What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-25 compared with 2021-03-26 · 183 added, 259 removed, 774 unchanged (36% of the section changed)

5 unchanged sentences

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Internal control over financial reporting is a process designed by, or under the supervision of, the principal executive officer and principal financial officer and effected by the Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S generally accepted accounting principles.

personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S generally accepted accounting principles.

Under the supervision and with the participation of our principal executive officer and our principal financial officer, management evaluated the effectiveness of our internal control over financial reporting as of January 29, 2022, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO).

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Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Directors, Executive Officers, and Corporate Governance

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We have a Code of Business Conduct that applies to all of our employees, including our Chief Executive Officer, Chief Financial Officer, Controller, and other persons performing similar functions.

We have posted a copy of our Code of Business Conduct under “Governance” in the Investor Relations section of our website located at http://ir.ultabeauty.com, and such Code of Business Conduct is available in print, without charge, to any stockholder who requests it from our Corporate Secretary.

We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, the Code of Business Conduct by posting such information under “Governance” in the Investor Relations section of our website located at http://ir.ultabeauty.com.

We have posted a copy of our Code of Business Conduct under “Governance” in the Investor Relations section of our website located at http://ulta.com/investor, and such Code of Business Conduct is available in print, without charge, to any stockholder who requests it from our Corporate Secretary.

We are not including the information contained on our website as part of, or incorporating it by reference into, this Annual Report on Form 10-K.

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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item with respect to security ownership of certain beneficial owners and management is included under the caption "Stock - Security Ownership of Certain Beneficial Owners and Management"

in the Proxy Statement and is hereby incorporated by reference.

The information required by this item with respect to security ownership of certain beneficial owners and management is included under the caption "Stock Ownership” in the Proxy Statement and is hereby incorporated by reference.

The information required by this item with respect to compensation plans under which our equity securities are authorized for issuance as of January 29, 2022 is set forth in Item 5 of this Annual Report on Form 10-K under the caption “Securities authorized for issuance under equity compensation plans.”

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The following documents are filed as a part of this Form 10-K:

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

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We have audited the accompanying consolidated balance sheets of Ulta Beauty, Inc.

(the Company) as of January 30, 2021, and February 1, 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended January 30, 2021, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 30, 2021 and February 1, 2020, and the consolidated results of its operations and its cash flows for each of the three years in the period ended January 30, 2021, in conformity with U.S.

(the Company) as of January 29, 2022, and January 30, 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended January 29, 2022, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 29, 2022 and January 30, 2021, and the consolidated results of its operations and its cash flows for each of the three years in the period ended January 29, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 29, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 25, 2022 expressed an unqualified opinion thereon.

Adoption of New Accounting Standards

As discussed in the Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU No.

2016-02, Leases (Topic 842) using the modified retrospective approach.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment of Long-Lived Tangible and Right of Use Assets

Description of the matter

As described in Notes 2 and 6 to the consolidated financial statements, the Company evaluates if there are indicators of impairment for long-lived tangible and right of use assets in accordance with ASC 360, Property, Plant, and Equipment.

The Company’s first step is to determine whether indicators of impairment exist in its long-lived assets (property and equipment and leasehold improvements and operating lease right-of-use assets) at the individual retail store level, which is the lowest level at which cash flows can be identified.

If indicators of impairment are identified for any retail stores, the Company evaluates if the projected undiscounted cash flows derived from continued retail operations by those stores are less than their carrying amounts.

When this is the case, the Company compares the calculated fair value of the respective retail store to its carrying value.

If fair value is less than the carrying value, an impairment loss is recorded.

For the year ended January 30, 2021, the Company recorded impairment charges of $41,948 thousand and $19,569 thousand related to operating retail stores and closed stores, respectively, as the Company experienced lower than projected revenues for certain stores due to the COVID-19 pandemic.

Significant assumptions used in the Company’s projected undiscounted cash flow analyses included estimates of future revenue growth rates and operating expenses.

Additionally, significant assumptions utilized in the fair value analyses included the aforementioned assumptions, as well as market-based assumptions such as a discount rate and market rents .

This led to a high degree of auditor judgment and subjectivity in performing procedures and in assessing the assumptions utilized to project the undiscounted cash flows generated by retail stores with indicators of impairment, for purposes of determining if such cash flows were less than the carrying amount as well as in evaluating the assumptions utilized to estimate the fair value of those retail stores to calculate the impairment all of which can be affected by expectations about future market or economic conditions including outcomes resulting from the COVID-19 pandemic.

How we addressed the matter in our audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s processes over the identification of indicators of impairment, the assessment of the projected undiscounted cash flows to be generated by retail stores with indicators of impairment, the determination of the fair value of the retail stores and the measurement of any resulting impairment.

These controls include, among others, management’s evaluation of indicators of impairment, management’s review of the assumptions utilized to develop the projected undiscounted cash flows and the related fair value estimates, and management’s testing of the completeness and accuracy of the underlying data utilized to project future operating results for the retail stores.

Our testing of the Company’s impairment analyses included, among other procedures, testing the completeness of retail stores evaluated for impairments, management’s process for developing the undiscounted cash flows, evaluating the models used and evaluating significant assumptions discussed above used to project the undiscounted cash flows and the incremental assumptions discussed above used to estimate fair value.

