RH, balance sheet: debt

US$ in thousands

	Jan 28, 2023	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018
Convertible senior notes due 2024, net	—)	3,600)	—)	—)	—)	—)
Convertible senior notes due 2023, net	1,696)	9,389)	2,354)	—)	—)	—)
Convertible senior notes due 2020, net	—)	—)	—)	290,532)	—)	—)
Convertible senior notes due 2019, net	—)	—)	—)	—)	343,789)	—)
Current portion of term loans	25,000)	20,000)	—)	—)	—)	—)
Current finance lease liabilities	17,007)	15,511)	14,671)	9,188)	1,074)	471)
Current portion of equipment promissory notes	1,160)	13,625)	22,747)	22,009)	892)	6,033)
Asset based credit facility	—)	—)	—)	—)	57,500)	199,970)
Term loan B, net	1,936,529)	1,953,203)	—)	—)	—)	—)
Term loan B-2, net	469,245)	—)	—)	—)	—)	—)
Term loan, net	—)	—)	—)	—)	—)	79,499)
Real estate loans	17,909)	—)	—)	—)	—)	—)
Convertible senior notes due 2024, net	41,724)	184,461)	281,454)	264,982)	—)	—)
Convertible senior notes due 2023, net	—)	59,002)	282,956)	266,658)	249,151)	—)
Convertible senior notes due 2020, net	—)	—)	—)	—)	271,157)	252,994)
Convertible senior notes due 2019, net	—)	—)	—)	—)	—)	327,731)
Non-current finance lease liabilities	653,050)	560,550)	485,481)	442,988)	7,720)	7,509)
Non-current portion of equipment promissory notes, net	—)	1,129)	14,614)	31,053)	—)	—)
Total debt (carrying amount)	3,163,320)	2,820,470)	1,104,277)	1,327,410)	931,283)	874,207)

Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).

The analysis of the debt data over the reported years reveals several notable trends in the company's debt structure and its evolution over time.

Convertible Senior Notes: The convertible senior notes due 2019 show a presence in the earlier years, specifically 2018 and 2019, after which they disappear from the data, indicating possible repayment or refinancing.; The notes due 2020 initially appear with significant amounts through 2018 and 2019 but cease to be reported beyond 2019, suggesting these were retired or converted around 2020.; The notes due 2023 and 2024 exhibit fluctuating amounts; the 2023 notes appear increasingly prominent in 2019 through 2021, then reduce significantly by 2023, while the 2024 notes show a later emergence starting in 2020, peaking in 2021, then declining sharply by 2023. This pattern might reflect refinancing activities or conversions.

Term Loans and Credit Facilities: There is a notable shift in term loan structures, with a “Term loan” reported only in 2018, followed by the introduction of "Term loan B" and "Term loan B-2" in later years, particularly 2022 and 2023. The substantial amounts in Term loan B reflect increased reliance on longer-term borrowing or restructuring of existing debt.; The asset-based credit facility is significant in 2018 and 2019 but is not reported in subsequent years, possibly indicating repayment or a shift away from this type of borrowing.; Real estate loans appear only in 2023, indicating new borrowing in this category.

Current and Non-current Finance Lease Liabilities: Both current and non-current finance lease liabilities demonstrate a consistent upward trend over the years. Current finance lease liabilities increased from a modest amount in 2018 to notably higher levels by 2023, indicating rising short-term lease obligations.; Non-current finance lease liabilities exhibit a particularly sharp increase starting in 2020, continuing through 2023, suggesting a growing commitment to longer-term lease liabilities during the period.

Equipment Promissory Notes: The current portion of equipment promissory notes shows significant fluctuations, with high amounts in 2020 and 2021, but a marked decrease in 2023. Conversely, non-current portions are reported only in 2020 through 2022 and diminish sharply by 2023, implying repayment or restructuring of these notes.

Current Portion of Term Loans and Overall Debt: The current portion of term loans emerges in 2022 and rises by 2023, indicating increasing near-term debt obligations.; The total debt carrying amount increases steadily from 2018 through 2023, with a substantial rise in 2022 and 2023. The marked growth in total debt in these later years suggests significant new borrowings or refinancing activities that have increased the company's leverage.

Overall, the data reflects a dynamic debt profile with shifts from convertible notes maturing or converting, expansion in term loans, growth in finance lease liabilities, and fluctuations in promissory notes. The total debt rising considerably in recent years points to increased funding needs or strategic financial restructuring.

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	Jan 28, 2023
Selected Financial Data (US$ in thousands)
Convertible senior notes due 2024	37,351)
Convertible senior notes due 2023	1,622)
Convertible senior notes due 2020	—)
Convertible senior notes due 2019	—)
Asset based credit facility	—)
Term loan B	1,961,056)
Term loan B-2	500,215)
Term loan	—)
Real estate loans	17,909)
Equipment promissory notes	1,160)
Finance lease liabilities	670,057)
Total debt (fair value)	3,189,370)
Financial Ratio
Debt, fair value to carrying amount ratio	1.01

Based on: 10-K (reporting date: 2023-01-28).

Weighted-average interest rate on debt: 6.66%

Interest rate	Debt amount¹	Interest rate × Debt amount
6.88%	1,956,529)	134,609)
7.67%	474,245)	36,375)
4.56%	1,160)	53)
5.32%	670,057)	35,647)
Total	3,101,991)	206,684)
6.66%

Based on: 10-K (reporting date: 2023-01-28).

