Restoration to restate earnings
March 25, 2002-- Home Textiles Today,
Weighed down by a fistful of one-time charges totaling $24.5 million as it pursues a repositioning strategy, specialty retailer Restoration Hardware recorded a fourth-quarter loss of $12.8 million, compared with a year-before profit of $9.5 million.
And raising the hackles of Wall Street and investors in an environment clouded by accounting issues at Enron and elsewhere, the retailer said it's restating sales for the past seven fiscal quarters, back to the beginning of 2000, because of the way it had improperly recorded furniture sales in the past. The company said it had been posting furniture revenue at the time of shipment, rather than the time of delivery to the customer.
Dismayed by the accounting issues, investors hammered the stock, driving the share price down by 6.6 percent, or $0.79 a share, to $11.21 in unusually heavy trading.
The restatement of revenues, the retailer said, "will result in a transfer of revenues and income from one period to the next for furniture that is in transit to the customer's home at the end of any period." The company emphasized that the restatement will have no effect on cash, receivables, accounts payable or debt. The company said it expects the anticipated effect of the change in revenues from amounts previously reported to be "no more than $5.0 million in any fiscal quarter and no more than $3.5 million for the recently closed 2002 fiscal year."
|Qtr. 2/2/02 (x000)||2002||2001||% CHG|
a-Fourth-quarter 12-month results include $24.5 million in one-time charges, including an inventory valuation adjustment of $5.3 million to write down discontinued merchandise; an accelerated depreciation charge of $2.0 million for store fixtures and leasehold assets which will be replaced in the March 2002 remodel program; a store asset impairment charge of $10.2 million to write down these assets to their fair value; and a $7.0 million valuation allowance on its deferred tax assets in the fourth quarter of 2001.
|Oper. income (EBIT)||(6,994)||18,366||—|
|Per share (diluted)||(0.53)||0.55||—|
|Average gross margin||21.5%||38.9%||—|
|Oper. income (EBIT)||(36,988)||448||—|
|Per share (diluted)||(1.75)||(0.20)||—|
|Average gross margin||21.2%||30.8%||—|
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