filings.toolsUlta Beauty (ULTA) 10-K risk factor changes: FY2017 vs FY2016
The 2017-01-28 10-K against the 2016-01-30 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 1A46 rewritten12 added8 removed252 unchanged
All filing items699 rewritten343 added267 removed1,448 unchanged
Summary
counted, not written
- Item 1A lists 31 risk factor headings: 3 new, 5 reworded and 23 unchanged since FY2016. 2 headings from FY2016 no longer appear.
- Sentence by sentence, 343 added, 267 removed, 699 rewritten and 1,448 unchanged across 18 items that differ.
New Item 1A headings (3)
- _The market price for our common stock may be volatile._
- _Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could affect our financial results or financial condition._
- _We are a holding company with no operations of our own, and we depend on our subsidiaries for cash._
Removed Item 1A headings (2)
- _Legal proceedings or third-party claims of intellectual property infringement may require us to spend time and money and could prevent us from developing certain aspects of our business operations, which could have a material adverse effect on our business, financial condition, profitability and cash flows._
- _The market price for our common stock may be volatile, and an investor may not be able to sell our stock at a favorable price or at all._
Reworded Item 1A headings (5)
- _Increased costs or interruption in our third-party vendors’ overseas sourcing operations could disrupt production, shipment or receipt of some of our merchandise, which
[removed: would][added: could] result in lost sales and could increase our costs._ - _If our manufacturers are unable to produce products manufactured uniquely for Ulta Beauty, including Ulta [added: Beauty] branded products and gifts with purchase and other promotional products, consistent with applicable regulatory requirements, we could suffer lost sales and be required to take costly corrective action, which could have a material adverse effect on our business, financial condition, profitability and cash flows._
- _Our Ulta [added: Beauty] branded products and salon services may cause unexpected and undesirable side effects that could result in their discontinuance or expose us to lawsuits, either of which could result in unexpected costs and damage to our reputation, which could have a material adverse effect on our business, financial condition, profitability and cash flows._
- _Litigation
[removed: costs]and [added: other legal or regulatory proceedings or claims and] the outcome of[removed: litigation][added: such litigation, proceedings or claims, including possible fines and penalties,] could have a material adverse effect on our business and any loss contingency accruals may not be adequate to cover actual losses._ - _Use of social media may adversely impact our
[removed: reputation or subject us to fines or other penalties._][added: reputation._]
A heading is new when no FY2016 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 FY2017; struck-through words were in FY2016. Sentences that are wholly new or wholly gone are labelled rather than marked.
Item 1A. Risk Factors
46 rewritten, 12 added, 8 removed, 252 unchanged
We currently operate [removed: four] [added: five] distribution facilities, which house the distribution operations for Ulta Beauty retail stores together with the order fulfillment operations of our e-commerce business.
In 2014, we began a multi-year supply chain project, which [removed: focuses] [added: focused] on, among other things, adding capacity and system improvements to support expanded omni-channel capabilities.
We opened our fourth [added: and fifth] distribution [removed: center] [added: centers] in [removed: August] 2015 and [added: 2016 and] expect to open our [removed: fifth] [added: sixth distribution center] in [removed: 2016.][added: 2018.]
Our failure to effectively upgrade and expand our distribution capacity on a timely basis to keep pace with our anticipated growth in stores and the performance of our newly opened distribution [removed: center and our distribution center to be opened in 2016] [added: centers] could have a material adverse effect on our business, financial condition, profitability and cash flows.
For more information on our quarterly results of operations, see [added: Note 13 to our consolidated financial statements, “Selected quarterly financial data (unaudited),” and] Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
We offer most of our beauty products for sale through our [added: Ulta.com] website.
[removed: As a result, we encounter risks] and [removed: difficulties frequently experienced by internet-based businesses, including risks related to our ability to attract and] retain customers on a cost-effective basis and our ability to operate, support, expand and develop our internet operations, website and software and other related operational systems.
Although we believe that our participation in both e-commerce and physical store sales is a distinct advantage for us due to synergies and the potential for new [added: customers, supporting product offerings through both of these channels could create issues that have the potential to adversely affect our results of operations.]
[removed: In addition, offering] [added: Offering] products through our internet channel could [added: also] cause some of our current or potential vendors to consider competing internet offerings of their products either on their own or through competing distributors.
As we continue to grow our e-commerce business, the impact of attracting existing rather than new guests, [removed: of] conflicts between product offerings online and through our stores and [removed: of] opening up our channels to increased internet competition could have a material adverse effect on our business, financial condition, profitability and cash flows.
_Increased costs or interruption in our third-party vendors’ overseas sourcing operations could disrupt production, shipment or receipt of some of our merchandise, which [removed: would] [added: could] result in lost sales and could increase our costs._
We directly source the majority of our Ulta [added: Beauty] branded product components and gifts with purchase and other promotional products through third-party vendors using foreign factories.
[added: In addition, many of our vendors use] overseas sourcing to varying degrees to manufacture some or all of their products.
[added: Our business depends to a significant extent on the] willingness and ability of our vendor partners to supply us with a sufficient selection and volume of products to stock our stores.
During fiscal [removed: 2015,] [added: 2016,] merchandise supplied to Ulta Beauty by our top ten vendor partners accounted for approximately 50% of our net sales.
The loss of or a reduction in the amount of merchandise made available to us by any one of these key [removed: vendor partners,] [added: vendors,] or by any of our other [removed: vendors,] [added: vendor partners,] could have a material adverse effect on our business, financial condition, profitability and cash flows.
Our principal intellectual property rights include registered and common law trademarks on our name, [added: “Ulta Beauty,”] “Ulta,” “All Things Beauty, All in One PlaceTM” and other marks incorporating our name, copyrights in our website content, rights to our domain name www.ulta.com and trade secrets and know-how with respect to our Ulta [added: Beauty] branded product formulations, product sourcing, sales and marketing and other aspects of our business.
_If our manufacturers are unable to produce products manufactured uniquely for Ulta Beauty, including Ulta [added: Beauty] branded products and gifts with purchase and other promotional products, consistent with applicable regulatory requirements, we could suffer lost sales and be required to take costly corrective action, which could have a material adverse effect on our business, financial condition, profitability and cash flows._
We do not own or operate any manufacturing facilities and therefore depend upon independent third-party vendors for the manufacture of all products manufactured uniquely for Ulta Beauty, including the Ulta Beauty Collection and Ulta [added: Beauty] branded gifts with purchase and other promotional products.
Our third-party manufacturers of Ulta [added: Beauty] products may not maintain adequate controls with respect to product specifications and quality and may not continue to produce products that are consistent with applicable regulatory requirements.
The FDA does not have a pre-market approval system for cosmetics, and we believe we are permitted to market our cosmetics and have them manufactured without submitting safety or [removed: efficacy data to the FDA.]
These events could interrupt the marketing and sale of our Ulta [added: Beauty] products, severely damage our brand reputation and image in the marketplace, increase the cost of our products, cause us to fail to meet customer expectations or cause us to be unable to deliver merchandise in sufficient quantities or of sufficient quality to our stores, any of which could result in lost sales, which could have a material adverse effect on our business, financial condition, profitability and cash flows.
If we fail to comply with any present or future laws or regulations, we could be subject to future liabilities, a prohibition on the operation of our stores or a prohibition on the sale of our Ulta [added: Beauty] branded products.
In addition, the formulation, manufacturing, packaging, labeling, distribution, sale and storage of our vendors’ products and our Ulta [added: Beauty] branded products are subject to extensive regulation by various federal agencies, including FDA, FTC, CPSC and [added: various state and local agencies, such as] State [removed: AGs.][added: AGs and District Attorneys.]
If we, our vendors or the manufacturers of our Ulta [added: Beauty] branded products fail to comply with those regulations, we could become subject to significant penalties, [removed: claims,] [added: claims] or product recalls, which could harm our results of operations or our ability to conduct our business.
In addition, the adoption of new regulations or changes in the interpretations of existing regulations may result in significant compliance costs or discontinuation of product sales and may impair the marketability of our vendors’ products or our Ulta [added: Beauty] branded products, resulting in significant loss of net sales.
Our failure to comply with [removed: FTC or] [added: federal,] state [added: or local] requirements when we advertise our products (including prices) or services, or engage in other promotional activities, in digital (including social media), television or print may result in enforcement actions and imposition of penalties or otherwise harm the distribution and sale of our products.
Our store leases generally require us to provide a certificate of occupancy with respect to the interior build-out of our stores (landlords generally provide the certificate of occupancy with respect to the shell of the store and the larger shopping area and common areas), and while we strive to remain in compliance with local building codes relating to the interior build out of our stores, the constantly increasing number of local jurisdictions in which we operate makes it increasingly difficult to stay abreast of changes in, and requirements of, local building codes and local building and fire [added: inspectors’ interpretations of such building codes.]
_Our Ulta [added: Beauty] branded products and salon services may cause unexpected and undesirable side effects that could result in their discontinuance or expose us to lawsuits, either of which could result in unexpected costs and damage to our reputation, which could have a material adverse effect on our business, financial condition, profitability and cash flows._
Unexpected and undesirable side effects caused by our Ulta [added: Beauty] branded products for which we have not provided sufficient label warnings or salon services, which may have been performed negligently, could result in the discontinuance of sales of our products or of certain salon services or prevent us from achieving or maintaining market acceptance of the affected products and services.
[removed: Our] [added: Specifically, our] technologies, promotional products purchased from third-party vendors, and/or Ulta [added: Beauty] branded products or potential products in development may infringe rights under patents, patent applications, trademark, copyright or other intellectual property rights of third parties in the United States and abroad.
In addition to infringement claims against us, we may become a party to other patent or trademark litigation and other proceedings, including interference proceedings declared by the United States Patent and Trademark Office (USPTO) proceedings before the USPTO’s Trademark Trial and Appeal Board and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to products purchased from third-party vendors or our Ulta [added: Beauty] branded products and technology.
_The market price for our common stock may be [removed: volatile, and an investor may not be able to sell our stock at a favorable price or at all._][added: volatile._]
_Use of social media may adversely impact our [removed: reputation or subject us to fines or other penalties._][added: reputation._]
For example, we maintain Facebook, [removed: Twitter] [added: Twitter, Instagram] and Pinterest accounts.
As laws and regulations rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact our business, financial condition, profitability and cash [removed: flows or subject us to fines or other penalties.][added: flows.]
Our [removed: amended and restated] certificate of incorporation and [removed: by-laws] [added: bylaws] 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 harm the market price of our common stock and diminish the voting and other rights of the holders of our common stock.
| | • | | prohibiting our stockholders from making certain changes to our [removed: amended and restated] certificate of incorporation or [removed: amended and restated] bylaws except with a two-thirds majority stockholder approval; and |
As permitted by our [removed: amended and restated] certificate of incorporation and [removed: by-laws,] [added: bylaws,] we have a stockholder rights agreement, sometimes known as a “poison pill,” which provides for the issuance of a new series of preferred stock to holders of common stock.
Together, these provisions of our certificate of incorporation, [removed: by-laws] [added: bylaws] and stockholder rights agreement and of Delaware law could make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock.
As a result, we encounter risks and difficulties frequently experienced by internet-based businesses, including risks related to our ability to attract
efficacy data to the FDA.
aggregate.
##### [Table of Contents](#toc)
our stock.
_Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could affect our financial results or financial condition._
Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, such as revenue recognition, lease obligations, inventory valuation, vendor allowances, impairment of long-lived tangible assets, customer loyalty program, share-based compensation, tax matters and litigation, are highly complex and involve many subjective assumptions, estimates and judgments.
Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments could negatively affect our reported or expected financial performance or financial condition.
_We are a holding company with no operations of our own, and we depend on our subsidiaries for cash._
Following the Reorganization, we are a holding company and we do not have any material assets or operations other than ownership of equity interests of our subsidiaries.
Our operations are conducted entirely through our subsidiaries, and our ability to generate cash to meet our obligations or to repurchase stock or pay dividends (if declared by our Board of Directors in the future) is dependent on the earnings of, and receipt of funds from, our subsidiaries through dividends or intercompany loans.
