EX-99.1
Published on March 27, 2023
Exhibit 99.1
SECOND QUARTER 2022 FINANCIAL RESULTS
EXPLANATORY NOTE
This Current Report on Form 8-K/A amends the Current Report on Form 8-K filed by RH (“we,” “us,” “our” or the “Company”) on September 8, 2022 (the “Original 8-K”). The Original 8-K furnished a shareholder letter announcing the Company’s financial results for the second quarter ended July 30, 2022 as Exhibit 99.2 (the “Exhibit”).
We are correcting the Exhibit in order to furnish updated non-GAAP information and specifically to set forth certain modifications in how we determine the applicable adjusted tax rate for purposes of calculating non-GAAP adjusted net income and adjusted diluted net income per share for the three and six months ended July 30, 2022 as previously set forth in the Exhibit (collectively, the updated “Updated Non-GAAP Adjusted Net Income Information”).
We filed amended Quarterly Reports on Form 10-Q/A with the SEC on March 27, 2023 (collectively, the “10-Q Amendments”) in order to implement certain required restatements (collectively, the “Restatements”). The Restatements are limited to the calculation of basic and diluted net income per share, including the weighted-average shares used in the computation of the diluted net income per share.
The corrected Exhibit also reflects changes to the furnished financial information as a result of the Restatements.
Other than the changes described above to reflect the Updated Non-GAAP Adjusted Net Income Information and the Restatements, no other changes have been made to the Exhibit.
RETAIL GALLERY METRICS
(Unaudited)
We operated the following number of Galleries, Outlets and Showrooms:
|
|
JULY 30, 2022 |
|
JULY 31, 2021 |
|
||
RH |
|
|
|
|
|
|
|
Design Galleries(1) |
|
28 |
|
|
25 |
|
|
Legacy Galleries |
|
35 |
|
|
37 |
|
|
Modern Galleries |
|
1 |
|
|
1 |
|
|
Baby & Child and TEEN Galleries |
|
3 |
|
|
3 |
|
|
Total Galleries |
|
67 |
|
|
66 |
|
|
Outlets(2) |
|
39 |
|
|
38 |
|
|
Waterworks Showrooms |
|
14 |
|
|
14 |
|
|
| (1) | As of July 30, 2022 and July 31, 2021, fourteen and eleven of our Design Galleries included an integrated RH Hospitality experience, respectively. |
| (2) | Net revenues for outlet stores were $69 million for both the three months ended July 30, 2022 and July 31, 2021. |
T-1 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
The following table presents RH Gallery and Waterworks Showroom metrics, and excludes Outlets:
|
|
THREE MONTHS ENDED |
|
||||||||||
|
|
JULY 30, 2022 |
|
JULY 31, 2021 |
|
||||||||
|
|
COUNT |
|
TOTAL LEASED SELLING |
|
COUNT |
|
TOTAL LEASED SELLING |
|
||||
|
|
|
|
|
(in thousands) |
|
|
|
|
(in thousands) |
|
||
Beginning of period |
|
81 |
|
|
1,254 |
|
|
82 |
|
|
1,162 |
|
|
RH Design Galleries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
San Francisco Design Gallery |
|
1 |
|
|
42.1 |
|
|
— |
|
|
— |
|
|
Dallas Design Gallery |
|
— |
|
|
— |
|
|
1 |
|
|
38.0 |
|
|
RH Modern Galleries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dallas RH Modern Gallery |
|
— |
|
|
— |
|
|
(1) |
|
|
(3.9) |
|
|
RH Baby & Child and TEEN Galleries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Santa Monica RH Baby & Child and TEEN Gallery |
|
— |
|
|
— |
|
|
(1) |
|
|
(7.3) |
|
|
RH Legacy Galleries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
San Francisco legacy Gallery |
|
(1) |
|
|
(4.8) |
|
|
— |
|
|
— |
|
|
Dallas legacy Gallery |
|
— |
|
|
— |
|
|
(1) |
|
|
(8.4) |
|
|
End of period |
|
81 |
|
|
1,291 |
|
|
80 |
|
|
1,180 |
|
|
Weighted-average leased selling square footage |
|
|
|
|
1,286 |
|
|
|
|
|
1,183 |
|
|
% growth vs. same quarter last year |
|
|
|
|
9 |
% |
|
|
|
|
4 |
% |
|
See the Company’s most recent Form 10-K and Form 10-Q filings for square footage definitions.
Total leased square footage as of July 30, 2022 and July 31, 2021 was approximately 1,737,000 and 1,580,000, respectively.
Weighted-average leased square footage for the three months ended July 30, 2022 and July 31, 2021 was approximately 1,728,000 and 1,588,000, respectively.
T-2 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
ESTIMATED DILUTED SHARES OUTSTANDING
(Shares outstanding in millions)
|
|
ILLUSTRATIVE AVERAGE STOCK PRICES |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2022 |
||||||||||||||||
Average stock price |
|
$ |
200 |
|
$ |
250 |
|
$ |
300 |
|
$ |
350 |
|
$ |
400 |
|
$ |
450 |
Estimated adjusted diluted shares outstanding(1) |
|
|
25.63 |
|
|
25.92 |
|
|
26.16 |
|
|
26.32 |
|
|
26.48 |
|
|
26.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2022 |
||||||||||||||||
Average stock price |
|
$ |
200 |
|
$ |
250 |
|
$ |
300 |
|
$ |
350 |
|
$ |
400 |
|
$ |
450 |
Estimated adjusted diluted shares outstanding(1) |
|
|
25.68 |
|
|
25.98 |
|
|
26.21 |
|
|
26.38 |
|
|
26.53 |
|
|
26.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL 2022 |
||||||||||||||||
Implied average stock price(2) |
|
$ |
259 |
|
$ |
284 |
|
$ |
309 |
|
$ |
334 |
|
$ |
359 |
|
$ |
384 |
Estimated adjusted diluted shares outstanding(1) |
|
|
26.37 |
|
|
26.52 |
|
|
26.64 |
|
|
26.72 |
|
|
26.80 |
|
|
26.89 |
| (2) | The implied fiscal 2022 average stock price is calculated by averaging (1) the actual average share price of $365.86 for the three months ended April 30, 2022, (2) the actual average share price of $271.73 for the three months ended July 30, 2022 and (3) an estimated average stock price for the remainder of fiscal 2022, as noted above. |
Note: The table above is intended to demonstrate the impact stock prices could have on our adjusted diluted shares outstanding due to 1) additional in-the-money options, 2) the higher cost of acquired shares under the treasury stock method and 3) dilution resulting from the outstanding convertible senior notes. The table above includes the impact of the repurchase of 1,000,000 shares of our common stock during the three months ended July 30, 2022 under our Share Repurchase Program; however, it does not include the potential impact of future repurchases under such plan.
