RH (NYSE:RH) today announced first quarter fiscal 2017 results
and Chairman and Chief Executive Officer, Gary Friedman, provided
an update on the Company’s continued evolution and outlook.
RH leadership will host a Q&A conference call at 2:00
p.m. PT (5:00 p.m. ET) today.
First Quarter Highlights
- Net revenues increased 23% on top of
an 8% increase last year
- Comparable brand revenues increased
9% compared to a 4% increase last year
- GAAP net loss of $3.4 million
compared to net loss of $13.5 million last year
- Adjusted net income of $1.8 million
compared to net loss of $2.1 million last year
- GAAP diluted loss per share of $0.09
compared to loss of $0.33 last year
- Adjusted diluted earnings per share
of $0.05 compared to loss of $0.05 last year
To Our People, Partners, and Shareholders:
I'm pleased to report that our first quarter results reflect a
return to growth as we are now past the most uncertain stages of
our transformation. In 2016, we transformed our business from a
promotional to a membership model that we believe will enhance our
brand, streamline our operations, and vastly improve the customer
experience. We also began the redesign of our supply chain network,
rationalizing our product offer, and transitioning inventory into
fewer facilities, which enabled us to forgo building a planned
distribution center scheduled to open this year. 2016 was also the
first full year of many new business initiatives such as RH Modern,
RH Teen, RH Hospitality, the redesign of our RH Interiors Source
Book, the roll out of Design Ateliers across our retail Galleries,
and the addition of Waterworks to our platform. All of these new
initiatives are expected to contribute to growth in 2017 and
beyond.
While 2016 was a year of transformation and transition, 2017
will be a year of execution, architecture, and cash. Our efforts
will be focused on executing our new business model, architecting a
new operating platform, and maximizing cash flow by increasing
revenues and earnings, and reducing inventory and capital
investments. Our priorities include: the transformation of our real
estate; the expansion of our product offer; and the design of our
new operating platform, inclusive of the distribution center
network, the in-home delivery experience, plus decision data and
analytics to support long-term growth. Our goal is to break down
the silos that exist in most businesses of scale, and cross
functionally design a fully integrated operating platform that
simplifies our business, enhances the customer experience, and
amplifies decision quality and speed.
In 2017, we plan to invest in RH Hospitality, where we will
incur substantial start-up costs to support the roll out of an
integrated food and beverage experience similar to our successful
Gallery at the Historic 3Arts Club in Chicago. We've been
successful blurring the lines between residential and retail,
creating spaces that are more home than store. The next logical
step is to further blur the lines between home and hospitality by
integrating cafes, wine vaults, and coffee bars into our Galleries.
These multi-dimensional experiences activate all of the senses:
sight, sound, taste, touch, and smell, and generate significant
customer traffic. What RH President of Hospitality Brendan Sodikoff
and his team have created in Chicago is nothing short of
extraordinary, and we believe our new Galleries opening this year
in Toronto, Palm Beach, and New York will redefine the retail
experience in our industry.
Our business is off to a strong start to the year with first
quarter net revenues increasing 23%, of which approximately 6
points of growth was due to the acquisition of Waterworks and 6
points was related to higher outlet and warehouse sales stemming
from accelerated inventory optimization efforts during the quarter.
Excluding these factors, our business grew by approximately 11%,
with comparable brand revenues increasing 9% as we cycled the
launch of the RH Members Program, and benefited from the mailing of
our Fall 2016 RH Interiors Source Book and the Spring 2017 mailing
of RH Outdoor.
While our higher outlet sales and inventory optimization efforts
had a positive impact on revenues in the first quarter, these
sales, plus related mark-downs and inventory reserves, had a
negative impact on margins and earnings. As such, adjusted net
income for the quarter was $1.8 million, and adjusted diluted
earnings per share were $0.05, versus a loss per share of $0.05
last year.
