filings.toolsUlta Beauty (ULTA) 10-K risk factor changes: FY2010 vs FY2009
The 2010-01-30 10-K against the 2009-01-31 one, compared heading by heading and sentence by sentence. One of these filings carries no fiscal year tag, so its year is the calendar year of the period end.
Item 1A23 rewritten18 added16 removed249 unchanged
All filing items586 rewritten323 added273 removed1,502 unchanged
Summary
counted, not written
- Item 1A lists 28 risk factor headings: 0 new, 4 reworded and 24 unchanged since FY2009. 2 headings from FY2009 no longer appear.
- Sentence by sentence, 323 added, 273 removed, 586 rewritten and 1,502 unchanged across 18 items that differ.
New Item 1A headings (0)
No risk factor heading in this filing is absent from FY2009.
Removed Item 1A headings (2)
- _plans or cause us to incur costs to expand this infrastructure, which could have a material adverse effect on our business, financial condition and results of operations._
- _We are currently subject to a consolidated securities class action lawsuit, the outcome of which is uncertain._
Reworded Item 1A headings (4)
[removed: _Continued turbulence][added: _The recent global economic crisis and continued volatility] in global economic conditions and [added: the financial markets as well as] prolonged declines in consumer spending may adversely affect our liquidity and financial condition._- _The capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans, which could prevent the successful implementation of
[removed: these_][added: these plans or cause us to incur costs to expand this infrastructure, which could have a material adverse effect on our business, financial condition and results of operations._] - _Any material disruption of our information systems could negatively impact financial results and materially adversely affect our business
[removed: operations._][added: operations, particularly during the holiday season._] - _We will need to raise additional funds to pursue our growth
[removed: strategy or continue our operations,][added: strategy,] and we may be unable to raise capital when needed, which could have a material adverse effect on our business, financial condition and results of operations._
A heading is new when no FY2009 heading matches it after ignoring case and punctuation, and reworded when it shares at least 60 percent of its words with one that went away. All current risk factor headings.
Sentences by item
21 items, with every count and a link to each item that changed
Underlined words on a shaded ground are new in FY2010; struck-through words were in FY2009. Sentences that are wholly new or wholly gone are labelled rather than marked.
Item 1A. Risk Factors
23 rewritten, 18 added, 16 removed, 249 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
[removed: _Continued turbulence] [added: _The recent global economic crisis and continued volatility] in global economic conditions and [added: the financial markets as well as] prolonged declines in consumer spending may adversely affect our liquidity and financial condition._
[added: Concerns over inflation, energy costs, geopolitical issues, the] availability and cost of credit, [removed: and] the [removed: global housing and] [added: U.S.] mortgage [removed: markets] [added: market and a declining real estate market in the U.S.] have contributed to increased [removed: market] volatility and diminished expectations for [removed: western and emerging economies.][added: the economy.]
A significant decrease in new retail center development [removed: could] [added: has] adversely [removed: affect] [added: affected] our new store program and [added: could] limit our future growth opportunities as long as the aforementioned conditions exist.
[removed: As the current economic downturn remains uncertain, our customers may become more apprehensive about] [added: Continued uncertainty in] the economy [removed: and further reduce their level] [added: could adversely impact levels] of [added: consumer] discretionary spending across all of our product categories including prestige beauty products and premium salon services.
A bankruptcy or financial failure of a significant vendor or a number of significant real estate developers or shopping center landlords could have a material adverse [removed: affect] [added: effect] on our business, financial condition, profitability, and cash flows.
The markets for beauty products and salon services are highly competitive with few barriers to [removed: entry.][added: entry even when economic conditions are favorable.]
Many of our competitors are, and many of our potential competitors may be, larger and have greater financial, marketing and other resources and therefore may be able to adapt to changes in customer requirements more quickly, devote greater resources to the marketing and sale of their products, generate greater national brand [added: recognition or adopt more aggressive pricing policies than we can.]
Ms. Kirby, our President and Chief Executive Officer since December 1999, is [removed: of key importance] [added: important] to our business, including her relationships with our vendors and influence on our sales and marketing.
[removed: If we lost Ms. Kirby’s services or] [added: In addition,] if we were to lose the benefit of the experience, efforts and abilities of other key executive [removed: and buying] personnel, it could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, our ability to manage our retail expansion will require us to continue to train, motivate and manage our [removed: associates and to attract, motivate and retain additional qualified managerial and merchandising personnel and store] associates.
During fiscal [removed: 2008,] [added: 2009,] we opened [removed: 63] [added: 37] new stores.
During fiscal [removed: 2008,] [added: 2009,] the average investment required to open a typical new store [removed: was] [added: is] approximately [removed: $1.5] [added: $1.1] million.
_The capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans, which could prevent the successful implementation of [removed: these_][added: these plans or cause us to incur costs to expand this infrastructure, which could have a material adverse effect on our business, financial condition and results of operations._]
Any significant interruption in the operation of our [removed: distribution] [added: supply chain] infrastructure, such as disruptions in our information systems, disruptions in operations due to fire or other catastrophic events, labor disagreements, or shipping [added: and transportation] problems, could drastically reduce our ability to receive and process orders and provide products and services to our stores, which could have a material adverse effect on our business, financial condition and results of operations.
_Any material disruption of our information systems could negatively impact financial results and materially adversely affect our business [removed: operations._][added: operations, particularly during the holiday season._]
The failure of our information systems to perform as [removed: designed, including the failure of our warehouse management software system to operate as expected during the holiday season] [added: designed] could have an adverse effect on our business and results of our operations.
Any event causing a sudden disruption of manufacturing or imports from such foreign countries, including the imposition of additional import restrictions, unanticipated political [removed: changes, increased customs duties, legal or economic restrictions on overseas suppliers’ ability to produce and]
[added: changes, increased customs duties, legal or economic restrictions on overseas suppliers’ ability to produce and] deliver products, and natural disasters, could materially harm our operations.
During fiscal [removed: 2008,] [added: 2009,] merchandise supplied to Ulta by our top ten vendors accounted for approximately [removed: 48%] [added: 46%] of our net sales.
These covenants could restrict our operational [removed: flexibility, including our ability to open stores,] [added: flexibility] and any failure to comply with these covenants or our payment obligations would limit our ability to borrow under the credit facility and, in certain circumstances, may allow the lenders thereunder to require repayment.
_We will need to raise additional funds to pursue our growth [removed: strategy or continue our operations,] [added: strategy,] and we may be unable to raise capital when needed, which could have a material adverse effect on our business, financial condition and results of operations._
Our principal stockholders own or control, in the aggregate, approximately [removed: 44%] [added: 35%] of our outstanding common stock.
Our amended and restated certificate of incorporation and by-laws contain provisions that may delay or prevent a change in control, discourage bids at a premium over the market price of our common stock and [added: harm the market price of our common stock and diminish the voting and other rights of the holders of our common stock.]
The global economic crisis and the continued volatility and disruption to the capital and credit markets have had a significant, adverse impact on global economic conditions, resulting in additional significant recessionary pressures and declines in consumer confidence and economic growth.
These conditions have led to decreases in consumer spending across the economy.
Increases in the levels of unemployment, energy costs, healthcare costs and taxes, combined with tighter credit markets, reduced consumer confidence and other factors, contribute to the decline in consumer spending.
Although there has been limited recent improvement in some of these measures, the level of consumer spending is not where it was prior to the global recession.
Such reduced consumer spending could cause changes in customer order patterns and changes in the level of inventory purchased by our customers, which may adversely affect our industry, business and financial condition.
Economic conditions have also resulted in a substantial tightening of the credit markets, including lending by financial institutions, which is a source of capital for our borrowing and liquidity.
This tightening of the credit markets has increased the cost of capital and reduced the availability of credit.
It is difficult to predict how long the current economic and capital and credit market conditions will continue, the extent to which they will continue to deteriorate, if at all, and which aspects of our products or business may be adversely affected.
Our financial condition may be materially affected by conditions in the global capital markets and the economy generally, both in the U.S. and elsewhere around the world.
The stress experienced by global capital markets that began in the second half of 2007 continued and substantially increased during 2008 and 2009.
Factors that could affect consumers’ willingness to make such discretionary purchases include general business conditions, levels of employment, interest rates and tax rates, the availability of consumer credit, and consumer confidence in future economic conditions.
Ms. Kirby has an agreement to remain employed with us through March 2011, and if we lost Ms. Kirby’s services before the conclusion of this agreement, it could have a material adverse effect on our business, financial condition and results of operations.
We will need to attract, motivate and retain additional qualified executive, managerial and merchandising personnel and store associates.
| | • | small trading volumes and small public float; |
| | • | stock transactions by our principal stockholders; |
| --- | --- | --- |
| | | |
| | | |
Recent global market and economic conditions have been unprecedented and challenging with tighter credit conditions and recession in most major economies continuing into 2009.
Continued concerns about the systemic impact of potential long-term and wide-spread recession, energy costs, geopolitical issues, the
In the second half of 2008, added concerns fueled by the United States government conservatorship of the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association, the declared bankruptcy of Lehman Brothers Holdings Inc., the United States government financial assistance to American International Group Inc., Citibank, Bank of America and other federal government interventions in the United States financial system led to increased market uncertainty and instability in both the United States and international capital and credit markets.
These conditions, combined with volatile oil prices, declining business and consumer confidence and increased unemployment, have contributed to volatility of unprecedented levels.
As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads.
Additionally, the ongoing impacts of the housing crisis, rising unemployment, financial market volatility, the availability of credit, and general consumer confidence may worsen and exacerbate current conditions.
recognition or adopt more aggressive pricing policies than we can.
Ms. Kirby has entered an agreement to remain employed with us through March 2011.
_plans or cause us to incur costs to expand this infrastructure, which could have a material adverse effect on our business, financial condition and results of operations._
_We are currently subject to a consolidated securities class action lawsuit, the outcome of which is uncertain._
We and certain of our current and former executive officers are defendants in a consolidated securities class action lawsuit in federal court.
See Item 3, “Legal Proceedings” for a more detailed description of these proceedings.
This putative class action remains in its preliminary stages and it is not yet possible to determine the ultimate outcome.
The plaintiffs in the class action lawsuit seek substantial damages.
