The company priced that $300 million of 0% convertible senior notes due 2019 at $85.99, a 35% conversion premium over Wednesday's closing price. Initial purchasers will have a 13-day option to buy up to an additional $50 million of the senior notes with the same terms and conditions.
Under the terms of the transactions, Restoration Hardware shareholders aren't expected to experience dilution until the stock is above about $172, according to the company.
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TheStreet Ratings team rates RESTORATION HARDWARE HLDNGS as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate RESTORATION HARDWARE HLDNGS (RH) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 2.2%. Since the same quarter one year prior, revenues rose by 21.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RESTORATION HARDWARE HLDNGS has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, RESTORATION HARDWARE HLDNGS turned its bottom line around by earning $0.42 versus -$0.34 in the prior year. This year, the market expects an improvement in earnings ($2.27 versus $0.42).
- 36.04% is the gross profit margin for RESTORATION HARDWARE HLDNGS which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 0.49% trails the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Specialty Retail industry and the overall market, RESTORATION HARDWARE HLDNGS's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$57.22 million or 191.59% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: RH Ratings Report