Restoration Hardware Holdings, Inc. Reports Record Fourth Quarter and Fiscal Year 2013 Financial Results

  Restoration Hardware Holdings, Inc. Reports Record Fourth Quarter and Fiscal
  Year 2013 Financial Results

 Fiscal 2013 Net Revenues Increased 33% on Comparable Week Basis; Comparable
Brand Revenue Growth of 31%; Adjusted Diluted EPS Increased 76% on Comparable
                             Week Basis to $1.71

   Q4 Net Revenues Increased 26% on Comparable Week Basis; Comparable Brand
 Revenue Growth of 24%; Adjusted Diluted EPS Increased 38% on Comparable Week
                                Basis to $0.83

          Company Expects Q1 2014 Adjusted EPS of $0.09 to $0.11 and

                  Fiscal 2014 Adjusted EPS of $2.14 to $2.22

Business Wire

CORTE MADERA, Calif. -- March 27, 2014

Restoration Hardware Holdings, Inc. (NYSE: RH) today announced financial
results for the fourth quarter and fiscal year ended February 1, 2014. Fourth
quarter and fiscal 2013 included 13 weeks and 52 weeks, respectively. The
prior year fourth quarter and fiscal year ended February 2, 2013 included 14
weeks and 53 weeks, respectively. In the fourth quarter and fiscal 2012, the
additional week contributed approximately $24.0 million in net revenues and an
estimated $0.04 benefit to adjusted diluted earnings per share.

Full Year Highlights

  *On a comparable 52 week basis, net revenues increased 33% on top of a 22%
    increase for the same period last year; GAAP net revenues increased 30%
  *Comparable brand revenue growth was 31% on top of 28% last year
  *Adjusted operating income increased 76% to $120.9 million from $68.7
    million for the same period last year; GAAP operating income increased to
    $54.9 million from a loss of $69.0 million for the same period last year
  *Adjusted net income increased 92% on a comparable week basis to $69.1
    million; GAAP net income of $18.2 million compared to a net loss of $12.8
    million for the same period last year
  *Adjusted diluted earnings per share increased 76% on a comparable week
    basis to $1.71; GAAP diluted earnings per share of $0.45 compared to a
    loss per share of $1.36 for the same period last year

Fourth Quarter Highlights

  *On a comparable 13 week basis, net revenues increased 26% on top of a 23%
    increase for the same period last year; GAAP net revenues increased 18%
  *Comparable brand revenue growth was 24% on top of 29% last year
  *Adjusted operating income increased 41% to $58.3 million from $41.4
    million for the same period last year; GAAP operating income of $58.3
    million compared to operating loss of $88.6 million in the prior year
    period
  *Adjusted net income increased 52% on a comparable week basis to $34.0
    million; GAAP net income of $26.6 million compared to a net loss of $28.4
    million for the same period last year
  *Adjusted diluted earnings per share increased 38% on a comparable week
    basis to $0.83; GAAP diluted earnings per share of $0.65 compared to a
    loss of $0.79 for the same period last year

Gary Friedman, Chairman and Chief Executive Officer, commented, “In 2013, RH
continued to outperform the home furnishings industry by a wide margin. We
increased net revenues 33% on a comparable week basis, and comparable brand
revenue increased 31% on top of 28% last year, delivering our fourth
consecutive year of over 25% comparable brand revenue growth. Additionally, we
grew adjusted net income by 92% to $69 million on a comparable week basis and
adjusted EPS to $1.71.”

Mr. Friedman added, “Throughout fiscal 2013, we continued to take market share
and outperform our expectations – delivering results that far exceeded the
annual financial targets we introduced at the beginning of the year. We
increased revenue by 32% in the back half of the year on a comparable week
basis, roughly in-line with the 34% growth in the first half, despite the
elimination of our Fall Source Book. During the fourth quarter of fiscal 2013,
we increased comparable brand revenue by 24%, on top of 29% last year, in
spite of a tougher than anticipated holiday selling season and the impact of
weather on our retail business. Additionally, we increased adjusted net income
52% on a comparable week basis demonstrating the disruptive nature of the RH
brand and the power of our multi-channel business model.”

Mr. Friedman concluded, “As we enter 2014, we remain focused on our two
largest value driving strategies – the expansion of our offer and the
transformation of our retail stores. The expansion of our offer will be
highlighted across 3,200 pages in our Spring 2014 Source Books, positioning us
for what we believe will be another year of industry leading results. In
regards to the transformation of our retail stores, we believe we have a $4 to
$5 billion Company trapped in billion dollar legacy real estate. Post the drop
of our Spring 2014 Source Books, approximately 10% of our assortment will be
displayed at retail. We believe the key to unlocking the value of the Company
is to transform our real estate portfolio into our next generation Full Line
Design Galleries. This year, we will open new Galleries in Greenwich, Los
Angeles, and our first next generation Full Line Design Gallery in Atlanta.
Additionally, we are significantly expanding the size our New York Gallery,
adding two additional floors to our top performing store in the Company. We
now have signed leases for five next generation Full Line Design Galleries and
are in negotiations for an additional 25 locations. Once our real estate
transformation is complete in North America, we believe we will deliver $4
billion to $5 billion in annual sales, achieve mid-teens operating margins,
and generate significant free cash flow.”

Fiscal Year 2013 Financial Highlights

Revenue - Net revenues for fiscal 2013 increased 30% to $1.551 billion from
$1.193 billion in fiscal 2012. Excluding the additional week in fiscal 2012,
net revenues increased 33% in fiscal 2013 on top of a 22% increase in net
revenues for fiscal 2012.

