SEC Comment Letter for Ulta Beauty, Inc. (ULTA) (CIK 0001403568) (ULTA) — Dec 3, 2010
Ulta Beauty, Inc. (ULTA) (CIK 0001403568)
Date: Dec. 3, 2010 · CIK: 0001403568 · Accession: 0000000000-10-072516
AI Filing Summary & Sentiment
Reasoning
Letter
December 3, 2010
Carl Rubin Chief Executive Officer Ulta Salon, Cosmetics & Fragrance, Inc. 1000 Remington Blvd., Suite 120 Bolingbrook, Illinois 60440 Re: Ulta Salon, Cosmetics & Fragrance, Inc. Form 10-K for the fiscal year ended January 30, 2010 Filed March 31, 2010 Forms 10-Q for the periods ended May 1, 2010, July 31, 2010, and October 30, 2010 Filed June 3, 2010, September 2, 2010, and December 2, 2010, respectively Definitive Proxy Statement on Schedule 14A Filed May 7, 2010 File No. 1-33764 Dear Mr. Rubin: We have reviewed your filings and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter within ten business days by amending your Form 10-K, by providing the requested information, or by advi sing us when you will provide the requested response. If you do not believe our comments apply to your fact s and circumstances or do not believe an amendment is appropriate, pl ease tell us why in your response. After reviewing any amendment to your f ilings and the information you provide in response to these comments, we ma y have additional comments.
Form 10-K for the fiscal year ended January 30, 2010
Item 1A. Risk Factors, page 14
1. Please delete the language in the last two sentences of the opening paragraph in which you state that other unknown or immaterial risks may also impair your business operations. All material risks should be described in your di sclosure. If risks are not deemed material, you should not reference them.
Carl Rubin Ulta Salon, Cosmetics & Fragrance, Inc. December 3, 2010 Page 2
Item 9A. Controls and Procedures, page 44
2. We note that you state that your disclosure c ontrols and procedures were effective “to ensure that the information required to be di sclosed by [you] in [y] our reports that [you] file or submit under the Securities Excha nge Act of 1934 is recorded, processed, summarized and reported within the time peri ods specified.” Please supplementally confirm, if true, that your officers concluded that your disclosure controls and procedures were also effective to ensure that information requi red to be disclosed in the reports that you file or submit under the Exchange Act is accumulated and communicated to your management, including your pr incipal executive and principal financial officer, to allow timely decisions regarding required disclosure . In addition, please confirm that you will revise future filings, including any amendments to filings as applicable, accordingly. See Exchange Act Rule 13a-15(e). This comment also applies to your Form 10-Q for the fiscal period ended May 1, 2010, your Form 10-Q for the fiscal period ended July 31, 2010 and your Form 10-Q for the fiscal period ended October 30, 2010.
Item 15. Exhibits and Financia l Statement Schedules, page 46
Statements of Income, page 50
3. Your discussion of operating expenses on page 35 indicates a porti on of depreciation and amortization is classified within selli ng, general and administrative expenses and excluded from cost of goods sold. Please revise the description of the cost of goods sold line item in future filings to comply with SAB Topic no. 11.B. 2.Summary of significant acc ounting policies, page 55
General 4. We assume the absence of disclosure re lated to segment reporting suggests you have concluded that you have only one reportable segment. Please explain to us in detail how you determined you have one reportable segment. Please also tell us if you aggregate operating segments, and if so, how the aggreg ation into one reportable segment complies with the aggregation requirements of FASB ASC 280-10-50. Lastly, revise your future disclosure to comply with the requirements of FASB AS C 280-10-50-21. Please show us what your revised disclosure will look like. 5. Please disclose in tabular form for each pe riod presented the amount or percentage of total revenue contributed by each class of simila r products or services. In this regard we note you offer salon services and products including make-up, skincare, fragrances and styling tools. Please refer to FASB ASC 280-10-50-40. See also Item 101(c)(1) of Regulation S-K as it relates to disclo sure in your Business description.
