What changed in this filing

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Item 1. Financial Statements

2020-12-03 compared with 2020-08-27 · 163 added, 124 removed, 297 unchanged (49% of the section changed)

22 unchanged sentences

Current operating lease liabilities

Accrued income taxes

Total current liabilities

Non-current operating lease liabilities

Long-term debt

Deferred income taxes

6 unchanged sentences

56,332 , 56,609 and 57,283 shares outstanding;

at August 1, 2020 (unaudited), February 1, 2020, and August 3, 2019 (unaudited), respectively

at October 31, 2020 (unaudited), February 1, 2020, and November 2, 2019 (unaudited), respectively

Treasury stock-common, at cost

1 unchanged sentence

Retained earnings

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Total stockholders’ equity

8 unchanged sentences

Selling, general and administrative expenses

Impairment charges, store closures and other costs

Impairment, restructuring and other costs

Pre-opening expenses

Operating income (loss)

Operating income

Interest expense (income), net

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income (loss) per common share:

Income before income taxes

Income tax expense

Net income per common share:

Weighted average common shares outstanding:

1 unchanged sentence

Ulta Beauty, Inc.

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income

13 Weeks Ended

1 unchanged sentence

(In thousands)

Net income (loss)

Other comprehensive income:

Other comprehensive income (loss):

Foreign currency translation adjustments

Comprehensive income (loss)

Comprehensive income

See accompanying notes to consolidated financial statements.

4 unchanged sentences

Operating activities

Net income (loss)

Adjustments to reconcile net income to net cash provided by operating activities:

1 unchanged sentence

Non-cash lease expense

Impairment charges, store closures and other costs

Long-lived asset impairment charge

Deferred income taxes

16 unchanged sentences

Purchases of equity investments

Net cash provided by (used in) investing activities

Net cash used in investing activities

Financing activities

Proceeds from long-term debt

Payments on long-term debt

Repurchase of common shares

2 unchanged sentences

Debt issuance costs

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

25 unchanged sentences

Balance – August 1, 2020

Stock-based compensation

Foreign currency translation adjustments

Stock options exercised and other awards

Purchase of treasury shares

Balance – October 31, 2020

See accompanying notes to consolidated financial statements.

15 unchanged sentences

Balance – August 3, 2019

Stock-based compensation

Stock options exercised and other awards

Purchase of treasury shares

Repurchase of common shares

Balance – November 2, 2019

See accompanying notes to consolidated financial statements.

10 unchanged sentences

The stores also feature full-service salons.

As of August 1, 2020, the Company operated 1,264 stores across 50 states, as shown in the table below.

As of October 31, 2020, the Company operated 1,262 stores across 50 states, as shown in the table below.

New Hampshire

10 unchanged sentences

recurring nature, necessary to fairly state the financial position and results of operations and cash flows for the interim periods presented.

The Company’s operating results for the 13 and 26 weeks ended August 1, 2020 may not be indicative of the results that may be expected for the fiscal year ending January 30, 2021 because of the novel coronavirus (COVID-19) pandemic.

As a result of the pandemic, the Company modified a number of its business practices, in part due to legislation, executive orders and guidance from government entities and healthcare authorities (including the temporary closing of businesses deemed “non-essential,” shelter in place orders, social distancing and quarantines).

The COVID-19 pandemic has had, and will continue to have, a negative impact on the Company’s business, financial condition, profitability, cash flows and supply chain, although the full extent is uncertain.

As the pandemic continues to evolve, the extent of the impact on the Company’s business, financial condition, profitability, cash flows and supply chain will depend on future developments, including, but not limited to, the duration and extent of any temporary closing of certain of our stores, the duration of quarantines, shelter-in-place and other travel restrictions within the U.S.

and other affected countries, the duration and spread of the pandemic (including any relapses), its severity, the actions to contain the virus and/or treat its impact, the duration, timing and severity of the impact on consumer spending (including the recession resulting from the pandemic), and how quickly and to what extent normal economic and operating conditions can resume, all of which are highly uncertain and cannot be predicted.

The novel coronavirus (COVID-19) pandemic has had, and will continue to have, a negative impact on the Company’s business, financial condition, profitability, cash flows, and supply chain, although the full extent is uncertain.

