10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 26, 2023
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
|
||
(State or other jurisdiction of |
|
(I.R.S. Employer |
|
||
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class) |
(Trading symbol) |
(Name of each exchange on which registered) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
☒ |
|
Accelerated filer |
|
☐ |
|
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
|
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 19, 2023,
RH
INDEX TO FORM 10-Q
PART I
ITEM 1. FINANCIAL STATEMENTS
RH
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
APRIL 29, |
|
JANUARY 28, |
||
|
2023 |
2023 |
||||
(in thousands) |
||||||
ASSETS |
|
|
|
|
||
Cash and cash equivalents |
$ |
|
$ |
|
||
Restricted cash |
|
|
||||
Accounts receivable—net |
|
|
|
|
||
Merchandise inventories |
|
|
|
|
||
Prepaid expense and other current assets |
|
|
|
|
||
Total current assets |
|
|
|
|
||
Property and equipment—net |
|
|
|
|
||
Operating lease right-of-use assets |
|
|
||||
Goodwill |
|
|
|
|
||
Tradenames, trademarks and other intangible assets |
|
|
|
|
||
Deferred tax assets |
|
|
|
|
||
Equity method investments |
|
|
||||
Other non-current assets |
|
|
|
|
||
Total assets |
$ |
|
$ |
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
||
Accounts payable and accrued expenses |
$ |
|
$ |
|
||
Deferred revenue and customer deposits |
|
|
|
|||
Convertible senior notes due 2023 |
|
|
||||
Operating lease liabilities |
|
|
||||
Other current liabilities |
|
|
|
|
||
Total current liabilities |
|
|
|
|
||
Asset based credit facility |
|
— |
|
— |
||
Term loan B—net |
|
|
|
|
||
Term loan B-2—net |
|
|
|
|
||
Real estate loans |
|
|
||||
Convertible senior notes due 2024—net |
|
|
||||
Non-current operating lease liabilities |
|
|
|
|
||
Non-current finance lease liabilities |
|
|
||||
Deferred tax liabilities |
|
|
||||
Other non-current obligations |
|
|
|
|
||
Total liabilities |
|
|
|
|
||
Commitments and contingencies (Note 16) |
|
|
||||
Stockholders’ equity: |
|
|
|
|
||
Preferred stock—$ |
|
|||||
Common stock—$ |
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
||
Accumulated other comprehensive loss |
|
( |
|
( |
||
Retained earnings |
|
|
|
|
||
Total stockholders’ equity |
|
|
||||
Total liabilities and stockholders’ equity |
$ |
|
$ |
|
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
RH
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
THREE MONTHS ENDED |
|||||
|
APRIL 29, |
APRIL 30, |
||||
|
|
2023 |
|
2022 |
||
(in thousands, except share and per share amounts) |
||||||
Net revenues |
$ |
|
$ |
|
||
Cost of goods sold |
|
|
|
|
||
Gross profit |
|
|
|
|
||
Selling, general and administrative expenses |
|
|
|
|
||
Income from operations |
|
|
|
|
||
Other expenses |
||||||
Interest expense—net |
|
|
||||
Loss on extinguishment of debt |
|
— |
|
|||
Other income—net |
( |
( |
||||
Total other expenses |
|
|
|
|
||
Income before income taxes and equity method investments |
|
|
||||
Income tax expense (benefit) |
|
( |
||||
Income before equity method investments |
|
|
||||
Share of equity method investments loss |
|
|
||||
Net income |
$ |
|
$ |
|
||
Weighted-average shares used in computing basic net income per share |
|
|
||||
Basic net income per share |
$ |
|
$ |
|
||
Weighted-average shares used in computing diluted net income per share |
|
|
||||
Diluted net income per share |
$ |
|
$ |
|
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
PART I. FINANCIAL INFORMATION |
2023 FIRST QUARTER FORM 10-Q | 4 |
RH
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
THREE MONTHS ENDED |
|||||
|
APRIL 29, |
APRIL 30, |
||||
|
2023 |
|
2022 |
|||
(in thousands) |
||||||
Net income |
$ |
|
$ |
|
||
Net gains (losses) from foreign currency translation |
|
( |
||||
Comprehensive income |
$ |
|
$ |
|
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
PART I. FINANCIAL INFORMATION |
2023 FIRST QUARTER FORM 10-Q | 5 |
RH
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
THREE MONTHS ENDED |
||||||||||||||||||||||
COMMON STOCK |