We recently completed the mailing of our second edition of RH
Modern in May. The new Source Book is filled with 480 pages of
inspired design with new collections by world renowned designers
and exclusive reissues of iconic pieces from the past. We expect
this new business to grow and gain share in the emerging market for
modern furniture, and believe RH Modern has the potential to become
a billion dollar brand.
While still in the early innings of our move from a promotional
to a membership model, we are encouraged by the early data in
regards to new membership growth and renewals as we anniversary
last year’s launch of the RH Members Program. We believe the
benefits of eliminating the operational chaos and costs that are a
result of constant promotions, and positioning our brand around
product versus price, will drive high quality growth for years to
come.
While we expect revenue growth to accelerate, operating margins
to expand, and to generate significant free cash flow in fiscal
2017, we are taking a cautiously optimistic approach to our outlook
given the uncertain macro environment in addition to the many
initiatives and investments we are undertaking. Additionally, given
our focus on the architecture of a new operating platform and
maximizing cash flow, we may, as we are doing in our second quarter
and fiscal year outlook, accelerate the rationalization of our
product offer to enable us to more quickly optimize our network
design, and turn unproductive inventory into cash. Accordingly, we
are guiding revenue for the second quarter to a range of $595
million to $610 million, a 9% to 12% increase over last year,
adjusted net income to a range of $13 million to $15 million, which
would translate to adjusted diluted earnings per share in a range
of $0.38 to $0.43, assuming a weighted average diluted share count
of 34.5 million.
For fiscal 2017, we are increasing our revenue guidance to a
range of $2.4 billion to $2.45 billion, reflecting a more
aggressive approach to rationalizing our product offer, reducing
inventories, and increasing free cash flow. While this approach
will benefit revenues and cash flow for the year, it will have a
negative impact on earnings. As a result, we are lowering our
adjusted net income guidance from a range of $65 million to $80
million, to a range of $60 million to $70 million, which would
translate to adjusted diluted earnings per share in a range of
$1.67 to $1.94, assuming a weighted average diluted share count of
36.0 million.
As previously discussed, we believe there is an opportunity to
improve returns by having a more disciplined approach to capital
allocation. Accordingly, we plan to reduce our new Gallery opening
cadence to a range of 3 to 5 per year, which is expected to drive
high-quality sustainable growth, while lowering capital
requirements and execution risk over the course of our real estate
transformation. In fiscal 2017, we expect to open 3 next generation
Design Galleries, all with integrated food and beverage. We remain
confident in reaching our long-term goal of $4 to $5 billion in
North American revenues, industry-leading operating margins, and
significant free cash flow and returns on invested capital.
We understand that many of the strategies we are pursuing -
opening the largest specialty retail experiences in our industry
while most are shrinking the size of their retail footprint and
closing stores; expanding our Source Book mailings while many are
eliminating catalogs; moving from a promotional to a membership
model, while others are increasing promotions, positioning their
brands around price versus product; and refusing to follow the herd
in self-promotion on social media platforms, instead allowing our
brand to be defined by the taste, style, design and quality of the
products and experiences we are creating - are all in direct
conflict with conventional wisdom and the strategies being pursued
by many in our industry.
We believe when you step back and consider we are - one,
building a brand with no peer; two, creating a customer experience
that cannot be replicated online; and three, have total control of
our content from concept to customer - you realize what we are
building is extremely rare in contrast to today's retail landscape.
Yet, our most valuable asset is not what we've done, but rather who
we've become. We've become a team of people who don't know what
can't be done. A team that is driven by our values and beliefs. A
team that is willing to march into hell, as we did last year, for a
heavenly cause. A team that has a bold vision for the future, and
an organization that is demonstrating it can bring that vision to
life.
Carpe Diem,
Gary
Gary FriedmanChairman and Chief Executive Officer
Q&A Conference Call
Information
Accompanying this release, RH leadership will host a live
question and answer conference call at 2:00 p.m. PT (5:00 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.rh.com. A replay of the question and answer session
conference call will be available through June 14, 2017 by dialing
(855) 859-2056 or (404) 537-3406 and entering passcode 29859081, as
well as on the Company’s investor relations website.