  *Comparable brand revenue growth, which includes direct, increased 31% in
    fiscal 2013 on top of a 28% increase in fiscal 2012.
  *Comparable store sales increased 27% in fiscal 2013 on top of a 28%
    increase in fiscal 2012.
  *Direct revenues increased 33% to $732.6 million for fiscal 2013 from
    $549.7 million. Excluding the additional week in fiscal 2012, direct
    revenues increased 36% in fiscal 2013 on top of a 27% increase in fiscal
    2012.

Operating Income (Loss)* - Adjusted operating income for fiscal year 2013
increased 76% to $120.9 million compared to $68.7 million in fiscal 2012.
Including the impact of non-recurring and other items, operating income
increased to $54.9 million from a loss of $69.0 million in the prior year,
primarily as a result of certain charges incurred in connection with the
Company’s initial public offering in fiscal 2012.

EBITDA* - Adjusted EBITDA for fiscal year 2013 increased 54% to $148.6 million
compared to $96.6 million for the same period last year. Including the impact
of non-recurring and other items, EBITDA was $82.5 million compared to an
EBITDA loss of $42.3 million in the prior year period.

Net Income (Loss)* - Adjusted net income for fiscal 2013 increased 83% to
$69.1 million from $37.7 million for the prior year period. Adjusted net
income excludes the impact of non-recurring and other items and is calculated
using a 40% effective tax rate. Excluding the additional week in fiscal 2012,
adjusted net income increased 92% compared to the prior year period. GAAP net
income for fiscal 2013 increased to $18.2 million compared to a net loss of
$12.8 million for the same period last year.

Earnings Per Share* - Adjusted diluted earnings per share increased 69% to
$1.71 for fiscal year 2013 compared to $1.01 during the prior year period.
Excluding the additional week in fiscal 2012, adjusted diluted earnings per
share increased 76%. Including the impact of non-recurring and other items,
GAAP diluted EPS for fiscal 2013 was $0.45 compared to a loss per share of
$1.36 in the prior year period.

Fourth Quarter Fiscal 2013 Financial Results

Revenue - Net revenues for the fourth quarter of fiscal 2013 increased 18% to
$471.7 million from $398.1 million in the fourth quarter of fiscal 2012.
Excluding the additional week in the fourth quarter of fiscal 2012, net
revenues increased 26% on top of a 23% increase in net revenues for the fourth
quarter of fiscal 2012.

  *Comparable brand revenue growth, which includes direct, increased 24% in
    the fourth quarter of fiscal 2013 on top of a 29% increase last year.
  *Comparable store sales increased 17% for the fourth quarter of fiscal 2013
    on top of a 26% increase last year.
  *As of February 1, 2014, 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 17 outlet stores throughout the United States
    and Canada. This compares to a total of 71 retail stores, consisting of 65
    Galleries, 3 Full Line Design Galleries and 3 Baby & Child Galleries, as
    well as 13 outlet stores at the end of fiscal 2012.
  *Direct revenues increased 22% to $228.9 million for the fourth quarter of
    fiscal 2013. Excluding the additional week in the fourth quarter of fiscal
    2012, direct revenues increased 30% on top of a 32% increase in the fourth
    quarter of fiscal 2012.

Operating Income (Loss)* - Adjusted operating income for the fourth quarter of
fiscal 2013 increased 41% to $58.3 million compared to $41.4 million in the
fourth quarter of fiscal 2012. Including the impact of non-recurring and other
items, operating income for the fourth quarter of fiscal 2013 increased to
$58.3 million from a loss of $88.6 million in the prior year fiscal quarter,
primarily as a result of certain charges incurred in connection with the
Company’s initial public offering in fiscal 2012.

EBITDA* - Adjusted EBITDA for the fourth quarter of fiscal 2013 increased 35%
to $66.0 million compared to $48.7 million for the same period last year.
Including the impact of non-recurring and other items, EBITDA was $66.0
million compared to an EBITDA loss of $81.3 million in the prior year period.

Net Income (Loss)* - Adjusted net income for the fourth quarter of fiscal 2013
increased 41% to $34.0 million from $24.2 million for the prior year period.
Adjusted net income excludes the impact of non-recurring and other items and
is calculated using a 40% effective tax rate. Excluding the additional week in
the fourth quarter of fiscal 2012, adjusted net income increased 52% compared
to the prior year period. GAAP net income for the fourth quarter of fiscal
2013 increased to $26.6 million compared to a net loss of $28.4 million for
the same period last year.

Earnings Per Share* - Adjusted diluted earnings per share increased 30% to
$0.83 for the fourth quarter of fiscal 2013 from $0.64 during the prior year
period. Excluding the additional week in the fourth quarter of fiscal 2012,
adjusted diluted earnings per share increased 38%. Including the impact of
non-recurring and other items, GAAP diluted EPS for the fourth quarter of
fiscal 2013 was $0.65 compared to a loss per share of $0.79 in the prior year
fiscal quarter.

A reconciliation of GAAP to non-GAAP financial measures is provided in the
tables accompanying this release.

Outlook

The Company is providing the following guidance for the first fiscal quarter
of 2014:

  *Net revenues in the range of $345 million to $350 million
  *Adjusted net income in the range of $3.7 million to $4.5 million
  *Adjusted diluted EPS in the range of $0.09 to $0.11
  *Diluted shares outstanding of approximately 40.7 million

The Company is providing the following guidance for the fiscal year ending
January 31, 2015:

  *Net revenues in the range of $1.825 billion to $1.860 billion
  *Adjusted net income in the range of $87.6 million to $90.9 million
  *Adjusted diluted EPS in the range of $2.14 to $2.22
  *Diluted shares outstanding of approximately 40.9 million

Note: The Company’s adjusted net income and adjusted diluted earnings per
share guidance does not include certain charges and costs, such as for unusual
items which may occur in the future, and which are expected to be similar in
future periods to the kinds of charges and costs excluded from adjusted net
income and adjusted diluted earnings in prior quarters.

