XML 38 R23.htm IDEA: XBRL DOCUMENT
v3.19.1

Stock-Based Compensation | 12 Months Ended
--- | ---
Feb. 02, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stock-Based Compensation | NOTE 16—STOCK-BASED COMPENSATION The Company estimates the value of equity grants based upon an OPM 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 $24.0 million, $50.7 million and $29.2 million in fiscal 2018, fiscal 2017 and fiscal 2016, respectively. No stock-based compensation cost has been capitalized in the accompanying consolidated financial statements. 2012 Stock Incentive Plan and 2012 Stock Option Plan The Restoration Hardware 2012 Stock Incentive Plan (the “Stock Incentive Plan”) was adopted on November 1, 2012. The Stock Incentive Plan provides for the grant of incentive stock options to the Company’s employees, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, cash-based awards and any combination thereof to the Company’s employees, directors and consultants and the Company’s parent and subsidiary corporations’ employees, directors and consultants. The Restoration Hardware 2012 Stock Option Plan (the “Option Plan”) was adopted on November 1, 2012 and on such date 6,829,041 fully vested options were granted under this plan to certain of the Company’s employees and advisors. Aside from these options granted on November 1, 2012, no other awards will be granted under the Option Plan. As of February 3, 2018, there were a total of 495,653 shares issuable under the Stock Incentive Plan. On February 5, 2018, an additional 430,347 shares became issuable under the Stock Incentive Plan in accordance with the Stock Incentive Plan evergreen provision, increasing the total number of shares issuable under the Stock Incentive Plan to 926,000. Awards under the plans reduce the number of shares available for future issuance. Cancellations and forfeitures of awards previously granted under the Stock Incentive Plan increase the number of shares available for future issuance. Cancellations and forfeitures of awards previously granted under the Option Plan are immediately retired and are no longer available for future issuance. The number of shares available for future issuance under the Stock Incentive Plan as of February 2, 2019 was 1,419,552. Shares issued as a result of award exercises under the Stock Incentive Plan and Option Plan will be funded with the issuance of new shares. On February 4, 2019, an additional 409,556 shares became issuable under the Stock Incentive Plan in accordance with the Stock Incentive Plan evergreen provision. 2012 Stock Incentive Plan and 2012 Stock Option Plan—Stock Options A summary of stock option activity under the Stock Incentive Plan and the Option Plan for fiscal 2018 is as follows:
|  | Options |  |  | Weighted-Average Exercise Price |
Outstanding—February 3, 2018 |  |  | 8,616,578 |  |  | $ | 50.31 |
Granted |  |  | 428,350 |  |  |  | 123.13 |
Exercised |  |  | (882,272 | ) |  |  | 49.90 |
Cancelled |  |  | (663,240 | ) |  |  | 51.91 |
Outstanding—February 2, 2019 |  |  | 7,499,416 |  |  | $ | 54.37 |
The fair value of stock options issued was estimated on the date of grant using the following assumptions:
|  | Year Ended |
|  | February 2, |  |  | February 3, |  |  | January 28, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Expected volatility |  |  | 54.7 | % |  |  | 48.3 | % |  |  | 44.9 | %
Expected life (years) |  |  | 6.7 |  |  |  | 9.3 |  |  |  | 6.5 |
Risk-free interest rate |  |  | 2.9 | % |  |  | 2.2 | % |  |  | 1.4 | %
Dividend yield |  |  | — |  |  |  | — |  |  |  | — |
A summary of additional information about stock options is as follows:
|  | Year Ended |
|  | February 2, |  |  | February 3, |  |  | January 28, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Weighted-average fair value per share of stock options granted |  | $ | 69.60 |  |  | $ | 24.24 |  |  | $ | 15.88 |
Aggregate intrinsic value of stock options exercised (in thousands) |  |  | 77,311 |  |  |  | 27,362 |  |  |  | 1,238 |
Fair value of stock options vested (in thousands) |  |  | 13,915 |  |  |  | 38,402 |  |  |  | 13,726 |
Information about stock options outstanding, vested or expected to vest, and exercisable as of February 2, 2019 is as follows:
|  | Options Outstanding |  |  | Options Exercisable |
Range of Exercise Prices |  | Number of Options |  |  | Weighted- Average Remaining Contractual Life (in years) |  |  | Weighted- Average Exercise Price |  |  | Number of Options |  |  | Weighted- Average Exercise Price |
