þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Delaware | 36-3685240 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
1000 Remington Blvd., Suite 120 | 60440 | |
Bolingbrook, Illinois | (Zip code) | |
(Address of principal executive offices) |
Large accelerated filer þ | Accelerated filer o | Non- accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
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EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
2
July 30, | January 29, | July 31, | ||||||||||
(In thousands) | 2011 | 2011 | 2010 | |||||||||
(unaudited) | (unaudited) | |||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 142,545 | $ | 111,185 | $ | 15,916 | ||||||
Receivables, net |
19,939 | 22,292 | 11,418 | |||||||||
Merchandise inventories, net |
258,752 | 218,516 | 224,329 | |||||||||
Prepaid expenses and other current assets |
34,114 | 32,790 | 30,989 | |||||||||
Prepaid income taxes |
| 10,684 | 7,280 | |||||||||
Deferred income taxes |
8,922 | 8,922 | 8,060 | |||||||||
Total current assets |
464,272 | 404,389 | 297,992 | |||||||||
Property and equipment, net |
351,576 | 326,099 | 301,333 | |||||||||
Total assets |
$ | 815,848 | $ | 730,488 | $ | 599,325 | ||||||
Liabilities and stockholders equity |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 81,380 | $ | 87,093 | $ | 61,316 | ||||||
Accrued liabilities |
73,745 | 76,264 | 68,833 | |||||||||
Accrued income taxes |
483 | | | |||||||||
Total current liabilities |
155,608 | 163,357 | 130,149 | |||||||||
Deferred rent |
153,159 | 134,572 | 120,313 | |||||||||
Deferred income taxes |
29,049 | 30,026 | 20,952 | |||||||||
Total liabilities |
337,816 | 327,955 | 271,414 | |||||||||
Commitments and contingencies (note 3) |
3
July 30, | January 29, | July 31, | ||||||||||
(In thousands, except per share data) | 2011 | 2011 | 2010 | |||||||||
(unaudited) | (unaudited) | |||||||||||
Stockholders equity: |
||||||||||||
Common stock, $.01 par value, 400,000 shares
authorized; 61,693, 60,707 and 59,365 shares
issued; 61,188, 60,202 and 58,860 shares
outstanding; at July 30, 2011 (unaudited),
January 29, 2011 and July 31, 2010
(unaudited), respectively |
$ | 617 | $ | 606 | $ | 594 | ||||||
Treasury stock-common, at cost |
(4,179 | ) | (4,179 | ) | (4,179 | ) | ||||||
Additional paid-in capital |
367,863 | 339,576 | 309,273 | |||||||||
Retained earnings |
113,731 | 66,530 | 22,223 | |||||||||
Total stockholders equity |
478,032 | 402,533 | 327,911 | |||||||||
Total liabilities and stockholders equity |
$ | 815,848 | $ | 730,488 | $ | 599,325 | ||||||
4
Three months ended | Six months ended | |||||||||||||||
July 30, | July 31, | July 30, | July 31, | |||||||||||||
(In thousands, except per share data) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net sales |
$ | 394,567 | $ | 321,804 | $ | 780,573 | $ | 642,000 | ||||||||
Cost of sales |
260,280 | 217,846 | 511,381 | 433,507 | ||||||||||||
Gross profit |
134,287 | 103,958 | 269,192 | 208,493 | ||||||||||||
Selling, general and administrative expenses |
90,811 | 79,909 | 185,426 | 160,638 | ||||||||||||
Pre-opening expenses |
3,816 | 1,793 | 5,046 | 2,267 | ||||||||||||
Operating income |
39,660 | 22,256 | 78,720 | 45,588 | ||||||||||||
Interest expense |
147 | 214 | 320 | 332 | ||||||||||||
Income before income taxes |
39,513 | 22,042 | 78,400 | 45,256 | ||||||||||||
Income tax expense |
15,608 | 8,980 | 31,199 | 18,533 | ||||||||||||
Net income |
$ | 23,905 | $ | 13,062 | $ | 47,201 | $ | 26,723 | ||||||||
Net income per common share: |
||||||||||||||||
Basic |
$ | 0.39 | $ | 0.22 | $ | 0.78 | $ | 0.46 | ||||||||
Diluted |
$ | 0.38 | $ | 0.22 | $ | 0.75 | $ | 0.44 | ||||||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
61,126 | 58,727 | 60,840 | 58,517 | ||||||||||||
Diluted |
63,241 | 60,672 | 63,013 | 60,505 |
5
Six months ended | ||||||||
July 30, | July 31, | |||||||
