What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-06-03 compared with 2020-12-10 · 135 added, 295 removed, 372 unchanged (54% of the section changed)

3 unchanged sentences

Amounts in thousands, except per share amounts)

2020 February 2,

2021 January 31,

Current assets

49 unchanged sentences

lululemon athletica inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Amounts in thousands, except per share amounts)

Quarter Ended Three Quarters Ended

November 1, 2020 November 3, 2019 November 1, 2020 November 3, 2019

Quarter Ended

Net revenue $ 1,226,465 $ 651,962

9 unchanged sentences

Net income $ 144,956 $ 28,632

Other comprehensive income:

Other comprehensive income (loss):

Foreign currency translation adjustment 43,636 ( 60,604 )

Comprehensive income $ 145,912 $ 135,862 $ 255,041 $ 346,246

Comprehensive income (loss) $ 188,592 $ ( 31,972 )

Basic earnings per share $ 1.11 $ 0.22

6 unchanged sentences

Amounts in thousands)

Quarter Ended November 1, 2020

Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total

Shares Shares Par Value Shares Par Value

Balance at August 2, 2020 5,393 5,393 $ — 124,917 $ 625 $ 358,414 $ 1,872,948 $ ( 230,885 ) $ 2,001,102

Net income 143,643 143,643

Foreign currency translation adjustment 2,269 2,269

Common stock issued upon exchange of exchangeable shares ( 177 ) ( 177 ) — 177 1 ( 1 ) —

Stock-based compensation expense 15,186 15,186

Common stock issued upon settlement of stock-based compensation 30 1 1,678 1,679

Shares withheld related to net share settlement of stock-based compensation ( 3 ) ( 1 ) ( 925 ) ( 926 )

Balance at November 1, 2020 5,216 5,216 $ — 125,121 $ 626 $ 374,352 $ 2,016,591 $ ( 228,616 ) $ 2,162,953

Quarter Ended November 3, 2019

Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total

Shares Shares Par Value Shares Par Value

Balance at August 4, 2019 7,381 7,381 $ — 122,921 $ 615 $ 329,915 $ 1,404,866 $ ( 228,017 ) $ 1,507,379

Net income 125,982 125,982

Foreign currency translation adjustment 9,880 9,880

Common stock issued upon exchange of exchangeable shares ( 421 ) ( 421 ) — 421 2 ( 2 ) —

Stock-based compensation expense 14,065 14,065

Common stock issued upon settlement of stock-based compensation 50 — 1,516 1,516

Shares withheld related to net share settlement of stock-based compensation ( 12 ) — ( 2,093 ) ( 2,093 )

Repurchase of common stock ( 44 ) — ( 66 ) ( 7,927 ) ( 7,993 )

Balance at November 3, 2019 6,960 6,960 $ — 123,336 $ 617 $ 343,335 $ 1,522,921 $ ( 218,137 ) $ 1,648,736

Three Quarters Ended November 1, 2020

Quarter Ended May 2, 2021

Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total

Shares Shares Par Value Shares Par Value

Balance at February 2, 2020 6,227 6,227 $ — 124,122 $ 621 $ 355,541 $ 1,820,637 $ ( 224,581 ) $ 1,952,218

Balance as of January 31, 2021 5,203 5,203 $ — 125,150 $ 626 $ 388,667 $ 2,346,428 $ ( 177,155 ) $ 2,558,566

Net income 144,956 144,956

Foreign currency translation adjustment 43,636 43,636

Common stock issued upon exchange of exchangeable shares ( 1,011 ) ( 1,011 ) — 1,011 5 ( 5 ) —

Stock-based compensation expense 14,932 14,932

2 unchanged sentences

Repurchase of common stock ( 270 ) ( 2 ) ( 451 ) ( 83,378 ) ( 83,831 )

Balance at November 1, 2020 5,216 5,216 $ — 125,121 $ 626 $ 374,352 $ 2,016,591 $ ( 228,616 ) $ 2,162,953

Three Quarters Ended November 3, 2019

Balance as of May 2, 2021 5,203 5,203 $ — 125,069 $ 625 $ 364,743 $ 2,408,006 $ ( 133,519 ) $ 2,639,855

Quarter Ended May 3, 2020

Exchangeable Stock Special Voting Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total

Shares Shares Par Value Shares Par Value

Balance at February 3, 2019 9,332 9,332 $ — 121,600 $ 608 $ 315,285 $ 1,346,890 $ ( 216,808 ) $ 1,445,975

Balance as of February 2, 2020 6,227 6,227 $ — 124,122 $ 621 $ 355,541 $ 1,820,637 $ ( 224,581 ) $ 1,952,218

Net income 28,632 28,632

5 unchanged sentences

Repurchase of common stock ( 369 ) ( 2 ) ( 539 ) ( 63,122 ) ( 63,663 )

Balance at November 3, 2019 6,960 6,960 $ — 123,336 $ 617 $ 343,335 $ 1,522,921 $ ( 218,137 ) $ 1,648,736

Balance as of May 3, 2020 5,482 5,482 $ — 124,717 $ 624 $ 334,201 $ 1,786,147 $ ( 285,185 ) $ 1,835,787

See accompanying notes to the unaudited interim consolidated financial statements

2 unchanged sentences

Amounts in thousands)

Three Quarters Ended

November 1, 2020 November 3, 2019

Quarter Ended

May 2, 2021 May 3, 2020

Cash flows from operating activities

17 unchanged sentences

Other current and non-current liabilities 4,554 16,121

Net cash provided by operating activities 85,404 95,106

Net cash provided by (used in) operating activities 214,109 ( 121,243 )

Cash flows from investing activities

1 unchanged sentence

Settlement of net investment hedges ( 21,239 ) 6,475

Acquisition, net of cash acquired ( 452,581 ) —

Other investing activities 1,000 ( 1,636 )

Net cash used in investing activities ( 85,464 ) ( 45,626 )

1 unchanged sentence

Proceeds from settlement of stock-based compensation 4,495 3,135

Taxes paid related to net share settlement of stock-based compensation ( 31,883 ) ( 21,493 )

Shares withheld related to net share settlement of stock-based compensation ( 42,899 ) ( 30,059 )

Repurchase of common stock ( 83,831 ) ( 63,663 )

1 unchanged sentence

Effect of exchange rate changes on cash and cash equivalents 22,812 ( 13,043 )