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 fourth quarter and fiscal year results.
Interested parties may access the call by dialing (866) 394-6658 (United
States/Canada) or (706) 679-9188 (International). A live broadcast of
Restoration Hardware Holdings’ quarterly conference call will also be
available online at the Company’s website www.rh.com under Investor Relations.
A replay of the conference call will be available through April 10th by
dialing (855) 859-2056 or (404) 537-3406 and entering passcode 19582570,  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, adjusted EBITDA, adjusted net income, adjusted EPS, pro
forma EPS and adjusted diluted EPS (collectively, “non-GAAP financial
measures”). We compute these measures by adjusting the applicable GAAP
measures to remove the impact of certain recurring and non-recurring charges
and gains and the tax effect of these adjustments. 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 include 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 non-GAAP guidance for the first fiscal quarter and the full
fiscal year 2014, the Company is not able to provide a reconciliation of the
non-GAAP financial measures to GAAP because it does not provide specific
guidance for the various non-recurring and recurring reconciling items such as
non-cash and other one-time compensation, and one-time income tax expense
(benefit), among others. Certain items that impact these measures have not yet
occurred, are out of the Company’s control and/or cannot be reasonably
predicted, and as a result, reconciliation of the non-GAAP guidance measures
to GAAP is not available without unreasonable effort.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the
federal securities laws including statements related to our strategy,
including the planned expansion of the Company’s product offerings and the
transformation of the Company’s retail stores; the number of pages to be in
the Company’s Spring 2014 Source Books, positioning us for what we believe
will be another year of industry leading results; the percentage of our
assortment that will be displayed at retail following the mailing of our
Spring 2014 Source Books; our belief that the key to unlocking the value of
the Company is to transform our real estate portfolio into our next generation
Full Line Design Galleries; the planned opening of our new Galleries in
Greenwich, Los Angeles, and our first next generation Full Line Design Gallery
in Atlanta; the expansion of our New York Gallery; the negotiations for an
additional 25 locations; the Company’s belief that there is an opportunity to
deliver $4 billion to $5 billion in annual sales, achieve mid-teens operating
margins and generate significant free cash flow after our real estate
transformation is complete in North America, and the Company’s future
financial guidance, including for the first fiscal quarter of 2014 and the
full year ending January 31, 2015. 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, our ability to retain key
personnel; successful implementation of our growth strategy; general economic
conditions and the impact on consumer confidence and spending; changes in
customer demand for our products; our ability to anticipate consumer
preferences and buying trends; changes in consumer spending based on weather
and other conditions beyond our control; risks related to the number of new
business initiatives we are undertaking; our ability to employ reasonable and
appropriate security measures to protect personal information that we collect;
risks related to “conflict minerals” compliance and its impact on sourcing, if
any, 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, the
risks and uncertainties disclosed under the section entitled “Risk Factors” in
Restoration Hardware Holdings’ Form 10-Q filed with the Securities and
Exchange Commission on December 17, 2013, and similar disclosures in
subsequent reports filed with the SEC, which are 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 8.            Condensed Consolidated Statements of Operations
                   
Page 9.            Condensed Consolidated Balance Sheets
                   
Page 10.           Condensed Consolidated Statements of Cash Flows
                   
Page 11.           Operating Metrics and Other Data
                   
Page 12.           Reconciliation of Adjusted Income Statement Items
                   
Page 14.           Reconciliation of Net Income (Loss) to Operating Income
                   (Loss) and Adjusted Operating Income
                   
Page 15.           Reconciliation of Net Income (Loss) to EBITDA and Adjusted
                   EBITDA
                   
Page 16.           Reconciliation of GAAP Net Income (Loss) to Adjusted Net
                   Income
                   
Page 17.           Reconciliation of Diluted Net Income (Loss) Per Share to
                   Adjusted Diluted Net Income Per Share
                   

RESTORATION HARDWARE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
                                                                                                                        
                                                                                                                                                 
                       Three Months Ended ^[a]                                         Twelve Months Ended ^[a]
                       February 1,        % of Net     February 2,        % of Net     February 1,        % of Net     February 2,        % of Net
                       2014              Revenues     2013               Revenues     2014               Revenues     2013               Revenues
Net revenues           $ 471,694          100.0  %     $ 398,055          100.0  %     $ 1,550,961        100.0  %     $ 1,193,046        100.0  %
Cost of goods           296,717         62.9   %      252,881         63.5   %      994,081         64.1   %      756,597         63.4   %
sold
Gross profit             174,977          37.1   %       145,174          36.5   %       556,880          35.9   %       436,449          36.6   %
Selling, general
and                     116,717         24.7   %      233,769         58.7   %      502,029         32.4   %      505,485         42.4   %
administrative
expenses
Income (loss)            58,260           12.4   %       (88,595    )     -22.2  %       54,851           3.5    %       (69,036    )     -5.8   %
from operations
Interest expense        (1,537     )     -0.3   %      (1,178     )     -0.3   %      (5,733     )     -0.3   %      (5,776     )     -0.5   %
Income (loss)
before income            56,723           12.1   %       (89,773    )     -22.5  %       49,118           3.2    %       (74,812    )     -6.3   %
taxes
Income tax
expense                 30,081          6.5    %      (61,411    )     -15.4  %      30,923          2.0    %      (62,023    )     -5.2   %
(benefit)
Net income             $ 26,642          5.6    %     $ (28,362    )     -7.1   %     $ 18,195          1.2    %     $ (12,789    )     -1.1   %
(loss)
                                                                                                                                                 
Weighted-average
shares used in
computing basic          39,008,383                      35,692,064                      38,671,564                      9,428,828
net income
(loss) per share
Weighted-average
shares used in
computing                41,119,175                      35,692,064                      40,416,630                      9,428,828
diluted net
income (loss)
per share
                                                                                                                                                 
Basic net income       $ 0.68                          $ (0.79      )                  $ 0.47                          $ (1.36      )
(loss) per share
Diluted net
income (loss)          $ 0.65                          $ (0.79      )                  $ 0.45                          $ (1.36      )
per share
                                                                                                                                                 
Pro forma
weighted-average
shares used in
computing pro                                            37,578,314                                                      37,131,790
forma basic and
diluted net loss
per share ^[b]
Pro forma basic
and diluted net                                        $ (0.75      )                                                  $ (0.34      )
loss per share

[a] The three months ended February 1, 2014 and February 2, 2013 included 13
weeks and 14 weeks, respectively. The twelve months ended February 1, 2014 and
February 2, 2013 included 52 weeks and 53 weeks, respectively.

