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Restoration Hardware Holdings, Inc. Reports Record First Quarter Fiscal 2013 Financial Results



  Restoration Hardware Holdings, Inc. Reports Record First Quarter Fiscal 2013
  Financial Results

  Q1 Net Revenues Increased 38%; Q1 Comparable Store Sales Increased 41%; Q1
                        Adjusted Diluted EPS of $0.06

 Company Provides Q2 Guidance of Revenue Growth Between 28% and 30%, Adjusted
                        Diluted EPS of $0.40 to $0.42

 Company Increases Fiscal 2013 Guidance to Revenue Growth Between 23% and 27%
  from Previous Range of 19% to 22%, Adjusted Diluted EPS of $1.41 to $1.47
                  versus Previous Guidance of $1.29 to $1.37

Business Wire

CORTE MADERA, Calif. -- June 13, 2013

Restoration Hardware Holdings, Inc. (NYSE: RH) today announced financial
results for the first quarter ended May 4, 2013.

First Quarter Highlights

  * Net revenues increased 38% on top of an 18% increase for the same period
    last year

       * Comparable store sales increased 41% on top of 26% growth for the
         same period last year
       * Direct revenues increased 38% on top of a 20% increase for the same
         period last year

  * Adjusted operating income increased to $4.6 million from an operating loss
    of $0.6 million for the same period last year; GAAP operating income of
    $0.5 million from an operating loss of $2.1 million for the same period
    last year
  * Adjusted net income increased to $2.3 million from a net loss of $1.3
    million for the same period last year; GAAP net loss of $0.2 million from
    a net loss of $3.7 million for the same period last year
  * Adjusted diluted earnings per share reached $0.06; GAAP diluted earnings
    per share of $0.00

Carlos Alberini, Chief Executive Officer, said, “We are extremely pleased with
our first quarter performance and financial results. During the period, we
delivered an increase in net revenues of 38%, comp store sales growth of 41%,
and a significant improvement in profitability as we continued to invest in
our infrastructure and new businesses to support our growth.”

Mr. Alberini commented, “We are receiving overwhelming support and interest
from the landlord community, with offers for leases with more favorable terms
that are typically available only to anchor tenants in several of the most
prestigious shopping centers in North America. We believe that over time,
these new deals will enable us to deliver higher sales and increased earnings,
reduce our capital investment, and achieve higher ROIC. We now see
opportunities to have Full Line Design Galleries in more than the
approximately 50 markets we previously identified and are currently in lease
discussions for over 30 locations in North America, including New York,
Chicago, Miami, Denver, Nashville, New Orleans and San Diego, among many
others.”

Gary Friedman, Chairman Emeritus, Creator and Curator commented, "Our
continued industry leading performance is a reflection of our demonstrated
ability to innovate, curate and integrate new products, businesses and
experiences. Our Spring Collection, inclusive of our new catalogs, RH
Tableware and RH Objects of Curiosity, is performing ahead of our plans. This
Fall, we plan to launch two new catalogs, RH Leather and RH Rugs. The new
catalogs will include expanded and dominant collections presented in a
dramatic and innovative context. As previously announced, this Fall we will
also launch RH Contemporary Art, post the Rain Room exhibition at the Museum
of Modern Art in New York, with our inaugural exhibition ‘Autonomy’ with
existing and newly commissioned artworks by the Rain Room creators, rAndom
International, in our new art gallery in the Meatpacking-Chelsea Arts
District. We will also launch our immersive new online Contemporary Art
platform, as well as an Art Journal."

Mr. Friedman continued, "Also announced today, is our intent to launch two new
businesses, RH Kitchen and Tableware and RH Antiquities. RH Kitchen and
Tableware provides another logical opportunity for growth as we expand beyond
our initial tableware offering and create a curated collection of kitchen
furniture, appliances, lighting, cookware, tools, and food. RH Antiquities
will provide an opportunity to fill current customer demand with a curated
collection of antiques as we enter this $25 billion highly fragmented market.
These new businesses will further enhance our brand position and provide
meaningful long-term growth opportunities."