Decrease in cash and cash equivalents ( 611,924 ) ( 295,167 )

Increase (decrease) in cash and cash equivalents 29,222 ( 270,499 )

Cash and cash equivalents, beginning of period $ 1,150,517 $ 1,093,505

6 unchanged sentences

Note 3 Acquisition

Note 4 Goodwill

Note 5 Intangible Assets, Net

Note 6 Credit Facilities

Note 4 Revolving Credit Facilities

Note 5 Stock-Based Compensation and Benefit Plans

3 unchanged sentences

Note 9 Supplementary Financial Information

Note 12 Segmented Information and Disaggregated Net Revenue

Note 10 Segmented Information

Note 11 Net Revenue by Geography and Category

Note 12 Legal Proceedings and Other Contingencies

3 unchanged sentences

Nature of operations

lululemon athletica inc., a Delaware corporation ("lululemon" and, together with its subsidiaries unless the context otherwise requires, the "Company") is engaged in the design, distribution, and retail of healthy lifestyle inspired athletic apparel and accessories.

The Company primarily conducts its business through company-operated stores and direct to consumer through e-commerce.

It also generates net revenue from outlets, sales from temporary locations, sales to wholesale accounts, and license and supply arrangements.

The Company operates stores in the United States, Canada, the People's Republic of China ("PRC"), Australia, the United Kingdom, Japan, Germany, New Zealand, South Korea, Singapore, France, Malaysia, Sweden, Ireland, the Netherlands, Norway, an d Switzerland.

The Company had 515 and 491 company-operated stores as of November 1, 2020 and February 2, 2020, respectively.

lululemon athletica inc., a Delaware corporation, ("lululemon" and, together with its subsidiaries unless the context otherwise requires, the "Company") is engaged in the design, distribution, and retail of healthy lifestyle inspired athletic apparel and accessories, which are sold through a chain of company-operated stores, direct to consumer through e-commerce, outlets, sales from temporary locations, sales to wholesale accounts, and license and supply arrangements.

The Company operates stores in the United States, Canada, the People's Republic of China ("PRC"), Australia, the United Kingdom, South Korea, Germany, New Zealand, Japan, Singapore, France, Malaysia, Sweden, Ireland, the Netherlands, Norway, and Switzerland.

There were 523 and 521 company-operated stores as of May 2, 2021 and January 31, 2021, respectively.

On July 7, 2020, the Company acquired Curiouser Products Inc., dba MIRROR, ("MIRROR") which has been consolidated from the date of acquisition.

MIRROR generates net revenue from the sale of in-home fitness equipment and associated content subscriptions.

Please refer to Note 3 for further information.

Please refer to Note 3.

Acquisition for further information.

COVID-19 Pandemic

The outbreak of a novel strain of coronavirus ("COVID-19") was declared a global pandemic by the World Health Organization in March 2020.

In line with recommendations by public health officials and in accordance with governmental authority orders, the Company took actions to temporarily close the majority of its retail locations and to reduce operating hours.

In February 2020, the Company temporarily closed all of its retail locations in Mainland China, and in March 2020, the Company temporarily closed all of its retail locations in North America, Europe, and certain countries in Asia Pacific.

The stores in Mainland China reopened during the first quarter of fiscal 2020, and stores in other markets began reopening in accordance with local government and public health authority guidelines during the second quarter of fiscal 2020.

Almost all of the Company's stores were open during the third quarter of fiscal 2020.

The Company's stores are operating with restrictive measures in place such as reduced operating hours and limited occupancy levels.

The Company's distribution centers in Columbus, Ohio and Sumner, Washington were temporarily closed for one and two weeks, respectively, during the first quarter of fiscal 2020 due to COVID-19.

Subsequent to November 1, 2020, while almost all of the Company's retail locations have remained open, it has experienced some temporary closures and is currently operating with tighter capacity restrictions in certain markets.

In response to the COVID-19 pandemic, various government programs have been announced which provide financial relief for affected businesses.

The most significant relief measures which the Company qualifies for are the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") in the United States, and the Canada Emergency Wage Subsidy ("CEWS") under the COVID-19 Economic Response Plan in Canada.

During the third quarter of fiscal 2020 and the first three quarters of fiscal 2020, the Company recognized payroll subsidies totaling $ 1.4 million and $ 37.0 million, respectively, under these wage subsidy programs and similar plans in other jurisdictions.

These subsidies were recorded as a reduction in the associated wage costs which the Company incurred, and were recognized in selling, general and administrative expenses.

The Company also deferred certain corporate income tax payments and employer payroll tax payments.

The most significant was the deferral of $ 127.5 million of Canadian corporate income tax payments from the first and second quarters of fiscal 2020 to the third quarter of fiscal 2020.

The Canadian corporate income payments during the third quarter of fiscal 2020 removed the balance previously included within income taxes payable on the consolidated balance sheets and resulted in a balance being recognized within prepaid and receivable income taxes on the consolidated balance sheets.

The Financial Accounting Standards Board ("FASB") issued guidance in April 2020 in relation to accounting for lease concessions made in connection with the effects of COVID-19.

In accordance with this guidance, the Company has elected to treat COVID-19-related lease concessions as variable lease payments.

The Company is actively negotiating commercially reasonable lease concessions.

Lease concessions of $ 2.4 million and $ 5.5 million were recognized during the third quarter of fiscal 2020 and the first three quarters of fiscal 2020, respectively.

Temporary closures as a result of COVID-19 and associated reduction in operating income during the first two quarters of fiscal 2020 were considered to be an indicator of impairment and the Company performed an assessment of recoverability

for the long-lived assets and right-of-use assets associated with closed retail locations.

In the first quarter of fiscal 2020, the Company recognized an insignificant impairment charge as a result of this analysis.

Revenue is presented net of an allowance for expected returns, which is estimated based on historic return rates, trends, considering shifts towards increased online shopping by guests, and future expectations.

The increase in the sales return allowance reflects the higher proportion of direct to consumer net revenue and anticipated delays in returns as a result of reduced capacity at retail locations.

The COVID-19 pandemic has materially impacted the Company's operations.

The extent to which COVID-19 continues to impact the Company's operations, and in turn, its operating results and financial position will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact.