About RH
RH (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, RHModern.com,
and Waterworks.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, adjusted gross
profit, adjusted gross margin 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 contains forward-looking statements within the
meaning of the federal securities laws including statements related
to: our future financial outlook and guidance, including for the
second quarter of fiscal 2017, for fiscal year 2017 and over the
longer term, including net revenues, net income, operating margins,
cash flow, costs and expenses and EPS which in turn is derived
based upon certain assumed share counts; our primary areas of focus
for 2017 including executing our new business model, architecting a
new operating platform, maximizing cash flow, transformation of our
real estate and expansion of our product offer; the anticipated
benefits of our business investments and strategies including (i)
efforts to optimize inventories and rationalize our product offer,
(ii) efforts to implement a more disciplined approach to capital
allocation, (iii) the mailing of Source Books, (iv) opening of new
Gallery locations and the cadence of such openings, (v) the
membership program and (vi) the redesign of our supply chain
network; our plans and expectations related to new business
investments and in particular with respect to RH Hospitality; our
expectations concerning the potential of the RH Modern product
offering; our expectations concerning the strength of the RH brand;
our expectations concerning the Company’s confidence in the
long-term opportunity to reach $4 to $5 billion in North American
revenues, industry-leading operating margins, and 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,” “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 or the assumptions set forth in this letter include,
among others, 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; our decisions concerning the allocation of
capital including the extent to which we repurchase additional
shares of our common stock under our previously announced share
repurchase program which will affect shares outstanding and EPS;
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; 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 RH’s 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.rh.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.
RH
REVENUE METRICS
(Unaudited)
Three Months Ended
April 29,2017
April 30,2016
Stores as a percentage of net revenues 56 % 56 %
Direct as a percentage of net revenues 44 % 44 % Growth in net
revenues: Stores 24 % 19 % Direct 23 % -4 % Total 23 % 8 %
Comparable brand revenue growth (1)(2) 9 % 4 % 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 month following the anniversary of
the acquisition. (2) Membership revenue is included in comparable
brand revenue growth beginning April 2017, which is the first full
month following the anniversary of the program launch.
RHRETAIL GALLERY
METRICS(Unaudited)
As of April 29, 2017, the Company operated a total of 85 retail
Galleries, consisting of 50 legacy Galleries, 6 larger format
Design Galleries, 8 next generation Design Galleries, 1 RH Modern
Gallery, and 5 RH Baby & Child Galleries throughout the United
States and Canada, and 15 Waterworks showroom throughout the United
States and UK. This compares to a total of 69 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 April 30, 2016.
In addition, as of April 29, 2017, the Company operated 28
outlet stores compared to 19 as of April 30, 2016.
Three Months Ended
April 29,2017
April 30,2016
Store Count
Total Leased SellingSquare
Footage
Store Count
Total Leased SellingSquare
Footage
(in thousands) (in thousands)
Beginning of
period 85 912 69 725
End of
period 85 912 69 725 % Growth
26 % 20 %
Weighted-average leased
selling
square footage
912 725 % Growth 26 % 20 % See the Company’s most recent
Form 10-K and Form 10-Q filings for square footage definitions.
Total leased square footage as of April 29, 2017 and April 30, 2016
was 1,242,000 and 1,011,000, respectively. Weighted-average leased
square footage for the three months ended April 29, 2017 and April
30, 2016 was 1,242,000 and 1,011,000, respectively. Retail sales
per leased selling square foot for the three months ended April 29,
2017 and April 30, 2016 was $284 and $313, respectively.
