Restoration Hardware 2015 Annual Report Download - page 93

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90
The following number of options and restricted stock units were excluded from the calculation of diluted net income per share
because their inclusion would have been anti-dilutive:
Year Ended
January 30, January 31, February 1,
2016 2015 2014
Options ..................................................................................... 522,390 1,009,157 774,745
Restricted stock units ................................................................ 12,916 4,253 90,988
Total anti-dilutive stock-based awards ................................ 535,306 1,013,410 865,733
NOTE 14—SHARE REPURCHASES
Certain options and awards granted under the Company’s equity plans contain a repurchase right, which may be exercised at the
Company’s discretion in the event of the termination of an employee’s employment with the Company. The repurchases are settled
with the issuance of promissory notes that bear interest, which is paid annually. The Company’s repurchase and promissory note
issuance activity is as follows:
Year Ended
January 30, January 31, February 1,
2016 2015 2014
Shares repurchased ................................................................. 2,625 251,910 40,353
Fair value at purchase price (in thousands) ............................ $ 238 $ 16,575 $ 2,710
Weighted-average interest rate ............................................... 3% 5 % 5%
Weighted-average term ........................................................... 7 years 8 years 10 years
As of January 30, 2016 and January 31, 2015, the aggregate unpaid principal amount of the notes payable for share repurchases
was $19.5 million and $19.3 million, respectively, which is included in other non-current obligations on the consolidated balance
sheets. In fiscal 2015, fiscal 2014 and fiscal 2013, the Company recorded interest expense on the outstanding notes of $1.0 million,
$0.9 million and $0.1 million, respectively.
NOTE 15—STOCK-BASED COMPENSATION
The Company estimates the value of equity grants based upon an option-pricing model and recognizes this estimated value as
compensation expense over the vesting periods. The Company recognizes expense associated with performance-based awards when it
becomes probable that the performance condition will be met. Once it becomes probable that an award will vest, the Company
recognizes compensation expense equal to the number of shares which are probable to vest multiplied by the fair value of the related
shares measured at the grant date.
Stock-based compensation expense is included in selling, general and administrative expenses on the consolidated statements of
income. The Company recorded stock-based compensation expense of $24.2 million, $17.1 million and $67.6 million in fiscal 2015,
fiscal 2014 and fiscal 2013, respectively. No stock-based compensation cost has been capitalized in the accompanying consolidated
financial statements.
2012 Stock Option Plan and 2012 Stock Incentive Plan
In connection with the Reorganization, the Board of Directors adopted the Restoration Hardware 2012 Stock Option Plan (the
“Option Plan”), pursuant to which 6,829,041 fully vested options were granted in connection with the Reorganization to certain of the
Company’s employees and advisors, including Mr. Friedman and Mr. Alberini as Co-Chief Executive Officers at the time. The
options granted under this plan were fully vested upon the completion of the initial public offering and are subject to resale restrictions
whereby the holder may not sell the shares for a period of 20 years after the initial public offering, except as follows: (i) with respect
to 875,389 of these shares with an exercise price of $29.00 per share, such resale restrictions lapse over time in accordance with the
dates set forth in the applicable award agreement, and (ii) with respect to 5,953,652 shares with an exercise price of $46.50 per share,
such resale restrictions lapse on dates after the initial public offering on which the 10-day average closing price per share of the
Company’s common stock reaches specified levels ranging from $50.75 to $111.25 for at least 10 consecutive trading days. Aside
from these options granted in connection with the Reorganization, no other awards will be granted under the Option Plan.