Continued proliferation of the virus, or resurgence, may result in further or prolonged closures of the Company's retail locations and distribution centers, reduce operating hours, interrupt the Company's supply chain, cause changes in guest behavior, and reduce discretionary spending.

Such factors could result in the impairment of long-lived assets and right-of-use assets and the need for an increased provision against the carrying value of the Company's inventories.

The outbreak of a novel strain of coronavirus ("COVID-19") has caused governments and public health officials to impose restrictions and to recommend precautions to mitigate the spread of the virus.

The Company temporarily closed its retail locations for periods of time during the first two quarters of fiscal 2020.

While most of the Company's retail locations remained open throughout the first quarter of fiscal 2021, certain locations were temporarily closed based on government and health authority guidance in those markets, including in parts of Europe and Canada, as well as other markets.

In accordance with relevant government and health authority guidance, the Company continues to operate its distribution centers and retail locations with restrictive and precautionary measures in place.

These measures are market dependent and can include restricted occupancy levels, physical distancing, enhanced cleaning and sanitation, and reduced operating hours.

During the first quarter of fiscal 2020, the Company recognized $ 14.3 million of government payroll subsidies as a reduction in selling, general, and administrative expenses.

These subsidies partially offset the wages paid to employees while its retail locations were temporarily closed due to COVID-19.

The Company did not recognize any payroll subsidies in the first quarter of fiscal 2021.

Basis of presentation

The unaudited interim consolidated financial statements as of November 1, 2020 and for the quarters and three quarters ended November 1, 2020 and November 3, 2019 are presented in United States dollars and have been prepared by the Company under the rules and regulations of the Securities and Exchange Commission ("SEC").

The unaudited interim consolidated financial statements as of May 2, 2021 and for the quarters ended May 2, 2021 and May 3, 2020 are presented in U.S.

dollars and have been prepared by the Company under the rules and regulations of the Securities and Exchange Commission ("SEC").

The financial information is presented in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and, accordingly, does not include all of the information and footnotes required by GAAP for complete financial statements.

The financial information as of February 2, 2020 is derived from the Company's audited consolidated financial statements and related notes for the fiscal year ended February 2, 2020, which are includ ed in Item 8 in the Company's fiscal 2019 Annual Report on Form 10-K filed with the SEC on March 26, 2020.

The financial information as of January 31, 2021 is derived from the Company's audited consolidated financial statements and related notes for the fiscal year ended January 31, 2021, which are included in Item 8 in the Company's fiscal 2020 Annual Report on Form 10-K filed with the SEC on March 30, 2021.

These unaudited interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.

These unaudited interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and related notes included in Item 8 in the Company's fiscal 2020 Annual Report on Form 10-K.

Changes in the significant accounting policies of the Company compared to those described in the Company's fiscal 2019 Annual Report on Form 10-K adopted as a result of the acquisition of MIRROR are described below, and Note 2 sets out the impact of recent accounting pronouncements.

Recent Accounting Pronouncements sets out the impact of recent accounting pronouncements.

The Company's fiscal year ends on the Sunday closest to January 31 of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year.

Fiscal 2021 will end on January 30, 2022 and will be a 52-week year.

Fiscal 2019 was a 52-week year.

Fiscal 2020 was a 52-week year and ended on January 31, 2021.

Fiscal 2021 and fiscal 2020 are referred to as "2021," and "2020," respectively.

The first quarter of 2021 and 2020 ended on May 2, 2021 and May 3, 2020, respectively.

The Company's business is affected by the pattern of seasonality common to most retail apparel businesses.

Historically, the Company has recognized a significant portion of its operating profit in the fourth fiscal quarter of each year as a result of increased net revenue during the holiday season.

Certain comparative figures have been reclassified to conform to the financial presentation adopted for the current year.

Accounting policies related to the acquisition of MIRROR

Business combinations

The purchase price of an acquisition is measured as the aggregate of the fair value of the consideration transferred including the acquisition-date fair value of the Company's previously held equity interests.

The purchase price is allocated to the fair values of the tangible and intangible assets acquired and liabilities assumed, with any excess recorded as goodwill.

These fair value determinations require judgment and may involve the use of significant estimates and assumptions.

The purchase price allocation may be provisional during a measurement period of up to one year to provide reasonable time to obtain the information necessary to identify and measure the assets acquired and liabilities assumed.

Any such measurement period adjustments are recognized in the period in which the adjustment amount is determined.

Transaction costs associated with the acquisition are expensed as incurred.

Goodwill and intangible assets

Acquired finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, and are reviewed for impairment when events or circumstances indicate that the asset group to which the intangible assets belong might

The Company revises the estimated remaining useful life of these assets when events or changes in circumstances warrant a revision.

If the Company revises the useful life, the unamortized balance is amortized over the remaining useful life on a prospective basis.

Goodwill represents the excess of the aggregate of the consideration transferred over the net assets acquired and liabilities assumed and is tested annually for impairment, or more frequently if there are indicators of impairment.

Revenue recognition and cost of goods sold

MIRROR generates net revenue from the sale of in-home fitness equipment and associated content subscriptions.

Certain in-home fitness contracts contain multiple performance obligations, including hardware and a subscription service commitment.

For customer contracts that contain multiple performance obligations the Company accounts for individual performance obligations if they are distinct.

The transaction price is allocated to each performance obligation based on its standalone selling price.

The cost of digital content subscription services, including the costs of content creation, studio overhead, and related production departments is recorded in costs of goods sold.

Recent Accounting Pronouncements

Recently adopted accounting pronouncements

In June 2016, the FASB issued guidance on ASC 326 "Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments".

This guidance changes the impairment model for most financial assets and requires the use of a forward-looking expected loss model rather than incurred losses for instruments measured at amortized cost.

Under this model, entities are required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset.

The Company adopted this update during the first quarter of fiscal 2020 and it did not have a material impact on the Company's consolidated financial statements.

Recently issued accounting pronouncements

In December 2019, the FASB issued guidance on ASC 740, Income Taxes.

The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC 740.

The amendments also improve consistent application and simplify GAAP for other areas of this topic by clarifying and amending existing guidance.

This guidance is effective for the Company beginning in its first quarter of fiscal 2021 and early adoption is permitted.

The Company is currently evaluating the impact that this new guidance may have on its consolidated financial statements but does not believe it will have a material impact.