RH
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except share and per
share amounts)
(Unaudited)
Three Months Ended
April 29,2017
% of NetRevenues
April 30,2016
% of NetRevenues
Net revenues $ 562,080 100.0 % $ 455,456 100.0 % Cost
of goods sold 391,824 69.7 % 327,981
72.0 % Gross profit 170,256 30.3 % 127,475 28.0 % Selling, general
and administrative
expenses
163,360 29.1 % 138,950 30.5 % Income
(loss) from operations 6,896 1.2 % (11,475 ) -2.5 % Interest
expense—net 12,179 2.1 % 10,528 2.3 %
Loss before income taxes (5,283 ) -0.9 % (22,003 ) -4.8 % Income
tax benefit (1,913 ) -0.3 % (8,533 )
-1.8 % Net loss $ (3,370 ) -0.6 % $ (13,470 ) -3.0 %
Weighted-average shares used in
computing basic net loss
per share
37,609,516 40,588,081 Basic net loss per share $ (0.09 ) $ (0.33 )
Weighted-average shares used in
computing diluted net loss
per share
37,609,516 40,588,081 Diluted net loss per share $ (0.09 ) $ (0.33
)
RH
RECONCILIATION OF GAAP NET LOSS TO
ADJUSTED NET INCOME (LOSS)
(In thousands)
(Unaudited)
Three Months Ended
April 29,2017
April 30,2016
GAAP net loss $ (3,370 ) $ (13,470 )
Adjustments (pre-tax):
Cost of goods sold: Impact of inventory step-up [a] 1,380 — Legal
claim [b] — 7,729 Selling, general and administrative expenses:
Acquisition related costs [c] — 2,069 Reorganization related costs
[d] — 1,415 Legal claim [b] — 972 Interest expense—net:
Amortization of debt discount [e] 6,715 6,442
Subtotal adjusted items 8,095 18,627 Impact of income tax on
adjusted items [f] (2,931 ) (7,223 ) Adjusted net
income (loss) [g] $ 1,794 $ (2,066 ) [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 incurred in connection with our acquisition of
Waterworks including professional fees. [d] 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. [e] 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 April 29, 2017 and April 30,
2016, respectively. [f] The adjustments for the three months ended
April 29, 2017 and April 30, 2016 represent the tax effect of the
adjusted items based on our effective tax rates of 36.2% and 38.8%,
respectively. [g] Adjusted net income (loss) is a supplemental
measure of financial performance that is not required by, or
presented in accordance with, GAAP. We define adjusted net income
(loss) as net loss, adjusted for the impact of certain
non-recurring and other items that we do not consider
representative of our ongoing operating performance. Adjusted net
income (loss) is included in this press release because management
believes that adjusted net income (loss) 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.
RH
RECONCILIATION OF DILUTED NET LOSS PER
SHARE TO
ADJUSTED DILUTED NET INCOME (LOSS) PER
SHARE
(Unaudited)
Three Months Ended
April 29,2017
April 30,2016
Diluted net loss per share $ (0.09 ) $ (0.33 )
Pro forma diluted net loss per share
[a]
$ (0.09 ) $ (0.33 ) EPS impact of adjustments (pre-tax) [b]:
Amortization of debt discount $ 0.18 $ 0.16 Impact of inventory
step-up 0.04 — Legal claim — 0.21 Acquisition related costs — 0.05
Reorganization related costs — 0.04 Subtotal adjusted
items 0.22 0.46 Impact of income tax on adjusted items [b]
(0.08 ) (0.18 )
Adjusted diluted net income (loss) per
share [c]
$ 0.05 $ (0.05 ) [a] Pro forma diluted net loss per
share for the three months ended April 29, 2017 is calculated based
on GAAP net loss and diluted weighted-average shares of 37,879,107.
[b] Refer to table titled “Reconciliation of GAAP Net Loss to
Adjusted Net Income (Loss)” and the related footnotes for
additional information. [c] Adjusted diluted net income (loss) 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 (loss) per share as net 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
(loss) per share is included in this press release because
management believes that adjusted diluted net income (loss) 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.