The legal and other costs associated with the defense of this action, the amount of time required to be spent by management and the board of directors on this matter and the ultimate outcome of the litigation could have a material adverse effect on our business, financial condition and results of operations.
harm the market price of our common stock and diminish the voting and other rights of the holders of our common stock.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
87 rewritten, 47 added, 72 removed, 271 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
_The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our [removed: consolidated] financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation: the impact of weakness in the economy; changes in the overall level of consumer spending; changes in the wholesale cost of our products; the possibility that we may be unable to compete effectively in our highly competitive markets; the possibility that our continued opening of new stores could strain our resources and have a material adverse effect on our business and financial performance; the possibility that new store openings may be impacted by developer or co-tenant issues; the possibility that the capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans; the possibility of material disruptions to our information systems; weather conditions that could negatively impact [removed: sales] [added: sales;] and other risk factors detailed in our public filings with the Securities and Exchange Commission (the “SEC”), including risk factors contained in Item 1A, “Risk Factors” of this Annual Report on Form 10-K for the year ended January [removed: 31, 2009.][added: 30, 2010.]
As of January [removed: 31, 2009,] [added: 30, 2010,] we operated [removed: 311] [added: 346] stores across [removed: 36] [added: 38] states.
In addition to these fundamental elements of a beauty superstore, we strive to offer an uplifting shopping experience through what we refer to as “The [removed: Four] [added: Five] E’s”: Escape, Education, [removed: Entertainment] [added: Entertainment, Esthetics] and [removed: Esthetics.][added: Empowerment.]
Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases, [added: cease to provide credit to businesses and consumers.]
These factors have [removed: lead] [added: led] to a decrease in spending by businesses and consumers alike, and a corresponding decrease in global infrastructure spending.
| | • | salon payroll and benefits; [removed: and] |
Pre-opening expense includes non-capital expenditures during the period prior to store opening for new and remodeled stores including [added: rent during the construction period for new stores,] store set-up labor, management and employee training, and grand opening advertising.
[removed: Our interest expense will fluctuate based on the seasonal borrowing requirements] associated with acquiring inventory in advance of key holiday selling periods and fluctuation in the variable interest rates we are charged on outstanding balances.
The Company’s fiscal years ended January [added: 30, 2010, January] 31, [removed: 2009,] [added: 2009 and] February 2, 2008 [removed: and February 3, 2007] were [removed: 52,] 52 [removed: and 53] week [removed: years, respectively,] [added: years] and are hereafter referred to as fiscal [removed: 2008,] [added: 2009,] fiscal [removed: 2007] [added: 2008] and fiscal [removed: 2006.][added: 2007.]
| | | January [removed: 31,] [added: 30,] | | | | [removed: February 2,] [added: January 31,] | | | | February [removed: 3,] [added: 2,] | | |
| | | [removed: 2009] [added: 2010] | | | | [removed: 2008] [added: 2009] | | | | [removed: 2007] [added: 2008] | | |
| Net sales | | $ | [removed: 1,084,646] [added: 1,222,771] | | | $ | [removed: 912,141] [added: 1,084,646] | | | $ | [removed: 755,113] [added: 912,141] | |
| Cost of sales | | | [removed: 756,712] [added: 849,722] | | | | [removed: 628,495] [added: 756,712] | | | | [removed: 519,929] [added: 628,495] | |
| Gross profit | | | [removed: 327,934] [added: 373,049] | | | | [removed: 283,646] [added: 327,934] | | | | [removed: 235,184] [added: 283,646] | |
| Selling, general and administrative expenses | | | [removed: 267,322] [added: 298,893] | | | | [removed: 225,167] [added: 267,322] | | | | [removed: 188,000] [added: 225,167] | |
| Pre-opening expenses | | | [removed: 14,311] [added: 6,003] | | | | [removed: 11,758] [added: 14,311] | | | | [removed: 7,096] [added: 11,758] | |
| Operating income | | | [removed: 46,301] [added: 68,153] | | | | [removed: 46,721] [added: 46,301] | | | | [removed: 40,088] [added: 46,721] | |
| Interest expense | | | [removed: 3,943] [added: 2,202] | | | | [removed: 4,542] [added: 3,943] | | | | [removed: 3,314] [added: 4,542] | |
| Income before income taxes | | | [removed: 42,358] [added: 65,951] | | | | [removed: 42,179] [added: 42,358] | | | | [removed: 36,774] [added: 42,179] | |
| Income tax expense | | | [removed: 17,090] [added: 26,595] | | | | [removed: 16,844] [added: 17,090] | | | | [removed: 14,231] [added: 16,844] | |
| Net income | | $ | [removed: 25,268] [added: 39,356] | | | $ | [removed: 25,335] [added: 25,268] | | | $ | [removed: 22,543] [added: 25,335] | |
| Number of stores end of period | | | [removed: 311] [added: 346] | | | | [removed: 249] [added: 311] | | | | [removed: 196] [added: 249] | |
| Comparable store sales increase | | | [removed: 0.2] [added: 1.4] | % | | | [removed: 6.4] [added: 0.2] | % | | | [removed: 14.5] [added: 6.4] | % |
| | | January [removed: 31,] [added: 30,] | | | | [removed: February 2,] [added: January 31,] | | | | February [removed: 3,] [added: 2,] | | |
| (Percentage of Net Sales) | | [removed: 2009] [added: 2010] | | | | [removed: 2008] [added: 2009] | | | | [removed: 2007] [added: 2008] | | |
| Cost of sales | | | [removed: 69.8] [added: 69.5] | % | | | [removed: 68.9] [added: 69.8] | % | | | 68.9 | % |
| Gross profit | | | [removed: 30.2] [added: 30.5] | % | | | [removed: 31.1] [added: 30.2] | % | | | 31.1 | % |
| Selling, general and administrative expenses | | | [removed: 24.6] [added: 24.4] | % | | | [removed: 24.7] [added: 24.6] | % | | | [removed: 24.9] [added: 24.7] | % |
| Pre-opening expenses | | | [removed: 1.3] [added: 0.5] | % | | | 1.3 | % | | | [removed: 0.9] [added: 1.3] | % |
| Operating income | | | [removed: 4.3] [added: 5.6] | % | | | [removed: 5.1] [added: 4.3] | % | | | [removed: 5.3] [added: 5.1] | % |
| Interest expense | | | [removed: 0.4] [added: 0.2] | % | | | [removed: 0.5] [added: 0.4] | % | | | [removed: 0.4] [added: 0.5] | % |
| Income before income taxes | | | [removed: 3.9] [added: 5.4] | % | | | [removed: 4.6] [added: 3.9] | % | | | [removed: 4.9] [added: 4.6] | % |
| Income tax expense | | | [removed: 1.6] [added: 2.2] | % | | | [removed: 1.8] [added: 1.6] | % | | | [removed: 1.9] [added: 1.8] | % |
| Net income | | | [removed: 2.3] [added: 3.2] | % | | | [removed: 2.8] [added: 2.3] | % | | | [removed: 3.0] [added: 2.8] | % |
This increase [removed: is] [added: was] due to the opening of 62 net new stores in 2008 and a 0.2% increase in comparable store sales.
We believe the [removed: continuing] [added: continued] deterioration and uncertainty in the United States economy were significant contributing factors to our [removed: decreasing] [added: decreased] comparable store sales during fiscal 2008, especially during the holiday season when consumers significantly reduced discretionary spending.
Selling, general and administrative [added: (SG&A)] expenses increased $42.1 million, or 18.7%, to $267.3 million in fiscal 2008 compared to $225.2 million in fiscal 2007.
As a percentage of net sales, [removed: selling, general and administrative] [added: SG&A] expenses decreased 10 basis points to 24.6% in fiscal 2008 compared to 24.7% in fiscal 2007.
[removed: Selling, general and administrative (SG&A)] [added: SG&A] expenses were primarily impacted by:
We do not expect our comparable store sales increases over the next five years to reflect the sustained high single digit to low double digit increases we experienced in 2005 through early 2007.
We believe the sequential decline in our quarterly comparable store sales during 2008 and the comparable store sales declines in first and second quarter 2009 were due primarily to the difficult economic environment.
While we have experienced some level of stabilization in our comparable store sales during the course of 2009, and recorded a positive comparable store sales increase in the third and fourth quarters of 2009, the continuing economic uncertainty may impact the level of comparable store sales we can achieve.
Gross profit as a percentage of net sales is expected to increase as a result of our ability to leverage our supply chain infrastructure and fixed store costs with comparable store sales increases.
The global economic crisis and the continued volatility and disruption to the capital and credit markets have had a significant, adverse impact on global economic conditions, resulting in additional significant recessionary pressures and declines in consumer confidence and economic growth.
During fiscal 2009, we experienced a sequential improvement in our comparable store sales.
Comparables store sales for the first, second, third and fourth quarters of fiscal 2009 were -2.3%, -1.7%, 1.5% and 6.2%, respectively.
We believe the improvement in our comparable store sales trends is due to a combination of factors including our ability to better plan our marketing and merchandise programs for the challenging economic environment and the relatively lower comparable in the prior year fourth quarter period.
We also believe that overall consumer sentiment and shopping patterns improved somewhat in the second half of 2009 which may have contributed to our improving trends when compared to 2008.
E-commerce merchandise sales are excluded from comparable store sales.
| | • | customer loyalty program expense; and |
Our interest expense will fluctuate based on the seasonal borrowing requirements
Net sales increased $138.2 million, or 12.7%, to $1,222.8 million in fiscal 2009 compared to $1,084.6 million in fiscal 2008.
Fiscal 2009 comparable store sales were positively affected by the 6.2% increase in comparable store sales in the fourth quarter.
We believe the improvement in our comparable store sales trends is due to a combination of factors including our ability to better plan our marketing and merchandise programs for the challenging environment and the relatively lower comparable in the prior year fourth quarter period.
We also believe that overall consumer sentiment and shopping patterns improved somewhat in the second half of 2009 which may have contributed to our improving trends when compared to 2008.
Gross profit increased $45.1 million, or 13.8%, to $373.0 million in fiscal 2009, compared to $327.9 million, in fiscal 2008.
