Lululemon 2011 Annual Report Download - page 56

Table of Contents
lululemon athletica inc. and Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts and store count information, unless
otherwise indicated)
1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature of operations
lululemon athletica inc., a Delaware corporation (“lululemon” or “LAI” and, together with its subsidiaries unless the context otherwise
requires, the “Company”) is engaged in the design, manufacture and distribution of healthy lifestyle inspired athletic apparel, which is sold
through a chain of corporate-owned and operated retail stores, direct to consumer through e-commerce, and a network of wholesale accounts.
The Company’s primary markets are Canada, the United States, Australia, and New Zealand, where 47, 108, 18, and 1 corporate-owned store(s),
respectively, were in operation as at January 29, 2012. There were 174, 133, and 110 corporate-owned stores in operation as at January 29,
2012, January 30, 2011, and January 31, 2010, respectively.
Basis of presentation
The accompanying consolidated financial statements include the financial position, results of operations and cash flows of the Company
and its subsidiary companies during the three-year period ended January 29, 2012. The consolidated financial statements have been prepared
using the U.S. dollar and are presented in accordance with United States generally accepted accounting principles (“GAAP”).
The Company has experienced, and expects to continue to experience, significant seasonal variations in net revenue and income from
operations. Seasonal variations in revenue are primarily related to increased sales of products during the fourth fiscal quarter, reflecting historical
strength in sales during the holiday season. Historically, seasonal variations in income from operations have been driven principally by increased
net revenue in the fourth fiscal quarter.
The Company’s fiscal year ends on the Sunday closest to January 31 of the following year, typically resulting in a 52 week year, but
occasionally giving rise to an additional week, resulting in a 53 week year. Fiscal 2011, 2010 and 2009 ended on January 29, 2012, January 30,
2011, and January 31, 2010, respectively.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of lululemon athletica inc. and its wholly-owned subsidiaries. All inter-
company balances and transactions have been eliminated. The results of operations of lululemon athletica australia Pty attributable to the non-
controlling interest are presented within equity and net income, and are shown separately from the Company’
s equity and net income attributable
to the Company. In the opinion of management, all adjustments, consisting primarily of normal recurring accruals, considered necessary for a
fair presentation of the Company’s results of operations for the periods reported and of its financial condition as of the date of the balance sheet
have been included.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank balances and short-term deposits with original maturities of less than three
months. The Company has not experienced any losses related to these balances, and management believes its credit risk to be minimal.
Accounts receivable
Accounts receivable primarily arise out of sales to wholesale accounts and landlord deferred lease inducements. The allowance for
doubtful accounts represents management’s best estimate of probable credit
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