RH Announces Completion of $700 Million Share Repurchase Program
Company Confirms Prior Second Quarter Guidance
The Company is also confirming its previous second quarter guidance of
revenue in the range of
Post reduction in the number of shares outstanding from the share
repurchase, second quarter adjusted diluted earnings per share is
expected to be in the range of
Chairman and Chief Executive Officer,
We are delighted to announce the completion of our
As we previously discussed, 2017 is a year of execution,
architecture, and cash at
We expect to generate significant free cash flow during the remainder of fiscal 2017, which should allow the Company to pay down the most expensive debt balances prior to the end of the fiscal year assuming that business conditions remain in line with current trends. Specifically, the Company expects to repay in full the second lien term loan (as described below) prior to the end of fiscal 2017.
We remain confident in our ability to drive long-term sustainable growth, industry leading returns on capital, and significant value for our shareholders.
The incremental indebtedness incurred by the Company to finance the
remainder of the repurchase program included the previously announced
amendment and restatement of the Company’s
The primary indebtedness incurred by the Company upon completion of the repurchase programs is summarized below:
Summary of Principal Indebtedness |
|||||||
Principal | Current Cash | ||||||
Amount (1) |
Interest Rate (2) |
||||||
(in millions) | (annualized) | ||||||
Convertible Senior Notes | $ | 650 | 0.00% | ||||
ABL Revolving Credit Agreement (3) | 323 | 2.73% | |||||
LILO Term Loan | 80 | 3.98% | |||||
Second Lien Term Loan | 100 | 9.48% | |||||
Total (2) | $ | 1,153 | 1.89% | ||||
(1) Represents the primary currently outstanding indebtedness
obligations of
(2) Blended average cash interest rate represents the aggregate cash interest payable with respect to indebtedness on a pre-tax basis without giving effect to any tax benefit arising from the deduction of interest for tax purposes. OID and other forms of interest expense that are not paid as a cash coupon during the life of the loan are not reflected in this table. Rates reflected in the table are based upon a one-month LIBOR rate of 1.22%, where applicable. For interest rates that are tied to LIBOR, the rates payable are subject to change over time based on interest rate fluctuations.
(3) The principal amount of
Note: The Company has not completed its second fiscal quarter and the actual results may differ from the outlook provided in this press release. Further commentary on the Company’s second quarter financial results and 2017 outlook will be provided as part of the second quarter earnings release. 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 periods, such as unusual, extraordinary or non-recurring charges or expenses including non-cash and other compensation expense; one-time income tax expense or benefits; legal claim and product recall related reserves or expenses; reorganization costs including severance costs and related taxes; non-cash amortization of debt discount; and charges and costs in connection with transactions such as 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.
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 certain non-GAAP financial measures including adjusted net income and adjusted diluted EPS (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.
About
Forward-Looking Statements
This release contains forward-looking statements within the meaning of
federal securities laws including statements related to: our future
financial outlook and guidance, including for the second quarter of
fiscal 2017 with respect to revenues, adjusted net income and adjusted
diluted EPS; certain areas of our focus for 2017 and in future periods
including maximizing cash flow and the repayment of indebtedness; the
anticipated benefits of our business investments and strategies
including anticipated benefits to our investors from (i) the share
repurchase program including expected increases in adjusted diluted
earnings per share, (ii) efforts to implement and continue a more
disciplined approach to capital allocation, (iii) the incurrence of
additional indebtedness to fund our business initiatives including the
repurchase of our shares of common stock and further investment in our
operations and (iv) the flexibility and favorable terms of our
outstanding indebtedness including the currently low levels of interest
rates with respect to such indebtedness as well as the existence of
limited restrictions in such indebtedness in terms of financial
covenants and other limitations; our expectations about being able to
reduce indebtedness in 2017 and future periods and/or refinance such
indebtedness; our expectations concerning the current trajectory of our
business trends; our expectations concerning the long-term strength of
the RH brand and business including our objective to achieve continuing
significant free cash flow and returns on invested capital. 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,” “assume,” “estimate,” “expect,” “future,”
“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 or the
assumptions set forth in this press release include, among others,
changes in interest rates that may increase the cost of our
indebtedness, most of which has floating interest rates tied to the
LIBOR rate as in effect from time to time; changes in the capital
markets or our financial condition that might affect our ability to
repay or refinance outstanding indebtedness; our decisions concerning
further allocation of capital with respect to our business including the
extent to which we require additional investments of capital beyond
currently anticipated needs in order to support our business; factors
affecting our outstanding convertible senior notes or other forms of our
indebtedness; 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; our ability to retain key personnel; successful
implementation of our growth strategy; our ability to leverage
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;
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; product
recalls or other losses or damages resulting from product defects; 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
legal compliance and litigation; 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 RH’s most recent Form 10-K and Form 10-Q filed
with the
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Source:
RH
Cammeron McLaughlin, 415-945-4998
SVP, Investor Relations
and Strategy
cmclaughlin@rh.com