TREASURY STOCK |
|||||||||||||||||||||
|
ACCUMULATED |
|
||||||||||||||||||||
|
ADDITIONAL |
|
OTHER |
|
TOTAL |
|||||||||||||||||
|
PAID-IN |
|
COMPREHENSIVE |
|
RETAINED |
|
|
STOCKHOLDERS' |
||||||||||||||
|
SHARES |
|
AMOUNT |
|
CAPITAL |
|
LOSS |
|
EARNINGS |
|
SHARES |
|
AMOUNT |
|
EQUITY |
|||||||
(in thousands, except share amounts) |
||||||||||||||||||||||
Balances—January 28, 2023 |
|
$ |
|
|
$ |
|
|
$ |
( |
|
$ |
|
|
— |
|
$ |
— |
|
$ |
|
||
Stock-based compensation |
— |
— |
|
— |
— |
— |
— |
|
||||||||||||||
Vested and delivered restricted stock units |
|
— |
( |
— |
— |
— |
— |
( |
||||||||||||||
Exercise of stock options |
|
— |
|
— |
— |
— |
— |
|
||||||||||||||
Settlement of convertible senior notes |
|
— |
— |
— |
— |
— |
— |
— |
||||||||||||||
Net income |
— |
— |
— |
— |
|
— |
— |
|
||||||||||||||
Net gains from foreign currency translation |
— |
— |
— |
|
— |
— |
— |
|
||||||||||||||
Balances—April 29, 2023 |
|
|
$ |
|
|
$ |
|
|
$ |
( |
|
$ |
|
|
— |
|
$ |
— |
|
$ |
|
|
Balances—January 29, 2022 |
|
$ |
|
|
$ |
|
|
$ |
( |
|
$ |
|
|
— |
|
$ |
— |
|
$ |
|
||
Stock-based compensation |
— |
— |
|
— |
— |
— |
— |
|
||||||||||||||
Vested and delivered restricted stock units |
|
— |
( |
— |
— |
— |
— |
( |
||||||||||||||
Exercise of stock options |
|
— |
|
— |
— |
— |
— |
|
||||||||||||||
Exercise of call option under bond hedge upon settlement of convertible senior notes |
( |
— |
|
— |
— |
|
( |
— |
||||||||||||||
Settlement of convertible senior notes |
|
— |
( |
— |
— |
( |
|
— |
||||||||||||||
Termination of common stock warrants |
— |
— |
( |
— |
— |
— |
— |
( |
||||||||||||||
Termination of convertible note hedge |
— |
— |
|
— |
— |
— |
— |
|
||||||||||||||
Impact of ASU 2020-06 adoption |
— |
— |
( |
— |
|
— |
— |
( |
||||||||||||||
Net income |
— |
— |
— |
— |
|
— |
— |
|
||||||||||||||
Net losses from foreign currency translation |
— |
— |
— |
( |
— |
— |
— |
( |
||||||||||||||
Balances—April 30, 2022 |
|
|
$ |
|
|
$ |
|
|
$ |
( |
|
$ |
|
|
— |
|
$ |
— |
|
$ |
|
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
PART I. FINANCIAL INFORMATION |
2023 FIRST QUARTER FORM 10-Q | 6 |
RH
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
THREE MONTHS ENDED |
|||||
---|---|---|---|---|---|---|
|
APRIL 29, |
APRIL 30, |
||||
|
2023 |
|
2022 |
|||
(in thousands) |
||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||
Net income |
$ |
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
||||
Depreciation and amortization |
|
|
|
|||
Non-cash operating lease cost |
|
|
||||
Asset impairments |
|
|
||||
Stock-based compensation expense |
|
|
|
|||
Non-cash finance lease interest expense |
|
|
||||
Product recalls |
— |
|
||||
Deferred income taxes |
|
|
||||
Loss on extinguishment of debt |
— |
|
||||
Gain on derivative instruments—net |
— |
( |
||||
Share of equity method investments loss |
|
|
||||
Other non-cash items |
|
|
|
|||
Change in assets and liabilities: |
|
|||||
Accounts receivable |
|
( |
( |
|||
Merchandise inventories |
|
|
( |
|||
Prepaid expense and other assets |
|
( |
( |
|||
Landlord assets under construction—net of tenant allowances |
|
( |
( |
|||
Accounts payable and accrued expenses |
|
( |
( |
|||
Deferred revenue and customer deposits |
|
|
|
|||
Other current liabilities |
|
( |
( |
|||
Current and non-current operating lease liabilities |
|
( |
( |
|||
Other non-current obligations |
|
( |
( |
|||
Net cash provided by operating activities |
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
||||
Capital expenditures |
|
( |
( |
|||
Equity method investments |
|
( |
( |
|||
Net cash used in investing activities |
|
( |
|
( |
|
THREE MONTHS ENDED |
|||||
---|---|---|---|---|---|---|
|
APRIL 29, |
APRIL 30, |
||||
|
2023 |
|
2022 |
|||
(in thousands) |
||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
||
Repayments under term loans |
( |
( |
||||
Repayments under real estate loans |
( |
— |
||||
Repayments under promissory and equipment security notes |
|
( |
( |
|||
Repayments of convertible senior notes |
( |
( |
||||
Principal payments under finance lease agreements—net of tenant allowances |