See Note 3, “Impact of the COVID-19 pandemic,” for additional details.

In addition, the Company’s business is subject to seasonal fluctuation, with significant portions of the Company’s net sales and net income being realized during the fourth quarter of the fiscal year due to the holiday selling season.

As a result, the results for the 13 and 26 weeks ended August 1, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending January 30, 2021, or for any other future interim period or for any future year.

As a result, the results for the 13 and 39 weeks ended October 31, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending January 30, 2021, or for any other future interim period or for any future year.

These interim consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended February 1, 2020.

5 unchanged sentences

The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31.

The Company’s second quarter in fiscal 2020 and 2019 ended on August 1, 2020 and August 3, 2019, respectively.

The Company’s third quarter in fiscal 2020 and 2019 ended on October 31, 2020 and November 2, 2019, respectively.

Use of estimates

5 unchanged sentences

Actual amounts could differ from these estimates, and such differences could be material.

Inventory valuation

Merchandise inventories are carried at the lower of cost or market (net realizable value).

Cost is determined using the moving average cost method and includes costs incurred to purchase and distribute goods as well as related vendor allowances including co-op advertising, markdowns, and volume discounts.

We record valuation adjustments to our inventories if the cost of a specific product on hand exceeds the amount we expect to realize from the ultimate sale or disposal of the inventory.

These estimates are based on management’s judgment regarding future demand, age of inventory, and analysis of historical experience.

If actual demand or market conditions are different than those projected by management, future merchandise margin rates may be unfavorably or favorably affected by adjustments to these estimates.

During the 13 and 26 weeks ended August 1, 2020, the Company increased inventory reserves $ 16,523 and $ 17,745 , respectively, to adjust for slow turning and discontinued makeup SKUs and permanently closed stores.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted.

The CARES Act, among other things, includes provisions relating to refundable payroll tax, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

The most significant relief measures which the Company qualifies for are the employee retention credit, tax deferral, and technical corrections to tax depreciation.

The Company recognizes government grants for which there is a reasonable assurance of compliance with grant conditions and receipt of credits.

We believe there is a reasonable assurance that the Company will comply with the relevant conditions of the employee retention credit provision of the CARES Act, and that we will receive the credits for which we have applied.

We will continue to assess our treatment of the CARES Act to the extent additional guidance and regulations are issued, the further applic ability of the CARES Act to the Company, and the potential impacts on our business.

Employee retention credit (ERC) and payroll tax deferral.

The ERC allows for a refundable tax credit against certain employment taxes equal to 50% of the first ten thousand dollars in qualified wages paid to each employee commencing on March 13, 2020 and through January 1, 2021.

To be eligible, the Company must (i) have had operations fully or partially suspended because of a shut-down order from a governmental authority related to COVID-19, or (ii) have had gross receipts decline by more than 50% in a calendar quarter when compared to the same quarter in 2019.

Qualified wages are limited to wages paid to employees who were not providing services due to the COVID-19 pandemic.

During the 13 and 26 weeks ended August 1, 2020, the Company recognized $ 48,181 related to the CARES Act ERC as a reduction of the associated costs within selling, general and administrative expenses on the Company’s consolidated statements of operations and within accounts receivable, net on the Company's consolidated balance sheets.

Additionally, the CARES Act contains provisions for deferral of the employer portion of social security taxes incurred through the end of calendar 2020 .

As of August 1, 2020, the Company has deferred $ 18,709 in social security tax payments, of which 50% are required to be remitted by December 2021 and the remaining 50% by December 2022.

The deferred amounts are recorded as a liability within other long-term liabilities on the Company’s consolidated balance sheets.

Technical corrections to tax depreciation.

The CARES Act also includes a technical correction of tax depreciation methods for qualified improvement property, which changes 39-year property to 15-year property eligible for 100% tax bonus depreciation.

This provision of the CARES Act resulted in a cash tax refund of $ 4,600 relating to property and equipment, from filing an amended federal income tax return, as of August 1, 2020.

Furthermore, t he Company expects the changes to qualified impairment property depreciation to result in reductions to estimated income tax payments for fiscal 2020.

Recent accounting pronouncements not yet adopted

2 unchanged sentences

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes.

