Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

lululemon athletica inc. and Subsidiaries

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	38
Consolidated Balance Sheets as at February 2, 2014 and February 3, 2013	39
Consolidated Statements of Operations and Comprehensive Income for the years ended February 2, 2014, February 3, 2013, and January 29, 2012	40
Consolidated Statements of Stockholders' Equity for the years ended February 2, 2014, February 3, 2013, and January 29, 2012	41
Consolidated Statements of Cash Flows for the years ended February 2, 2014, February 3, 2013, and January 29, 2012	42
Notes to the Consolidated Financial Statements	43

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of lululemon athletica inc.

We have audited the accompanying consolidated balance sheets of lululemon athletica inc. and its subsidiaries as of February 2, 2014 and February 3, 2013 and the related consolidated statements of operations and comprehensive income, stockholders' equity and cash flows for the 52, 53, and 52 week periods ended February 2, 2014, February 3, 2013, and January 29, 2012, respectively. In addition, we have audited the financial statement schedule listed in the index appearing under Item 15(a)(2). We also have audited lululemon athletica inc.'s and its subsidiaries' internal control over financial reporting as of February 2, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management is responsible for these consolidated financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on these consolidated financial statements, the financial statement schedule and the company's internal control over financial reporting based on our integrated audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements and the financial statement schedule are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of lululemon athletica inc. and its subsidiaries as of February 2, 2014 and February 3, 2013 and the results of their operations and their cash flows for the 52, 53, and 52 week periods ended February 2, 2014, February 3, 2013, and January 29, 2012, respectively, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also, in our opinion, lululemon athletica inc. and its subsidiaries maintained, in all material respects, effective internal control over financial reporting as of February 2, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by COSO.

/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Vancouver, BC
March 26, 2014

lululemon athletica inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

		February 2, 2014				February 3, 2013
		(Amounts in thousands, except per share amounts)
ASSETS
Current assets
Cash and cash equivalents		$	698,649			$	590,179
Accounts receivable		11,903				6,351
Inventories		186,090				155,222
Prepaid expenses and other current assets		46,197				35,301
		942,839				787,053
Property and equipment, net		255,603				214,639
Goodwill and intangible assets, net		28,201				30,201
Deferred income tax asset		18,300				15,033
Other non-current assets		4,745				4,152
		$	1,249,688			$	1,051,078
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	12,647			$	1,045
Accrued liabilities		42,310				30,032
Accrued compensation and related expenses		19,445				27,530
Income taxes payable		769				39,637
Unredeemed gift card liability		38,343				35,113
		113,514				133,357
Non-current liabilities		39,492				30,422
		153,006				163,779
Stockholders' equity
Undesignated preferred stock, $0.01 par value, 5,000 shares authorized, none issued and outstanding		—				—
Exchangeable stock, no par value, 60,000 shares authorized, issued and outstanding 29,955 and 32,065		—				—
Special voting stock, $0.000005 par value, 60,000 shares authorized, issued and outstanding 29,955 and 32,065		—				—
Common stock, $0.005 par value, 400,000 shares authorized, issued and outstanding 115,342 and 112,371		577				562
Additional paid-in capital		240,351				221,372
Retained earnings		923,822				644,275
Accumulated other comprehensive (loss) income		(68,068		)		21,090
		1,096,682				887,299
		$	1,249,688			$	1,051,078

See accompanying notes to the consolidated financial statements

lululemon athletica inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

		Fiscal Year Ended
		February 2, 2014				February 3, 2013				January 29, 2012
		(Amounts in thousands, except per share amounts)
Net revenue		$	1,591,188			$	1,370,358			$	1,000,839
Cost of goods sold		751,112				607,532				431,488
Gross profit		840,076				762,826				569,351
Selling, general and administrative expenses		448,718				386,387				282,393
Income from operations		391,358				376,439				286,958
Other income (expense), net		5,768				4,957				2,500
Income before provision for income taxes		397,126				381,396				289,458
Provision for income taxes		117,579				109,965				104,494
Net income		279,547				271,431				184,964
Net income attributable to non-controlling interest		—				875				901
Net income attributable to lululemon athletica inc.		$	279,547			$	270,556			$	184,063
Basic earnings per share		$	1.93			$	1.88			$	1.29
Diluted earnings per share		$	1.91			$	1.85			$	1.27
Basic weighted-average number of shares outstanding		144,913				144,000				143,196
Diluted weighted-average number of shares outstanding		146,043				145,806				145,278
Other comprehensive (loss) income:
Foreign currency translation adjustment		(89,158		)		(459		)		1,220
Comprehensive income		$	190,389			$	270,097			$	185,283

See accompanying notes to the consolidated financial statements

lululemon athletica inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

		Exchangeable Stock							Special Voting Stock							Common Stock
		Shares			Par Value				Shares			Par Value				Shares			Par Value				Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total				Non- Controlling Interest				Total
		(Amounts in thousands)
Balance at January 30, 2011		35,636			$	—			35,636			$	—			106,756			$	534			$	179,870			$	189,656			$	20,329			$	390,389			$	3,904			$	394,293
Net income attributable to lululemon athletica inc.																											184,063								184,063								184,063
Foreign currency translation adjustment																															1,220				1,220								1,220
Stock-based compensation																							10,340												10,340								10,340
Excess tax benefit from stock-based compensation																							5,750												5,750								5,750
Common stock issued upon exchange of exchangeable shares		(2,224	)		—				(2,224	)		—				2,224			11				(11		)										—								—
Restricted share issuance																4			—				—												—								—
Stock option exercises																1,151			6				9,608												9,614								9,614
Non-controlling interest:
Net income attributable to non-controlling interests																																							901				901
Balance at January 29, 2012		33,412			$	—			33,412			$	—			110,135			$	551			$	205,557			$	373,719			$	21,549			$	601,376			$	4,805			$	606,181
Net income attributable to lululemon athletica inc.																											270,556								270,556								270,556
Foreign currency translation adjustment																															(459		)		(459		)						(459		)
Stock-based compensation																							15,637												15,637								15,637
Excess tax benefit from stock-based compensation																							9,901												9,901								9,901
Common stock issued upon exchange of exchangeable shares		(1,347	)		—				(1,347	)		—				1,347			7				(7		)										—								—
Restricted share issuance																16			—				—												—								—
Stock option exercises																873			4				11,010												11,014								11,014
Registration fees associated with shelf registration statement																							(393		)										(393		)						(393		)
Non-controlling interest:
Net income attributable to non-controlling interests																																							875				875
Purchase of remaining non- controlling interests																							(20,333		)										(20,333		)		(5,680		)		(26,013		)
Balance at February 3, 2013		32,065			$	—			32,065			$	—			112,371			$	562			$	221,372			$	644,275			$	21,090			$	887,299			$	—			$	887,299
Net income attributable to lululemon athletica inc.																											279,547								279,547								279,547
Foreign currency translation adjustment																															(89,158		)		(89,158		)						(89,158		)
Stock-based compensation																							10,087												10,087								10,087
Excess tax benefit from stock-based compensation																							6,457												6,457								6,457
Common stock issued upon exchange of exchangeable shares		(2,110	)						(2,110	)		—				2,110			11				(11		)										—								—
Restricted share issuance																58			—				—												—								—
Stock option exercised																686			3				8,168												8,171								8,171
Common stock issued upon settlement of performance stock units																208			1				(1		)										—								—
Shares withheld related to net share settlement of performance-based restricted stock units																(91	)		—				(5,721		)										(5,721		)						(5,721		)
Balance at February 2, 2014		29,955			$	—			29,955			$	—			115,342			$	577			$	240,351			$	923,822			$	(68,068	)		$	1,096,682			$	—			$	1,096,682