The ability of our subsidiaries to generate sufficient cash flow from operations to allow us and them to make scheduled payments on our obligations will depend on their future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our control.
customers, supporting product offerings through both of these channels could create issues that have the potential to adversely affect our results of operations.
In addition, many of our vendors use
Our business depends to a significant extent on the
inspectors’ interpretations of such building codes.
_Legal proceedings or third-party claims of intellectual property infringement may require us to spend time and money and could prevent us from developing certain aspects of our business operations, which could have a material adverse effect on our business, financial condition, profitability and cash flows._
Management does not believe the nature of any pending legal proceeding will have a material adverse effect on our business, financial condition, profitability and cash flows.
However, management’s assessment may change at any time based upon the discovery of facts or circumstances that are presently not known to us.
Therefore, there can be no assurance that any pending or future litigation will not have a material adverse effect on our business, financial condition, profitability and cash flows.
An excerpt. Shown here: 40 of 46 rewritten, all 12 added and all 8 removed. The counts are complete. For every sentence, read Item 1A. Risk Factors in the FY2017 filing and the FY2016 filing.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
111 rewritten, 44 added, 72 removed, 267 unchanged
We focus on providing affordable indulgence to our guests by combining unmatched product breadth, value and convenience with [removed: the] [added: a] distinctive [added: specialty retail] environment and [removed: experience of a specialty retailer.][added: experience.]
The continued growth of our business and any future increases in net sales, net income and cash flows is dependent on our ability to execute our [removed: six] strategic imperatives: 1) acquire new guests and deepen loyalty with existing guests, 2) differentiate by delivering a distinctive and personalized guest experience across all channels, 3) offer relevant, innovative and often exclusive products that excite our guests, 4) deliver exceptional services in three core areas: hair, skin health and brows, 5) grow stores and e-commerce to reach and serve more [removed: guests and] [added: guests,] 6) invest in infrastructure to support our guest experience and growth, and capture scale [removed: efficiencies.][added: efficiencies and 7) attract]
Operating profit is expected to increase as a result of our ability to expand merchandise margin and leverage our fixed store costs with comparable sales increases and operating efficiencies offset by incremental investments in people, systems and supply chain required to support a [removed: more than 1,200] [added: 1,400 to 1,700] store chain with a successful e-commerce business and competitive omni-channel capabilities.
[removed: Merchandise] [added: Stores and e-commerce merchandise] sales are recorded net of estimated returns.
| | • | | the cost of merchandise [removed: sold,] [added: sold (retail and e-commerce),] including substantially all vendor allowances, which are treated as a reduction of merchandise costs; |
The Company’s fiscal years ended January [added: 28, 2017, January] 30, [removed: 2016,] [added: 2016 and] January 31, 2015 [removed: and February 1, 2014] were 52 week years and are hereafter referred to as fiscal [removed: 2015,] [added: 2016,] fiscal [removed: 2014] [added: 2015] and fiscal [removed: 2013.][added: 2014.]
| (Dollars in thousands) | | January [removed: 30, 2016] [added: 28, 2017] | | | | January [removed: 31, 2015] [added: 30, 2016] | | | | [removed: February 1, 2014] [added: January 31, 2015] | | |
| Net sales | | $ | [removed: 3,924,116] [added: 4,854,737] | | | $ | [removed: 3,241,369] [added: 3,924,116] | | | $ | [removed: 2,670,573] [added: 3,241,369] | |
| Cost of sales | | | [removed: 2,539,783] [added: 3,107,508] | | | | [removed: 2,104,582] [added: 2,539,783] | | | | [removed: 1,729,325] [added: 2,104,582] | |
| Gross profit | | | [removed: 1,384,333] [added: 1,747,229] | | | | [removed: 1,136,787] [added: 1,384,333] | | | | [removed: 941,248] [added: 1,136,787] | |
| Selling, general and administrative expenses | | | [removed: 863,354] [added: 1,073,834] | | | | [removed: 712,006] [added: 863,354] | | | | [removed: 596,390] [added: 712,006] | |
| Pre-opening expenses | | | [removed: 14,682] [added: 18,571] | | | | [removed: 14,366] [added: 14,682] | | | | [removed: 17,270] [added: 14,366] | |
| Operating income | | | [removed: 506,297] [added: 654,824] | | | | [removed: 410,415] [added: 506,297] | | | | [removed: 327,588] [added: 410,415] | |
| Interest income, net | | | [removed: (1,143] [added: (890] | ) | | | [removed: (894] [added: (1,143] | ) | | | [removed: (118] [added: (894] | ) |
| Income before income taxes | | | [removed: 507,440] [added: 655,714] | | | | [removed: 411,309] [added: 507,440] | | | | [removed: 327,706] [added: 411,309] | |
| Income tax expense | | | [removed: 187,432] [added: 245,954] | | | | [removed: 154,174] [added: 187,432] | | | | [removed: 124,857] [added: 154,174] | |
| Net income | | $ | [removed: 320,008] [added: 409,760] | | | $ | [removed: 257,135] [added: 320,008] | | | $ | [removed: 202,849] [added: 257,135] | |
| Number of stores end of period | | | [removed: 874] [added: 974] | | | | [removed: 774] [added: 874] | | | | [removed: 675] [added: 774] | |
| Retail and salon comparable sales | | | [removed: 10.0] [added: 13.4] | % | | | [removed: 8.1] [added: 10.0] | % | | | [removed: 6.1] [added: 8.1] | % |
| E-commerce comparable sales | | | [removed: 47.5] [added: 56.2] | % | | | [removed: 56.4] [added: 47.5] | % | | | [removed: 76.6] [added: 56.4] | % |
| Total comparable sales increase | | | [removed: 11.8] [added: 15.8] | % | | | [removed: 9.9] [added: 11.8] | % | | | [removed: 7.9] [added: 9.9] | % |
| (Percentage of net sales) | | January [removed: 30, 2016] [added: 28, 2017] | | | | January [removed: 31, 2015] [added: 30, 2016] | | | | [removed: February 1, 2014] [added: January 31, 2015] | | |
| Cost of sales | | | [removed: 64.7] [added: 64.0] | % | | | [removed: 64.9] [added: 64.7] | % | | | [removed: 64.8] [added: 64.9] | % |
| Gross profit | | | [removed: 35.3] [added: 36.0] | % | | | [removed: 35.1] [added: 35.3] | % | | | [removed: 35.2] [added: 35.1] | % |
| Selling, general and administrative expenses | | | [removed: 22.0] [added: 22.1] | % | | | 22.0 | % | | | [removed: 22.3] [added: 22.0] | % |
| Pre-opening expenses | | | 0.4 | % | | | 0.4 | % | | | [removed: 0.6] [added: 0.4] | % |
| Operating income | | | [removed: 12.9] [added: 13.5] | % | | | [removed: 12.7] [added: 12.9] | % | | | [removed: 12.3] [added: 12.7] | % |
| Income before income taxes | | | [removed: 12.9] [added: 13.5] | % | | | [removed: 12.7] [added: 12.9] | % | | | [removed: 12.3] [added: 12.7] | % |
| Income tax expense | | | [removed: 4.8] [added: 5.1] | % | | | 4.8 | % | | | [removed: 4.7] [added: 4.8] | % |
| Net income | | | [removed: 8.2] [added: 8.4] | % | | | [removed: 7.9] [added: 8.2] | % | | | [removed: 7.6] [added: 7.9] | % |
The net sales increases are due to the opening of 100 net new stores in 2015 and [removed: a] [added: an] 11.8% increase in comparable sales.
[removed: Selling, general and administrative (SG&A)] [added: SG&A] expenses increased $151.3 million, or 21.3%, to $863.4 million in fiscal 2015 compared to $712.0 million in fiscal 2014.
Fiscal year [removed: 2014] [added: 2016] versus fiscal year [removed: 2013][added: 2015]
The net sales increases are due to the opening of [removed: 99] [added: 100] net new stores in [removed: 2014] [added: 2016] and a [removed: 9.9%] [added: 15.8%] increase in comparable sales.
[removed: Non-comparable stores, which include stores opened in fiscal 2014] as [removed: well as] stores opened in fiscal [removed: 2013] [added: 2015,] which have not yet turned comparable, contributed [removed: $312.3] [added: $320.9] million of the net sales [removed: increase] [added: increase,] while comparable stores contributed [removed: $258.5] [added: $609.8] million of the total net sales increase.
The [removed: 9.9%] [added: 15.8%] comparable sales increase consisted of [removed: an 8.1%] [added: a 13.4%] increase at the Company’s retail and salon stores and a [removed: 56.4%] [added: 56.2%] increase in the Company’s e-commerce business.
The inclusion of the e-commerce business resulted in an increase of approximately [removed: 180] [added: 240] basis points to the Company’s consolidated same store sales calculation for fiscal [removed: 2014 and 2013.][added: 2016 compared to 180 basis points for fiscal 2015.]
The total comparable sales increase included a [removed: 4.3%] [added: 5.1%] increase in average ticket and a [removed: 5.6%] [added: 10.7%] increase in transactions.
Gross profit as a percentage of net sales [removed: decreased 10] [added: increased 70] basis points to [removed: 35.1%] [added: 36.0%] in fiscal [removed: 2014] [added: 2016] compared to [removed: 35.2%] [added: 35.3%] in fiscal [removed: 2013.][added: 2015.]
As a percentage of net sales, SG&A [removed: expenses decreased 30] [added: expense increased 10] basis points to [removed: 22.0%] [added: 22.1%] in fiscal [removed: 2014] [added: 2016] compared to [removed: 22.3%] [added: 22.0%] in fiscal [removed: 2013.][added: 2015.]
and retain talent that drives a winning culture.
| | • | | shipping and handling costs; |
| | • | | credit card program incentives; |
As of January 28, 2017, we operated 974 stores across 48 states and the District of Columbia.
Net sales increased $930.6 million, or 23.7%, to $4,854.7 million in fiscal 2016 compared to $3,924.1 million in fiscal 2015.
Salon service sales increased $31.9 million, or 15.2% to $241.1 million compared to $209.2 million in fiscal 2015.
E-commerce sales increased $124.2 million, or 56.2%, to $345.3 million compared to $221.1 million in fiscal 2015.
Non-comparable stores, which include stores opened in fiscal 2016 as well
Gross profit increased $362.9 million, or 26.2%, to $1,747.2 million in fiscal 2016, compared to $1,384.3 million, in fiscal 2015.
The increase in gross profit margin was primarily due to:
| | • | | 30 basis points improvement in merchandise margins driven by our marketing and merchandising strategies, including a reduction in year-over-year promotional levels; |
| | • | | 30 basis points of planned deleverage related to supply chain investments. |
Selling, general and administrative (SG&A) expenses increased $210.5 million, or 24.4%, to $1,073.8 million in fiscal 2016 compared to $863.4 million in fiscal 2015.
The deleverage in SG&A was primarily due to:
| | • | | 30 basis points deleverage primarily due to investments in store labor to support our growth initiatives; |
| | • | | 20 basis points deleverage in corporate overhead due to higher variable compensation, depreciation expense and impairment charges related to the closure of stores in Chicago, Illinois and Denham Springs, Louisiana, partly offset by; |
| | • | | 40 basis points of leverage in marketing expense attributed to strong sales growth. |
Pre-opening expenses increased $3.9 million, or 26.5%, to $18.6 million in fiscal 2016 compared to $14.7 million in fiscal 2015.
The fiscal 2015 tax rate included benefits from lower state taxes that did not recur in fiscal 2016.
Net income increased $89.8 million, or 28.0%, to $409.8 million in fiscal 2016 compared to $320.0 million in fiscal 2015.
| --- | --- | --- | --- |
| --- | --- | --- | --- |
| --- | --- | --- | --- |
| --- | --- | --- | --- |
| --- | --- | --- | --- |
| --- | --- | --- | --- |
Capital expenditures increased in fiscal 2016 compared to fiscal 2015 due to our new store program, the expansion of prestige boutiques and related in-store merchandising upgrades, and corporate office expansion.
| | | $ | 463 | | | $ | 374 | | | $ | 299 | | | $ | 249 | |
The 2016 Share Repurchase Program authorization revoked the previously authorized, but unused amounts of $172.4 million from the 2014 Share Repurchase Program.