For example, we compared the significant assumptions used by management to historical results and current industry and economic trends.

We performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the individual retail stores that would result from changes in the

underlying assumptions.

We involved our valuation specialists to assist in our evaluation of the fair value estimate specific to evaluating the discount rate and market rents.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Loyalty Program

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The Company maintains a loyalty program, Ultamate Rewards, which offers members the ability to earn and redeem points on purchases of products and services.

As described in Notes 2 and 5 to the consolidated financial statements, revenue from the loyalty program is recognized when the members redeem points or points expire.

As described in Note 2 to the consolidated financial statements, revenue from the loyalty program is recognized when the members redeem points or points expire.

The Company estimates the amount of revenue to defer using the standalone selling price of the points earned and the expected redemption percentage.

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The expected redemption percentage is based on historical redemption patterns in conjunction with current information and trends.

Auditing the Company’s estimate of loyalty deferred revenue was complex because the calculation involves subjective management assumptions for the standalone selling price and expected redemption rate.

Auditing the Company’s estimate of loyalty deferred revenue was complex as the calculation involved management’s assumptions, such as the standalone selling price and expected redemption rate, which drive the revenue deferral.

In particular, the estimate is sensitive to these significant assumptions, which are affected by expectations about future customer behavior.

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Our audit procedures included, among others, evaluating the methodology used, analyzing the significant assumptions discussed above, and testing the accuracy and completeness of the underlying data used in management’s calculation.

To audit the standalone selling price per point, we validated that the price per point for each membership level was appropriate based on products or services purchased by loyalty members.

To test the standalone selling price per point, we validated that the price per point for each membership level was appropriate based on products or services purchased by loyalty members.

To audit the redemption rate, we tested redemption activity and compared the results of that testing to the redemption rate used by management in its estimate.

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of January 29, 2022, based on COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 30, 2021 and February 1, 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended January 30, 2021, and the related notes and financial statement schedule listed in the Index at Item 15 and our report dated March 26, 2021 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 29, 2022 and January 30, 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended January 29, 2022, and the related notes and financial statement schedule listed in the Index at Item 15 and our report dated March 25, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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Cash and cash equivalents

Short-term investments

Receivables, net

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52,311 and 56,260 shares outstanding;

at January 30, 2021 and February 1, 2020, respectively

at January 29, 2022 and January 30, 2021, respectively

Treasury stock-common, at cost

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Ulta Beauty, Inc.

Consolidated Statements of Operations

Consolidated Statements of Income

Fiscal year ended

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Operating lease liabilities

Deferred rent

Other assets and liabilities

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Acquisitions, net of cash acquired

Purchases of equity investments

Other investments

Net cash used in investing activities

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Repurchase of common shares

( 1,521,925 )

Stock options exercised

2 unchanged sentences

Net cash used in financing activities

( 1,497,216 )

Effect of exchange rate changes on cash and cash equivalents

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Stock-based compensation

Adoption of accounting standards - ASC 842

Foreign currency translation adjustments

Stock options exercised and other awards

1 unchanged sentence

Repurchase of common shares

Balance – February 1, 2020

Balance – January 30, 2021

Stock-based compensation

3 unchanged sentences

Repurchase of common shares

( 1,521,883 )

( 1,521,925 )

Balance – January 29, 2022

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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.

Ulta Beauty, Inc.

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 Annual Report on Form 10-K, 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 January 30, 2021, the Company operated 1,264 stores across 50 states.

All amounts are stated in thousands, with the exception of per share amounts and number of stores.

As of January 29, 2022, the Company operated 1,308 stores across 50 states.

The Company has one reportable segment, which includes retail stores, salon services, and e-commerce.

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The Company’s fiscal year is the 52 or 53 weeks ending on the Saturday closest to January 31.

The Company’s fiscal years ended January 30, 2021 (fiscal 2020), February 1, 2020 (fiscal 2019), and February 2, 2019 (fiscal 2018) were 52 -week years.

The Company’s fiscal years ended January 29, 2022 (fiscal 2021), January 30, 2021 (fiscal 2020), and February 1, 2020 (fiscal 2019) were 52-week years.

Consolidation

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Actual results could differ from those estimates.

The Company considers its accounting policies relating to inventory valuations, vendor allowances, impairment of long-lived tangible and operating lease assets, loyalty program and income taxes to be the most significant accounting policies that involve management estimates and judgments.

The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business disruptions and adversely impact the Company’s results of operations.

While the full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated, the Company has made accounting estimates based on the facts and circumstances available as of the reporting date.

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

The Company considers its accounting policies relating to inventory valuations, vendor allowances, impairment of long-lived tangible and right-of-use assets, loyalty program and income taxes to be the most significant accounting policies that involve management estimates and judgments.

Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods.

Reclassifications

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Cash and cash equivalents

Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of three months or less from the date of purchase.

Cash equivalents include highly liquid investments such as money market funds and certificates of deposit with an original maturity of three months or less from the date of purchase.

Cash equivalents also include amounts due from third-party financial institutions for credit card and debit card transactions.

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Cash and cash equivalents

Short-term investments

The balance sheet classification of investments is determined at the time of purchase and evaluated at each balance sheet date.