(In thousands) | 2011 | 2010 | ||||||
Operating activities |
||||||||
Net income |
$ | 47,201 | $ | 26,723 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Depreciation and amortization |
36,400 | 31,593 | ||||||
Deferred income taxes |
(977 | ) | | |||||
Non-cash stock compensation charges |
5,196 | 4,222 | ||||||
Excess tax benefits from stock-based compensation |
(10,049 | ) | (924 | ) | ||||
Loss on disposal of property and equipment |
402 | 157 | ||||||
Change in operating assets and liabilities: |
||||||||
Receivables |
2,353 | 2,059 | ||||||
Merchandise inventories |
(40,236 | ) | (17,381 | ) | ||||
Prepaid expenses and other assets |
(1,324 | ) | (717 | ) | ||||
Income taxes |
21,216 | (17,137 | ) | |||||
Accounts payable |
(5,713 | ) | 4,929 | |||||
Accrued liabilities |
(12,119 | ) | 6 | |||||
Deferred rent |
18,587 | 6,595 | ||||||
Net cash provided by operating activities |
60,937 | 40,125 | ||||||
Investing activities |
||||||||
Purchases of property and equipment |
(52,679 | ) | (32,584 | ) | ||||
Net cash used in investing activities |
(52,679 | ) | (32,584 | ) | ||||
Financing activities |
||||||||
Proceeds from issuance of common stock under stock plans |
13,053 | 3,434 | ||||||
Excess tax benefits from stock-based compensation |
10,049 | 924 | ||||||
Net cash provided by financing activities |
23,102 | 4,358 | ||||||
Net increase in cash and cash equivalents |
31,360 | 11,899 | ||||||
Cash and cash equivalents at beginning of period |
111,185 | 4,017 | ||||||
Cash and cash equivalents at end of period |
$ | 142,545 | $ | 15,916 | ||||
Supplemental cash flow information |
||||||||
Cash paid for income taxes |
$ | 10,960 | $ | 35,670 | ||||
Noncash investing and financing activities: |
||||||||
Change in property and equipment included in accrued liabilities |
$ | 9,600 | $ | 9,638 | ||||
6
Treasury | ||||||||||||||||||||||||||||
Common Stock | Common Stock | Additional | Total | |||||||||||||||||||||||||
Issued | Treasury | Paid-In | Retained | Stockholders | ||||||||||||||||||||||||
(In thousands, except per share data) | Shares | Amount | Shares | Amount | Capital | Earnings | Equity | |||||||||||||||||||||
Balance January 29, 2011 |
60,707 | $ | 606 | (505 | ) | $ | (4,179 | ) | $ | 339,576 | $ | 66,530 | $ | 402,533 | ||||||||||||||
Common stock options exercised |
986 | 11 | | | 13,042 | | 13,053 | |||||||||||||||||||||
Net income for the six months ended July 30, 2011 |
| | | | | 47,201 | 47,201 | |||||||||||||||||||||
Excess tax benefits from stock-based compensation |
| | | | 10,049 | | 10,049 | |||||||||||||||||||||
Stock compensation charge |
| | | | 5,196 | | 5,196 | |||||||||||||||||||||
Balance July 30, 2011 |
61,693 | $ | 617 | (505 | ) | $ | (4,179 | ) | $ | 367,863 | $ | 113,731 | $ | 478,032 | ||||||||||||||
7
Number of | Number of | |||||||||
State | stores | State | stores | |||||||
Alabama
|
7 | Mississippi | 3 | |||||||
Arizona
|
23 | Missouri | 4 | |||||||
Arkansas
|
3 | Nebraska | 2 | |||||||
California
|
36 | Nevada | 6 | |||||||
Colorado
|
11 | New Hampshire | 1 | |||||||
Connecticut
|
3 | New Jersey | 12 | |||||||
Delaware
|
1 | New Mexico | 1 | |||||||
Florida
|
30 | New York | 13 | |||||||
Georgia
|
18 | North Carolina | 16 | |||||||
Idaho
|
1 | Ohio | 12 | |||||||
Illinois
|
35 | Oklahoma | 7 | |||||||
Indiana
|
8 | Oregon | 5 | |||||||
Iowa
|
4 | Pennsylvania | 18 | |||||||
Kansas
|
3 | Rhode Island | 1 | |||||||
Kentucky
|
4 | South Carolina | 6 | |||||||
Louisiana
|
3 | Tennessee | 5 | |||||||
Maine
|
2 | Texas | 54 | |||||||
Maryland
|
6 | Utah | 3 | |||||||
Massachusetts
|
5 | Virginia | 11 | |||||||
Michigan
|
12 | Washington | 6 | |||||||
Minnesota
|
9 | Wisconsin | 5 | |||||||
Total | 415 |
8
Six months ended | ||||||||
July 30, 2011 | July 31, 2010 | |||||||
Volatility rate |
54.2 | % | 58.8 | % | ||||
Average risk-free interest rate |
2.4 | % | 2.2 | % | ||||