RH
RECONCILIATION OF GROSS PROFIT TO
ADJUSTED GROSS PROFIT
(In thousands)
(Unaudited)
Three Months Ended
April 29,2017
April 30,2016
Gross profit $ 170,256 $ 127,475 Impact of inventory step-up [a]
1,380 — Legal claim [a] — 7,729 Adjusted gross profit
[b] $ 171,636 $ 135,204 Net revenues $ 562,080 $ 455,456
Gross margin [c] 30.3 % 28.0 % Adjusted gross margin
[c] 30.5 % 29.7 % [a] Refer to table
titled “Reconciliation of GAAP Net Loss to Adjusted Net Income
(Loss)” and the related footnotes for additional information. [b]
Adjusted gross profit is a supplemental measure of financial
performance that is not required by, or presented in accordance
with, GAAP. We define adjusted gross profit as gross profit,
adjusted for the impact of certain non-recurring and other items
that we do not consider representative of our underlying operating
performance. Adjusted gross profit is included in this press
release because management believes that adjusted gross profit
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.
[c] Gross margin is defined as gross profit divided by net
revenues. Adjusted gross margin is defined as adjusted gross profit
divided by net revenues.
RH
RECONCILIATION OF NET LOSS TO
OPERATING
INCOME (LOSS) AND ADJUSTED OPERATING
INCOME
(In thousands)
(Unaudited)
Three Months Ended
April 29,2017
April 30,2016
Net loss $ (3,370 ) $ (13,470 ) Interest expense—net 12,179 10,528
Income tax benefit (1,913 ) (8,533 ) Operating income
(loss) 6,896 (11,475 ) Impact of inventory step-up [a] 1,380 —
Legal claim [a] — 8,701 Acquisition related costs [a] — 2,069
Reorganization related costs [a] — 1,415 Adjusted operating
income $ 8,276 $ 710 Net revenues $ 562,080 $ 455,456
Operating margin [b] 1.2 % -2.5 % Adjusted operating
margin [b] 1.5 % 0.2 % [a] Refer to
table titled “Reconciliation of GAAP Net Loss to Adjusted Net
Income (Loss)” and the related footnotes for additional
information. [b]
Operating margin is defined as operating
income (loss) divided by net revenues. Adjusted operating margin is
defined as adjusted operating income divided by net revenues.
RH
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
April 29,2017
January 28,2017
April 30,2016
As Revised [a] ASSETS Cash and cash
equivalents $ 80,150 $ 87,023 $ 234,668 Short-term investments —
142,677 100,095 Merchandise inventories 683,984 752,304 763,055
Asset held for sale 8,179 4,900 — Other current assets
142,357 151,353 144,129 Total current assets 914,670
1,138,257 1,241,947 Long-term investments — 33,212 10,859 Property
and equipment—net 702,741 682,056 558,431 Goodwill and intangible
assets 274,892 274,360 173,005 Other non-current assets
56,083 64,635 64,278 Total assets $ 1,948,386 $
2,192,520 $ 2,048,520
LIABILITIES AND STOCKHOLDERS’
EQUITY Liabilities Accounts payable and accrued expenses $
233,395 $ 226,980 $ 246,483 Deferred revenue, customer deposits and
other current liabilities 210,526 189,189
157,966 Total current liabilities 443,921 416,169 404,449
Convertible senior notes due 2019—net 316,153 312,379 301,311
Convertible senior notes due 2020—net 240,120 235,965 223,895
Financing obligations under build-to-suit lease transactions
220,019 203,015 154,953 Other non-current obligations
105,395 105,123 84,384 Total liabilities
1,325,608 1,272,651 1,168,992 Stockholders’
equity 622,778 919,869 879,528 Total
liabilities and stockholders’ equity $ 1,948,386 $ 2,192,520 $
2,048,520 [a]
During the fourth quarter of fiscal 2016
management determined that we had incorrectly reported negative
cash balances due to outstanding checks in the accounts payable and
accrued expenses financial statement line item in our consolidated
balance sheets without properly applying the limited right of
offset against cash and cash equivalents. The revision decreased
cash and cash equivalents and accounts payable and accrued expenses
by $2.5 million as of April 30, 2016.