For adjusted dilution purposes, we will incur dilution above the strike prices of the the $335 million aggregate principal amount of convertible senior notes that were issued in June 2018 (the “2023 Notes”) and the $350 million aggregate principal amount of convertible senior notes that were issued in September 2019 (the “2024 Notes”) of $193.65 and $211.40, respectively.
The calculation also includes assumptions around the timing and number of options exercises. Actual diluted shares outstanding may differ if actual exercises differ from estimates. The stock option awards outstanding for RH’s Chairman and CEO are included in all of the adjusted diluted shares outstanding scenarios above based on the exercise prices of $75.43, $50.00 and $385.30 for the July 2013, May 2017 and October 2020 grants, respectively.
T-3 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
THREE MONTHS ENDED |
|
|
SIX MONTHS ENDED |
|
|
||||||||||||||||
|
|
JULY 30, |
|
% OF NET |
|
JULY 31, |
|
% OF NET |
|
JULY 30, |
|
% OF NET |
|
|
JULY 31, |
|
% OF NET |
|
|||||
|
|
(restated) |
|
|
|
|
|
|
|
|
|
(restated) |
|
|
|
|
|
|
|
|
|
||
|
|
(in thousands, except per share amounts) |
|
||||||||||||||||||||
Net revenues |
|
$ |
991,620 |
|
100.0 |
% |
$ |
988,859 |
|
100.0 |
% |
|
$ |
1,948,912 |
|
100.0 |
% |
$ |
1,849,651 |
|
100.0 |
% |
|
Cost of goods sold |
|
|
468,402 |
|
47.2 |
|
|
501,183 |
|
50.7 |
|
|
|
927,111 |
|
47.6 |
|
|
954,998 |
|
51.6 |
|
|
Gross profit |
|
|
523,218 |
|
52.8 |
|
|
487,676 |
|
49.3 |
|
|
|
1,021,801 |
|
52.4 |
|
|
894,653 |
|
48.4 |
|
|
Selling, general and administrative expenses |
|
|
288,804 |
|
29.2 |
|
|
238,688 |
|
24.1 |
|
|
|
582,099 |
|
29.8 |
|
|
457,777 |
|
24.8 |
|
|
Income from operations |
|
|
234,414 |
|
23.6 |
|
|
248,988 |
|
25.2 |
|
|
|
439,702 |
|
22.6 |
|
|
436,876 |
|
23.6 |
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense—net |
|
|
26,264 |
|
2.6 |
|
|
13,581 |
|
1.4 |
|
|
|
47,119 |
|
2.5 |
|
|
26,889 |
|
1.4 |
|
|
Loss on extinguishment of debt |
|
|
23,462 |
|
2.4 |
|
|
3,166 |
|
0.3 |
|
|
|
169,578 |
|
8.7 |
|
|
3,271 |
|
0.2 |
|
|
Other expense—net |
|
|
3,195 |
|
0.3 |
|
|
— |
|
— |
|
|
|
2,852 |
|
0.1 |
|
|
— |
|
— |
|
|
Total other expenses |
|
|
52,921 |
|
5.3 |
|
|
16,747 |
|
1.7 |
|
|
|
219,549 |
|
11.3 |
|
|
30,160 |
|
1.6 |
|
|
Income before income taxes and equity method investments |
|
|
181,493 |
|
18.3 |
|
|
232,241 |
|
23.5 |
|
|
|
220,153 |
|
11.3 |
|
|
406,716 |
|
22.0 |
|
|
Income tax expense (benefit) |
|
|
56,397 |
|
5.7 |
|
|
3,009 |
|
0.3 |
|
|
|
(107,029) |
|
(5.5) |
|
|
44,733 |
|
2.4 |
|
|
Income before equity method investments |
|
|
125,096 |
|
12.6 |
|
|
229,232 |
|
23.2 |
|
|
|
327,182 |
|
16.8 |
|
|
361,983 |
|
19.6 |
|
|
Share of equity method investments losses |
|
|
(2,821) |
|
(0.3) |
|
|
(2,486) |
|
(0.3) |
|
|
|
(4,196) |
|
(0.2) |
|
|
(4,581) |
|
(0.3) |
|
|
Net income |
|
$ |
122,275 |
|
12.3 |
% |
$ |
226,746 |
|
22.9 |
% |
|
$ |
322,986 |
|
16.6 |
% |
$ |
357,402 |
|
19.3 |
% |
|
Weighted-average shares used in computing basic net income per share |
|
|
24,475,373 |
|
|
|
21,166,638 |
|
|
|
|
|
23,541,955 |
|
|
|
21,084,941 |
|
|
|
|
||
Basic net income per share |
|
$ |
5.00 |
|
|
|
$ |
10.71 |
|
|
|
|
$ |
13.72 |
|
|
|
$ |
16.95 |
|
|
|
|
Weighted-average shares used in computing diluted net income per share |
|
|
26,934,914 |
|
|
|
31,979,098 |
|
|
|
27,371,500 |
|
|
31,594,555 |
|
|
|
||||||
Diluted net income per share |
|
$ |
4.54 |
|
|
|
$ |
7.09 |
|
|
|
|
$ |
11.80 |
|
|
|
$ |
11.31 |
|
|
|
|
T-4 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
JULY 30, |
|
JANUARY 29, |
|
||
|
|
2022 |
|
2022 |
|
||
|
|
(in thousands) |
|
||||
ASSETS |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,085,081 |
|
$ |
2,177,889 |
|
Merchandise inventories |
|
|
859,078 |
|
|
734,289 |
|
Other current assets |
|
|
307,159 |
|
|
179,264 |
|
Total current assets |
|
|
3,251,318 |
|
|
3,091,442 |
|
Property and equipment—net |
|
|
1,554,880 |
|
|
1,227,920 |
|
Operating lease right-of-use assets |
|
|
540,396 |
|
|
551,045 |
|
Goodwill and intangible assets |
|
|
214,908 |
|
|
214,261 |
|
Equity method investments |
|
|
98,135 |
|
|
100,810 |
|
Deferred tax assets and other non-current assets |
|
|
171,810 |
|
|
354,992 |
|
Total assets |
|
$ |
5,831,447 |
|
$ |
5,540,470 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
376,132 |
|
$ |
442,379 |
|
Convertible senior notes due 2023—net |
|
|
1,704 |
|
|
9,389 |
|
Convertible senior notes due 2024 |
|
|
— |
|
|
3,600 |
|
Deferred revenue and customer deposits |
|
|
390,710 |
|
|
387,933 |
|
Other current liabilities |
|
|
190,357 |
|
|
220,457 |
|
Total current liabilities |
|
|
958,903 |
|
|
1,063,758 |
|
Asset based credit facility |
|
|
— |
|
|
— |
|
Term loan B—net |
|
|
1,944,870 |
|
|
1,953,203 |
|
Term loan B-2—net |
|
|
469,546 |
|
|
— |
|
Convertible senior notes due 2023—net |
|
|
— |
|
|
59,002 |
|
Convertible senior notes due 2024—net |
|
|
41,668 |
|
|
184,461 |
|
Non-current operating lease liabilities |
|
|
527,445 |
|
|
540,513 |
|
Non-current finance lease liabilities |
|
|
661,001 |
|
|
560,550 |
|
Other non-current obligations |
|
|
7,770 |
|
|
8,706 |
|
Total liabilities |
|
|
4,611,203 |
|
|
4,370,193 |
|
Stockholders’ equity |
