What changed in this filing

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Item 1. Financial Statements

2021-09-08 compared with 2021-06-03 · 104 added, 65 removed, 442 unchanged (28% of the section changed)

6 unchanged sentences

Cash and cash equivalents

$ 1,170,041 $ 1,150,517

Accounts receivable 56,150 62,399

41 unchanged sentences

Additional paid-in capital

381,737 388,667

Retained earnings

2,445,845 2,346,428

Accumulated other comprehensive loss

1 unchanged sentence

2,671,166 2,558,566

$ 4,405,098 $ 4,185,215

See accompanying notes to the unaudited interim consolidated financial statements

lululemon athletica inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Amounts in thousands, except per share amounts)

Quarter Ended

Quarter Ended Two Quarters Ended

2021 August 2,

2020 August 1,

2021 August 2,

Net revenue $ 1,450,618 $ 902,942 $ 2,677,083 $ 1,554,904

11 unchanged sentences

Foreign currency translation adjustment ( 23,520 ) 54,300 20,116 ( 6,304 )

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

Comprehensive income $ 184,554 $ 141,101 $ 373,146 $ 109,129

Basic earnings per share $ 1.60 $ 0.67 $ 2.71 $ 0.89

6 unchanged sentences

Amounts in thousands)

Quarter Ended May 2, 2021

Quarter Ended August 1, 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 as of January 31, 2021 5,203 5,203 $ — 125,150 $ 626 $ 388,667 $ 2,346,428 $ ( 177,155 ) $ 2,558,566

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

Net income 208,074 208,074

4 unchanged sentences

Repurchase of common stock ( 505 ) ( 2 ) ( 845 ) ( 170,235 ) ( 171,082 )

Balance as of August 1, 2021 5,203 5,203 $ — 124,644 $ 623 $ 381,737 $ 2,445,845 $ ( 157,039 ) $ 2,671,166

Quarter Ended August 2, 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 as of May 3, 2020 5,482 5,482 $ — 124,717 $ 624 $ 334,201 $ 1,786,147 $ ( 285,185 ) $ 1,835,787

Quarter Ended May 3, 2020

Net income 86,801 86,801

Foreign currency translation adjustment 54,300 54,300

Common stock issued upon exchange of exchangeable shares ( 89 ) ( 89 ) — 89 — — —

Stock-based compensation expense 15,784 15,784

Common stock issued upon settlement of stock-based compensation 114 — 9,328 9,328

Shares withheld related to net share settlement of stock-based compensation ( 3 ) 1 ( 899 ) ( 898 )

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

Two Quarters Ended August 1, 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 as of January 31, 2021 5,203 5,203 $ — 125,150 $ 626 $ 388,667 $ 2,346,428 $ ( 177,155 ) $ 2,558,566

Net income 353,030 353,030

Foreign currency translation adjustment 20,116 20,116

Stock-based compensation expense 30,221 30,221

Common stock issued upon settlement of stock-based compensation 412 2 9,711 9,713

Shares withheld related to net share settlement of stock-based compensation ( 143 ) ( 1 ) ( 45,566 ) ( 45,567 )

Repurchase of common stock ( 775 ) ( 4 ) ( 1,296 ) ( 253,613 ) ( 254,913 )

Balance as of August 1, 2021 5,203 5,203 $ — 124,644 $ 623 $ 381,737 $ 2,445,845 $ ( 157,039 ) $ 2,671,166

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

6 unchanged sentences

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

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

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

See accompanying notes to the unaudited interim consolidated financial statements

2 unchanged sentences

Amounts in thousands)

Quarter Ended

May 2, 2021 May 3, 2020

Two Quarters Ended

August 1, 2021 August 2, 2020

Cash flows from operating activities

17 unchanged sentences

Other current and non-current liabilities 1,483 3,358

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

Net cash provided by operating activities 499,772 60,062

Cash flows from investing activities

1 unchanged sentence

Settlement of net investment hedges ( 46,999 ) 10,981

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

Other investing activities ( 10,000 ) 1,000

Net cash used in investing activities ( 201,493 ) ( 545,323 )

4 unchanged sentences

Net cash used in financing activities ( 290,767 ) ( 82,157 )

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

Effect of foreign currency exchange rate changes on cash and cash equivalents 12,012 ( 3,089 )

Increase (decrease) in cash and cash equivalents 19,524 ( 570,507 )

22 unchanged sentences

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.

