What changed in this filing

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Item 1. Financial Statements

2021-08-25 compared with 2021-05-27 · 119 added, 70 removed, 276 unchanged (41% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Short-term investments

Receivables, net

26 unchanged sentences

54,446 , 56,260 and 56,323 shares outstanding;

at May 1, 2021, January 30, 2021, and May 2, 2020, respectively

at July 31, 2021 (unaudited), January 30, 2021, and August 1, 2020 (unaudited), respectively

Treasury stock-common, at cost

1 unchanged sentence

Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Total stockholders’ equity

4 unchanged sentences

13 Weeks Ended

26 Weeks Ended

(In thousands, except per share data)

1 unchanged sentence

Selling, general and administrative expenses

Impairment costs

Impairment, restructuring and other costs

Pre-opening expenses

10 unchanged sentences

13 Weeks Ended

26 Weeks Ended

(In thousands)

Net income (loss)

Other comprehensive income (loss):

Other comprehensive income:

Foreign currency translation adjustments

22 unchanged sentences

Other assets and liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Investing activities

Proceeds from short-term investments

Capital expenditures

Acquisitions, net of cash acquired

Purchases of equity investments

Net cash used in investing activities

Net cash provided by (used in) investing activities

Financing activities

20 unchanged sentences

Income (Loss)

Balance – February 1, 2020

Balance – January 30, 2021

Stock-based compensation

4 unchanged sentences

Balance – May 1, 2021

Balance – January 30, 2021

Stock-based compensation

Stock options exercised and other awards

Purchase of treasury shares

Repurchase of common shares

Balance – July 31, 2021

See accompanying notes to consolidated financial statements.

Ulta Beauty, Inc.

Consolidated Statements of Stockholders’ Equity

Comprehensive

Stockholders'

(In thousands)

Income (Loss)

Balance – February 1, 2020

Stock-based compensation

Foreign currency translation adjustments

3 unchanged sentences

Balance – May 2, 2020

Stock-based compensation

Foreign currency translation adjustments

Stock options exercised and other awards

Purchase of treasury shares

Balance – August 1, 2020

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Business and basis of presentation

On January 29, 2017, Ulta Salon, Cosmetics & Fragrance, Inc.

implemented a holding company reorganization.

Pursuant to the reorganization, Ulta Beauty, Inc., which was incorporated as a Delaware corporation in December 2016, became the successor to Ulta Salon, Cosmetics & Fragrance, Inc., the former publicly-traded company and now a wholly owned subsidiary of Ulta Beauty, Inc.

The Company was founded in 1990 to operate specialty retail stores selling cosmetics, fragrance, haircare and skincare products, and related accessories and services.

The stores also feature full-service salons.

As used in these notes and throughout this Quarterly Report on Form 10-Q, all references to “we,” “us,” “our,” “Ulta Beauty,” or the “Company” refer to Ulta Beauty, Inc.

and its consolidated subsidiaries.

The Company was originally founded in 1990 to operate specialty retail stores selling cosmetics, fragrance, haircare and skincare products, and related accessories and services.

The stores also feature full-service salons.

As of May 1, 2021, the Company operated 1,290 stores across 50 states, as shown in the table below.

As of July 31, 2021, the Company operated 1,296 stores across 50 states, as shown in the table below.

New Hampshire

8 unchanged sentences

All significant intercompany accounts, transactions, and unrealized profit were eliminated in consolidation.

In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, which are of a

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

In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to fairly state the financial position and results of operations and cash flows for the interim periods presented.

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

The results for the 13 weeks ended May 1, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending January 29, 2022, or for any other future interim period or for any future year, in particular as a result of the uncertainty around the continuing effects of the COVID-19 pandemic on future periods.

The results for the 13 and 26 weeks ended July 31, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending January 29, 2022, or for any other future interim period or for any future year, in particular as a result of the uncertainty around the continuing effects of the COVID-19 pandemic on future periods.

These unaudited 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 January 30, 2021.

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 first quarter in fiscal 2021 and 2020 ended on May 1, 2021 and May 2, 2020, respectively.

The second quarter in fiscal 2021 and 2020 ended on July 31, 2021 and August 1, 2020, respectively.

Use of estimates

17 unchanged sentences

Estimates of market rent are based on non-binding broker quotes.

As these inputs are unobservable, they are classified as Level 3 inputs under the fair value hierarchy (see Note 9, Fair value measurements”).

If actual results are not consistent with estimates and assumptions used in estimating future cash flows and asset fair values, there may be exposure to additional impairment losses in a future period (see Note 4, “Impairment costs”).

As these inputs are unobservable, they are classified as Level 3 inputs

under the fair value hierarchy (see Note 9, “Fair value measurements”).

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 CARES Act, among other things, includes provisions relating to refundable payroll taxes, deferral 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.