|
|
1,220,244 |
|
|
1,170,277 |
|
Total liabilities and stockholders’ equity |
|
$ |
5,831,447 |
|
$ |
5,540,470 |
|
T-5 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
SIX MONTHS ENDED |
|
||||
|
|
JULY 30, |
|
JULY 31, |
|
||
|
|
2022 |
|
2021 |
|
||
|
|
(in thousands) |
|||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
Net income |
|
$ |
322,986 |
|
$ |
357,402 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Non-cash operating lease cost and finance lease interest expense |
|
|
52,152 |
|
|
48,298 |
|
Depreciation and amortization |
|
|
51,728 |
|
|
46,556 |
|
Stock-based compensation expense |
|
|
23,538 |
|
|
25,431 |
|
Loss on extinguishment of debt |
|
|
169,578 |
|
|
3,271 |
|
Asset impairments |
|
|
8,154 |
|
|
7,354 |
|
Other non-cash items |
|
|
11,873 |
|
|
13,164 |
|
Change in assets and liabilities: |
|
|
|
|
|
|
|
Merchandise inventories |
|
|
(124,958) |
|
|
(101,641) |
|
Prepaid expenses and other current assets |
|
|
(153,471) |
|
|
(57,919) |
|
Landlord assets under construction—net of tenant allowances |
|
|
(32,460) |
|
|
(43,352) |
|
Deferred revenue and customer deposits |
|
|
2,911 |
|
|
116,492 |
|
Other changes in assets and liabilities |
|
|
(139,515) |
|
|
(98,338) |
|
Net cash provided by operating activities |
|
|
192,516 |
|
|
316,718 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
Capital expenditures |
|
|
(62,558) |
|
|
(82,138) |
|
Equity method investments |
|
|
(1,520) |
|
|
(1,939) |
|
Net cash used in investing activities |
|
|
(64,078) |
|
|
(84,077) |
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
Net borrowings under term loans |
|
|
490,000 |
|
|
— |
|
Repayment under convertible senior notes repurchase obligation |
|
|
(395,372) |
|
|
— |
|
Debt issuance costs |
|
|
(27,646) |
|
|
(3,634) |
|
Repayments of convertible senior notes |
|
|
(13,048) |
|
|
(28,111) |
|
Proceeds from termination of convertible senior note hedges |
|
|
231,796 |
|
|
— |
|
Payments for termination of common stock warrants |
|
|
(390,934) |
|
|
— |
|
Repurchases of common stock—including commissions |
|
|
(254,731) |
|
|
— |
|
Proceeds from exercise of stock options |
|
|
152,041 |
|
|
25,979 |
|
Other financing activities |
|
|
(16,262) |
|
|
(37,202) |
|
Net cash used in financing activities |
|
|
(224,156) |
|
|
(42,968) |
|
Effects of foreign currency exchange rate translation |
|
|
(440) |
|
|
92 |
|
Net increase (decrease) in cash and cash equivalents and restricted cash equivalents |
|
|
(96,158) |
|
|
189,765 |
|
Cash and cash equivalents and restricted cash equivalents |
|
|
|
|
|
|
|
Beginning of period—cash and cash equivalents |
|
|
2,177,889 |
|
|
100,446 |
|
Beginning of period—restricted cash equivalents (acquisition related escrow deposits) |
|
|
3,975 |
|
|
6,625 |
|
Beginning of period—cash and cash equivalents |
|
$ |
2,181,864 |
|
$ |
107,071 |
|
|
|
|
|
|
|
|
|
End of period—cash and cash equivalents |
|
|
2,085,081 |
|
|
291,461 |
|
End of period—restricted cash equivalents (acquisition related escrow deposits) |
|
|
625 |
|
|
5,375 |
|
End of period—cash and cash equivalents and restricted cash equivalents |
|
$ |
2,085,706 |
|
$ |
296,836 |
|
T-6 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
CALCULATION OF FREE CASH FLOW
(Unaudited)
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
||||||||
|
|
JULY 30, |
|
JULY 31, |
|
JULY 30, |
|
JULY 31, |
|
||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
||||
|
|
(in thousands) |
|
||||||||||
Net cash provided by operating activities |
|
$ |
56,567 |
|
$ |
125,843 |
|
$ |
192,516 |
|
$ |
316,718 |
|
Capital expenditures |
|
|
(33,194) |
|
|
(31,887) |
|
|
(62,558) |
|
|
(82,138) |
|
Free cash flow(1) |
|
$ |
23,373 |
|
$ |
93,956 |
|
$ |
129,958 |
|
$ |
234,580 |
|
| (1) | Free cash flow is net cash provided by operating activities less capital expenditures. Free cash flow for the three and six months ended July 31, 2021 includes the effect of $4.8 million and $5.1 million, respectively, relating to the portion of repayments of convertible senior notes attributable to debt discount upon settlement (such portion of the debt settlement reduces net cash provided by operating activities in the reported period). We adopted ASU 2020-06 as of the first quarter of fiscal 2022. No amortization of the debt discounts were recognized during the three or six months ended July 30, 2022, since we recombined the previously outstanding equity component of the 2023 Notes and 2024 Notes upon the adoption of ASU 2020-06, which resulted in an increase in the balance of convertible debt outstanding. |
Free cash flow is a non-GAAP financial measure and is included in this press release because we believe that this measure provides useful information to our senior leadership team and investors in understanding the strength of our liquidity and our ability to generate additional cash from our business operations. Free cash flow should not be considered in isolation or as an alternative to cash flows from operations calculated in accordance with GAAP, and should be considered alongside our other liquidity performance measures that are calculated in accordance with GAAP, such as net cash provided by operating activities and our other GAAP financial results. Our senior leadership team uses this non-GAAP financial measure in order to have comparable financial results for the purpose of analyzing changes in our underlying business from quarter to quarter. Our measure of free cash flow is not necessarily comparable to other similarly titled measures for other companies due to different methods of calculation.