The guidance removes certain exceptions for recognizing deferred taxes for equity

method investments, performing intraperiod allocation, and calculating income taxes in interim periods.

The guidance removes certain exceptions for recognizing deferred taxes for equity method investments, performing intraperiod allocation, and calculating income taxes in interim periods.

The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group, among others.

10 unchanged sentences

The Company adopted the new guidance prospectively as of February 2, 2020, and its adoption did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

Impact of the COVID-19 pandemic

In March 2020, the World Health Organization declared COVID-19 a global pandemic.

In response to federal, state, and local government restrictions and recommendations and for the health and safety of our associates and guests, the Company temporarily closed all stores effective March 19, 2020.

Effective April 19, 2020, the Company temporarily furloughed many store and salon associates and introduced curbside pickup, and on May 11, 2020, the Company started a phased store reopening process.

By July 20, 2020, the full fleet of Ulta Beauty stores was operational.

By October 31, 2020, salon and brow services had resumed in almost all stores.

Reflecting operational limitations related to COVID-19 and the partial resumption of services, the Company has reactivated more than half of the furloughed associates.

Results of operations for the 13 and 39 weeks ended October 31, 2020 were significantly impacted by the effects of COVID-19, and the pandemic is expected to continue to have a negative impact on the Company’s business, financial condition, profitability, cash flows, and supply chain, although the full extent is uncertain.

As COVID-19 continues to evolve and resurgences occur, the extent of the impact on the Company’s business, financial condition, profitability, cash flows, and supply chain will depend on future developments, including, but not limited to, the potential temporary reclosing of certain stores, the potential temporary restrictions on certain store operating hours and/or in-store capacity, the duration of potential future quarantines, shelter-in-place and other travel restrictions within the U.S.

and other affected countries, the severity of the virus, the duration and spread of the virus, the duration, timing and severity of the impact on consumer spending, how quickly and to what extent normal economic and operating conditions can resume, and the public’s response to resurgences of the virus and its eventual aftermath, all of which are highly uncertain and cannot be predicted.

The multi-year, strategic investments the Company has made to enhance omnichannel and supply chain capabilities, combined with the ongoing commitment of the Company’s distribution associates, have enabled the Company to support increased e-commerce demand and guest engagement.

The Company has taken the following steps to preserve financial liquidity through these unprecedented circumstances:

● the drawdown of $ 800,000 on March 18, 2020 under the Company’s revolving credit facility, which was repaid in full on September 2, 2020;

● limited new hires and delayed merit increases for all corporate, store, and salon associates;

● reduced marketing, travel and controllable expenses;

● aligned inventory receipts with current sales trends;

● prioritized payment obligations;

● reduced new store openings, relocations and remodel projects;

● suspended the Company’s stock repurchase program, which may be resumed in the fourth quarter of fiscal 2020.

The Company evaluates long-lived assets for indicators of impairment quarterly or when events or changes in circumstances indicate that their carrying amounts may not be recoverable.

As a result of the COVID-19 pandemic, the Company experienced lower than projected revenues and identified indicators of impairment for certain stores, which resulted in the recording of certain long-lived asset impairment and restructuring charges.

See Note 5, “Impairment, restructuring and other costs,” for additional details.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted.

The CARES Act, among other things, includes provisions relating to refundable payroll taxes, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

The most significant relief measures which the Company qualifies for are the employee retention credit, payroll tax deferral, and technical corrections to tax depreciation.

The Company recognizes government grants for which there is a reasonable assurance of compliance with grant conditions and receipt of credits.

The Company believes there is a reasonable assurance that it will comply with the relevant conditions of the employee retention credit provision of the CARES Act and that it will receive the credit.

The Company will continue to assess the treatment of the CARES Act to the extent additional guidance and regulations are issued, the further applic ability of the CARES Act to the Company, and the potential impacts on the business.

Employee retention credit (ERC) and payroll tax deferral.

Qualified wages are limited to wages paid to employees who were not providing services due to the COVID-19 pandemic.

During the 13 and 39 weeks ended October 31, 2020, the Company recognized $ 2,402 and $ 50,583 , respectively, related to the ERC as a reduction of the associated costs within selling, general and administrative expenses on the consolidated statements of operations and within accounts receivable, net on the consolidated balance sheets.

