Restoration Hardware 2012 Annual Report Download - page 156

operating loss carryforwards available from those years. There are no United States tax examinations currently in
progress. The Company may also be subject to audits in Canada for years 2004 and forward. During fiscal 2012,
the Canada Revenue Agency concluded, with no adjustments, its audit of Restoration Hardware Canada, Inc. for
the years ended 2006 and 2007 and for the period ended June 16, 2008.
NOTE 11—EARNINGS PER SHARE
On November 1, 2012, the Company acquired all of the outstanding shares of capital stock of Restoration
Hardware, Inc. 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. 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.
The weighted-average number of shares for fiscal 2011 is calculated by giving effect to the capitalization of
Restoration Hardware Holdings, Inc. on September 2, 2011, which resulted in the number of shares outstanding
increasing from 100 shares to 1,000 shares.
The weighted-average number of shares for fiscal 2012 excludes 6,020,152 million shares related to stock
options and other stock awards because their inclusion would have an anti-dilutive effect on earnings per share.
The Company did not have any anti-dilutive securities in fiscal 2011 or fiscal 2010 because all securities granted
in those periods were granted by Home Holdings.
NOTE 12—STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with applicable guidance, which
requires the Company to estimate the value of securities issued based upon an option-pricing model and
recognize this estimated value as compensation expense over the vesting periods.
Team Resto Ownership Plan
Home Holdings established the Team Resto Ownership Plan in fiscal 2009. Awards under the Team Resto
Ownership Plan were granted by the Home Holdings and were made up of the following:
• Time-based units—time-based units vested in annual installments, generally over a five-year graded
vesting period.
• Performance-based units—performance-based units vested based on a return on equity investment to
the Company’s investors between either two times and three times such investment or three times and
five times such investment.
All stock-based compensation expense associated with the grants of units by Home Holdings to the
Company’s directors, executive officers and employees was recorded by the Company.
On November 7, 2012, the Company completed its initial public offering and at the time of the initial public
offering, outstanding units under the Team Resto Ownership Plan, were replaced with common stock of the Company.
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