See accompanying notes to the consolidated financial statements

lululemon athletica inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Fiscal Year Ended
		February 2, 2014				February 3, 2013				January 29, 2012
		(Amounts in thousands)
Cash flows from operating activities
Net income		$	279,547			$	271,431			$	184,964
Items not affecting cash
Depreciation and amortization		49,068				43,000				30,259
Stock-based compensation		10,087				15,637				10,340
Derecognition of unredeemed gift card liability		(4,654		)		(1,351		)		(1,775		)
Deferred income taxes		820				(6,445		)		(693		)
Excess tax benefits from stock-based compensation		(6,457		)		(9,901		)		(5,750		)
Other, including net changes in other non-cash balances
Prepaid tax installments		3,067				(7,812		)		(4,030		)
Other prepaid expenses and other current assets		(14,408		)		(10,492		)		5,374
Inventories		(37,407		)		(51,022		)		(46,072		)
Accounts payable		11,627				(13,481		)		7,861
Accrued liabilities		13,722				(208		)		1,027
Sales tax collected		161				(4,232		)		8,232
Income taxes payable		(35,075		)		30,951				(3,951		)
Accrued compensation and related expenses		(6,282		)		4,695				5,976
Deferred gift card revenue		9,306				13,711				6,110
Other non-cash balances		5,217				5,632				5,743
Net cash provided by operating activities		278,339				280,113				203,615
Cash flows from investing activities
Purchase of property and equipment		(106,408		)		(93,229		)		(116,657		)
Acquisition of franchises		—				—				(5,654		)
Net cash used in investing activities		(106,408		)		(93,229		)		(122,311		)
Cash flows from financing activities
Proceeds from exercise of stock options		8,171				11,014				9,614
Excess tax benefits from stock-based compensation		6,457				9,901				5,750
Registration fees associated with shelf registration statement		—				(393		)		—
Purchase of non-controlling interest		—				(26,013		)		—
Taxes paid related to net share settlement of equity awards		(5,721		)		—				—
Net cash provided by (used in) financing activities		8,907				(5,491		)		15,364
Effect of exchange rate changes on cash		(72,368		)		(651		)		(3,517		)
Increase in cash and cash equivalents		108,470				180,742				93,151
Cash and cash equivalents, beginning of period		$	590,179			$	409,437			$	316,286
Cash and cash equivalents, end of period		$	698,649			$	590,179			$	409,437

See accompanying notes to the consolidated financial statements

lululemon athletica inc. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts and store count information, unless

otherwise indicated)

1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of operations

lululemon athletica inc., a Delaware corporation ("lululemon" and, together with its subsidiaries unless the context otherwise requires, the "Company") is engaged in the design, manufacture and distribution of healthy lifestyle inspired athletic apparel, which is sold through a chain of corporate-owned and operated retail stores, direct to consumer through e-commerce and through a network of wholesale accounts. The Company's primary markets are the United States, Canada, Australia, and New Zealand, where 171, 54, 25, and four corporate-owned stores, respectively, were in operation as at February 2, 2014. There were 254, 211, and 174 corporate-owned stores in operation as at February 2, 2014, February 3, 2013, and January 29, 2012, respectively.

Basis of presentation

The accompanying consolidated financial statements include the financial position, results of operations and cash flows of the Company and its subsidiary companies during the three-year period ended February 2, 2014. The consolidated financial statements have been prepared using the U.S. dollar and are presented in accordance with United States generally accepted accounting principles ("GAAP").

The Company has experienced, and expects to continue to experience, significant seasonal variations in net revenue and income from operations. Seasonal variations in revenue are primarily related to increased sales of products during the fourth fiscal quarter, reflecting historical strength in sales during the holiday season. Historically, seasonal variations in income from operations have been driven principally by increased net revenue in the fourth fiscal quarter.

The Company's fiscal year ends on the Sunday closest to January 31 of the following year, typically resulting in a 52 week year, but occasionally giving rise to an additional week, resulting in a 53 week year. Fiscal 2013 is a 52 week year whereas fiscal 2012 was a 53 week year. Net sales numbers for fiscal 2012 include this additional week; however, comparable stores sales calculations exclude the 53rd week. Fiscal 2013, 2012 and 2011 ended on February 2, 2014, February 3, 2013, and January 29, 2012, respectively.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The consolidated financial statements include the accounts of lululemon athletica inc. and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated. The results of operations of lululemon athletica australia Pty attributable to the non-controlling interest for fiscal 2012 and fiscal 2011 are presented within equity and net income, and are shown separately from the Company's equity and net income attributable to the Company.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, bank balances and short-term deposits with original maturities of less than three months. The Company has not experienced any losses related to these balances, and management believes its credit risk to be minimal.

Accounts receivable

Accounts receivable primarily arise out of sales to wholesale accounts and landlord deferred lease inducements. The allowance for doubtful accounts represents management's best estimate of probable credit losses in accounts receivable and is reviewed monthly. Receivables are written off against the allowance when management believes that the amount receivable will not be recovered. As at February 2, 2014, February 3, 2013 and January 29, 2012 the Company recorded an insignificant allowance for doubtful accounts.

Inventories

Inventories, consisting of finished goods and raw materials, are stated at the lower of cost and market value. Cost is determined using weighted-average costs. For finished goods, market is defined as net realizable value, and for raw materials,

market is defined as replacement cost. Cost of inventories includes acquisition and production costs including raw material and labor, as applicable, and all costs incurred to deliver inventory to the Company's distribution centers including freight, non-refundable taxes, duty and other landing costs.

The Company periodically reviews its inventories and makes provisions as necessary to appropriately value obsolete or damaged goods. The amount of the provision is equal to the difference between the cost of the inventory and its estimated net realizable value based upon assumptions about future demand, selling prices and market conditions. In addition, as part of inventory valuations, the Company accrues for inventory shrinkage based on historical trends from actual physical inventory counts. Inventory shrinkage estimates are made to reduce the inventory value for lost or stolen items. The Company performs physical inventory counts and cycle counts throughout the year and adjusts the shrink reserve accordingly.

Property and equipment

Property and equipment are recorded at cost less accumulated depreciation. Direct internal and external costs related to software used for internal purposes which are incurred during the application development stage or for upgrades that add functionality are capitalized. All other costs related to internal use software are expensed as incurred.