Additionally, the CARES Act contains provisions for deferral of the employer portion of social security taxes incurred through the end of calendar 2020 .

As of October 31, 2020, the Company has deferred $ 34,060 in social security tax payments, of which 50% are required to be remitted by December 2021 and the remaining 50% by December 2022.

The deferred amounts are recorded as a liability within accrued liabilities on the Company’s consolidated balance sheets.

Technical corrections to tax depreciation.

This provision of the CARES Act resulted in a cash tax refund of $ 4,600 relating to property and equipment, from filing an amended federal income tax return, as of October 31, 2020.

Furthermore, t he Company expects the changes to qualified impairment property depreciation to result in reductions to estimated income tax payments for fiscal 2020.

The Company’s net sales include retail stores and e-commerce merchandise sales as well as salon services and other revenue.

5 unchanged sentences

(Percentage of net sales)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Skincare, bath, and fragrance

7 unchanged sentences

39 Weeks Ended

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

(In thousands)

October 31, 2020

November 2, 2019

October 31, 2020

November 2, 2019

Beginning balance

4 unchanged sentences

(2) Revenue recognized in the current period related to the beginning liability.

Other amounts included in deferred revenue were $ 8,799 and $ 10,401 at August 1, 2020 and August 3, 2019, respectively.

Impairment charges, store closures and other costs

Other amounts included in deferred revenue were $ 15,216 and $ 14,884 at October 31, 2020 and November 2, 2019, respectively.

Impairment, restructuring and other costs

Impairment of long-lived tangible assets

4 unchanged sentences

The Company evaluates long-lived assets for indicators of impairment quarterly or when events or changes in circumstances indicate that their carrying amounts may not be recoverable.

As a result of the COVID-19 pandemic, the Company experienced lower than projected revenues and identified indicators of impairment for certain stores.

The Company performed undiscounted cash flow analyses over the long-lived assets associated with those stores.

Based on these undiscounted cash flow analyses, the Company determined that certain long-lived assets had carrying values that exceeded their estimated undiscounted cash flows.

The Company performs an undiscounted cash flow analysis over the long-lived assets.

Asset groups are written down only to the extent that their carrying value is lower than their respective fair value.

2 unchanged sentences

The fair value of individual operating lease assets is determined using estimated market rent assessments.

As a result of the COVID-19 pandemic, the Company experienced lower than projected revenues and identified indicators of impairment for certain stores.

The Company’s analysis indicated that the carrying values of certain long-lived assets exceeded their respective fair values.

As a result, the Company recognized an impairment charge of $ 20,886 and $ 40,428 for the 13 and 26 weeks ended August 1, 2020, respectively.

Additional impairments were recorded in the second quarter as a result of continued business disruption and certain macroeconomic factors associated with the COVID-19 pandemic.

These charges are recorded in impairment charges, store closures and other costs in the consolidated statements of operations.

As a result, the Company recognized an impairment charge of $ 40,428 for the 26 weeks ended August 1, 2020.

There were no asset impairment charges recognized during the 13 weeks ended October 31, 2020.

These charges are recorded in impairment, restructuring and other costs in the consolidated statements of operations.

These impairment charges were primarily driven by lower than projected revenues, lower market rate assessments, and the effect of temporary store closures as a result of the COVID-19 pandemic.

The determination of estimated market rent used in the fair value estimate of the Company’s operating lease assets included within the respective store asset group requires significant management judgment.

Changes in these estimates

could have a significant impact on whether long-lived store assets should be further evaluated for impairment and could have a significant impact on the resulting impairment charge.

Store closures and other costs.

Changes in these estimates could have a significant impact on whether long-lived store assets should be further evaluated for impairment and could have a significant impact on the resulting impairment charge.

The significant estimates, all of which are considered Level 3 inputs, used in the fair value methodology include:

the Company’s expectations for future operations and projected cash flows, including revenues, operating expenses, and market conditions.