[b] On a pro forma basis, basic and diluted shares outstanding for the three
and twelve months ended February 2, 2013 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 respective periods and the common stock resulting therefrom was
outstanding for the respective periods.


RESTORATION HARDWARE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                                                          
                                                                 
                                               February 1,    February 2,
                                               2014           2013
                                                                 
ASSETS
Cash and cash equivalents                      $ 13,389       $  8,354
Merchandise inventories                          453,845         353,329
Other current assets                            146,581        131,075
Total current assets                             613,815         492,758
Property and equipment—net                       214,909         111,406
Goodwill and other intangibles                   171,132         172,724
Other assets                                    25,247         12,725
Total assets                                   $ 1,025,103    $  789,613
                                                                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable and accrued expenses          $ 206,778      $  145,353
Other current liabilities                       110,670        74,071
Total current liabilities                        317,448         219,424
Revolving line of credit                         85,425          82,501
Other long-term liabilities                     76,958         36,077
Total liabilities                               479,831        338,002
                                                                 
Stockholders’ equity                            545,272        451,611
Total liabilities and stockholders’ equity     $ 1,025,103    $  789,613
                                                                 

RESTORATION HARDWARE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                                                            
                                                                    
                                                 Twelve Months Ended ^[a]
                                                 February 1,      February 2,
                                                 2014             2013
                                                                    
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                $ 18,195         $ (12,789  )
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization                      27,654           26,748
Stock-based compensation expense                   67,622           116,183
Other non-cash items                               3,973            (61,008  )
Change in assets and liabilities:
Merchandise inventories                            (100,937 )       (107,454 )
Accounts payable, accrued expenses, and           71,014         34,456   
other
Net cash provided by (used in) operating          87,521         (3,864   )
activities
                                                                    
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures                               (93,868  )       (49,058  )
Purchase of trademarks and other                  —              (310     )
intangible assets
Net cash used in investing activities             (93,868  )      (49,368  )
                                                                    
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under revolving line of             2,924            (25,001  )
credit
Repayment of term loan                            —                (15,000  )
Debt issuance costs                               —                (426     )
Payments on capital leases and other               (2,555   )       (4,214   )
long-term obligations
Proceeds from issuance of common stock–net        —                97,693
of issuance costs
Stock options exercised                            7,629            —
Excess tax benefit from exercise of stock          3,685            —
options
Tax withholdings related to issuance of           (178     )      —        
stock-based awards
Net cash provided by financing activities         11,505         53,052   
Effects of foreign currency exchange rate         (123     )      22       
translation
Net increase (decrease) in cash and cash           5,035            (158     )
equivalents
Cash and cash equivalents
Beginning of period                               8,354          8,512    
End of period                                    $ 13,389        $ 8,354    
                                                                             

[a] The twelve months ended February 1, 2014 and February 2, 2013 included 52
weeks and 53 weeks, respectively.


RESTORATION HARDWARE HOLDINGS, INC.
OPERATING METRICS AND OTHER DATA
(Unaudited)
                                                          
                                                                             
                     Three Months Ended ^[a]       Twelve Months Ended ^[a]
                     February 1,     February 2,   February 1,     February 2,
                     2014           2013          2014           2013
Growth in net
revenues:
Stores ^[b]              16   %         22    %       27     %        20     %
Direct                   22   %         41    %       33     %        30     %
Total                    18   %         30    %       30     %        25     %
Comparable
brand revenue            24   %         29    %       31     %        28     %
growth ^[c]
Retail: ^[d]
Comparable
store sales              17   %         26    %       27     %        28     %
change ^[e]
Retail stores
open at                  70             73            71              74
beginning of
period
Stores opened            —              2             2               5
Stores closed            —              4             3               8
Retail stores
open at end of           70             71            70              71
period
Retail sales
per leased           $   392         $  382        $  1,395        $  1,143
selling square
foot ^[f]
Total leased
square footage
at end of                798            768           798             768
period (in
thousands)
Total leased
selling square
footage at end           554            501           554             501
of period (in
thousands)
^[g]
Average leased
square footage           797            775           793             784
(in thousands)
^[h]
Average leased
selling square
footage (in              537            500           522             504
thousands)
^[h]
Direct:
Catalogs
circulated (in           —              5,861         12,325          32,712
thousands)
^[i]
Catalog pages
circulated (in           —              669           6,583           16,029
millions) ^[i]
Direct as a
percentage of            49   %         47    %       47     %        46     %
net revenues
^[j]

[a] The three months ended February 1, 2014 and February 2, 2013 included 13
weeks and 14 weeks, respectively. The twelve months ended February 1, 2014 and
February 2, 2013 included 52 weeks and 53 weeks, respectively.

[b] Store data represents retail stores plus outlet stores. Net revenues for
outlet stores for the three months ended February 1, 2014 and February 2, 2013
were $32.2 million and $16.1 million, respectively. Net revenues for outlet
stores for the twelve months ended February 1, 2014 and February 2, 2013 were
$89.6 million and $54.3 million, respectively.