Gross profit as a percentage of net sales increased 30 basis points to 30.5% in fiscal 2009 compared to 30.2% in fiscal 2008.
| | • | a 70 basis point improvement due to supply chain efficiencies including labor and freight; offset by |
| | • | 40 basis points of deleverage of fixed store costs due to the impacts of our new store program; the level of fixed store costs deleverage improved during the course of fiscal 2009 as the rate of square footage growth slowed consistent with the decrease in our fiscal 2009 new store program as compared to fiscal 2008 and 2007. |
SG&A expense as a percentage of sales was primarily impacted by:
| | • | a 40 basis point improvement in variable store expense leverage attributed to cost management strategies; |
| | • | a 20 basis point improvement in marketing expense leverage attributed to improved cost efficiencies while total number of marketing impressions were maintained at historical levels; offset by |
| | • | a 40 basis point deleverage of general corporate overhead which is attributed to a 90 basis point, or $11.6 million, increase in incentive compensation compared to the prior year. |
Pre-opening expenses decreased $8.3 million, or 58.1%, to $6.0 million in fiscal 2009 compared to $14.3 million in fiscal 2008.
Merchandise inventories were $206.9 million at January 30, 2010, compared to $213.6 million at January 31, 2009, representing a decrease of $6.7 million.
The decrease is due to a 12.9% decrease in average inventory per store driven by management initiatives focused on leveraging supply chain inventories, offset by the addition of 35 net new stores opened since January 31, 2009.
The reduction in inventories in fiscal 2009 did not affect our store in-stock levels or the customer experience.
We received an $8.0 million income tax refund in May 2009, related to certain tax planning changes adopted in fiscal 2008.
The increase is due to fiscal 2009 activity which includes 35 net new stores.
Capital expenditures were lower during fiscal 2009 due to the reduction in our 2009 new store program.
The increase in cash used in financing activities of $139.8 million in fiscal 2009 compared to fiscal 2008 is primarily the result of $56.3 million less in proceeds from long-term borrowings and $81.0 million more in payments on long-term borrowings.
We had no borrowings outstanding under our credit facility at the end of fiscal 2009.
The zero outstanding borrowings position is due to a combination of factors including stronger than expected sales growth, overall
performance of management initiatives including expense control as well as inventory and other working capital reductions, and a planned reduction in our fiscal 2009 new store program.
While we expect the level of borrowings under the facility will be lower than historical amounts, we expect that we will require borrowings under the facility from time to time in future periods to support our new store program and seasonal inventory needs.
The facility provides maximum borrowings equal to the lesser of $200 million or a percentage of eligible owned inventory.
We had no outstanding borrowings under the facility as of January 30, 2010.
For certain locations, we receive cash tenant allowances and we report these amounts as deferred rent, which is amortized
| Operating lease obligations(1) | | $ | 624,627 | | | $ | 89,712 | | | $ | 169,297 | | | $ | 154,218 | | | $ | 211,400 | |
We do not expect our future comparable store sales increases to reflect the levels experienced in prior periods.
This is due in part to the difficulty in improving on such significant increases in subsequent periods and the current economic environment.
Gross profit as a percentage of net sales is expected to be relatively consistent with historical rates given our planned distribution infrastructure investments and the impact of the rate of new store growth.
Recent global market and economic conditions have been unprecedented and challenging with tighter credit conditions and recession in most major economies continuing into 2009.
cease to provide credit to businesses and consumers.
We experienced relative decreases in both the retail products and salon services areas of our business as consumers decreased spending on beauty products or deferred salon services.
As we began fiscal 2009, we have experienced a slight decrease in our comparable store sales trend which we believe reflects a continuation of the negative consumer sentiment due to the difficult economic environment.
We expect this trend to continue and expect that our comparable store sales will be negatively affected during fiscal 2009.
The level of comparable store sales increase or decrease during a period affects our earnings and ability to leverage fixed costs.
During fiscal 2008, as we saw the economic conditions worsen, we took steps to manage our cost structure and mitigate the earnings impacts.
We were able to mitigate the earnings impact of the decelerating comparable store sales increases to a considerable degree and were able to slightly leverage our selling, general and administrative costs.
In response to the continuing difficult economic environment, management has developed a number of initiatives focused on maximizing cash flow including reducing our capital expenditures by reducing our new store growth plans, expense management and improving working capital utilization by decreasing merchandise inventory levels.
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We also expect that cost of sales as a percentage of net sales will be negatively impacted in the next several years as a result of accelerated depreciation related to our store remodel program.
The program was adopted in third quarter fiscal 2006.
We have accelerated depreciation expense on assets to be disposed of during the remodel process such that those assets will be fully depreciated at the time of the planned remodel.
| | • | public company expense including Sarbanes-Oxley compliance expenses; |
Pre-opening expenses also includes rent during the construction period related to new stores.
Net sales increased $157.0 million, or 20.8%, to $912.1 million in fiscal 2007 compared to $755.1 million in fiscal 2006.
Fiscal 2006 was a 53-week operating year and the 53rd week represented approximately $16.4 million in net sales.
Adjusted for the 53rd week, fiscal 2007 net sales increased $173.4 million, or 23.5% compared to fiscal 2006.
Our comparable store sales growth in fiscal 2007 was driven by a balance in growth of customer traffic and average transaction value.
We attribute these results to the continued effectiveness of our marketing strategy, particularly in a difficult holiday season, and double-digit growth in our prestige cosmetics category consistent with our growth strategy.
Gross profit increased $48.4 million, or 20.6%, to $283.6 million in fiscal 2007, compared to $235.2 million, in fiscal 2006.
Gross profit as a percentage of net sales was 31.1% in fiscal 2007 and fiscal 2006.
| | • | an increase of $157.0 million in net sales from new stores and comparable sales growth; |
| | • | a 30 basis point decrease due to warehouse management software-related inefficiencies during the first half of fiscal 2007; and |
| | • | a 20 basis point increase due to increased vendor co-op monies on increased advertising compared to the prior year. |
This decrease in the selling, general and administrative percentage resulted from:
| | • | operating expenses from new stores opened in fiscal 2007 and fiscal 2006; |
| | • | 20 basis point decrease in stock compensation expense representing the net effects of new 2007 stock option grants and the non-recurring stock compensation charge of $2.8 million in fiscal 2006; |
| | • | a 40 basis point increase in marketing expense driven by increased number of advertising vehicles and circulation to drive customer traffic mainly during the fourth quarter of fiscal 2007; and |
| | • | the remainder is primarily attributed to improved leverage in corporate overhead and store payroll on higher sales compared to the prior year. |
Pre-opening expenses increased $4.7 million, or 65.7%, to $11.8 million in fiscal 2007 compared to $7.1 million in fiscal 2006.
The increase in the effective tax rate is primarily due to an adjustment in fiscal 2006 to reflect the benefit of state tax effects of our net operating loss carry forwards.
The increase in net income of $2.8 million resulted from an increase in gross profit of $48.4 million driven by a comparable store sales increase of 6.4%.
This is also the time of year when we are at
An excerpt. Shown here: 40 of 87 rewritten, 40 of 47 added and 40 of 72 removed. The counts are complete. For every sentence, read Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the FY2010 filing and the FY2009 filing.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
3 rewritten, 5 added, 2 removed, 8 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
[removed: The interest rate swap reflected in the consolidated balance sheets as] [added: As] of January [removed: 31, 2009] [added: 30, 2010] and [removed: February 2, 2008] [added: January 31, 2009, the interest rate swap] had a negative fair value of [removed: $1.0 million] [added: zero] and [removed: $1.2] [added: $1.0] million, respectively, and is included in accrued liabilities.
Our weighted average debt for fiscal [removed: 2008] [added: 2009] was [removed: $83.0] [added: $37.6] million, adjusted [removed: for] [added: to exclude] the $25.0 million hedged amount.
A hypothetical 1% increase or decrease in interest rates would have resulted in a [removed: $0.8] [added: $0.4] million change to our interest expense for fiscal [removed: 2008.][added: 2009.]
On January 31, 2007, we entered into an interest rate swap agreement with a notional amount of $25,000 that qualified as a cash flow hedge to obtain a fixed interest rate on variable rate debt and reduce certain exposures to interest rate fluctuations.
The swap resulted in fixed rate payments at an interest rate of 5.11% for a term of three years, ending on January 31, 2010.
The change in market value during fiscal 2009 and 2008 related to the effective portion of the cash flow hedge was recorded as an unrecognized gain or loss
in the accumulated other comprehensive loss section of stockholders’ equity in the balance sheets.
Amounts related to any ineffectiveness, which are insignificant, are recorded as interest expense.
We have an interest rate swap agreement in place with a notional amount of $25.0 million which effectively converts variable rate debt to fixed rate debt at an interest rate of 5.11%.
The interest rate swap is designated as a cash flow hedge, the effective portion of which is recorded as an unrecognized gain (loss) in other comprehensive income (loss) in stockholders’ equity.
Item 1. Business
63 rewritten, 21 added, 16 removed, 261 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
In addition to the fundamental elements of a beauty superstore, we strive to offer an uplifting shopping experience through what we refer to as “The [removed: Four] [added: Five] E’s”: Escape, Education, [removed: Entertainment] [added: Entertainment, Esthetics] and [removed: Esthetics.][added: Empowerment.]
In addition to providing [removed: approximately 3,900] [added: over 4,500] testers in categories such as fragrance, cosmetics, skincare, and salon styling tools, we further enhance the shopping experience and store atmosphere through live demonstrations from our licensed salon professionals and beauty consultants, and through customer makeovers and in-store videos.
Based on our research and customer surveys, we pioneered what we believe to be a unique retail approach that focuses on all aspects of how women prefer to shop for beauty products by combining the fundamental elements of a beauty superstore, including one-stop shopping, a compelling value proposition and convenient locations, together with an uplifting specialty retail experience through our [removed: emphasis on “The Four E’s”.]
The [removed: “Four] [added: “Five] E’s” provide the foundation for our operating strategy.
_Retail format poised to benefit from shifting channel dynamics._ Over the past several years, the approximately [removed: $75] [added: $80] billion beauty products and salon services industry has experienced significant changes, including a shift in how manufacturers distribute and customers purchase beauty products.
_Loyal and active customer base._ We have approximately [removed: six] [added: seven] million customer loyalty program members, the majority of whom have shopped at one of our stores within the past 12 months.
_Growing our store base._ We opened [removed: 63 stores in fiscal 2008 and 53 stores in fiscal 2007] [added: 37 stores,] representing square footage growth of [removed: 25%] [added: 12%,] and [removed: 28%, respectively.][added: remodeled 6 stores in fiscal 2009.]