Buildings are depreciated on a straight-line basis over the expected useful life of the asset, which ranges from 10 to 20 years. Leasehold improvements are depreciated on a straight-line basis over the lesser of the length of the lease, without consideration of option renewal periods, and the estimated useful life of the improvement, to a maximum of five years. All other property and equipment are depreciated using the declining balance method as follows. Depreciation commences when an asset is ready for its intended use.

Furniture and fixtures	20	%
Computer hardware and software	30	%
Equipment and vehicles	30	%

Goodwill and intangible assets

Intangible assets are recorded at cost. Reacquired franchise rights are amortized on a straight-line basis over their estimated useful lives of 10 years.

Goodwill represents the excess of the net assets acquired and liabilities assumed over the aggregate of the consideration transferred, the fair value of any non-controlling interest in the acquiree and the acquisition-date fair value of the Company's previously held equity interest. Goodwill and intangible assets with indefinite lives are tested annually for impairment or more frequently when an event or circumstance indicates that goodwill or indefinite life intangible assets might be impaired. The Company's operating segment for goodwill is its corporate-owned stores.

Impairment of long-lived assets

Long-lived assets, including intangible assets with finite lives, held for use are evaluated for impairment when the occurrence of events or a change in circumstances indicates that the carrying value of the assets may not be recoverable as measured by comparing their carrying value to the estimated undiscounted future cash flows generated by their use and eventual disposition. Impaired assets are recorded at fair value, determined principally by discounting the future cash flows expected from their use and eventual disposition. Reductions in asset values resulting from impairment valuations are recognized in income in the period that the impairment is determined. Long-lived assets, including intangible assets with finite lives, held for sale are reported at the lower of the carrying value of the asset and fair value less cost to sell. Any write-down to reflect fair value less selling cost is recognized in income when the asset is classified as held for sale. Gains or losses on assets held for sale and asset dispositions are included in provision for impairment and lease exit costs.

Leased property and equipment

The Company leases corporate-owned stores and distribution centers and administrative offices. Minimum rental payments, including any fixed escalation of rental payments and rent premiums, are amortized on a straight-line basis over the life of the lease beginning on the possession date. Rental costs incurred during a construction period, prior to store opening, are recognized as rental expense. The difference between the recognized rental expense and the total rental payments paid is reflected on the consolidated balance sheet as a deferred lease liability or a prepaid lease asset.

Deferred lease inducements, which include leasehold improvements paid for by the landlord and free rent, are recorded as liabilities on the consolidated balance sheet and recognized as a reduction of rent expense on a straight-line basis over the term of the lease.

Contingent rental payments based on sales volumes are recorded in the period in which the sales occur.

The Company recognizes a liability for the fair value of a required asset retirement obligation ("ARO") when such obligation is incurred. The Company's AROs are primarily associated with leasehold improvements which, at the end of a lease, the Company is contractually obligated to remove in order to comply with the lease agreement. At the inception of a lease with such conditions, the Company records an ARO liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. The liability is estimated based on a number of assumptions requiring management's judgment, including store closing costs, cost inflation rates and discount rates, and is accreted to its projected future value over time. The capitalized asset is depreciated using the convention for depreciation of leasehold improvement assets. Upon satisfaction of the ARO conditions, any difference between the recorded ARO liability and the actual retirement costs incurred is recognized as an operating gain or loss in the consolidated statements of operations.

The Company recognizes a liability for a cost associated with a lease exit or disposal activity when such obligation is incurred. A lease exit or disposal activity is measured initially at its fair value in the period in which the liability is incurred. The Company estimates fair value at the cease-use date of its operating leases as the remaining lease rentals, reduced by estimated sublease rentals that could be reasonably obtained for the property, even where the Company does not intend to enter into a sublease. Estimating the cost of certain lease exit costs involves subjective assumptions, including the time it would take to sublease the leased location and the related potential sublease income. The estimated accruals for these costs could be significantly affected if future experience differs from that used in the initial estimate. Lease exit costs are included in provision for impairment and lease exit costs.

Deferred revenue

Receipts from the sale of gift cards are treated as deferred revenue. Amounts received in respect of gift cards are recorded as unredeemed gift card liability. When gift cards are redeemed for apparel, the Company recognizes the related revenue.

Revenue recognition

Net revenue includes sales of apparel to customers through corporate-owned and operated retail stores, direct to consumer through www.lululemon.com, www.ivivva.com and other country and region specific websites, outlet sales, sales through a network of wholesale accounts, warehouse sales, and sales from company-operated showrooms and temporary locations.

Sales to customers through corporate-owned retail stores are recognized at the point of sale, net of an estimated allowance for sales returns.

Sales of apparel to customers through the Company's retail internet site are recognized when goods are shipped, and collection is reasonably assured, net of an estimated allowance for sales returns.

Sales of apparel to wholesale accounts are recognized when goods are shipped and collection is reasonably assured.

All revenue is reported net of sales taxes collected for various governmental agencies.

Revenue from the Company's gift cards is recognized when tendered for payment, or upon redemption. Outstanding customer balances are included in "Unredeemed gift card liability" on the consolidated balance sheets. There are no expiration dates on the Company's gift cards, and lululemon does not charge any service fees that cause a decrement to customer balances.

While the Company will continue to honor all gift cards presented for payment, management may determine the likelihood of redemption to be remote for certain card balances due to, among other things, long periods of inactivity. In these circumstances, to the extent management determines there is no requirement for remitting card balances to government agencies under unclaimed property laws, card balances may be recognized in the consolidated statements of operations in "Net revenue." For the years ended February 2, 2014, February 3, 2013 and January 29, 2012, net revenue recognized on unredeemed gift card balances was $4,654, $1,351, and $1,775, respectively.

Cost of goods sold

Cost of goods sold includes the cost of purchased merchandise, including in-bound freight, duty and nonrefundable taxes incurred in delivering the goods to the Company's distribution centers. It also includes all occupancy costs such as minimum

rent, contingent rent where applicable, property taxes, utilities and depreciation expense for the Company's corporate-owned store locations and all costs incurred in operating the Company's distribution centers and production, design and merchandise departments, hemming and shrink and valuation reserves. Production, design, merchandise and distribution center costs include salaries and benefits as well as operating expenses, which include occupancy costs and depreciation expense for the Company's distribution centers.

Store pre-opening costs

Operating costs incurred prior to the opening of new stores are expensed as incurred.

Income taxes

The Company follows the liability method with respect to accounting for income taxes. Deferred income tax assets and liabilities are determined based on temporary differences between the carrying amounts and the tax basis of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates that are expected to be in effect when these differences are anticipated to reverse. Deferred income tax assets are reduced by a valuation allowance, if based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The recognition of a deferred income tax asset is based primarily on management's forecasts, including current and proposed tax legislation, current and anticipated taxable income, utilization of previously unrealized non-operating loss carryforwards and regulatory reviews of tax filings. Given the judgments and estimates required and the sensitivity of the results to the significant assumptions used, the accounting estimates used in relation to the recognition of deferred income tax assets are subject to measurement uncertainty and are susceptible to a material change if the underlying assumptions change.

