Restoration Hardware 2015 Annual Report Download - page 82

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79
NOTE 5—PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
January 30, January 31,
2016 2015
Leasehold improvements
(
1
)
....................................................... $ 336,995 $ 280,602
Computer software ..................................................................... 96,618 60,650
Furniture, fixtures and equipment .............................................. 49,650 37,365
Machinery, equipment and aircraft ............................................ 32,190 15,013
Land ........................................................................................... 11,188 5,396
Building and building improvements ......................................... 9,811 2,205
Build-to-suit property
(
2
)
(
3
)
......................................................... 146,550 125,082
Building and equipment under capital leases ............................. 8,025 7,937
Total property and equipment............................................... 691,027 534,250
Less—accumulated depreciation and amortization
(
4
)
................ (175,422) (143,406 )
Total property and equipment—net ...................................... $ 515,605 $ 390,844
(1) Leasehold improvements include construction in progress of $51.1 million and $47.7 million as of January 30, 2016, and
January 31, 2015, respectively.
(2) The Company capitalizes assets and records a corresponding non-current liability for build-to-suit lease transactions where it is
considered the owner, for accounting purposes, during the construction period. Refer to Lease Accounting within Note 3—
Significant Accounting Policies.
(3) In fiscal 2014, the Company concluded that it was the deemed owner for accounting purposes for a new distribution center
located in California during the construction period pursuant to ASC 840. During the construction period, the Company
capitalized the cash and non-cash assets contributed by the landlord for the construction of the distribution center on its
consolidated balance sheets as an increase in property and equipment and an increase in financing obligations under build-to-
suit lease transactions. During the fourth quarter of fiscal 2015, upon the completion of the construction period, the Company
performed a sale-leaseback analysis and determined that it did not have any prohibitive forms of continuing involvement and
therefore removed the asset and corresponding liability of $74.9 million from its consolidated balance sheet as of January 30,
2016. The effected sale leaseback did not have an impact on the consolidated statements of income or consolidated statements of
cash flows in fiscal 2015.
(4) Includes accumulated amortization related to equipment under capital leases of $1.6 million and $0.9 million as of January 30,
2016, and January 31, 2015, respectively.
The Company recorded depreciation expense of $44.2 million, $33.7 million, and $26.5 million in fiscal 2015, fiscal 2014, and
fiscal 2013, respectively.
NOTE 6—GOODWILL AND INTANGIBLE ASSETS
The following sets forth the goodwill and intangible assets as of January 30, 2016 (in thousands):
Gross
Carrying
Amount
Accumulated
Amortization
Foreign
Currency
Translation
Net Book
Value
Intangible assets subject to amortization ................................
Fair value of leases
(
1
)
........................................................
Fair market write-up .................................................... $ 1,924 $ (1,697) $ — $227
Fair market write-down
(
2
)
........................................... (1,467) 1,289 — (178)
Total intangible assets subject to amortization....... $ 457 $ (408) $ — $49
Intangible assets not subject to amortization ..........................
Goodwill ........................................................................... $ 124,461 $ — $ (160 ) $124,301
Trademarks and domain names ......................................... $ 48,309 $ — $ — $48,309
(1) The fair value of each lease is amortized over the life of the respective lease.
(2) The fair market write-down of leases is included in other non-current obligations on the consolidated balance sheets.