( |
( |
||||
Proceeds from termination of convertible senior note hedges |
— |
|
||||
Payments for termination of common stock warrants |
— |
( |
||||
Proceeds from exercise of stock options |
|
|
|
|||
Tax withholdings related to issuance of stock-based awards |
( |
( |
||||
Net cash used in financing activities |
|
( |
|
( |
||
Effects of foreign currency exchange rate translation |
|
( |
( |
|||
Net increase in cash and cash equivalents, restricted cash and restricted cash equivalents |
|
|
|
|
||
Cash and cash equivalents, restricted cash and restricted cash equivalents |
|
|
|
|||
Beginning of period—cash and cash equivalents |
|
|
|
|
||
Beginning of period—restricted cash |
|
|
|
— |
||
Beginning of period—restricted cash equivalents (acquisition related escrow deposits) |
|
— |
|
|||
Beginning of period—cash and cash equivalents, restricted cash and restricted cash equivalents |
$ |
|
$ |
|
||
End of period—cash and cash equivalents |
|
|
|
|
||
End of period—restricted cash |
|
|
|
— |
||
End of period—restricted cash equivalents (acquisition related escrow deposits) |
|
— |
|
|
||
End of period—cash and cash equivalents, restricted cash and restricted cash equivalents |
$ |
|
$ |
|
||
Non-cash transactions: |
|
|
|
|||
Property and equipment additions in accounts payable and accrued expenses at period-end |
$ |
|
$ |
|
||
Landlord asset additions in accounts payable and accrued expenses at period-end |
|
|
||||
Reclassification of assets from landlord assets under construction to finance lease right-of-use assets |
— |
|
||||
Extinguishment of convertible senior notes related to repurchase obligation |
— |
( |
||||
Financing liability and embedded derivative arising from convertible senior notes repurchase |
— |
|
||||
Shares issued on settlement of convertible senior notes |
— |
( |
||||
Shares received on exercise of call option under bond hedge upon settlement of convertible senior notes |
— |
|
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
PART I. FINANCIAL INFORMATION |
2023 FIRST QUARTER FORM 10-Q | 8 |
RH
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—THE COMPANY
Nature of Business
RH, a Delaware corporation, together with its subsidiaries (collectively, “we,” “us,” “our” or the “Company”), is a leading retailer and luxury lifestyle brand operating primarily in the home furnishings market. Our curated and fully integrated assortments are presented consistently across our sales channels, including our retail locations, websites and Source Books. We offer merchandise assortments across a number of categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, and baby, child and teen furnishings.
As of April 29, 2023, we operated a total of
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared from our records and, in our senior leadership team’s opinion, include all adjustments, consisting of normal recurring adjustments, necessary to fairly state our financial position as of April 29, 2023, and the results of operations for the three months ended April 29, 2023 and April 30, 2022. Our current fiscal year, which consists of 53 weeks, ends on February 3, 2024 (“fiscal 2023”).
The condensed consolidated financial statements include our accounts and those of our wholly-owned subsidiaries, as well as the financial information of variable interest entities (“VIEs”) where we represent the primary beneficiary and have the power to direct the activities that most significantly impact the entity’s performance. Accordingly, all intercompany balances and transactions have been eliminated through the consolidation process.
Certain information and disclosures normally included in the notes to annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted for purposes of these interim condensed consolidated financial statements.
The preparation of our condensed consolidated financial statements, in conformity with GAAP, requires our senior leadership team to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material to the condensed consolidated financial statements.