In March 2020, the FASB released guidance on ASC 848, "Reference Rate Reform:

Facilitation of the Effects of Reference Rate Reform on Financial Reporting" .

This update provides optional expedients and exceptions to the current guidance on contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this update apply only to contracts and hedging relationships that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued due to reference rate reform.

The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022.

The Company is currently evaluating the impact that this new guidance may have on its consolidated financial statements but does not believe it will have a material impact.

The amendments also improve consistent application and make simplifications in other areas of this topic by clarifying and amending existing guidance.

The Company adopted this update during the first quarter of 2021 and it did not have a material impact on the Company's consolidated financial statements.

Recently issued accounting pronouncements

The Company considers the applicability and impact of all Accounting Standard Updates ("ASUs").

Recently issued ASUs were assessed and determined to be either not applicable or are expected to have minimal impact on its consolidated financial position or results of operations.

On July 7, 2020, the Company acquired all of the outstanding shares of MIRROR, an in-home fitness company with an interactive workout platform that features live and on-demand classes.

The results of operations, financial position, and cash flows of MIRROR have been included in the Company's consolidated financial statements since the date of acquisition.

The following table summarizes the fair value of the consideration transferred at the date of acquisition, as well as the calculation of goodwill based on the excess of consideration over the provisional fair value of net assets acquired.

As part of the transaction, the Company assumed $ 30.1 million of MIRROR's outstanding debt.

This included $ 15.1 million of external debt that was settled as part of the transaction and $ 15.0 million of debt previously owed by MIRROR to the Company, which

represents the effective settlement of a preexisting relationship.

The debt was determined to be at market terms and was recognized as a component of the consideration transferred, and no gain or loss was recorded on settlement.

(in thousands)

Fair value of consideration transferred:

Cash paid to shareholders $ 428,261

Employee options attributed to pre-combination vesting 4,569

Acquired debt settled on acquisition 30,122

Fair value of existing lululemon investment 1,782

Less cash and cash equivalents acquired ( 12,153 )

Fair value of consideration transferred, net of cash and cash equivalents acquired $ 452,581

Less net assets acquired:

Assets acquired:

Inventories $ 16,734

Prepaid expenses and other current assets 3,492

Intangible assets 85,000

Other non-current assets 5,648

Liabilities assumed:

Current liabilities $ ( 13,465 )

Current and non-current lease liabilities ( 3,246 )

Net deferred income tax liability ( 4,074 )

Net assets acquired $ 90,089

Goodwill $ 362,492

The purchase price allocation remains provisional as the Company is still obtaining all information necessary to finalize the fair value of acquired intangibles, deferred taxes, certain contingencies, and resulting amount of goodwill as of the date of acquisition.

Goodwill relates to benefits expected as a result of the acquisition to MIRROR's business and has been allocated to the MIRROR reporting unit within the Company's other channels.

No ne of the goodwill is expected to be deductible for income tax purposes.

The Company assigned a fair value to and estimated useful lives for the intangible assets acquired as part of the MIRROR business combination.

The fair value of the separately identifiable intangible assets, and their estimated useful lives as of the acquisition date were as follows:

Estimated Fair Value Estimated Useful Life

(In thousands)

Intangible assets:

Brand $ 26,500 20.0 years

Customer relationships 28,000 10.0 years

Technology 25,500 7.5 years

Content 5,000 5.0 years

Accounting for business combinations requires significant estimates and assumptions to derive the fair value of acquired assets and liabilities, and in the case of MIRROR, this is with specific reference to acquired intangible assets.

The fair value of intangible assets was based upon widely-accepted valuation techniques, including discounted cash flows and relief from royalty and replacement cost methods, depending on the nature of the assets acquired or liabilities assumed.

Inherent in each valuation technique are critical assumptions, including future revenue growth rates, gross margin, royalty rates, discount rates, and terminal value assumptions.

The recognition of deferred tax assets in relation to the historic net operating losses of MIRROR relied on assumptions and estimates of the future profitability of the Company's US operations.

The Company has not disclosed pro forma information of the combined business as the transaction is not material to revenue or net earnings.

The fair value of the consideration paid, net of cash acquired, was $ 452.6 million.

This resulted in the recognition of intangible assets of $ 85.0 million and goodwill of $ 362.5 million.

The purchase price allocation was finalized as of January 31, 2021 with no measurement period adjustments.

Acquisition-related expenses

4 unchanged sentences

• gain recognized on the Company's existing investment in the acquiree as of the acquisition date.

The following table summarizes the acquisition-related expenses recognized during fiscal 2020:

Quarter Ended

November 1, 2020 Three Quarters Ended

November 1, 2020

The following table summarizes the acquisition-related expenses recognized:

First Quarter

(in thousands)

5 unchanged sentences

Income tax effects of acquisition-related expenses $ ( 372 ) $ —

In the first three quarters of fiscal 2020, the Company recognized $ 9.7 million related to deferred consideration, and recognized an expense of $ 2.9 million for the partial acceleration of vesting of certain stock options held by MIRROR employees.

The Company will recognize a total expense of $ 57.1 million for deferred consideration which is due to certain continuing MIRROR employees, subject to the continued employment of those individuals through various vesting dates up to three years from the acquisition date.

This acquisition-related compensation is expensed over the vesting periods as service is provided, and consists of cash payments, which are included within accrued compensation and related expenses until payments are made, and stock-based compensation awards that have been granted under the Company's 2014 Equity Incentive Plan to replace certain unvested options as of the acquisition date.

The Company's goodwill is assigned to its company-operated stores and other segments.

The changes in the carrying amounts of goodwill were as follows:

(In thousands)

Balance as of February 2, 2020 $ 24,182

MIRROR acquisition 362,492

Effect of foreign currency translation ( 42 )

Balance as of November 1, 2020 $ 386,632

INTANGIBLE ASSETS, NET

The carrying value of intangible assets, and their estimated remaining useful lives as of November 1, 2020 were as follows:

2020 February 2,

2020 Remaining Useful Life

(In thousands)

Intangible assets, net:

Brand $ 26,058 $ — 19.7 years

Customer relationships 27,033 — 9.7 years

Technology 24,344 — 7.2 years

Content 4,667 — 4.7 years

Other 174 241 1.9 years

$ 82,276 $ 241

CREDIT FACILITIES

Revolving Credit Facilities

North America revolving credit facility

On June 6, 2018, the Company entered into Amendment No.