In May 2016, the ASR settled and an additional 153,418 shares were delivered to the Company and retired.
The transaction was accounted for as an equity transaction.
The par value of shares received was recorded as a reduction to common stock with the remainder recorded as a reduction to additional paid-in capital and retained earnings.
Upon receipt of the shares, there was an immediate reduction in the weighted average common shares calculation for basic and diluted earnings per share.
During fiscal 2016, excluding the shares repurchased under the ASR, we purchased 634,155 shares of common stock for $144.3 million at an average price of $227.49.
| Operating lease obligations(1) | | $ | 2,006,041 | | | $ | 270,684 | | | $ | 534,500 | | | $ | 474,282 | | | $ | 726,575 | |
| Purchase obligations | | | 47,463 | | | | 40,518 | | | | 6,945 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 2,053,504 | | | $ | 311,202 | | | $ | 541,445 | | | $ | 474,282 | | | $ | 726,575 | |
| | | | | | | | | | | | | | | | | | | | | |
Significant estimates are used in determining future operating
Global economic conditions
Economic conditions in the U.S. continue to be uneven.
Fiscal stress in Europe and economic uncertainty in the U.S. related to deficit issues, potential tax increases and federal spending cuts have resulted in significant fluctuations in the financial markets.
While the U.S. credit markets have stabilized and credit availability has improved compared to the recent recessionary period, economic growth is expected to continue to be weak.
Consumer spending habits are affected by levels of unemployment, unsettled financial markets, weakness in housing and real estate, higher interest rates, fuel and energy costs and consumer perception of economic conditions, among others.
Sudden negative changes in one or more of the factors that affect consumer spending could adversely affect consumer spending levels which could lead to reduced consumer demand for our merchandise and adversely affect our sales levels and financial performance.
As of January 30, 2016, we operated 874 stores across 48 states.
Net sales increased $570.8 million, or 21.4%, to $3,241.4 million in fiscal 2014 compared to $2,670.6 million in fiscal 2013.
Salon service sales increased $29.7 million, or 20.4% to $175.5 million compared to $145.8 million
in fiscal 2013.
E-commerce sales increased $54.1 million, or 56.4%, to $149.9 million compared to $95.8 million in fiscal 2013.
The salon business contributed 10 basis points to the retail and salon comp of 8.1%.
Gross profit increased $195.6 million, or 20.8%, to $1,136.8 million in fiscal 2014, compared to $941.2 million, in fiscal 2013.
The decrease in gross profit margin in fiscal 2014 was primarily due to 10 basis points of deleverage in merchandise margins driven primarily by product and channel mix shifts and converting the remaining 50% of our loyalty program members to the Ultamate Rewards loyalty program.
SG&A expenses increased $115.6 million, or 19.4%, to $712.0 million in fiscal 2014 compared to $596.4 million in fiscal 2013.
The leverage in SG&A expenses is primarily attributed to:
| | • | | 30 basis points deleverage in corporate overhead expense primarily driven by higher variable compensation, consulting and depreciation expense. |
Pre-opening expenses decreased $2.9 million, or 16.8%, to $14.4 million in fiscal 2014 compared to $17.3 million in fiscal 2013.
The lower tax rate in fiscal 2014 is primarily due to a decrease in state taxes compared to fiscal 2013.
Net income increased $54.3 million, or 26.8%, to $257.1 million in fiscal 2014 compared to $202.8 million in fiscal 2013.
We had a current tax liability of $12.7 million at the end of fiscal 2015 compared to $19.4 million at the end of fiscal 2014.
The decrease in taxes payable is primarily due to an increase in tax deductible stock option exercises and a decrease in state taxes.
Investment activities for capital expenditures
Capital expenditures increased in fiscal 2015 compared to fiscal 2014 due to investments in information technology systems, merchandise fixtures and supply chain initiatives during 2015.
| | | $ | 391 | | | $ | 299 | | | $ | 249 | | | $ | 226 | |
Repurchases pursuant to the 2013 Share Repurchase Program were made from time to time in the open market, in privately negotiated transactions or otherwise, at prices the Company deemed appropriate and subject to market conditions, applicable law and other factors deemed relevant in the Company’s sole discretion.
During fiscal 2015, we purchased 1,034,418 shares of common stock for $167.4 million at an average price of $161.81 from the 2014 Share Repurchase Program.
The Loan Agreement amended and restated the Loan and Security Agreement, dated as of August 31, 2010, by and among the Company and the lenders.
On September 5, 2012, we entered into Amendment No. 1 to the Loan Agreement (the First Amendment) with the lender group.
The First Amendment updated certain administrative terms and conditions and provides us greater flexibility to take certain corporate actions.
There were no changes to the revolving loan amounts available, interest rates, covenants or maturity date under terms of the Loan Agreement.
On December 6, 2013, we entered into Amendment No. 2 to the Loan Agreement (the Second Amendment) with the lender group.
The Second Amendment further extended the maturity of the facility to December 2018.
To a lesser extent, our business is also
| Operating lease obligations(1) | | $ | 1,759,133 | | | $ | 238,837 | | | $ | 465,841 | | | $ | 406,819 | | | $ | 647,636 | |
| Purchase obligations | | | 26,913 | | | | 26,913 | | | | — | | | | — | | | | — | |
While a number of our store leases include contingent rentals, contingent rent amounts are insignificant.
estimates or assumptions we use to calculate our impairment charges.
We have not recorded any significant impairment charges in any of the periods presented in the accompanying consolidated financial statements.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, issued as a new Topic, Accounting Standards Codification Topic 606.
An excerpt. Shown here: 40 of 111 rewritten, 40 of 44 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 FY2017 filing and the FY2016 filing.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
1 rewritten, 0 added, 0 removed, 8 unchanged
We did not utilize the credit facility during fiscal [removed: 2015, 2014] [added: 2016, 2015] or [removed: 2013.][added: 2014.]
Item 1. Business
72 rewritten, 44 added, 58 removed, 174 unchanged
Our stores and website offer more than 20,000 products from [removed: over] [added: approximately] 500 well-established and emerging beauty brands across all categories and price points, including Ulta Beauty’s own private label, the Ulta Beauty Collection.
[removed: The beauty products are arranged in self-service displays and full-service boutiques in a] [added: Our] bright [added: and] open store environment [removed: that] encourages our guests to enjoy discovering new products and services.
We were founded [removed: as a Delaware corporation] in 1990 as a beauty retailer at a time when prestige, mass and salon products were sold through distinct channels – department stores for prestige products, drug stores and mass merchandisers for mass products and salons and authorized retail outlets for professional hair care products.
We developed a unique specialty retail concept that offers All Things Beauty, All in One Place™, a compelling value proposition, and a convenient and [removed: a] welcoming shopping environment.
[removed: _Differentiated merchandising strategy with broad appeal._] [added: _Offer relevant, innovative and often exclusive products that excite our guests._] We believe our broad selection of merchandise across categories, price points and brands offers a unique shopping experience for our guests.
While the products we sell can be found in department stores, specialty stores, salons, drug stores and mass merchandisers, we offer [removed: all of these products] [added: approximately 500 brands] in one retail format so that our guests can find everything they need in one shopping trip.
We also [removed: offer] [added: continue to upgrade and enhance the] Ulta Beauty [removed: Collection] [added: Collection, our private label, which offers] products in key categories such as cosmetics, skincare and [removed: bath and exclusive products such as IT Brushes for Ulta.][added: bath.]
Because [removed: we offer a] [added: of our] broad array of [removed: products in prestige, mass] [added: categories, brand] and [removed: salon,] [added: price points,] we appeal to a wide range of consumers including women of all ages, demographics and lifestyles.
[removed: _Loyal and active customer base._ Over 18] [added: We have approximately 23] million [added: active] Ulta Beauty guests [removed: are active members of] [added: enrolled in] our Ultamate Rewards loyalty program.
We use this [removed: valuable] proprietary database to drive traffic, better understand our guests’ purchasing patterns and support new store site selection.
We [removed: work closely with] [added: believe] our vendor partners [added: view us as a significant distribution channel for growth and brand enhancement and we work closely with them] to market both new and existing [removed: brands in a collaborative manner.][added: brands.]
[removed: _Experienced management team_.] We have an experienced [removed: senior] management team that brings a creative merchandising approach and a disciplined operating philosophy to our business.
We continue to expand the depth of our [removed: management] team at all levels and in all functional areas to support our growth.
We are committed to [removed: the following six] [added: executing our] strategic imperatives to drive [removed: sustainable] long-term [removed: growth:][added: growth and sustainable competitive advantages.]
[removed: Loyalty] member transactions represent more than [removed: 80%] [added: 90%] of our annual total net sales, and the transaction data demonstrates that loyalty members shop with higher frequency and spend more per visit as compared to non-members.
_Differentiate by delivering a distinctive and personalized guest experience across all channels._ The Ulta Beauty guest experience today is differentiated by our broad array of categories, brands and price points, high quality services and [removed: friendly and helpful] [added: friendly, well-trained, non-commissioned] associates.
Through our loyalty and CRM capabilities, we [removed: are gaining efficiencies in our marketing by targeting] [added: continue to emphasize targeted] communications and [removed: promotions to be more] personalized [removed: and] [added: promotions that are] relevant to our guests.
Salon guests shop more frequently and spend [added: almost three times] more than [removed: twice as much as] non-salon guests based on loyalty guest data.
We provide haircare services in our full service salons, using high quality Redken products and offering trend-right hairstyles and [removed: color in partnership with Rodney Cutler of Redken.][added: color.]
[removed: _Grow stores and e-commerce to reach and serve more guests._] We believe that over the long-term, we have the potential to grow our store base to [removed: more than 1,200] [added: between 1,400 to 1,700] Ulta Beauty stores in the United [removed: States and significantly grow our e-commerce business.][added: States.]
We opened [removed: 103] [added: 104 (100 net of store closures)] new stores during our fiscal year ended January [removed: 30, 2016] [added: 28, 2017] (fiscal [removed: 2015),] [added: 2016),] representing [removed: a 13%] [added: an 11%] increase in square footage growth compared to [removed: 100] [added: 103 (100 net of store closures)] new stores in [added: our] fiscal [removed: 2014.][added: year ended January 30, 2016 (fiscal 2015).]
We also remodeled [removed: four] [added: twelve] stores and relocated [removed: five] [added: two] stores in fiscal [removed: 2015.][added: 2016.]
Our fiscal [removed: 2015] [added: 2016] new store program was comprised of approximately [removed: 70%] [added: 60%] new stores opened in existing shopping centers and [removed: 30%] [added: 40%] in new shopping centers.
In fiscal [removed: 2015,] [added: 2016,] approximately one [removed: third] [added: quarter] of new stores were in new markets and [removed: two thirds] [added: three quarters] were [removed: filling-in] [added: filling in] existing markets.
| | | [removed: 2011 | | | |] 2012 | | | | 2013 | | | | 2014 | | | | 2015 | | | [added: | 2016 | | |]
| Total stores beginning of period | | | [removed: 389 | | | |] 449 | | | | 550 | | | | 675 | | | | 774 | | [added: | | 874 | |]
| Stores opened | | | [removed: 61 | | | |] 102 | | | | 127 | | | | 100 | | | | 103 | | [added: | | 104 | |]
| Stores closed | | | (1 | ) | | | [removed: (1] [added: (2] | ) | | | [removed: (2] [added: (1] | ) | | | [removed: (1] [added: (3] | ) | | | [removed: (3] [added: (4] | ) |
| Total stores end of period | | | [removed: 449 | | | |] 550 | | | | 675 | | | | 774 | | | | 874 | | [added: | | 974 | |]
| Stores remodeled | | | [removed: 17 | | | |] 21 | | | | 7 | | | | 9 | | | | 4 | | [added: | | 12 | |]
| Total square footage | | | [removed: 4,747,148 | | | |] 5,847,393 | | | | 7,158,286 | | | | 8,182,404 | | | | 9,225,957 | | [added: | | 10,271,184 | |]
| Average square footage per store | | | [removed: 10,573 | | | |] 10,632 | | | | 10,605 | | | | 10,572 | | | | 10,556 | | [added: | | 10,545 | |]
[removed: Our e-commerce platform serves two roles: to generate direct channel sales and profits and to communicate with our guests in an] interactive, enjoyable way that reinforces the Ulta Beauty brand [removed: and drives] [added: driving] traffic to our [removed: stores] [added: stores, website,] and [removed: website.][added: native applications.]