CALCULATION OF ADJUSTED CAPITAL EXPENDITURES
(Unaudited)
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
||||||||
|
|
JULY 30, |
|
JULY 31, |
|
JULY 30, |
|
JULY 31, |
|
||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
||||
|
|
(in thousands) |
|
||||||||||
Capital expenditures |
|
$ |
33,194 |
|
$ |
31,887 |
|
$ |
62,558 |
|
$ |
82,138 |
|
Landlord assets under construction—net of tenant allowances |
|
|
20,312 |
|
|
29,774 |
|
|
32,460 |
|
|
43,352 |
|
Adjusted capital expenditures(1) |
|
$ |
53,506 |
|
$ |
61,661 |
|
$ |
95,018 |
|
$ |
125,490 |
|
| (1) | We define adjusted capital expenditures as capital expenditures from investing activities and cash outflows of capital related to construction activities to design and build landlord-owned leased assets, net of tenant allowances received during the construction period. |
T-7 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME
(Unaudited)
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
||||||||
|
|
JULY 30, |
|
JULY 31, |
|
JULY 30, |
|
JULY 31, |
|
||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
||||
|
|
(in thousands) |
|
||||||||||
GAAP net income |
|
$ |
122,275 |
|
$ |
226,746 |
|
$ |
322,986 |
|
$ |
357,402 |
|
Adjustments (pre-tax): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer payroll taxes on option exercise(1) |
|
|
— |
|
|
— |
|
|
11,717 |
|
|
— |
|
Non-cash compensation(2) |
|
|
4,321 |
|
|
5,864 |
|
|
10,179 |
|
|
11,728 |
|
Asset impairments(3) |
|
|
2,231 |
|
|
7,354 |
|
|
8,154 |
|
|
7,354 |
|
Professional fees(4) |
|
|
285 |
|
|
— |
|
|
7,469 |
|
|
— |
|
Compensation settlements(5) |
|
|
3,483 |
|
|
— |
|
|
3,483 |
|
|
— |
|
Recall accrual(6) |
|
|
— |
|
|
— |
|
|
560 |
|
|
500 |
|
Reorganization related costs(7) |
|
|
— |
|
|
449 |
|
|
— |
|
|
449 |
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt(8) |
|
|
23,462 |
|
|
3,166 |
|
|
169,578 |
|
|
3,271 |
|
(Gain) loss on derivative instruments—net(9) |
|
|
1,453 |
|
|
— |
|
|
(1,724) |
|
|
— |
|
Amortization of debt discount(10) |
|
|
— |
|
|
5,865 |
|
|
— |
|
|
11,846 |
|
Subtotal adjusted items |
|
|
35,235 |
|
|
22,698 |
|
|
209,416 |
|
|
35,148 |
|
Impact of income tax items(11) (modified) |
|
|
3,732 |
|
|
(305) |
|
|
(191,194) |
|
|
(3,256) |
|
Share of equity method investments losses(12) |
|
|
2,821 |
|
|
2,486 |
|
|
4,196 |
|
|
4,581 |
|
Adjusted net income(13) (modified) |
|
$ |
164,063 |
|
$ |
251,625 |
|
$ |
345,404 |
|
$ |
393,875 |
|
| (1) | Represents employer payroll tax expense related to the option exercise by Mr. Friedman in the first quarter of fiscal 2022. |
| (2) | Represents the amortization of the non-cash compensation charge related to an option grant made to Mr. Friedman in October 2020. |
| (4) | Represents professional fees contingent upon the completion of certain transactions related to the 2023 Notes and 2024 Notes, including bond hedge and warrant terminations and convertible senior notes repurchases. |
| (5) | Represents compensation settlements related to the Rollover Units and Profit Interest Units in the Waterworks subsidiary. |
| (6) | Represents accruals associated with product recalls. |
| (7) | Represents severance costs and related payroll taxes associated with reorganizations. |
| (8) | The adjustment for the three months ended July 30, 2022 represents a loss on extinguishment of debt related to the repurchase of $57 million of principal value of convertible senior notes, inclusive of the acceleration of amortization of debt issuance costs of $0.3 million. The adjustment for the six months ended July 30, 2022 represents a loss on extinguishment of debt related to the repurchase of $237 million of principal value of convertible senior notes, inclusive of the acceleration of amortization of debt issuance costs of $1.3 million. The adjustments for the three and six months ended July 31, 2021 represent the loss on extinguishment of debt for a portion of the 2023 Notes that were early converted at the option of the noteholders. |
| (9) | Represents net (gain) loss on derivative instruments resulting from certain transactions related to the 2023 Notes and 2024 Notes, including bond hedge and warrant terminations and convertible senior notes repurchases. |
T-8 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