1 to its credit agreement.

This amended the credit agreement to provide for (i) an increase in the aggregate commitments under the unsecured five-year revolving credit facility to $ 400.0 million, with an increase of the sub-limits for the issuance of letters of credit and extensions of swing line loans to $ 50.0 million for each, (ii) an increase in the option, subject to certain conditions as set forth in the credit agreement, to request increases in commitments under the revolving facility from $ 400.0 million to $ 600.0 million, and (iii) an extension in the maturity of the revolving facility from December 15, 2021 to June 6, 2023.

In addition, this amendment decreased the applicable margins for LIBOR loans from 1.00 %- 1.75 % to 1.00 %- 1.50 % and for alternate base rate loans from 0.00 %- 0.75 % to 0.00 %- 0.50 %, reduced the commitment fee on average daily unused amounts under the revolving facility from 0.125 %- 0.200 % to 0.10 %- 0.20 %, and reduced fees for unused letters of credit from 1.00 %- 1.75 % to 1.00 %- 1.50 %.

The Company is required to follow certain covenants.

As of November 1, 2020, the Company was in compliance with these covenants.

The Company had no borrowings outstanding under this credit facility as of November 1, 2020 and February 2, 2020.

As of November 1, 2020, the Company had letters of credit of $ 2.7 million outstanding.

Mainland China revolving credit facility

In December 2019, the Company entered into an uncommitted and unsecured 130.0 million Chinese Yuan revolving credit facility.

The terms are reviewed on an annual basis.

The facility includes a revolving loan of up to 100.0 million Chinese Yuan as well as a financial bank guarantee facility of up to 30.0 million Chinese Yuan, or its equivalent in another currency.

dollars, the uncommitted and unsecured revolving credit facility is equivalent to $ 19.4 million, the revolving loan is equivalent of up to $ 14.9 million, and the financial bank guarantee facility is equivalent of up to $ 4.5 million.

Loans are available in Chinese Yuan for a period not to exceed 12 months, and interest accrues on them at a rate equal to 105 % of the applicable PBOC Benchmark Lending Rate.

Guarantees have a commission equal to 1 % per annum of the outstanding amount.

The Company is required to follow certain covenants.

As of November 1, 2020, the Company was in compliance with these covenants.

As of November 1, 2020, there were no borrowings outstanding under this credit facility.

364-Day revolving credit facility

On June 29, 2020, the Company entered into a 364-day credit agreement providing for a $ 300.0 million committed and unsecured revolving credit facility.

The credit agreement matures on June 28, 2021.

Bank of America, N.A., is administrative agent and swing line lender.

Borrowings under the credit facility may be prepaid and commitments may be reduced or terminated without premium or penalty (other than customary breakage costs).

Borrowings made under the credit facility bear interest at a rate per annum equal to, at the Company's option, either (1) a rate based on the rates applicable for deposits on the interbank market for U.S.

Dollars or the applicable currency in which the borrowings are made (“LIBOR”) or (2) an alternate base rate, plus, in each case, an applicable margin.

The applicable margin is determined by reference to a pricing grid, based on the ratio of indebtedness to earnings before interest, tax depreciation, amortization, and rent (“EBITDAR”) and ranges between 1.50 %- 2.25 % for LIBOR loans and 0.50 %- 1.25 % for alternate base rate or Canadian prime rate loans.

Additionally, a commitment fee of between 0.25 %- 0.55 %, also determined by reference to the pricing grid, is payable on the average daily unused amounts under the credit facility.

During 2016, the Company obtained a $ 150.0 million committed and unsecured five-year revolving credit facility with major financial institutions.

During 2018, the Company amended the credit agreement to provide for:

an increase in the aggregate commitments under the revolving credit facility to $ 400.0 million, with an increase of the sub-limits for the issuance of letters of credit and extensions of swing line loans to $ 50.0 million for each;

an increase in the option, subject to certain conditions, to request increases in commitments from $ 400.0 million to $ 600.0 million;

an extension in the maturity of the facility from December 15, 2021 to June 6, 2023.

Borrowings under the facility may be made in U.S.

Dollars, Euros, Canadian Dollars, and in other currencies, subject to the lenders' approval.

As of May 2, 2021, aside from letters of credit of $ 2.7 million, there were no other borrowings outstanding under this facility.

Borrowings under the facility bear interest at a rate equal to, at the Company's option, either (a) rates based on deposits on the interbank market for U.S.

Dollars or the applicable currency in which the borrowings are made ("LIBOR") or (b) an alternate base rate, plus, an applicable margin determined by reference to a pricing grid, based on the ratio of indebtedness to earnings before interest, tax, depreciation, amortization, and rent ("EBITDAR") and ranges between 1.00 %- 1.50 % for LIBOR loans and 0.00 %- 0.50 % for alternate base rate loans.

Additionally, a commitment fee of between 0.10 %- 0.20 % is payable on the average unused amounts under the revolving credit facility, and fees of 1.00 %- 1.50 % are payable on unused letters of credit.

The credit agreement contains negative covenants that, among other things and subject to certain exceptions, limit the ability of the Company's subsidiaries to incur indebtedness, incur liens, undergo fundamental changes, make dispositions of all or substantially all of their assets, alter their businesses and enter into agreements limiting subsidiary dividends and distributions.

The Company is also required to maintain a consolidated rent-adjusted leverage ratio of not greater than 3.50 :1.00 and the Company is not permitted to allow the ratio of consolidated EBITDAR to consolidated interest charges (plus rent) to be less than 2.00 :1.00.

The Company is also required to maintain a consolidated rent-adjusted leverage ratio of not greater than 3.5 :1 and to maintain the ratio of consolidated EBITDAR to consolidated interest charges (plus rent) below 2 :1.

The credit agreement also contains certain customary representations, warranties, affirmative covenants, and events of default (including, among others, an event of default upon the occurrence of a change of control).

If an event of default occurs, the credit agreement may be terminated, and the maturity of any outstanding amounts may be accelerated.

As of November 1, 2020, the Company was in compliance with the covenants.

As of November 1, 2020, there were no borrowings outstanding under this credit facility.

On December 4, 2020, the Company gave notice to terminate this 364-day unsecured revolving credit facility.

It will be terminated without penalty on December 11, 2020.