Our omni-channel guests are extremely valuable, spending [removed: two to four] [added: nearly three] times as much as [removed: single channel] [added: retail only] guests.
We intend to establish ourselves as a leading online beauty resource by providing our guests with a rich online experience for information on key trends and products, editorial content, expanded assortments, best in class features and [removed: functionality] [added: functionality, interactive experiences] and social media content.
Our [removed: long-term] goal is to grow our e-commerce business from approximately [removed: 6%] [added: 7%] of sales as of January [removed: 30, 2016] [added: 28, 2017] to approximately 10% of total sales [removed: over] [added: by] the [removed: next several years.][added: end of fiscal 2019.]
This includes optimizing our distribution network, improving inventory turns by moving product faster and more frequently through all channels and improving inventory visibility, forecast accuracy, and [added: managing] product life cycle through investments in people, process and technology.
[added: We] expect to capture operational efficiencies in new enterprise inventory capabilities to help fund [removed: those] investments [removed: in-store] [added: in additional store] labor and [removed: tools.][added: other in-store technologies.]
This market represents approximately [removed: $127] [added: $134] billion in sales, according to Euromonitor International and IBIS World Inc. The approximately [removed: $74] [added: $81] billion beauty products industry includes cosmetics, haircare, fragrance, bath and body, skincare, salon styling tools and other toiletries.
[removed: We opened 103 (100 net of closings) stores in fiscal 2015 and the] [added: The] average investment required to open a new Ulta Beauty store is approximately [removed: $1.2] [added: $1.4] million, which includes capital investments, net of landlord contributions, pre-opening expenses and initial inventory, net of payables.
We provide unmatched product breadth, value and convenience in a distinctive specialty retail environment.
As of January 28, 2017, we operated 974 retail stores across 48 states and the District of Columbia, as well as an e-commerce website.
On January 29, 2017, we implemented a holding company reorganization (the Reorganization) pursuant to which Ulta Beauty, Inc., which was incorporated as a Delaware corporation in December 2016, became the successor to Ulta Salon, Cosmetics & Fragrance, Inc., the former publicly-traded company and now a wholly owned subsidiary of Ulta Beauty.
Our strategy
Loyalty
To enable an elevated and engaging in-store guest experience, we are focusing on three key areas: process improvements, store and technology enhancements and labor and staffing solutions.
For example, we have improved our mobile app, launched a try-on app called “Glamlab” to digitally test products and expanded our online assortment.
Our vision is to be the undisputed destination for All Things Beauty, All in One Place™.
To achieve this vision, we continue to evolve our product assortment with a focus on newness, exclusivity and category dominance and we focus on three key areas: prestige cosmetics, mass cosmetics and professional hair care in order to maximize our leadership in these categories.
_Deliver exceptional services in three core areas: hair, skin health and brows._ Our services offerings play an important role on delivering on our brand promise to be All Things Beauty, All in One Place™.
We believe focusing on guest satisfaction, increasing effectiveness of promotions and optimizing staffing and scheduling will make our services business an even stronger differentiator in our stores.
_Grow stores and e-commerce to reach and serve more guests._ Our real estate vision is to make Ulta Beauty accessible and convenient to more consumers across a variety of markets, a key part of how we plan to double our market share over the next several years.
We plan to further penetrate existing suburban markets, expand our presence in small markets and begin to develop urban markets.
In addition to store expansion, we expect to significantly grow our e-commerce sales.
Our e-commerce platform has two key roles: generating direct channel sales and profits, while communicating with our guests in an
We also continue to improve our order fulfillment capabilities with increased speed of delivery through new distribution centers and efficient processes designed for e-commerce fulfillment.
_Attract and retain talent that drives a winning culture._ Leadership, culture and engagement of our associates are key drivers of our performance.
Our well-trained, non-commissioned store associates are highly engaged and delivering a differentiated guest experience.
due to prestige brand expansions and several higher cost non-prototypical store locations expected to open in fiscal 2017.
As of January 28, 2017, we operated 974 stores in 48 states and the District of Columbia.
_Categories_
We offer a balanced portfolio across five primary categories: (1) cosmetics; (2) skincare, bath and fragrance; (3) haircare products and styling tools; (4) salon services; and (5) other, which includes nail products and accessories.
We have gained market shares across all categories of our business, with particular strength in cosmetics.
The following table sets forth the approximate percentage of net sales attributed to each category for the periods presented:
| | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Fiscal year ended | | | | | | | | | | |
| | | January 28, 2017 | | | | January 30, 2016 | | | | January 31, 2015 | | |
| Cosmetics | | | 51 | % | | | 46 | % | | | 42 | % |
| Skincare, Bath & Fragrance | | | 20 | % | | | 23 | % | | | 24 | % |
| Haircare Products & Styling Tools | | | 20 | % | | | 22 | % | | | 24 | % |
| Salon Services | | | 5 | % | | | 5 | % | | | 5 | % |
| Other | | | 4 | % | | | 4 | % | | | 5 | % |
| | | | | | | | | | | | | |
| | | | 100 | % | | | 100 | % | | | 100 | % |
| | | | | | | | | | | | | |
We believe this structure maximizes
In fiscal 2016, we implemented a new merchandising planning and forecasting system, as well as enhancements to the master data and space and floor planning systems.
To enhance our loyalty program, we recently launched co-branded and private label credit cards.
The credit cards drive higher wallet share and greater loyalty from our rewards members, provide increased consumer insights and offer attractive economics.
We focus on providing affordable indulgences to our guests by combining unmatched product breadth, value and convenience with the distinctive environment and experience of a specialty retailer.
As of January 30, 2016, we operated 874 retail stores across 48 states and distributed our products through our website, which includes a collection of tips, tutorials and social content.
Our competitive strengths
We believe the following competitive strengths differentiate us and are critical to our success:
We offer more than 500 brands, such as Bare Minerals, Clinique and Urban Decay prestige cosmetics, NYX and Maybelline mass cosmetics, Coty and Estée Lauder Companies fragrances, Redken and Matrix haircare, as well as Dermalogica and Philosophy skincare and Clarisonic, CHI and Helen of Troy personal care appliances.
_Our unique guest experience._ We combine unmatched product breadth, value and convenience with the distinctive environment and experience of a specialty retailer.
Our well-trained, non-commissioned beauty
advisors provide unbiased and customized advice tailored to our guests’ needs.
Our customer service strategy, convenient locations, attractive store design and compelling e-commerce offerings combine to create a unique shopping experience.
We regularly employ a broad range of media, including digital, catalogs and newspaper inserts and targeted promotions driven by our CRM platform, to drive traffic to our stores and website.
_Strong vendor partnerships across product categories._ We have strong, active relationships with over 350 vendor partners, including Bare Minerals, Coty, Estée Lauder Companies, L’Oréal and Procter & Gamble.
We believe that the scope of these long-term relationships, which span the three beauty categories of prestige, mass and salon creates an impediment for other retailers to replicate our model.
Six strategic imperatives
We have over 18 million active Ulta Beauty guests enrolled in our Ultamate Rewards loyalty program.
We continue to invest in labor and technology to enable this experience.
For example, we are testing in-store technology solutions like clienteling and have rolled out task management tools.
_Offer relevant, innovative and often exclusive products that excite our guests._ Our strategy is to continue to partner with existing and new key vendor partners to bring new and exclusive products to delight our guests and to introduce new brands both in-store and online.
We regularly add new brands across product categories, especially in prestige cosmetics, currently the beauty industry’s highest growth category.
We continue to increase the presence of prestige brands and boutiques in our stores.
We are also refining and growing the Ulta Beauty Collection, our private label products.
Our private label strategy could include partnerships or acquisitions to create more exclusive brands for Ulta Beauty in the future.
_Deliver exceptional services in three core areas: hair, skin health and brows._ The salon represents a small percent of our total sales, but salon guests are our best guests.
We plan to grow the expertise and tenure of our salon professionals through more frequent training and programs to reduce turnover.
We plan to continue opening stores both in markets in which we currently operate and new markets.
In addition, our investment and focus in 2015 continued to build out our order fulfillment capabilities resulting in increased capacity, faster order and delivery time, enhanced guest shipping communications and improved order quality.
We believe our website and retail stores provide our guests with an integrated shopping experience and increased flexibility for their beauty buying needs.
We
As of January 30, 2016, we operated 874 stores in 48 states.
Many of the products we sell can also be found in department stores, specialty stores, salons, mass merchandisers and drug stores, but we offer all of these products in a single store environment that represents All Things Beauty, All in One Place TM.
We offer a comprehensive customer loyalty program, Ultamate Rewards, and targeted promotions through our CRM platform.
We also offer promotions and coupons, in-store events and gifts with purchase.
The Ulta Beauty Collection has a strong following and we may expand our private label products into additional categories.
_Assortment_
We offer products in the following categories:
| | • | | Cosmetics, which includes products for the face, eyes, cheeks, lips, nails and brushes; |
| --- | --- | --- | --- |
| | • | | Haircare, which includes shampoos, conditioners, styling products, hair accessories and hair brushes; |
| | • | | Salon styling tools, which includes hair dryers, curling irons and flat irons; |
| | • | | Skincare and bath and body, which includes products for the face, hands and body; |
| | • | | Fragrance; |
An excerpt. Shown here: 40 of 72 rewritten, 40 of 44 added and 40 of 58 removed. The counts are complete. For every sentence, read Item 1. Business in the FY2017 filing and the FY2016 filing.
Cover and table of contents
33 rewritten, 6 added, 2 removed, 88 unchanged
| | [removed: þ] [added: ☑] | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| | | For the fiscal year ended January [removed: 30, 2016] [added: 28, 2017] |
| | [removed: ¨] [added: ☐] | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| Delaware _(State or other jurisdiction of incorporation or organization)_ | | [removed: 36-3685240] [added: 38-4022268] _(I.R.S. Employer Identification No.)_ |
[removed: þ] [added: ☑] Yes [removed: ¨] [added: ☐] No
[removed: ¨] [added: ☐] Yes [removed: þ] [added: ☑] No
| Large accelerated filer [removed: þ] [added: ☑] | | Accelerated filer [removed: ¨] [added: ☐] | | Non-accelerated filer [removed: ¨] [added: ☐] | | Smaller reporting company [removed: ¨] [added: ☐] |
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 July [removed: 31, 2015,] [added: 29, 2016,] as reported on the NASDAQ Global Select Market, was approximately [removed: $9,282,171,000.][added: $10,919,168,000.]
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 July [removed: 31, 2015] [added: 29, 2016] 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: 24, 2016] [added: 23, 2017] was [removed: 62,618,206] [added: 62,132,265] shares.