Money market funds, certificates of deposit, and time deposits with maturities of greater than three months but no more than twelve months are carried at cost, which approximates fair value and are recorded in the consolidated balance sheets in short-term investments (see Note 16, “Investments”).

Receivables consist principally of amounts due from vendors and amounts related to the employee retention credit (see Note 3, “Impact of the COVID-19 pandemic”).

Fair value of financial instruments

The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximates fair value due to the short maturities of these instruments.

There was no outstanding debt as of January 29, 2022 and January 30, 2021.

Receivables primarily include amounts due from vendors for allowances, amounts related to the employee retention credit (ERC), and amounts due from third-party gift card providers.

The Company does not require collateral on its receivables and does not accrue interest.

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The Company performs ongoing credit evaluations of its vendors and evaluates the collectability of its receivables based on the length of time the receivable is past due and historical experience.

The receivable for vendor allowances was $ 90,271 and $ 113,048 as of January 30, 2021 and February 1, 2020, respectively.

The allowance for doubtful receivables was $ 768 and $ 1,363 as of January 30, 2021 and February 1, 2020, respectively.

The receivable for the employee retention credit was $ 52,405 as of January 30, 2021.

There was no receivable for the employee retention credit as of February 1, 2020.

(In thousands)

Vendor allowances

Employee retention credit (1)

Allowance for doubtful accounts

Receivables, net

(1) During the fiscal years ended January 29, 2022 and January 30, 2021, the Company qualified for various relief measures resulting from the Coronavirus Aid, Relief and Economic Security (CARES) Act, including the ERC which allowed for a refundable tax credit against certain employment taxes on qualified wages.

During the fiscal years ended January 29, 2022 and January 30, 2021, there was $ 4,021 and $ 52,405 , 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 .

Vendor allowances

The Company receives consideration from vendors for advertising, markdown allowances, purchase volume discounts and rebates, reimbursement for defective merchandise, and certain selling and display expenses.

Substantially all vendor allowances are recorded as a reduction of the vendor’s product cost and recognized in cost of sales as the product is sold.

Merchandise inventories

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The Company maintains an inventory reserve for lower of cost or net realizable value and shrink.

The inventory reserve was $ 52,860 and $ 46,941 as of January 30, 2021 and February 1, 2020, respectively.

Fair value of financial instruments

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.

There was no outstanding debt as of January 30, 2021 and February 1, 2020.

Property and equipment

The inventory reserve was $ 26,882 and $ 52,860 as of January 29, 2022 and January 30, 2021, respectively.

Property and equipment and internal use software

Property and equipment is stated at cost, net of accumulated depreciation, and depreciated using the straight-line method over the shorter of the assets’ estimated useful lives or lease term.

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Electronic equipment and software

Costs incurred to obtain or develop internal use software are capitalized.

These costs are amortized on a straight-line basis over the estimated useful life of the software.

Costs incurred to obtain or develop internal use software that are capitalized are amortized on a straight-line basis over the estimated useful life of the software.

Cloud computing arrangements (software-as-a-service contracts) and related implementation costs that are capitalized are amortized on a straight-line basis over the contract term ( 1 month to 5 years ).

These amounts are classified within prepaid expenses and other current assets and other long-term assets in the consolidated balance sheets.

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

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An impairment loss is recorded if the carrying amount of the long-lived asset exceeds its fair value.

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

The Company performs an undiscounted cash flow analysis over the asset group.

Long-lived tangible and right-of-use assets are evaluated for indicators of impairment quarterly or when events or changes in circumstances indicate that their carrying amounts may not be recoverable.

An undiscounted cash flow analysis is performed over the asset group.

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

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Management’s forecast of future cash flows is based on the income approach.

The fair value of individual operating lease assets is determined under the market approach using estimated market rent assessments based on broker quotes.

The fair value of individual right-of-use assets is determined under the market approach using estimated market rent assessments based on broker quotes.

The determination of fair value under the income approach requires assumptions including forecasts of future cash flows (such as revenue growth rates and operating expenses) and selection of a market-based discount rate.

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As these inputs are unobservable, they are classified as Level 3 inputs under the fair value hierarchy (see Note 13, “Fair value measurements”).

If actual results are not consistent with estimates and assumptions used in estimating future cash flows and asset fair values, the Company may be exposed to additional impairment losses in a future period (see Note 6, “Impairment, restructuring and other costs”).

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, restructuring and other costs”).

Goodwill represents the excess of cost over the fair value of net assets acquired.

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 (see Note 8, “Goodwill”).

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 (see Note 6, “Goodwill”).

Other intangible assets

Other definite-lived intangible assets are amortized over their useful lives.

The Company reviews the recoverability of intangible assets whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable (see Note 9, “Other intangible assets”).

The Company adopted ASU 2016-02, Leases (Topic 842) on February 3, 2019 using the modified retrospective approach.

Results and disclosure requirements for reporting periods beginning February 3, 2019 and later are presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported under Topic 840.

The recoverability of intangible assets is reviewed whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable (see Note 7, “Other intangible assets”).

The Company determines whether an arrangement is or contains a lease at contract inception.

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Tenant incentives are amortized through the right-of-use asset as reduction of rent expense over the lease term.

The difference between the minimum rents paid and the straight-line rent is reflected within the associated right-of-use asset.