Average expected life (in years) |
6.3 | 4.8 | ||||||
Dividend yield |
None | None |
9
| Level 1 observable inputs such as quoted prices for identical instruments in active markets. | ||
| Level 2 inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data. | ||
| Level 3 unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions. |
Three months ended | Six months ended | |||||||||||||||
July 30, | July 31, | July 30, | July 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income |
$ | 23,905 | $ | 13,062 | $ | 47,201 | $ | 26,723 | ||||||||
Denominator for basic net income per share
weighted-average common shares |
61,126 | 58,727 | 60,840 | 58,517 | ||||||||||||
Dilutive effect of stock options and non-vested stock |
2,115 | 1,945 | 2,173 | 1,988 | ||||||||||||
Denominator for diluted net income per share |
63,241 | 60,672 | 63,013 | 60,505 | ||||||||||||
Net income per common share: |
||||||||||||||||
Basic |
$ | 0.39 | $ | 0.22 | $ | 0.78 | $ | 0.46 | ||||||||
Diluted |
$ | 0.38 | $ | 0.22 | $ | 0.75 | $ | 0.44 |
10
11
| the general national, regional and local economic conditions and corresponding impact on consumer spending levels; | ||
| the introduction of new products or brands; | ||
| the location of new stores in existing store markets; | ||
| competition; | ||
| our ability to respond on a timely basis to changes in consumer preferences; | ||
| the effectiveness of our various marketing activities; and | ||
| the number of new stores opened and the impact on the average age of all of our comparable stores. |
12
| the cost of merchandise sold, including all vendor allowances, which are treated as a reduction of merchandise costs; | ||
| warehousing and distribution costs including labor and related benefits, freight, rent, depreciation and amortization, real estate taxes, utilities and insurance; | ||
| store occupancy costs including rent, depreciation and amortization, real estate taxes, utilities, repairs and maintenance, insurance, licenses and cleaning expenses; | ||
| salon payroll and benefits; | ||
| customer loyalty program expense; and | ||
| shrink and inventory valuation reserves. |
| payroll, bonus and benefit costs for retail and corporate employees; | ||
| advertising and marketing costs; | ||
| occupancy costs related to our corporate office facilities; | ||
| stock-based compensation expense; | ||
| depreciation and amortization for all assets except those related to our retail and warehouse operations, which are included in cost of sales; and | ||
| legal, finance, information systems and other corporate overhead costs. |
13
Three months ended | Six months ended | |||||||||||||||
July 30, | July 31, | July 30, | July 31, | |||||||||||||
(Dollars in thousands) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net sales |
$ | 394,567 | $ | 321,804 | $ | 780,573 | $ | 642,000 | ||||||||
Cost of sales |
260,280 | 217,846 | 511,381 | 433,507 | ||||||||||||
Gross profit |
134,287 | 103,958 | 269,192 | 208,493 | ||||||||||||
Selling, general and administrative expenses |
90,811 | 79,909 | 185,426 | 160,638 | ||||||||||||
Pre-opening expenses |
3,816 | 1,793 | 5,046 | 2,267 | ||||||||||||
Operating income |
39,660 | 22,256 | 78,720 | 45,588 | ||||||||||||
Interest expense |
147 | 214 | 320 | 332 | ||||||||||||
Income before income taxes |
39,513 | 22,042 | 78,400 | 45,256 | ||||||||||||
Income tax expense |
15,608 | 8,980 | 31,199 | 18,533 | ||||||||||||
Net income |
$ | 23,905 | $ | 13,062 | $ | 47,201 | $ | 26,723 | ||||||||
Other operating data: |
||||||||||||||||
Number of stores end of period |
415 | 356 | 415 | 356 | ||||||||||||
Comparable store sales increase |
11.3 | % | 10.8 | % | 11.2 | % | 10.8 | % |
Three months ended | Six months ended | |||||||||||||||
July 30, | July 31, | July 30, | July 31, | |||||||||||||