[c] Comparable brand revenue growth includes retail comparable store sales,
including Baby & Child Galleries, and direct net revenues. Comparable brand
revenue growth excludes retail non-comparable store sales and outlet store net
revenues. Refer to footnote [e] below for a definition of comparable store
sales.Because the three and twelve months ended February 2, 2013 were 14-week
and 53-week periods, respectively, comparable brand revenue growth percentage
for each period excludes the extra week of revenue.

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

[e] 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. Because the three and twelve months ended February 2, 2013 were
14-week and 53-week periods, respectively, comparable store sales change
percentage for each period excludes the extra week of sales.

[f] 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.

[g] 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.

[h] Average square footage (leased or leased selling, as applicable) is
calculated for each quarter by taking the total applicable square footage at
the beginning of the quarter plus the total applicable square footage at the
end of the quarter and dividing by two. Average square footage for periods of
six, nine and twelve months is calculated by averaging the average square
footage for the quarters within such periods.

[i] 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.

[j] 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 ^[a]                                                                                            
                       Reported                      Adjusted                   Reported                       Adjusted         
                       February 1,                    February 1,      % of Net   February 2,                     February 2,      % of Net
                       2014             Adjustments   2014             Revenues   2013             Adjustments    2013             Revenues
Net revenues           $ 471,694        $  —          $ 471,694        100.0  %   $ 398,055        $ —            $ 398,055        100.0  %
Cost of goods           296,717         —          296,717       62.9   %    252,881        (3,250   )    249,631       62.7   %
sold ^[b]
Gross profit             174,977           —            174,977        37.1   %     145,174          3,250          148,424        37.3   %
Selling, general
and                     116,717         —          116,717       24.7   %    233,769        (126,783 )    106,986       26.9   %
administrative
expenses ^[c]
Income (loss)            58,260            —            58,260         12.4   %     (88,595    )     130,033        41,438         10.4   %
from operations
Interest expense        (1,537     )     —          (1,537     )   -0.4   %    (1,178     )    —            (1,178     )   -0.3   %
Income (loss)
before income            56,723            —            56,723         12.0   %     (89,773    )     130,033        40,260         10.1   %
taxes
Income tax
expense                 30,081          (7,392 )    22,689        4.8    %    (61,411    )    77,515       16,104        4.0    %
(benefit) ^[d]
Net income             $ 26,642        $  7,392     $ 34,034        7.2    %   $ (28,362    )   $ 52,518      $ 24,156        6.1    %
(loss) ^[e]
                                                                                                                                          
EBITDA ^[f]            $ 65,955                       $ 65,955                    $ (81,332    )                  $ 48,701
                                                                                                                                          
Weighted-average
shares used in
computing basic          39,008,383                     39,008,383                  35,692,064                      37,578,314
net income
(loss) per share
^[g]
Weighted-average
shares used in
computing                41,119,175                     41,119,175                  35,692,064                      37,978,500
diluted net
income (loss)
per share ^ [g]
                                                                                                                                          
Basic net income       $ 0.68                         $ 0.87                      $ (0.79      )                  $ 0.64
(loss) per share
Diluted net
income (loss)          $ 0.65                         $ 0.83                      $ (0.79      )                  $ 0.64
per share

[a] The three months ended February 1, 2014 and February 2, 2013 included 13
weeks and 14 weeks, respectively.

[b] The adjustment to cost of goods sold relates to the anti-dumping exposure.
See table titled “Reconciliation of GAAP Net Income (Loss) to Adjusted Net
Income” for additional details.

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

[d] As of the end of fiscal 2012, our U.S. operations had returned to a
position of cumulative profits for the most recentthree-year period. We
concluded that this record of cumulative profitability in recent years,
coupled with our business plan for profitability in future periods, provided
assurance that our future tax benefits more likely than not would be realized.
Accordingly, in the three months ended February 2, 2013, we released all of
our valuation allowance against net deferred tax assets for the U.S. In
addition, income tax items exclude the tax benefit from the utilization of
federal and state net operating losses, and assume a normalized tax rate of
40% for all periods presented. See table titled “Reconciliation of GAAP Net
Income (Loss) to Adjusted Net Income” for additional details.

[e] 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 (loss) less non-recurring and
other items. Adjusted net income is included in this press release because
management believes that adjusted net income 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.

[f] 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 and our
Board of Directors 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 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.
Please see the table titled “Reconciliation of Net Income (Loss) to EBITDA and
Adjusted EBITDA” for further information.

[g] On an adjusted basis for the three months ended February 2, 2013, 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 ADJUSTED INCOME STATEMENT ITEMS
(In thousands, except share and per share amounts)
(Unaudited)
                                                                                                                                  
                                                                                                                                                    
                     Twelve Months Ended ^[a]
                     Reported                           Adjusted                        Reported                             Adjusted            
                     February 1,                         February 1,         % of Net     February 2,                           February 2,         % of Net
                     2014              Adjustments       2014                Revenues     2013               Adjustments       2013                Revenues
Net revenues         $ 1,550,961       $ —               $ 1,550,961         100.0 %      $ 1,193,046        $ —                $ 1,193,046         100.0  %
Cost of goods         994,081         —               994,081          64.1  %       756,597          (3,250   )        753,347          63.1   %
sold ^[b]
Gross profit           556,880           —                 556,880           35.9  %        436,449            3,250              439,699           36.9   %
Selling, general
and                   502,029         (66,050 )        435,979          28.1  %       505,485          (134,460 )        371,025          31.1   %
administrative
expenses ^[c]
Income (loss)          54,851            66,050            120,901           7.8   %        (69,036   )        137,710            68,674            5.8    %
from operations
Interest              (5,733     )     —               (5,733     )      -0.4  %       (5,776    )       —                (5,776     )      -0.5   %
expense
Income (loss)
before income          49,118            66,050            115,168           7.4   %        (74,812   )        137,710            62,898            5.3    %
taxes
Income tax
expense               30,923          15,144          46,067           2.9   %       (62,023   )       87,182           25,159           2.1    %
(benefit) ^[d]
Net income           $ 18,195         $ 50,906         $ 69,101           4.5   %      $ (12,789   )      $ 50,528          $ 37,739           3.2    %
(loss) ^[e]
                                                                                                                                                    
