Restoration Hardware 2012 Annual Report Download - page 124

Cash Flow Analysis
A summary of operating, investing, and financing activities is shown in the following table:
Year Ended
February 2,
2013
January 28,
2012
January 29,
2011
(in thousands)
Provided by (used in) operating activities $ (3,864) $ 17,121 $(11,810)
Used in investing activities (49,368) (25,593) (39,907)
Provided by financing activities 53,052 3,371 51,601
Increase (decrease) in cash and cash equivalents (158) (4,852) 178
Cash and cash equivalents at end of period 8,354 8,512 13,364
Net Cash Used In Operating Activities
Cash from operating activities consists primarily of net income (loss) adjusted for non-cash items including
depreciation and amortization, stock-based compensation and the effect of changes in working capital and other
activities.
For fiscal 2012, net cash used in operating activities was $3.9 million and consisted of an increase in working
capital and other activities of $73.0 million and a net loss of $12.8 million, offset by non-cash items of $81.9
million. Non-cash items of $81.9 million include a $92.0 million compensation charge related to equity activity at
the time of the Reorganization, a compensation charge of $23.1 million related to the performance-based vesting of
certain shares granted to Mr. Alberini and Mr. Friedman subsequent to the Reorganization and depreciation and
amortization of $26.7 million, offset by the release of our U.S. valuation allowance in fiscal 2012 of $57.2 million
and a decrease in our non-cash income tax adjustments of $4.7 million. The increase in working capital and other
activities consisted primarily of increases in inventory of $107.5 million as part of our strategy to improve our
inventory position to meet demand levels, prepaid expenses of $24.5 million primarily due to an increase in catalog
costs associated with the Source Book strategy and accounts receivable of $5.3 million due to timing of payments
received related to our credit card receivables. These uses of cash from working capital components were partially
offset by increases in accrued liabilities and accounts payable of $36.2 million primarily due to timing of payments,
increases in deferred revenue and customer deposits of $16.2 million due to the timing of shipments made at fiscal
year end, as well as increases in deferred rent and lease incentives of $10.9 million primarily due to entering into
new lease agreements for Full Line Design Gallery locations.
For fiscal 2011, net cash provided by operating activities was $17.1 million and consisted of net income of
$20.6 million and non-cash items of $48.6 million, offset by an increase in working capital and other activities of
$52.1 million. Non-cash items of $48.6 million include expenses of $6.4 million related to the repayment of the
executive loan by Mr. Friedman and $6.0 million for the management fee to the Principal Equity Holders, both
incurred by Home Holdings on our behalf and reflected as capital contributions. The increase in working capital and
other activities consisted primarily of increases in inventory of $39.5 million in anticipation of future demand and as
a result of the increased capacity due to opening a new distribution center in fiscal 2011, prepaid expenses of $36.4
million primarily due to an increase in catalog costs associated with the Source Book strategy and accounts
receivable of $7.3 million due to timing of payments received related to our credit card receivables. These uses of
cash from working capital components were offset by sources of cash from increases in accrued liabilities and
accounts payable of $14.4 million primarily due to timing of payments, increases in deferred revenue and customer
deposits of $11.4 million due to the timing of shipments made at fiscal year end, as well as increases in other current
liabilities of $3.9 million primarily due to an increase in gift certificate-related liabilities.
For fiscal 2010, net cash used in operating activities was $11.8 million and consisted of an increase in
working capital and other activities of $39.0 million, and a net loss of $7.1 million partially offset by non-cash
expenses included in the net loss of $34.3 million. Working capital and other activities consisted primarily of
increases in inventory of $57.1 million, partially offset by increases in deferred rent and lease incentives of $8.6
million, accrued liabilities and accounts payable of $5.5 million primarily due to timing of payments, other
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