Carl Rubin Ulta Salon, Cosmetics & Fragrance, Inc. December 3, 2010 Page 3
Revenue recognition, page 57
6. You disclose that e-commerce sales are reco rded upon shipment of merchandise. Please expand your disclosure to state when title tr ansfers to the customer. Further, please explain to us how your accounting policy comp lies with the delivery and performance requirements of SAB Topic 13:A. If shi pping terms determine risk of loss during shipment and/or title transfer to the custom er, please explain the terms to us and revise your disclosure to clarify these terms. If revenue on e-commerce sales is recognized prior to the transfer of title and delivery of the product to th e customer, please clarify how your policy complies with GAAP. 7. Please explain to us and disclo se your policy for granting product returns. Further, please explain to us how accurate your historical estimates for the pa st three fiscal years have been with respect to estimating your allowa nce for sales returns, and how variances between actual and estimated returns are tr acked and reviewed by management. Lastly, reference is made to your valuation and qualifying accounts disclosure on page 68. Explain to us in detail why you did not disclo se the allowance for sales returns activity, or revise your disclosure. Please refer to Rules 5-04 and 12-09 of Regulation S-X 8. Please expand your policy for unredeemed gift cards to indicate whether or not gift cards are sold with expiration dates. Further, explain to us and disclose how revenue is recognized on unredeemed gift cards. Lastly, tell us and disclose the amount of deferred gift card revenue for the past two fiscal years ended January 30, 2010 and January 31, 2009.
Cost of sales, page 58
9. Please disclose your policy for classifying sh ipping and handling costs in the statements of income. If shipping costs or handling co sts are significant and ar e not classified in cost of sales, disclose the amount(s) of thes e costs and the line item that includes them. Please refer to FASB ASC 605-45-50-2.
Self-insurance, page 58
10. We note from your disclosure under Critical accounting policies and estimates on page 42 that your reserves for self-insurance have steadily declined over the past three years despite the significant increase in the number of stores, employees and sales. Please explain to us the reason for the decrease and include in your re sponse a table showing year end balances of the reserve and additions, subtractions and adjustments made during the year. To the extent material, please include a tabular presentation of your reserve activity in future filings. You may provide such information as part of your analysis of reserve accounts included in Schedule II to your financial statements.
Carl Rubin Ulta Salon, Cosmetics & Fragrance, Inc. December 3, 2010 Page 4
Definitive Proxy Statement on Schedule 14A
Section 16(a) Beneficial Ownership Reporting Compliance, page 38
11. We note your statement that Ms. Kirby untimel y filed one report. Please supplementally tell us the number of transactions that were not reported on a timely basis due to the failure to file such report, and confirm that you will include such re quired disclosure in future filings as applicable. Refer to Item 405(a)(2) of Regulation S-K. Article IV. Compensation Committee Report an d Compensation Discussion and Analysis,
page 23 12. You state that your ex ecutive compensation is “evaluated against market based surveys and a pre-determined peer group.” Please revi se your disclosure in future filings to identify the benchmarks used in determini ng the base salaries and annual bonuses (as a percentage of base pay) of your executive officers, as well as the components of the benchmarks. In addition, please disclose in fu ture filings the companies that participated in the Towers Perrin CDB, Retail Industry su rvey and the Towers Perrin CDB, General Industry survey, or tell us why you are not required to do so. Refer to Item 402(b)(2)(xiv) of Regulation S-K. Please show us what your proposed revised disclosure will look like. 13. With respect to your engagement of your co mpensation consultant, please revise your disclosure in future filings to expand upon the nature and scope of the consultant’s assignment, and the material elements of the instructions or direct ions that you gave to the consultant with respect to the performance of its duties under the engagement. Refer to Item 407(e)(3)(iii) of Regulation S-K. Please show us what your proposed revised disclosure will look like.
Compensation Risk, page 23
14. We note your disclosure in response to Item 402(s) of Regulation S-K. Please supplementally describe the process you undert ook to reach your dete rmination that your compensation plans, practices and policies are not “reasonably likely to have a material adverse effect on the Company.”
We urge all persons who are responsible for th e accuracy and adequacy of the disclosure in the filing to be certain that the filing include s the information the Securities Exchange Act of 1934 and all applicable Exchange Act rules requir e. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
In responding to our comments, please provi de a written statement from the company acknowledging that:
Carl Rubin Ulta Salon, Cosmetics & Fragrance, Inc. December 3, 2010 Page 5
• the company is responsible for the adequacy and accuracy of the disclo sure in the filing;
• staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
• the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federa l securities laws of the United States.
You may contact Robert Babul a, Staff Accountant, at ( 202) 551-3339 or in his absence Donna Di Silvio, Staff Accountant, at (202) 551-3202 if you have questions regarding comments on the financial statements and related matters. Pl ease contact Lilyanna Peyser, Staff Attorney, at (202) 551-3222 or me at (202) 551- 3720 with any other questions.