$25.39 - $44.52 |  |  | 1,541,706 |  |  |  | 6.83 |  |  | $ | 34.54 |  |  |  | 583,526 |  |  | $ | 33.17 |
$45.21 - $45.82 |  |  | 29,540 |  |  |  | 8.56 |  |  |  | 45.23 |  |  |  | 4,140 |  |  |  | 45.24 |
$46.50 - $46.50 |  |  | 2,976,826 |  |  |  | 3.74 |  |  |  | 46.50 |  |  |  | 2,976,826 |  |  |  | 46.50 |
$47.53 - $61.30 |  |  | 1,331,277 |  |  |  | 7.58 |  |  |  | 52.69 |  |  |  | 1,216,457 |  |  |  | 51.99 |
$64.65 - $90.92 |  |  | 1,219,817 |  |  |  | 4.77 |  |  |  | 77.54 |  |  |  | 1,089,780 |  |  |  | 76.52 |
$91.69 - $159.00 |  |  | 400,250 |  |  |  | 8.94 |  |  |  | 124.97 |  |  |  | 27,650 |  |  |  | 93.63 |
Total |  |  | 7,499,416 |  |  |  | 5.52 |  |  | $ | 54.37 |  |  |  | 5,898,379 |  |  | $ | 52.08 |
Vested or expected to vest |  |  | 6,988,863 |  |  |  | 5.34 |  |  | $ | 52.86 |  |  |  |  |  |  |  |  |
The aggregate intrinsic value of options outstanding, options vested or expected to vest, and options exercisable as of February 2, 2019 was $597.3 million, $565.9 million, and $481.1 million, respectively. Stock options exercisable as of February 2, 2019 had a weighted-average remaining contractual life of 5.02 years. The Company recorded stock-based compensation expense for stock options of $13.6 million, $37.5 million and $16.3 million in fiscal 2018, fiscal 2017 and fiscal 2016, respectively. The fiscal 2017 expense of $37.5 million includes the $23.9 million of expense associated with the option grant to Mr. Friedman in May 2017. Refer to Chairman and Chief Executive Officer Option Grant below. As of February 2, 2019, the total unrecognized compensation expense related to unvested options was $22.0 million, which is expected to be recognized on a straight-line basis over a weighted-average period of 2.62 years. 2012 Stock Incentive Plan—Restricted Stock Awards The Company grants restricted stock awards, which include restricted stock and restricted stock units, to its employees and members of its Board of Directors. A summary of restricted stock award activity for fiscal 2018 is as follows:
|  | Awards |  |  | Weighted- Average Grant Date Fair Value |  |  | Intrinsic Value |
Outstanding—February 3, 2018 |  |  | 802,713 |  |  | $ | 52.65 |  |  |  |  |
Granted |  |  | 12,005 |  |  |  | 111.38 |  |  |  |  |
Released |  |  | (194,974 | ) |  |  | 58.87 |  |  |  |  |
Cancelled |  |  | (204,275 | ) |  |  | 50.68 |  |  |  |  |
Outstanding—February 2, 2019 |  |  | 415,469 |  |  | $ | 52.40 |  |  | $ | 55,523,277 |
A summary of additional information about restricted stock awards is as follows:
|  | Year Ended |
|  | February 2, |  |  | February 3, |  |  | January 28, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Weighted-average fair value per share of awards granted |  | $ | 111.38 |  |  | $ | 55.31 |  |  | $ | 40.18 |
Grant date fair value of awards released (in thousands) |  |  | 11,477 |  |  |  | 16,839 |  |  |  | 5,170 |
The Company recorded stock-based compensation expense for restricted stock awards of $10.0 million, $12.8 million and $12.6 million in fiscal 2018, fiscal 2017 and fiscal 2016, respectively. As of February 2, 2019, the total unrecognized compensation expense related to unvested restricted stock awards was $10.1 million, which is expected to be recognized on a straight-line basis over a weighted-average period of 2.11 years. Chairman and Chief Executive Officer Option Grant On May 2, 2017, the Company’s Board of Directors granted Mr. Friedman an option to purchase 1,000,000 shares of the Company’s common stock with an exercise price equal to $50 per share. The option contains dual-condition restrictions consisting of both time-based service restrictions over four years and performance-based restrictions linked to achieving the Company’s common stock price objectives of $100, $125 and $150 per share. The option is fully vested on the date of grant but the shares underlying the option remain subject to transfer restrictions to the extent the performance-based and time-based requirements have not been met. The option resulted in a non-cash stock compensation charge of $23.9 million in fiscal 2017, which is included in the $37.5 million stock-based compensation expense for stock options recorded in fiscal 2017 discussed above. Time-Based Restrictions The time-based restrictions are measured over an initial four year service period from the date of the award and these restrictions will lapse at the end of each of these first four years at a rate of 250,000 shares per year if (i) Mr. Friedman