There were 534 and 521 company-operated stores as of August 1, 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.

3 unchanged sentences

COVID-19 Pandemic

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 outbreak of a novel strain of coronavirus ("COVID-19") has caused governments and public health officials to impose restrictions and 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.

While most of the Company's retail locations were open throughout the first two quarters of fiscal 2021, certain locations were temporarily closed based on government and health authority guidance in those markets, including in parts of Canada, Asia Pacific, and Europe.

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

During the second quarter and first two quarters of fiscal 2020, the Company recognized $ 21.2 million and $ 35.5 million, respectively, 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.

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

Basis of presentation

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.

The unaudited interim consolidated financial statements as of August 1, 2021 and for the quarters and two quarters ended August 1, 2021 and August 2, 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").

8 unchanged sentences

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 first two quarters of 2021 and 2020 ended on August 1, 2021 and August 2, 2020, respectively.

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

21 unchanged sentences

The following table summarizes the acquisition-related expenses recognized:

First Quarter

Second Quarter First Two Quarters

2021 2020 2021 2020

(in thousands)

14 unchanged sentences

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.

As of August 1, 2021, aside from letters of credit of $ 2.8 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.

4 unchanged sentences

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).

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

As of August 1, 2021, the Company was in compliance with the covenants of the credit facility.

Mainland China revolving credit facility

4 unchanged sentences

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.

As of August 1, 2021, the Company was in compliance with the covenant and, aside from letters of credit of 1.3 million Chinese Yuan, there were no borrowings or guarantees outstanding under this credit facility.

Stock-Based Compensation and Benefit Plans

1 unchanged sentence

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-based compensation expense charged to income for the plans was $ 33.6 million and $ 24.9 million for the first two quarters of 2021 and 2020, respectively.

Total unrecognized compensation cost for all stock-based compensation plans was $ 117.1 million as of August 1, 2021, which is expected to be recognized over a weighted-average period of 2.3 years.

A summary of the balances of the Company's stock-based compensation plans as of August 1, 2021, and changes during the first two quarters then ended, is presented below:

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

6 unchanged sentences

Forfeited/expired 20 189.53 3 212.67 — — 12 230.55 — —

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

Balance as of August 1, 2021 868 $ 180.00 165 $ 222.30 4 $ 327.22 221 $ 244.47 15 $ 400.17

Exercisable as of August 1, 2021 301 $ 124.41

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.

10 unchanged sentences

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 quarter of 2021:

First Quarter

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

First Two Quarters

Expected term 3.75 years

7 unchanged sentences

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

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

During the second quarter of 2021, there were 16.2 thousand shares purchased.

Defined contribution pension plans

3 unchanged sentences

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.

The Company's net expense for the defined contribution plans was $ 5.8 million and $ 4.5 million in the first two quarters 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 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

As of August 1, 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:

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

(In thousands)

18 unchanged sentences

Derivative Financial Instruments

Foreign exchange risk

Foreign currency exchange risk

The Company is exposed to risks associated with changes in foreign currency exchange rates and uses derivative financial instruments to manage its exposure to certain of these foreign currency exchange rate risks.

3 unchanged sentences

Net investment hedges

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

The Company is exposed to foreign currency 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.

2 unchanged sentences

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 recorded no ineffectiveness from net investment hedges during the first two quarters 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.

Derivatives not designated as hedging instruments

The Company is exposed to gains and losses arising from changes in foreign exchange rates associated with transactions which are undertaken by its subsidiaries in currencies other than their functional currency.

The Company is exposed to gains and losses arising from changes in foreign currency exchange rates associated with transactions which are undertaken by its subsidiaries in currencies other than their functional currency.

Such transactions include intercompany transactions and inventory purchases.

These transactions result in the recognition of certain foreign currency denominated monetary assets and liabilities which are remeasured to the quarter-end or settlement date exchange rate.