RH
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
April 29,2017
April 30,2016
As Revised [a] CASH FLOWS FROM OPERATING
ACTIVITIES Net loss $ (3,370 ) $ (13,470 ) Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization 16,020 12,554 Other non-cash items
15,011 12,257 Change in assets and liabilities—net of acquisition:
Merchandise inventories 66,067 (37,228 ) Accounts payable, accrued
expenses and other 31,327 (64,463 ) Net cash provided
by (used in) operating activities 125,055 (90,350 )
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures—including
construction related deposits and purchase of trademarks and domain
names
(13,456 ) (48,991 ) Proceeds from sale of asset held for sale—net
4,900 — Net proceeds of investments 175,801 41,660
Net cash provided by (used in) investing activities 167,245
(7,331 )
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchases of common stock (300,140 ) — Net equity related
transactions 2,418 79 Other financing activities (1,365 )
(85 ) Net cash used in financing activities (299,087
) (6 ) Effects of foreign currency exchange rate translation
(86 ) 888 Net decrease in cash and cash equivalents
(6,873 ) (96,799 ) Cash and cash equivalents Beginning of period
87,023 331,467 End of period $ 80,150 $ 234,668
[a] During the fourth quarter of fiscal 2016
management determined that we had incorrectly reported negative
cash balances due to outstanding checks in the accounts payable and
accrued expenses financial statement line item in our consolidated
balance sheets without properly applying the limited right of
offset against cash and cash equivalents. The revision decreased
net cash provided by operating activities by $15.9 million for the
three months ended April 30, 2016.
RH
CALCULATION OF FREE CASH FLOW
(In thousands)
(Unaudited)
Three Months Ended
April 29,2017
April 30,2016
As Revised [a] Net cash provided by (used in)
operating activities $ 125,055 $ (90,350 ) Capital
expenditures—including construction related deposits (13,456 )
(48,827 ) Payments on build-to-suit lease transactions (1,289 ) —
Purchase of trademarks and domain names — (164 ) Payments on
capital leases (76 ) (85 ) Proceeds from sale of asset held for
sale—net 4,900 — Free cash flow [b] $ 115,134 $ (139,426 )
[a] During the fourth quarter of fiscal 2016
management determined that we had incorrectly reported negative
cash balances due to outstanding checks in the accounts payable and
accrued expenses financial statement line item in our consolidated
balance sheets without properly applying the limited right of
offset against cash and cash equivalents. The revision decreased
net cash provided by operating activities by $15.9 million for the
three months ended April 30, 2016. [b] Free cash flow is calculated
as net cash provided by (used in) operating activities and net
proceeds from sale of asset held for sale, less capital
expenditures, construction related deposits, payments on
build-to-suit lease transactions, 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.
RHSECOND QUARTER AND FISCAL 2017
OUTLOOK(In millions, except per share data)
RH’s fiscal 2017 will include 53 weeks compared to the prior
fiscal year which included 52 weeks. The Company is providing the
following outlook for the second quarter and fiscal 2017:
Second Quarter2017
Fiscal Year2017
Net revenues $595—$610 $2,400—$2,450 % growth vs. prior year 9%—12%
12%—15% Adjusted net income $13—$15 $60—$70 % growth vs.
prior year nm 16%—35% Adjusted diluted EPS inclusive of 7.85
million shares repurchased to date $0.38—$0.43 $1.67—$1.94
Weighted-average diluted shares outstanding inclusive of 7.85
million shares repurchased to date 34.5 36.0 Capital
expenditures $120—$140 Planned asset sales $15—$25
Note: The Company’s adjusted diluted earnings per share outlook
excludes the potential benefit of any additional stock repurchases
beyond those already completed to date and a one-time non-cash
stock compensation charge of approximately $24 million in the
second quarter of fiscal 2017 related to the Company’s Chairman and
Chief Executive Officer’s recent equity grant. 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
non-cash and other compensation expense; one-time income tax
expense or benefits; legal claim related expenses; reorganization
costs including severance costs and related taxes; non-cash
amortization of debt discount; 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170601006483/en/
RHCammeron McLaughlin, 415-945-4998SVP, Investor Relations and
Strategycmclaughlin@rh.com
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