Restoration Hardware 2014 Annual Report Download - page 59

compensation and (ii) other non-deductible expenses. The fiscal 2012 effective tax rate was significantly
impacted by (i) our reporting a loss before income taxes, (ii) the release of the U.S. valuation allowance against
our net deferred tax assets, and (iii) non-deductible stock-based compensation. By the end of fiscal 2012, our
U.S. operations achieved a position of cumulative profits (adjusted for permanent differences) for the most recent
three-year period, and this coupled with our business plan for profitability in future periods, provided assurance
that our future tax benefits are more likely than not to be realized. Accordingly, in the fourth quarter of fiscal
2012 we released $57.2 million of our U.S. valuation allowance against net deferred tax assets.
Quarterly Results
The following table sets forth our historical quarterly consolidated statements of income for each of the last
eight fiscal quarters ended through January 31, 2015. This quarterly information has been prepared on the same
basis as our annual audited financial statements and includes all adjustments that we consider necessary to
present fairly the financial information for the fiscal quarters presented. The quarterly data should be read in
conjunction with our consolidated financial statements and the related notes included in Item 8—Financial
Statements and Supplementary Data.
Our quarterly results have historically varied depending upon a variety of factors, including our product
offerings, promotional events, store openings, shifts in the timing of holidays and timing of Source Book
releases, among other things. As a result of these factors, our working capital requirements and demands on our
product distribution and delivery network may fluctuate during the year. During these peak periods of working
capital requirements, we have historically increased our borrowings under the Restoration Hardware, Inc.
revolving line of credit. As such, results of a period shorter than a full year may not be indicative of results
expected for the entire year.
Fiscal 2013 Fiscal 2014
First
Quarter (1)
Second
Quarter (2)
Third
Quarter
Fourth
Quarter
First
Quarter (3)
Second
Quarter (4)
Third
Quarter (4)
Fourth
Quarter (3) (4)
(dollars in thousands)
Net revenues $301,337 $382,098 $395,832 $471,694 $366,254 $433,766 $484,675 $582,727
Cost of goods sold 199,460 242,872 255,032 296,717 241,905 265,857 304,302 364,584
Gross profit 101,877 139,226 140,800 174,977 124,349 167,909 180,373 218,143
Selling, general, and
administrative expenses 101,366 167,006 116,940 116,717 119,571 118,974 143,685 142,818
Income (loss) from operations 511 (27,780) 23,860 58,260 4,778 48,935 36,688 75,325
Interest expense 840 1,191 2,165 1,537 2,056 4,346 5,210 5,939
Income (loss) before income taxes (329) (28,971) 21,695 56,723 2,722 44,589 31,478 69,386
Income tax expense (benefit) (168) (11,136) 12,146 30,081 927 17,336 12,049 26,861
Net income (loss) $ (161) $ (17,835) $ 9,549 $ 26,642 $ 1,795 $ 27,253 $ 19,429 $ 42,525
Adjusted net income (5) $ 2,257 $ 19,793 $ 13,017 $ 34,034 $ 7,153 $ 27,699 $ 20,287 $ 42,497
Comparable brand revenue
growth (6) 39% 30% 38% 24% 18% 13% 22% 24%
(1) The first quarter of fiscal 2013 includes (i) a $3.3 million non-cash compensation charge related to the
performance-based vesting of certain shares granted to Mr. Friedman and (ii) $0.8 million of costs incurred
in connection with our follow-on offering in May 2013.
(2) The second quarter of fiscal 2013 includes (i) a $33.7 million non-cash compensation charge related to the
one-time, fully vested option granted to Mr. Friedman upon his reappointment as Chairman and Co-Chief
Executive Officer in July 2013, (ii) a $26.2 million non-cash compensation charge related to the
performance-based vesting of certain shares granted to Mr. Friedman and (iii) $2.1 million of legal and
other professional fees incurred in connection with our follow-on offerings in May 2013 and July 2013.
55