Information required in response to Part III of Form 10-K (Items 10, 11, 12, 13 and 14) is hereby incorporated by reference from portions of the registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held during [removed: 2016.][added: 2017.]
| Item 1. | | [removed: [Business](#toc101485_1)] [added: [Business](#toc329810_1)] | | | 2 | |
| Item 1A. | | [Risk [removed: Factors](#toc101485_2)] [added: Factors](#toc329810_2)] | | | 11 | |
| Item 1B. | | [Unresolved Staff [removed: Comments](#toc101485_3)] [added: Comments](#toc329810_3)] | | | [removed: 21] [added: 22] | |
| Item 2. | | [removed: [Properties](#toc101485_4)] [added: [Properties](#toc329810_4)] | | | [removed: 21] [added: 22] | |
| Item 3. | | [Legal [removed: Proceedings](#toc101485_5)] [added: Proceedings](#toc329810_5)] | | | [removed: 23] [added: 24] | |
| Item 4. | | [Mine Safety [removed: Disclosures](#toc101485_6)] [added: Disclosures](#toc329810_6)] | | | [removed: 23] [added: 24] | |
| Item 5. | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#toc101485_7)] [added: Securities](#toc329810_7)] | | | [removed: 24] [added: 25] | |
| Item 6. | | [Selected Financial [removed: Data](#toc101485_8)] [added: Data](#toc329810_8)] | | | [removed: 27] [added: 29] | |
| Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#toc101485_9)] [added: Operations](#toc329810_9)] | | | [removed: 28] [added: 30] | |
| Item 7A. | | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#toc101485_10)] [added: Risk](#toc329810_10)] | | | [removed: 40] [added: 42] | |
| Item 8. | | [Financial Statements and Supplementary [removed: Data](#toc101485_11)] [added: Data](#toc329810_11)] | | | [removed: 40] [added: 42] | |
| Item 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#toc101485_12)] [added: Disclosure](#toc329810_12)] | | | [removed: 41] [added: 42] | |
| Item 9A. | | [Controls and [removed: Procedures](#toc101485_13)] [added: Procedures](#toc329810_13)] | | | [removed: 41] [added: 42] | |
| Item 9B. | | [Other [removed: Information](#toc101485_14)] [added: Information](#toc329810_14)] | | | [removed: 41] [added: 43] | |
| Item 10. | | [Directors, Executive Officers and Corporate [removed: Governance](#toc101485_15)] [added: Governance](#toc329810_15)] | | | [removed: 41] [added: 43] | |
| Item 11. | | [Executive [removed: Compensation](#toc101485_16)] [added: Compensation](#toc329810_16)] | | | [removed: 42] [added: 44] | |
| Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#toc101485_17)] [added: Matters](#toc329810_17)] | | | [removed: 42] [added: 44] | |
| Item 13. | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#toc101485_18)] [added: Independence](#toc329810_18)] | | | [removed: 42] [added: 44] | |
| Item 14. | | [Principal Accountant Fees and [removed: Services](#toc101485_19)] [added: Services](#toc329810_19)] | | | [removed: 42] [added: 44] | |
| Item 15. | | [Exhibits and Financial Statement [removed: Schedules](#toc101485_20)] [added: Schedules](#toc329810_20)] | | | [removed: 43] [added: 45] | |
References in this Annual Report on Form 10-K to “we,” “us,” “our,” [removed: “Ulta,”] “Ulta Beauty,” the “Company” and similar references mean Ulta [removed: Salon, Cosmetics & Fragrance,] [added: Beauty,] Inc. and its consolidated [removed: subsidiary, Ulta Inc.,] [added: subsidiaries,] unless otherwise expressly stated or the context otherwise requires.
| | • | | 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: 30, 2016.] [added: 28, 2017, as such may be amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q.] |
10-K 1 d329810d10k.htm FORM 10-K
ULTA BEAUTY, INC.
☑ Yes ☐ No
☑ Yes ☐ No
☐ Yes ☑ No
ULTA BEAUTY, INC.
10-K 1 d101485d10k.htm FORM 10-K
ULTA SALON, COSMETICS & FRAGRANCE, INC.
Item 2. Properties
39 rewritten, 15 added, 13 removed, 26 unchanged
As of January [removed: 30, 2016,] [added: 28, 2017,] we operated [removed: 874] [added: 974] retail stores in 48 [removed: states,] [added: states and the District of Columbia,] as shown in the table below:
| Alabama | | | [removed: 14] [added: 15] | |
| Arizona | | | [removed: 24] [added: 25] | |
| Arkansas | | | [removed: 6] [added: 7] | |
| Colorado | | | [removed: 18] [added: 20] | |
| Connecticut | | | [removed: 10] [added: 12] | |
| Delaware | | | [removed: 2] [added: 3] | |
| Florida | | | [removed: 61] [added: 66] | |
| Georgia | | | [removed: 27] [added: 29] | |
| Idaho | | | [removed: 6] [added: 7] | |
| Illinois | | | [removed: 46] [added: 47] | |
| Indiana | | | [removed: 16] [added: 17] | |
| Kansas | | | [removed: 7] [added: 9] | |
| Maryland | | | [removed: 14] [added: 15] | |
| Massachusetts | | | [removed: 13] [added: 15] | |
| Michigan | | | [removed: 38] [added: 43] | |
| Minnesota | | | [removed: 12] [added: 13] | |
| Mississippi | | | [removed: 7] [added: 8] | |
| Nebraska | | | [removed: 3] [added: 4] | |
| Nevada | | | [removed: 11] [added: 14] | |
| New Hampshire | | | [removed: 6] [added: 7] | |
| New Jersey | | | [removed: 23] [added: 26] | |
| New Mexico | | | [removed: 4] [added: 6] | |
| New York | | | [removed: 32] [added: 36] | |
| North Carolina | | | [removed: 25] [added: 28] | |
| North Dakota | | | [removed: 2] [added: 3] | |
| Ohio | | | [removed: 33] [added: 37] | |
| Oklahoma | | | [removed: 11] [added: 15] | |
| Pennsylvania | | | [removed: 32] [added: 36] | |
| Tennessee | | | [removed: 16] [added: 19] | |
| Texas | | | [removed: 84] [added: 95] | |
| Utah | | | [removed: 11] [added: 12] | |
| Virginia | | | [removed: 23] [added: 24] | |
| Washington | | | [removed: 20] [added: 22] | |
| West Virginia | | | [removed: 5] [added: 6] | |
| Wisconsin | | | [removed: 16] [added: 18] | |
| Wyoming | | | [removed: 1] [added: 2] | |
[removed: As of January 30, 2016, we operated four] [added: We currently operate five] distribution [removed: facilities] [added: centers] located in Romeoville, [removed: Illinois,] [added: Illinois;] Phoenix, [removed: Arizona,] [added: Arizona;] Chambersburg, [removed: Pennsylvania and] [added: Pennsylvania;] Greenwood, [removed: Indiana.][added: Indiana; and Dallas, Texas.]
The corporate office is approximately [removed: 157,000] [added: 308,000] square feet with lease terms expiring from 2020 to 2028.
| California | | | 121 | |
| District of Columbia | | | 1 | |
| Total | | | 974 | |
Our standard distribution center leases provide for a fixed minimum annual rent and generally have a 10 or 15-year initial term with three or four renewal options with terms of five years each.
The general location, approximate size, and lease expiration dates, of our leased distribution centers at January 28, 2017, are set forth below:
| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| Location | | Approximate Square Feet | | | | Lease Expiration Date |
| Romeoville, Illinois | | | 317,000 | | | April 30, 2020 |
| Phoenix, Arizona | | | 437,000 | | | March 31, 2019 |
| Chambersburg, Pennsylvania | | | 373,000 | | | March 31, 2027 |
| Greenwood, Indiana | | | 671,000 | | | July 31, 2025 |
| Dallas, Texas | | | 671,000 | | | July 31, 2026 |
In 2016, we opened a satellite corporate office in Chicago, Illinois.
The Chicago office is approximately 23,000 square feet with lease expiration in 2024.
| California | | | 104 | |
| Total | | | 874 | |
The Romeoville warehouse is approximately 291,000 square feet.
The lease for the Romeoville warehouse expires on April 30, 2017.
The Phoenix warehouse is approximately 437,000 square feet.
The lease for the Phoenix warehouse expires on March 31, 2019 and has three renewal options with terms of five years each.
The Chambersburg warehouse is approximately 373,000 square feet.
The lease for the Chambersburg warehouse expires on March 31, 2027 and has three renewal options with terms of five years each.
The Greenwood warehouse is approximately 671,000 square feet.
The lease for the Greenwood warehouse expires on July 31, 2025 and has four renewal options with terms of five years each.
In December 2014, we entered into a lease for a distribution center located in Dallas, Texas.
The Dallas warehouse is approximately 671,000 square feet and is expected to open in fiscal 2016.
The lease expires on July 31, 2026 and has four renewal options with terms of five years each.
Item 4. Mine Safety Disclosures
7 rewritten, 1 added, 1 removed, 36 unchanged
| Mary N. Dillon | | | [removed: 54] [added: 55] | | | Chief Executive Officer and member of the Board of Directors |
| Scott M. Settersten | | | [removed: 55] [added: 56] | | | Chief Financial Officer, Treasurer and Assistant Secretary |
| Jodi J. Caro | | | [removed: 50] [added: 51] | | | General Counsel and Corporate Secretary |
| Jeffrey J. Childs | | | [removed: 58] [added: 59] | | | Chief Human Resources Officer |
| David C. Kimbell | | | [removed: 49] [added: 50] | | | Chief Merchandising and Marketing Officer |
He joined Ulta Beauty in January 2005 [removed: as a Director of Financial Reporting.]
Prior to joining Ulta Beauty, she was Vice President, General Counsel and Secretary for Integrys Energy Group, in addition to holding [added: the role of Integrys’ Chief Compliance and Ethics Officer.]
as a Director of Financial Reporting.
the role of Integrys’ Chief Compliance and Ethics Officer.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
19 rewritten, 17 added, 19 removed, 40 unchanged
The following table sets forth the high and low sales prices for our common stock on the NASDAQ Global Select Market during fiscal years [removed: 2015] [added: 2016] and [removed: 2014:][added: 2015:]
| Fiscal Year [removed: 2014] [added: 2016] | | High | | | | Low | | |
The last reported sale price of our common stock on the NASDAQ Global Select Market on March [removed: 24, 2016] [added: 23, 2017] was [removed: $191.76] [added: $281.22] per share.
As of March [removed: 24, 2016,] [added: 23, 2017,] we had [removed: 48] [added: 43] holders of record of our common stock.
No cash dividends were declared on our common stock in [removed: 2015] [added: 2016] or [removed: 2014] [added: 2015] nor have any decisions been made to pay a dividend in the [removed: foreseeable] future.
The following table sets forth repurchases of our common stock during the fourth quarter of [removed: 2015:][added: 2016:]
| (1) | There were [removed: 262,342] [added: 189,632] shares repurchased as part of our publicly announced share repurchase program during the three months ended January [removed: 30, 2016] [added: 28, 2017] and there were [removed: 538] [added: 383] shares transferred from employees in satisfaction of minimum statutory tax withholding obligations upon the vesting of restricted stock during the period. |
| (2) | On [removed: September 11, 2014,] [added: March 10, 2016,] we announced [removed: that our Board of Directors authorized a new share repurchase program (the 2014] [added: the 2016] Share Repurchase [removed: Program)] [added: Program] pursuant to which the Company may repurchase up to [removed: $300] [added: $425] million of the Company’s common stock. The [removed: 2014 Share Repurchase Program authorization revoked the previously authorized, but unused amounts of $112.7 million from our prior 2013 Share Repurchase Program. The 2014] [added: 2016] Share Repurchase Program [removed: did] [added: does] not have an expiration date and [removed: could] [added: may] be suspended or discontinued at any time. [removed: On March 12, 2015, we announced that our Board of Directors authorized an increase of $100 million to the 2014 Share Repurchase Program effective March 17, 2015.] As of January [removed: 30, 2016, $192.7] [added: 28, 2017, $101.0] million remained available under the [removed: $400] [added: $425] million [removed: 2014] [added: 2016] Share Repurchase Program. [added: On March 9, 2017, we announced the 2017 Share Repurchase Program. For additional information on the 2017 Share Repurchase Program see Note 15 to our consolidated financial statements, “Subsequent event.”] |
The following table provides information about Ulta Beauty common stock that may be issued under our equity compensation plans as of January [removed: 30, 2016.][added: 28, 2017:]
[removed: |] (1) [removed: |] Includes options issued and available for exercise and shares available for issuance in connection with past awards under the [added: Amended and Restated] 2011 Incentive Award Plan and predecessor equity incentive plans. [removed: We currently grant awards only under the 2011 Incentive Award Plan. |]
[removed: |] (2) [removed: |] Includes [removed: 939,415] [added: 830,072] shares issuable pursuant to the exercise of outstanding stock options, [removed: 143,850] [added: 141,922] shares issuable pursuant to restricted stock units and [removed: 20,252] [added: 41,305] shares issuable pursuant to performance-based units. [removed: |]
[removed: |] (3) [removed: |] Calculation of weighted-average exercise price of outstanding awards includes stock options, but does not include shares of restricted stock units or performance-based units that convert to shares of common stock for no consideration. [removed: |]
[removed: | (4) | Represents shares that are available for issuance pursuant to the 2011 Incentive Award Plan.] The shares available under the plan are reduced by 1.0 for each stock option awarded and by 1.5 for each restricted stock unit and performance-based unit awarded. [removed: |]
Set forth below is a graph comparing the cumulative total stockholder return on Ulta Beauty’s common stock with the NASDAQ Global Select Market Composite Index (NQGS) and the S&P Retail Index (RLX) for the period covering January [removed: 29, 2011] [added: 28, 2012] through the end of Ulta Beauty’s fiscal year ended January [removed: 30, 2016.][added: 28, 2017.]