Due to the [removed: recent] economic downturn, the number of high-quality commercial real estate projects of the size and with the co-tenant mix that we typically target for our new store locations has significantly declined.
As the economy stabilizes and begins to recover, we believe our successful track record of opening new stores in diverse markets across the United States will allow us to increase our new store growth rates back to historical levels consistent with our long-term [removed: targets.][added: target of 15% to 20%.]
We [added: continue to] believe that over the long-term, we have the potential to grow our store base to over 1,000 Ulta stores in the United States.
We plan to [removed: open] [added: continue opening] stores both in markets in which we currently operate and new markets.
| | | [removed: 2004 | | | |] 2005 | | | | 2006 | | | | 2007 | | | | 2008 | | | [added: | 2009 | | |]
| Total stores beginning of period | | | [removed: 126 | | | |] 142 | | | | 167 | | | | 196 | | | | 249 | | [added: | | 311 | |]
| Stores opened | | | [removed: 20 | | | |] 25 | | | | 31 | | | | 53 | | | | 63 | | [added: | | 37 | |]
| Stores closed | | | [removed: (4 | ) | | |] — | | | | (2 | ) | | | — | | | | (1 | ) | [added: | | (2 | ) |]
| Total stores end of period | | | [removed: 142 | | | |] 167 | | | | 196 | | | | 249 | | | | 311 | | [added: | | 346 | |]
| Stores remodeled | | | [removed: — | | | |] 1 | | | | 7 | | | | 17 | | | | 8 | | [added: | | 6 | |]
| Total square footage | | | [removed: 1,464,330 | | | |] 1,726,563 | | | | 2,023,305 | | | | 2,589,244 | | | | 3,240,579 | | [added: | | 3,613,840 | |]
| Average square footage per store | | | [removed: 10,312 | | | |] 10,339 | | | | 10,323 | | | | 10,399 | | | | 10,420 | | [added: | | 10,445 | |]
For example, as of January [removed: 31, 2009,] [added: 30, 2010,] we have installed “boutique” areas of approximately 200 square feet in [removed: over 160] [added: 215] of our stores to showcase and build brand equity for key vendors and to provide our customers with a place to experiment and learn about these products.
Over the last [removed: three years,] [added: several years] we have added several prestige brands including [removed: Estée Lauder fragrance,] Juicy [removed: Couture and] [added: Couture,] Ed Hardy [added: and Marc Jacobs Lola] fragrances, Pureology and [removed: Frédéric Fekkai haircare, Smashbox, Napoleon Perdis] [added: Liquid Keratin hair care, Dermalogica, Korres,] and [added: Mario Badescu skin care, Benefit, Cargo, and] Lorac [removed: cosmetics,] [added: cosmetics] and [removed: Dermalogica skin care.][added: Philosophy fragrance and bath.]
We believe this strategy will positively influence our number of [added: customer] transactions and [removed: our] [added: their] average transaction value.
_Improving our profitability by leveraging our fixed costs._ We plan to continue to improve our operating results by leveraging our existing infrastructure and continually optimizing our [removed: operations under normal economic conditions.][added: operations.]
Our national magazine print advertising campaign exposes potential new customers to our retail [added: concept by conveying an attractive and sophisticated brand message.]
[removed: We believe we have an opportunity to] increase our in-store marketing efforts as an additional means of educating our customers and increasing the frequency of their visits to our stores.
We intend to establish ourselves over time as a leading online beauty resource for women by providing our customers with [added: a rich online experience for] information on key trends and products, [removed: including] editorial content, expanded assortments, [removed: and] leading website features and [removed: functionality.][added: functionality, and social media content.]
Through [removed: the re-launch of] our [removed: website and our] continued [added: enhancements and] multi-channel marketing initiatives, we believe we are well positioned to capitalize on the growth of Internet sales of beauty products.
This market represents approximately [removed: $75] [added: $80] billion in retail sales, according to a [removed: 2006] [added: 2008] report by Kline & Company and IBISWorld Inc. The approximately [removed: $35] [added: $36] billion beauty products industry includes color cosmetics, haircare, fragrance, bath and body, skincare, salon styling tools and other toiletries.
The approximately [removed: $40] [added: $44] billion salon services industry consists of hair, face and nail services.
We believe the principal bases upon which we compete are the quality [added: and assortment] of merchandise, our value proposition, the quality of our customers’ shopping experience and the convenience of our stores as one-stop destinations for beauty products and salon services.
Our competitors for salon services and products include Regis Corp., Sally Beauty, JCPenney [removed: salons] [added: salons, Premier Salons] and independent salons.
[removed: During] [added: We opened 37 stores in] fiscal [removed: 2008,] [added: 2009 and] the average investment required to open a new Ulta store [removed: was] [added: is] approximately [removed: $1.5] [added: $1.1] million, which includes capital investments, net of landlord contributions, pre-opening expenses, and initial inventory, net of payables.
As of January [removed: 31, 2009,] [added: 30, 2010,] we operated [removed: 311] [added: 346] stores in [removed: 36] [added: 38] states.
We remodeled [removed: 8 stores in fiscal 2008 and 17] [added: 6] stores in fiscal [removed: 2007.][added: 2009.]
The average investment to remodel a store in fiscal [removed: 2008] [added: 2009] was approximately [removed: $1.0] [added: $0.9] million.
Each salon is a full-service salon offering hair cuts, hair [removed: coloring,] [added: coloring and] permanent texture, with most salons also providing facials and waxing.
The [removed: new] Ulta.com website and experience [removed: more effectively] supports the key elements of the Ulta brand proposition and provides access to more than 11,000 beauty products from hundreds of brands.
As Ulta.com continues to grow in terms of functionality and content, it will become an even greater element in Ulta’s customer loyalty [removed: programs,] [added: programs] and a more important resource for our customers to access product and store information, beauty trends and techniques, and buy from a large assortment of product offerings.
We present these products in an assisted self-service environment using centrally produced planograms (detailed schematics showing product placement in the store) and promotional [removed: merchandising planners.]
| | • | Other, including candles, home fragrance [removed: products, exercise accessories, educational DVDs] [added: products] and other miscellaneous health and beauty products. |
_Empowerment._ We are committed to creating an environment in which women feel empowered by both their inner and outer beauty; we take honor in providing our guests with opportunities to showcase how they have empowered themselves and others.
Ulta is committed to positively impacting the lives of women through our work on two empowerment initiatives.
The first is the Ulta Enrich, Empower and Enlighten Scholarship Fund which grants deserving high school senior girls scholarships to the educational institution of their choice.
The second is our annual Windows of Love campaign that recognizes the “unsung heroes” who are affected by breast cancer.
It is our hope that through these stories of empowerment women everywhere become one step closer to achieving their dreams and positively impacting others.
emphasis on “The Five E’s”.
As a result, we reduced our new store program for 2009.
We believe we have an opportunity to
_Expanding our e-commerce business._ In addition to re-launching our Ulta.com website and e-commerce platform in November 2007, we continue to aggressively develop and add new website features and functionality, marketing programs, product assortment and new brands, and multi-channel integration points to drive increased visitor traffic and revenue to this channel.
A recent Kline & Company report found that consumers seek out specialty retailers for a number of reasons including that specialty stores carry more niche products, the merchandise and retail environment is more fun and provides the ability to shop across product lines and the customer service is better than in other channels.
merchandising planners.
planning and replenishment group.
In October 2009, we launched a Facebook application for the Company’s “Windows of Love” campaign in support of our Breast Cancer Research Foundation program.
In December 2009, we launched an interactive microsite to support the Company’s “12 Days of Holiday” marketing campaign.
We maintain two customer loyalty programs.
Our national program provides reward point certificates for free beauty products.
Customers earn purchase-based reward points and redeem the related reward certificate during specific promotional periods during the year.
We are also piloting a loyalty program in several markets in which customers earn purchase-based points on an annual basis which can be redeemed at any time.
We
ship less than an entire case when only one or two of a particular product is required.
Our distribution facilities use warehouse management and warehouse control software systems, which have been upgraded or installed in the last few years.
As a result, we have reduced our new store program for 2009 to approximately 35 stores, representing expected square footage growth of approximately 11%.
concept by conveying an attractive and sophisticated brand message.
_Expanding our e-commerce business._ We launched a new version of our Ulta.com website and e-commerce platform in November 2007 to enhance the overall Ulta experience with greater functionality, ease-of-use and integration with our customer loyalty programs.
A recent NPD study found that nine out of ten women who shop at specialty retailers for beauty products do so because they can touch, feel and smell the products.
We opened 63 stores in fiscal 2008 and 53 stores in fiscal 2007.
We launched a new version of our Ulta.com website and e-commerce platform in November 2007.
We intend to establish ourselves over time as a leading online beauty resource for women by providing our customers with information on key trends and products, including editorial content, expanded assortments, and leading website features and functionality.
In addition, we have structured our accounting policies to ensure appropriate clearance and movement of aged inventory.
The strategy of our customer loyalty program, which we initiated in 1996, is to engage, motivate and reward existing Ulta customers while increasing our customer count and sales.
Customers sign up to become members in-store and receive free gifts four times a year, with the value of such gifts based on customers’ spending levels.
We also send reward certificates to members in our catalogs.
Our distribution facilities use a warehouse management software system, which was upgraded in early 2007.
requirements and allowable claims.
Madison Street, Suite 1400, Chicago, Illinois 60661.
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An excerpt. Shown here: 40 of 63 rewritten, all 21 added and all 16 removed. The counts are complete. For every sentence, read Item 1. Business in the FY2010 filing and the FY2009 filing.
Item 3. Legal Proceedings
6 rewritten, 11 added, 0 removed, 12 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
Each suit [removed: alleges] [added: alleged] that the prospectus and registration statement filed pursuant to our initial public offering contained materially false and misleading statements and failed to disclose material facts.
Each suit [removed: claims] [added: claimed] violations of Sections 11, 12(a)(2) and/or 15 of the Securities Act of 1933, and the two later filed suits added claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as the associated Rule 10b-5.
The amended complaint [removed: alleges] [added: alleged] no new violations of the securities laws not asserted in the prior complaints.
It [removed: adds] [added: added] no new defendants and [removed: drops] [added: dropped] one of the then-current officers as a defendant.