First Quarter Fiscal 2013 Financial Results

Revenue - Net revenues for the first quarter of fiscal 2013 increased 38% to
$301.3 million from $217.9 million for the first quarter of fiscal 2012. This
is on top of an 18% increase in net revenues for the first quarter of fiscal
2012.

  * Comparable store sales increased 41% for the first quarter of fiscal 2013.
    This growth compares to an increase of 26% in comparable store sales for
    the first quarter of fiscal 2012.
  * As of May 4, 2013, the Company operated a total of 70 retail stores,
    consisting of 62 Galleries, 5 Full Line Design Galleries and 3 Baby &
    Child Galleries, as well as 14 outlet stores throughout the United States
    and Canada. This compares to a total of 74 retail stores, consisting of 70
    Galleries, 2 Full Line Design Galleries and 2 Baby & Child Galleries, as
    well as 10 outlet stores open at the end of the first quarter of fiscal
    2012.
  * Direct revenues increased 38% to $142.0 million for the first quarter of
    fiscal 2013. This growth is on top of the 20% increase in direct revenues
    for the first quarter of fiscal 2012.

Operating Income (Loss)* - Adjusted operating income for the first quarter of
fiscal 2013 increased to $4.6 million compared to an operating loss of $0.6
million for the first quarter of fiscal 2012. Including the impact of variable
non-cash stock-based compensation charges and costs related to the Company’s
follow-on offering, operating income was $0.5 million compared to an operating
loss of $2.1 million for the prior year fiscal quarter.

EBITDA* - Adjusted EBITDA for the first quarter of fiscal 2013 increased 82%
to $11.2 million compared to adjusted EBITDA of $6.2 million for the first
quarter of fiscal 2012. Including the impact of variable non-cash stock-based
compensation charges and costs related to the Company’s follow-on offering,
EBITDA for the quarter was $7.1 million compared to EBITDA of $4.3 million for
the prior year fiscal quarter.

Net Income (Loss)* - Adjusted net income increased to $2.3 million for the
first quarter of fiscal 2013 from an adjusted net loss of $1.3 million for the
first quarter of fiscal 2012. GAAP net loss during the first quarter 2013 was
$0.2 million compared to a GAAP net loss of $3.7 million for the first quarter
of fiscal 2012.

Earnings Per Share* - Adjusted diluted EPS increased to $0.06 for the first
quarter of fiscal 2013 from a loss of $0.04 for the first quarter of fiscal
2012. GAAP diluted EPS during the first quarter of fiscal 2013 was $0.00.

Outlook

The Company is providing the following guidance for the second quarter of
fiscal 2013:

  * Net revenues in the range of $375 million to $380 million
  * Adjusted net income in the range of $15.7 million to $16.5 million
  * Adjusted diluted EPS in the range of $0.40 to $0.42

The Company is increasing its guidance for the fiscal year ending February 1,
2014 as follows:

  * Net revenues in the range of $1.47 billion to $1.51 billion
  * Adjusted net income in the range of $55.8 million to $58.2 million
  * Adjusted diluted EPS in the range of $1.41 to $1.47

The Company’s adjusted net income and adjusted diluted earnings per share
guidance does not include (i) non-cash stock-based compensation charges, which
for the second quarter are estimated to be $26.1 million or (ii) follow-on
offering distribution costs relating to our common stock. The Company’s fiscal
year 2013 will include 52 weeks compared to fiscal year 2012 which included 53
weeks.

Conference Call and Webcast Information

Restoration Hardware Holdings, Inc. will host a conference call at 2:00 p.m.
PT (5:00 p.m. ET) today to discuss the first quarter results. Interested
parties may access the call by dialing (866) 510-0707 (United States/Canada)
or (617) 597-5376 (International), passcode 49317127. A live broadcast of
Restoration Hardware’s quarterly conference call will also be available online
at the Company's website www.restorationhardware.com under Investor Relations.
A replay of the conference call will be available through June 27, 2013 by
dialing (888) 286-8010 or (617) 801-6888 and entering passcode 29480670 as
well as on the Company’s investor relations website.