The graph assumes an investment of $100 made at the closing of trading on January [removed: 29, 2011,] [added: 28, 2012] in (i) Ulta Beauty’s common stock, (ii) the stocks comprising the NQGS and (iii) stocks comprising the RLX.
[removed: All values assume reinvestment] of the full amount of all dividends, if any, into additional shares of the same class of equity securities at the frequency with which dividends are paid on such securities during the applicable time period.
[removed: ][added: ]
| | | [added: Fiscal year ended] | | | | [removed: Fiscal year ended] | | | | | | | | | | | | | | | | | | |
| Company / Index | | January [removed: 29, 2011 | | | | January] 28, 2012 | | | | February 2, 2013 | | | | February 1, 2014 | | | | January 31, 2015 | | | | January 30, 2016 | | | [added: | January 28, 2017 | | |]
| First quarter | | $ | 212.92 | | | $ | 146.77 | |
| Second quarter | | | 262.12 | | | | 202.28 | |
| Third quarter | | | 278.63 | | | | 230.10 | |
| Fourth quarter | | | 273.99 | | | | 225.13 | |
| October 30, 2016 to November 26, 2016 | | | 87,925 | | | $ | 237.04 | | | | 87,925 | | | $ | 127,458 | |
| November 27, 2016 to December 24, 2016 | | | 49,927 | | | | 257.05 | | | | 49,544 | | | | 114,721 | |
| December 25, 2016 to January 28, 2017 | | | 52,163 | | | | 262.68 | | | | 52,163 | | | | 101,019 | |
| 13 weeks ended January 28, 2017 | | | 190,015 | | | $ | 249.34 | | | | 189,632 | | | $ | 101,019 | |
| Equity compensation plans approved by security holders(1) | | | 1,013,299 | | | $ | 120.78 | | | | 3,912,453 | |
| Total | | | 1,013,299 | | | $ | 120.78 | | | | 3,912,453 | |
We currently grant awards only under the Amended and Restated 2011 Incentive Award Plan.
(4) Represents shares that are available for issuance pursuant to the Amended and Restated 2011 Incentive Award Plan.
All values assume reinvestment
| Ulta Beauty | | $ | 100.00 | | | $ | 129.89 | | | $ | 113.09 | | | $ | 175.20 | | | $ | 240.57 | | | $ | 361.55 | |
| NASDAQ Global Select Market Com | | | 100.00 | | | | 111.65 | | | | 145.39 | | | | 164.87 | | | | 165.09 | | | | 200.78 | |
| S&P 500 Retailing Index | | | 100.00 | | | | 125.91 | | | | 156.47 | | | | 185.81 | | | | 214.72 | | | | 250.85 | |
##### [Table of Contents](#toc)
| --- | --- |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| First quarter | | $ | 104.30 | | | $ | 83.50 | |
| Second quarter | | | 97.11 | | | | 84.79 | |
| Third quarter | | | 121.56 | | | | 92.45 | |
| Fourth quarter | | | 136.08 | | | | 118.66 | |
| November 1, 2015 to November 28, 2015 | | | 83,970 | | | $ | 167.90 | | | | 83,970 | | | $ | 224,705 | |
| November 29, 2015 to December 26, 2015 | | | 74,821 | | | | 179.46 | | | | 74,821 | | | | 211,277 | |
| December 27, 2015 to January 30, 2016 | | | 104,089 | | | | 179.62 | | | | 103,551 | | | | 192,680 | |
| 13 weeks ended January 30, 2016 | | | 262,880 | | | | 175.83 | | | | 262,342 | | | | 192,680 | |
On March 10, 2016, we announced that the Board of Directors authorized a new share repurchase program (the 2016 Share Repurchase Program) pursuant to which the Company may repurchase up to $425 million of the Company’s common stock.
The 2016 Share Repurchase Program authorization revokes the previously authorized but unused amounts from the 2014 Share Repurchase Program.
As part of the 2016 Share Repurchase Program, the Company entered into an Accelerated Share Repurchase agreement with Goldman, Sachs & Co. to repurchase $200 million of the Company’s common stock.
For additional information, see Note 16 to our consolidated financial statements, “Subsequent Event” included in this Annual Report on Form 10-K.
| Equity compensation plans approved by security holders(1) | | | 1,103,517 | | | $ | 104.58 | | | | 4,095,792 | |
| Total | | | 1,103,517 | | | $ | 104.58 | | | | 4,095,792 | |
| Ulta | | $ | 100.00 | | | $ | 205.60 | | | $ | 267.05 | | | $ | 232.51 | | | $ | 360.20 | | | $ | 494.59 | |
| NASDAQ Global Select Market Com | | | 100.00 | | | | 104.69 | | | | 116.88 | | | | 152.20 | | | | 172.59 | | | | 172.82 | |
| S&P 500 Retailing Index | | | 100.00 | | | | 111.34 | | | | 140.19 | | | | 174.22 | | | | 206.88 | | | | 239.07 | |
Item 6. Selected Financial Data
35 rewritten, 0 added, 0 removed, 31 unchanged
| | | January [added: 28, 2017 | | | | January] 30, 2016 | | | | January 31, 2015 | | | | February 1, 2014 | | | | February 2, 2013 | | | [removed: | January 28, 2012 | | |]
| Net sales(2) | | $ | [removed: 3,924,116] [added: 4,854,737] | | | $ | [removed: 3,241,369] [added: 3,924,116] | | | $ | [removed: 2,670,573] [added: 3,241,369] | | | $ | [removed: 2,220,256] [added: 2,670,573] | | | $ | [removed: 1,776,151] [added: 2,220,256] | |
| Cost of sales | | | [removed: 2,539,783] [added: 3,107,508] | | | | [removed: 2,104,582] [added: 2,539,783] | | | | [removed: 1,729,325] [added: 2,104,582] | | | | [removed: 1,436,582] [added: 1,729,325] | | | | [removed: 1,159,311] [added: 1,436,582] | |
| Gross profit | | | [removed: 1,384,333] [added: 1,747,229] | | | | [removed: 1,136,787] [added: 1,384,333] | | | | [removed: 941,248] [added: 1,136,787] | | | | [removed: 783,674] [added: 941,248] | | | | [removed: 616,840] [added: 783,674] | |
| Selling, general and administrative expenses | | | [removed: 863,354] [added: 1,073,834] | | | | [removed: 712,006] [added: 863,354] | | | | [removed: 596,390] [added: 712,006] | | | | [removed: 488,880] [added: 596,390] | | | | [removed: 410,658] [added: 488,880] | |
| Pre-opening expenses | | | [removed: 14,682] [added: 18,571] | | | | [removed: 14,366] [added: 14,682] | | | | [removed: 17,270] [added: 14,366] | | | | [removed: 14,816] [added: 17,270] | | | | [removed: 9,987] [added: 14,816] | |
| Operating income | | | [removed: 506,297] [added: 654,824] | | | | [removed: 410,415] [added: 506,297] | | | | [removed: 327,588] [added: 410,415] | | | | [removed: 279,978] [added: 327,588] | | | | [removed: 196,195] [added: 279,978] | |
| Interest (income) expense, net | | | [removed: (1,143] [added: (890] | ) | | | [removed: (894] [added: (1,143] | ) | | | [removed: (118] [added: (894] | ) | | | [removed: 185] [added: (118] | [added: )] | | | [removed: 587] [added: 185] | |
| Income before income taxes | | | [removed: 507,440] [added: 655,714] | | | | [removed: 411,309] [added: 507,440] | | | | [removed: 327,706] [added: 411,309] | | | | [removed: 279,793] [added: 327,706] | | | | [removed: 195,608] [added: 279,793] | |
| Income tax expense | | | [removed: 187,432] [added: 245,954] | | | | [removed: 154,174] [added: 187,432] | | | | [removed: 124,857] [added: 154,174] | | | | [removed: 107,244] [added: 124,857] | | | | [removed: 75,344] [added: 107,244] | |
| Net income | | $ | [removed: 320,008] [added: 409,760] | | | $ | [removed: 257,135] [added: 320,008] | | | $ | [removed: 202,849] [added: 257,135] | | | $ | [removed: 172,549] [added: 202,849] | | | $ | [removed: 120,264] [added: 172,549] | |
| Basic | | $ | [removed: 5.00] [added: 6.55] | | | $ | [removed: 4.00] [added: 5.00] | | | $ | [removed: 3.17] [added: 4.00] | | | $ | [removed: 2.73] [added: 3.17] | | | $ | [removed: 1.96] [added: 2.73] | |
| Diluted | | $ | [removed: 4.98] [added: 6.52] | | | $ | [removed: 3.98] [added: 4.98] | | | $ | [removed: 3.15] [added: 3.98] | | | $ | [removed: 2.68] [added: 3.15] | | | $ | [removed: 1.90] [added: 2.68] | |
| Basic | | | [removed: 63,949] [added: 62,519] | | | | [removed: 64,335] [added: 63,949] | | | | [removed: 63,992] [added: 64,335] | | | | [removed: 63,250] [added: 63,992] | | | | [removed: 61,259] [added: 63,250] | |
| Diluted | | | [removed: 64,275] [added: 62,851] | | | | [removed: 64,651] [added: 64,275] | | | | [removed: 64,461] [added: 64,651] | | | | [removed: 64,396] [added: 64,461] | | | | [removed: 63,334] [added: 64,396] | |
| Dividends declared per common share | | $ | — | | | $ | — | | | $ | — | | | $ | [removed: 1.00] [added: —] | | | $ | [removed: —] [added: 1.00] | |
| Retail and salon comparable sales | | | [removed: 10.0] [added: 13.4] | % | | | [removed: 8.1] [added: 10.0] | % | | | [removed: 6.1] [added: 8.1] | % | | | [removed: 8.8] [added: 6.1] | % | | | [removed: 10.9] [added: 8.8] | % |
| E-commerce comparable sales | | | [removed: 47.5] [added: 56.2] | % | | | [removed: 56.4] [added: 47.5] | % | | | [removed: 76.6] [added: 56.4] | % | | | [removed: 30.7] [added: 76.6] | % | | | [removed: 37.8] [added: 30.7] | % |
| Total comparable sales increase | | | [removed: 11.8] [added: 15.8] | % | | | [removed: 9.9] [added: 11.8] | % | | | [removed: 7.9] [added: 9.9] | % | | | [removed: 9.3] [added: 7.9] | % | | | [removed: 11.5] [added: 9.3] | % |
| Number of stores end of year | | | [removed: 874] [added: 974] | | | | [removed: 774] [added: 874] | | | | [removed: 675] [added: 774] | | | | [removed: 550] [added: 675] | | | | [removed: 449] [added: 550] | |
| Total square footage end of year | | | [removed: 9,225,957] [added: 10,271,184] | | | | [removed: 8,182,404] [added: 9,225,957] | | | | [removed: 7,158,286] [added: 8,182,404] | | | | [removed: 5,847,393] [added: 7,158,286] | | | | [removed: 4,747,148] [added: 5,847,393] | |
| Total square footage per store(4) | | | [removed: 10,556] [added: 10,545] | | | | [removed: 10,572] [added: 10,556] | | | | [removed: 10,605] [added: 10,572] | | | | [removed: 10,632] [added: 10,605] | | | | [removed: 10,573] [added: 10,632] | |
| Average total square footage(5) | | | [removed: 8,724,581] [added: 9,641,367] | | | | [removed: 7,690,742] [added: 8,724,581] | | | | [removed: 6,555,960] [added: 7,690,742] | | | | [removed: 5,315,653] [added: 6,555,960] | | | | [removed: 4,413,236] [added: 5,315,653] | |
| [removed: Net] [added: Retail] sales per average total square foot(6) | | $ | [removed: 450] [added: 468] | | | $ | [removed: 421] [added: 424] | | | $ | [removed: 407] [added: 402] | | | $ | [removed: 418] [added: 393] | | | $ | [removed: 402] [added: 407] | |
| Capital expenditures | | | [removed: 299,167] [added: 373,747] | | | | [removed: 249,067] [added: 299,167] | | | | [removed: 226,024] [added: 249,067] | | | | [removed: 188,578] [added: 226,024] | | | | [removed: 128,636] [added: 188,578] | |
| Depreciation and amortization | | | [removed: 165,049] [added: 210,295] | | | | [removed: 131,764] [added: 165,049] | | | | [removed: 106,283] [added: 131,764] | | | | [removed: 88,233] [added: 106,283] | | | | [removed: 75,931] [added: 88,233] | |
| Repurchase of common shares | | | [removed: 167,396] [added: 344,275] | | | | [removed: 39,923] [added: 167,396] | | | | [removed: 37,337] [added: 39,923] | | | | [removed: —] [added: 37,337] | | | | — | |
| Cash and cash equivalents | | $ | [removed: 345,840] [added: 385,010] | | | $ | [removed: 389,149] [added: 345,840] | | | $ | [removed: 419,476] [added: 389,149] | | | $ | [removed: 320,475] [added: 419,476] | | | $ | [removed: 253,738] [added: 320,475] | |
| Short-term investments | | | [removed: 130,000] [added: 30,000] | | | | [removed: 150,209] [added: 130,000] | | | | [removed: —] [added: 150,209] | | | | — | | | | — | |
| Working capital(7) | | | [removed: 978,946] [added: 1,006,894] | | | | [removed: 900,761] [added: 978,946] | | | | [removed: 735,886] [added: 900,761] | | | | [removed: 568,257] [added: 735,886] | | | | [removed: 415,377] [added: 568,257] | |