Although we [removed: intend] [added: believe that we have meritorious defenses] to [removed: defend ourselves vigorously] [added: the claims made] in [removed: this lawsuit,] [added: the putative class action and intend to contest the lawsuit vigorously,] an adverse resolution [removed: may] [added: could] have a material adverse effect on our financial position and results of operations in the period in which the lawsuit is resolved.
[removed: _General litigation —_] We are also involved in various legal proceedings that are incidental to the conduct of our [removed: business, including, but not limited to, employment related claims.][added: business.]
On May 29, 2009, we and our primary insurance carrier engaged in a mediation with counsel representing the putative class.
Although we continue to deny plaintiffs’ allegations, in the interest of putting this matter behind us, we and our insurer reached a settlement with plaintiffs.
On August 7, 2009, the Court entered an order preliminarily approving the settlement, approving the form and manner of notice to putative class members, and setting a final hearing to determine whether to approve the settlement.
On November 16, 2009, the Court held a final hearing and, no class members having objected to the settlement or having requested exclusion from the settlement class, the Court entered a final order dismissing all three consolidated cases with prejudice.
The time for appeal expired on December 16, 2009 without any appeal or other challenge to the judgment being made.
All amounts paid under the settlement have been paid out of proceeds of our directors and officers liability insurance coverage.
_General litigation —_ In July 2009, a putative employment class action lawsuit was filed against us and certain unnamed defendants in State Court in California.
The suit alleges that Ulta misclassified its store General Managers and Salon Managers as exempt from the Fair Labor Standards Act and California Labor Code.
The suit seeks to recover damages and penalties as a result of this alleged misclassification.
On August 27, 2009, we filed our answer to the lawsuit, and on August 31, 2009 we moved the action to the United States District Court for the Northern District of California.
On November 2, 2009, the plaintiffs filed an amended complaint adding another named plaintiff.
Cover and table of contents
21 rewritten, 25 added, 34 removed, 39 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
| | | For the fiscal year ended January [removed: 31, 2009] [added: 30, 2010] |
ULTA SALON, COSMETICS & FRAGRANCE, [removed: INC.][added: INC.]
| [removed: _(State] [added: Delaware _(State] or other jurisdiction of incorporation or organization)_ | | [removed: _(I.R.S.] [added: 36-3685240 _(I.R.S.] Employer Identification No.)_ |
[removed: o Yes] þ [added: Yes o] No
| Large accelerated filer o | [removed: |] Accelerated filer þ | [removed: |] Non-accelerated filer o | [removed: |] Smaller reporting company o |
[removed: |] (Do not check if a smaller reporting company) [removed: | | | | | | |]
The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the common stock on August [removed: 2, 2008,] [added: 1, 2009,] as reported on the NASDAQ Global Select Market, was approximately [removed: $209.7] [added: $308.8] million.
Shares of the registrant’s common stock held by each executive officer and director and by each entity or person that, to the registrant’s knowledge, owned 5% or more of the registrant’s outstanding common stock as of August [removed: 2, 2008] [added: 1, 2009] have been excluded in that such persons may be deemed to be affiliates of the registrant.
The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of March [removed: 26, 2009] [added: 25, 2010] was [removed: 57,744,488] [added: 58,293,399] shares.
| [removed: [PART I](#101)] [added: PART I] | | | | | | | [added: | |]
[removed: | [Item 1A.](#103) | | [Risk Factors](#103) | | | 14 | |][added: Item 1A.]
[removed: | [Item 1B.](#104) | | [Unresolved] [added: Unresolved] Staff [removed: Comments](#104) | | | 25 | |][added: Comments 25]
[removed: | [Item 3.](#106) | | [Legal Proceedings](#106) | | | 27 | |][added: Legal Proceedings 27]
| [removed: [Part II](#108)] [added: Part II] | | | | | | | [added: | |]
[removed: | [Item 5.](#109) | | [Market] [added: Market] for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#109) | | | 28 | |][added: Securities 29]
[removed: | [Item 6.](#110) | | [Selected] [added: Selected] Financial [removed: Data](#110) | | | 30 | |][added: Data 31]
[removed: | [Item 7.](#111) | | [Management’s] [added: Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations](#111) | | | 31 | |][added: Operations 32]
[removed: | [Item 7A.](#112) | | [Quantitative] [added: Quantitative] and Qualitative Disclosures about Market [removed: Risk](#112) | | | 43 | |][added: Risk 43]
[removed: | [Item 8.](#113) | | [Financial] [added: Financial] Statements and Supplementary [removed: Data](#113) | | | 44 | |][added: Data 44]
[removed: | [Item 9.](#114) | | [Changes] [added: Changes] in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#114) | | | 44 | |][added: Disclosure 44]
[removed: | [Item 9A.](#115) | | [Controls] [added: Controls] and [removed: Procedures](#115) | | | 44 | |][added: Procedures 44]
10-K 1 c57102e10vk.htm FORM 10-K
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
o Yes o No
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| --- | --- | --- | --- |
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
Item 1.
Business 3
Risk Factors 14
Item 1B.
Item 2.
Properties 26
Item 3.
Item 4.
\[Reserved\] 28
| | | | | | | | | |
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
10-K 1 c50340e10vk.htm 10-K
| Delaware | | 36-3685240 |
| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| [Item 1.](#102) | | [Business](#102) | | | 3 | |
| [Item 2.](#105) | | [Properties](#105) | | | 26 | |
| [Item 4.](#107) | | [Submission of Matters to a Vote of Security Holders](#107) | | | 27 | |
| | | | | | | |
| [Item 9B.](#116) | | [Other Information](#116) | | | 44 | |
| | | | | | | |
| [Part III](#117) | | | | | | |
| [Item 10.](#118) | | [Directors, Executive Officers and Corporate Governance](#118) | | | 45 | |
| [Item 11.](#119) | | [Executive Compensation](#119) | | | 45 | |
| [Item 12.](#120) | | [Security Ownership and Certain Beneficial Owners and Management and Related Stockholder Matters](#120) | | | 45 | |
| [Item 13.](#121) | | [Certain Relationships and Related Transactions, and Director Independence](#121) | | | 45 | |
| [Item 14.](#122) | | [Principal Accountant Fees and Services](#122) | | | 45 | |
| | | | | | | |
| [PART IV](#123) | | | | | | |
| [Item 15.](#124) | | [Exhibits and Financial Statement Schedules](#124) | | | 46 | |
| | | | | | | |
| [SIGNATURES](#125) | | | | | 72 | |
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to, among other things, future events and financial performance.
You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “plans,” “estimates,” or other comparable words.
Any forward-looking statements contained in this Form 10-K are based upon our historical performance and on current plans, estimates and expectations.
The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved.
Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation: the impact of weakness in the economy; changes in the overall level of consumer spending; changes in the wholesale cost of our products; the possibility that we may be unable to compete effectively in our highly competitive markets; the possibility that our continued opening of new stores could strain our resources and have a material adverse effect on our business and financial performance; the possibility that new store openings may be impacted by developer or co-tenant issues; the possibility that the capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans; the possibility of material disruptions to our information systems; weather conditions that could negatively impact sales and other risk factors detailed in our public filings with the Securities and Exchange Commission (the “SEC”), including risk factors contained in Item 1A, “Risk Factors” of this Annual Report on Form 10-K for the year ended January 31, 2009.
We assume no obligation to update any forward-looking statements as a result of new information, future events or developments.
References in the following discussion to “we”, “us”, “our”, “the Company”, “Ulta” and similar references mean Ulta Salon, Cosmetics & Fragrance, Inc. unless otherwise expressly stated or the context otherwise requires.
Part I
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| --- | --- |
Item 9B. Other Information 44
1 rewritten, 25 added, 1 removed, 2 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
[added: |] Part III [added: | | | | | | | | |]
| | | | | | | | | |
Item 10.
Directors, Executive Officers and Corporate Governance 45
Item 11.
Executive Compensation 45
Item 12.
Security Ownership and Certain Beneficial Owners and Management and Related Stockholder Matters 45
Item 13.
Certain Relationships and Related Transactions, and Director Independence 45
Item 14.
Principal Accountant Fees and Services 45
| | | | | | | | | |
| PART IV | | | | | | | | |
Item 15.
Exhibits and Financial Statement Schedules 46
| SIGNATURES | | | | | | | 72 | |
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to, among other things, future events and financial performance.
You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “plans,” “estimates,” or other comparable words.
Any forward-looking statements contained in this Form 10-K are based upon our historical performance and on current plans, estimates and expectations.
The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved.
Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation: the impact of weakness in the economy; changes in the overall level of consumer spending; changes in the wholesale cost of our products; the possibility that we may be unable to compete effectively in our highly competitive markets; the possibility that our continued opening of new stores could strain our resources and have a material adverse effect on our business and financial performance; the possibility that new store openings may be impacted by developer or co-tenant issues; the possibility that the capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans; the possibility of material disruptions to our information systems; weather conditions that could negatively impact sales; and other risk factors detailed in our public filings with the Securities and Exchange Commission (the “SEC”), including risk factors contained in Item 1A, “Risk Factors” of this Annual Report on Form 10-K for the year ended January 30, 2010.
We assume no obligation to update any forward-looking statements as a result of new information, future events or developments.
References in the following discussion to “we”, “us”, “our”, “the Company”, “Ulta” and similar references mean Ulta Salon, Cosmetics & Fragrance, Inc. unless otherwise expressly stated or the context otherwise requires.
Part I
None.
Item 2. Properties
25 rewritten, 3 added, 2 removed, 33 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
As of January [removed: 31, 2009,] [added: 30, 2010,] we operated [removed: 311] [added: 346] retail stores in [removed: 36] [added: 38] states, as shown in the table below:
| Alabama | | | [removed: 6] [added: 7] | |
| Arizona | | | [removed: 22] [added: 23] | |
| California | | | [removed: 28] [added: 30] | |
| Colorado | | | [removed: 10] [added: 11] | |
| Florida | | | [removed: 22] [added: 24] | |
| Illinois | | | [removed: 31] [added: 32] | |
| Iowa | | | [removed: 2] [added: 3] | |
| Michigan | | | [removed: 8] [added: 9] | |
| Minnesota | | | [removed: 6] [added: 7] | |
| New Jersey | | | [removed: 9] [added: 11] | |
| New York | | | [removed: 9] [added: 13] | |
| Ohio | | | [removed: 6] [added: 7] | |
| Oklahoma | | | [removed: 6] [added: 7] | |
| Pennsylvania | | | [removed: 13] [added: 16] | |
| South Carolina | | | [removed: 4] [added: 6] | |
| Texas | | | [removed: 42] [added: 46] | |
| Virginia | | | [removed: 9] [added: 10] | |
| Washington | | | [removed: 4] [added: 5] | |
| Wisconsin | | | [removed: 2] [added: 3] | |
As of January [removed: 31, 2009,] [added: 30, 2010,] we operated two distribution facilitates located in Romeoville, Illinois and Phoenix, Arizona.