3 unchanged sentences

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 through January 1, 2021 and 70% of the first ten thousand dollars, per quarter, in qualified wages paid to each employee commencing on January 1, 2021 through June 30, 2021.

To be eligible, the Company must (i) have had operations fully or partially suspended because of a governmental order, or (ii) have had gross receipts decline by more than 50% in a calendar quarter in fiscal 2020 or 20% in a calendar quarter in fiscal 2021, 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 weeks ended May 1, 2021, there was $ 2,339 related to the ERC recognized 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.

The receivable for the ERC was $ 54,744 as of May 1, 2021.

There were no amounts related to the ERC recognized during the 13 weeks ended May 2, 2020, and there was no receivable for the ERC as of May 2, 2020.

During the 13 weeks ended July 31, 2021 and August 1, 2020, there was $ 1,048 and $ 48,181 , respectively, related to the ERC recognized as a reduction of the associated costs within selling, general and administrative expenses on the consolidated statements of operations.

During the 26 weeks ended July 31, 2021 and August 1, 2020, there was $ 3,387 and $ 48,181 , respectively, related to the ERC recognized as a reduction of the associated costs within selling, general and administrative expenses on the consolidated statements of operations.

The receivable for the ERC was $ 55,792 , $ 52,405 , and $ 48,181 as of July 31, 2021, January 30, 2021, and August 1, 2020, respectively.

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

As of May 1, 2021, there was $ 43,845 of social security tax payments deferred, of which 50% are required to be remitted by December 2021 and the remaining 50% by December 2022.

As of July 31, 2021, January 30, 2021, and August 1, 2020, there was $ 43,845 , $ 43,845 , and $ 18,709 , respectively, of social security tax payments deferred, of which 50% are required to be remitted by December 2021 and the remaining 50% by December 2022.

The deferred amounts are recorded within accrued liabilities on the consolidated balance sheets.

There were no social security tax payments deferred as of May 2, 2020.

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 amendment to the Company’s 2018 federal income tax return, during the 13 and 26 weeks ended August 1, 2020.

Recently adopted accounting pronouncements

3 unchanged sentences

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.

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.

This guidance is effective for interim and annual reporting periods beginning after December 15, 2020.

1 unchanged sentence

The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively.

The Company adopted the

new guidance as of January 31, 2021, and its adoption had no impact on the Company’s consolidated financial position, results of operations, or cash flows.

The Company adopted the new guidance as of January 31, 2021, and its adoption had no impact on the Company’s consolidated financial position, results of operations, or cash flows.

Net sales include retail stores and e-commerce merchandise sales as well as salon services and other revenue.

3 unchanged sentences

13 Weeks Ended

26 Weeks Ended

(Percentage of net sales)

7 unchanged sentences

In addition, breakage on gift cards is recognized proportionately as redemption occurs.

The following table provides a summary of the changes included in deferred revenue during the 13 weeks ended May 1, 2021 and May 2, 2020:

The following table provides a summary of the changes included in deferred revenue during the 13 and 26 weeks ended July 31, 2021 and August 1, 2020:

13 weeks ended

26 weeks ended

(In thousands)

5 unchanged sentences

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

Other amounts included in deferred revenue were $ 16,918 and $ 9,677 at May 1, 2021 and May 2, 2020, respectively.

Impairment costs

As a result of the COVID-19 pandemic, the Company experienced lower than projected revenues and identified indicators of impairment for certain retail stores during the 13 weeks ended May 2, 2020.

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

As a result, impairment costs of $ 19,542 related to certain retail stores were recognized during the 13 weeks ended May 2, 2020.

Other amounts included in deferred revenue were $ 9,235 and $ 8,799 at July 31, 2021 and August 1, 2020, respectively.

Impairment, restructuring and other costs

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

13 weeks ended

26 weeks ended

(In thousands)

Impairment of long-lived tangible and right-of-use assets (1)

Store closures

Impairment of long-lived tangible and right-of-use assets (1)

Severance (2)

Total store closures

(1) Amount included in the non-cash $ 59,997 long-lived asset impairment charge on the consolidated statements of cash flows for the 26 weeks ended August 1, 2020.

(2) As of August 1, 2020, there was $ 303 in accrued liabilities on the consolidated balance sheets for severance related to store closures.

There was no liability for severance related to store closures as of July 31, 2021.

(3) There were no impairment, restructuring and other costs recognized during the 13 and 26 weeks ended July 31, 2021.

Impairment of long-lived tangible and right-of-use assets.

As a result of the COVID-19 pandemic, the Company experienced lower than projected revenues and identified indicators of impairment for certain retail stores during the 13 and 26 weeks ended August 1, 2020.