The difference between the minimum rents paid and the straight-line rent is reflected within the right-of-use asset.

Certain leases contain provisions that require variable payments based upon sales volume or payment of common area maintenance costs, real estate taxes, and insurance related to leases (variable lease cost) .

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The expected redemption percentage is based on historical redemption patterns and considers current information or trends.

When a guest redeems points or the points expire, the Company recognizes revenue in net sales on the consolidated statements of operations.

When a guest redeems points or the points expire, the Company recognizes revenue in net sales on the consolidated statements of income.

The Company has agreements (the Agreements) with third parties to provide guests with private label credit cards and/or co-branded credit cards (collectively, the Credit Cards).

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The Company’s performance obligation is to maintain the Ultamate Rewards loyalty program as only guests enrolled in the loyalty program can apply for the Credit Cards.

Loyalty members earn points through purchases at Ulta Beauty and anywhere the co-branded credit card is accepted.

Loyalty members earn points through purchases at Ulta Beauty and anywhere the co-branded credit card is accepted, including Ulta Beauty at Target.

The third parties reimburse the Company for certain credit card program costs such as advertising and loyalty points, which help promote the credit card program.

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The Company accounts for the amounts associated with the Agreements as a single contract with the sole commercial objective to maintain the Credit Card programs.

As a result, all amounts associated with the Agreements are recognized within net sales on the consolidated statements of operations.

As a result, all amounts associated with the Agreements are recognized within net sales on the consolidated statements of income.

Gift card program

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Gift cards do not expire and do not include service fees that decrease guest balances.

The Company has maintained historical data related to gift card transactions sold and redeemed over a significant time frame.

The Company maintains historical data related to gift card transactions sold and redeemed over a significant time frame.

Gift card breakage (amounts not expected to be redeemed) is recognized to the extent there is no requirement for remitting balances to governmental agencies under unclaimed property laws.

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The Company provides refunds for merchandise returns within 60 days from the original purchase date.

however, due to store closures during the first half of fiscal 2020, we extended our return policy to 180 days through November 16, 2020.

State sales taxes are presented on a net basis as the Company considers itself a pass-through conduit

for collecting and remitting state sales tax.

State sales taxes are presented on a net basis as the Company considers itself a pass-through conduit for collecting and remitting state sales tax.

Company coupons and other incentives are recorded as a reduction of net sales.

Vendor allowances

The Company receives allowances from vendors in the normal course of business including advertising and markdown allowances, purchase volume discounts and rebates, reimbursement for defective merchandise, and certain selling and display expenses.

Substantially all vendor allowances are recorded as a reduction of the vendor’s product cost and are recognized in cost of sales as the product is sold.

Advertising costs consist principally of print, digital and social media, and television and radio advertising.

Advertising costs primarily consist of print, digital and social media, and television and radio advertising.

Costs related to advertising are expensed in the period the related promotional event occurs.

Prepaid advertising costs included in prepaid expenses and other current assets on the consolidated balance sheets were $ 7,112 and $ 9,605 as of January 30, 2021 and February 1, 2020, respectively.

Advertising expense, exclusive of incentives from vendors and start-up advertising expense, is presented in the following table:

Fiscal year ended

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Advertising expense as a percentage of net sales

Prepaid advertising costs included in prepaid expenses and other current assets on the consolidated balance sheets were $ 7,612 and $ 7,112 as of January 29, 2022 and January 30, 2021, respectively.

Pre-opening expenses

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Income tax benefits related to uncertain tax positions are recognized only when it is more likely than not that the tax position will be sustained on examination by the taxing authorities.

The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full

knowledge of all relevant information.

Penalties and interest related to unrecognized tax positions are recorded in income tax expense in the consolidated statements of operations (see Note 13, “Income taxes”).

The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information.

Penalties and interest related to unrecognized tax positions are recorded in income tax expense in the consolidated statements of income (see Note 11, “Income taxes”).

Stock-based compensation

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The Company makes collateral and premium payments during the plan year and accrues expenses in the event additional premium is due from the Company based on actual claim results.

In fiscal 2018, the Company created UB Insurance, Inc., an Arizona-based wholly owned captive insurance subsidiary of the Company, which charges the operating subsidiaries of the Company premiums to insure certain liability exposures.

UB Insurance, Inc., an Arizona-based wholly owned captive insurance subsidiary of the Company, charges the operating subsidiaries of the Company premiums to insure certain liability exposures.

Pursuant to Arizona insurance regulations, UB Insurance, Inc.

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Diluted net income per common share includes dilutive common stock equivalents, using the treasury stock method (see Note 16, “Net income per common share”).

Recent accounting pronouncements not yet adopted

Recently adopted accounting pronouncements

Taxes – Income Taxes (Topic 740):

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

The adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

Recently adopted accounting pronouncements

Intangibles – Goodwill and Other-Internal-Use Software.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which clarifies and aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

This guidance is effective for interim and annual reporting periods beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

Early adoption is permitted.

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, and by January 30, 2021, salon and brow services had resumed in almost all stores.

Results of operations for the fiscal year ended January 30, 2021 were significantly impacted by the effects of the COVID-19 pandemic, 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 the COVID-19 pandemic 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 duration of the pandemic and any more dangerous variants of the virus, the duration, timing and severity of the impact on consumer spending, the timing and effectiveness of vaccine distribution, 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 multi-year, strategic investments the Company made to enhance omnichannel and supply chain capabilities, combined with the ongoing commitment of the Company’s distribution associates, enabled the Company to support increased e-commerce demand and guest engagement.