Restructuring and other costs

The following table provides a summary of the restructuring and other charges included in impairment, restructuring and other costs in the consolidated statements of operations:

13 Weeks Ended

39 Weeks Ended

(In thousands)

Store Closures

Long-lived asset impairment charges (1)

Lease termination costs

Severance (2)

Suspension of Canadian expansion

Long-lived asset impairment charges (1)

Lease termination costs

Severance (2)

Other Severance (2)

(1) The significant estimates, all of which are considered Level 3 inputs, used in the fair value methodology include:

the Company’s expectations for future operations and projected cash flows, including revenues, operating expenses, and market conditions.

(2) As of October 31, 2020, the Company's restructuring accrual recorded in accrued liabilities on the consolidated balance sheets was $ 6,202 and is primarily for severance.

Store closures.

During the second quarter of fiscal 2020, the Company announced that after evaluating its store portfolio, it would permanently close 19 stores in the third quarter of fiscal 2020.

Accordingly, for the 13 and 26 weeks ended August 1, 2020, the Company recognized $ 19,569 of long-lived asset and right-of-use asset impairment charges and $ 303 in related severance charges in impairment charges, store closures and other costs in the consolidated statements of operations.

Accordingly, for the 13 and 39 weeks ended October 31, 2020, the Company recognized restructuring charges related to store closures of $ 2,030 and $ 21,902 , respectively.

There were no related restructuring charges for the 13 and 39 weeks ended November 2, 2019.

The impairment charges reduced the carrying value of the lease asset to its estimated fair value.

Fair value was estimated using an income-approach based on management's forecast of future cash flows expected to be derived from the property based on current sublease market rent.

There were no related asset impairment charges for the 13 or 26 weeks ended August 3, 2019.

The significant estimates, all of which are considered Level 3 inputs, used in the fair value methodology include:

the Company’s expectations for future operations and projected cash flows, including revenues, operating expenses, and market conditions.

Suspension of Canadian expansion.

In 2019, the Company announced plans to expand internationally with an initial launch into Canada.

The Company continues to believe international markets provide a long-term growth opportunity for the Company.

However, given the current operating environment, in September 2020 the Company decided to prioritize growth of its U.S.

operations at this time and suspended its planned expansion to Canada.

Investments to support the expansion into Canada have largely been limited to early-stage infrastructure buildout and lease obligations for a small number of stores.

In conjunction with this decision, the Company expects to incur pre-tax costs in the range of $ 30,000 to $ 40,000 , the majority of which will be recognized in fiscal 2020.

During the 13 and 39 weeks ended October 31, 2020, the Company recognized restructuring charges related to suspension of the Canada expansion of $ 15,886 .

The remaining estimated charges primarily relate to lease termination costs.

There were no related restructuring charges for the 13 and 39 weeks ended November 2, 2019.

Other severance.

As part of the efforts to optimize its cost structure, the Company eliminated the salon manager and prestige manager roles and created a new, single service manager.

During the 13 and 39 weeks ended October 31, 2020, the Company recognized severance charges of $ 5,708 .

There were no related severance charges for the 13 and 39 weeks ended November 2, 2019.

Goodwill and other intangible assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $ 10,870 at August 1, 2020, February 1, 2020, and August 3, 2019.

No additional goodwill was recognized during the 13 and 26 weeks ended August 1, 2020.

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $ 10,870 at October 31, 2020, February 1, 2020, and November 2, 2019.

No additional goodwill was recognized during the 13 and 39 weeks ended October 31, 2020.

The Company reviews the recoverability of goodwill annually during the fourth quarter or more frequently if an event occurs or circumstances change that would indicate that impairment may exist.

1 unchanged sentence

The Company reviews the recoverability of long-lived assets whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable.

As a result of the COVID-19 pandemic and decline in the macroeconomic environment, the Company performed an interim impairment analysis as of August 1, 2020, which indicated that no impairment existed for goodwill or other intangible assets.

As a result of the COVID-19 pandemic and decline in the macroeconomic environment, the Company performed an interim impairment analysis as of October 31, 2020, which indicated that no impairment existed for goodwill or other intangible assets.

The Company leases retail stores, distribution and fast fulfillment centers, corporate offices, and certain equipment under non-cancellable operating leases with various expiration dates through 2033.

6 unchanged sentences

Operating lease cost from the control date through store opening date is classified within pre-opening expenses.