The lease for the Romeoville warehouse expires on April 30, [removed: 2010] [added: 2015] and has [removed: two] [added: one] renewal [removed: options] [added: option] with [removed: terms] [added: a term] of five [removed: years each.][added: years.]
[removed: Our] [added: We have] corporate offices [removed: are located] in two separate locations.
Our [added: principal executive office is in Bolingbrook, Illinois and our] secondary corporate office [removed: continues to be located] [added: is] in Romeoville, [removed: Illinois] [added: Illinois,] on the site of the Romeoville warehouse.
The lease for the Bolingbrook office expires on August 31, 2018 and the lease for the Romeoville office expires on April 30, [removed: 2010.][added: 2015.]
| Connecticut | | | 1 | |
| Mississippi | | | 3 | |
| Total | | | 346 | |
| Total | | | 311 | |
In February 2008, we relocated our principal executive office from Romeoville, Illinois to Bolingbrook, Illinois.
Item 4. [Reserved]
3 rewritten, 15 added, 4 removed, 13 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
| Name | | Age | | | | Position | [removed: | |]
| Lyn P. Kirby | | | [removed: 54 |] [added: 56] | | | President, Chief Executive Officer and Director | [removed: |]
| Gregg R. Bodnar | | | [removed: 44 |] [added: 45] | | | Chief Financial Officer and Assistant Secretary | [removed: |]
| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | | | | |
| Robert S. Guttman | | | 57 | | | Senior Vice President, General Counsel & Secretary |
| Wayne D. L’Heureux | | | 51 | | | Senior Vice President — Human Resources |
_Robert S.
Guttman._ Mr. Guttman has been our Senior Vice President, General Counsel & Secretary since August 2007.
Prior to joining Ulta, Mr. Guttman was Vice President, General Counsel and Secretary of The Reynolds and Reynolds Company from August 2005 to October 2006.
From 2000 to 2005, Mr. Guttman served as Senior Vice President, General Counsel and Secretary of CCC Information Services, Inc. Prior to that time, Mr. Guttman was an Associate General Counsel with Sears, Roebuck and Co., having served in various positions as a lawyer with Sears from 1986 to 2000.
_Wayne D.
L’Heureux._ Mr. L’Heureux has been our Senior Vice President — Human Resources since October 2004.
Prior to joining Ulta, Mr. L’Heureux was Vice President Field Human Resources of AutoNation from 2003 to 2004.
From 2000 to 2002, Mr. L’Heureux served as Vice President, Human Resources of Spherion Corporation.
From 1996 to 2000, Mr. L’Heureux served as Vice President Human Resources at Volvo Cars North America.
Prior to 1996 he served as Vice President Retail Human Resources with Office Depot and in various Human Resources positions in the PepsiCo organization and Contel Corporation.
None.
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | |
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
8 rewritten, 6 added, 4 removed, 41 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
The following table sets forth the high and low sales prices for our common stock on the NASDAQ Global Select Market [removed: since October 25, 2007:][added: during fiscal years 2009 and 2008:]
| Fiscal Year [removed: 2007] [added: 2009] | | High | | | | Low | | |
The last reported sale price of our common stock on the NASDAQ Global Select Market on March [removed: 26, 2009] [added: 25, 2010] was [removed: $6.97] [added: $22.72] per share.
As of March [removed: 26, 2009,] [added: 25, 2010,] we had [removed: 264] [added: 181] holders of record of our common stock.
The following table provides information about Ulta common stock that may be issued under our equity compensation plans as of January [removed: 31, 2009.][added: 30, 2010.]
_The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the [removed: Securities and Exchange Commission,] [added: SEC,] nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing._
Set forth below is a graph comparing the cumulative total stockholder return on Ulta’s common stock with the NASDAQ Global Select Market Composite Index (NQGS) and the S&P Retail Index (RLX) for the period covering Ulta’s [removed: initial public offering] [added: first trading day] on October 25, 2007 through the end of Ulta’s fiscal year ended January [removed: 31, 2009.][added: 30, 2010.]
][added: GRAPH)](https://www.sec.gov/Archives/edgar/data/1403568/000095012310030932/c57102c5710207.gif)]
| First quarter | | $ | 8.75 | | | $ | 4.29 | |
| Second quarter | | | 11.56 | | | | 8.36 | |
| Third quarter | | | 17.44 | | | | 10.25 | |
| Fourth quarter | | | 21.61 | | | | 15.14 | |
| Equity compensation plans approved by security holders | | | 5,790,506 | | | $ | 11.18 | | | | 2,118,825 | |
| Total | | | 5,790,506 | | | $ | 11.18 | | | | 2,118,825 | |
| Third quarter | | $ | 35.63 | | | $ | 28.89 | |
| Fourth quarter | | | 32.25 | | | | 11.78 | |
| Equity compensation plans approved by security holders | | | 5,300,338 | | | $ | 10.27 | | | | 3,038,480 | |
| Total | | | 5,300,338 | | | $ | 10.27 | | | | 3,038,480 | |
Item 6. Selected Financial Data
31 rewritten, 1 added, 0 removed, 32 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
| | | January [removed: 31,] [added: 30,] | | | | [removed: February 2,] [added: January 31,] | | | | February [removed: 3,] [added: 2,] | | | | [removed: January 28,] [added: February 3,] | | | | January [removed: 29,] [added: 28,] | | |
| | | [removed: 2009] [added: 2010] | | | | [removed: 2008] [added: 2009] | | | | [removed: 2007] [added: 2008] | | | | [removed: 2006] [added: 2007] | | | | [removed: 2005] [added: 2006] | | |
| Net sales(2) | | $ | [removed: 1,084,646] [added: 1,222,771] | | | $ | [removed: 912,141] [added: 1,084,646] | | | $ | [removed: 755,113] [added: 912,141] | | | $ | [removed: 579,075] [added: 755,113] | | | $ | [removed: 491,152] [added: 579,075] | |
| Cost of sales | | | [removed: 756,712] [added: 849,722] | | | | [removed: 628,495] [added: 756,712] | | | | [removed: 519,929] [added: 628,495] | | | | [removed: 404,794] [added: 519,929] | | | | [removed: 346,585] [added: 404,794] | |
| Gross profit | | | [removed: 327,934] [added: 373,049] | | | | [removed: 283,646] [added: 327,934] | | | | [removed: 235,184] [added: 283,646] | | | | [removed: 174,281] [added: 235,184] | | | | [removed: 144,567] [added: 174,281] | |
| Selling, general and administrative expenses | | | [removed: 267,322] [added: 298,893] | | | | [removed: 225,167] [added: 267,322] | | | | [removed: 188,000] [added: 225,167] | | | | [removed: 140,145] [added: 188,000] | | | | [removed: 121,999] [added: 140,145] | |
| Pre-opening expenses | | | [removed: 14,311] [added: 6,003] | | | | [removed: 11,758] [added: 14,311] | | | | [removed: 7,096] [added: 11,758] | | | | [removed: 4,712] [added: 7,096] | | | | [removed: 4,072] [added: 4,712] | |
| Operating income | | | [removed: 46,301] [added: 68,153] | | | | [removed: 46,721] [added: 46,301] | | | | [removed: 40,088] [added: 46,721] | | | | [removed: 29,424] [added: 40,088] | | | | [removed: 18,496] [added: 29,424] | |
| Interest expense | | | [removed: 3,943] [added: 2,202] | | | | [removed: 4,542] [added: 3,943] | | | | [removed: 3,314] [added: 4,542] | | | | [removed: 2,951] [added: 3,314] | | | | [removed: 2,835] [added: 2,951] | |
| Income before income taxes | | | [removed: 42,358] [added: 65,951] | | | | [removed: 42,179] [added: 42,358] | | | | [removed: 36,774] [added: 42,179] | | | | [removed: 26,473] [added: 36,774] | | | | [removed: 15,661] [added: 26,473] | |
| Income tax expense | | | [removed: 17,090] [added: 26,595] | | | | [removed: 16,844] [added: 17,090] | | | | [removed: 14,231] [added: 16,844] | | | | [removed: 10,504] [added: 14,231] | | | | [removed: 6,201] [added: 10,504] | |
| Net income | | $ | [removed: 25,268] [added: 39,356] | | | $ | [removed: 25,335] [added: 25,268] | | | $ | [removed: 22,543] [added: 25,335] | | | $ | [removed: 15,969] [added: 22,543] | | | $ | [removed: 9,460] [added: 15,969] | |
| Basic | | $ | [removed: 0.44] [added: 0.68] | | | $ | [removed: 0.69] [added: 0.44] | | | $ | [removed: 1.38] [added: 0.69] | | | $ | [removed: 0.74] [added: 1.38] | | | $ | [removed: (0.70] [added: 0.74] | [removed: )] |
| Diluted | | $ | [removed: 0.43] [added: 0.66] | | | $ | [removed: 0.48] [added: 0.43] | | | $ | [removed: 0.45] [added: 0.48] | | | $ | [removed: 0.33] [added: 0.45] | | | $ | [removed: (0.70] [added: 0.33] | [removed: )] |
| Basic | | | [removed: 57,425] [added: 57,915] | | | | [removed: 20,383] [added: 57,425] | | | | [removed: 5,771] [added: 20,383] | | | | [removed: 4,094] [added: 5,771] | | | | [removed: 3,181] [added: 4,094] | |
| Diluted | | | [removed: 58,967] [added: 59,237] | | | | [removed: 53,293] [added: 58,967] | | | | [removed: 49,921] [added: 53,293] | | | | [removed: 48,196] [added: 49,921] | | | | [removed: 3,181] [added: 48,196] | |
| Comparable store sales increase(3) | | | [removed: 0.2] [added: 1.4] | % | | | [removed: 6.4] [added: 0.2] | % | | | [removed: 14.5] [added: 6.4] | % | | | [removed: 8.3] [added: 14.5] | % | | | [removed: 8.0] [added: 8.3] | % |
| Number of stores end of year | | | [removed: 311] [added: 346] | | | | [removed: 249] [added: 311] | | | | [removed: 196] [added: 249] | | | | [removed: 167] [added: 196] | | | | [removed: 142] [added: 167] | |
| Total square footage end of year | | | [removed: 3,240,579] [added: 3,613,840] | | | | [removed: 2,589,244] [added: 3,240,579] | | | | [removed: 2,023,305] [added: 2,589,244] | | | | [removed: 1,726,563] [added: 2,023,305] | | | | [removed: 1,464,330] [added: 1,726,563] | |
| Total square footage per store(4) | | | [removed: 10,420] [added: 10,445] | | | | [removed: 10,399] [added: 10,420] | | | | [removed: 10,323] [added: 10,399] | | | | [removed: 10,339] [added: 10,323] | | | | [removed: 10,312] [added: 10,339] | |