The Company provides for taxes at the rate applicable for the appropriate tax jurisdiction. Because present intentions are to reinvest the unremitted earnings into foreign operations, the Company does not provide U.S. income taxes on unremitted earnings of foreign subsidiaries. Management periodically assesses the need to utilize these unremitted earnings to finance foreign operations. This assessment is based on cash flow projections that are the result of estimates of future production and operational and fiscal objectives by tax jurisdiction for our operations. Such estimates are inherently imprecise since many assumptions utilized in the cash flow projections are subject to revision in the future.

The Company files income tax returns in the United States, Canada and various foreign and state jurisdictions. The 2011 to 2013 tax years remain subject to examination by the U.S. federal and state tax authorities. The 2008 tax year is still open for certain state tax authorities. The 2008 to 2013 tax years remain subject to examination by tax authorities in certain foreign jurisdictions. The Company's policy is to recognize interest expense and penalties related to income tax matters as a selling, general and administrative expense. At February 2, 2014, the Company does not have any significant accruals for interest related to unrecognized tax benefits or tax penalties. Intercompany transfer pricing policies are currently subject to audits by various foreign tax jurisdictions. Although management believes that the Company's intercompany transfer pricing policies and tax positions are reasonable, the final determination of tax audits or potential tax disputes may be materially different from that which is reflected in the Company's income tax provisions and accruals.

Currency translation

The functional currency for each entity included in these consolidated financial statements that is domiciled outside of the United States (the foreign entities) is the applicable local currency. Assets and liabilities of each foreign entity are translated into U.S. dollars at the exchange rate in effect on the balance sheet date. Revenue and expenses are translated at the average rate in effect during the period. Unrealized translation gains and losses are recorded as a cumulative translation adjustment, which is included in other comprehensive income or loss, which is a component of accumulated other comprehensive income or loss included in stockholders' equity.

Foreign currency transactions denominated in a currency other than an entity's functional currency are remeasured into the functional currency with any resulting gains and losses included in income, except for gains and losses arising on intercompany foreign currency transactions that are of a long-term investment nature.

Fair value of financial instruments

The Company's financial instruments consist of cash and cash equivalents, accounts receivable, trade accounts payable, accrued liabilities, and other liabilities. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. All foreign exchange gains or losses are recorded in the consolidated statements of operations under selling, general and administrative expenses. The fair value of these financial instruments approximates their carrying value, unless otherwise noted.

Foreign exchange risk

A significant portion of the Company's sales are denominated in Canadian dollars. The Company's exposure to foreign exchange risk is mainly related to fluctuations between the Canadian dollar and the U.S. dollar. This exposure is partly mitigated by a natural hedge in that a significant portion of the Company's operating costs are also denominated in Canadian dollars. The Company is also exposed to changes in interest rates. The Company does not hedge foreign currency and interest rate exposure in a manner that would entirely eliminate the effect of changes in foreign currency exchange rates, or interest rates on net income and cash flows.

The aggregate foreign exchange gains (losses) included in income amount to $17,314, $(625), and $(759) for the years ended February 2, 2014, February 3, 2013, and January 29, 2012, respectively.

Concentration of credit risk

The Company is not exposed to significant credit risk on its cash and cash equivalents and trade accounts receivable. Cash and cash equivalents are held with high quality financial institutions. Trade accounts receivable are primarily from wholesale accounts. The Company does not require collateral to support the trade accounts receivable; however, in certain circumstances, the Company may require parties to provide payment for goods prior to delivery of the goods. The accounts receivable are net of an allowance for doubtful accounts, which is established based on management's assessment of the credit risks of the underlying accounts.

Stock-based compensation

The Company accounts for stock-based compensation using the fair value method. The fair value of awards granted is estimated at the date of grant and recognized as employee compensation expense on a straight-line basis over the requisite service period with the offsetting credit to additional paid-in capital. For awards with service and/or performance conditions, the total amount of compensation expense to be recognized is based on the number of awards expected to vest and is adjusted to reflect those awards that do ultimately vest. For awards with performance conditions, the Company recognizes the compensation expense if and when the Company concludes that it is probable that the performance condition will be achieved. The Company reassesses the probability of achieving the performance condition at each reporting date. For awards with market conditions, all compensation expense is recognized irrespective of whether such conditions are met.

Earnings per share

Earnings per share is calculated using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income available to common stockholders for the period by the diluted weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution from common shares issuable through stock options and performance-based restricted stock units using the treasury stock method.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reporting period.

Recently issued accounting standards

In March 2013, the FASB amended ASC Topic 830 Foreign Currency Matters ("ASC 830") regarding cumulative translation adjustment derecognition guidance in particular when (i) an entity ceases to have a controlling financial interest in certain subsidiaries or groups of assets within a foreign entity, or (ii) there is a loss of a controlling financial interest in a foreign entity or a step acquisition involving an equity method investment that is a foreign entity. This guidance is effective for public entities for years, and interim periods within those years, beginning after December 15, 2013. The Company adopted the amendment in fiscal 2013 with no material impact on the Company's consolidated financial statements.

In January 2013, the FASB amended ASC Topic 210 Balance Sheet ("ASC 210") to clarify the scope of the required enhanced disclosures that will enable financial statement users to evaluate the effect or potential effect of netting arrangements on a company's financial position, including the effect or potential effect of rights of setoff associated within scope assets and liabilities. The amendment requires enhanced disclosures by requiring improved information about financial instruments and derivative instruments that are either (i) offset in accordance with ASC 210-20-45 or ASC 815-10-45 or (ii) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with ASC

210-20-45 or ASC 815-10-45. This guidance is effective for annual periods beginning on or after January 1, 2013. The Company adopted the amendment in the first quarter of fiscal 2013 with no material impact on the Company's consolidated financial statements.

Reclassifications

Certain prior year amounts have been reclassified to conform to fiscal 2013 presentation.

3 INVENTORIES

		February 2, 2014				February 3, 2013
Finished goods		$	196,288			$	163,008
Raw materials		4				583
Provision for obsolescence and shrink		(10,202		)		(8,369		)
		$	186,090			$	155,222

4 PROPERTY AND EQUIPMENT

		February 2, 2014				February 3, 2013
Land		$	67,903			$	72,679
Buildings		20,407				10,969
Leasehold improvements		140,748				109,233
Furniture and fixtures		41,400				30,907
Computer hardware and software		100,034				81,099
Equipment and vehicles		4,108				1,486
Accumulated depreciation		(118,997		)		(91,734		)
		$	255,603			$	214,639

Included in the cost of property and equipment are capitalized software costs of $1,697 and $1,177 at February 2, 2014 and February 3, 2013, respectively, associated with internally developed software.

Depreciation expense related to property and equipment was $48,177, $41,671 and $28,945 for the years ended February 2, 2014, February 3, 2013, and January 29, 2012, respectively.