About Restoration Hardware Holdings, Inc.

RH (Restoration Hardware Holdings, Inc. - NYSE:RH) is a curator of design,
taste and style in the luxury lifestyle market. The Company offers collections
through its retail galleries, source books, and online at RH.com.

*Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and
presented in accordance with Generally Accepted Accounting Principles (GAAP),
the Company uses the following non-GAAP financial measures: adjusted operating
income, EBITDA, adjusted EBITDA, adjusted net income, pro forma EPS and
adjusted diluted EPS (collectively the “non-GAAP financial measures”). The
presentation of this financial information is not intended to be considered in
isolation or as a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP. The Company uses these
non-GAAP financial measures for financial and operational decision making and
as a means to evaluate period-to-period comparisons. The Company believes that
they provide useful information about operating results, enhance the overall
understanding of past financial performance and future prospects, and allow
for greater transparency with respect to key metrics used by management in its
financial and operational decision making. The non-GAAP financial measures
used by the Company in this press release may be different from the methods
used by other companies.

For more information on the non-GAAP financial measures, please see the
Reconciliation of GAAP to non-GAAP Financial Measures tables in this press
release. These accompanying tables have more details on the GAAP financial
measures that are most directly comparable to non-GAAP financial measures and
the related reconciliations between these financial measures. With respect to
the Company’s adjusted net income and adjusted diluted EPA guidance for the
second fiscal quarter and the full year of fiscal 2013, the Company is not
able to provide a reconciliation of these non-GAAP financial measures to GAAP
without unreasonable effort as our estimated results are preliminary and may
change as we complete the quarter close process and management’s review of our
financial statements.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the
federal securities laws including statements related to the expected benefits
to our sales, earnings, capital investment amounts and ROIC of anticipated new
tenant deals with landlords, potential new markets for our stores, the
anticipated timing of the launch of RH Leather and RH Rugs, the anticipating
timing of the inaugural exhibition for RH Contemporary Art and the launch of
our new online Contemporary Art platform, our intention to launch two new
businesses, RH Kitchen and RH Antiquities, and the expected benefits to the
Company of such businesses, and the Company’s future financial guidance,
including for the second fiscal quarter of 2013 and the fiscal year ending
February 1, 2014. You can identify forward-looking statements by the fact that
they do not relate strictly to historical or current facts. These statements
may include words such as “anticipate,” “estimate,” “expect,” “project,”
“plan,” “intend,” “believe,” “may,” “will,” “should,” “likely” and other words
and terms of similar meaning in connection with any discussion of the timing
or nature of future events. We cannot assure you that future developments
affecting us will be those that we have anticipated. Important risks and
uncertainties that could cause actual results to differ materially from our
expectations include, among others, recent changes in general economic
conditions and the impact on consumer confidence and consumer spending,
changes in customer demand for our products, our ability to anticipate
consumer preferences and buying trends, risks related to the number of new
business initiatives we are undertaking, risks in the implementation or our
real estate portfolio transformation, delays in store openings, as well as
those risks and uncertainties disclosed under the sections entitled “Risk
Factors” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in Restoration Hardware Holdings’ Form 10-K filed with
the Securities and Exchange Commission on April 29, 2013 and available on our
investor relations website at ir.restorationhardware.com and on the SEC
website at www.sec.gov. Any forward-looking statement made by us in this press
release speaks only as of the date on which we make it. We undertake no
obligation to publicly update any forward-looking statement, whether as a
result of new information, future developments or otherwise, except as may be
required by any applicable securities laws.