| Property and equipment, net | | | [removed: 847,600] [added: 1,004,358] | | | | [removed: 717,159] [added: 847,600] | | | | [removed: 595,736] [added: 717,159] | | | | [removed: 483,059] [added: 595,736] | | | | [removed: 376,985] [added: 483,059] | |
| Total assets | | | [removed: 2,230,918] [added: 2,551,878] | | | | [removed: 1,983,170] [added: 2,230,918] | | | | [removed: 1,602,727] [added: 1,983,170] | | | | [removed: 1,275,249] [added: 1,602,727] | | | | [removed: 957,217] [added: 1,275,249] | |
| Total stockholders’ equity | | | [removed: 1,442,886] [added: 1,550,218] | | | | [removed: 1,247,509] [added: 1,442,886] | | | | [removed: 1,003,094] [added: 1,247,509] | | | | [removed: 786,942] [added: 1,003,094] | | | | [removed: 584,704] [added: 786,942] | |
| (6) | [removed: Net] [added: Retail] sales per average total square foot was [removed: calculated] [added: calculated, for all years presented,] by dividing net [removed: sales] [added: sales, excluding e-commerce sales,] for the year by the average square footage for those stores open during each year. [added: In prior years we calculated this metric using total net sales, including e-commerce sales.] The [added: Company believes that excluding e-commerce] sales [added: more appropriately reflects the Company’s retail store productivity. Net sales per average square foot calculated using total net sales, including e-commerce sales, would have been $504, $450, $421, $407, and $418,] for [added: fiscal years 2016, 2015, 2014, 2013 and 2012, respectively. The sales for] the 53rd week of fiscal 2012 were approximately $55 million. |
| (7) | The Company prospectively adopted Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes, in the fourth quarter of fiscal 2015. As a result of this [removed: adoption] [added: adoption,] at January [added: 28, 2017 and January] 30, 2016, current deferred tax assets were classified as non-current liabilities. |
Item 8. Financial Statements and Supplementary Data
1 rewritten, 0 added, 1 removed, 0 unchanged
See the index, financial statements and notes to financial statements included under Item 15, “Exhibits and Financial Statement [removed: Schedules”.][added: Schedules.”]
##### [Table of Contents](#toc)
Item 9A. Controls and Procedures
6 rewritten, 1 added, 0 removed, 5 unchanged
Based on management’s evaluation as of January [removed: 30, 2016,] [added: 28, 2017,] 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 [removed: Securities and Exchange Commission’s] [added: SEC’s] rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Internal control over financial reporting is a process designed by, or under the supervision of, the principal executive officer and principal financial officer and effected by the Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with [removed: generally accepted accounting principles in the United States of America.][added: GAAP.]
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: 30, 2016,] [added: 28, 2017,] based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO).
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: 30, 2016.][added: 28, 2017.]
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: 30, 2016] [added: 28, 2017] 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: 30, 2016] [added: 28, 2017] that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
##### [Table of Contents](#toc)
Item 9B. Other Information
0 rewritten, 13 added, 1 removed, 1 unchanged
On March 24, 2017, our Board of Directors adopted an Executive Change in Control and Severance Plan (the CIC Plan), which provides for the payment of the following severance and other benefits to our executive officers and certain other officers (collectively, the executives) in the event of a termination of employment with Ulta Beauty without “cause” or by the executive for “good reason” (as each is defined in the CIC Plan), in either case (1) following the announcement of a “change in control” (as defined in the CIC Plan) or (2) on or within eighteen months following a change in control:
| | • | | a lump sum cash payment of a multiple of the sum of the executive’s salary plus bonus (where “salary” is an amount equal to the greater of the executive’s salary (a) on the date of termination or (b) on the consummation of the change in control and where “bonus” is an amount equal to the greater of (a) the executive’s target bonus on the date of termination, (b) executive’s target bonus on the consummation of the change in control or (c) the actual anticipated bonus executive would receive based on performance as of the change in control). The multiplier to be applied varies based on the executive’s position (three times (3x) multiplier for the Chief Executive Officer; two times (2x) multiplier for our other executive officers, including all of our named executive officers; and a one time (1x) multiplier for other selected executives and key employees. The compensation committee of our Board of Directors will designate each year who is eligible to participate in the CIC Plan and his or her multiple level; |
| --- | --- | --- | --- |
| | • | | accelerated vesting of all outstanding equity awards held by the executives that vest solely based on the passage of time; |
| --- | --- | --- | --- |
| | • | | accelerated vesting of outstanding performance-based equity held by the executives based on the greater of (a) target performance levels or (b) actual shares that would have been earned for performance through the date of the change in control; and |
| --- | --- | --- | --- |
| | • | | Company-paid COBRA premium payments for up to eighteen months following the termination date. |
| --- | --- | --- | --- |
The executives’ right to receive the severance payments and benefits described above is subject to his or her delivery and non-revocation of an effective general release of claims in favor of the Company and the executive’s continued compliance with applicable restrictive covenants.
In addition, to the extent that any change in control payment or benefit would be subject to an excise tax imposed in connection with Section 4999 of the Internal Revenue Code, such payments and/or benefits may be subject to a “best net” reduction to the extent necessary so that the executive receives the greater of the (i) net amount of the change in control payments and benefits reduced such that such payments and benefits will not be subject to the excise tax and (ii) net amount of the change in control payments and benefits without such reduction.
The CIC Plan replaces in full and supersedes any other change in control protections provided to the executives, including without limitation, any individual letters or other plans.
The foregoing description of the CIC Plan is qualified in its entirety by reference to the full text of the CIC Plan, a copy of which is filed herewith as Exhibit 10.16 and is incorporated herein by reference.
None.
Item 10. Directors, Executive Officers and Corporate Governance
2 rewritten, 0 added, 0 removed, 6 unchanged
The information required by this item with respect to our executive officers is set forth after Part I, Item 4 of this Annual Report on Form 10-K under the caption “Executive Officers of the Registrant.” The additional information required by this item is included under the captions “Corporate Governance and the Board of [added: Directors – Election of Directors,” “Independent Registered Public Accounting Firm and Audit Committee –]
[removed: Directors – Election of Directors,” “Independent Registered Public Accounting Firm and] Audit [removed: Committee – Audit] Committee” and “Stock – Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement for our [removed: 2016] [added: 2017] Annual Meeting of Stockholders (the Proxy Statement) and is hereby incorporated herein by reference.
Item 11. Executive Compensation
1 rewritten, 0 added, 0 removed, 1 unchanged
The information required by this item is included under the captions “Compensation Committee Report and Compensation Discussion and Analysis” and “Corporate Governance and the Board of Directors – Non-Executive Director Compensation for Fiscal [removed: 2015”] [added: 2016”] in the Proxy Statement and is hereby incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
1 rewritten, 0 added, 0 removed, 2 unchanged
The information required by this item with respect to compensation plans under which our equity securities are authorized for issuance as of January [removed: 30, 2016] [added: 28, 2017] is set forth in Item 5 of this Annual Report on Form 10-K under the caption “Securities authorized for issuance under equity compensation plans.”
Item 13. Certain Relationships and Related Transactions, and Director Independence
1 rewritten, 0 added, 0 removed, 1 unchanged
The information required by this item is included under the captions “Corporate Governance and the Board of Directors – Corporate Governance – Independence,” [removed: Compensation] [added: “Compensation] Committee Report and Compensation Discussion and Analysis – Compensation Committee Interlocks and Insider Participation” and “Certain Relationships and Transactions” in the Proxy Statement and is hereby incorporated by reference.
Item 14. Principal Accountant Fees and Services
1 rewritten, 0 added, 0 removed, 3 unchanged
The information required by this item is included under the caption “Independent Registered Public Accounting Firm and Audit Committee [removed: —] [added: –] Fees to Independent Registered Public Accounting Firm” in the Proxy Statement and is hereby incorporated by reference.
Item 15. Exhibits and Financial Statement Schedules
323 rewritten, 190 added, 92 removed, 502 unchanged
| [Report of Independent Registered Public Accounting [removed: Firm](#tx101485_1)] [added: Firm](#tx329810_101)] | | | [removed: 44] [added: 46] | |
| [Consolidated Balance [removed: Sheets](#tx101485_2)] [added: Sheets](#tx329810_102)] | | | [removed: 46] [added: 48] | |
| [Consolidated Statements of [removed: Income](#tx101485_3)] [added: Income](#tx329810_103)] | | | [removed: 47] [added: 49] | |
| [Consolidated Statements of Cash [removed: Flows](#tx101485_4)] [added: Flows](#tx329810_104)] | | | [removed: 48] [added: 50] | |
| [Consolidated Statements of Stockholders’ [removed: Equity](#tx101485_5)] [added: Equity](#tx329810_105)] | | | [removed: 49] [added: 51] | |
| [Notes to Consolidated Financial [removed: Statements](#tx101485_6)] [added: Statements](#tx329810_106)] | | | [removed: 50] [added: 52] | |
[removed: The] [added: All other financial statement] schedules required by Form 10-K have been omitted because they were [removed: inapplicable, included in the notes to the consolidated financial statements,] [added: inapplicable] or otherwise not required under the instructions contained in Regulation S-X.
[added: On January 29, 2017,] Ulta Salon, Cosmetics & Fragrance, Inc. [added: implemented a holding company reorganization.]
We have audited the [removed: accompanying] consolidated balance sheets of Ulta [removed: Salon, Cosmetics & Fragrance,] [added: Beauty,] Inc. [added: (the Company)] as of January [removed: 30, 2016] [added: 28, 2017] and January [removed: 31, 2015,] [added: 30, 2016,] and the related consolidated statements of income, cash flows, and stockholders’ equity for each of the three years in the period ended January [removed: 30, 2016.][added: 28, 2017.]
