What changed in this filing

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Item 1. Financial Statements

2021-12-02 compared with 2021-08-25 · 95 added, 79 removed, 316 unchanged (36% of the section changed)

24 unchanged sentences

Non-current operating lease liabilities

Long-term debt

Deferred income taxes

6 unchanged sentences

54,170 , 56,260 and 56,332 shares outstanding;

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

at October 30, 2021 (unaudited), January 30, 2021, and October 31, 2020 (unaudited), respectively

Treasury stock-common, at cost

1 unchanged sentence

Retained earnings

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Total stockholders’ equity

2 unchanged sentences

Ulta Beauty, Inc.

Consolidated Statements of Operations

Consolidated Statements of Income

13 Weeks Ended

5 unchanged sentences

Pre-opening expenses

Operating income (loss)

Operating income

Interest expense, 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:

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 (loss) to net cash provided by operating activities:

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

Depreciation and amortization

18 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

12 unchanged sentences

(In thousands)

Income (Loss)

Balance – January 30, 2021

10 unchanged sentences

Balance – July 31, 2021

Stock-based compensation

Stock options exercised and other awards

Purchase of treasury shares

Repurchase of common shares

Balance – October 30, 2021

See accompanying notes to consolidated financial statements.

17 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.

7 unchanged sentences

and its consolidated subsidiaries.

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

As of October 30, 2021, the Company operated 1,302 stores across 50 states, as shown in the table below.

New Hampshire

10 unchanged sentences

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 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.

The results for the 13 and 39 weeks ended October 30, 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 second quarter in fiscal 2021 and 2020 ended on July 31, 2021 and August 1, 2020, respectively.

The third quarter in fiscal 2021 and 2020 ended on October 30, 2021 and October 31, 2020, respectively.

Use of estimates

30 unchanged sentences

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 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.

During the 13 weeks ended October 30, 2021 and October 31, 2020, there was $ 634 and $ 2,402 , respectively, related to the ERC recognized as a reduction of the associated costs within selling, general and administrative expenses on the consolidated statements of income.

During the 39 weeks ended October 30, 2021 and October 31, 2020, there was $ 4,021 and $ 50,583 , respectively, related to the ERC recognized as a reduction of the associated costs within selling, general and administrative expenses on the consolidated statements of income.

The receivable for the ERC was $ 56,426 , $ 52,405 , and $ 50,583 as of October 30, 2021, January 30, 2021, and October 31, 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 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.

As of January 30, 2021 and October 31, 2020, there was $ 43,845 and $ 34,060 , respectively, of social security tax payments deferred, of which 50% was required to be remitted by December 2021 and the remaining 50% by December 2022.

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

The company submitted payments for these taxes during the 13 weeks ended October 30, 2021, the therefore has no deferral balance as of October 30, 2021.

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.

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.

3 unchanged sentences

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

Other revenue sources include the private label and co-branded credit card programs, as well as deferred revenue related to the loyalty program and gift card breakage.

Other revenue sources mainly include the private label and co-branded credit card programs, as well as deferred revenue related to the loyalty program and gift card breakage.

Disaggregated revenue

11 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 and 26 weeks ended July 31, 2021 and August 1, 2020:

The following table provides a summary of the changes included in deferred revenue during the 13 and 39 weeks ended October 30, 2021 and October 31, 2020:

13 weeks ended

7 unchanged sentences

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

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

Other amounts included in deferred revenue were $ 9,405 and $ 15,216 at October 30, 2021 and October 31, 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:

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

13 weeks ended

4 unchanged sentences

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

Lease termination costs

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.

Suspension of Canadian expansion

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

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.

Lease termination costs

Severance (2)

Total suspension of Canadian expansion

Other severance (2)

(1) Amount included in the non-cash $ 69,932 long-lived asset impairment charge on the consolidated statements of cash flows for the 39 weeks ended October 31, 2020.

(2) As of October 31, 2020, there was $ 6,202 in accrued liabilities on the consolidated balance sheets for restructuring and was primarily for severance.

There was no liability for restructuring as of October 30, 2021.

(3) There were no impairment, restructuring and other costs recognized during the 13 and 39 weeks ended October 30, 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 39 weeks ended October 31, 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 26 weeks ended August 1, 2020.

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

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.

The Company also recorded long-lived tangible and right-of-use asset impairment charges related to store closures during the 39 weeks ended October 31, 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.

Accordingly, for the 13 and 39 weeks ended October 31, 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 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.

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

No additional goodwill was recognized during the 13 and 39 weeks ended October 30, 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.

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

The following table presents a summary of operating lease costs for the 13 and 39 weeks ended October 30, 2021 and October 31, 2020:

13 weeks ended

8 unchanged sentences

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

(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.

(1) Excludes $ 24,570 and $ 22,789 related to cash received for tenant incentives for the 39 weeks ended October 30, 2021 and October 31, 2020, respectively.