                     RESTORATION HARDWARE HOLDINGS, INC.
                 FINANCIAL STATEMENTS AND RELATED INFORMATION

                              TABLE OF CONTENTS

Page 6. Condensed Consolidated Statements of Operations

Page 7. Condensed Consolidated Balance Sheets

Page 8. Condensed Consolidated Statements of Cash Flows

Page 9. Operating Metrics and Other Data

Page 10. Reconciliation of Adjusted Income Statement Items

Page 11. Reconciliation of Net Loss to Operating Income (Loss) and Adjusted
Operating Income (Loss)

Page 12. Reconciliation of Net Loss to EBITDA and Adjusted EBITDA

Page 13. Reconciliation of GAAP Net Loss to Adjusted Net Income (Loss)

Page 14. Reconciliation of Net Loss Per Share to Adjusted Net Income (Loss)
Per Share

 
RESTORATION HARDWARE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
                                                                     
                         Three Months Ended
                         May 4,           % of Net   April 28,        % of Net
                         2013             Revenues   2012             Revenues
Net revenues             $ 301,337        100.0  %   $ 217,914        100.0  %
Cost of goods sold         199,460        66.2   %     142,646        65.5   %
Gross profit               101,877        33.8   %     75,268         34.5   %
Selling, general and
administrative             101,366        33.6   %     77,365         35.5   %
expenses
Income (loss) from         511            0.2    %     (2,097     )   -1.0   %
operations
Interest expense           (840       )   -0.3   %     (1,575     )   -0.7   %
Loss before income         (329       )   -0.1   %     (3,672     )   -1.7   %
taxes
Income tax expense         (168       )   -0.1   %     56             —      %
(benefit)
Net loss                 $ (161       )   —      %   $ (3,728     )   -1.7   %
                                                                       
Weighted-average
shares used in
computing basic and        38,076,026                  1,000
diluted net loss per
share
                                                                       
Basic and diluted net    $ —                         $ (3,728     )
loss per share
                                                                       
Pro forma
weighted-average
shares used in                                         36,971,500
computing pro forma
basic and diluted net
loss per share ^[a]
Pro forma basic and
diluted net loss per                                 $ (0.10      )
share

[a] On a pro forma basis, basic and diluted shares outstanding for the three
months ended April 28, 2012 include (1) the impact of the Company’s
reorganization, as further described in the Company’s final prospectus filed
with the Securities and Exchange Commission on November 5, 2012 (the
“Reorganization”), as well as (2) the 4,782,609 shares of common stock that
the Company issued and sold on November 7, 2012 in its initial public
offering, as if such events had been completed as of the beginning of the
period and the common stock resulting therefrom was outstanding for the
period.

                         
RESTORATION HARDWARE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                                                            
                                                              
                               May 4,         February 2,        April 28,    
                          2013               2013            2012
                                                              
ASSETS
Cash and cash             $     9,669        $   8,354       $     10,205
equivalents
Merchandise inventories         365,716          353,329           269,995
Other current assets            176,053          131,075           87,577
Total current assets            551,438          492,758           367,777
Property and                    123,091          111,406           85,927
equipment—net
Goodwill and other              172,125          172,724           174,506
intangibles
Other assets                    12,968           12,725            4,849
Total assets              $     859,622      $   789,613     $     633,059
                                                              
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Accounts payable and      $     179,420      $   145,353     $     128,447
accrued expenses
Other current                   75,761           74,071            61,360
liabilities
Total current                   255,181          219,424           189,807
liabilities
Revolving line of               113,994          82,501            140,263
credit and term loan
Other long term                 35,397           36,077            55,825
liabilities
Total liabilities               404,572          338,002           385,895
                                                              
Stockholders’ equity            455,050          451,611           247,164
Total liabilities and     $     859,622      $   789,613     $     633,059
stockholders’ equity
                                                              

RESTORATION HARDWARE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                                                                
                                                  Three Months Ended
                                                     May 4,        April 28,  
                                                  2013           2012
                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                          $  (161    )   $  (3,728   )
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
         Depreciation and amortization               6,630          6,424
         Stock-based compensation expense            3,631          387
         Other non-cash items                        168            147
Change in assets and liabilities:
         Merchandise inventories                     (12,437 )      (24,039  )
         Accounts payable, accrued expenses,         (17,454 )      11,842    
         and other
                     Net cash used in operating      (19,623 )      (8,967   )
                     activities
                                                                  
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures                                 (9,737  )      (6,193   )
                     Net cash used in investing      (9,737  )      (6,193   )
                     activities
                                                                  
