Ulta 2008 Annual Report Download - page 46

Investing activities
We have historically used cash primarily for new and remodeled stores as well as investments in information
technology systems. Investment activities primarily related to capital expenditures were $110.9 million in
fiscal 2008, compared to $101.9 million and $62.3 million in fiscal 2007 and 2006, respectively. Capital
expenditures were higher during fiscal 2008 due to the addition of a second distribution center and the number
of new store openings (63 new stores were opened during fiscal 2008, compared to 53 new stores during fiscal
2007 and 31 new stores during fiscal 2006).
During fiscal 2006, our Chief Executive Officer exercised stock options in exchange for a promissory note for
$4.1 million. The Company withheld $2.4 million of payroll-related taxes in connection with the exercised
options and that portion of the note has been classified as an investing activity in fiscal 2006. The remainder
of the promissory note of $1.7 million related to exercise proceeds of the options and was classified as a non-
cash financing activity. The note was paid in full on June 29, 2007.
Financing activities
Financing activities consist principally of draws and payments on our credit facility and capital stock
transactions. The decrease in net cash provided by financing activities of $15.1 million in fiscal 2008
compared to fiscal 2007 is primarily the result of $25.7 million of net proceeds from the Company’s initial
public offering in fiscal 2007. This was partially offset by a $7.3 million increase in long-term borrowings in
fiscal 2008 due to an increase in new store capital expenditures and merchandise inventories. The remaining
difference is related to capital stock transactions.
Credit facility
Our credit facility is with LaSalle Bank National Association as the administrative agent, Wachovia Capital
Finance Corporation as collateral agent, and JP Morgan Chase Bank as documentation agent. This facility
provides maximum credit of $200 million through May 31, 2011. The credit facility agreement contains a
restrictive financial covenant requiring us to maintain tangible net worth of not less than $80 million. On
January 31, 2009, our tangible net worth was approximately $245 million. Substantially all of our assets are
pledged as collateral for outstanding borrowings under the facility. Outstanding borrowings bear interest at the
prime rate or the Eurodollar rate plus 1.00% up to $100 million and 1.25% thereafter. The advance rates on
owned inventory are 80% (85% from September 1 to January 31).
The interest rate on the outstanding balances under the facility as of January 31, 2009 and February 2, 2008
was 1.52% and 4.81%, respectively. At January 31, 2009, we had $106.0 million of outstanding borrowings
under the facility. We have classified $88.0 million as long-term as this is the minimum amount we believe
will remain outstanding for an uninterrupted period over the next year. We had approximately $86.8 million
and $73.1 million (excluding the accordion option which was exercised on August 15, 2008) of availability as
of January 31, 2009 and February 2, 2008, respectively.
We also have an ongoing letter of credit that renews annually which had a balance of $0.3 million as of
January 31, 2009 and February 2, 2008.
Seasonality
Our business is subject to seasonal fluctuation. Significant portions of our net sales and profits are realized
during the fourth quarter of the fiscal year due to the holiday selling season. To a lesser extent, our business is
also affected by Mothers’ Day as well as the “Back to School” season and Valentines’ Day. Any decrease in
sales during these higher sales volume periods could have an adverse effect on our business, financial
condition, or operating results for the entire fiscal year. Our quarterly results of operations have varied in the
past and are likely to do so again in the future. As such, we believe that period-to-period comparisons of our
results of operations should not be relied upon as an indication of our future performance.
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