Sincerely,
H. Christopher Owings Assistant Director
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December 3, 2010 Carl Rubin Chief Executive Officer Ulta Salon, Cosmetics & Fragrance, Inc. 1000 Remington Blvd., Suite 120 Bolingbrook, Illinois 60440 Re: Ulta Salon, Cosmetics & Fragrance, Inc. Form 10-K for the fiscal year ended January 30, 2010 Filed March 31, 2010 Forms 10-Q for the periods ended May 1, 2010, July 31, 2010, and October 30, 2010 Filed June 3, 2010, September 2, 2010, and December 2, 2010, respectively Definitive Proxy Statement on Schedule 14A Filed May 7, 2010 File No. 1-33764 Dear Mr. Rubin: We have reviewed your filings and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter within ten business days by amending your Form 10-K, by providing the requested information, or by advi sing us when you will provide the requested response. If you do not believe our comments apply to your fact s and circumstances or do not believe an amendment is appropriate, pl ease tell us why in your response. After reviewing any amendment to your f ilings and the information you provide in response to these comments, we ma y have additional comments. Form 10-K for the fiscal year ended January 30, 2010 Item 1A. Risk Factors, page 14 1. Please delete the language in the last two sentences of the opening paragraph in which you state that other unknown or immaterial risks may also impair your business operations. All material risks should be described in your di sclosure. If risks are not deemed material, you should not reference them. Carl Rubin Ulta Salon, Cosmetics & Fragrance, Inc. December 3, 2010 Page 2 Item 9A. Controls and Procedures, page 44 2. We note that you state that your disclosure c ontrols and procedures were effective “to ensure that the information required to be di sclosed by [you] in [y] our reports that [you] file or submit under the Securities Excha nge Act of 1934 is recorded, processed, summarized and reported within the time peri ods specified.” Please supplementally confirm, if true, that your officers concluded that your disclosure controls and procedures were also effective to ensure that information requi red to be disclosed in the reports that you file or submit under the Exchange Act is accumulated and communicated to your management, including your pr incipal executive and principal financial officer, to allow timely decisions regarding required disclosure . In addition, please confirm that you will revise future filings, including any amendments to filings as applicable, accordingly. See Exchange Act Rule 13a-15(e). This comment also applies to your Form 10-Q for the fiscal period ended May 1, 2010, your Form 10-Q for the fiscal period ended July 31, 2010 and your Form 10-Q for the fiscal period ended October 30, 2010. Item 15. Exhibits and Financia l Statement Schedules, page 46 Statements of Income, page 50 3. Your discussion of operating expenses on page 35 indicates a porti on of depreciation and amortization is classified within selli ng, general and administrative expenses and excluded from cost of goods sold. Please revise the description of the cost of goods sold line item in future filings to comply with SAB Topic no. 11.B. 2.Summary of significant acc ounting policies, page 55 General 4. We assume the absence of disclosure re lated to segment reporting suggests you have concluded that you have only one reportable segment. Please explain to us in detail how you determined you have one reportable segment. Please also tell us if you aggregate operating segments, and if so, how the aggreg ation into one reportable segment complies with the aggregation requirements of FASB ASC 280-10-50. Lastly, revise your future disclosure to comply with the requirements of FASB AS C 280-10-50-21. Please show us what your revised disclosure will look like. 5. Please disclose in tabular form for each pe riod presented the amount or percentage of total revenue contributed by each class of simila r products or services. In this regard we note you offer salon services and products including make-up, skincare, fragrances and styling tools. Please refer to FASB ASC 280-10-50-40. See also Item 101(c)(1) of Regulation S-K as it relates to disclo sure in your Business description. Carl Rubin Ulta Salon, Cosmetics & Fragrance, Inc. December 3, 2010 Page 3 Revenue recognition, page 57 6. You disclose that e-commerce sales are reco rded upon shipment of merchandise. Please expand your disclosure to state when title tr ansfers to the customer. Further, please explain to us how your accounting policy comp lies with the delivery and performance requirements of SAB Topic 13:A. If shi pping terms determine risk of loss during shipment and/or title transfer to the custom er, please explain the terms to us and revise your disclosure to clarify these terms. If revenue on e-commerce sales is recognized prior to the transfer of title and delivery of the product to th e customer, please clarify how your policy complies with GAAP. 7. Please explain to us and disclo se your policy for granting product returns. Further, please explain to us how accurate your historical estimates for the pa st three fiscal years have been with respect to estimating your allowa nce for sales returns, and how variances between actual and estimated returns are tr acked and reviewed by management. Lastly, reference is made to your valuation and qualifying accounts disclosure on page 68. Explain to us in detail why you did not disclo se the allowance for sales returns activity, or revise your disclosure. Please refer to Rules 5-04 and 12-09 of Regulation S-X 8. Please expand your policy for unredeemed gift cards to indicate whether or not gift cards are sold with expiration dates. Further, explain to us and disclose how revenue is recognized on unredeemed gift cards. Lastly, tell us and disclose the amount of deferred gift card revenue for the past two fiscal years ended January 30, 2010 and January 31, 2009. Cost of sales, page 58 9. Please disclose your policy for classifying sh ipping and handling costs in the statements of income. If shipping costs or handling co sts are significant and ar e not classified in cost of sales, disclose the amount(s) of thes e costs and the line item that includes them. Please refer to FASB ASC 605-45-50-2. Self-insurance, page 58 10. We note from your disclosure under Critical accounting policies and estimates on page 42 that your reserves for self-insurance have steadily declined over the past three years despite the significant increase in the number of stores, employees and sales. Please explain to us the reason for the decrease and include in your re sponse a table showing year end balances of the reserve and additions, subtractions and adjustments made during the year. To the extent material, please include a tabular presentation of your reserve activity in future filings. You may provide such information as part of your analysis of reserve accounts included in Schedule II to your financial statements. Carl Rubin Ulta Salon, Cosmetics & Fragrance, Inc. December 3, 2010 Page 4 Definitive Proxy Statement on Schedule 14A Section 16(a) Beneficial Ownership Reporting Compliance, page 38 11. We note your statement that Ms. Kirby untimel y filed one report. Please supplementally tell us the number of transactions that were not reported on a timely basis due to the failure to file such report, and confirm that you will include such re quired disclosure in future filings as applicable. Refer to Item 405(a)(2) of Regulation S-K. Article IV. Compensation Committee Report an d Compensation Discussion and Analysis, page 23 12. You state that your ex ecutive compensation is “evaluated against market based surveys and a pre-determined peer group.” Please revi se your disclosure in future filings to identify the benchmarks used in determini ng the base salaries and annual bonuses (as a percentage of base pay) of your executive officers, as well as the components of the benchmarks. In addition, please disclose in fu ture filings the companies that participated in the Towers Perrin CDB, Retail Industry su rvey and the Towers Perrin CDB, General Industry survey, or tell us why you are not required to do so. Refer to Item 402(b)(2)(xiv) of Regulation S-K. Please show us what your proposed revised disclosure will look like. 13. With respect to your engagement of your co mpensation consultant, please revise your disclosure in future filings to expand upon the nature and scope of the consultant’s assignment, and the material elements of the instructions or direct ions that you gave to the consultant with respect to the performance of its duties under the engagement. Refer to Item 407(e)(3)(iii) of Regulation S-K. Please show us what your proposed revised disclosure will look like. Compensation Risk, page 23 14. We note your disclosure in response to Item 402(s) of Regulation S-K. Please supplementally describe the process you undert ook to reach your dete rmination that your compensation plans, practices and policies are not “reasonably likely to have a material adverse effect on the Company.” We urge all persons who are responsible for th e accuracy and adequacy of the disclosure in the filing to be certain that the filing include s the information the Securities Exchange Act of 1934 and all applicable Exchange Act rules requir e. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. In responding to our comments, please provi de a written statement from the company acknowledging that: Carl Rubin Ulta Salon, Cosmetics & Fragrance, Inc. December 3, 2010 Page 5 • the company is responsible for the adequacy and accuracy of the disclo sure in the filing; • staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and • the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federa l securities laws of the United States. You may contact Robert Babul a, Staff Accountant, at ( 202) 551-3339 or in his absence Donna Di Silvio, Staff Accountant, at (202) 551-3202 if you have questions regarding comments on the financial statements and related matters. Pl ease contact Lilyanna Peyser, Staff Attorney, at (202) 551-3222 or me at (202) 551- 3720 with any other questions. Sincerely, H. Christopher Owings Assistant Director