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line of credit                  31,493         17,963
Payments on capital leases                           (840    )      (1,110   )
                     Net cash provided by            30,653         16,853    
                     financing activities
Effects of foreign currency exchange rate            22             -         
translation
                     Net increase in cash and        1,315          1,693
                     cash equivalents
Cash and cash equivalents
                     Beginning of period             8,354          8,512     
                     End of period                $  9,669       $  10,205    
                                                                  

RESTORATION HARDWARE HOLDINGS, INC.
OPERATING METRICS AND OTHER DATA
(Unaudited)
                                                                
                                                  Three Months Ended
                                                     May 4,        April 28,  
                                                  2013           2012
Growth in net revenues:
Stores ^[a]                                           39    %       16      %
Direct                                                38    %       20      %
Total                                                 38    %       18      %
Retail ^[b]:
Comparable store sales change ^[c]                    41    %       26      %
Retail stores open at beginning of period             71            74
Stores opened                                         2             3
Stores closed                                         3             3
Retail stores open at end of period                   70            74
Retail sales per leased selling square foot       $   284        $  200
^[d]
Total leased square footage at end of period          796           802
(in thousands)
Total leased selling square footage at end of         521           522
period (in thousands) ^[e]
Direct:
Catalogs circulated (in thousands) ^[f]               —             14,906
Catalog pages circulated (in millions) ^[f]           —             7,363
Direct as a percentage of net revenues ^[g]           47    %       47      %

[a] Store data represents retail stores plus outlet stores. Net revenues for
outlet stores for the three months ended May 4, 2013 and April 28, 2012 were
$14.4 million and $10.9 million, respectively.

[b] Retail data have been calculated based upon retail stores, which includes
our Baby & Child stores, and excludes outlet stores.

[c] Comparable store sales have been calculated based upon retail stores that
were open at least fourteen full months as of the end of the reporting period
and did not change square footage by more than 20% between periods. If a store
is closed for seven days during a month, that month will be excluded from
comparable store sales. Comparable store net revenues exclude revenues from
outlet stores.

[d] Retail sales per leased selling square foot is calculated by dividing
total net revenues for all retail stores, comparable and non-comparable, by
the average leased selling square footage for the period.

[e] Leased selling square footage is retail space at our stores used to sell
our products. Leased selling square footage excludes backrooms at retail
stores used for storage office space or similar matters. Leased selling square
footage excludes exterior sales space located outside a store, such as
courtyards, gardens and rooftops. Leased selling square footage includes
approximately 4,500 square feet related to one owned store location.

[f] The catalogs and catalog pages circulated from period to period do not
take into account different page sizes per catalog distributed. Page sizes and
page counts vary for different catalog mailings and we sometimes mail
different versions of a catalog at the same time. Accordingly, period to
period comparisons of catalogs circulated and catalog pages circulated do not
take these variations into account.

[g] Direct revenues include sales through our catalogs and websites.

                                                                                                                          
RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF ADJUSTED INCOME STATEMENT ITEMS
(In thousands, except share and per share amounts)
(Unaudited)
                                                                                                                            
                   Three Months Ended
                   Reported                       Adjusted                    Reported                    Adjusted
                                                                   % of Net                                                % of Net
                   May 4,           Adjustments   May 4,           Revenues   April 28,     Adjustments   April 28,        Revenues

                   2013                           2013                        2012                        2012
Net revenues       $ 301,337        $  —          $ 301,337        100.0  %   $ 217,914     $  —          $ 217,914        100.0  %
Cost of goods        199,460           —            199,460        66.2   %     142,646        —            142,646        65.5   %
sold
Gross profit         101,877           —            101,877        33.8   %     75,268         —            75,268         34.5   %
Selling, general
and                  101,366           (4,090 )     97,276         32.3   %     77,365         (1,464 )     75,901         34.8   %
administrative
expenses ^[a]
Income (loss)        511               4,090        4,601          1.5    %     (2,097  )      1,464        (633       )   -0.3   %
from operations
Interest expense     (840       )      —            (840       )   -0.3   %     (1,575  )      —            (1,575     )   -0.7   %
Income (loss)
before income        (329       )      4,090        3,761          1.2    %     (3,672  )      1,464        (2,208     )   -1.0   %
taxes
Income tax
expense              (168       )      1,672        1,504          0.5    %     56             (939   )     (883       )   -0.4   %
(benefit) ^[b]
Net income         $ (161       )   $  2,418      $ 2,257          0.7    %   $ (3,728  )   $  2,403      $ (1,325     )   -0.6   %
(loss) ^[c]
                                                                                                                            