| (10) | Prior to the adoption of ASU 2020-06, certain convertible debt instruments that may be settled in cash on conversion were required to be separately accounted for as liability and equity components of the instrument in a manner that reflected the issuer’s non-convertible debt borrowing rate. Accordingly, in accounting for GAAP purposes through fiscal 2021 for the 2023 Notes and the 2024 Notes, we separated the 2023 Notes and 2024 Notes into liability (debt) and equity (conversion option) components and we amortized as debt discount an amount equal to the fair value of the equity components as interest expense on the 2023 Notes and 2024 Notes over their expected lives. The equity components represented the difference between the proceeds from the issuance of the 2023 Notes and 2024 Notes and the fair value of the liability components of the 2023 Notes and 2024 Notes, respectively. Amounts were presented net of interest capitalized for capital projects of $2.9 million and $5.6 million during the three and six months ended July 31, 2021, respectively. No amortization of the debt discounts were recognized during the three months ended July 30, 2022, since we recombined the previously outstanding equity component of the 2023 Notes and 2024 Notes upon the adoption of ASU 2020-06. |
| (11) | We exclude the GAAP tax provision and apply a non-GAAP tax provision based upon (i) adjusted pre-tax net income, (ii) the projected annual adjusted tax rate and (iii) the exclusion of material discrete tax items that are unusual or infrequent, such as tax benefits related to the option exercise by Mr. Friedman in the first quarter of fiscal 2022. The adjustments for the three and six months ended July 30, 2022 are based on adjusted tax rates of 24.3% and 19.6%, respectively. Our previously reported adjustments for the three and six months ended July 30, 2022 in our originally filed Form 8-K on September 8, 2022 were based on an adjusted tax rate of 0.0%. |
The adjustments for the three and six months ended July 31, 2021 are based on adjusted tax rates of 1.3% and 10.9%, respectively, which exclude the tax impact associated with our share of equity method investments losses.
| (12) | Represents our proportionate share of the losses of our equity method investments. |
| (13) | Adjusted net income is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted net income as consolidated net income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our underlying operating performance. Adjusted net income is included in this press release because our senior leadership team believes that adjusted net income 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 senior leadership team uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. |
T-9 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
RECONCILIATION OF DILUTED NET INCOME PER SHARE TO
ADJUSTED DILUTED NET INCOME PER SHARE
(Unaudited)
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
||||||||
|
|
JULY 30, |
|
JULY 31, |
|
JULY 30, |
|
JULY 31, |
|
||||
|
|
2022(1) |
|
2021(2) |
|
2022(3) |
|
2021(2) |
|
||||
Diluted net income per share (restated) |
|
$ |
4.54 |
|
$ |
7.09 |
|
$ |
11.80 |
|
$ |
11.31 |
|
Pro forma diluted net income per share(4) (modified) |
|
$ |
4.56 |
|
$ |
7.65 |
|
$ |
11.92 |
|
$ |
12.17 |
|
Per share impact of adjustments (pre-tax)(5): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt (modified) |
|
|
0.87 |
|
|
0.10 |
|
|
6.26 |
|
|
0.11 |
|
Employer payroll taxes on option exercise |
|
|
— |
|
|
— |
|
|
0.43 |
|
|
— |
|
Non-cash compensation |
|
|
0.16 |
|
|
0.20 |
|
|
0.38 |
|
|
0.40 |
|
Asset impairments |
|
|
0.08 |
|
|
0.25 |
|
|
0.30 |
|
|
0.25 |
|
Professional fees |
|
|
0.01 |
|
|
— |
|
|
0.28 |
|
|
— |
|
Compensation settlements |
|
|
0.14 |
|
|
— |
|
|
0.12 |
|
|
— |
|
Recall accrual |
|
|
— |
|
|
— |
|
|
0.02 |
|
|
0.02 |
|
Amortization of debt discount |
|
|
— |
|
|
0.20 |
|
|
— |
|
|
0.40 |
|
(Gain) loss on derivative instruments—net |
|
|
0.05 |
|
|
0.02 |
|
|
(0.06) |
|
|
0.02 |
|
Subtotal adjusted items (modified) |
|
|
1.31 |
|
|
0.77 |
|
|
7.73 |
|
|
1.20 |
|
Impact of income tax items(5) (modified) |
|
|
0.14 |
|
|
(0.01) |
|
|
(7.05) |
|
|
(0.11) |
|
Share of equity method investments losses(5) |
|
|
0.11 |
|
|
0.07 |
|
|
0.15 |
|
|
0.15 |
|
Adjusted diluted net income per share(6) (modified) |
|
$ |
6.12 |
|
$ |
8.48 |
|
$ |
12.75 |
|
$ |
13.41 |
|
| (1) | For the three months ended July 30, 2022, subsequent to the adoption of ASU 2020-06, for GAAP purposes, we incur dilution for the principal of the convertible notes assuming the if-converted method. |
| (2) | For the three and six months ended July 31, 2021, prior to the adoption of ASU 2020-06, for GAAP purposes, we incurred dilution above the lower strike prices of the 2023 Notes and 2024 Notes of $193.65 and $211.40, respectively. However, we excluded from our adjusted diluted shares outstanding calculation the dilutive impact of the convertible notes between $193.65 and $309.84 for the 2023 Notes and between $211.40 and $338.24 for our 2024 Notes, based on the bond hedge contracts that were in place and would deliver shares to offset dilution in these ranges. At stock prices in excess of $309.84 and $338.24, we incurred dilution related to the 2023 Notes and 2024 Notes, respectively, and we would have had an obligation to deliver additional shares in excess of the dilution protection provided by the bond hedges. |