The Company took the following actions during fiscal 2020 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 stock repurchase program, which resumed in the fourth quarter of fiscal 2020.

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 6, “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 applicability of the CARES Act to the Company, and the potential impacts on the 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 the COVID-19 pandemic, 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 fiscal year ended January 30, 2021, the Company recognized $52,405 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 the deferral of the employer portion of social security taxes incurred through the end of calendar 2020.

As of January 30, 2021, the Company had deferred $ 43,845 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 within accrued 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 amendment to the Company’s 2018 federal income tax return, during fiscal 2020.

The Company has made investments to evolve the customer experience, with a strong emphasis on integrating technology across the business.

To support these efforts, the Company paid $ 13,606 to acquire two technology companies in fiscal 2018.

On September 10, 2018, the Company acquired QM Scientific, an artificial intelligence technology company.

The acquisition is not material to the Company’s consolidated financial statements.

On October 29, 2018, the Company acquired GlamST, an augmented reality technology company.

The acquisition is not material to the Company’s consolidated financial statements.

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.

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 include the private label and co-branded credit card programs and royalties derived from the partnership with Target, as well as deferred revenue related to the loyalty program and gift card breakage.

Disaggregated revenue

1 unchanged sentence

Fiscal year ended

Skincare, bath, and fragrance

(Percentage of net sales)

Cosmetics (1)

Haircare products and styling tools (1)

Other (nail products, accessories, and other)

Fragrance and bath

Accessories and other (1)

(1) Certain sales departments were reclassified between categories in the prior year to conform to current year presentation .

Deferred revenue

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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 fiscal years 2020 and 2019:

The following table provides a summary of the changes included in deferred revenue during fiscal 2021 and 2020:

(In thousands)

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

Other amounts included in deferred revenue were $ 5,351 and $ 7,524 at January 30, 2021 and February 1, 2020, respectively.

Other amounts included in deferred revenue were $ 8,373 and $ 5,351 at January 29, 2022 and January 30, 2021, respectively.

Impairment, restructuring and other costs

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

Fiscal year ended

The following table provides a summary of the impairment, restructuring and other costs during fiscal 2020:

(In thousands)

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(1) Amount included in the non-cash $ 72,533 long-lived asset impairment charge on the consolidated statements of cash flows for the fiscal year ended January 30, 2021.

(2) As of January 30, 2021, there was $ 9,476 in accrued liabilities on the consolidated balance sheets primarily for severance.

(3) There were no impairment, restructuring and other costs recognized during the fiscal years ended February 1, 2020 and February 2, 2019.

(2) As of January 30, 2021, there was $ 9,476 in accrued liabilities on the consolidated balance sheets for restructuring and was primarily for severance.

There was no liability for restructuring as of January 29, 2022.

(3) There were no impairment, restructuring and other costs recognized during fiscal 2021 or fiscal 2019.

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.

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 fiscal 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 for the fiscal year ended January 30, 2021.

As a result, the Company recognized impairment charges related to certain retail stores in fiscal 2020.

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 Company also recorded long-lived tangible and right-of-use asset impairment charges related to store closures and suspension of the Canadian expansion during the fiscal year ended January 30, 2021 as described below.

The Company also recorded long-lived tangible and right-of-use asset impairment charges related to store closures and suspension of the Canadian expansion during fiscal 2020 as described below.

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 fiscal year ended January 30, 2021, 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.

The Company permanently closed 19 stores in the third quarter of fiscal 2020.

The impairment charges recognized in fiscal 2020 reduced the carrying value of the long-lived tangible and right-of-use assets to their fair value.

Suspension of Canadian expansion.

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

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 were limited to early-stage infrastructure buildout and lease obligations for a small number of

The Company recognized impairment, restructuring and other costs related to suspension of the Canada expansion during the fiscal year ended January 30, 2021.

However, as a result of the COVID-19 pandemic, in September 2020 the Company decided to prioritize growth of its U.S.

operations and suspended its planned expansion to Canada.

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

Impairment, restructuring and other costs related to suspension of the Canada expansion were recognized in fiscal 2020.

Other severance.

As part of the efforts to optimize its cost structure, the Company eliminated certain field and corporate roles.

As a result, severance expense was recognized during the fiscal year ended January 30, 2021.

As a result, severance expense was recognized during fiscal 2020.

Property and equipment and internal use software

Property and equipment

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Property and equipment, net

The changes in the carrying amounts of goodwill during the fiscal years 2020 and 2019 are as follows:

Internal use software

As of January 29, 2022, capitalized costs related to cloud computing arrangements of $ 23,379 was classified as prepaid expenses and other current assets and $ 22,596 was classified as other long-term assets in the consolidated balance sheets.

As of January 30, 2021, capitalized costs related to cloud computing arrangements of $ 18,773 was classified as prepaid expenses and other current assets and $ 16,694 was classified as other long-term assets in the consolidated balance sheets.

Expense related to cloud computing arrangements was $ 62,215 , $ 49,615 , and $ 38,034 in fiscal 2021, fiscal 2020, and fiscal 2019, respectively, and was included in SG&A expenses in the consolidated statements of income.