Operating lease cost was $ 75,699 and $ 71,579 for the 13 weeks ended August 1, 2020 and August 3, 2019, respectively.

Operating lease cost was $ 153,232 and $ 142,921 for the 26 weeks ended August 1, 2020 and August 3, 2019, respectively.

Operating lease cost was $ 75,649 and $ 72,467 for the 13 weeks ended October 31, 2020 and November 2, 2019, respectively.

Operating lease cost was $ 228,881 and $ 215,388 for the 39 weeks ended October 31, 2020 and November 2, 2019, respectively.

Other information

2 unchanged sentences

(In thousands)

August 1, 2020

August 3, 2019

Cash paid for operating lease liabilities (1)

Operating lease assets obtained in exchange for operating lease liabilities (non-cash)

(1) Excludes cash received for tenant incentives of $ 18,149 and $ 36,445 for the 26 weeks ended August 1, 2020 and August 3, 2019, respectively.

(1) Excludes cash received for tenant incentives of $ 22,789 and $ 57,160 for the 39 weeks ended October 31, 2020 and November 2, 2019, respectively.

Commitments and contingencies

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Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0 % to 0.125 % or the London Interbank Offered Rate plus a margin of 1.125 % to 1.250 %, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.20 % per annum.

As of August 1, 2020, the Company had $ 800,000 outstanding under the credit facility and the weighted average interest rate was 1.59 % for the 26 weeks ended August 1, 2020.

As of February 1, 2020 and August 3, 2019, the Company had no borrowings outstanding under the credit facility.

As of August 1, 2020, the Company was in compliance with all terms and covenants of the Loan Agreement.

As of October 31, 2020, February 1, 2020, and November 2, 2019, the Company had no borrowings outstanding under the credit facility and the weighted average interest rate was 1.56 % for the 39 weeks ended October 31, 2020.

As of October 31, 2020, the Company was in compliance with all terms and covenants of the Loan Agreement.

Fair value measurements

The carrying value of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable approximates their estimated fair values due to the short maturities of these instruments.

The carrying value of long-term debt also approximates its fair value.

Fair value is measured using inputs from the three levels of the fair value hierarchy, which are described as follows:

2 unchanged sentences

● Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

As of August 1, 2020, February 1, 2020, and August 3, 2019, the Company held financial liabilities included in other long-term liabilities on the consolidated balance sheets of $ 27,283 , $ 29,442 , and $ 26,848 , respectively, related to its non-qualified deferred compensation plan.

As of October 31, 2020, February 1, 2020, and November 2, 2019, the Company held financial liabilities included in other long-term liabilities on the consolidated balance sheets of $ 29,240 , $ 29,442 , and $ 27,417 , respectively, related to its non-qualified deferred compensation plan.

The liabilities have been categorized as Level 2 as they are based on third-party reported values, which are based primarily on quoted market prices of underlying assets of the funds within the plan.

Some assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances.

These assets can include long-lived assets and goodwill that have been reduced to fair value when impaired.

These assets can include long-lived assets and goodwill that are reduced to fair value when impaired.

Assets that are written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment occurs.

Short-term investments typically consist of certificates of deposit and are carried at cost, which approximates fair value and are recorded in the consolidated balance sheets in short-term investments.

The Company did not have short-term investments as of August 1, 2020.

The Company’s short-term investments were $ 110,000 and $ 150,000 as of February 1, 2020, and August 3, 2019, respectively.

The Company did not have short-term investments as of October 31, 2020 and November 2, 2019.

The Company’s short-term investments were $ 110,000 as of February 1, 2020.

The Company’s investments in renewable energy projects are accounted for under the equity method of accounting.

The balance of these investments was $ 5,110 , $ 3,936 , and $ 17,449 as of August 1, 2020, February 1, 2020, and August 3, 2019, respectively, and is included in other long-term assets on the consolidated balance sheets.

The Company contributed capital of $ 5,386 and received distributions including $ 1,291 of investment tax credits during the 26 weeks ended August 1, 2020.

The Company contributed capital of $ 33,339 and received distributions including $ 17,370 of investment tax credits during the 26 weeks ended August 3, 2019.

The balance of these investments was $ 3,642 , $ 3,936 , and $ 11,000 as of October 31, 2020, February 1, 2020, and November 2, 2019, respectively, and is included in other long-term assets on the consolidated balance sheets.