5 GOODWILL AND INTANGIBLE ASSETS

		February 2, 2014				February 3, 2013
Goodwill		$	25,496			$	25,496
Changes in foreign currency exchange rates		(217		)		564
		25,279				26,060
Intangibles—reacquired franchise rights		$	10,630			$	10,630
Accumulated amortization		(7,830		)		(6,939		)
Changes in foreign currency exchange rates		122				450
		2,922				4,141
Total goodwill and intangibles		$	28,201			$	30,201

Amortization expense related to intangible assets was $891, $1,329, and $1,314 for the years ended February 2, 2014, February 3, 2013, and January 29, 2012, respectively. The estimated aggregate amortization expense is as follows:

Fiscal Year
2014	$	938
2015	898
2016	747
2017	265
2018	74
Thereafter	—
	$	2,922

Reacquired franchise rights are amortized on a straight-line basis over their estimated useful lives. The weighted-average remaining useful lives of the reacquired franchise rights was 2.49 years as at February 2, 2014 and 3.26 years years as at February 3, 2013. Goodwill is reviewed for impairment annually, or as events occur or circumstances arise which may reduce the fair value of goodwill below carrying value.

6 ACCRUED LIABILITIES

		February 2, 2014				February 3, 2013
Inventory purchases		$	12,715			$	7,633
Sales tax collected		8,341				8,501
Accrued rent		5,936				5,688
Other		15,318				8,210
		$	42,310			$	30,032

7 NON-CURRENT LIABILITIES

		February 2, 2014				February 3, 2013
Deferred lease liability		$	17,994			$	16,785
Tenant inducements		17,521				13,637
Deferred income tax liability		3,977				—
		$	39,492			$	30,422

8 LONG-TERM DEBT AND CREDIT FACILITIES

In November 2013, the Company canceled the uncommitted senior secured demand revolving credit facility with Royal Bank of Canada that it had entered into in April 2007. In November 2013 the Company entered into unsecured demand revolving credit facilities with HSBC Bank Canada and Bank of America, N.A., Canada Branch for up to $15,000 total to support the issuance of letters of credit and to fund the working capital requirements of the Company. Borrowings under the uncommitted credit facilities are made on a when-and-as-needed basis at the discretion of the Company.

Borrowings under the credit facility can be made either as (i) US Dollar Loans - US Dollar Loans will bear interest a rate equal to US LIBOR plus 100 basis points or US prime rate, at the Company's option; (ii) Letters of Credit - Borrowings drawn down under standby letters of credit issued by the banks will bear a fee of 100 basis points; and (iii) CDN Dollar Loans - CDN Dollar Loans will bear interest at a rate equal to Bankers Acceptance plus 100 basis points or the Canadian Prime Rate, at the Company's option.

At February 2, 2014, there were no borrowings outstanding under these credit facilities. At February 2, 2014, letters of credit totaling USD $1.1 million had been issued outside of this facility.

9 STOCKHOLDERS' EQUITY

Authorized share capital

On June 8, 2011 the Company's stockholders approved a two-for-one stock split (the "Stock Split") of the Company's common stock and an increase in the Company's authorized common stock from 200,000 shares to 400,000 shares. Shares of the Company's common stock began trading on a post-split basis on July 12, 2011 on the Nasdaq Stock Market. In connection with the Stock Split, the stockholders also approved a two-for-one split of the Company's special voting stock and an increase in the Company's authorized special voting stock from 30,000 to 60,000. Lulu Canadian Holding, Inc., a wholly-owned subsidiary of the Company, effected a two-for-one stock split of the exchangeable shares (which are exchangeable for an equal number of shares of the Company's common stock) in connection with the Stock Split.

The holders of the special voting stock are entitled to one vote for each share held. The special voting shares are not entitled to receive dividends or distributions or receive any consideration in the event of a liquidation, dissolution or wind-up. To the extent that exchangeable shares as described below are exchanged for common stock, a corresponding number of special voting shares will be cancelled without consideration.

The holders of the exchangeable shares have dividend and liquidation rights equivalent to those of holders of the common shares of the Company. The exchangeable shares can be converted on a one for one basis by the holder at any time into common shares of the Company plus a cash payment for any accrued and unpaid dividends. Holders of exchangeable shares are entitled to the same or economically equivalent dividend as declared on the common stock of the Company. The exchangeable shares are non-voting. The Company has the right to convert the exchangeable shares into common shares of the Company at any time after the earlier of July 26, 2047, the date on which less than 4,188 exchangeable shares are outstanding or in the event of certain events such as a change in control.

Purchase of non-controlling interest

In August 2012, the Company purchased the non-controlling interest in lululemon athletica Australia Pty Ltd ("lululemon australia") for $26,013. lululemon australia is engaged in the distribution of healthy lifestyle inspired athletic apparel, which is sold through a chain of corporate-owned retail locations and through a network of wholesale accounts, in Australia and New Zealand. The Company previously accounted for its 80 percent interest in lululemon australia as a subsidiary with non-controlling interest.

As a result of the transaction, the carrying amount of $5,680 of the non-controlling interest was reduced to $nil. The Company's equity was reduced by $20,333, the excess of the purchase price over the net adjustments, as a charge to additional paid in capital.

10 STOCK-BASED COMPENSATION

Stock-based compensation plans

The Company's employees participate in various stock-based compensation plans which are provided by the Company directly.

In July 2007, the Company's Board of Directors adopted, and the Company's stockholders approved the 2007 Equity Incentive Plan ("2007 Plan"). The 2007 Plan provides for the grants of stock options, stock appreciation rights, performance-based restricted stock unitss, restricted stock or restricted stock units to employees (including officers and directors who are also employees) of the Company. The majority of stock options granted to date have a four-year vesting period and vest at a rate of 25% each year on the anniversary date of the grant. Performance-based restricted stock units issued under the 2007 Plan generally vest three years from the grant date and restricted stock issued under the 2007 Plan vest one year from the grant date. To date, 165 shares of restricted stock have been issued under the 2007 Plan to certain directors and consultants of the Company.

The Company's policy is to issue shares upon the exercise of Company options or vesting of performance-based restricted stock units from treasury.

Stock-based compensation expense charged to income for the plans was $10,087, $15,637 and $10,340 for the years ended February 2, 2014, February 3, 2013, and January 29, 2012, respectively.

Total unrecognized compensation cost for all stock-based compensation plans was $17,065 as at February 2, 2014, which is expected to be recognized over a weighted-average period of 2.2 years, and was $20,871 as at February 3, 2013 over a weighted-average period of 2.0 years.

Employee stock purchase plan

The Company's Board of Directors and stockholders approved the Company's Employee Share Purchase Plan ("ESPP") in September 2007. The ESPP allows for the purchase of common stock of the Company by all eligible employees at a 25% discount from fair market value subject to certain limits as defined in the ESPP. The maximum number of shares available under the ESPP is 6,000 shares. During the year ended February 2, 2014, 98 shares were purchased under the ESPP, which were funded by the Company through open market purchases.