The changes in the carrying amounts of goodwill during the fiscal 2021 and 2020 are as follows:

(In thousands)

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January 29, 2022

February 1, 2020

January 30, 2021

Weighted-average

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Developed technology

Amortization expense related to intangible assets was $ 926 , $ 926 , and $ 314 in fiscal 2020, fiscal 2019, and fiscal 2018, respectively.

Estimated amortization expense related to intangible assets at January 30, 2021, for the next five years and thereafter is as follows:

Amortization expense related to intangible assets was $ 926 in fiscal 2021, fiscal 2020, and fiscal 2019.

Estimated amortization expense related to intangible assets for the next five years and thereafter is as follows:

(In thousands)

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

Leases generally have initial lease terms of 10 years and when determined applicable, include renewal options under substantially the same terms and conditions as the original leases.

All leases are classified as operating leases and generally have initial lease terms of 10 years and when determined applicable, include renewal options under substantially the same terms and conditions as the original leases.

Leases do not contain any material residual value guarantees or material restrictive covenants.

All retail store, distribution center, fast fulfillment center, and corporate office leases are classified as operating leases.

The Company does not have any finance leases.

The following table presents supplemental balance sheet information, the weighted-average remaining lease term, and discount rate for operating leases:

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(In thousands)

Classification on the Statement of Operations

Classification on the Statement of Income

Operating lease cost

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(1) The majority of operating lease cost relates to retail stores, distribution centers, and fast fulfillment centers and is classified within cost of sales.

Operating lease cost for corporate offices is classified within the selling, general and administrative expenses.

Operating lease cost for corporate offices is classified within the selling,

general and administrative expenses.

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

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

(1) Excludes $ 33,092 and $ 71,294 related to cash received for tenant incentives as of January 30, 2021 and February 1, 2020, respectively.

(1) Excludes $ 28,591 , $ 33,092 , and $ 71,294 related to cash received for tenant incentives as of January 29, 2022, January 30, 2021, and February 1, 2020, respectively.

Maturity of lease liabilities

The following table presents maturities of operating lease liabilities as of January 30, 2021:

The following table presents maturities of operating lease liabilities:

(In thousands)

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Commitments and contingencies

Contractual obligations – As of January 30, 2021, the Company had various non-cancelable obligations of $ 1,020 related to commitments made for goods and service contracts.

All of these agreements expire over one year .

Contractual obligations – As of January 29, 2022, the Company had various non-cancelable obligations of $ 51,056 primarily due to commitments made to a third party for products and services for our strategic investments related to supply chain optimization and information technology systems.

A majority of these agreements are due within three years and are recorded as liabilities when the goods are received or the services are rendered.

Payments under these agreements were $ 17,370 as of January 29, 2022.

General litigation – 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.

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Accrued payroll, bonus, and employee benefits (1)

Accrued advertising

Accrued taxes

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Accrued liabilities

(1) Includes $ 43,845 in social security tax payments deferred related to the CARES Act as of January 30, 2021.

There was no deferral related to the CARES Act as of January 29, 2022 .

The provision for income taxes consists of the following:

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Employee benefits

Inventory valuation

NOL carryforwards

Property and equipment

Credit carryforwards

NOL carryforwards

Inventory valuation

Total deferred tax assets

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Operating lease asset

Property and equipment

Prepaid expenses

Receivables not currently includable

Inventory valuation

Property and equipment

Total deferred tax liabilities

2 unchanged sentences

The Company also had $ 95 of state net operating loss (NOL) carryforwards that expire by 2040 and $ 825 of federal and $ 163 of state NOL carryforwards that do not expire.

The Company accounts for uncertainty in income taxes in accordance with the ASC 740-10 rules for income taxes.

The reserve for uncertain tax positions was $ 2,783 and $ 3,536 at January 30, 2021 and February 1, 2020, respectively.

The balance is the Company’s best estimate of the potential liability for uncertain tax positions.

The Company accounts for uncertainty in income taxes in accordance with Accounting Standards Codification 740-10.

The reserve for uncertain tax positions was $ 3,389 and $ 2,783 at January 29, 2022 and January 30, 2021, respectively, which represents the best estimate of the potential liability.

A reconciliation of unrecognized tax benefits, excluding interest and penalties, is as follows:

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1 to the Second Amended and Restated Loan Agreement (as so amended, the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder;

Wells Fargo Bank, National Association and JPMorgan Chase Bank, N.A., as Lead Arrangers and Bookrunners;

Wells Fargo Bank, National Association and JPMorgan Chase Bank, N.A., as Lead

Arrangers and Bookrunners;

JPMorgan Chase Bank, N.A., as Syndication Agent and a Lender;

PNC Bank, National

Association, as Documentation Agent and a Lender;

PNC Bank, National Association, as Documentation Agent and a Lender;

and the other lenders party thereto.

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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 January 30, 2021 and February 1, 2020, the Company had no borrowings outstanding under the credit facility and the weighted average interest rate was 1.56 % for fiscal year 2020.

As of January 29, 2022 and January 30, 2021, the Company had no borrowings outstanding under the credit facility.

The weighted average interest rate was 1.56 % for fiscal 2020.