EBITDA ^[d]        $ 7,141                        $ 11,231                    $ 4,327                     $ 6,159
                                                                                                                            
Weighted-average
shares used in
computing basic      38,076,026                     38,076,026                  1,000                       36,971,500
net income
(loss) per share
^[e]
Weighted-average
shares used in
computing            38,076,026                     38,671,785                  1,000                       36,971,500
diluted net
income (loss)
per share ^ [e]
                                                                                                                            
Basic net income   $ —                            $ 0.06                      $ (3,728  )                 $ (0.04      )
(loss) per share
Diluted net
income (loss)      $ —                            $ 0.06                      $ (3,728  )                 $ (0.04      )
per share

[a] The adjustments for selling, general, and administrative expenses include
management and pre-initial public offering board fees, non-cash and other
one-time compensation, secondary offering costs and lease termination costs.
See table titled “Reconciliation of GAAP Net Loss to Adjusted Net Income
(Loss)” for additional details.

[b] Assumes a normalized tax rate of 40% for all periods presented. See table
titled “Reconciliation of GAAP Net Loss to Adjusted Net Income (Loss)” for
additional details.

[c] Adjusted net income (loss) is a supplemental measure of financial
performance that is not required by, or presented in accordance with, GAAP. We
define adjusted net income (loss) as consolidated net loss less non-recurring
and other items. Adjusted net income (loss) is included in this press release
because management believes that adjusted net income (loss) provides
meaningful supplemental information for investors regarding the performance of
our business and facilitates a meaningful evaluation of actual results on a
comparable basis with historical results. Our management uses this non-GAAP
financial measure in order to have comparable financial results to analyze
changes in our underlying business from quarter to quarter.

[d] 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 (loss) before depreciation and
amortization, interest expense and provision for income taxes. Adjusted EBITDA
reflects further adjustments to EBITDA to eliminate the impact of certain
items including non-cash or other items that we do not consider representative
of our ongoing financial performance. EBITDA and Adjusted EBITDA are included
in this press release because they are key metrics used by management, our
Board of Directors and our principal shareholders to assess our financial
performance, and Adjusted EBITDA is used in connection with determining
incentive compensation under our Management Incentive Program (“MIP”).
Additionally, EBITDA is frequently used by analysts, investors and other
interested parties to evaluate companies in our industry. We use EBITDA and
Adjusted EBITDA, alongside other GAAP measures such as gross profit, operating
income (loss) and net income (loss), to measure profitability, as a key
profitability target in our annual and other budgets, and to compare our
performance against that of peer companies. We believe that Adjusted EBITDA
provides useful information facilitating operating performance comparisons
from period to period and company to company. Please see the table titled
“Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA” for
further information.

[e] On an adjusted basis for the three months ended April 28, 2012, basic and
diluted shares outstanding include (1) the impact of the Reorganization, as
well as (2) the 4,782,609 shares of common stock that the Company issued and
sold on November 7, 2012 in its initial public offering, as if such events had
been completed as of the beginning of the period and the common stock
resulting therefrom was outstanding for the period.

 
RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF NET LOSS TO OPERATING INCOME (LOSS)
AND ADJUSTED OPERATING INCOME (LOSS)
(In thousands)
(Unaudited)
                                                       
                                                         
                                         Three Months Ended
                                            May 4,        April 28,  
                                         2013           2012
Net loss                                 $  (161   )    $  (3,728  )
Interest expense                            840            1,575
Income tax expense (benefit)                (168   )       56       
Operating income (loss)                     511            (2,097  )
Management and pre-IPO board fees ^[a]      —              889
Non-cash compensation ^[b]                  3,323          —
Secondary offering fees ^[c]                767            —
Lease termination costs ^[d]                —              575      
Adjusted operating income (loss)         $  4,601       $  (633    )

[a] Includes fees and expenses paid in accordance with our management services
agreement with Home Holdings, LLC (“Home Holdings”), as well as fees and
expense reimbursements paid to our Board of Directors prior to the initial
public offering. All management fees were paid in full at the time of the
initial public offering.