(Percentage of net sales) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net sales |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of sales |
66.0 | % | 67.7 | % | 65.5 | % | 67.5 | % | ||||||||
Gross profit |
34.0 | % | 32.3 | % | 34.5 | % | 32.5 | % | ||||||||
Selling, general and administrative expenses |
23.0 | % | 24.8 | % | 23.8 | % | 25.0 | % | ||||||||
Pre-opening expenses |
1.0 | % | 0.6 | % | 0.6 | % | 0.4 | % | ||||||||
Operating income |
10.1 | % | 6.9 | % | 10.1 | % | 7.1 | % | ||||||||
Interest expense |
0.0 | % | 0.1 | % | 0.0 | % | 0.1 | % | ||||||||
Income before income taxes |
10.0 | % | 6.8 | % | 10.0 | % | 7.0 | % | ||||||||
Income tax expense |
4.0 | % | 2.8 | % | 4.0 | % | 2.9 | % | ||||||||
Net income |
6.1 | % | 4.1 | % | 6.0 | % | 4.2 | % | ||||||||
14
| 90 basis points improvement in merchandise margins driven by our marketing and merchandising strategies; and | ||
| 60 basis points of leverage in fixed store costs due to increased comparable store sales levels. |
15
| 90 basis points improvement in merchandise margins driven by our marketing and merchandising strategies; and | ||
| 90 basis points of leverage in fixed store costs due to increased comparable store sales levels. |
16
Six months ended | ||||||||
July 30, | July 31, | |||||||
(In thousands) | 2011 | 2010 | ||||||
Net cash provided by operating activities |
$ | 60,937 | $ | 40,125 | ||||
Net cash used in investing activities |
(52,679 | ) | (32,584 | ) | ||||
Net cash provided by financing activities |
23,102 | 4,358 | ||||||
Net increase in cash and cash equivalents |
$ | 31,360 | $ | 11,899 | ||||
17
18
19
Incorporated by Reference | ||||||||||||
Exhibit | Filed | Exhibit | File | Filing | ||||||||
Number | Description of document | Herewith | Form | Number | Number | Date | ||||||
3.1 |
Amended and Restated Certificate of | S-1 | 3.1 | 333-144405 | 8/17/2007 | |||||||
Incorporation | ||||||||||||
3.2 |
Amended and Restated Bylaws | S-1 | 3.2 | 333-144405 | 8/17/2007 | |||||||
4.1 |
Specimen Common Stock Certificate | S-1 | 4.1 | 333-144405 | 10/11/2007 | |||||||
4.2 |
Third Amended and Restated | S-1 | 4.2 | 333-144405 | 8/17/2007 | |||||||
Registration Rights Agreement | ||||||||||||
between Ulta Salon, Cosmetics & | ||||||||||||
Fragrance, Inc. and the | ||||||||||||
stockholders party thereto | ||||||||||||
4.3 |
Stockholder Rights Agreement | S-1 | 4.4 | 333-144405 | 8/17/2007 | |||||||
31.1 |
Certification of the Chief | X | ||||||||||
Executive Officer pursuant to Rules | ||||||||||||
13a-14(a) and 15d-14(a) of the | ||||||||||||
Securities Exchange Act of 1934, as | ||||||||||||
adopted pursuant to section 302 of | ||||||||||||
the Sarbanes-Oxley Act of 2002 | ||||||||||||
31.2 |
Certification of the Chief | X | ||||||||||
Financial Officer pursuant to Rules | ||||||||||||
13a-14(a) and 15d-14(a) of the | ||||||||||||
Securities Exchange Act of 1934, as | ||||||||||||
adopted pursuant to section 302 of | ||||||||||||
the Sarbanes-Oxley Act of 2002 | ||||||||||||
32.1 |
Certification of the Chief | X | ||||||||||
Executive Officer and Chief | ||||||||||||
Financial Officer pursuant to 18 | ||||||||||||
U.S.C. Section 1350, as adopted | ||||||||||||
pursuant to Section 906 of the | ||||||||||||
Sarbanes-Oxley Act of 2002 | ||||||||||||
101.INS * |
XBRL Instance | X | ||||||||||
101.SCH * |
XBRL Taxonomy Extension Schema | X | ||||||||||
101.CAL * |
XBRL Taxonomy Extension Calculation | X | ||||||||||
101.LAB * |
XBRL Taxonomy Extension Labels | X | ||||||||||
101.PRE * |
XBRL Taxonomy Extension Presentation | X | ||||||||||
101.DEF * |
XBRL Taxonomy Extension Definition | X |
* | In accordance with Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed furnished and not filed. |
20
ULTA SALON, COSMETICS & FRAGRANCE, INC. |
||||
By: | /s/ Carl S. Rubin | |||
Carl S. Rubin | ||||
President, Chief Executive Officer and Director | ||||
By: | /s/ Gregg R. Bodnar | |||
