The Company defines reportable and operating segments on the same basis that it uses to evaluate performance internally by the CODM. The Company has determined that the Chief Executive Officer is its CODM. As of February 2, 2019, the Company had two operating segments: RH Segment and Waterworks. The two operating segments include all sales channels accessed by the Company’s customers, including sales through catalogs, websites, stores and the commercial channel.

The Company’s two operating segments are strategic business units that offer products for the home furnishings customer. While RH Segment and Waterworks have a shared management team and customer base, the Company has determined that their results cannot be aggregated as they do not share similar economic characteristics, as well as due to other quantitative factors.

The Company uses operating income to evaluate segment profitability. Operating income is defined as net income before interest expense—net, goodwill and tradename impairment, loss on extinguishment of debt and income tax expense.

Prior to the Waterworks acquisition, the Company had one reportable segment. As the Company’s acquisition of Waterworks was completed on May 27, 2016, reportable segment financial information for Waterworks below represents thirty-five weeks of results for fiscal 2016, whereas the RH Segment results represent fifty-two weeks for fiscal 2016. The results for fiscal 2017 include fifty-three weeks for both the RH Segment and Waterworks and the results for fiscal 2018 include fifty-two weeks for both the RH Segment and Waterworks.

The following table presents the statements of income metrics reviewed by the CODM to evaluate performance internally or as required under ASC 280—Segment Reporting (in thousands):

	Year Ended
	February 2,						February 3,						January 28,
	2019						2018						2017
	RH Segment		Waterworks		Total		RH Segment		Waterworks		Total		RH Segment		Waterworks		Total
Net revenues	$	2,375,472	$	130,181	$	2,505,653	$	2,319,332	$	120,842	$	2,440,174	$	2,060,044	$	74,827	$	2,134,871
Gross profit		949,307		51,540		1,000,847		801,999		47,068		849,067		656,191		23,596		679,787
Depreciation and amortization		69,608		4,738		74,346		65,666		4,469		70,135		54,480		2,515		56,995

The following table presents the balance sheet metrics as required under ASC 280—Segment Reporting (in thousands):

	February 2,						February 3,
	2019						2018
	RH Segment		Waterworks		Total		RH Segment		Waterworks		Total
Goodwill ⁽¹⁾	$	124,379	$	—	$	124,379	$	124,448	$	17,445	$	141,893
Tradenames, trademarks and domain names ⁽²⁾		48,563		37,459		86,022		48,563		52,100		100,663
Total assets		1,707,101		98,933		1,806,034		1,608,290		124,576		1,732,866

The Company uses segment operating income to evaluate segment performance and allocate resources. Segment operating income excludes (i) severance costs associated with a reorganizations, including the closures of distribution centers and the Dallas customer call center as part of the Company’s supply chain reorganization, (ii) asset impairments and lease losses, (iii) disposals of inventory and property and equipment, lease related charges, inventory transfer costs and other costs and adjustments associated with distribution center closures, (iv) product recall accruals and adjustments, (v) non-cash amortization of the inventory fair value adjustment recorded in connection with the acquisition of Waterworks, (vi) a favorable legal settlement, net of legal expenses, (vii) a non-cash compensation charge related to a fully vested option grant made to Mr. Friedman in May 2017, (viii) the release of the remaining reserve for potential claims regarding anti-dumping duties which the Company believes have lapsed, (ix) the gain on sale of building and land for one of the Company’s previously owned retail galleries, (x) charges incurred for the estimated cumulative impact of coupons redeemed in connection with a legal claim, (xi) impairment recorded due to the Company committing to a plan to sell its aircraft and (xii) costs incurred in connection with the acquisition of Waterworks including professional fees. These items are excluded from segment operating income in order to provide better transparency of segment operating results. Accordingly, these items are not presented by segment because they are excluded from the segment profitability measure that management reviews.

The following table presents segment operating income (loss) and consolidated income before income taxes (in thousands):

	Year Ended
	February 2,			February 3,			January 28
	2019			2018			2017
Operating income:
RH Segment	$	306,068		$	173,414		$	105,274
Waterworks		(1,155	)		(2,116	)		(2,360	)
Reorganization related costs		(9,977	)		(949	)		(5,698	)
Asset impairments and lease losses		(7,218	)		(4,417	)		(12,743	)
Distribution center closures		(1,778	)		(4,846	)		—
Recall accrual		(1,619	)		(7,707	)		(4,615	)
Impact of inventory step-up		(380	)		(2,527	)		(6,835	)
Legal settlement		5,289			—			—
Non-cash compensation		—			(23,872	)		(3,672	)
Anti-dumping exposure		—			2,202			—
Gain on sale of building and land		—			2,119			—
Legal claim		—			—			(8,701	)
Aircraft impairment		—			—			(4,767	)
Acquisition related costs		—			—			(2,847	)
Income from operations		289,230			131,301			53,036
Interest expense—net		75,074			62,570			44,482
Goodwill and tradename impairment		32,086			33,700			—
Loss on extinguishment of debt		917			4,880			—
Income before income taxes	$	181,153		$	30,151		$	8,554

The Company classifies its sales into furniture and non-furniture product lines. Furniture includes both indoor and outdoor furniture. Non-furniture includes lighting, textiles, fittings, fixtures, surfaces, accessories and home décor. Net revenues in each category were as follows (in thousands):

	Year Ended
	February 2,		February 3,		January 28,
	2019		2018		2017
Furniture	$	1,625,553	$	1,543,404	$	1,334,526
Non-furniture		880,100		896,770		800,345
Total net revenues	$	2,505,653	$	2,440,174	$	2,134,871

The Company is domiciled in the United States and primarily operates its retail and outlet stores in the United States. As of February 2, 2019, the Company operates 4 retail and 2 outlet stores in Canada and 1 retail store in the U.K. Revenues from Canadian and U.K. operations, and the long-lived assets in Canada and the U.K., are not material to the Company. Canada and U.K. geographic revenues are based upon revenues recognized at the retail store locations in the respective country.

No single customer accounted for more than 10% of the Company’s revenues in fiscal 2018, fiscal 2017 or fiscal 2016.