Company stock options, performance-based restricted stock units and restricted shares

A summary of the Company's stock options, performance-based restricted stock units and restricted shares activity as of February 2, 2014, February 3, 2013, and January 29, 2012, and changes during the years then ended is presented below:

		Number of Stock Options			Weighted- Average Exercise Price				Number of Performance-Based Restricted Stock Units			Weighted- Average Grant Fair Value				Number of Restricted Shares			Weighted- Average Grant Fair Value
Balance at January 30, 2011		3,270			$	10.83			174			$	20.96			8			$	21.22
Granted		183			45.47				231			40.99				9			47.74
Exercised		1,150			8.36				—			—				8			23.41
Forfeited		50			16.62				21			41.00				1			60.54
Balance at January 29, 2012		2,253			$	14.77			384			$	31.90			8			$	46.10
Granted		84			75.52				156			74.46				16			63.97
Exercised		874			12.60				—			—				8			46.10
Forfeited		86			20.43				49			31.81				—			—
Balance at February 3, 2013		1,377			$	19.51			491			$	45.47			16			$	63.97
Granted		118			64.86				290			52.41				59			52.35
Exercised		686			11.90				208			21.72				16			63.97
Forfeited		140			41.33				147			59.32				2			64.30
Balance at February 2, 2014		669			$	30.76			426			$	56.97			57			$	51.99

The Company's performance-based restricted stock units are awarded to eligible employees and entitle the grantee to receive a maximum of 1.5 shares of common stock per performance share unit if the Company achieves specified performance goals and the grantee remains employed during the vesting period. The fair value of performance-based restricted stock units is based on the closing price of the Company's common stock on the award date. Expense for performance-based restricted stock units is recognized when it is probable the performance goal will be achieved.

The following table summarizes information about stock options outstanding and exercisable at February 2, 2014:

		Outstanding										Exercisable
Range of Exercise Prices		Number of Options				Weighted- Average Exercise Price				Weighted- Average Remaining Life (Years)		Number of Options				Weighted- Average Exercise Price				Weighted- Average Remaining Life (Years)
$0.25 – $6.92		136				$	2.83			2.6		136				$	2.83			2.6
$9.00 – $14.51		136				12.84				4.5		122				12.69				4.6
$17.27 – $33.50		116				22.25				3.4		79				23.24				3.4
$34.94 – $57.88		148				43.77				4.5		57				41.27				4.2
$64.30 – $75.23		133				70.59				6.0		19				75.17				5.4
		669				$	30.76			4.2		413				$	18.34			3.7
Intrinsic value		$	13,845									$	11,981

As of February 2, 2014, the unrecognized compensation cost related to these options was $4,761, which is expected to be recognized over a weighted-average period of 2.7 years; and the total aggregate intrinsic value for stock options outstanding and exercisable was $11,981. The intrinsic value of stock options exercised during the years ended February 2, 2014, February 3, 2013, and January 29, 2012 was $37,591, $53,605, and $42,783. The weighted-average grant date fair value

of options granted during the years ended February 2, 2014, February 3, 2013, and January 29, 2012 was $31.96, $37.20, and $22.51, respectively.

The fair value of options with service conditions was determined at the date of grant using the Black-Scholes model. Expected volatilities are based on a review of a peer group of publicly traded apparel retailers. The expected term of options with service conditions is the simple average of the term and the requisite service period as stated in the respective option contracts. The risk-free interest rate is the Federal Reserve federal funds rate. The following assumptions were used in calculating the fair value of stock options issued in fiscal 2013:

	lululemon athletica inc.
Dividend yield	—	%
Expected volatility	64.65	%
Risk-free interest rate	0.72	%
Weighted-average life	4.06 years

11 EARNINGS PER SHARE

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

		Fiscal Year Ended
		February 2, 2014				February 3, 2013				January 29, 2012
Net income attributable to lululemon athletica inc		$	279,547			$	270,556			$	184,063
Basic weighted-average number of shares outstanding		144,913				144,000				143,196
Effect of stock options assumed exercised		1,130				1,806				2,082
Diluted weighted-average number of shares outstanding		146,043				145,806				145,278
Basic earnings per share		$	1.93			$	1.88			$	1.29
Diluted earnings per share		$	1.91			$	1.85			$	1.27

The Company's calculation of weighted-average shares includes the common stock of the Company as well as the exchangeable shares. Exchangeable shares are the equivalent of common shares in all material respects. All classes of stock have in effect the same rights and share equally in undistributed net income. For the fiscal years ended February 2, 2014, February 3, 2013 and January 29, 2012, 57, 45 and 50 stock options, respectively, were anti-dilutive to earnings and therefore have been excluded from the computation of diluted earnings per share.

12 COMMITMENTS AND CONTINGENCIES

The Company has obligations under operating leases for its office, distribution centers and corporate-owned store and showroom premises. As of February 2, 2014, the lease terms of various leases are from two to 10 years. A substantial number of the Company's leases for corporate-owned store premises include renewal options and certain of the Company's leases include rent escalation clauses, rent holidays and leasehold rental incentives. Certain of the Company's leases for corporate-owned store premises also include contingent rental payments based on sales volume. The Company is required to make deposits for rental payments pursuant to certain lease agreements, which have been included in other non-current assets. Minimum annual basic rent payments excluding other executory operating costs, pursuant to lease agreements are approximately as laid out in the table below. These amounts include commitment in respect of corporate-owned stores that have not yet opened but for which lease agreements have been executed.

Fiscal Year
2014	$	70,913
2015	69,209
2016	65,421
2017	54,261
2018	37,979
Thereafter	52,385

Rent expense for the years ended February 2, 2014, February 3, 2013, and January 29, 2012 was $95,574, $82,428, and $67,117, respectively, under operating lease agreements, consisting of minimum rental expense of $61,552, $54,050, and $43,795, respectively, and contingent rental amounts of $34,022, $28,378, and $23,322, respectively.

On October 25, 2013, plaintiff Laborers' District Council Industry Pension Fund filed a books-and-records action entitled Laborers' District Council Construction Industry Pension Fund v. lululemon athletica inc., No. 9039 (Del. Ch.) under 7 Del. C. Sec. 220 based on a demand letter it sent to the Company on or around August 8, 2013 to request certain lululemon records relating to the March 2013 sheer Luon issue, the Company's announcement that its then CEO, Christine Day, intends to resign, and certain stock trades executed by the Chairman of our board of directors, Mr. Wilson, prior to the Company's announcement regarding its former CEO, Christine Day. The Company moved to dismiss the complaint on November 11, 2013, and the motion remains pending. The Company believes there is no merit to plaintiff's claims and the Company intends to continue to defend vigorously.