Gregg R. Bodnar | ||||
Chief Financial Officer |
21
1. | I have reviewed this quarterly report on Form 10-Q of Ulta Salon, Cosmetics & Fragrance, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: September 8, 2011 | By: | /s/ Carl S. Rubin | ||
Carl S. Rubin | ||||
President, Chief Executive Officer and Director |
1. | I have reviewed this quarterly report on Form 10-Q of Ulta Salon, Cosmetics & Fragrance, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: September 8, 2011 | By: | /s/ Gregg R. Bodnar | ||
Gregg R. Bodnar | ||||
Chief Financial Officer |
Date: September 8, 2011 | By: | /s/ Carl S. Rubin | ||
Carl S. Rubin | ||||
President, Chief Executive Officer and Director | ||||
Date: September 8, 2011 | By: | /s/ Gregg R. Bodnar | ||
Gregg R. Bodnar | ||||
Chief Financial Officer | ||||
Balance Sheets (Unaudited) (Parenthetical) (USD $)
In Thousands, except Per Share data |
Jul. 30, 2011
|
Jan. 29, 2011
|
Jul. 31, 2010
|
---|---|---|---|
Stockholders' equity: | Â | Â | Â |
Common Stock, Par Value | $ 0.01 | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 400,000 | 400,000 | 400,000 |
Common Stock, Shares Issued | 61,693 | 60,707 | 59,365 |
Common Stock, Shares Outstanding | 61,188 | 60,202 | 58,860 |
Statements of Income (Unaudited) (USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 30, 2011
|
Jul. 31, 2010
|
Jul. 30, 2011
|
Jul. 31, 2010
|
|
Statements of Income [Abstract] | Â | Â | Â | Â |
Net sales | $ 394,567 | $ 321,804 | $ 780,573 | $ 642,000 |
Cost of sales | 260,280 | 217,846 | 511,381 | 433,507 |
Gross profit | 134,287 | 103,958 | 269,192 | 208,493 |
Selling, general and administrative expenses | 90,811 | 79,909 | 185,426 | 160,638 |
Pre-opening expenses | 3,816 | 1,793 | 5,046 | 2,267 |
Operating income | 39,660 | 22,256 | 78,720 | 45,588 |
Interest expense | 147 | 214 | 320 | 332 |
Income before income taxes | 39,513 | 22,042 | 78,400 | 45,256 |
Income tax expense | 15,608 | 8,980 | 31,199 | 18,533 |
Net income | $ 23,905 | $ 13,062 | $ 47,201 | $ 26,723 |
Net income per common share: | Â | Â | Â | Â |
Basic | $ 0.39 | $ 0.22 | $ 0.78 | $ 0.46 |
Diluted | $ 0.38 | $ 0.22 | $ 0.75 | $ 0.44 |
Weighted average common shares outstanding: | Â | Â | Â | Â |
Basic | 61,126 | 58,727 | 60,840 | 58,517 |
Diluted | 63,241 | 60,672 | 63,013 | 60,505 |
Document and Entity Information (USD $)
|
6 Months Ended | ||
---|---|---|---|
Jul. 30, 2011
|
Sep. 01, 2011
|
Jul. 31, 2010
|
|
Document and Entity Information [Abstract] | Â | Â | Â |
Entity Registrant Name | Ulta Salon, Cosmetics & Fragrance, Inc. | Â | Â |
Entity Central Index Key | 0001403568 | Â | Â |
Document Type | 10-Q | Â | Â |
Document Period End Date | Jul. 30, 2011 | ||
Amendment Flag | false | Â | Â |
Document Fiscal Year Focus | 2011 | Â | Â |
Document Fiscal Period Focus | Q2 | Â | Â |
Current Fiscal Year End Date | --01-28 | Â | Â |
Entity Well-known Seasoned Issuer | Yes | Â | Â |
Entity Voluntary Filers | No | Â | Â |
Entity Current Reporting Status | Yes | Â | Â |
Entity Filer Category | Large Accelerated Filer | Â | Â |
Entity Public Float | Â | Â | $ 1,120,326,000 |
Entity Common Stock, Shares Outstanding | Â | 61,347,990 | Â |
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Net Income Per Common Share
|
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Jul. 30, 2011
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Net Income Per Common Share [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income per common share |
6. Net income per common share
The following is a reconciliation of net income and the number of shares of common stock used in
the computation of net income per basic and diluted share:
The denominators for diluted net income per common share for the three months ended July 30,
2011 and July 31, 2010 exclude 124 and 1,061 employee stock options, respectively, due to their
anti-dilutive effects.