| Average total square footage(5) | | | [removed: 2,960,355] [added: 3,459,628] | | | | [removed: 2,283,935] [added: 2,960,355] | | | | [removed: 1,857,885] [added: 2,283,935] | | | | [removed: 1,582,935] [added: 1,857,885] | | | | [removed: 1,374,005] [added: 1,582,935] | |
| Net sales per average total square foot(6) | | $ | [removed: 366] [added: 353] | | | $ | [removed: 399] [added: 366] | | | $ | [removed: 398] [added: 399] | | | $ | [removed: 366] [added: 398] | | | $ | [removed: 357] [added: 366] | |
| Capital expenditures | | | [removed: 110,863] [added: 68,105] | | | | [removed: 101,866] [added: 110,863] | | | | [removed: 62,331] [added: 101,866] | | | | [removed: 41,607] [added: 62,331] | | | | [removed: 34,807] [added: 41,607] | |
| Depreciation and amortization | | | [removed: 51,445] [added: 62,166] | | | | [removed: 39,503] [added: 51,445] | | | | [removed: 29,736] [added: 39,503] | | | | [removed: 22,285] [added: 29,736] | | | | [removed: 18,304] [added: 22,285] | |
| Cash and cash equivalents | | $ | [removed: 3,638] [added: 4,017] | | | $ | [removed: 3,789] [added: 3,638] | | | $ | [removed: 3,645] [added: 3,789] | | | $ | [removed: 2,839] [added: 3,645] | | | $ | [removed: 3,004] [added: 2,839] | |
| Working capital | | | [removed: 159,695] [added: 136,417] | | | | [removed: 117,039] [added: 159,695] | | | | [removed: 88,105] [added: 117,039] | | | | [removed: 76,473] [added: 88,105] | | | | [removed: 69,955] [added: 76,473] | |
| Property and equipment, net | | | [removed: 292,224] [added: 290,861] | | | | [removed: 236,389] [added: 292,224] | | | | [removed: 162,080] [added: 236,389] | | | | [removed: 133,003] [added: 162,080] | | | | [removed: 114,912] [added: 133,003] | |
| Total assets | | | [removed: 568,932] [added: 553,635] | | | | [removed: 469,413] [added: 568,932] | | | | [removed: 338,597] [added: 469,413] | | | | [removed: 282,615] [added: 338,597] | | | | [removed: 253,425] [added: 282,615] | |
| Total debt(7) | | | [removed: 106,047] [added: —] | | | | [removed: 74,770] [added: 106,047] | | | | [removed: 55,529] [added: 74,770] | | | | [removed: 50,173] [added: 55,529] | | | | [removed: 47,008] [added: 50,173] | |
| Total stockholders’ equity | | | [removed: 244,968] [added: 292,608] | | | | [removed: 211,503] [added: 244,968] | | | | [removed: 148,760] [added: 211,503] | | | | [removed: 123,015] [added: 148,760] | | | | [removed: 105,308] [added: 123,015] | |
| (7) | | Total debt includes approximately $4.8 million related to the Series III preferred stock, which is presented between the liabilities section and the equity section of our [removed: consolidated] balance sheet for all years prior to February 2, 2008. |
| | | | | | | | | | | | | | | | | | | | | |
Item 9A. Controls and Procedures
5 rewritten, 6 added, 0 removed, 8 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
Based on management’s evaluation as of January [removed: 31, 2009,] [added: 30, 2010,] our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
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 [removed: 31, 2009,] [added: 30, 2010,] based on the criteria established in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on this evaluation, our principal executive officer and principal financial officer concluded that our internal controls over financial reporting were effective as of January [removed: 31, 2009.][added: 30, 2010.]
Ernst & Young LLP, the independent registered public accounting firm that audited our financial statements included in this Annual Report on Form 10-K, has audited the effectiveness of our internal control over financial reporting as of January [removed: 31, 2009] [added: 30, 2010] and has issued the attestation report included in Item 15 of this Annual Report on Form 10-K.
There were no changes to our internal controls over financial reporting during the three months ended January [removed: 31, 2009] [added: 30, 2010] that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B.
Other Information
None.
Part III
| | |
| --- | --- |
Item 10. Directors, Executive Officers and Corporate Governance
1 rewritten, 0 added, 0 removed, 2 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
The information required by this item [added: with respect to our executive officers] is [added: set forth after Part I, Item 4 of this report under the caption “Executive Officers of the Registrant.” The additional information required by this item is] incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January [removed: 31, 2009] [added: 30, 2010] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2008] [added: 2010] annual meeting of stockholders.
Item 11. Executive Compensation
1 rewritten, 0 added, 0 removed, 2 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
The information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January [removed: 31, 2009] [added: 30, 2010] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2008] [added: 2010] annual meeting of stockholders.
Item 12. Security Ownership and Certain Beneficial Owners and Management and Related Stockholder Matters
1 rewritten, 0 added, 0 removed, 2 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
The information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January [removed: 31, 2009] [added: 30, 2010] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2008] [added: 2010] annual meeting of stockholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence
1 rewritten, 0 added, 0 removed, 2 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
The information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January [removed: 31, 2009] [added: 30, 2010] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2008] [added: 2010] annual meeting of stockholders.
Item 14. Principal Accountant Fees and Services
1 rewritten, 0 added, 0 removed, 3 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
The information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January [removed: 31, 2009] [added: 30, 2010] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2008] [added: 2010] annual meeting of stockholders.
Item 15. Exhibits and Financial Statement Schedules
305 rewritten, 140 added, 122 removed, 513 unchanged
Read the full itemFY2010 item · filed March 31, 2010FY2009 item · filed April 2, 2009
| [removed: [Reports] [added: Report] of Independent Registered Public Accounting [removed: Firm](#300)] [added: Firm] | | | 47 | |
| [removed: [Consolidated] Balance [removed: Sheets](#301)] [added: Sheets] | | | 49 | |
| [removed: [Consolidated] Statements of [removed: Income](#302)] [added: Income] | | | 50 | |
| [removed: [Consolidated] Statements of Cash [removed: Flows](#303)] [added: Flows] | | | 51 | |
| [removed: [Consolidated] Statements of Stockholders’ [removed: Equity](#304)] [added: Equity] | | | 52 | |
| [removed: [Notes] [added: Notes] to [removed: Consolidated] Financial [removed: Statements](#305)] [added: Statements] | | | [removed: 56] [added: 55] | |
| [removed: [Exhibits](#306)] [added: Exhibits] | | | [removed: 71] [added: 70] | |
The schedules required by Form 10-K have been omitted because they were inapplicable, included in the notes to the [removed: consolidated] financial statements, or otherwise not required under the instructions contained in Regulation S-X.
We have audited the accompanying [removed: consolidated] balance sheets of Ulta Salon, Cosmetics & Fragrance, Inc. (the Company) as of January [removed: 31, 2009] [added: 30, 2010] and [removed: February 2, 2008,] [added: January 31, 2009,] and the related [removed: consolidated] statements of income, cash flows, and stockholders’ equity for each of the three years in the period ended January [removed: 31, 2009.][added: 30, 2010.]
In our opinion, the financial statements referred to above present fairly, in all material respects, the [removed: consolidated] financial position of Ulta Salon, Cosmetics & Fragrance, Inc. at January [removed: 31, 2009] [added: 30, 2010] and [removed: February 2, 2008,] [added: January 31, 2009,] and the [removed: consolidated] results of its operations and its cash flows for each of the three years in the period ended January [removed: 31, 2009,] [added: 30, 2010,] 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), Ulta Salon, Cosmetics & Fragrance, Inc.’s internal control over financial reporting as of January [removed: 31, 2009,] [added: 30, 2010,] based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 31, [removed: 2009,] [added: 2010,] expressed an unqualified opinion thereon.
Report of Independent Registered Public Accounting [removed: Firm][added: Firm]
We have audited Ulta Salon, Cosmetics & Fragrance, Inc.’s internal control over financial reporting as of January [removed: 31, 2009,] [added: 30, 2010,] based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).
In our opinion, Ulta Salon, Cosmetics & Fragrance, Inc. maintained, in all material respects, effective internal control over financial reporting as of January [removed: 31, 2009,] [added: 30, 2010,] based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the [removed: consolidated] balance sheets of Ulta Salon, Cosmetics & Fragrance, Inc. as of January [removed: 31, 2009] [added: 30, 2010] and [removed: February 2, 2008,] [added: January 31, 2009,] and the related [removed: consolidated] statements of income, cash flows and stockholders’ equity for each of the three years in the period ended January [removed: 31, 2009] [added: 30, 2010] and our report dated March 31, [removed: 2009] [added: 2010] expressed an unqualified opinion thereon.