The Company’s analysis indicated that the carrying values of certain long-lived

tangible and right-of-use assets exceeded their respective fair values.

As a result, the Company recognized impairment charges related to certain retail stores during the 13 and 26 weeks ended August 1, 2020.

These impairment costs 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.

There were no impairment costs recognized during the 13 weeks ended May 1, 2021.

The Company also recorded long-lived tangible and right-of-use asset impairment charges related to store closures during the 13 and 26 weeks ended August 1, 2020 as described below.

Store closures and other costs.

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 impairment, restructuring and other costs related to store closures.

The impairment charges reduced the carrying value of the long-lived tangible and right-of-use assets to their fair value.

Goodwill and other intangible assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired, was $ 10,870 at May 1, 2021, January 30, 2021, and May 2, 2020.

No additional goodwill was recognized during the 13 weeks ended May 1, 2021.

Goodwill, which represents the excess of cost over the fair value of net assets acquired, was $ 10,870 at July 31, 2021, January 30, 2021, and August 1, 2020.

No additional goodwill was recognized during the 13 and 26 weeks ended July 31, 2021.

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

7 unchanged sentences

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

Operating lease cost was $ 78,736 and $ 77,533 for the 13 weeks ended May 1, 2021 and May 2, 2020, respectively.

The following table presents a summary of operating lease costs for the 13 and 26 weeks ended July 31, 2021 and August 1, 2020:

13 weeks ended

26 weeks ended

(In thousands)

Operating lease cost

Other information

4 unchanged sentences

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

(1) Excludes $ 7,986 and $ 12,075 related to cash received for tenant incentives for the 13 weeks ended May 1, 2021 and May 2, 2020, respectively.

(1) Excludes $ 16,923 and $ 18,149 related to cash received for tenant incentives for the 26 weeks ended July 31, 2021 and August 1, 2020, respectively.

Commitments and contingencies

The Company is involved in various legal proceedings that are incidental to the conduct of the business including both class action and single plaintiff litigation.

In the opinion of management, the amount of any liability with respect to these

proceedings, either individually or in the aggregate, will not have a material adverse effect on the consolidated financial position, results of operations or cash flows.

In the opinion of management, the amount of any liability with respect to these proceedings, either individually or in the aggregate, will not have a material adverse effect on the consolidated financial position, results of operations or cash flows.

On March 11, 2020, the Company entered into Amendment No.

8 unchanged sentences

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 May 1, 2021 and January 30, 2021, there were no borrowings outstanding under the credit facility.

As of May 2, 2020, there was $ 800,000 outstanding under the credit facility and the weighted average interest rate was 1.94 %.

As of May 1, 2021, the Company was in compliance with all terms and covenants of the Loan Agreement.

As of July 31, 2021 and January 30, 2021, there were no borrowings outstanding under the credit facility.

As of August 1, 2020, there was $ 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 July 31, 2021, 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 cash and cash equivalents, 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.

3 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 May 1, 2021, January 30, 2021, and May 2, 2020, there were liabilities related to the non-qualified deferred compensation plan included in other long-term liabilities on the consolidated balance sheets of $ 35,449 , $ 32,909 , and $ 23,330 , respectively.

As of July 31, 2021, January 30, 2021, and August 1, 2020, there were liabilities related to the non-qualified deferred compensation plan included in other long-term liabilities on the consolidated balance sheets of $ 38,077 , $ 32,909 , and $ 27,283 , respectively.

The liabilities are 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.

2 unchanged sentences

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.

There were no short-term investments as of May 1, 2021 and January 30, 2021.

Short-term investments were $ 110,000 as of May 2, 2020.

Investments in renewable energy projects are accounted for under the equity method of accounting.

The balance of these investments was $ 3,247 , $ 3,174 , and $ 6,437 as of May 1, 2021, January 30, 2021, and May 2, 2020, respectively, and is included in other long-term assets on the consolidated balance sheets.

The Company did not contribute capital or receive investment tax credits during the 13 weeks ended May 1, 2021.

The Company contributed capital of $ 5,386 and received distributions including $ 1,250 of investment tax credits during the 13 weeks ended May 2, 2020.

The balance of these investments was $ 3,146 , $ 3,174 , and $ 5,110 as of July 31, 2021, January 30, 2021, and August 1, 2020, respectively, and is included in other long-term assets on the consolidated balance sheets.

The Company did not contribute capital or receive investment tax credits during the 26 weeks ended July 31, 2021.

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.

Stock-based compensation

7 unchanged sentences

Dividend yield

The Company granted 61 and 248 stock options during the 13 weeks ended May 1, 2021 and May 2, 2020, respectively.

Stock-based compensation expense for stock options was $ 2,897 and $ 2,475 for the 13 weeks ended May 1, 2021 and May 2, 2020, respectively.

