBITDA and Adjusted EBITDA are included in this press release because they are key metrics used by management, our Board of Directors and our principal shareholders to assess our financial performance, and Adjusted EBITDA is used in connection with determining incentive compensation under our Management Incentive Program (MIP). Additionally, EBITDA is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We believe that Adjusted EBITDA provides useful information facilitating operating performance comparisons from period to period and company to company. EBITDA and Adjusted EBITDA are not GAAP measures of our financial performance or liquidity and should not be considered as alternatives to net income (loss), as a measure of financial performance, cash flows from operating activities, as a measure of liquidity, or any other performance measure derived in accordance with GAAP and they should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items. Our measures of EBITDA and Adjusted EBITDA are not necessarily comparable to other similarly titled captions for other companies due to different methods of calculation. | |||||||||||||||||||
[b] Includes fees and expenses paid in accordance with our management services agreement with Home Holdings, as well as fees and expense reimbursements paid to our Board of Directors prior to the IPO. | |||||||||||||||||||
[c] The Company excludes non-cash compensation because it is non-cash in nature and because the Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. The Company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements and facilitates comparison to competitors' operating results. The three and nine months ended October 29, 2011 include a $6.4 million non-cash compensation charge related to the repayment of loans owed to Home Holdings by our former Chairman and Co-Chief Executive Officer, Gary Friedman, through the reclassification by Home Holdings of Mr. Friedman’s Class A and Class A-1 ownership units into an equal number of Class A Prime and Class A-1 Prime ownership units. Mr. Friedman served as our Chairman and Co-Chief Executive Officer at the time of such loan repayment. | |||||||||||||||||||
[d] Includes costs related to the restructuring of our Shanghai office location. | |||||||||||||||||||
[e] Amounts include executive severance and other related costs. | |||||||||||||||||||
[f] Includes lease termination costs for retail stores that were closed prior to their respective lease termination dates. The amounts in the nine months ended October 27, 2012 and three months ended October 29, 2011 relate to changes in estimates regarding liabilities for future lease payments for closed stores. | |||||||||||||||||||
[g] Represents legal and other professional fees, incurred in connection with the investigation conducted by the special committee of the Board of Directors relating to our former Chairman and Co-Chief Executive Officer and our subsequent remedial actions. | |||||||||||||||||||
[h] Represents certain other items which management believes are not indicative of our ongoing operating performance. The nine months ended October 29, 2011 include consulting fees related to organizational matters and state franchise tax amounts. All periods include foreign exchange gains and losses. | |||||||||||||||||||
10 |
RESTORATION HARDWARE HOLDINGS, INC. | |||||||||||||||||||
RECONCILIATION OF GAAP NET INCOME (LOSS) TO ADJUSTED NET INCOME | |||||||||||||||||||
(In thousands) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||
October 27, | October 29, | October 27, | October 29, | ||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||||
GAAP net income (loss) | $ | 1,685 | $ | (4,830 | ) | $ | 15,573 | $ | (3,466 | ) | |||||||||
Adjustments (pre-tax): |
|||||||||||||||||||
Management and pre-IPO board fees [a] | $ | 1,198 | $ | 1,149 | $ | 3,285 | $ | 3,545 | |||||||||||
Non-cash compensation [b] | — | 6,350 | — | 6,350 | |||||||||||||||
Terminated operations [c] | — | 14 | — | 1,680 | |||||||||||||||
Severance and other transaction costs [d] | — | 443 | — | 471 | |||||||||||||||
Lease termination costs [e] | — | (461 | ) | (386 | ) | 3,110 | |||||||||||||
Special committee investigation and remediation [f] | 2,789 | - | 4,778 | — | |||||||||||||||
Subtotal adjusted items | 3,987 | 7,495 | 7,677 | 15,156 | |||||||||||||||
Impact of income tax items [g] | (3,010 | ) | (1,589 | ) | (9,668 | ) | (4,729 | ) | |||||||||||
Adjusted net income [h] | $ | 2,662 | $ | 1,076 | $ | 13,582 | $ | 6,961 | |||||||||||
Notes: | |||||||||||||||||||
[a] Represents fees paid in accordance with our management services agreement with Home Holdings, as well as fees and expense reimbursements paid to our Board of Directors prior to the IPO. | |||||||||||||||||||
[b] Amount relates to a $6.4 million compensation charge related to the repayment of loans owed to Home Holdings by our former Chairman and Co-Chief Executive Officer, Gary Friedman, through the reclassification by Home Holdings of Mr. Friedman’s Class A and Class A-1 ownership units into an equal number of Class A Prime and Class A-1 Prime ownership units. Mr. Friedman served as our Chairman and Co-Chief Executive Officer at the time of such loan repayment. | |||||||||||||||||||