EBITDA ^[f]          $ 82,505                            $ 148,555                        $ (42,288   )                         $ 96,571
                                                                                                                                                    
Weighted-average
shares used in
computing basic        38,671,564                          38,671,564                       9,428,828                             37,131,790
net income
(loss) per share
^[g]
Weighted-average
shares used in
computing              40,416,630                          40,416,630                       9,428,828                             37,242,178
diluted net
income (loss)
per share ^ [g]
                                                                                                                                                    
Basic net income     $ 0.47                              $ 1.79                           $ (1.36     )                         $ 1.02
(loss) per share
Diluted net
income (loss)        $ 0.45                              $ 1.71                           $ (1.36     )                         $ 1.01
per share

[a] The twelve months ended February 1, 2014 and February 2, 2013 included 52
weeks and 53 weeks, respectively.

[b] The adjustment to cost of goods sold relates to the anti-dumping exposure.
See table titled “Reconciliation of GAAP Net Income (Loss) to Adjusted Net
Income” for additional details.

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

[d] As of the end of fiscal 2012, our U.S. operations had returned to a
position of cumulative profits for the most recentthree-year period. We
concluded that this record of cumulative profitability in recent years,
coupled with our business plan for profitability in future periods, provided
assurance that our future tax benefits more likely than not would be realized.
Accordingly, in the three months ended February 2, 2013, we released all of
our valuation allowance against net deferred tax assets for the U.S. In
addition, income tax items exclude the tax benefit from the utilization of
federal and state net operating losses, and assume a normalized tax rate of
40% for all periods presented. See table titled “Reconciliation of GAAP Net
Income (Loss) to Adjusted Net Income” for additional details.

[e] 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 (loss) less non-recurring and
other items. Adjusted net income is included in this press release because
management believes that adjusted net income 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.

[f] 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 and our
Board of Directors 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. Please see the table titled
“Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA” for
further information.

[g] On an adjusted basis for the twelve months ended February 2, 2013, 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 INCOME (LOSS) TO OPERATING INCOME (LOSS)
AND ADJUSTED OPERATING INCOME
(In thousands)
(Unaudited)
                                                            
                                                                   
                        Three Months Ended ^[a]      Twelve Months Ended ^[a]
                        February 1,   February 2,    February 1,   February 2,
                        2014          2013           2014          2013
Net income (loss)       $  26,642     $ (28,362 )    $ 18,195      $ (12,789 )
Interest expense           1,537        1,178          5,733         5,776
Income tax                30,081     (61,411 )     30,923      (62,023 )
expense (benefit)
Operating income           58,260       (88,595 )      54,851        (69,036 )
(loss)
Management and
pre-IPO board              —            973            —             4,258
fees ^[b]
Non-cash                   —            115,055        63,155        115,055
compensation ^[c]
Follow-on
offering fees              —            —              2,895         —
^[d]
Lease termination          —            —              —             (386    )
costs ^[e]
Special committee
investigation and          —            —              —             4,778
remediation ^[f]
Initial public
offering costs             —            10,755         —             10,755
^[g]
Anti-dumping              —          3,250        —           3,250   
exposure ^[h]
Adjusted                $  58,260    $ 41,438      $ 120,901    $ 68,674  
operating income

[a] The three months ended February 1, 2014 and February 2, 2013 included 13
weeks and 14 weeks, respectively. The twelve months ended February 1, 2014 and
February 2, 2013 included 52 weeks and 53 weeks, respectively.

[b] Represents fees 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. Board fees and expenses subsequent to the initial public
offering are not included in the above adjustments and are included in both
the operating and adjusted operating income (loss) amounts.

[c] The twelve months ended February 1, 2014 includes a $33.7 million non-cash
charge related to the one-time, fully vested option granted to Mr. Friedman
upon his reappointment as Chairman and Co-Chief Executive Officer in July 2013
and a $29.5 million non-cash compensation charge related to the
performance-based vesting of certain shares granted to Mr. Friedman. The three
and twelve months ended February 2, 2013 include a $92.0 million non-cash
compensation charge related to equity grants at the time of the
Reorganization, as well as a non-cash compensation charge of $23.1 million
related to the performance-based vesting of certain shares granted to Mr.
Alberini and Mr. Friedman. All other equity related awards granted to
employees are not included in the above adjustments and are included in both
the operating and adjusted operating income (loss) amounts.

[d] Represents legal and other professional fees incurred in connection with
our follow-on offerings in May 2013 and July 2013.

[e] Represents changes in estimates of future lease payments related to lease
termination cost liabilities for retail stores that were closed prior to their
respective lease termination dates.

[f] Represents legal and other professional fees, incurred in connection with
the investigation conducted by the special committee of the Board of Directors
relating to Mr. Friedman and our subsequent remedial actions.

[g] Represents costs incurred in connection with our initial public offering,
including a fee of $7.0 million to Catterton Management Company, LLC
(“Catterton”), Tower Three Home LLC (“Tower Three”) and Glenhill Capital
Management LLC (“Glenhill”) in accordance with our management services
agreement, payments of $2.2 million to certain former executives and bonus
payments to employees of $1.3 million.

[h] Represents expense incurred as a result of increased tariff obligations of
one of our foreign suppliers following the U.S. Department of Commerce’s
review of the anti-dumping duty order on wooden bedroom furniture from China
for the period from January 1, 2011 through December 31, 2011.

RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA
(In thousands)
(Unaudited)
                                                          
                                                                   
                     Three Months Ended ^[a]         Twelve Months Ended ^[a]
                     February 1,   February 2,       February 1,   February 2,
                     2014          2013              2014          2013
Net income           $  26,642     $ (28,362 )       $ 18,195      $ (12,789 )
(loss)
Depreciation
and                     7,695        7,263             27,654        26,748
amortization
Interest                1,537        1,178             5,733         5,776
expense
Income tax
expense                30,081     (61,411 )        30,923      (62,023 )
(benefit)
EBITDA ^[b]             65,955       (81,332 )         82,505        (42,288 )
Management and
pre-IPO board           —            973               —             4,258
fees ^[c]
Non-cash
compensation            —            115,055           63,155        116,157
^[d]
Follow-on
offering fees           —            —                 2,895         —
^[e]
Lease
termination             —            —                 —             (386    )
costs ^[f]
Special
committee
investigation           —            —                 —             4,778
and
remediation
^[g]
Initial public
offering costs          —            10,755            —             10,755
^[h]
Anti-dumping            —            3,250             —             3,250
exposure ^[i]
Other ^[j]             —          —               —           47      
Adjusted             $  65,955    $ 48,701         $ 148,555    $ 96,571  
EBITDA ^[b]

[a] The three months ended February 1, 2014 and February 2, 2013 included 13
weeks and 14 weeks, respectively. The twelve months ended February 1, 2014 and
February 2, 2013 included 52 weeks and 53 weeks, respectively.

[b] 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 and our
Board of Directors 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.

[c] 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 EBITDA and Adjusted EBITDA
amounts.

[d] The twelve months ended February 1, 2014 includes a $33.7 million non-cash
charge related to the one-time, fully vested option granted to Mr. Friedman
upon his reappointment as Chairman and Co-Chief Executive Officer in July 2013
and a $29.5 million non-cash compensation charge related to the
performance-based vesting of certain shares granted to Mr. Friedman. The three
and twelve months ended February 2, 2013 include stock-based compensation
expense incurred prior to the initial public offering, a $92.0 million
non-cash compensation charge related to equity grants at the time of the
Reorganization, and a non-cash compensation charge of $23.1 million related to
the performance-based vesting of certain shares granted to Mr. Alberini and
Mr. Friedman. All other equity related awards granted to employees subsequent
to the initial public offering are not included in the above adjustments and
are included in both the EBITDA and Adjusted EBITDA amounts.

[e] Represents legal and other professional fees incurred in connection with
our follow-on offerings in May 2013 and July 2013.

[f] Represents changes in estimates of future lease payments related to lease
termination cost liabilities for retail stores that were closed prior to their
respective lease termination dates.

[g] Represents legal and other professional fees, incurred in connection with
the investigation conducted by the special committee of the Board of Directors
relating to Mr. Friedman and our subsequent remedial actions.

[h] Represents costs incurred in connection with our initial public offering,
including a fee of $7.0 million to Catterton, Tower Three and Glenhill in
accordance with our management services agreement, payments of $2.2 million to
certain former executives and bonus payments to employees of $1.3 million.

[i] Represents expense incurred as a result of increased tariff obligations of
one of our foreign suppliers following the U.S. Department of Commerce’s
review of the anti-dumping duty order on wooden bedroom furniture from China
for the period from January 1, 2011 through December 31, 2011.

[j] Represents certain other items which management believes are not
indicative of our ongoing operating performance, which includes foreign
exchange gains and losses.

RESTORATION HARDWARE HOLDINGS, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) TO ADJUSTED NET INCOME
(In thousands)
(Unaudited)
                                                          
                                                                     
                    Three Months Ended ^[a]          Twelve Months Ended ^[a]
                    February       February 2,       February 1,     February 2,
                    1,
                    2014           2013              2014            2013
GAAP net            $ 26,642      $ (28,362 )       $ 18,195       $ (12,789 )
income (loss)
Adjustments
(pre-tax):
Management
and pre-IPO         $ —            $ 973             $ —             $ 4,258
board fees
^[b]
Non-cash
compensation          —              115,055           63,155          115,055
^[c]
Follow-on
offering fees         —              —                 2,895           —
^[d]
Lease
termination           —              —                 —               (386    )
costs ^[e]
Special
committee
investigation         —              —                 —               4,778
and
remediation
^[f]
Initial
public                —              10,755            —               10,755
offering
costs ^[g]
Anti-dumping         —            3,250           —             3,250   
exposure ^[h]
Subtotal
adjusted              —              130,033           66,050          137,710
items
Impact of
income tax           7,392        (77,515 )        (15,144 )      (87,182 )
items ^[i]
Adjusted net        $ 34,034      $ 24,156         $ 69,101       $ 37,739  
income ^[j]

[a] The three months ended February 1, 2014 and February 2, 2013 included 13
weeks and 14 weeks, respectively. The twelve months ended February 1, 2014 and
February 2, 2013 included 52 weeks and 53 weeks, respectively.

[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
(loss) amounts.

[c] The twelve months ended February 1, 2014 includes a $33.7 million non-cash
charge related to the one-time, fully vested option granted to Mr. Friedman
upon his reappointment as Chairman and Co-Chief Executive Officer in July 2013
and a $29.5 million non-cash compensation charge related to the
performance-based vesting of certain shares granted to Mr. Friedman. The three
and twelve months ended February 2, 2013 include stock-based compensation
expense incurred prior to the initial public offering, a $92.0 million
non-cash compensation charge related to equity grants at the time of the
Reorganization, and a non-cash compensation charge of $23.1 million related to
the performance-based vesting of certain shares granted to Mr. Alberini and
Mr. Friedman. All other equity related awards granted to employees are not
included in the above adjustments and are included in both the GAAP and
adjusted net income (loss) amounts.

[d] Represents legal and other professional fees incurred in connection with
our follow-on offerings in May 2013 and July 2013.