These transactions result in the recognition of certain foreign currency denominated monetary assets and liabilities which are remeasured to the quarter-end or settlement date foreign currency exchange rate.

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

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.

During the first two quarters of 2021, the Company entered into certain forward currency contracts designed to economically hedge the foreign currency 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 May 2, 2021, there were derivative assets of $ 27.8 million and derivative liabilities of $ 30.9 million subject to enforceable netting arrangements.

As of August 1, 2021, there were derivative assets of $ 14.0 million and derivative liabilities of $ 16.2 million subject to enforceable netting arrangements.

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

May 2, 2021 January 31, 2021

August 1, 2021 January 31, 2021

Gross Notional Assets Liabilities Gross Notional Assets Liabilities

6 unchanged sentences

Forward currency contracts $ 13,956 $ 16,176 $ 17,364 $ 18,767

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:

First Quarter

The forward currency contracts designated as net investment hedges outstanding as of August 1, 2021 mature on different dates between August 2021 and March 2022.

The forward currency contracts not designated in a hedging relationship outstanding as of August 1, 2021 mature on different dates between August 2021 and March 2022.

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

Second Quarter First Two Quarters

2021 2020 2021 2020

(In thousands)

2 unchanged sentences

No gains or losses have been reclassified from accumulated other comprehensive income or loss into net income for derivative financial instruments in a net investment hedging relationship, as the Company has not sold or liquidated (or substantially liquidated) its hedged subsidiary.

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

First Quarter

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

Second Quarter First Two Quarters

2021 2020 2021 2020

(In thousands)

Gains (losses) recognized in selling, general and administrative expenses:

Foreign exchange gains (losses) $ ( 33,540 ) $ 27,742

Foreign currency exchange gains (losses) $ 13,404 $ ( 23,867 ) $ ( 20,135 ) $ 3,874

Derivatives not designated in a hedging relationship ( 18,344 ) 21,574 12,247 ( 5,946 )

Net foreign exchange and derivative gains (losses) $ ( 2,948 ) $ 222

Net foreign currency exchange and derivative gains (losses) $ ( 4,940 ) $ ( 2,293 ) $ ( 7,888 ) $ ( 2,072 )

The Company is exposed to credit-related losses in the event of nonperformance by the counterparties to the forward currency contracts.

5 unchanged sentences

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

First Quarter

Second Quarter First Two Quarters

2021 2020 2021 2020

(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 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.

For each of the first two 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.

3 unchanged sentences

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 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.

As of August 1, 2021, the remaining value of shares available to be repurchased under this program was $ 245.1 million.

During the first two quarters of 2021 and 2020, 0.8 million and 0.4 million shares, respectively, were repurchased under the program at a total cost of $ 254.9 million and $ 63.7 million, respectively.

Subsequent to August 1, 2021, and up to September 1, 2021, 48.0 thousand shares were repurchased at a total cost of $ 19.4 million.

Supplementary Financial Information

43 unchanged sentences

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

Second Quarter First Two Quarters

2021 2020 2021 2020

(In thousands)

3 unchanged sentences

$ 1,450,618 $ 902,942 $ 2,677,083 $ 1,554,904

Segmented income from operations:

Segmented income (loss) from operations:

Company-operated stores $ 184,996 $ ( 5,293 ) $ 284,144 $ ( 35,447 )

20 unchanged sentences

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

First Quarter

Second Quarter First Two Quarters

2021 2020 2021 2020

(In thousands)

6 unchanged sentences

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

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

Second Quarter First Two Quarters

2021 2020 2021 2020

(In thousands)

10 unchanged sentences

The plaintiff is seeking to recover civil penalties under PAGA.

The Company intends to vigorously defend this matter.

The Company denied all allegations.

The parties have agreed in principle to resolve the matter and are working to finalize the resolution and dismiss the action.

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.

The Company obtained summary judgment that the Company did not infringe upon any of the plaintiff's rights and the district court entered judgment in the Company's favor on all claims.

The plaintiff has filed a Notice of Appeal with the United States Court of Appeals for the Ninth Circuit.

The Company intends to defend its win at the appellate level.

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

2 unchanged sentences

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 ITC investigation is ongoing and the Delaware litigation remains stayed pending resolution to 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