As of May 2, 2021, the Company was in compliance with the covenants of the credit facility.

Mainland China revolving credit facility

In December 2019, the Company entered into an uncommitted and unsecured 130.0 million Chinese Yuan revolving credit facility with terms that are reviewed on an annual basis.

The credit facility was increased to 230.0 million Chinese Yuan during 2020.

It is comprised of a revolving loan of up to 200.0 million Chinese Yuan and a financial guarantee facility of up to 30.0 million Chinese Yuan, or its equivalent in another currency.

Loans are available for a period not to exceed 12 months, at an interest rate equal to the loan prime rate plus a spread of 0.5175 %.

The Company is required to follow certain covenants.

As of May 2, 2021, the Company was in compliance with the covenant and there were no borrowings or guarantees outstanding under this credit facility.

Stock-Based Compensation and Benefit Plans

Stock-based compensation plans

The Company's eligible employees participate in various stock-based compensation plans, which are provided by the Company directly.

Stock-based compensation expense charged to income for the plans was $ 41.9 million and $ 35.7 million for the three quarters ended November 1, 2020 and November 3, 2019, respectively.

Total unrecognized compensation cost for all stock-based compensation plans w as $ 86.1 million at November 1, 2020, which is expected to be recognized over a weighted-average period of 2.1 years.

A summary of the balances of the Company's stock-based compensation plans as of November 1, 2020, and changes during the first three quarters then ended, is presented below:

The Company's eligible employees participate in various stock-based compensation plans, provided directly by the Company.

Stock-based compensation expense charged to income for the plans was $ 16.2 million and $ 6.6 million for the first quarter of 2021 and 2020, respectively.

Total unrecognized compensation cost for all stock-based compensation plans was $ 132.6 million as of May 2, 2021, which is expected to be recognized over a weighted-average period of 2.5 years.

A summary of the balances of the Company's stock-based compensation plans as of May 2, 2021, and changes during the first quarter then ended, is presented below:

Stock Options Performance-Based Restricted Stock Units Restricted Shares Restricted Stock Units Restricted Stock Units

2 unchanged sentences

(In thousands, except per share amounts)

Balance at February 2, 2020 776 $ 113.41 238 $ 103.52 7 $ 175.82 333 $ 108.44 29 $ 239.39

Balance as of January 31, 2021 804 $ 139.27 199 $ 149.2 4 $ 299.09 275 $ 166.5 15 $ 328.68

Granted 183 306.71 135 180.26 — — 90 307.55 — —

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Forfeited/expired 6 154.21 — 183.74 — — 3 194.55 — —

Balance at November 1, 2020 820 $ 137.49 198 $ 146.25 4 $ 296.36 278 $ 164.21 15 $ 319.29

Exercisable at November 1, 2020 176 $ 107.43

Balance as of May 2, 2021 941 $ 172.88 168 $ 221.93 4 $ 299.09 245 $ 233.16 15 $ 335.27

Exercisable as of May 2, 2021 348 $ 118.98

The Company's performance-based restricted stock units are awarded to eligible employees and entitle the grantee to receive a maximum of two shares of common stock per performance-based restricted stock unit if the Company achieves specified performance goals and the grantee remains employed during the vesting period.

The fair value of performance-based restricted stock units is based on the closing price of the Company's common stock on the award date.

Expense for performance-based restricted stock units is recognized when it is probable that the performance goal will be achieved.

The grant date fair value of the restricted shares and restricted stock units is based on the closing price of the Company's common stock on the award date.

Restricted stock units that are settled in cash or common stock at the election of the employee are remeasured to fair value at the end of each reporting period until settlement.

This fair value is based on the closing price of the Company's common stock on the last business day before each period end.

The grant date fair value of each stock option granted is estimated on the date of grant using the Black-Scholes model.

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Treasury yield curve for the period corresponding with the expected term of the options.

The following are weighted averages of the assumptions that were used in calculating the fair value of stock options granted during the first three quarters of fiscal 2020:

Three Quarters Ended

November 1, 2020

The following are weighted averages of the assumptions that were used in calculating the fair value of stock options granted during the first quarter of 2021:

First Quarter

Expected term 3.75 years

2 unchanged sentences

Dividend yield — %

The fair value of performance-based restricted stock units is based on the closing price of the Company's common stock on the award date.

Expense for performance-based restricted stock units is recognized when it is probable that the performance goal will be achieved.

The grant date fair value of the restricted shares and restricted stock units is based on the closing price of the Company's common stock on the award date.

Restricted stock units that are settled in cash or common stock at the election of the employee are remeasured to fair value at the end of each reporting period until settlement.

This fair value is based on the closing price of the Company's common stock on the last business day before each period end.

Employee share purchase plan

3 unchanged sentences

All shares purchased under the ESPP are purchased in the open market.

During the quarter ended November 1, 2020, there were 16.0 thousand shares purchased.

During the first quarter of 2021, there were 19.5 thousand shares purchased.

Defined contribution pension plans

1 unchanged sentence

Participating employees may elect to defer and contribute a portion of their eligible compensation to a plan up to limits stated in the plan documents, not to exceed the dollar amounts set by applicable laws.

The Company matches 50 % to 75 % of the contribution depending on the participant's length of service, and the contribution is subject to a two year vesting period.

The Company's net expense for the defined contribution plans was $ 6.7 million and $ 6.4 million in the first three quarters of fiscal 2020 and fiscal 2019, respectively.

The Company matches 50 % to 75 % of the contribution depending on the

participant's length of service, and the contribution is subject to a two year vesting period.

The Company's net expense for the defined contribution plans was $ 2.8 million and $ 2.3 million in the first quarter of 2021 and 2020, respectively.

Fair Value Measurement

6 unchanged sentences

The fair value measurement is categorized in its entirety by reference to its lowest level of significant input.

As of November 1, 2020 and February 2, 2020, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis:

November 1, 2020 Level 1 Level 2 Level 3 Balance Sheet Classification

As of May 2, 2021 and January 31, 2021, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis:

May 2, 2021 Level 1 Level 2 Level 3 Balance Sheet Classification

(In thousands)

3 unchanged sentences

Forward currency contract liabilities 30,858 — 30,858 — Other current liabilities

February 2, 2020 Level 1 Level 2 Level 3 Balance Sheet Classification

January 31, 2021 Level 1 Level 2 Level 3 Balance Sheet Classification

(In thousands)

3 unchanged sentences

Forward currency contract liabilities 18,767 — 18,767 — Other current liabilities

The Company records accounts receivable, accounts payable, and accrued liabilities at cost.