These financial statements [added: and schedules] are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements [added: and schedule] based on our audits.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ulta [removed: Salon, Cosmetics & Fragrance,] [added: Beauty,] Inc. at January [removed: 30, 2016] [added: 28, 2017] and January [removed: 31, 2015,] [added: 30, 2016,] and the [removed: consolidated] results of its operations and its cash flows for each of the three years in the period ended January [removed: 30, 2016,] [added: 28, 2017,] 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 [removed: Salon, Cosmetics & Fragrance,] [added: Beauty,] Inc.’s internal control over financial reporting as of January [removed: 30, 2016,] [added: 28, 2017,] based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March [removed: 30, 2016,] [added: 28, 2017,] expressed an unqualified opinion thereon.
[removed: |] /s/ Ernst & Young LLP [removed: |]
[removed: |] Chicago, Illinois [removed: |]
We have audited Ulta [removed: Salon, Cosmetics & Fragrance,] [added: Beauty,] Inc.’s internal control over financial reporting as of January [removed: 30, 2016,] [added: 28, 2017,] based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
Ulta [removed: Salon, Cosmetics & Fragrance,] [added: Beauty,] Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s [added: Annual] Report on Internal Control over Financial Reporting.
In our opinion, Ulta [removed: Salon, Cosmetics & Fragrance,] [added: Beauty,] Inc. maintained, in all material respects, effective internal control over financial reporting as of January [removed: 30, 2016,] [added: 28, 2017,] based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Ulta [removed: Salon, Cosmetics & Fragrance,] [added: Beauty,] Inc. as of January [removed: 30, 2016] [added: 28, 2017] and January [removed: 31, 2015,] [added: 30, 2016,] and the related consolidated statements of income, cash flows and stockholders’ equity for each of the three years in the period ended January [removed: 30, 2016] [added: 28, 2017] and our report dated March [removed: 30, 2016] [added: 28, 2017] expressed an unqualified opinion thereon.
| (In thousands, except per share data) | | January [added: 28, 2017 | | | | January] 30, 2016 | | | | January 31, 2015 | | |
| Cash and cash equivalents [added: at beginning of year] | | [removed: $] | 345,840 | | | [removed: $] | 389,149 | | [added: | | 419,476 | |]
| Short-term investments | | | [removed: 130,000] [added: 30,000] | | | | [removed: 150,209] [added: 130,000] | |
| Receivables, net | | | [removed: 64,992] [added: 88,631] | | | | [removed: 52,440] [added: 64,992] | |
| Merchandise inventories, net | | | [removed: 761,793] [added: 943,975] | | | | [removed: 581,229] [added: 761,793] | |
| Prepaid expenses and other current assets | | | [removed: 72,548] [added: 88,621] | | | | [removed: 66,548] [added: 72,548] | |
| Deferred income taxes | | | [removed: —] [added: 86,498] | | | | [removed: 20,780] [added: 59,527] | |
| Total current assets | | | [removed: 1,375,173] [added: 1,536,237] | | | | [removed: 1,260,355] [added: 1,375,173] | |
| Property and equipment, net | | | [removed: 847,600] [added: 1,004,358] | | | | [removed: 717,159] [added: 847,600] | |
| Deferred compensation plan assets | | | [removed: 8,145] [added: 11,283] | | | | [removed: 5,656] [added: 8,145] | |
| Total assets | | $ | [removed: 2,230,918] [added: 2,551,878] | | | $ | [removed: 1,983,170] [added: 2,230,918] | |
| Accounts payable | | $ | [removed: 196,174] [added: 259,518] | | | $ | [removed: 190,778] [added: 196,174] | |
| Accrued liabilities | | | [removed: 187,351] [added: 260,854] | | | | [removed: 149,412] [added: 187,351] | |
| Accrued income taxes | | | [removed: 12,702] [added: 8,971] | | | | [removed: 19,404] [added: 12,702] | |
| Total current liabilities | | | [removed: 396,227] [added: 529,343] | | | | [removed: 359,594] [added: 396,227] | |
| Deferred rent | | | [removed: 321,789] [added: 366,191] | | | | [removed: 294,127] [added: 321,789] | |
| Other long-term liabilities | | | [removed: 10,489] [added: 19,628] | | | | [removed: 7,442] [added: 10,489] | |
| Total liabilities | | | [removed: 788,032] [added: 1,001,660] | | | | [removed: 735,661] [added: 788,032] | |
| Common stock, $.01 par value, 400,000 shares authorized; [removed: 64,131] [added: 62,733] and [removed: 64,762] [added: 64,131] shares issued; [removed: 63,540] [added: 62,129] and [removed: 64,184] [added: 63,540] shares outstanding; at January [removed: 30, 2016,] [added: 28, 2017,] and January [removed: 31, 2015,] [added: 30, 2016,] respectively | | | [removed: 641] [added: 627] | | | | [removed: 647] [added: 641] | |
| Treasury stock-common, at cost | | | [removed: (11,685] [added: (14,524] | ) | | | [removed: (9,713] [added: (11,685] | ) |
| Additional paid-in capital | | | [removed: 621,715] [added: 658,330] | | | | [removed: 576,982] [added: 621,715] | |
| [Schedule II – Valuation and Qualifying Accounts](#tx329810_107) | | | 69 | |
Ulta Beauty, Inc.
Our audits also included the financial statement schedule listed in the Index at Item 15.
March 28, 2017
Ulta Beauty, Inc.
/s/ Ernst & Young LLP
Chicago, Illinois
March 28, 2017
Ulta Beauty, Inc.
| (In thousands, except per share data) | | January 28, 2017 | | | | January 30, 2016 | | |
| Cash and cash equivalents | | $ | 385,010 | | | $ | 345,840 | |
Ulta Beauty, Inc.
Ulta Beauty, Inc.
| Net income | | $ | 409,760 | | | $ | 320,008 | | | $ | 257,135 | |
Ulta Beauty, Inc.
| Net income | | | — | | | | — | | | | — | | | | — | | | | — | | | | 409,760 | | | | 409,760 | |
| Repurchase of common shares | | | (1,639 | ) | | | (16 | ) | | | — | | | | — | | | | (8,069 | ) | | | (336,190 | ) | | | (344,275 | ) |
| Balance — January 28, 2017 | | | 62,733 | | | $ | 627 | | | | (604 | ) | | $ | (14,524 | ) | | $ | 658,330 | | | $ | 905,785 | | | $ | 1,550,218 | |
Ulta Beauty, Inc.
Pursuant to which Ulta Beauty, Inc., which was incorporated as a Delaware corporation in December 2016, became the successor to Ulta Salon, Cosmetics & Fragrance, Inc., the former publicly-traded company and now a wholly owned subsidiary of Ulta Beauty.
As of January 28, 2017, the Company operated 974 stores in 48 states and the District of Columbia.
All amounts are stated in thousands, with the exception of per share amounts and number of stores.
The Company offers a balanced portfolio across five primary categories: (1) cosmetics; (2) skincare, bath and fragrance; (3) haircare products and styling tools; (4) salon services; and (5) other, which includes nail products and accessories.
The following table sets forth the approximate percentage of net sales attributed to each category for the periods indicated:
| | | January 28, 2017 | | | | January 30, 2016 | | | | January 31, 2015 | | |
| Cosmetics | | | 51 | % | | | 46 | % | | | 42 | % |
| Skincare, Bath & Fragrance | | | 20 | % | | | 23 | % | | | 24 | % |
| Haircare Products & Styling Tools | | | 20 | % | | | 22 | % | | | 24 | % |
| Salon Services | | | 5 | % | | | 5 | % | | | 5 | % |
| Other | | | 4 | % | | | 4 | % | | | 5 | % |
| | | | 100 | % | | | 100 | % | | | 100 | % |
assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the accounting period.
The Company recognized $3,124 of fixed asset impairment charges related to store closures in Chicago, Illinois and Denham Springs, Louisiana in fiscal 2016, which is included in selling, general and administrative (SG&A) expenses in the statements of income.
No significant impairment charges were recognized in fiscal 2015 or 2014.
_Credit Cards_
During 2016, the Company entered into certain agreements (the Agreements) with third parties to provide our guests with private label and/or co-branded credit cards (collectively, the Credit Cards).
The private label credit card can be used at any of our store locations and online and the co-branded credit card can be used anywhere the co-branded card is accepted.
A third-party financing company is the sole owner of the accounts and underwrites the credit issued under the Credit Card programs.
The Company receives payments and reimbursements of expenses in accordance with the Agreements and based on usage of the Credit Cards.
We recognize income for such cash receipts when the amounts are fixed or determinable and collectability is reasonably assured, which is generally the time at which the actual usage of the Credit Cards or specified transaction occurs.
| --- | --- |
| |
| --- |
| March 30, 2016 |
Ulta Salon, Cosmetics & Fragrance, Inc.
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Deferred income taxes | | | 59,527 | | | | 74,498 | |
| Cash and cash equivalents at beginning of year | | | 389,149 | | | | 419,476 | | | | 320,475 | |
| Balance — February 2, 2013 | | | 64,565 | | | $ | 645 | | | | (556 | ) | | $ | (7,494 | ) | | $ | 496,930 | | | $ | 296,861 | | | $ | 786,942 | |
| Net income | | | — | | | | — | | | | — | | | | — | | | | — | | | | 202,849 | | | | 202,849 | |
| Repurchase of common shares | | | (501 | ) | | | (5 | ) | | | — | | | | — | | | | — | | | | (37,332 | ) | | | (37,337 | ) |
As of January 30, 2016, the Company operated 874 stores in 48 states.
receivables and does not accrue interest.
No significant impairments charges have been recognized in fiscal 2015, 2014 or 2013.
and how revenue is recognized.
In June 2014, the FASB issued ASU No. 2014-12, Compensation – Stock Compensation, Accounting Standards Codification Topic 718.
The Company will not be affected by this guidance as the Company currently accounts for these awards in a manner consistent with the new guidance.
Early adoption is permitted.
The standard will take effect for public companies for annual reporting periods beginning after December 15, 2018, including interim reporting periods.
In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes.
The new standard requires that all deferred tax assets and liabilities, and any related valuation allowance, be reported as non-current in a classified balance sheet instead of separating deferred taxes and related valuation allowances into current and non-current amounts.
The standard will take effect for public companies for annual reporting periods beginning after December 15, 2016, including interim reporting periods.
As permitted, the Company adopted this standard, prospectively, in the fourth quarter of its fiscal year ended January 30, 2016.
As a result of the adoption at January 30, 2016, current deferred income tax assets were classified as non-current liabilities on the Company’s consolidated balance sheet at January 30, 2016.
| | | | 1,501,955 | | | | 1,243,249 | |
A number of the Company’s store leases provide for contingent rentals based upon sales.
Contingent rent amounts were insignificant in fiscal 2015, 2014 and 2013.
| 2016 | | $ | 238,837 | |
| 2017 | | | 240,654 | |
| 2018 | | | 225,187 | |
| 2019 | | | 209,867 | |
| 2020 | | | 196,952 | |
| 2021 and thereafter | | | 647,636 | |
Payments under these commitments were $28,044 and $38,212 for fiscal 2015 and 2014, respectively.
_General litigation_ — The Company is the defendant in four putative employment class action lawsuits that allege that the Company violated various provisions of California’s labor laws.
All four of these lawsuits seek to recover damages and penalties as a result of these alleged practices.
The Company has agreed to settle one of the suits for $1,750 (a significant portion of which will be allocated to attorneys’ fees for plaintiff’s counsel).
The settlement, which is fully reserved for, remains subject to final court approval; preliminary approval was granted on March 11, 2016.
Under the terms of the settlement, the Company admits no liability and the parties fully and finally release all claims.
An excerpt. Shown here: 40 of 323 rewritten, 40 of 190 added and 40 of 92 removed. The counts are complete. For every sentence, read Item 15. Exhibits and Financial Statement Schedules in the FY2017 filing and the FY2016 filing.