The denominators for diluted net income per common share for the six months ended July 30, 2011 and
July 31, 2010 exclude 252 and 1,061 employee stock options, respectively, due to their
anti-dilutive effects.
|
Summary of Significant Accounting Policies (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 30, 2011
|
Jul. 31, 2010
|
Jul. 30, 2011
|
Jul. 31, 2010
|
|
Fair value of stock option using a Black-Scholes valuation model | Â | Â | Â | Â |
Volatility rate | Â | Â | 54.20% | 58.80% |
Average risk-free interest rate | Â | Â | 2.40% | 2.20% |
Average expected life (in years) | Â | Â | 6.3 | 4.8 |
Dividend yield | Â | Â | 0.00% | 0.00% |
Summary of Significant Accounting Policies (Textuals) [Abstract] | Â | Â | Â | Â |
Number of shares granted in stock option | Â | Â | 124 | 745 |
Weighted average fair value of stock option | Â | Â | $ 28.62 | $ 11.38 |
Stock compensation expenses | $ 2,388 | $ 2,487 | $ 5,196 | $ 4,222 |
Unrecognized compensation expense related to unvested options and restricted stock | $ 21,290 | Â | $ 21,290 | Â |
Summary of Significant Accounting Policies
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 30, 2011
|
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Summary of Significant Accounting Policies [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of significant accounting policies |
2. Summary of significant accounting policies
Information regarding the Company’s significant accounting policies is contained in Note 2,
“Summary of significant accounting policies,” to the financial statements in the Company’s Annual
Report on Form 10-K for the fiscal year ended January 29, 2011. Presented below in this and the
following notes is supplemental information that should be read in conjunction with “Notes to
Financial Statements” in the Annual Report.
Fiscal quarter
The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July
31, October 31, and January 31. The Company’s second quarters in fiscal 2011 and 2010 ended on July
30, 2011 and July 31, 2010, respectively.
Share-based compensation
The Company measures share-based compensation cost on the grant date, based on the fair value of
the award, and recognizes the expense over the requisite service period for awards expected to
vest. The Company estimated the grant date fair value of stock options using a Black-Scholes
valuation model using the following assumptions for the periods indicated:
The Company granted 124 and 745 stock options during the six months ended July 30, 2011 and July
31, 2010, respectively. The weighted-average grant date fair value of these options was $28.62 and
$11.38, respectively.
The Company recorded stock compensation expense of $2,388 and $2,487 for the three months ended
July 30, 2011 and July 31, 2010, respectively. The Company recorded stock compensation expense of
$5,196 and $4,222 for the six months ended July 30, 2011 and July 31, 2010, respectively. At July
30, 2011, there was approximately $21,290 of unrecognized compensation expense related to unvested
options and restricted stock.
|
Summary of Significant Accounting policies (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 30, 2011
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Summary of Significant Accounting Policies [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of stock option using a Black-Scholes valuation model |
|
Notes Payable (Details) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended |
---|---|
Jul. 30, 2011
|
|
Notes Payable (Additional) (Textuals) [Abstract] | Â |
Letters of credit subfacility, maximum borrowing capacity | $ 200,000 |
Notes Payable (Textuals) [Abstract] | Â |
Line of credit facility, maximum borrowing capacity | 200,000 |
Line of credit expiration date | May 31, 2013 |
Credit facility restrictive financial covenant | Company to maintain tangible net worth of not less than $200,000 |
Tangible net worth | 478,032 |
Interest rate on outstanding borrowing under facility | Prime rate or Libor plus 2.00% |
Percentage of unused Line of Credit Facility Fee | 0.25% |
Maximum borrowing under facility | lesser of $200,000 or a percentage of eligible owned inventory |
Standby Letters of Credit [Member]
|
 |
Notes Payable (Additional) (Textuals) [Abstract] | Â |
Letters of credit subfacility, maximum borrowing capacity | 10,000 |
Notes Payable (Textuals) [Abstract] | Â |
Line of credit facility, maximum borrowing capacity | $ 10,000 |
Net Income Per Common Share (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 30, 2011
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Net Income Per Common Share [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income per basic and diluted share |
|
Business and basis of presentation (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 30, 2011
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Business and Basis of Presentation [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Details of Company operated stores in following states |
|
Statement of Stockholders' Equity (Unaudited) (USD $)
In Thousands |
Total
|
Common Stock
|
Treasury - Common Stock
|
Additional Paid-in Capital
|
Retained Earnings
|
---|---|---|---|---|---|
Beginning Balance at Jan. 29, 2011 | $ 402,533 | $ 606 | $ (4,179) | $ 339,576 | $ 66,530 |
Beginning Balance, Shares at Jan. 29, 2011 | Â | 60,707 | (505) | Â | Â |
Common stock options exercised | 13,053 | 11 | Â | 13,042 | Â |
Common stock options exercised, Shares | Â | 986 | Â | Â | Â |
Net income for the six months ended July 30, 2011 | 47,201 | Â | Â | Â | 47,201 |
Excess tax benefits from stock-based compensation | 10,049 | Â | Â | 10,049 | Â |
Stock compensation charge | 5,196 | Â | Â | 5,196 | Â |
Ending Balance at Jul. 30, 2011 | $ 478,032 | $ 617 | $ (4,179) | $ 367,863 | $ 113,731 |
Ending Balance, Shares at Jul. 30, 2011 | Â | 61,693 | (505) | Â | Â |
Commitments and Contingencies
|
6 Months Ended |
---|---|
Jul. 30, 2011
|
|
Commitments and Contingencies [Abstract] | Â |
Commitments and contingencies |
3. Commitments and contingencies
Leases — The Company leases stores, distribution and office facilities, and certain equipment.
Original non-cancelable lease terms range from three to ten years, and store leases generally
contain renewal options for additional years. A number of the Company’s store leases provide for
contingent rentals based upon sales. Contingent rent amounts were insignificant in the three and
six months ended July 30, 2011 and July 31, 2010. Total rent expense under operating leases was
$23,127 and $20,135 for the three months ended July 30, 2011 and July 31, 2010, respectively. Total
rent expense under operating leases was $44,984 and $39,594 for the six months ended July 30, 2011
and July 31, 2010, respectively.
General litigation — In May 2010, a putative employment class action lawsuit was filed against the
Company and certain unnamed defendants in state court in California. The plaintiff and members of
the proposed class are alleged to be (or have been) non-exempt hourly employees. The suit alleges
that Ulta violated various provisions of the California labor laws and failed to provide plaintiff
and members of the proposed class with full meal periods, paid rest breaks, certain wages, overtime
compensation and premium pay. The suit seeks to recover damages and penalties as a result of these
alleged practices. On June 21, 2010, the Company filed its answer to the lawsuit. On January 12,
2011, the Company and plaintiffs engaged in a voluntary mediation. Although the Company continues
to deny plaintiffs’ allegations, in the interest of putting certain of the claims behind it, the
Company agreed in principle to settle all claims of the putative class consisting of non-exempt
hourly hair designers in the salon department within the California retail stores. The settlement,
which is not an admission of liability, is subject to final documentation and Court approval.
Counsel for the plaintiffs has agreed to dismiss without prejudice the claims of all other putative
class members. The proposed settlement amount is not material.
The Company is also involved in various legal proceedings that are incidental to the conduct of its
business. In the opinion of management, the amount of any liability with respect to these
proceedings, either individually or in the aggregate, will not be material.
|
Notes Payable
|
6 Months Ended |
---|---|
Jul. 30, 2011
|
|
Notes Payable [Abstract] | Â |
Notes payable |
4. Notes payable
The Company’s credit facility is with Wells Fargo Bank, National Association, as Administrative
Agent, Collateral Agent and a Lender thereunder, JPMorgan Chase Bank, N.A. as a Lender, and PNC
Bank, National Association, as a Lender. The facility provides maximum credit of $200,000 through
May 31, 2013 and is available for working capital and general corporate purposes. The facility
provides maximum borrowings equal to the lesser of $200,000 or a percentage of eligible owned
inventory, and contains a $10,000 subfacility for letters of credit. The credit facility agreement
contains a restrictive financial covenant requiring the Company to maintain tangible net worth of
not less than $200,000. The Company’s tangible net worth was $478,032 at July 30, 2011.
Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings
under the facility. Outstanding borrowings will bear interest at the prime rate or Libor plus 2.00%
and the unused line fee is 0.25%.