[b] Includes a non-cash compensation charge related to the performance-based
vesting of certain shares granted to Mr. Friedman.

[c] Represents legal and other professional fees incurred in connection with
our secondary offering.

[d] Includes lease termination costs for retail stores that were closed prior
to their respective lease termination dates.

 
RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED EBITDA
(In thousands)
(Unaudited)
                                                       
                                                         
                                         Three Months Ended
                                            May 4,        April 28,  
                                         2013           2012
Net loss                                 $  (161    )   $  (3,728  )
Depreciation and amortization               6,630          6,424
Interest expense                            840            1,575
Income tax expense (benefit)                (168    )      56       
EBITDA ^[a]                                 7,141          4,327
Management and pre-IPO board fees ^[b]      —              889
Non-cash compensation ^[c]                  3,323          387
Secondary offering fees ^[d]                767            —
Lease termination costs ^[e]                —              575
Other ^[f]                                  —              (19     )
Adjusted EBITDA ^[a]                     $  11,231      $  6,159    

[a] 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 (loss) before depreciation and
amortization, interest expense and provision for income taxes. Adjusted EBITDA
reflects further adjustments to EBITDA to eliminate the impact of certain
items including non-cash or other items that we do not consider representative
of our ongoing financial performance. EBITDA and Adjusted EBITDA are included
in this press release because they are key metrics used by management, our
Board of Directors and our principal shareholders to assess our financial
performance, and Adjusted EBITDA is used in connection with determining
incentive compensation under our MIP. Additionally, EBITDA is frequently used
by analysts, investors and other interested parties to evaluate companies in
our industry. We believe that Adjusted EBITDA provides useful information
facilitating operating performance comparisons from period to period and
company to company. We use EBITDA and Adjusted EBITDA, alongside other GAAP
measures such as gross profit, operating income (loss) and net income (loss),
to measure profitability, as a key profitability target in our annual and
other budgets, and to compare our performance against that of peer companies.
EBITDA and Adjusted EBITDA are not GAAP measures of our financial performance
or liquidity and should not be considered as alternatives to net income
(loss), as a measure of financial performance, cash flows from operating
activities, as a measure of liquidity, or any other performance measure
derived in accordance with GAAP and they should not be construed as an
implication that our future results will be unaffected by non-recurring and
other items. 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.

[b] Includes fees and expenses paid in accordance with our management services
agreement with Home Holdings, as well as fees and expense reimbursements paid
to our Board of Directors prior to the initial public offering. All management
fees were paid in full at the time of the initial public offering.

[c] The three months ended May 4, 2013 includes a non-cash compensation charge
related to the performance-based vesting of certain shares granted to Mr.
Friedman. The three months ended April 28, 2012 includes stock-based
compensation expense incurred prior to the initial public offering.

[d] Represents legal and other professional fees incurred in connection with
our secondary offering.

[e] Includes lease termination costs for retail stores that were closed prior
to their respective lease termination dates.

[f] Represents certain other items which management believes are not
indicative of our ongoing operating performance, which includes foreign
exchange gains and losses for the three months ended April 28, 2012.