| (3) | For GAAP purposes, for the six months ended July 30, 2022, we incur dilution for the principal of the convertible notes assuming the if-converted method. For non-GAAP purposes, our adjusted diluted shares outstanding calculation excludes (i) the dilutive impact of the principal value of the convertible notes since we have the intent and ability to settle the principal value of such notes in cash and (ii) the dilutive impact of the convertible notes between $193.65 and $309.84 for our 2023 convertible senior notes and between $211.40 and $338.24 for our 2024 convertible senior notes, based on the bond hedge contracts that were in place and would have delivered shares to offset dilution in these ranges through the termination date of such contracts in the first quarter of fiscal 2022. Consistent with GAAP dilution, our adjusted diluted shares outstanding calculation includes the dilutive impact of stock prices in excess of $309.84 for our 2023 convertible senior notes and $338.24 for our 2024 convertible senior notes through the termination dates of the related bond hedge contracts in the first quarter of fiscal 2022, as we would have had an obligation to deliver additional shares in excess of the dilution protection provided by the bond hedges. |
| (4) | Pro forma diluted net income per share for the three months ended July 30, 2022 is calculated based on GAAP net income and pro forma diluted weighted-average shares of 26,824,986, which excludes dilution of 109,928 shares related to the 2023 Notes and 2024 Notes. Pro forma diluted net income per share for the six months ended July 30, 2022 is calculated based on GAAP net income and pro forma diluted weighted-average shares of 27,096,365, which excludes dilution of 275,135 shares related to the 2023 Notes and 2024 Notes. |
Pro forma diluted net income per share for the three months ended July 31, 2021 is calculated based on GAAP net income and pro forma diluted weighted-average shares of 29,657,589, which excludes dilution related to the 2023 Notes and 2024 Notes of 2,321,509 shares. Pro forma diluted net income per share for the six months ended July 31, 2021 is calculated based on GAAP net income and pro forma diluted weighted-average shares of 29,373,533, which excludes dilution of 2,221,022 shares related to the 2023 Notes and 2024 Notes.
T-10 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
| (5) | Refer to table titled “Reconciliation of GAAP Net Income to Adjusted Net Income” and the related footnotes for additional information. |
| (6) | Adjusted diluted net income 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 per share as consolidated net income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our underlying operating performance divided by our pro forma share count. Adjusted diluted net income per share is included in this press release because our senior leadership team believes that adjusted diluted net income 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 senior leadership team uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. |
T-11 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
RECONCILIATION OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSES TO
ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
(Unaudited)
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
||||||||
|
|
JULY 30, |
|
JULY 31, |
|
JULY 30, |
|
JULY 31, |
|
||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
||||
|
|
(dollars in thousands) |
|
||||||||||
Selling, general and administrative expenses |
|
$ |
288,804 |
|
$ |
238,688 |
|
$ |
582,099 |
|
$ |
457,777 |
|
Employer payroll taxes on option exercise(1) |
|
|
— |
|
|
— |
|
|
(11,717) |
|
|
— |
|
Non-cash compensation(1) |
|
|
(4,321) |
|
|
(5,864) |
|
|
(10,179) |
|
|
(11,728) |
|
Asset impairments(1) |
|
|
(2,231) |
|
|
(7,354) |
|
|
(8,154) |
|
|
(7,354) |
|
Professional fees(1) |
|
|
(285) |
|
|
— |
|
|
(7,469) |
|
|
— |
|
Compensation settlements(1) |
|
|
(3,483) |
|
|
— |
|
|
(3,483) |
|
|
— |
|
Recall accrual(1) |
|
|
— |
|
|
— |
|
|
(560) |
|
|
(500) |
|
Reorganizational related costs(1) |
|
|
— |
|
|
(449) |
|
|
— |
|
|
(449) |
|
Adjusted selling, general and administrative expenses(2) |
|
$ |
278,484 |
|
$ |
225,021 |
|
$ |
540,537 |
|
$ |
437,746 |
|
Net revenues |
|
$ |
991,620 |
|
$ |
988,859 |
|
$ |
1,948,912 |
|
$ |
1,849,651 |
|
Selling, general and administrative expenses margin(3) |
|
|
29.1 |
% |
|
24.1 |
% |
|
29.9 |
% |
|
24.7 |
% |
Adjusted selling, general and administrative expenses margin(3) |
|
|
28.1 |
% |
|
22.8 |
% |
|
27.7 |
% |
|
23.7 |
% |
| (1) | Refer to table titled “Reconciliation of GAAP Net Income to Adjusted Net Income” and the related footnotes for additional information. |
| (2) | Adjusted selling, general and administrative expenses is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted selling, general and administrative expenses as consolidated selling, general and administrative expenses, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our underlying operating performance. Adjusted selling, general and administrative expenses is included in this press release because our senior leadership team believes that adjusted selling, general and administrative expenses 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 senior leadership team uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. |
| (3) | Selling, general and administrative expenses margin is defined as selling, general and administrative expenses divided by net revenues. Adjusted selling, general and administrative expenses margin is defined as adjusted selling, general and administrative expenses divided by net revenues. |
T-12 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