As of July 30, 2011 and January 29, 2011, the Company had no borrowings outstanding under the
credit facility.
|
Commitments and Contingencies (Details) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 30, 2011
|
Jul. 31, 2010
|
Jul. 30, 2011
|
Jul. 31, 2010
|
|
Commitments and contingencies (Textuals) [Abstract] | Â | Â | Â | Â |
Non-cancelable operating lease terms, minimum | Â | Â | 3 years | Â |
Non-cancelable operating lease terms, maximum | Â | Â | 10 years | Â |
Total rent expense under operating leases | $ 23,127 | $ 20,135 | $ 44,984 | $ 39,594 |
Fair Value Measurements
|
6 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 30, 2011
|
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Fair Value Measurements [Abstract] | Â | ||||||||||||||
Fair Value Measurements |
5. Fair Value Measurements
The carrying value of cash and cash equivalents, accounts receivable, and accounts payable
approximates their estimated fair values due to the short maturities of these instruments.
On February 3, 2008, the Company adopted the ASC rules for fair value measurements and disclosures.
The adoption had no impact on the Company’s financial statements. The new rules established a
three-tier hierarchy for fair value measurements, which prioritizes the inputs used in measuring
fair value as follows:
As of July 30, 2011, the Company held financial liabilities of $1,936 related to its non-qualified
deferred compensation plan. The liabilities have been categorized as Level 2 as they are based on
third-party reported net asset values which are based primarily on quoted market prices of
underlying assets of the funds within the plan.
|
Net Income Per Common Share (Details) (USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 30, 2011
|
Jul. 31, 2010
|
Jul. 30, 2011
|
Jul. 31, 2010
|
|
Net income per common share reconciliation | Â | Â | Â | Â |
Net income | $ 23,905 | $ 13,062 | $ 47,201 | $ 26,723 |
Denominator for basic net income per share - weighted-average common shares | 61,126 | 58,727 | 60,840 | 58,517 |
Dilutive effect of stock options and non-vested stock | 2,115 | 1,945 | 2,173 | 1,988 |
Denominator for diluted net income per share | 63,241 | 60,672 | 63,013 | 60,505 |
Net income per common share: | Â | Â | Â | Â |
Basic | $ 0.39 | $ 0.22 | $ 0.78 | $ 0.46 |
Diluted | $ 0.38 | $ 0.22 | $ 0.75 | $ 0.44 |
Net income per common share (Textuals) [Abstract] | Â | Â | Â | Â |
Antidilutive stock option excluded from computation of net income per common share | 124 | 1,061 | 252 | 1,061 |
Business and Basis of Presentation
|
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Jul. 30, 2011
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Business and Basis of Presentation [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business and basis of presentation |
1. Business and basis of presentation
Ulta Salon, Cosmetics & Fragrance, Inc. (Company or Ulta) was incorporated in the state of Delaware
on January 9, 1990, to operate specialty retail stores selling cosmetics, fragrance, haircare and
skincare products, and related accessories and services. The stores also feature full-service
salons. As of July 30, 2011, the Company operated 415 stores in 42 states, as shown in the table
below:
The accompanying unaudited financial statements and related notes have been prepared in
accordance with U.S. generally accepted accounting principles (GAAP) for interim financial
information and with the instructions to Form 10-Q and the U.S. Securities and Exchange
Commission’s Article 10, Regulation S-X. In the opinion of management, the accompanying financial
statements reflect all adjustments, which are of a normal recurring nature, necessary to fairly
state the financial position and results of operations and cash flows for the interim periods
presented.
The Company’s business is subject to seasonal fluctuation. Significant portions of the Company’s
net sales and net income are realized during the fourth quarter of the fiscal year due to the
holiday selling season. The results for the three and six months ended July 30, 2011 are not
necessarily indicative of the results to be expected for the fiscal year ending January 28, 2012,
or for any other future interim period or for any future year.
These interim financial statements and the related notes should be read in conjunction with the
financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal
year ended January 29, 2011. All amounts are stated in thousands, with the exception of per share
amounts and number of stores.
|
Fair Value Measurements (Details) (Fair Value, Inputs, Level 2 [Member], USD $)
In Thousands |
Jul. 30, 2011
|
---|---|
Fair Value, Inputs, Level 2 [Member]
|
 |
Fair Value Measurements (Textuals) [Abstract] | Â |
Financial liabilities related to non-qualified deferred compensation plan | $ 1,936 |