The weighted-average grant date fair value of these stock options was $ 109.72 and $ 54.40 for the 13 weeks ended May 1, 2021 and May 2, 2020, respectively.

At May 1, 2021, there was approximately $ 20,470 of unrecognized stock-based compensation expense related to unvested stock options.

There were 52 and 152 restricted stock units issued during the 13 weeks ended May 1, 2021 and May 2, 2020, respectively.

Stock-based compensation expense for restricted stock units was $ 4,835 and $ 4,187 for the 13 weeks ended May 1, 2021 and May 2, 2020, respectively.

At May 1, 2021, there was approximately $ 36,761 of unrecognized stock-based compensation expense related to restricted stock units.

There were 46 performance-based restricted stock units issued during the 13 weeks ended May 1, 2021.

There were no performance-based restricted stock units issued during the 13 weeks ended May 2, 2020.

Stock-based compensation expense for performance-based restricted stock units was $ 1,246 for the 13 weeks ended May 1, 2021.

Stock-based compensation benefit for performance-based restricted stock units was $ 480 for the 13 weeks ended May 2, 2020.

At May 1, 2021, there was approximately $ 19,721 of unrecognized stock-based compensation expense related to performance-based restricted stock units.

The Company granted 61 and 248 stock options during the 26 weeks ended July 31, 2021 and August 1, 2020, respectively.

Stock-based compensation expense for stock options was $ 3,101 and $ 2,872 for the 13 weeks ended July 31, 2021 and August 1, 2020, respectively.

Stock-based compensation expense for stock options was $ 5,998 and $ 5,347 for the 26 weeks ended July 31, 2021 and August 1, 2020, respectively.

The weighted-average grant date fair value of these stock options was $ 109.72 and $ 54.40 for the 26 weeks ended July 31, 2021 and August 1, 2020, respectively.

At July 31, 2021, there was approximately $ 17,216 of unrecognized stock-based compensation expense related to unvested stock options.

There were 58 and 158 restricted stock units issued during the 26 weeks ended July 31, 2021 and August 1, 2020, respectively.

Stock-based compensation expense for restricted stock units was $ 5,149 and $ 5,161 for the 13 weeks ended July 31, 2021 and August 1, 2020, respectively.

Stock-based compensation expense for restricted stock units was $ 9,984 and $ 9,348 for the 26 weeks ended July 31, 2021 and August 1, 2020, respectively.

At July 31, 2021, there was approximately $ 32,844 of unrecognized stock-based compensation expense related to restricted stock units.

There were 46 performance-based restricted stock units issued during the 26 weeks ended July 31, 2021.

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

Stock-based compensation expense for performance-based restricted stock units was $ 1,869 and $ 380 for the 13 weeks ended July 31, 2021 and August 1, 2020, respectively.

Stock-based compensation expense for performance-based restricted stock units

was $ 3,115 for the 26 weeks ended July 31, 2021.

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

At July 31, 2021, there was approximately $ 18,130 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 $ 74,677 for the 13 weeks ended May 1, 2021 represents an effective tax rate of 24.5 %, compared to $ 24,247 of income tax benefit representing an effective tax rate of 23.6 % for the 13 weeks ended May 2, 2020.

The higher effective tax rate is primarily due to a decrease in the benefit of state tax credits compared to the first quarter of fiscal 2020 as a result of an increase in pretax income.

Income tax expense of $ 80,989 for the 13 weeks ended July 31, 2021 represents an effective tax rate of 24.4 %, compared to $ 2,086 of tax expense representing an effective tax rate of 20.6 % for the 13 weeks ended August 1, 2020.

The higher effective tax rate is primarily due to a decrease in the benefit of state tax credits compared to the 13 weeks ended August 1, 2020 as a result of an increase in pretax income.

Income tax expense of $ 155,666 for the 26 weeks ended July 31, 2021 represents an effective tax rate of 24.4 %, compared to $ 22,161 of tax benefit representing an effective tax rate of 23.9 % for the 26 weeks ended August 1, 2020.

The higher effective tax rate is primarily due to a decrease in the benefit of state tax credits compared to the 26 weeks ended August 1, 2020 as a result of an increase in pretax income.

Net income (loss) per common share

1 unchanged sentence

13 Weeks Ended

26 Weeks Ended

(In thousands, except per share data)

4 unchanged sentences

Net income (loss) per common share:

The denominator for diluted net income (loss) per common share for the 13 weeks ended May 1, 2021 and May 2, 2020 excludes 262 and 732 stock options and restricted stock units, respectively, due to their anti-dilutive effects.

The denominator for diluted net income per common share for the 13 weeks ended July 31, 2021 and August 1, 2020 excludes 152 and 553 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 July 31, 2021 and August 1, 2020 excludes 207 and 711 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.

12 unchanged sentences

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