[c] Represents costs related to the restructuring of our Shanghai office location. | |||||||||||||||||||
[d] Amounts include executive severance and other related costs. | |||||||||||||||||||
[e] Includes lease termination costs for retail stores that were closed prior to their respective lease termination dates. The amounts in the nine months ended October 27, 2012 and three months ended October 29, 2011 relate to changes in estimates regarding liabilities for future lease payments for closed stores. | |||||||||||||||||||
[f] Represents legal and other professional fees, incurred in connection with the investigation conducted by the special committee of the Board of Directors relating to our former Chairman and Co-Chief Executive Officer and our subsequent remedial actions. | |||||||||||||||||||
[g] Income tax items exclude the tax benefit related to the resolution of our Canadian Revenue Agency examination in the three months and nine months ended October 27, 2012, exclude the tax benefit from the utilization of federal and state net operating losses, and assume a normalized tax rate of 40% for all periods presented. | |||||||||||||||||||
[h] Adjusted net income is a supplemental measure of financial performance that is not required by, or presented in accordance with GAAP. 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 consolidated net income (loss) less unusual and non-recurring items. Adjusted net income is included in this press release 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. | |||||||||||||||||||
11 |
RESTORATION HARDWARE HOLDINGS, INC. | |||||||||||
RECONCILIATION OF PRO FORMA NET INCOME PER SHARE TO | |||||||||||
ADJUSTED NET INCOME PER SHARE | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | Nine Months Ended | ||||||||||
October 27, | October 27, | ||||||||||
2012 | 2012 | ||||||||||
Pro forma diluted net income per share (pre-IPO share count of 32,188,891) [a] | $ | 0.05 | $ | 0.48 | |||||||
Pro forma diluted net income per share (post-IPO share count of 36,971,500) [b] | $ | 0.05 | $ | 0.42 | |||||||
EPS impact of adjustments (pre-tax): |
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Management and pre-IPO board fees [c] | $ | 0.03 | $ | 0.09 | |||||||
Lease termination costs [d] | - | (0.01 | ) | ||||||||
Special committee investigation and remediation [e] | 0.07 | 0.13 | |||||||||
Subtotal adjusted items | 0.10 | 0.21 | |||||||||
Impact of income tax items [f] | (0.08 | ) | (0.26 | ) | |||||||
Adjusted diluted net income per share (post-IPO share count of 36,971,500)[g,h] | $ | 0.07 | $ | 0.37 | |||||||
Notes: | |||||||||||
[a] Pro forma diluted net income per share is calculated based on GAAP net income and the Company's vested share count prior to November 7, 2012 initial public offering. See table titled "Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income" for pro forma net income calculation. | |||||||||||
[b] Pro forma diluted net income per share is calculated based on GAAP net income and the Company's share count after the November 7, 2012 initial public offering. See table titled "Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income" for pro forma net income calculation. | |||||||||||
[c] Represents fees and expenses paid in accordance with our management services agreement with Home Holdings, as well as fees and expense reimbursements paid to our Board of Directors prior to the IPO. | |||||||||||
[d] Includes lease termination costs for retail stores that were closed prior to their respective lease termination dates. The amounts in the nine months ended October 27, 2012 and three months ended October 29, 2011 relate to changes in estimates regarding liabilities for future lease payments for closed stores. | |||||||||||
[e] Represents legal and other professional fees, incurred in connection with the investigation conducted by the special committee of the Board of Directors relating to our former Chairman and Co-Chief Executive Officer and our subsequent remedial actions. | |||||||||||
[f] Income tax items adjust pro forma net income to 1) exclude the tax benefit related to the resolution of our Canadian Revenue Agency examination in the three months and nine months ended October 27, 2012, 2) exclude the tax benefit from the utilization of federal and state net operating losses, and 3) assume a normalized tax rate of 40% for all periods presented. | |||||||||||
[g] Adjusted diluted net income per share includes the 4,782,609 shares of common stock that the Company issued and sold on November 7, 2012 in its initial public offering. | |||||||||||
[h] 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 net income per share as consolidated net income (loss) less unusual and non-recurring items divided by the Company’s post-initial public offering share count. Adjusted net income per share is included in this press release because management believes that adjusted net income per share 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. | |||||||||||
12 |
Source:
Restoration Hardware Holdings, Inc.
Cammeron McLaughlin, 415-945-4998
VP, Investor Relations
cmclaughlin@restorationhardware.com