RECONCILIATION OF NET INCOME TO OPERATING INCOME
AND ADJUSTED OPERATING INCOME
(Unaudited)
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
||||||||
|
|
JULY 30, |
|
JULY 31, |
|
JULY 30, |
|
JULY 31, |
|
||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
||||
|
|
(dollars in thousands) |
|
||||||||||
Net income |
|
$ |
122,275 |
|
$ |
226,746 |
|
$ |
322,986 |
|
$ |
357,402 |
|
Income tax expense (benefit) |
|
|
56,397 |
|
|
3,009 |
|
|
(107,029) |
|
|
44,733 |
|
Interest expense—net |
|
|
26,264 |
|
|
13,581 |
|
|
47,119 |
|
|
26,889 |
|
Loss on extinguishment of debt |
|
|
23,462 |
|
|
3,166 |
|
|
169,578 |
|
|
3,271 |
|
Share of equity method investments losses |
|
|
2,821 |
|
|
2,486 |
|
|
4,196 |
|
|
4,581 |
|
Other expense—net |
|
|
3,195 |
|
|
— |
|
|
2,852 |
|
|
— |
|
Operating income |
|
|
234,414 |
|
|
248,988 |
|
|
439,702 |
|
|
436,876 |
|
Employer payroll taxes on option exercise(1) |
|
|
— |
|
|
— |
|
|
11,717 |
|
|
— |
|
Non-cash compensation(1) |
|
|
4,321 |
|
|
5,864 |
|
|
10,179 |
|
|
11,728 |
|
Asset impairments(1) |
|
|
2,231 |
|
|
7,354 |
|
|
8,154 |
|
|
7,354 |
|
Professional fees(1) |
|
|
285 |
|
|
— |
|
|
7,469 |
|
|
— |
|
Compensation settlement(1) |
|
|
3,483 |
|
|
— |
|
|
3,483 |
|
|
— |
|
Recall accrual(1) |
|
|
— |
|
|
— |
|
|
560 |
|
|
500 |
|
Reorganizational related costs(1) |
|
|
— |
|
|
449 |
|
|
— |
|
|
449 |
|
Adjusted operating income(2) |
|
$ |
244,734 |
|
$ |
262,655 |
|
$ |
481,264 |
|
$ |
456,907 |
|
Net revenues |
|
$ |
991,620 |
|
$ |
988,859 |
|
$ |
1,948,912 |
|
$ |
1,849,651 |
|
Operating margin(3) |
|
|
23.6 |
% |
|
25.2 |
% |
|
22.6 |
% |
|
23.6 |
% |
Adjusted operating margin(3) |
|
|
24.7 |
% |
|
26.6 |
% |
|
24.7 |
% |
|
24.7 |
% |
| (1) | Refer to table titled “Reconciliation of GAAP Net Income to Adjusted Net Income” and the related footnotes for additional information. |
| (2) | Adjusted operating income is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted operating income as consolidated operating income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our underlying operating performance. Adjusted operating income is included in this press release because our senior leadership team believes that adjusted operating income 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 senior leadership team uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. |
| (3) | Operating margin is defined as operating income divided by net revenues. Adjusted operating margin is defined as adjusted operating income divided by net revenues. We are not able to provide a reconciliation of our adjusted operating margin financial guidance or other non-GAAP financial guidance to the corresponding GAAP measure without unreasonable effort because of the uncertainty and variability of the nature and amount of the non-recurring and other items that are excluded from such non-GAAP financial measures. Such adjustments in future periods are generally expected to be similar to the kinds of charges excluded from such non-GAAP financial measure in prior periods. The exclusion of these charges and costs in future periods could have a significant impact on our non-GAAP financial measures. |
T-13 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
(Unaudited)
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
||||||||
|
|
JULY 30, |
|
JULY 31, |
|
JULY 30, |
|
JULY 31, |
|
||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
||||
|
|
(in thousands) |
|
||||||||||
Net income |
|
$ |
122,275 |
|
$ |
226,746 |
|
$ |
322,986 |
|
$ |
357,402 |
|
Depreciation and amortization |
|
|
26,970 |
|
|
22,670 |
|
|
51,728 |
|
|
46,556 |
|
Interest expense—net |
|
|
26,264 |
|
|
13,581 |
|
|
47,119 |
|
|
26,889 |
|
Income tax expense (benefit) |
|
|
56,397 |
|
|
3,009 |
|
|
(107,029) |
|
|
44,733 |
|
EBITDA(1) |
|
|
231,906 |
|
|
266,006 |
|
|
314,804 |
|
|
475,580 |
|
Loss on extinguishment of debt(2) |
|
|
23,462 |
|
|
3,166 |
|
|
169,578 |
|
|
3,271 |
|
Non-cash compensation(3) |
|
|
10,736 |
|
|
10,124 |
|
|
23,538 |
|
|
25,431 |
|
Employer payroll taxes on option exercise(2) |
|
|
— |
|
|
— |
|
|
11,717 |
|
|
— |
|
Asset impairments(2) |
|
|
2,231 |
|
|
7,354 |
|
|
8,154 |
|
|
7,354 |
|
Professional fees(2) |
|
|
285 |
|
|
— |
|
|
7,469 |
|
|
— |
|
Share of equity method investments losses(2) |
|
|
2,821 |
|
|
2,486 |
|
|
4,196 |
|
|
4,581 |
|
Compensation settlements(2) |
|
|
3,483 |
|
|
— |
|
|
3,483 |
|
|
— |
|
Capitalized cloud computing amortization(4) |
|
|
1,699 |
|
|
785 |
|
|
3,053 |
|
|
1,462 |
|
Other expense—net(5) |
|
|
3,195 |
|
|
— |
|
|
2,852 |
|
|
— |
|
Recall accrual(2) |
|
|
— |
|
|
— |
|
|
560 |
|
|
500 |
|
Reorganizational related costs(2) |
|
|
— |
|
|
449 |
|
|
— |
|
|
449 |
|
Adjusted EBITDA(1) |
|
$ |
279,818 |
|
$ |
290,370 |
|
$ |
549,404 |
|
$ |
518,628 |
|
Net revenues |
|
$ |
991,620 |
|
$ |
988,859 |
|
$ |
1,948,912 |
|
$ |
1,849,651 |
|
EBITDA margin(6) |
|
|
23.4 |
% |
|
26.9 |
% |
|
16.2 |
% |
|
25.7 |
% |
Adjusted EBITDA margin(6) |
|
|
28.2 |
% |
|
29.4 |
% |
|
28.2 |
% |
|
28.0 |
% |