As of January 29, 2022, 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, accounts receivable, and accounts payable approximates their estimated fair values due to the short maturities of these instruments.

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

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● 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 January 30, 2021 and February 1, 2020, the Company held financial liabilities included in other long-term liabilities on the consolidated balance sheets of $ 32,909 and $ 29,442 , respectively, related to its non-qualified deferred compensation plan.

As of January 29, 2022 and January 30, 2021, there were liabilities related to the non-qualified deferred compensation plan included in other long-term liabilities on the consolidated balance sheets of $ 40,839 and $ 32,909 , respectively.

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.

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 and are recorded in the consolidated balance sheets in short-term investments.

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

Short-term investments were $ 110,000 as of February 1, 2020.

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

The balance of these investments was $ 3,174 and $ 3,936 as of January 30, 2021 and February 1, 2020, 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 $ 1,689 of investment tax credits during fiscal year 2020.

The Company contributed capital of $ 62,946 and received distributions including $ 60,208 of investment tax credits during fiscal year 2019.

The balance of these investments was $ 2,671 and $ 3,174 as of January 29, 2022 and January 30, 2021, 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 fiscal 2021.

The Company contributed capital of $ 5,665 and received distributions including $ 1,689 of investment tax credits during fiscal 2020.

The Company made other investments of $ 4,297 during fiscal 2021.

Stock-based compensation

The Company’s equity incentive plan was adopted in order to attract and retain the best available personnel for positions of substantial authority and to provide additional incentive to employees and directors to promote the success of the business.

In June 2016, the Company adopted the Amended and Restated 2011 Incentive Award Plan (the 2011 Plan).

The 2011 Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, dividend equivalent rights, stock payments, deferred stock, and cash-based awards to employees, consultants, and directors.

The Company’s equity incentive plan was adopted in order to attract and retain personnel for positions of substantial authority and to provide additional incentive to employees and directors to promote the success of the business.

The Amended and Restated 2011 Incentive Award Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, dividend equivalent rights, stock payments, deferred stock, and cash-based awards to employees, consultants, and directors.

Unless provided otherwise by the administrator of the plan, options vest over four years at the rate of 25 % per year from the date of grant and must be exercised within ten years .

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Income tax benefit

Common stock options

Stock options

Stock-based compensation expense is measured on the grant date based on the fair value of the award.

Stock-based compensation expense is recognized on a straight-line basis over the requisite service period for awards expected to vest.

The estimated grant date fair value of stock options was determined using a Black-Scholes valuation model with the following weighted-average assumptions:

The estimated grant date fair value of stock options was determined using a Black-Scholes valuation model using the following weighted-average assumptions for the periods indicated:

Fiscal year ended

42 unchanged sentences

Restricted stock units are granted to certain employees and directors.

Employee grants generally cliff vest after three years and director grants cliff vest within one year .

Employee grants generally cliff vest after three years and director grants cliff vest after one year .

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

15 unchanged sentences

Performance-based restricted stock units are granted to certain employees.

These awards cliff vest after three years based upon achievement of pre-established net sales and earnings before tax goals at the end of the second year of the term.

The grant date fair value of performance-based restricted stock units is based on the closing market price of shares of the Company’s common stock on the date of grant.

Units granted prior to 2021 cliff vest after three years based upon achievement of pre-established net sales and earnings before tax goals at the end of the second year of the term.

The grant date fair value of these performance-based restricted stock units is based on the closing market price of shares of the Company’s common stock on the date of grant.

Performance-based restricted stock units granted in 2021 cliff vest after three years based upon achievement of pre-established net sales and earnings before tax goals for each of the first two years .

The performance is then capped at 100% if the total shareholder return over a three-year period is not positive.

The grant date fair value of the 2021 performance-based restricted stock units are measured using a Monte Carlo simulation.

Performance-based restricted stock units are expensed on a straight-line basis over the requisite service period, based on the probability of achieving the performance goal, with changes in expectations recognized as an adjustment to earnings in the period of the change.

2 unchanged sentences

At January 29, 2022, unrecognized stock-based compensation expense related to performance-based restricted stock units was $ 13,990 .

The unrecognized stock-based compensation expense is expected to be recognized over a weighted-average period of approximately one year .

The unrecognized stock-based compensation expense is expected to be recognized over a weighted-average period of approximately one and a half years .

A summary of performance-based restricted stock unit activity is presented in the following table (shares in thousands):

4 unchanged sentences

As of January 29, 2022, the maximum number of units that could vest under the provisions of the agreements was 92 .

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 totaling 28 shares were granted to the former Chief Executive Officer in fiscal 2018 and settled during fiscal 2021.

Compensation expense for liability awards was $ 7,671 , $ 879 , and $ 597 for the fiscal years ended January 29, 2022, January 30, 2021, and February 1, 2020, respectively.

Net income per common share

11 unchanged sentences

The plan is funded through employee contributions and a Company match.

In fiscal 2018, the Company match was 100 % of the first 3 % of eligible compensation.

Starting in January 2019, the Company added an additional 50 % match for the next 2 % of eligible compensation.

Total expense recorded under this plan is included in SG&A expenses in the consolidated statements of operations as follows:

In fiscal 2021, 2020, and 2019, the Company match was 100 % of the first 3 % of eligible compensation and an additional 50 % match for the next 2 % of eligible compensation.

