Restoration Hardware 2012 Annual Report Download - page 138

RESTORATION HARDWARE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—NATURE OF BUSINESS
Restoration Hardware Holdings, Inc., a Delaware corporation, together with its subsidiaries (collectively,
the “Company”), is a luxury home furnishings retailer that offers a growing number of categories including
furniture, lighting, textiles, bathware, decorative accessories, outdoor and children’s furnishings. These products
are sold through the Company’s stores, catalogs and websites. As of February 2, 2013, the Company operated a
total of 71 retail stores and 13 outlet stores in 28 states, the District of Columbia and Canada, and had sourcing
operations in Shanghai and Hong Kong.
NOTE 2—ORGANIZATION
The Company was formed on August 18, 2011 and capitalized on September 2, 2011 as a holding company
for the purposes of facilitating an initial public offering of common equity and is a direct subsidiary of Home
Holdings, LLC, a Delaware limited liability company (“Home Holdings”).
On November 1, 2012, the Company acquired all of the outstanding shares of capital stock of Restoration
Hardware, Inc., a Delaware corporation, and Restoration Hardware, Inc. became a direct, wholly owned
subsidiary of the Company. Outstanding units issued by Home Holdings under its equity compensation plan,
referred to as the Team Resto Ownership Plan, were replaced with common stock of the Company at the time of
its initial public offering. Restoration Hardware, Inc. was a direct, wholly owned subsidiary of Home Holdings
prior to the Company’s initial public offering. These transactions are referred to as the “Reorganization.” As a
result of these transactions, as of November 1, 2012, 32,188,891 shares of the Company’s common stock were
outstanding.
On November 7, 2012, the Company completed its initial public offering. In connection with its initial
public offering, the Company issued and sold 4,782,609 shares of its common stock at a price of $24.00 per
share. In addition, certain of the Company’s stockholders sold an aggregate of 381,723 shares of common stock
held by them in the initial public offering. Further, certain stockholders sold an additional aggregate of 774,650
shares of common stock held by them pursuant to the exercise by the offering’s underwriters of their option to
purchase additional shares. The Company did not receive any proceeds from the sale of stock by its stockholders.
As a result of the initial public offering, the Company raised a total of $114.8 million in gross proceeds, or
approximately $106.7 million in net proceeds after deducting underwriting discounts and commissions of $8.1
million. The Company capitalized $9.1 million of offering costs associated with its initial public offering, which
are included in additional paid-in capital and offset against the initial public offering proceeds.
Prior to the Reorganization, Restoration Hardware Holdings, Inc. had not engaged in any business or other
activities except in connection with its formation and the Reorganization. Accordingly, all financial and other
information herein relating to periods prior to the completion of the Reorganization is that of Restoration
Hardware, Inc.
NOTE 3—CHANGE IN ACCOUNTING PRINCIPLE—STOCK-BASED COMPENSATION
In the third quarter of 2012, the Company changed its policy for recognizing stock-based compensation
expense from the graded method of accounting to the straight-line method of accounting for its time-based units
(or service-only awards). The Company previously disclosed this change in accounting policy and retrospectively
restated its consolidated financial statements for such change in its audited consolidated financial statements for
the fiscal year ended January 28, 2012 and unaudited condensed consolidated financial statements for the six
months ended July 28, 2012, which are included in the Company’s final prospectus filed with the Securities and
Exchange Commission on November 5, 2012.
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