The Company contributed capital of $ 5,665 and received distributions including $ 1,690 of investment tax credits during the 39 weeks ended October 31, 2020.

The Company contributed capital of $ 43,757 and received distributions including $ 31,554 of investment tax credits during the 39 weeks ended November 2, 2019.

Stock-based compensation

6 unchanged sentences

Dividend yield

The Company granted 248 and 97 stock options during the 26 weeks ended August 1, 2020 and August 3, 2019, respectively.

The stock-based compensation expense for stock options was $ 2,872 and $ 2,199 for the 13 weeks ended August 1, 2020 and August 3, 2019, respectively.

The stock-based compensation expense for stock options was $ 5,347 and $ 4,319 for the 26 weeks ended August 1, 2020 and August 3, 2019, respectively.

The weighted-average grant date fair value of these stock options was $ 54.40 and $ 89.91 for the 26 weeks ended August 1, 2020 and August 3, 2019, respectively.

At August 1, 2020, there was approximately $ 23,696 of unrecognized stock-based compensation expense related to unvested stock options.

The Company issued 158 and 47 restricted stock units during the 26 weeks ended August 1, 2020 and August 3, 2019, respectively.

The stock-based compensation expense for restricted stock units was $ 5,161 and $ 3,422 for the 13 weeks ended August 1, 2020 and August 3, 2019, respectively.

The stock-based compensation expense for restricted stock units was $ 9,348 and $ 6,243 for the 26 weeks ended August 1, 2020 and August 3, 2019, respectively.

At August 1, 2020, there was approximately $ 38,743 of unrecognized stock-based compensation expense related to restricted stock units.

The Company did not issue any performance-based restricted stock units during the 26 weeks ended August 1, 2020.

The Company issued 21 performance-based restricted stock units during the 26 weeks ended August 3, 2019.

The stock-based compensation expense for performance-based restricted stock units was $ 380 and $ 1,390 for the 13 weeks ended August 1, 2020 and August 3, 2019, respectively.

The stock-based compensation benefit for performance-based restricted stock units was $ 100 for the 26 weeks ended August 1, 2020.

The stock-based compensation expense for performance-based restricted stock units was $ 3,101 for the 26 weeks ended August 3, 2019.

At August 1, 2020, there was approximately $ 1,019 of unrecognized stock-based compensation expense related to performance-based restricted stock units.

The Company granted 248 and 97 stock options during the 39 weeks ended October 31, 2020 and November 2, 2019, respectively.

The stock-based compensation expense for stock options was $ 2,900 and $ 2,204 for the 13 weeks ended October 31, 2020 and November 2, 2019, respectively.

The stock-based compensation expense for stock options was $ 8,247 and $ 6,523 for the 39 weeks ended October 31, 2020 and November 2, 2019, respectively.

The weighted-average grant date fair value of these stock options was $ 54.40 and $ 89.91 for the 39 weeks ended October 31, 2020 and

November 2, 2019, respectively.

At October 31, 2020, there was approximately $ 20,691 of unrecognized stock-based compensation expense related to unvested stock options.

The Company issued 161 and 52 restricted stock units during the 39 weeks ended October 31, 2020 and November 2, 2019, respectively.

The stock-based compensation expense for restricted stock units was $ 5,098 and $ 3,429 for the 13 weeks ended October 31, 2020 and November 2, 2019, respectively.

The stock-based compensation expense for restricted stock units was $ 14,446 and $ 9,672 for the 39 weeks ended October 31, 2020 and November 2, 2019, respectively.

At October 31, 2020, there was approximately $ 34,048 of unrecognized stock-based compensation expense related to restricted stock units.

The Company did not issue any performance-based restricted stock units during the 39 weeks ended October 31, 2020.

The Company issued 21 performance-based restricted stock units during the 39 weeks ended November 2, 2019.

The stock-based compensation expense for performance-based restricted stock units was $ 386 for the 13 weeks ended October 31, 2020.

The stock-based compensation benefit for performance-based restricted stock units was $ 122 for the 13 weeks ended November 2, 2019.