¹ US$ in thousands

² Weighted-average interest rate = 100 × 206,684 ÷ 3,101,991 = 6.66%

RH, interest costs incurred

US$ in thousands

12 months ended:	Jan 28, 2023	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018
Interest expense	151,730)	66,883)	70,648)	88,509)	75,908)	63,084)
Capitalized interest for capital projects	4,903)	12,208)	5,574)	4,930)	3,139)	3,304)
Interest costs incurred	156,633)	79,091)	76,222)	93,439)	79,047)	66,388)

Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).

The data on annual interest costs incurred reveals several notable trends over the six-year period ending in early 2023.

Interest Expense: The interest expense exhibited a generally upward trend from 2018 to 2020, increasing from 63,084 thousand USD to 88,509 thousand USD. However, in 2021 and 2022, the values decreased to 70,648 thousand USD and 66,883 thousand USD respectively, indicating a reduction in interest expense during those years. In the most recent year, 2023, there was a significant surge, with interest expense rising sharply to 151,730 thousand USD, more than doubling the figure from the prior year.
Capitalized Interest for Capital Projects: The capitalized interest showed some fluctuations during the period. Starting at 3,304 thousand USD in 2018, the value slightly decreased to 3,139 thousand USD in 2019. Thereafter, it increased considerably, peaking at 12,208 thousand USD in 2022, followed by a decline to 4,903 thousand USD in 2023. The sharp increase in 2022 suggests intensified capital investment activity during that year, while the drop in 2023 indicates a reduction in capital project capitalization of interest.
Interest Costs Incurred: The total interest costs incurred, which combine interest expense and capitalized interest, broadly mirrors the patterns observed in the previous two items. Starting from 66,388 thousand USD in 2018, the costs rose steadily through 2020 to 93,439 thousand USD. A decline occurred in 2021 to 76,222 thousand USD, followed by a slight increase in 2022 to 79,091 thousand USD. The most pronounced change is seen in 2023, with total interest costs more than doubling to 156,633 thousand USD compared to the prior year. This indicates significantly higher borrowing costs or increased debt levels in the most recent period.

Overall, the data indicates a period of rising interest-related costs until 2020, a subsequent phase of moderate decline and stabilization through 2021 and 2022, and a sharp increase in 2023. The spike in 2023 for both interest expense and total interest costs suggests a substantial change in financing costs or debt structure that year. The fluctuating capitalized interest values also suggest varying levels of investment in capital projects over the period, peaking in 2022 and reducing in 2023.

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	Jan 28, 2023	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018
Selected Financial Data (US$ in thousands)
Net income	528,642)	688,546)	271,815)	220,375)	150,639)	2,180)
Add: Income tax expense	(91,358)	133,558)	104,598)	48,807)	30,514)	27,971)
Add: Interest expense	151,730)	66,883)	70,648)	88,509)	75,908)	63,084)
Earnings before interest and tax (EBIT)	589,014)	888,987)	447,061)	357,691)	257,061)	93,235)

Interest costs incurred	156,633)	79,091)	76,222)	93,439)	79,047)	66,388)
Financial Ratio With and Without Capitalized Interest
Interest coverage ratio (without capitalized interest)¹	3.88	13.29	6.33	4.04	3.39	1.48
Adjusted interest coverage ratio (with capitalized interest)²	3.76	11.24	5.87	3.83	3.25	1.40

Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).

2023 Calculations

¹ Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= 589,014 ÷ 151,730 = 3.88

² Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= 589,014 ÷ 156,633 = 3.76

The financial data reveals notable fluctuations in the interest coverage ratios over the analyzed periods. Both the interest coverage ratio without capitalized interest and the adjusted interest coverage ratio with capitalized interest demonstrate general upward trends until the year ending January 29, 2022, followed by significant declines in the subsequent year.

Interest coverage ratio (without capitalized interest): This ratio increased steadily from 1.48 in early 2018 to a peak of 13.29 by early 2022, indicating an improving ability to cover interest obligations from operating earnings. However, in the year ending January 28, 2023, this ratio dropped sharply to 3.88, suggesting a reduction in earnings relative to interest expense or an increase in interest costs.
Adjusted interest coverage ratio (with capitalized interest): Similarly, the adjusted ratio rose from 1.40 in early 2018 to a high of 11.24 in early 2022. The pattern closely mirrors the unadjusted ratio but is consistently slightly lower, reflecting the impact of capitalized interest on coverage capacity. The ratio also declined markedly to 3.76 by the latest period, indicating a comparable decrease in coverage when capitalized interest is included.

Overall, the data shows a strong improvement in the company’s interest coverage ability over four years, followed by a significant weakening in the most recent year. This trend could reflect changes in earnings performance, increased interest expenses, or shifts in capitalized interest policies. Close monitoring of these ratios is advised to assess ongoing financial risk related to debt servicing capacity.

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RH (NYSE:RH)

Analysis of Debt

Total Debt (Carrying Amount)

Total Debt (Fair Value)

Weighted-average Interest Rate on Debt

Interest Costs Incurred

Adjusted Interest Coverage Ratio