Restoration Hardware 2012 Annual Report Download - page 114

to the performance-based vesting of certain shares granted to Mr. Alberini and Mr. Friedman. The third
quarter of fiscal 2011 includes a $6.4 million compensation charge related to the repayment of loans owed
to Home Holdings by Gary Friedman, through the reclassification by Home Holdings of Mr. Friedman’s
Class A and Class A-1 ownership units into an equal number of Class A Prime and Class A-1 Prime
ownership units. Mr. Friedman served as our Chairman and Co-Chief Executive Officer at the time of such
loan repayment.
(c) Includes costs related to the restructuring of our Shanghai office location.
(d) Generally includes executive severance and other related costs.
(e) Includes costs related to impairment of long-lived assets related to our retail store operations.
(f) Includes lease termination costs for retail stores that were closed prior to their respective lease termination
dates. The lease termination amount in fiscal 2012 includes changes in estimates regarding liabilities for
future lease payments for closed stores.
(g) Represents costs related to our efforts to pursue an initial public offering.
(h) Represents legal and other professional fees incurred in connection with the investigation conducted by the
special committee of the board of directors relating to our former Chairman and Co-Chief Executive
Officer, Gary Friedman, and our subsequent remedial actions.
(i) 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.
(j) 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.
(k) As of the end of fiscal 2012, our U.S. operations achieved a position of cumulative profits for the most
recent three-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 fiscal 2012, we released all of our U.S. valuation
allowance against net deferred tax assets. In addition, income tax items exclude the tax benefit related to the
resolution of our Canada Revenue Agency examination in fiscal 2012, 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.
The following table sets forth our consolidated statement of operations data as a percentage of total
revenues.
Year Ended
February 2,
2013
January 28,
2012
January 29,
2011
Statement of Operations Data:
Net revenues 100.0% 100.0% 100.0%
Cost of goods sold 63.4 62.8 64.9
Gross profit 36.6 37.2 35.1
Selling, general and administrative expenses 42.4 34.4 35.5
Income (loss) from operations (5.8) 2.8 (0.4)
Interest expense (0.5) (0.5) (0.4)
Income (loss) before income taxes (6.3) 2.3 (0.8)
Income tax expense (benefit) (5.2) 0.1 0.1
Net income (loss) (1.1)% 2.2% (0.9)%
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