The stock-based compensation expense for performance-based restricted stock units was $ 286 and $ 2,979 for the 39 weeks ended October 31, 2020 and November 2, 2019, respectively.

At October 31, 2020, there was approximately $ 613 of unrecognized stock-based compensation expense related to performance-based restricted stock units.

Income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which the Company operates stores.

Income tax expense of $ 2,086 for the 13 weeks ended August 1, 2020 represents an effective tax rate of 20.6 %, compared to $ 48,431 of tax expense representing an effective tax rate of 23.1 % for the 13 weeks ended August 3, 2019.

The lower effective tax rate is primarily due to a decrease in operating income.

Income tax benefit of $ 22,161 for the 26 weeks ended August 1, 2020 represents an effective tax rate of 23.9 %, compared to $ 95,796 of tax expense representing an effective tax rate of 21.3 % for the 26 weeks ended August 3, 2019.

The higher effective tax rate is due to a reduction of tax-deductible stock option expense in the first 26 weeks of fiscal 2020.

Net income (loss) per common share

The following is a reconciliation of net income (loss) and the number of shares of common stock used in the computation of net income (loss) per basic and diluted share:

Income tax expense of $ 25,096 for the 13 weeks ended October 31, 2020 represents an effective tax rate of 25.1 %, compared to $ 38,933 of tax expense representing an effective tax rate of 23.1 % for the 13 weeks ended November 2, 2019.

The higher effective tax rate is primarily due to less investment tax credits received.

Income tax expense of $ 2,935 for the 39 weeks ended October 31, 2020 represents an effective tax rate of 40.3 %, compared to $ 134,729 of tax expense representing an effective tax rate of 21.8 % for the 39 weeks ended November 2, 2019.

The higher effective tax rate is primarily due to a near break-even pre-tax operating income in fiscal 2020, less investment tax credits received, and tax expense from the income tax accounting for share-based compensation compared to a tax benefit in fiscal 2019.

Net income per common share

The following is a reconciliation of net income and the number of shares of common stock used in the computation of net income per basic and diluted share:

13 Weeks Ended

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(In thousands, except per share data)

Net income (loss)

Weighted-average common shares – Basic

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Weighted-average common shares – Diluted

Net income (loss) per common share:

The denominator for diluted net income per common share for the 13 weeks ended August 1, 2020 and August 3, 2019 excludes 553 and 101 employee stock options and restricted stock units, respectively, due to their anti-dilutive effects.

The denominator for diluted net income (loss) per common share for the 26 weeks ended August 1, 2020 and August 3, 2019 excludes 711 and 164 employee stock options and restricted stock units, respectively, due to their anti-dilutive effects.

Net income per common share:

The denominator for diluted net income per common share for the 13 weeks ended October 31, 2020 and November 2, 2019 excludes 246 and 219 employee stock options and restricted stock units, respectively, due to their anti-dilutive

The denominator for diluted net income per common share for the 39 weeks ended October 31, 2020 and November 2, 2019 excludes 562 and 217 employee stock options and restricted stock units, respectively, due to their anti-dilutive effects.

Outstanding performance-based restricted stock units are included in the computation of dilutive shares only to the extent that the underlying performance conditions are satisfied prior to the end of the reporting period or would be considered satisfied if the end of the reporting period were the end of the related contingency period and the results would be dilutive under the treasury stock method.

Share repurchase program

On March 15, 2018, the Company announced that the Board of Directors authorized a share repurchase program (the 2018 Share Repurchase Program) pursuant to which the Company could repurchase up to $ 625,000 of the Company’s

common stock.

The 2018 Share Repurchase Program authorization revoked the previously authorized but unused amount of $ 41,317 from the earlier share repurchase program.

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The 2020 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time.

On April 2, 2020, the Company announced that the share repurchase program has been suspended in order to strengthen its liquidity and preserve cash while navigating the COVID-19 pandemic.

On April 2, 2020, the Company announced that the share repurchase program had been suspended in order to strengthen its liquidity and preserve cash in the early stages of the COVID-19 pandemic.

The Company may resume the 2020 Share Repurchase Program in the fourth quarter of fiscal 2020.

A summary of the Company’s common stock repurchase activity is presented in the following table:

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(In thousands)

August 1, 2020

August 3, 2019

Shares repurchased

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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