remains employed at the end of such year, and (ii) the stock price goals have been achieved in such year as described further below. Performance-Based Restrictions The stock price objectives are measured each year and are set at prices for the Company’s common stock of $100, $125 and $150 per share. If all three stock price objectives are met in the first performance year, restrictions will lapse as to 250,000 shares in aggregate at the end of such year, with 83,333 shares tied to a $100 price per share, 83,333 shares tied to a $125 price per share and 83,334 shares tied to a $150 price per share. The same price performance tests are applied in the second year of performance such that restrictions will lapse for an additional 250,000 shares at the end of the second year and then again as to an additional 250,000 shares at the end of each of the third and fourth years so long as Mr. Friedman remains employed at the end of each year. To the extent that any of the price performance objectives is not reached within one of these first four performance years, the stock price objective can be achieved in any subsequent year until the 8th anniversary of the date of grant. 2012 Stock Incentive Plan—Grant to Waterworks Associates On May 27, 2016, the date of the Company’s acquisition of Waterworks, the Company granted stock options to certain Waterworks associates under the Stock Incentive Plan to purchase 322,784 shares of its common stock, with an exercise price of $33.54 per share, which is equal to the closing price of the Company’s common stock on the date of grant. These options are fully vested as of the date of grant but any shares issued upon exercise of such options will be subject to selling restrictions which are scheduled to lapse in five equal installments on the first, second, third, fourth and fifth anniversaries of the grant date. The fully vested options resulted in a non-cash stock-based compensation charge of $3.7 million in fiscal 2016, which is included in the $16.3 million stock-based compensation expense for stock options recorded in fiscal 2016 discussed above. Rollover Units In connection with the acquisition of Waterworks, $1.5 million rollover units in the Waterworks subsidiary (the “Rollover Units”) were recorded as part of the transaction. The Rollover Units are subject to the terms of the Waterworks LLC agreement, including redemption rights at an amount equal to the greater of (i) the $1.5 million remitted as consideration in the business combination or (ii) an amount based on the percentage interest represented in the overall valuation of the Waterworks subsidiary (the “Appreciation Rights”). The Appreciation Rights are measured at fair value and are subject to fair value measurements during the expected life of the Rollover Units, with changes to fair value recorded in the consolidated statements of income. The fair value of the Appreciation Rights is determined based on an OPM. The Company did not record any expense related to the Appreciation Rights during fiscal 2018, fiscal 2017 or fiscal 2016. As of both February 2, 2019 and February 3, 2018, the liability associated with the Rollover Units and related Appreciation Rights was $1.5 million, which is included in other non-current obligations on the consolidated balance sheets. Profit Interests In connection with the acquisition of Waterworks, profit interests units in the Waterworks subsidiary (the “Profit Interests”) were issued to certain Waterworks associates. The Profit Interests are measured at their grant date fair value and expensed on a straight-line basis over their expected life, or five years. The Profit Interests are subject to fair value measurements during their expected life, with changes to fair value recorded in the consolidated statements of income. The fair value of the Profit Interests is determined based on an OPM. The Company recorded $0.4 million, $0.4 million and $0.3 million related to the Profit Interests in fiscal 2018, fiscal 2017 and fiscal 2016, respectively, which is included in selling, general and administrative expenses on the consolidated statements of income. As of February 2, 2019 and February 3, 2018, the liability associated with the Profit Interests was $1.1 million and $0.7 million, respectively, which is included in other non-current obligations on the consolidated balance sheets.

X
- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsSharebasedPaymentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration