Restoration Hardware 2012 Annual Report Download - page 120

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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. In addition, as of the end of fiscal 2012, our U.S.
operations achieved a position of cumulative profits (adjusted for permanent differences) 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 the fourth fiscal quarter of 2012, we released all of
our U.S. valuation allowance of $57.2 million against net deferred tax assets.
(4) In the third quarter of fiscal 2012, we changed our policy for recognizing stock-based compensation expense
from the graded method of accounting to the straight-line method of accounting for our pre-Reorganization
time-based units (or service-only awards). This change in accounting had the same impact on our selling,
general and administrative expenses and net income (loss) for all periods presented. The table below
presents the impact to our net income (loss) as a result of this change in accounting policy. See Note 3—
Change in Accounting Principle—Stock-Based Compensation to our audited consolidated financial
statements.
Fiscal 2011 Fiscal 2012
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
(in thousands)
Net income (loss)—as reported $(6,327) $7,467 $(4,857) $24,058 $(3,764) $17,753
Change in accounting policy adjustment 109 115 27 (4) 36 (137)
Net income (loss)—as revised $(6,218) $7,582 $(4,830) $24,054 $(3,728) $17,616
(5) The following table presents a reconciliation of net income (loss), the most directly comparable GAAP
financial measure, to EBITDA and adjusted EBITDA for the periods indicated below. For further discussion
of the use of EBITDA and adjusted EBITDA, see footnote 10 to the table included in “Selected Historical
Consolidated Financial and Operating Data.”
Fiscal 2011 Fiscal 2012
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(in thousands)
Net income (loss) $(6,218) $ 7,582 $ (4,830) $24,054 $(3,728) $17,616 $ 1,685 $ (28,362)
Depreciation and amortization 7,386 7,597 7,373 6,830 6,424 6,468 6,593 7,263
Interest expense 899 989 1,598 1,648 1,575 1,479 1,544 1,178
Income tax expense (benefit) (204) 987 (871) 1,209 56 567 (1,235) (61,411)
EBITDA 1,863 17,155 3,270 33,741 4,327 26,130 8,587 (81,332)
Management and board
fees (a) 1,198 1,198 1,149 7,170 889 1,198 1,198 973
Non-cash and other one-time
compensation (b) 389 487 6,687 344 387 351 364 115,055
Terminated operations (c) 1,666 — 14 (100) — — — —
Severance and other related
costs (d) 28 — 443 150 — — — —
Lease termination costs (e) — 3,571 (461) — 575 (961) — —
Special committee
investigation (f) —————1,989 2,789 —
Initial public offering costs (g) ———————10,755
Anti-dumping exposure (h) ———————3,250
Other adjustments allowable
under our agreements with
our stockholders (i) 189 3 — — (19) 31 35 —
Adjusted EBITDA $ 5,333 $22,414 $11,102 $41,305 $ 6,159 $28,738 $12,973 $ 48,701
64