| (1) | EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We define EBITDA as consolidated net income before depreciation and amortization, interest expense—net and income tax expense (benefit). Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of non-cash compensation, as well as certain non-recurring and other items that we do not consider representative of our underlying operating performance. EBITDA and Adjusted EBITDA are included in this press release because our senior leadership team believes that these metrics provide meaningful supplemental information for investors regarding the performance of our business and facilitate a meaningful evaluation of operating results on a comparable basis with historical results. Our senior leadership team uses these non-GAAP financial measures in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. Our measures of EBITDA and Adjusted EBITDA are not necessarily comparable to other similarly titled captions for other companies due to different methods of calculation. |
| (2) | Refer to table titled “Reconciliation of GAAP Net Income to Adjusted Net Income” and the related footnotes for additional information. |
| (3) | Represents non-cash compensation related to equity awards granted to employees, including the non-cash compensation charge related to a fully vested option grant made to Mr. Friedman in October 2020. |
| (4) | Represents amortization associated with capitalized cloud computing costs. |
T-14 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
| (5) | The adjustments for the three and six months ended July 30, 2022 include losses of $1.7 million and $4.6 million, respectively, due to unfavorable exchange rate changes affecting foreign currency denominated transactions, primarily between the U.S. dollar as compared to Pound Sterling and Euro, as well as foreign exchange losses from the remeasurement of an intercompany loan with a U.K. subsidiary. Additionally, the adjustments for the three and six months ended July 30, 2022 include a loss on derivative instruments of $1.5 million and a net gain on derivative instruments of $1.7 million, respectively, resulting from the completion of certain transactions related to the 2023 Notes and 2024 Notes, including bond hedge and warrant terminations and convertible senior notes repurchases. |
| (6) | EBITDA margin is defined as EBITDA divided by net revenues. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenues. |
T-15 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
RECONCILIATION OF TRAILING TWELVE MONTHS NET INCOME
TO TRAILING TWELVE MONTHS EBITDA AND
TRAILING TWELVE MONTHS ADJUSTED EBITDA
(Unaudited)
|
|
TRAILING TWELVE MONTHS |
|
|
|
JULY 30, 2022 |
|
|
|
(in thousands) |
|
Net income |
|
$ |
654,130 |
Depreciation and amortization |
|
|
101,194 |
Interest expense—net |
|
|
85,177 |
Income tax benefit—net |
|
|
(18,204) |
EBITDA(1) |
|
|
822,297 |
Loss on extinguishment of debt(2) |
|
|
195,445 |
Non-cash compensation(3) |
|
|
46,585 |
Employer payroll taxes on option exercise(4) |
|
|
11,717 |
Asset impairments(5) |
|
|
10,430 |
Share of equity method investments losses(6) |
|
|
7,829 |
Professional fees(7) |
|
|
7,469 |
Other expense—net(8) |
|
|
5,630 |
Capitalized cloud computing amortization(9) |
|
|
5,156 |
Compensation settlements(10) |
|
|
3,483 |
Recall accrual(11) |
|
|
2,000 |
Adjusted EBITDA(1) |
|
$ |
1,118,041 |
| (1) | Refer to footnote (1) within table titled “Reconciliation of Net Income to EBITDA and Adjusted EBITDA.” |
| (2) | Represents a loss on extinguishment of debt related to convertible senior note transactions in the first and second quarters of fiscal 2022, as well as losses related to a portion of the 2023 Notes and 2024 Notes that were early converted at the option of the noteholders. |
| (4) | Represents employer payroll tax expense related to the option exercise by Mr. Friedman in the first quarter of fiscal 2022. |
| (5) | Represents asset impairment related to property and equipment of Galleries under construction and lease impairment due to the early exit of a leased facility. |
| (6) | Represents our proportionate share of the losses of our equity method investments. |
| (7) | Represents professional fees contingent upon the completion of certain transactions related to the 2023 Notes and 2024 Notes, including bond hedge and warrant terminations and convertible senior notes repurchases. |
| (8) | Includes exchange rate changes affecting foreign currency denominated transactions, as well as to foreign exchange losses from the remeasurement of an intercompany loan with a U.K. subsidiary. Additionally, includes net gains on derivative instruments resulting from the completion of certain transactions related to the 2023 Notes and 2024 Notes, including bond hedge and warrant terminations and convertible senior notes repurchases. |
| (9) | Represents amortization associated with capitalized cloud computing costs. |
| (10) | Represents compensation settlements related to the Rollover Units and Profit Interest Units in the Waterworks subsidiary. |
| (11) | Represents accruals associated with product recalls. |
T-16 |
SECOND QUARTER 2022 FINANCIAL RESULTS |
CALCULATION OF TOTAL DEBT, TOTAL NET DEBT
AND RATIO OF TOTAL NET DEBT TO
TRAILING TWELVE MONTHS ADJUSTED EBITDA
(Unaudited)
|
|
JULY 30, |
|
INTEREST |
|
|
|
2022 |
|
RATE(1) |
|
|
|
(dollars in thousands) |
|
|
|
Asset based credit facility |
|
$ |
— |
|
3.62% |
Term loan B(2) |
|
|
1,985,000 |
||