We have assessed various accounting estimates and other matters, including those that require consideration of forecasted financial information, using information that is reasonably available to us at this time. The accounting estimates and other matters we have assessed include, but were not limited to, sales return reserve, inventory reserve, allowance for doubtful accounts, goodwill, and intangible and other long-lived assets. Our current assessment of these estimates is included in our condensed consolidated financial statements as of and for the three months ended April 29, 2023. As additional information becomes available to us, our future assessment of these estimates, as well as other factors, could change and the results of any such change could materially and adversely impact our condensed consolidated financial statements in future reporting periods.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023 (the “2022 Form 10-K”).
The results of operations for the three months ended April 29, 2023, presented herein, are not necessarily indicative of the results to be expected for the full fiscal year. Our business, like the businesses of retailers generally, is subject to uncertainty surrounding the financial impact of the factors as discussed in Business Conditions below.
PART I. FINANCIAL INFORMATION |
2023 FIRST QUARTER FORM 10-Q | 9 |
Business Conditions
There are a number of macroeconomic factors and uncertainties affecting the overall business climate as well as our business, including increased inflation, rising interest and mortgage rates, and unpredictability in the global financial markets related to the foregoing as well as, among other things, the war in Ukraine and recent failures of several financial institutions. We experienced increased demand for our products during the pandemic and there have been significant shifts in consumer consumption patterns with the easing of the pandemic including increases in travel and services rather than spending on home furnishings. These and other macroeconomic factors may have a number of adverse effects on macroeconomic conditions and markets in which we operate, including the housing market, with the potential for an economic recession and a sustained downturn in the housing market. Factors such as a slowdown in the housing market or negative trends in stock market prices could have an adverse impact on demand for our products. We believe that these macroeconomic and other factors have contributed to the slowdown in demand that we have experienced in our business over the last several fiscal quarters.
Our decisions regarding the sources and uses of capital will continue to reflect and adapt to changes in market conditions and our business, including further developments with respect to macroeconomic factors.
For more information, refer to the section entitled “Risk Factors” in our 2022 Form 10-K.
NOTE 2—RECENTLY ISSUED ACCOUNTING STANDARDS
New Accounting Standards or Updates Adopted
Disclosure of Supplier Finance Program Obligations
In September 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-04—Disclosure of Supplier Finance Program Obligations (“ASU 2022-04”). ASU 2022-04 requires entities to disclose a program’s nature, activity during the period, changes from period to period and potential magnitude. Under ASU 2022-04, the buyer in a supplier finance program is required to disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented. With the exception of the disclosure of rollforward information, the guidance is effective for fiscal years beginning after December 15, 2022 and is required to be applied retrospectively to all periods for which a balance sheet is presented. The rollforward requirement is effective for fiscal years beginning after December 15, 2023 and is required to be applied prospectively. We adopted ASU 2022-04 in the first quarter of fiscal 2023.
Supplier Finance Program
We facilitate a voluntary supply chain financing program (the “Financing Program”) with a third-party financial institution (the “Bank”) to provide participating suppliers with the opportunity to receive early payment on invoices, net of a discount charged to the supplier by the Bank. We are not a party to the supplier agreements with the Bank, and the terms of our payment obligations to suppliers are not impacted by a supplier’s participation in the Financing Program. Our responsibility is limited to making payments to the Bank on the terms originally negotiated with our suppliers, which are typically either 30 days or 60 days. There are
The Financing Program is not indicative of a borrowing arrangement and the liabilities under the Financing Program are included in accounts payable and accrued expenses on the condensed consolidated balance sheets and associated payments are included within operating activities on the condensed consolidated statements of cash flows. As of April 29, 2023 and January 28, 2023, supplier invoices that have been confirmed as valid under the Financing Program included in accounts payable and accrued expenses were $
PART I. FINANCIAL INFORMATION |
2023 FIRST QUARTER FORM 10-Q | 10 |
NOTE 3—PREPAID EXPENSE AND OTHER ASSETS
Prepaid expense and other current assets consist of the following:
|
|
APRIL 29, |
|
JANUARY 28, |
||
|
2023 |
2023 |
||||
(in thousands) |
||||||
Prepaid expenses |
$ |
|
$ |
|
||
Capitalized catalog costs |
|
|
||||
Vendor deposits |
|
|
||||
Federal and state tax receivable |
|
|
||||
Value added tax (VAT) receivable |
|
|
||||
Tenant allowance receivable |
|
|
||||
Right of return asset for merchandise |
|
|
|
|
||
Promissory notes receivable, including interest(1) |
|
|
|
|
||
Interest income receivable |
|
|
||||
Other current assets |
|
|
||||
Total prepaid expense and other current assets |
$ |
|
$ |
|
(1) | Represents promissory notes, including principal and accrued interest, due from an affiliate of the managing member of the Aspen LLCs (refer to Note 5—Variable Interest Entities). |
Other non-current assets consist of the following:
|
|
APRIL 29, |
|
JANUARY 28, |
||
|
2023 |
2023 |
||||
(in thousands) |
||||||
Landlord assets under construction—net of tenant allowances |
$ |
|
$ |
|
||
Initial direct costs prior to lease commencement |
|
|
||||
Capitalized cloud computing costs—net(1) |
|
|
||||
Vendor deposits—non-current |
|
|
||||
Other deposits |
|
|
|
|
||
Deferred financing fees |
|
|
|
|
||
Other non-current assets |
|
|
|
|
||
Total other non-current assets |
$ |
|
$ |
|
(1) |
Presented net of accumulated amortization of $ |
PART I. FINANCIAL INFORMATION |
2023 FIRST QUARTER FORM 10-Q | 11 |
NOTE 4—GOODWILL, TRADENAMES, TRADEMARKS AND OTHER INTANGIBLE ASSETS
The following sets forth the goodwill, tradenames, trademarks and other intangible assets activity for the RH Segment and Waterworks (refer to Note 17—Segment Reporting):
|
|
RH SEGMENT |
|
WATERWORKS |
||||||||
|
TRADENAMES, |
TRADENAMES, |
||||||||||
TRADEMARKS AND |
TRADEMARKS AND |
|||||||||||
OTHER INTANGIBLE |
OTHER INTANGIBLE |
|||||||||||
|
GOODWILL |
ASSETS |
GOODWILL(1) |
ASSETS(2) |
||||||||
(in thousands) |
||||||||||||
January 28, 2023 |
$ |
|
$ |
|
$ |
— |
$ |
|
||||
Additions |
|
— |
|
|
|
— |
|
— |
||||
Foreign currency translation |
( |
— |
— |
— |
||||||||
April 29, 2023 |
$ |
|
$ |
|
$ |
— |
$ |
|
(1) |
Waterworks reporting unit goodwill of $ |
(2) |
Presented net of an impairment charge of $ |
There are no goodwill, tradenames, trademarks and other intangible assets for the Real Estate segment.
NOTE 5—VARIABLE INTEREST ENTITIES
Consolidated Variable Interest Entities and Noncontrolling Interests
In fiscal 2022, we formed
The Member LLCs are qualitatively determined to be VIEs due to their having insufficient equity investment at risk to finance their activities without additional subordinated financial support. Upon the formation of each Member LLC we determined that the power to direct the most significant activities of each Member LLC is either controlled by us or shared between the members of the Member LLCs. In the instances where there is shared power among related parties as defined in the consolidation accounting guidance, we evaluated the related-party tiebreaker guidance and determined that we are most closely associated with each Member LLC. Accordingly, we are the primary beneficiary of the Member LLCs and we consolidate the results of operations, financial condition and cash flows of the Member LLCs in our consolidated financial statements.
We measure the noncontrolling interests in the consolidated variable interest entities using the distribution provisions set out in the operating agreements of each Member LLC. As of April 29, 2023 and January 28, 2023, the noncontrolling interest holders had no claim to the net assets of each Member LLC based upon such distribution provisions. Accordingly, we did not recognize any noncontrolling interests as of April 29, 2023 and January 28, 2023.