[e] Represents changes in estimates of future lease payments related to lease
termination cost liabilities for retail stores that were closed prior to their
respective lease termination dates.

[f] Represents legal and other professional fees, incurred in connection with
the investigation conducted by the special committee of the Board of Directors
relating to Mr. Friedman and our subsequent remedial actions.

[g] Represents costs incurred in connection with our initial public offering,
including a fee of $7.0 million to Catterton, Tower Three and Glenhill in
accordance with our management services agreement, payments of $2.2 million to
certain former executives and bonus payments to employees of $1.3 million.

[h] Represents expense incurred as a result of increased tariff obligations of
one of our foreign suppliers following the U.S. Department of Commerce’s
review of the anti-dumping duty order on wooden bedroom furniture from China
for the period from January 1, 2011 through December 31, 2011.

[i] As of the end of fiscal 2012, our U.S. operations had returned to a
position of cumulative profits for the most recentthree-year period. We
concluded that this record of cumulative profitability in recent years,
coupled with our business plan for profitability in future periods, provided
assurance that our future tax benefits more likely than not would be realized.
Accordingly, in the three and twelve months ended February 2, 2013, we
released all of our valuation allowance against net deferred tax assets for
the U.S. In addition, income tax items exclude the tax benefit related to the
resolution of our Canada Revenue Agency examination in the twelve months ended
February 2, 2013, exclude the tax benefit from the utilization of federal and
state net operating losses, and assume a normalized tax rate of 40% for all
periods presented.

[j] 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 (loss) less non-recurring and
other items. Adjusted net income is included in this press release because
management believes that adjusted net income 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 DILUTED NET INCOME (LOSS) PER SHARE TO
ADJUSTED DILUTED NET INCOME PER SHARE
(Unaudited)
                                                           
                                                                             
                      Three Months Ended ^[a]       Twelve Months Ended ^[a]
                      February 1,   February 2,     February 1,     February
                                                                    2,
                      2014          2013            2014            2013
                                                                             
Pro forma
diluted net           $  0.65       $  (0.75  )     $  0.45         $  (0.34 )
income (loss)
per share ^[b]
                                                                             
EPS impact of
adjustments
(pre-tax):
Management and
pre-IPO board         $  —          $  0.03         $  —            $  0.10
fees ^[c]
Non-cash
compensation            —             3.03            1.56            3.09
^[d]
Follow-on
offering fees           —            —               0.07           —
^[e]
Special
committee
investigation           —            —              —               0.13
and remediation
^[f]
Initial public
offering costs          —             0.28           —               0.29
^[g]
Anti-dumping            —           0.09          —             0.09  
exposure ^[h]
Subtotal                —             3.43            1.63            3.70
adjusted items
Impact of
income tax              0.18        (2.04  )       (0.37  )       (2.35 )
items ^[i]
Adjusted
diluted net           $  0.83      $  0.64        $  1.71        $  1.01  
income per
share ^[j]

[a] The three months ended February 1, 2014 and February 2, 2013 included 13
weeks and 14 weeks, respectively. The twelve months ended February 1, 2014 and
February 2, 2013 included 52 weeks and 53 weeks, respectively.

[b] Pro forma diluted net income per share for the three and twelve months
ended February 2, 2013 is calculated based on GAAP net income 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 respective
periods and the common stock resulting therefrom was outstanding for the
respective periods.

[c] 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
(loss) amounts.

[d] The twelve months ended February 1, 2014 includes a $33.7 million non-cash
charge related to the one-time, fully vested option granted to Mr. Friedman
upon his reappointment as Chairman and Co-Chief Executive Officer in July 2013
and a $29.5 million non-cash compensation charge related to the
performance-based vesting of certain shares granted to Mr. Friedman. The three
and twelve months ended February 2, 2013 include stock-based compensation
expense incurred prior to the initial public offering, a $92.0 million
non-cash compensation charge related to equity grants at the time of the
Reorganization, and a non-cash compensation charge of $23.1 million related to
the performance-based vesting of certain shares granted to Mr. Alberini and
Mr. Friedman. All other equity related awards granted to employees are not
included in the above adjustments and are included in both the GAAP and
adjusted net income (loss) amounts.

[e] Represents legal and other professional fees incurred in connection with
our follow-on offerings in May 2013 and July 2013.

[f] Represents legal and other professional fees incurred in connection with
the investigation conducted by the special committee of the Board of Directors
relating to Mr. Friedman and our subsequent remedial actions.

[g] Represents costs incurred in connection with our initial public offering,
including a fee of $7.0 million to Catterton, Tower Three and Glenhill in
accordance with our management services agreement, payments of $2.2 million to
certain former executives and bonus payments to employees of $1.3 million.

[h] Represents expense incurred as a result of increased tariff obligations of
one of our foreign suppliers following the U.S. Department of Commerce’s
review of the anti-dumping duty order on wooden bedroom furniture from China
for the period from January 1, 2011 through December 31, 2011.

[i] As of the end of fiscal 2012, our U.S. operations had returned to a
position of cumulative profits for the most recentthree-year period. We
concluded that this record of cumulative profitability in recent years,
coupled with our business plan for profitability in future periods, provided
assurance that our future tax benefits more likely than not would be realized.
Accordingly, in the three and twelve months ended February 2, 2013, we
released all of our valuation allowance against net deferred tax assets for
the U.S. In addition, income tax items exclude the tax benefit related to the
resolution of our Canada Revenue Agency examination in the twelve months ended
February 2, 2013, exclude the tax benefit from the utilization of federal and
state net operating losses, and assume a normalized tax rate of 40% for all
periods presented.

[j] 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 (loss) less non-recurring and other items divided by the Company’s
post-initial public offering share count. Adjusted diluted net income per
share is included in this press release because management 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 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@rh.com
 
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