 
RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF GAAP NET LOSS TO ADJUSTED NET INCOME (LOSS)
(In thousands)
(Unaudited)
                                                       
                                                         
                                         Three Months Ended
                                            May 4,        April 28,  
                                         2013           2012
GAAP net loss                            $  (161    )   $  (3,728  )
Adjustments (pre-tax):
Management and pre-IPO board fees ^[a]   $  —           $  889
Non-cash compensation ^[b]                  3,323          —
Secondary offering fees ^[c]                767            —
Lease termination costs ^[d]                —              575      
Subtotal adjusted items                     4,090          1,464
Impact of income tax items ^[e]             (1,672  )      939      
Adjusted net income (loss) ^[f]          $  2,257       $  (1,325  )

[a] Represents fees paid in accordance with our management services agreement
with Home Holdings, as well as fees and expense reimbursements paid to our
Board of Directors prior to the initial public offering. All management fees
were paid in full at the time of the initial public offering. Board fees and
expenses subsequent to the initial public offering are not included in the
above adjustments and are included in both the GAAP and adjusted net income
amounts.

[b] Includes a non-cash compensation charge related to the performance-based
vesting of certain shares granted to Mr. Friedman.

[c] Represents legal and other professional fees incurred in connection with
our secondary offering.

[d] Includes lease termination costs for retail stores that were closed prior
to their respective lease termination dates.

[e] Assumes a normalized tax rate of 40% for all periods presented.

[f] Adjusted net income (loss) is a supplemental measure of financial
performance that is not required by, or presented in accordance with, GAAP. We
define adjusted net income (loss) as consolidated net loss less non-recurring
and other items. Adjusted net income (loss) is included in this press release
because management believes that adjusted net income (loss) provides
meaningful supplemental information for investors regarding the performance of
our business and facilitates a meaningful evaluation of actual results on a
comparable basis with historical results. Our management uses this non-GAAP
financial measure in order to have comparable financial results to analyze
changes in our underlying business from quarter to quarter.

 
RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF NET LOSS PER SHARE TO
ADJUSTED NET INCOME (LOSS) PER SHARE
(Unaudited)
                                                                
                                                                  
                                                  Three Months Ended
                                                     May 4,        April 28,  
                                                  2013           2012
                                                                  
Diluted net loss per share ^[a]                   $  —           $   (0.10  )
                                                                  
EPS impact of adjustments (pre-tax):
Management and pre-IPO board fees ^[b]            $  —           $   0.02
Non-cash compensation ^[c]                           0.09            —
Secondary offering fees ^[d]                         0.02            —
Lease termination costs ^[e]                         —               0.02    
Subtotal adjusted items                              0.11            0.04
Impact of income tax items ^[f]                      (0.05  )        0.02    
Adjusted diluted net income (loss) per share         0.06        $   (0.04  )
^[g]

[a] Pro forma diluted net loss per share for the three months ended April 28,
2012 is calculated based on GAAP net loss and the Company’s vested share count
as if (1) the Reorganization and (2) initial public offering had been
completed as of the beginning of the period and the common stock resulting
therefrom was outstanding for the period.

[b] Represents fees paid in accordance with our management services agreement
with Home Holdings, as well as fees and expense reimbursements paid to our
Board of Directors prior to the initial public offering. All management fees
were paid in full at the time of the initial public offering. Board fees and
expenses subsequent to the initial public offering are not included in the
above adjustments and are included in both the GAAP and adjusted net income
amounts.

[c] Includes a non-cash compensation charge related to the performance-based
vesting of certain shares granted to Mr. Friedman.

[d] Represents legal and other professional fees incurred in connection with
our secondary offering.

[e] Includes lease termination costs for retail stores that were closed prior
to their respective lease termination dates.

[f] Assumes a normalized tax rate of 40% for all periods presented.

[g] Adjusted diluted net income (loss) per share is a supplemental measure of
financial performance that is not required by, or presented in accordance with
GAAP. We define adjusted net income (loss) per share as consolidated net loss
less non-recurring and other items divided by the Company’s post-initial
public offering share count. Adjusted net income (loss) per share is included
in this press release because management believes that adjusted net income
(loss) per share provides meaningful supplemental information for investors
regarding the performance of our business and facilitates a meaningful
evaluation of actual results on a comparable basis with historical results.
Our management uses this non-GAAP financial measure in order to have
comparable financial results to analyze changes in our underlying business
from quarter to quarter.

Contact:

Restoration Hardware Holdings, Inc.
Cammeron McLaughlin, 415-945-4998
VP, Investor Relations
cmclaughlin@restorationhardware.com
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