On August 12, 2103 and August 23, 2013, plaintiffs Thomas Canty and Tammy Federman filed shareholder derivative actions entitled Canty v. Day , et al., No. 13-CV-5629 (S.D.N.Y.) and Federman v. Day, et al., No. 13-CV-5977 (S.D.N.Y.). Plaintiffs allege that they are acting on behalf of the Company and name as defendants current and former directors and certain officers of the Company. On January 17, 2014, plaintiffs filed an amended complaint, operative in both actions. In that amended complaint, plaintiffs challenge certain public disclosures and conduct relating to the March 2013 sheer Luon issue, the June 2013 announcement of the resignation of the Company's former CEO, Christine Day, and certain stock trades executed by Mr. Wilson and Ms. Day in the months leading up to that announcement. Plaintiffs allege violations of Section 14(a) of the Securities Exchange Act and breach of fiduciary duty, unjust enrichment, abuse of control, and gross mismanagement. Defendants believe there is no merit to plaintiffs' claims and have moved to dismiss both lawsuits.

On July 2, 2013, plaintiff Houssam Alkhoury filed a putative shareholder class action entitled Alkhoury v. lululemon athletica inc., et al., No. 13-CV-4596 (S.D.N.Y.) against lululemon, a certain director and a certain officer of the Company (collectively, "Defendants"). On October 1, 2013, the Court appointed Louisiana Sheriffs' Pension & Relief Fund as Lead Plaintiff and on November 1, Lead Plaintiff filed a consolidated class action complaint on behalf of a proposed class of purchasers of lululemon stock between September 7, 2012 through June 11, 2013 (the "Complaint"). In its Complaint, Lead Plaintiff asserted causes of action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against Defendants based on certain public disclosures made by the Company relating to lululemon's product quality and the March 2013 sheer Luon issue. On January 15, 2014, Lead Plaintiff filed a consolidated amended class action compliant (the "Amended Complaint") on behalf of a proposed class of purchasers of lululemon stock between September 7, 2012 through January 10, 2014. In its Amended Complaint, Lead Plaintiff added new claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on certain of lululemon's public disclosures related to the Company's ongoing quality control improvements and the impact of those improvements on the Company's financial results. Defendants believe there is no merit to Lead Plaintiff's claims and have moved to dismiss this lawsuit.

On May 3, 2013, plaintiff Hallandale Beach Police Officers and Firefighters Personnel Retirement Fund filed a books-and-records action entitled Hallandale Beach Police Officers and Firefighters' Personnel Retirement Fund v. lululemon athletica inc., No. 8522 (Del. Ch.)., under 7 Del. C. Sec. 220 based on a demand letter it sent to us on April 17, 2013 to request certain lululemon records relating to the March 2013 sheer Luon issue and recent revisions to our executive bonus plan. The Company moved to dismiss the complaint on May 28, 2013. On June 14, 2013, plaintiff sent a supplemental demand letter that requested additional records from us relating to our announcement that Christine Day intends to resign as our Chief Executive Officer, and certain stock trades executed by our Chairman, Mr. Wilson, prior to our announcement regarding Ms. Day. On July 1, 2013, plaintiff filed an amended complaint to incorporate allegations relating to the June 14, 2013 supplemental demand letter. The Company moved to dismiss the amended complaint on August 15, 2013, and, in response to this filing, plaintiffs served the Company with a new demand letter and then filed a second amended complaint on November 4, 2013. The Company believes there is no merit to plaintiff's claims and the Company intends to continue to defend vigorously.

The Company has indemnification agreements with certain of its current and former officers and directors that may require it, among other things, to indemnify such current or former officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.

The Company is unable at this time to predict the amount of its legal expenses associated with these proceedings and any settlement or damages payments associated with these matters. In the event that the Company is unsuccessful in its defense, or if the Company pursues settlement with regard to any of these actions, the Company could be required to pay significant final settlement amounts and/or judgments that exceed the limits of its insurance policies or the carriers may decline to fund such final settlements and/or judgments, which could have a material adverse effect on the Company's financial condition and liquidity. Regardless of whether any of the claims asserted against the Company in these actions are valid, or whether the Company is ultimately held liable, such litigation may be expensive to defend and may divert resources away from the

Company's operations and negatively impact earnings. Further, the Company may not be able to obtain adequate insurance to protect it from these types of litigation matters or extraordinary business losses.

In addition to the legal matters described above, the Company is, from time to time, involved in routine legal matters incidental to its business. The company believes the ultimate resolution of any such current proceeding will not have a material adverse effect on its continued financial position, results of operations or cash flows.

13 RELATED PARTY BALANCES AND TRANSACTIONS

The Company entered into the following transactions with related parties:

		February 2, 2014				February 3, 2013				January 29, 2012
Payments to related parties
Occupancy costs for one corporate-owned store		$	150			$	151			$	134
Consulting fees		$	409			$	295			$	305

The Company's principal stockholder owns a retail space that the Company leases for one of its corporate-owned stores. Consulting fees were paid to a relative of our principal stockholder.

14 SUPPLEMENTAL CASH FLOW INFORMATION

		February 2, 2014				February 3, 2013				January 29, 2012
Cash paid for income taxes		$	155,394			$	71,342			$	85,633
Interest paid		$	117			$	206			$	155

15 INCOME TAXES

The Company files income tax returns in the U.S., Canada and various foreign, state and provincial jurisdictions. The 2012 and 2013 tax years remain subject to examination by the U.S. federal and state tax authorities. The 2008 tax year is still open for certain state tax authorities. The 2008 to 2013 tax years remain subject to examination by tax authorities in certain foreign jurisdictions. The Company's policy is to recognize interest expense and penalties related to income tax matters as a selling, general and administrative expense. At February 2, 2014, the Company does not have any significant accruals for interest related to unrecognized tax benefits or tax penalties.

The Company's intercompany transfer pricing policies are currently subject to audits by the various foreign tax jurisdictions. Although the Company believes that its intercompany transfer pricing policies and tax positions are fully supportable, the final determination of tax audits or potential tax disputes may be different from that which is reflected in the Company's income tax provisions and accruals.

The provision for income taxes consists of the following:

		February 2, 2014			February 3, 2013			January 29, 2012
Federal income tax at statutory rate		35.0	%		35.0	%		35.0	%
Non-deductible compensation expense		0.5			0.8			0.8
U.S. state taxes		1.2			1.2			2.8
Foreign tax rate differential		(7.1	)		(7.7	)		(3.4	)
Permanent and other		—			(0.5	)		0.9
Provision for income taxes		29.6	%		28.8	%		36.1	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax asset and deferred tax liability at February 2, 2014 and February 3, 2013 are presented below:

		February 2, 2014				February 3, 2013
Deferred income tax asset
Net operating loss carryforward		$	5,097			$	2,397
Foreign tax credits		4,585				4,585
Property and equipment		(12,447		)		(13,151		)
Deferred lease liability		6,284				6,243
Stock-based compensation		3,758				3,317
Inventory		4,681				5,372
Tenant inducements		5,841				4,506
Other		501				1,764
		18,300				15,033
Deferred income tax liability
Property and equipment		(5,122		)		—
Other		1,145				—
		(3,977		)		—
Net deferred income tax asset		$	14,323			$	15,033

The Company's current and deferred taxes from federal, state and foreign sources were as follows:

		February 2, 2014				February 3, 2013				January 29, 2012
Income before provision for income taxes
Domestic		$	81,688			$	63,426			$	114,481
Foreign		315,438				317,970				174,977
Income before provision for income taxes		397,126				381,396				289,458
Current taxes
Federal		$	27,818			$	22,598			$	45,623
State		4,017				3,795				8,438
Foreign		84,924				90,017				51,126
Total current		116,759				116,410				105,187
Deferred taxes
Federal		$	266			$	(5,667	)		$	73
State		38				(786		)		12
Foreign		516				8				(778		)
Total deferred		820				(6,445		)		(693		)
Provision for income taxes		$	117,579			$	109,965			$	104,494

U.S. income and foreign withholding taxes have not been provided on approximately CDN $678,204 of cumulative undistributed earnings of foreign subsidiaries at February 2, 2014. The Company intends to reinvest these earnings for the foreseeable future. U.S. income taxes of approximately CDN $97,119 would be incurred if these earnings were distributed.