Commitments and contingencies

11 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 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.

As of October 30, 2021, January 30, 2021, and October 31, 2020, there were no borrowings outstanding under the credit facility.

The weighted average interest rate was 1.56 % for the 39 weeks ended October 31, 2020.

As of October 30, 2021, the Company was in compliance with all terms and covenants of the Loan Agreement.

Fair value measurements

5 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 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.

As of October 30, 2021, January 30, 2021, and October 31, 2020, there were liabilities related to the non-qualified deferred compensation plan included in other long-term liabilities on the consolidated balance sheets of $ 38,333 , $ 32,909 , and $ 29,240 , 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.

3 unchanged sentences

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

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.

The balance of these investments was $ 2,815 , $ 3,174 , and $ 3,642 as of October 30, 2021, January 30, 2021, and October 31, 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 39 weeks ended October 30, 2021.

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.

Stock-based compensation

7 unchanged sentences

Dividend yield

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.

The Company granted 61 and 248 stock options during the 39 weeks ended October 30, 2021 and October 31, 2020, respectively.

Stock-based compensation expense for stock options was $ 2,712 and $ 2,900 for the 13 weeks ended October 30, 2021 and October 31, 2020, respectively.

Stock-based compensation expense for stock options was $ 8,710 and $ 8,247 for the 39 weeks ended October 30, 2021 and October 31, 2020, respectively.

The weighted-average grant date fair value of these stock options was $ 109.72 and $ 54.40 for the 39 weeks ended October 30, 2021 and October 31,

2020, respectively.

At October 30, 2021, there was approximately $ 14,108 of unrecognized stock-based compensation expense related to unvested stock options.

There were 60 and 161 restricted stock units issued during the 39 weeks ended October 30, 2021 and October 31, 2020, respectively.

Stock-based compensation expense for restricted stock units was $ 4,622 and $ 5,098 for the 13 weeks ended October 30, 2021 and October 31, 2020, respectively.

Stock-based compensation expense for restricted stock units was $ 14,606 and $ 14,446 for the 39 weeks ended October 30, 2021 and October 31, 2020, respectively.

At October 30, 2021, there was approximately $ 27,111 of unrecognized stock-based compensation expense related to restricted stock units.

There were 46 performance-based restricted stock units issued during the 39 weeks ended October 30, 2021.

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

Stock-based compensation expense for performance-based restricted stock units was $ 1,786 and $ 386 for the 13 weeks ended October 30, 2021 and October 31, 2020, respectively.

Stock-based compensation expense for performance-based restricted stock units was $ 4,901 and $ 286 for the 39 weeks ended October 30, 2021 and October 31, 2020, respectively.

At October 30, 2021, there was approximately $ 15,898 of unrecognized stock-based compensation expense related to performance-based restricted stock units.

Awards with market conditions are classified as liability awards and the fair value is determined using a Monte Carlo simulation.

Market-based restricted stock units were granted to the former CEO in fiscal 2018 and settled during the 39 weeks ended October 30, 2021.

Compensation expense for liability awards was $ 3,289 and $ 198 for the 13 weeks ended October 30, 2021 and October 31, 2020, respectively.

Compensation expense (benefit) for liability awards was $ 7,671 and ( $ 331 ) for the 39 weeks ended October 30, 2021 and October 31, 2020, respectively.

The total compensation expense for this award was $ 10,000 and 28 shares were settled during the 39 weeks ended October 30, 2021 .

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 $ 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

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 common share:

Income tax expense of $ 68,537 for the 13 weeks ended October 30, 2021 represents an effective tax rate of 24.1 %, compared to $ 25,096 of tax expense representing an effective tax rate of 25.1 % for the 13 weeks ended October 31, 2020.

The lower effective tax rate is primarily due to favorable provision to tax return adjustments, driven by federal employment tax credits, compared to third quarter of fiscal 2020.

Income tax expense of $ 224,203 for the 39 weeks ended October 30, 2021 represents an effective tax rate of 24.4 %, compared to $ 2,935 of tax expense representing an effective tax rate of 40.3 % for the 39 weeks ended October 31, 2020.

The lower effective tax rate is primarily due to a benefit from the income tax accounting for share-based compensation and favorable provision to tax return adjustments, driven by federal employment tax credits, compared to fiscal 2020.

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 common share:

13 Weeks Ended

1 unchanged sentence

(In thousands, except per share data)

Net income (loss)

Weighted-average common shares – Basic

1 unchanged sentence

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 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.

Net income per common share:

The denominator for diluted net income per common share for the 13 weeks ended October 30, 2021 and October 31, 2020 excludes 144 and 246 employee stock options and restricted stock units, respectively, due to their anti-dilutive effects.

The denominator for diluted net income per common share for the 39 weeks ended October 30, 2021 and October 31, 2020 excludes 173 and 562 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