PART I. FINANCIAL INFORMATION |
2023 FIRST QUARTER FORM 10-Q | 12 |
The carrying amounts and classification of the VIEs’ assets and liabilities included in the condensed consolidated balance sheets were as follows:
|
|
APRIL 29, |
|
JANUARY 28, |
||
|
2023 |
2023 |
||||
(in thousands) |
||||||
ASSETS |
|
|
|
|
||
Cash and cash equivalents |
$ |
|
$ |
|
||
Restricted cash(1) |
|
|
||||
Prepaid expense and other current assets |
|
|
|
|
||
Total current assets |
|
|
|
|
||
Property and equipment—net(2) |
|
|
|
|
||
Other non-current assets |
|
|
|
|||
Total assets |
$ |
|
$ |
|
||
LIABILITIES |
|
|
|
|
||
Accounts payable and accrued expenses |
$ |
|
$ |
|
||
Real estate loans(3) |
|
|
||||
Other non-current obligations |
|
|
|
|||
Total liabilities |
$ |
|
$ |
|
(1) | Restricted cash deposits are held in escrow for one Member LLC and represent a portion of the proceeds from the issuance of the Promissory Note (defined below) that are required to be used for tenant allowances specified in a lease agreement between us and the Member LLC. |
(2) |
Includes $ |
(3) | Real estate loans are secured by the assets of each respective Member LLC and the associated creditors do not have recourse against RH’s general assets. |
On August 3, 2022, a Member LLC as the borrower executed a Secured Promissory Note (the “Secured Promissory Note”) with a third-party in an aggregate principal amount equal to $
On September 9, 2022, a Member LLC as the borrower executed a Promissory Note (the “Promissory Note”) with a third-party bank in an aggregate principal amount equal to $
Equity Method Investments
Equity method investments represent our membership interests in
PART I. FINANCIAL INFORMATION |
2023 FIRST QUARTER FORM 10-Q | 13 |
We have previously made contractually required contributions to the Aspen LLCs in an aggregate amount of $
During the three months ended April 29, 2023 and April 30, 2022, we did
NOTE 6—ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts payable and accrued expenses consist of the following:
|
|
APRIL 29, |
|
JANUARY 28, |
||
|
2023 |
2023 |
||||
(in thousands) |
||||||
Accounts payable |
$ |
|
$ |
|
||
Accrued compensation |
|
|
|
|
||
Accrued sales and use tax(1) |
|
|
|
|
||
Accrued occupancy |
|
|
|
|
||
Accrued freight and duty |
|
|
|
|
||
Accrued legal reserves |
|
|
||||
Accrued professional fees |
|
|
|
|
||
Accrued catalog costs(1) |
|
|
|
|
||
Accrued interest |
|
|
||||
Other accrued expenses |
|
|
|
|
||
Total accounts payable and accrued expenses |
$ |
|
$ |
|
(1) | Prior year amounts have been adjusted to conform to the current period presentation. |
Reorganization
As reported in the 2022 Form 10-K, we implemented a restructuring on March 24, 2023 that includes workforce and expense reductions in order to improve and simplify our organizational structure, streamline certain aspects of our business operations and better position us for further growth. The workforce reduction associated with the initiative included the elimination of numerous leadership and other positions throughout the organization, which affected approximately
PART I. FINANCIAL INFORMATION |
2023 FIRST QUARTER FORM 10-Q | 14 |
Other current liabilities consist of the following:
|
|
APRIL 29, |
|
JANUARY 28, |
||
|
2023 |
2023 |
||||
(in thousands) |
||||||
Unredeemed gift card and merchandise credit liability |
$ |
|
$ |
|
||
Current portion of term loans |
|
|
||||
Allowance for sales returns |
|
|
||||
Finance lease liabilities |
|
|
||||
Foreign tax payable |
|
|
||||
Other current liabilities |
|
|
|
|
||
Total other current liabilities |
$ |
|
$ |
|
Contract Liabilities
We defer revenue associated with merchandise delivered via the home-delivery channel. We expect that substantially all of the deferred revenue and customer deposits as of April 29, 2023 will be recognized within the next six months as the performance obligations are satisfied. In addition, we defer revenue when cash payments are received in advance of performance for unsatisfied obligations related to our gift cards. During the three months ended April 29, 2023 and April 30, 2022, we recognized $
NOTE 7—OTHER NON-CURRENT OBLIGATIONS
Other non-current obligations consist of the following:
|
|
APRIL 29, |
|
JANUARY 28, |
||
|
2023 |
2023 |
||||
(in thousands) |
||||||
Unrecognized tax benefits |
$ |
|
$ |
|
||
Other non-current obligations |
|
|
|
|
||
Total other non-current obligations |
$ |
|
$ |
|
.
PART I. FINANCIAL INFORMATION |
2023 FIRST QUARTER FORM 10-Q | 15 |
NOTE 8—LEASES
|
THREE MONTHS ENDED |
||||||
APRIL 29, |
|
APRIL 30, |
|||||
|
|
|
2023 |
|
2022 |
||
(in thousands) |
|||||||
Operating lease cost(1) |
$ |
|
$ |
|
|||
Finance lease costs |
|||||||
Amortization of leased assets(1) |
|
|
|||||
Interest on lease liabilities(2) |
|
|
|||||
Variable lease costs(3) |
|
|
|||||
Sublease income(4) |