Restoration Hardware 2012 Annual Report Download - page 122

Download and view the complete annual report

Please find page 122 of the 2012 Restoration Hardware annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 180

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180

(6) Adjusted net income (loss) is a supplemental measure of financial performance that is not required by, or
presented in accordance with, GAAP. We define adjusted net income as consolidated net income (loss),
adjusted for the impact of certain non-recurring and other items that we do not consider representative of
our ongoing operating performance. Adjusted net income (loss) is included in this Form 10-K because
management believes that adjusted net income (loss) provides meaningful supplemental information for
investors regarding the performance of our business and facilitates a meaningful evaluation of actual results
on a comparable basis with historical results. Our management uses this non-GAAP financial measure in
order to have comparable financial results to analyze changes in our underlying business from quarter to
quarter. The following table presents a reconciliation of net income (loss), the most directly comparable
GAAP financial measure, to adjusted net income (loss) for the periods indicated below.
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)
Adjustments pre-tax:
Management and board
fees (j) 1,198 1,198 1,149 7,170 889 1,198 1,198 973
Non-cash and other one-
time compensation (k) — — 6,350 — — — — 115,055
Terminated
operations (l) 1,666 — 14 (100) — — — —
Severance and other related
costs (m) 28 — 443 150 — — — —
Lease termination costs (n) — 3,571 (461) — 575 (961) — —
Special committee
investigation (o) — — — — — 1,989 2,789 —
Initial public offering
costs (p) — — — — — — — 10,755
Anti-dumping exposure (q) — — — — — — — 3,250
Subtotal adjusted items 2,892 4,769 7,495 7,220 1,464 2,226 3,987 130,033
Impact of income tax
items (r) 1,208 (4,348) (1,589) (11,784) 940 (7,597) (3,010) (77,515)
Adjusted net income (loss) $(2,118) $ 8,003 $ 1,076 $ 19,490 $(1,324) $12,245 $ 2,662 $ 24,156
(j) Includes fees and expenses paid in accordance with our management services agreement with Home
Holdings, as well as fees and expense reimbursements paid to our board of directors prior to the initial
public offering.
(k) The fourth quarter of fiscal 2012 includes a $92.0 million non-cash compensation charge related to
equity grants at the time of the Reorganization, as well as a non-cash compensation charge of
$23.1 million related 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.
(l) Includes costs related to the restructuring of our Shanghai office location.
(m) Generally includes executive severance and other related costs.
66