[removed: Consolidated] Balance Sheets
| | | January [added: 30, | | | | January] 31, | | | | February 2, | | |
| | | 2009 | | | | [added: | | | | | | | | | | | |] 2008 | | | [added: | | | | | | | | | | | |]
| Cash and cash equivalents | | $ | [removed: 3,638] [added: 4,017] | | | $ | [removed: 3,789] [added: 3,638] | |
| Receivables, net | | | [removed: 18,268] [added: 13,477] | | | | [removed: 20,643] [added: 18,268] | |
| Merchandise inventories, net | | | [removed: 213,602] [added: 206,948] | | | | [removed: 176,109] [added: 213,602] | |
| Prepaid expenses and other current assets | | | [removed: 24,294] [added: 30,272] | | | | [removed: 19,184] [added: 24,294] | |
| Prepaid income taxes | | | [removed: 8,628] [added: —] | | | | [removed: —] [added: 8,628] | |
| Deferred income taxes | | | [removed: 8,278] [added: 8,060] | | | | [removed: 9,219] [added: 8,278] | |
| Total current assets | | | [removed: 276,708] [added: 262,774] | | | | [removed: 228,944] [added: 276,708] | |
| Property and equipment, net | | | [removed: 292,224] [added: 290,861] | | | | [removed: 236,389] [added: 292,224] | |
| Deferred income taxes | | | [removed: —] [added: 20,952] | | | | [removed: 4,080] [added: 17,616] | |
| Total assets | | $ | [removed: 568,932] [added: 553,635] | | | $ | [removed: 469,413] [added: 568,932] | |
| Current portion — notes payable | | $ | [removed: 18,000] [added: —] | | | $ | [removed: —] [added: 18,000] | |
| Accounts payable | | | [removed: 47,811] [added: 56,387] | | | | [removed: 52,122] [added: 47,811] | |
| Accrued liabilities | | | [removed: 51,202] [added: 59,189] | | | | [removed: 54,719] [added: 51,202] | |
| Accrued income taxes | | | [removed: —] [added: 10,781] | | | | [removed: 5,064] [added: —] | |
| Total current liabilities | | | [removed: 117,013] [added: 126,357] | | | | [removed: 111,905] [added: 117,013] | |
| Notes payable — less current portion | | | [removed: 88,047] [added: —] | | | | [removed: 74,770] [added: 88,047] | |
| Deferred rent | | | [removed: 101,288] [added: 113,718] | | | | [removed: 71,235] [added: 101,288] | |
| Deferred income taxes | | | [removed: 17,616] [added: 3,143] | | | | [removed: —] [added: 22,583] | | [added: | | (3,284 | ) |]
| Total liabilities | | | [removed: 323,964] [added: 261,027] | | | | [removed: 257,910] [added: 323,964] | |
| Common stock, $.01 par value, 400,000 shares authorized; [removed: 58,245] [added: 58,674] and [removed: 57,411] [added: 58,245] shares issued; [removed: 57,740] [added: 58,169] and [removed: 56,906] [added: 57,740] shares outstanding; at January [added: 30, 2010, and January] 31, 2009, [removed: and February 2, 2008,] respectively | | | [removed: 582] [added: 586] | | | | [removed: 574] [added: 582] | |
| Additional paid-in capital | | | [removed: 293,052] [added: 300,701] | | | | [removed: 284,951] [added: 293,052] | |
| Accumulated deficit | | | [removed: (43,856] [added: (4,500] | ) | | | [removed: (69,124] [added: (43,856] | ) |
March 31, 2010
March 31, 2010
| | | 2010 | | | | 2009 | | |
| Common stock options exercised | | | 429 | | | | 4 | | | | — | | | | — | | | | 1,224 | | | | — | | | | — | | | | 1,228 | |
| Balance — January 30, 2010 | | | 58,674 | | | $ | 586 | | | | (505 | ) | | $ | (4,179 | ) | | $ | 300,701 | | | $ | (4,500 | ) | | $ | — | | | $ | 292,608 | |
Cash equivalents include third-party credit card receivables because such amounts generally convert to cash within one to three days with little or no default risk.
The estimated fair value of the Company’s variable rate debt at January 31, 2009 approximates its carrying value since the rate of interest on the variable rate debt is revised frequently based upon the current prime rate or the Eurodollar rate.
The Company had an interest rate swap that expired on January 31, 2010.
This derivative financial instrument was designated and qualified as a cash flow hedge.
The remaining gain or loss, the ineffective portion, on the derivative instrument, if other than inconsequential, was recognized in interest expense during the period of change.
This derivative was recorded in the January 31, 2009 balance sheet at fair value.
flows during their holding period to determine whether the long-lived assets are impaired.
Prepaid advertising costs included in prepaid expenses and other current assets were $4,000 and $3,289 as of January 30, 2010 and January 31, 2009, respectively.
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.
Although the Company believes that its estimates are reasonable, actual results could differ from these estimates.
The Company accounts for share-based compensation in accordance with the Accounting Standards Codificationtm (ASC) rules for stock compensation.
severity factors, and actuarial assumptions.
In June 2009, the Financial Accounting Standards Board (FASB) issued the ASC as the single source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with GAAP.
The ASC also recognizes rules and interpretive releases of the Securities and Exchange Commission (SEC) under federal securities laws as authoritative GAAP for SEC registrants.
The ASC is effective for financial statements issued for fiscal years and interim periods ending after September 15, 2009.
The Company adopted the ASC in the third quarter of 2009 and it did not have any impact on its financial position or results of operations.
| | | 2010 | | | | 2009 | | |
| | | | 516,507 | | | | 469,623 | |
Total rent expense under operating
| 2010 | | $ | 89,712 | |
| 2011 | | | 86,278 | |
| 2012 | | | 83,019 | |
| 2013 | | | 79,996 | |
| 2014 | | | 74,222 | |
| 2015 and thereafter | | | 211,400 | |
On May 29, 2009, the Company and its primary insurance carrier engaged in a mediation with counsel representing the putative class.
Although defendants continue to deny plaintiffs’ allegations, in the interest of putting this matter behind it, the Company and its insurer reached a settlement with plaintiffs.
On August 7, 2009, the Court entered an order preliminarily approving the settlement, approving the form and manner of notice to putative class members, and setting a final hearing to determine whether to approve the settlement.
On November 16, 2009, the Court held a final hearing and, no class members having objected to the settlement or having requested exclusion from the settlement class, the Court entered a final order dismissing all three consolidated cases with prejudice.
The time for appeal expired on December 16, 2009 without any appeal or other challenge to the judgment being made.
All amounts paid under the settlement have been paid out of proceeds of the Company’s directors and officers liability insurance coverage.
_General litigation_ — In July 2009, a putative employment class action lawsuit was filed against the Company and certain unnamed defendants in State Court in California.
The suit alleges that Ulta misclassified its store General Managers and Salon Managers as exempt from the Fair Labor Standards Act and California Labor Code.
The suit seeks to recover damages and penalties as a result of this alleged misclassification.
March 31, 2009
on Internal Control over Financial Reporting
March 31, 2009
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| | | | | | | | | | | | | |
(In thousands)
| Deferred income taxes | | | 22,583 | | | | (3,284 | ) | | | (3,080 | ) |
| Issuance of related party notes receivable | | | — | | | | — | | | | (2,414 | ) |
| Issuance of related party notes receivable for exercise of stock options | | $ | — | | | $ | — | | | $ | (1,680 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance — January 28, 2006 | | | 16,915 | | | $ | 39,040 | | | | 7,634 | | | $ | 74,455 | | | | 19,184 | | | $ | 42,296 | | | | 21,448 | | | $ | 50,576 | | | | 920 | | | $ | 2,108 | | | | 66,101 | | | $ | 208,475 | | | | (38 | ) | | $ | (12 | ) |
| Accretion of preferred dividends | | | — | | | | 4,277 | | | | — | | | | — | | | | — | | | | 4,575 | | | | — | | | | 5,503 | | | | — | | | | 229 | | | | — | | | | 14,584 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | Treasury - | | | | | | | | | | | | | | | | Related | | | | | | | | Accumulated | | | | | | |
| | | Common Stock | | | | | | | | Common Stock | | | | | | | | Additional | | | | Deferred | | | | Party | | | | | | | | Other | | | | Total | | |
| | | Issued | | | | | | | | Treasury | | | | | | | | Paid-In | | | | Stock-based | | | | Notes | | | | Accumulated | | | | Comprehensive | | | | Stockholders’ | | |
| | | | | | | | | | | Shares | | | | Amount | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance — January 28, 2006 | | | 4,513 | | | $ | 71 | | | | (1 | ) | | $ | — | | | $ | 6,533 | | | $ | (431 | ) | | $ | (373 | ) | | $ | (91,199 | ) | | $ | (49 | ) | | $ | 123,015 | |
| Issuance of stock | | | 2,896 | | | | 46 | | | | — | | | | — | | | | 3,056 | | | | — | | | | — | | | | — | | | | — | | | | 3,102 | |
| Purchase of treasury stock | | | — | | | | — | | | | (241 | ) | | | (2,217 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2,217 | ) |
| Accretion of preferred dividends | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (14,584 | ) | | | — | | | | — | |
| Issuance of related party notes receivable | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (4,094 | ) | | | — | | | | — | | | | (4,094 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reclassification of deferred compensation on SFAS 123(R) adoption | | | — | | | | — | | | | — | | | | — | | | | (431 | ) | | | 431 | | | | — | | | | — | | | | — | | | | — | |
| Amortization of deferred stock-based compensation | | | — | | | | — | | | | — | | | | — | | | | 293 | | | | — | | | | — | | | | — | | | | — | | | | 293 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance — February 3, 2007 | | | 7,409 | | | $ | 117 | | | | (242 | ) | | $ | (2,217 | ) | | $ | 15,501 | | | $ | — | | | $ | (4,467 | ) | | $ | (83,240 | ) | | $ | 19 | | | $ | 148,760 | |
Consolidated Statements of Stockholders’ Equity — (Continued)
| | | Shares | | | | Amount | | | | Shares | | | | Amount | | | | Capital | | | | Deficit | | | | Loss | | | | Equity | | |
The accompanying consolidated financial statements of Ulta Salon, Cosmetics & Fragrance, Inc. (the Company) include Ulta Salon, Cosmetics & Fragrance, Inc. and its wholly owned subsidiary, Ulta Internet Holdings, Inc. (Internet).
All intercompany balances and transactions have been eliminated.
The operations of Internet were merged into the Company during 2006, resulting in its dissolution as a separate legal entity on November 30, 2006.
_Reclassifications_
Certain reclassifications have been made to the fiscal 2007 and 2006 operating activities in the consolidated statements of cash flows to separately present income taxes to conform to the fiscal 2008 presentation.
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the accounting period.
An excerpt. Shown here: 40 of 305 rewritten, 40 of 140 added and 40 of 122 removed. The counts are complete. For every sentence, read Item 15. Exhibits and Financial Statement Schedules in the FY2010 filing and the FY2009 filing.