Total expense recorded under this plan is included in SG&A expenses in the consolidated statements of income as follows:

Fiscal year ended

6 unchanged sentences

In the event of bankruptcy, the assets of this plan are available to satisfy the claims of general creditors.

The Company manages the risk of changes in the fair value of the liability for deferred compensation by electing to match its liability under the plan with investment vehicles that offset a substantial portion of its exposure.

Total expense recorded under this plan is included in SG&A expenses in the consolidated statements of operations and was insignificant during fiscal 2020, 2019, and 2018.

its exposure.

Total expense recorded under this plan is included in SG&A expenses in the consolidated statements of income and was insignificant during fiscal 2021, 2020, and 2019.

Amounts included in the consolidated balance sheets related to the deferred compensation plan were as follows:

2 unchanged sentences

Deferred compensation plan assets

Selected quarterly financial data (unaudited)

The following tables set forth the unaudited quarterly results of operations for each of the quarters in fiscal 2020 and fiscal 2019.

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

(In thousands, except per share data)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Cost of sales

Selling, general and administrative expenses

Impairment, restructuring and other costs

Pre-opening expenses

Operating income (loss)

Interest expense, net

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income (loss) per common share:

(In thousands, except per share data)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Cost of sales

Selling, general and administrative expenses

Pre-opening expenses

Operating income

Interest income, net

Income before income taxes

Income tax expense

Net income per common share:

The sum of the quarterly net income per common share may not equal the annual total due to quarterly changes in the weighted average shares and share equivalents outstanding.

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.

In March 2019, the Board of Directors authorized a share repurchase program (the 2019 Share Repurchase Program) pursuant to which the Company could repurchase up to $ 875,000 of the Company’s common stock.

The 2019 Share Repurchase Program authorization revoked the previously authorized but unused amount of $ 25,435 from the earlier share repurchase program.

The 2019 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time.

On March 14, 2019, the Company announced that the Board of Directors authorized a new share repurchase program (the 2019 Share Repurchase Program) pursuant to which the Company could repurchase up to $ 875,000 of the Company’s common stock.

In March 2020, the Board of Directors authorized a new share repurchase program (the 2020 Share Repurchase Program) pursuant to which the Company could repurchase up to $ 1,600,000 of the Company’s common stock.

The 2020 Share Repurchase Program authorization revoked the previously authorized but unused amount of $ 177,805 from the 2019 Share Repurchase Program.

The 2020 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time.

On March 12, 2020, the Company announced that the Board of Directors authorized a new share repurchase program (the 2020 Share Repurchase Program) pursuant to which the Company may repurchase up to $ 1,600,000 of the Company’s common stock.

The 2020 Share Repurchase Program authorization revoked the previously authorized but unused amounts of $ 177,805 from the 2019 Share Repurchase Program.

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 had been suspended in order to strengthen its liquidity and preserve cash while navigating the COVID-19 pandemic.

During fiscal 2020, the share repurchase program was suspended in order to strengthen its liquidity and preserve cash while navigating the COVID-19 pandemic.

The program resumed during the fourth quarter of fiscal 2020.

4 unchanged sentences

Total cost of shares repurchased

Subsequent event

On March 7, 2022, the Board of Directors authorized a new share repurchase program (the 2022 Share Repurchase Program) pursuant to which the Company may repurchase up to $ 2,000,000 of the Company’s common stock.

The 2022 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time.

Exhibits and Financial Statement Schedules (Continued)

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and Mary Dillon*

New Form of Restricted Stock Unit Award Agreement—PSUs—under the Amended and Restated Ulta Beauty, Inc.

2011 Incentive Award Plan*

New Form of Stock Option Agreement under the Amended and Restated Ulta Beauty, Inc.

2011 Incentive Award Plan*

Restricted Stock Unit Award Agreement—PSUs—dated March 25, 2021, with Mary Dillon*

Stock Option Agreement dated March 25, 2021, with Mary Dillon*

Restricted Stock Unit Award Agreement dated March 25, 2021, with Mary Dillon*

Confidential Information & Restrictive Covenants Agreement with Mary Dillon*

Alternative Form of Restricted Stock Unit Award Agreement—PSUs—under the Amended and Restated Ulta Beauty, Inc.

2011 Incentive Award Plan*

Alternative Form of Stock Option Agreement under the Amended and Restated Ulta Beauty, Inc.

2011 Incentive Award Plan*

Incorporated by Reference

Description of document

Alternative Form of Restricted Stock Unit Award Agreement under the Amended and Restated Ulta Beauty, Inc.

2011 Incentive Award Plan*

List of Significant Subsidiaries

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Incorporated by Reference

Description of document

Proxy Statement for the 2022 Annual Meeting of Stockholders.

7 unchanged sentences

Inline XBRL Taxonomy Extension Definition

Incorporated by Reference

Description of document

Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

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March 25, 2022

/s/ Robert F.

Chairperson of the Board of Directors

Executive Chair of the Board of Directors

March 25, 2022

/s/ Catherine Halligan

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George Mrkonic

Lead Independent Director of the Board of Directors

March 25, 2022

/s/ Gisel Ruiz

March 25, 2022

/s/ Michael C.

1 unchanged sentence

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-K

Item 9A. Controls and Procedures