16 SEGMENTED FINANCIAL INFORMATION

The Company applies ASC Topic 280, Segment Reporting ("ASC 280"), in determining reportable segments for financial statement disclosure. The Company reports segments based on the financial information it uses in managing its business. The Company's reportable segments are comprised of corporate-owned stores, direct to consumer and other. Direct to consumer includes sales from the Company's e-commerce websites. Outlet, wholesale, showroom, temporary location and franchise sales have been combined into other. The Company has reviewed its general corporate expenses and determined some costs previously classified as general corporate are direct segment expenses. Accordingly, all prior year comparable information has been reclassified to conform to the current year classification. Information for these segments is detailed in the table below:

		Fiscal Year Ended
		February 2, 2014				February 3, 2013				January 29, 2012
Net revenue
Corporate-owned stores		$	1,228,999			$	1,090,181			$	816,925
Direct to consumer		263,083				197,255				106,313
Other		99,106				82,922				77,601
		$	1,591,188			$	1,370,358			$	1,000,839
Income from operations before general corporate expense
Corporate-owned stores		$	372,631			$	375,461			$	297,809
Direct to consumer		109,569				84,677				44,175
Other		16,107				19,928				21,103
		$	498,307			$	480,066			$	363,087
General corporate expense		106,949				103,627				76,129
Income from operations		$	391,358			376,439				286,958
Other income (expense), net		$	5,768			4,957				2,500
Income before provision for income taxes		$	397,126			$	381,396			$	289,458
Capital expenditures
Corporate-owned stores		$	60,233			64,863				34,117
Direct to consumer		5,953				4,881				6,724
Corporate		40,222				23,485				76,055
		$	106,408			$	93,229			$	116,896
Depreciation and amortization
Corporate-owned stores		$	31,349			$	27,519			$	18,480
Direct to consumer		4,599				3,393				2,377
Corporate		13,120				12,088				9,402
		$	49,068			$	43,000			$	30,259

The intercompany wholesale sales of $591,004, $490,982, and $66,824 for the years ended February 2, 2014, February 3, 2013, and January 29, 2012 respectively, have been excluded from the net revenue in the Other reportable segment. In addition, the income from operations reported included in the segment results for Other does not reflect the intercompany profit on these sales, which amounted to $255,421, $216,156, and $21,072 for the years ended February 2, 2014, February 3, 2013, and January 29, 2012, respectively. The increase in intercompany wholesale sales and the profit on these sales in fiscal 2013 compared to prior years was the result of revised intercompany pricing agreements.

The Company operates in five geographic areas—Canada, the United States, Australia and New Zealand, Asia and Europe. Revenue from these regions for the years ended February 2, 2014, February 3, 2013, and January 29, 2012 was as follows:

		February 2, 2014				February 3, 2013				January 29, 2012
United States		$	1,052,148			$	839,908			$	536,182
Canada		454,209				461,586				425,720
Outside of North America		84,831				68,864				38,937
		$	1,591,188			$	1,370,358			$	1,000,839

Long-lived assets by geographic area for the years ended February 2, 2014 and February 3, 2013 were as follows:

		February 2, 2014				February 3, 2013
United States		$	97,288			$	68,115
Canada		145,416				135,505
Outside of North America		12,899				11,019
		$	255,603			$	214,639

Substantially all of the Company's intangible assets and goodwill relate to the reporting segment consisting of corporate-owned stores.

17 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following tables present the Company's unaudited quarterly results of operations and comprehensive income for each of the eight fiscal quarters in the periods ended February 2, 2014 and February 3, 2013. You should read the following tables in conjunction with the Company's audited consolidated financial statements and related notes appearing elsewhere in this Form 10-K. The Company has prepared the information below on a basis consistent with its audited consolidated financial statements and has included all adjustments, consisting of normal recurring adjustments, which, in the opinion of the Company's management, are necessary to fairly present its operating results for the quarters presented. The Company's historical unaudited quarterly results of operations are not necessarily indicative of results for any future quarter or for a full year.

		Fiscal 2013																Fiscal 2012
		Fourth Quarter				Third Quarter				Second Quarter				First Quarter				Fourth Quarter				Third Quarter				Second Quarter				First Quarter
		(In thousands) (unaudited)
Consolidated statements of operations and comprehensive income:
Net revenue		$	520,993			$	379,900			$	344,513			$	345,782			$	485,489			$	316,537			$	282,634			$	285,698
Cost of goods sold		242,203				175,294				158,558				175,057				210,982				141,237				126,879				128,434
Gross profit		278,790				204,606				185,955				170,725				274,507				175,300				155,755				157,264
Operating expenses:
Selling, general and administrative expenses		124,643				112,270				106,969				104,836				121,932				94,689				85,567				84,199
Income from operations		154,147				92,336				78,986				65,889				152,575				80,611				70,188				73,065
Other income (expense), net		1,519				1,453				1,295				1,501				1,457				1,424				1,166				910
Income before provision for income taxes		155,666				93,789				80,281				67,390				154,032				82,035				71,354				73,975
Provision for income taxes		45,974				27,678				23,816				20,111				44,657				24,655				13,652				27,001
Net income		109,692				66,111				56,465				47,279				109,375				57,380				57,702				46,974
Net income attributable to non-controlling interest		—				—				—				—				—				64				480				331
Net income attributable to lululemon athletica inc.		$	109,692			$	66,111			$	56,465			$	47,279			$	109,375			$	57,316			$	57,222			$	46,643
Basic earnings per share		$	0.75			$	0.46			$	0.39			$	0.33			$	0.76			$	0.40			$	0.40			$	0.32
Diluted earnings per share		$	0.75			$	0.45			$	0.39			$	0.32			$	0.75			$	0.39			$	0.39			$	0.32
Other comprehensive (loss) income:
Foreign currency translation adjustment		(53,657		)		(9,153		)		(21,901		)		(4,447		)		(79		)		2,642				(10,567		)		7,545
Comprehensive income		$	56,035			$	56,958			$	34,564			$	42,832			$	109,296			$	59,958			$	46,655			$	54,188

The Company's quarterly results of operations have varied in the past and are likely to do so again in the future. As such, the Company believes that comparisons of its quarterly results of operations should not be relied upon as an indication of the Company's future performance.