The Company records cash, accounts receivable, accounts payable, and accrued liabilities at cost.

The carrying values of these instruments approximate their fair value due to their short-term maturities.

9 unchanged sentences

The Company does not enter into derivative contracts for speculative or trading purposes.

The Company currently hedges against changes in the Canadian dollar to U.S.

dollar exchange rate and changes in the Chinese Yuan to U.S.

dollar exchange rate using forward currency contracts.

The Company currently hedges against changes in the Canadian dollar and Chinese Yuan to the U.S.

dollar exchange rate and changes in the Euro and Australian dollar to the Canadian dollar exchange rate using forward currency contracts.

Net investment hedges

The Company is exposed to foreign exchange gains and losses which arise on translation of its foreign subsidiaries' balance sheets into U.S.

The Company is exposed to foreign exchange gains and losses which arise on translation of its international subsidiaries' balance sheets into U.S.

These gains and losses are recorded as a foreign currency translation adjustment in accumulated other comprehensive income or loss within stockholders' equity.

1 unchanged sentence

These forward currency contracts are designated as net investment hedges.

The effective portions of the hedges are reported in accumulated other comprehensive income or loss and will subsequently be reclassified to net earnings in the period in which the hedged investment is either sold or substantially liquidated.

Hedge effectiveness is measured using a method based on changes in forward exchange rates.

The Company recorded no ineffectiveness from net investment hedges during the first three quarters of fiscal 2020.

The Company assesses hedge effectiveness based on changes in forward rates.

The Company recorded no ineffectiveness from net investment hedges during the first quarter of 2021.

The Company classifies the cash flows at settlement of its net investment hedges within investing activities in the consolidated statements of cash flows.

4 unchanged sentences

The resulting foreign currency gains and losses are recorded in selling, general and administrative expenses.

During the first three quarters of fiscal 2020, the Company entered into certain forward currency contracts designed to economically hedge the foreign exchange revaluation gains and losses that are recognized by its Canadian and Chinese subsidiaries on U.S.

dollar denominated monetary assets and liabilities.

During the first quarter of 2021, the Company entered into certain forward currency contracts designed to economically hedge the foreign exchange revaluation gains and losses that are recognized by its Canadian and Chinese subsidiaries on specific monetary assets and liabilities denominated in currencies other than the functional currency of the entity.

The Company has not applied hedge accounting to these instruments and the change in fair value of these derivatives is recorded within selling, general and administrative expenses.

3 unchanged sentences

However, the Company's Master International Swap Dealers Association, Inc., Agreements and other similar arrangements allow net settlements under certain conditions.

As of November 1, 2020, there were derivative assets of $ 7.5 million and derivative liabilities of $ 9.7 million subject to enforceable netting arrangements.

As of May 2, 2021, there were derivative assets of $ 27.8 million and derivative liabilities of $ 30.9 million subject to enforceable netting arrangements.

The notional amounts and fair values of forward currency contracts were as follows:

November 1, 2020 February 2, 2020

May 2, 2021 January 31, 2021

Gross Notional Assets Liabilities Gross Notional Assets Liabilities

6 unchanged sentences

Forward currency contracts $ 27,789 $ 30,858 $ 17,364 $ 18,767

The forward currency contracts designated as net investment hedges outstanding as of November 1, 2020 mature on different dates between November 2020 and April 2021.

The forward currency contracts not designated in a hedging relationship outstanding as of November 1, 2020 mature on different dates between November 2020 and April 2021.

The forward currency contracts designated as net investment hedges outstanding as of May 2, 2021 mature on different dates between May 2021 and October 2021.

The forward currency contracts not designated in a hedging relationship outstanding as of May 2, 2021 mature on different dates between May 2021 and October 2021.

The pre-tax gains and losses on foreign exchange forward contracts recorded in accumulated other comprehensive income or loss were as follows:

Quarter Ended Three Quarters Ended

November 1, 2020 November 3, 2019 November 1, 2020 November 3, 2019

First Quarter

(In thousands)

3 unchanged sentences

The pre-tax net foreign exchange and derivative gains and losses recorded in the consolidated statement of operations were as follows:

Quarter Ended Three Quarters Ended

November 1, 2020 November 3, 2019 November 1, 2020 November 3, 2019

First Quarter

(In thousands)

10 unchanged sentences

The details of the computation of basic and diluted earnings per share are as follows:

Quarter Ended Three Quarters Ended

November 1, 2020 November 3, 2019 November 1, 2020 November 3, 2019

First Quarter

(In thousands, except per share amounts)

8 unchanged sentences

All classes of stock have, in effect, the same rights and share equally in undistributed net income.

For the three quarters ended November 1, 2020 and November 3, 2019, 40.2 thousand and 63.0 thousand stock options and awards, respectively, were anti-dilutive to earnings per share and therefore have been excluded from the computation of diluted earnings per share.

For each of the first quarters of 2021 and 2020, 0.1 million stock options and awards were anti-dilutive to earnings per share and therefore have been excluded from the computation of diluted earnings per share.

On January 31, 2019, the Company's board of directors approved a stock repurchase program for up to $ 500.0 million of the Company's common shares on the open market or in privately negotiated transactions.

On December 1, 2020, the Company's board of directors approved an increase in the remaining authorization of the existing stock repurchase program from $ 263.6 million to $ 500.0 million.

The repurchase plan has no time limit and does not require the repurchase of a minimum number of shares.

Common shares repurchased on the open market are at prevailing market prices, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934.

The timing and actual number of common shares to be repurchased will depend upon market conditions, eligibility to trade, and other factors, in accordance with Securities and Exchange Commission requirements.

As of March 31, 2020, the Company temporarily paused its share repurchase program, which has restarted again as of September 22, 2020.

As of November 1, 2020, the remaining aggregate value of shares available to be repurchased under this program was $ 263.6 million.

During the three quarters ended November 1, 2020 and November 3, 2019, 0.4 million and 1.1 million shares, respectively, were repurchased under the program at a total cost of $ 63.7 million and $ 173.1 million, respectively.

Subsequent to November 1, 2020, and up to December 4, 2020, no shares were repurchased.

On December 1, 2020, the Company's board of directors approved an increase in the remaining authorization of its existing stock repurchase program from $ 263.6 million to $ 500.0 million.

The repurchase plan has no time limit and does not require the repurchase of any minimum number of shares.

As of May 2, 2021, the remaining value of shares available to be repurchased under this program was $ 416.2 million.

During the first quarter of 2021 and 2020, 0.3 million and 0.4 million shares, respectively, were repurchased under the program at a total cost of $ 83.8 million and $ 63.7 million, respectively.

Subsequent to May 2, 2021, and up to May 28, 2021, 0.1 million shares were repurchased at a total cost of $ 40.4 million.

Supplementary Financial Information

A summary of certain consolidated balance sheet accounts is as follows:

2020 February 2,

2021 January 31,

(In thousands)

2 unchanged sentences

$ 732,890 $ 647,230

2020 February 2,

2021 January 31,

(In thousands)

2 unchanged sentences

Forward currency contract assets 27,789 17,364

Government payroll subsidy receivables 13,309 —

Other current assets 22,109 25,579

27 unchanged sentences

$ 258,642 $ 211,911

SEGMENTED INFORMATION AND DISAGGREGATED NET REVENUE

The Company applies ASC Topic 280, Segment Reporting ("ASC 280"), in determining reportable segments for its financial statement disclosure.

The Company reports segments based on the financial information it uses in managing its business.

The Company's reportable segments are comprised of company-operated stores and direct to consumer.

Direct to consumer represents sales from the Company's e-commerce websites and mobile apps.

Other net revenue includes revenue from outlets, temporary locations, sales to wholesale accounts, license and supply arrangements, and the sale of in-home fitness equipment and associated content subscriptions.

During the first quarter of fiscal 2020, the Company reviewed its segment and general corporate expenses and determined certain costs that are more appropriately classified in different categories.

Accordingly, comparative figures have been reclassified to conform to the financial presentation adopted for the current year.

Quarter Ended Three Quarters Ended

November 1, 2020 November 3, 2019 November 1, 2020 November 3, 2019

Segmented Information

The Company's segments are based on the financial information it uses in managing its business and comprise two reportable segments:

(i) company-operated stores and (ii) direct to consumer.

The remainder of its operations which includes outlets, temporary locations, sales to wholesale accounts, license and supply arrangements, and MIRROR are included within Other.

First Quarter

(In thousands)

24 unchanged sentences

$ 50,485 $ 43,532

Net Revenue by Geography and Category

The following table disaggregates the Company's net revenue by geographic area.

Quarter Ended Three Quarters Ended

November 1, 2020 November 3, 2019 November 1, 2020 November 3, 2019

First Quarter

(In thousands)

4 unchanged sentences

The following table disaggregates the Company's net revenue by category.

Quarter Ended Three Quarters Ended

November 1, 2020 November 3, 2019 November 1, 2020 November 3, 2019

During the fourth quarter of 2020, the Company determined that a portion of certain sales returns which had been recorded within Other categories were more

appropriately classified within Women's product and Men's product.

Accordingly, comparative figures have been reclassified to conform to the presentation adopted for the current year.

First Quarter

(In thousands)

7 unchanged sentences

The Company believes the ultimate resolution of any such legal proceedings, audits, and inspections will not have a material adverse effect on its consolidated balance sheets, results of operations or cash flows.

On October 9, 2015, certain current and former hourly employees of the Company filed a class action lawsuit in the Supreme Court of New York entitled Rebecca Gathmann-Landini et al v.

lululemon USA inc.

On December 2, 2015, the case was moved to the United States District Court for the Eastern District of New York.

The lawsuit alleges that the Company violated various New York labor codes by failing to pay all earned wages, including overtime compensation.

This matter was settled on September 30, 2020 for an immaterial amount.

On March 23, 2020, a former retail employee filed a representative action in the Los Angeles Superior Court alleging violation of the Private Attorney General Act ("PAGA") based on purported California labor code violations including failure to pay wages, failure to pay overtime, failure to provide accurate itemized statements, and failure to provide meal and rest periods.

The Company has recognized immaterial provisions related to the expected outcome of legal proceedings.

In March 2020, a former retail employee filed a representative action in the Los Angeles Superior Court alleging violation of the Private Attorney General Act ("PAGA") based on purported California labor code violations including failure to pay wages, failure to pay overtime, failure to provide accurate itemized statements, and failure to provide meal and rest periods.

The plaintiff is seeking to recover civil penalties under PAGA.

The Company intends to vigorously defend this matter.

On April 9, 2020, Aliign Activation Wear, LLC filed a lawsuit in the United States District Court for the Central District of California alleging federal trademark infringement, false designation of origin and unfair competition.

In April 2020, Aliign Activation Wear, LLC filed a lawsuit in the United States District Court for the Central District of California alleging federal trademark infringement, false designation of origin and unfair competition.

The plaintiff is seeking injunctive relief, monetary damages and declaratory relief.

The Company intends to vigorously defend this matter.

In April 2021, DISH Technologies L.L.C., and Sling TV L.L.C.

(DISH) filed a complaint in the United States District Court for the District of Delaware and, along with DISH DBS Corporation, also with the United States International Trade Commission (ITC) under Section 337 of the Tariff Act of 1930 against the Company and its Curiouser Products subsidiary (MIRROR), along with ICON Health & Fitness, Inc., FreeMotion Fitness, Inc., NordicTrack, Inc., and Peloton Interactive, Inc., alleging infringement of various patents related to fitness devices containing internet-streaming enabled video displays.

In the ITC complaint, DISH seeks an exclusion order barring the importation of MIRROR fitness devices, streaming components and systems containing components that infringe one or more of the asserted patents as well as a cease and desist order preventing the Company from carrying out commercial activities within the United States related to those products.

In the District of Delaware complaint, DISH is seeking an order permanently enjoining the Company from infringing the asserted patents, an award of damages for the infringement of the asserted patents, and an award of damages for lost sales.

The Company has moved to extend the date to respond to the ITC complaint from June 7, 2021 to June 18, 2021.

The Company has also moved to stay the District of Delaware litigation pending resolution of the ITC investigation.

The Company intends to vigorously defend this matter.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements