Lululemon 2010 Annual Report Download

Download and view the complete annual report

Please find the complete 2010 Lululemon annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 137

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137

LULULEMON ATHLETICA INC.
FORM 10-K
(Annual Report)
Filed 03/17/11 for the Period Ending 01/30/11
Telephone 604-732-6124
CIK 0001397187
Symbol LULU
SIC Code
2300 - Apparel & Other Finishd Prods of Fabrics & Similar Matl
Industry Apparel/Accessories
Sector Consumer Cyclical
Fiscal Year 02/01
http://www.edgar-online.com
© Copyright 2011, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    LULULEMON ATHLETICA INC. FORM 10-K (Annual Report) Filed 03/17/11 for the Period Ending 01/30/11 Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 604-732-6124 0001397187 LULU 2300 - Apparel & Other Finishd Prods of Fabrics & Similar Matl Apparel/Accessories Consumer Cyclical 02/01 http...

  • Page 2
    Table of Contents

  • Page 3
    ...Such aggregate market value was computed by reference to the closing price of the common stock as reported on the Nasdaq Global Select Market on July 30, 2010. For purposes of determining this amount only, the registrant has defined affiliates as including the executive officers and directors of the...

  • Page 4
    ... were outstanding 17,708,018 exchangeable shares of Lulu Canadian Holding, Inc., a wholly-owned subsidiary of the registrant. Exchangeable shares are exchangeable for an equal number of shares of ... WHICH INCORPORATED Portions of Proxy Statement for the 2011 Annual Meeting of Stockholders Part III

  • Page 5
    ... OF OPERATIONS QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CONTROLS AND PROCEDURES DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE EXECUTIVE COMPENSATION SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED...

  • Page 6
    ... line of apparel and accessories including fitness pants, shorts, tops and jackets designed for athletic pursuits such as yoga, running and general fitness. As of January 30, 2011, our branded apparel was principally sold through 137 stores that are located in Canada, the United States and Australia...

  • Page 7
    ...our product appeal. • Distinctive Retail Experience. We locate our stores in street locations, lifestyle centers and malls that position lululemon athletica stores to be an integral part of their communities. Our retail concept is based on a community-centric philosophy designed to offer customers...

  • Page 8
    ...mix of retail, design, operations, product sourcing, marketing and information technology experience from leading apparel and retail companies such as Abercrombie & Fitch Co., The Gap, Inc., Nike, Inc. and Speedo International Limited. We believe our management team is well positioned to execute the...

  • Page 9
    ... men's business as a proportion of our total sales. • Grow our Youth Brand. We launched our youth focused brand, ivivva athletica, in the fourth quarter of fiscal 2009. We believe the premium quality and technical rigor of our dance-inspired products designed for female youth serve an open market...

  • Page 10
    ... The following store list shows the number of branded stores (including corporate-owned stores and franchise stores) operated in each Canadian province, U.S. state, and internationally as of January 30, 2011: Corporate-Owned Stores Franchise Stores Total Stores Canada Alberta British Columbia...

  • Page 11
    ...owned store channel alone. We use this channel to build brand awareness, especially in new markets, including those outside of North America. International Stores Beyond North America, we intend to expand our global presence as part of our long-term business strategy. We believe that partnering with...

  • Page 12
    ... Contents Our Products We offer a comprehensive line of performance apparel and accessories for women, men and female youth. Our apparel assortment, including items such as fitness pants, shorts, tops and jackets, is designed for healthy lifestyle activities such as yoga, running and general fitness...

  • Page 13
    ... speed to market necessary to respond quickly to changing trends and increased demand. While we plan to support future growth through manufacturers outside of North America, our intent is also to maintain production in Canada and the United States whenever possible. We have developed long-standing...

  • Page 14
    ... accommodate our expected store growth and expanded product offerings over the next several years. Merchandise is typically shipped to our stores through third-party delivery services multiple times per week, providing them with a steady flow of new inventory. Competition Competition in the athletic...

  • Page 15
    ... reduce our sales. We are increasingly dependent on information systems to operate our e-commerce website, process transactions, respond to customer inquiries, manage inventory, purchase, sell and ship goods on a timely basis and maintain costefficient operations. Throughout the past few years, we...

  • Page 16
    ... our growth, we could lose customers. Our direct to consumer channel, which includes e-commerce, is an increasingly substantial part of our business, representing approximately 8% of our revenues in fiscal 2010. In addition to changing consumer preferences and buying trends relating to e-commerce...

  • Page 17
    ... trade relations" status with, China, could significantly increase our cost of products imported into North America or Australia and harm our business. We may not be able to successfully open new store locations in a timely manner, if at all, which could harm our results of operations. Our growth...

  • Page 18
    ... limited brand recognition in new markets may limit our expansion strategy and cause our business and growth to suffer. Our future growth depends, to a considerable extent, on our expansion efforts outside of Canada, especially in the United States. Our current operations are based largely in Canada...

  • Page 19
    ... offer a unique store experience to our customers and to continue to provide high quality products and services, which we may not do successfully. Failure to develop new markets outside of North America or disappointing growth outside of North America will harm our business and results of operations...

  • Page 20
    ... store sales and average sales per square foot, including foreign exchange fluctuations, fashion trends, competition, current economic conditions, pricing, inflation, the timing of the release of new merchandise and promotional events, changes in our merchandise mix, the success of marketing...

  • Page 21
    ..., which could harm our competitive position and reduce our net revenue and profitability. In addition to our store expansion strategy, we plan to grow our business by improving and expanding our product offerings, which includes introducing new product technologies, increasing the range of athletic...

  • Page 22
    ...products based on our fabrics and manufacturing technology at lower prices than we can. If our competitors do sell similar products to ours at lower prices, our net revenue and profitability could suffer. Our future success is substantially dependent on the continued service of our senior management...

  • Page 23
    ... successfully manage our inventory at a level appropriate for future customer demand. Our current and future joint ventures may not be successful. As part of our long-term growth strategy, we plan to expand our stores and sales of our products into new locations outside North America. Our successful...

  • Page 24
    ... so in the future. The reporting currency for our consolidated financial statements is the U.S. dollar. In the future, we expect to continue to derive a significant portion of our net revenue and incur a significant portion of our operating costs in Canada, and changes in exchange rates between the...

  • Page 25
    ... beyond our control and that could harm our business, financial condition and results of operations. Almost all of our suppliers are located outside the United States. During fiscal 2010, approximately 4% of our products were produced in Canada, approximately 60% in China, approximately 26% in South...

  • Page 26
    ...from time to time, such as the collection of royalty payments or other matters related to the franchisee's successful operation of the retail store. Such disputes could divert the attention of our management and our franchisees from our operations, which could cause our business, financial condition...

  • Page 27
    ... and marketing. Third parties may assert intellectual property claims against us, particularly as we expand our business and the number of products we offer. Our defense of any claim, regardless of its merit, could be expensive and time consuming and could divert management resources. Successful...

  • Page 28
    ... public market may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales also could cause our stock price to fall and make it more difficult for you to sell shares of our common stock. Our current directors and executive...

  • Page 29
    ... houses our administrative offices. We currently operate two distribution centers located in Vancouver, British Columbia and Sumner, Washington, which together are capable of accommodating our expansion plans through the foreseeable future. The general location, use, approximate size and lease...

  • Page 30
    ... PROCEEDINGS On September 7, 2010, a former hourly employee filed a class action lawsuit in the United States District Court For the Northern District of Illinois, Eastern Division entitled Lydia Brown v. lululemon athletica inc. The lawsuit alleges that we require employees to work "off the clock...

  • Page 31
    ...table sets forth, for the periods indicated, the high and low closing sale prices of our common stock reported by the Nasdaq Global Select Market for the last two fiscal years: Common Stock Price (Nasdaq Global Select Market) High Low Fiscal Year Ending January 30, 2011 Fourth Quarter Third Quarter...

  • Page 32
    ...period ended January 30, 2011: Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(2) Period(1) Total Number of Shares Purchased Average Price Paid per Share November 1, 2010 - November...

  • Page 33
    ... presented. Fiscal Year Ended January 30, January 31, February 1, February 3, January 31, 2011 2010 2009 2008 2007 (In thousands, except per share data) Consolidated statement of operations data: Net revenue Cost of goods sold Gross profit Operating expenses: Selling, general and administrative...

  • Page 34
    ... developing this channel. Further, we see our e-commerce website as an opportunity to increase our brand awareness in international markets. Operating Segment Overview lululemon is a designer and retailer of technical athletic apparel operating primarily in North America and Australia. Our yoga...

  • Page 35
    ...inventory from prior seasons to retail customers at discounted prices. Our showrooms are typically small locations that we open from time to time when we enter new markets and feature a limited selection of our product offering during select hours. Other net revenue accounted for 9% of total revenue...

  • Page 36
    ... based on their gross revenue. Additionally, unless otherwise approved by us, our franchisees are required to sell only lululemon athletica branded products, which are purchased from us at a discount to the suggested retail price. Pursuing new franchise partnerships or opening new franchise stores...

  • Page 37
    ... Opening new stores is an important part of our growth strategy. Accordingly, comparable store sales has limited utility for assessing the success of our growth strategy insofar as comparable store sales do not reflect the performance of stores open less than 12 months. Cost of goods sold includes...

  • Page 38
    ...in the future we may start to sell our products directly to some customers located outside of Canada, the United States and Australia, in which case we would become subject to taxation based on the foreign statutory rates in the countries where these sales take place and our effective tax rate could...

  • Page 39
    ... increase in comparable store sales was driven primarily by the strength of our existing product lines, the successful introduction of new products and increasing recognition of the lululemon athletica brand name, especially at our U.S. stores. Our net revenue on a segment basis for fiscal 2010...

  • Page 40
    ..., new wholesale partners and net revenue growth at existing locations attributable to a strong product offering and brand interest. We continue to employ our other segment strategy to increase interest in our product in markets we have not otherwise entered with corporate-owned stores. Gross Profit...

  • Page 41
    ... in employee costs of $24.8 million as we experience natural growth in labor hours associated with new corporate-owned stores, showrooms, outlets and other, and growth at existing locations; • an increase in variable administrative costs of $18.4 million related to our direct to consumer segment...

  • Page 42
    ... profit, which was offset partially by a natural increase in selling, general and administrative expenses related to employee costs as well as operating expenses associated with new stores and net revenue growth at existing stores. Direct to consumer. Net income from our direct to consumer segment...

  • Page 43
    ... as sales from new stores opened. The constant dollar increase in comparable store sales was driven primarily by the strength of our existing product lines, successful introduction of new products and increasing recognition of the lululemon athletica brand name. Our net revenue on a segment basis...

  • Page 44
    ... from two new outlet locations that opened in fiscal 2009. New and existing wholesale accounts contributed $4.4 million to the increase, and increased showroom sales revenue contributed $1.6 million. The increase in net revenue from our other segment was offset by temporary store locations opened in...

  • Page 45
    ... locations and store support center, as our net revenue growth recovered in the latter half of fiscal 2009, as well as increased store labor hours due to opening additional corporate-owned stores, partially offset by a one-time charge in fiscal 2008 related to the acceleration of performance-based...

  • Page 46
    ... our wholesale channel, showroom, outlet and remaining franchise locations. Opening new franchise stores is not a significant part of our near-term store growth strategy, and as such we do not expect income from operations from our franchises to grow in future years as a result of adding franchise...

  • Page 47
    ... expected growth rate slows, we believe that we will experience fourth quarter gross profits as a percentage of full year gross profits as high, or higher, than in the current year. The level of our working capital reflects the seasonality of our business. We expect inventory, accounts payable and...

  • Page 48
    ... indicated: January 30, 2011 Fiscal Year Ended January 31, February 1, 2010 2009 (In thousands) Total cash provided by (used in): Operating activities Investing activities Financing activities Effect of exchange rate changes Increase in cash and cash equivalents Operating Activities $ 179,995 (42...

  • Page 49
    ... in future periods: Total 2011 Payments Due by Fiscal Year 2012 2013 2014 2015 (In thousands) Thereafter Operating Leases (minimum rent) $248,999 $36,958 $36,329 $35,693 $35,277 $32,277 $72,465 Franchise Agreements. As of January 30, 2011, we operated four stores in the United States through...

  • Page 50
    ... of corporate-owned store net revenue, direct to consumer sales through www.lululemon.com and phone sales, and other net revenue, which includes, franchise royalties as well as sales of products to franchisees, sales to wholesale accounts, warehouse sales and sales from company-operated showrooms...

  • Page 51
    .... The liability is estimated based on a number of assumptions requiring management's judgment, including store closing costs, cost inflation rates and discount rates, and is accreted to its projected future value over time. The capitalized asset is depreciated using the convention for depreciation...

  • Page 52
    ... used, we believe the accounting estimates used in relation to the recognition of deferred income tax assets are subject to measurement uncertainty and are susceptible to a material change if the underlying assumptions change. For financial reporting purposes, we generally provide taxes at the rate...

  • Page 53
    ... rates. We do not hold or issue financial instruments for trading purposes. Foreign Currency Exchange Risk. We currently generate a significant portion of our net revenue in Canada. The reporting currency for our consolidated financial statements is the U.S. dollar. Historically, our operations...

  • Page 54
    ... our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net revenue if the selling prices of our products...

  • Page 55
    ... athletica inc. and Subsidiaries INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as at January 30, 2011 and January 31, 2010 Consolidated Statements of Operations for the years ended...

  • Page 56
    ... financial position of lululemon athletica inc. at January 30, 2011 and January 31, 2010, and the results of its operations and its cash flows for each of the three years in the period ended January 30, 2011 in conformity with accounting principles generally accepted in the United States of America...

  • Page 57
    ... and related expenses Income taxes payable Unredeemed gift card liability Other non-current liabilities Stockholders' equity Undesignated preferred stock, $0.01 par value, 5,000 shares authorized, none issued and outstanding Exchangeable stock, no par value, 30,000 shares authorized, issued and...

  • Page 58
    ...lululemon athletica inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS Fiscal Year Ended January 30, January 31, February 1, 2011 2010 2009 (Amounts in thousands, except per share amounts) Net revenue Cost of goods sold Gross profit Operating expenses: Selling... financial statements 53

  • Page 59
    ... Comprehensive income Stock-based compensation Excess tax benefit from stock-based compensation Common stock issued upon exchange of exchangeable shares Restricted stock issuance Stock option exercises Balance at January 31, 2010 Net income attributable to lululemon athletica inc. Foreign currency...

  • Page 60
    Table of Contents lululemon athletica inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended January 30, January 31, February 1, 2011 2010 2009 (Amounts in thousands) Cash flows from operating activities Net income attributable to lululemon athletica inc. Net income ...

  • Page 61
    ... 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, independent franchises and a network of wholesale accounts. The Company's primary markets are Canada, the United States and Australia...

  • Page 62
    ... its inventories and makes provisions as necessary to appropriately value obsolete or damaged goods. The amount of the provision is equal to the difference between the cost of the inventory and its estimated net realizable value based upon assumptions about future demand, selling prices and market...

  • Page 63
    .... The liability is estimated based on a number of assumptions requiring management's judgment, including store closing costs, cost inflation rates and discount rates, and is accreted to its projected future value over time. The capitalized asset is depreciated using the convention for depreciation...

  • Page 64
    ...sales of apparel to customers through corporate-owned and operated retail stores, direct to consumer through www.lululemon.com and phone sales, initial license and franchise fees, royalties from franchisees and sales of apparel to franchisees, sales through a network of wholesale accounts, and sales...

  • Page 65
    ... assumptions used, the accounting estimates used in relation to the recognition of deferred income tax assets are subject to measurement uncertainty and are susceptible to a material change if the underlying assumptions change. The Company generally provides for taxes at the rate applicable...

  • Page 66
    ... stock units using the treasury stock method. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities...

  • Page 67
    ...in the first quarter of fiscal 2010. In April 2010, the FASB amended ASC Topic 718 Compensation ("ASC 718") to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity's equity securities trades should not be...

  • Page 68
    ...healthy lifestyle inspired athletic apparel, which is sold through a chain of corporate-owned retail locations and through a network of wholesale accounts, in Australia. The Company previously accounted for its 13 percent interest in lululemon australia as an equity investment. The acquired business...

  • Page 69
    ...value of the non-controlling interest in lululemon australia. In July 2010, the Company reacquired in an asset purchase transaction a franchised store in Saskatoon, Saskatchewan for total cash consideration of $6,610. Included in the Company's consolidated statements of operations for the year ended...

  • Page 70
    ... lululemon athletica inc. and Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the fair values of the net assets acquired at the date of acquisition: Inventory Prepaid and other current assets Property and equipment Goodwill Total assets...

  • Page 71
    Table of Contents lululemon athletica inc. and Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) impairment annually, or as events occur or circumstances arise which may reduce the fair value of goodwill below carrying value. The weighted-average remaining useful lives of the...

  • Page 72
    ... lululemon athletica inc. and Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Borrowings under the credit facility can be made either as i) Revolving Loans - Revolving loan borrowings will bear interest at a rate equal to the Bank's CDN$ or USD$ annual base rate (defined...

  • Page 73
    ... employees at a 25% discount from fair market value subject to certain limits as defined in the ESPP. The maximum number of shares available under the ESPP is 3,000 shares. During the year ended January 30, 2011, 37 shares were purchased under the ESPP, which were funded by the Company through open...

  • Page 74
    ...lululemon athletica inc. and Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the shares granted under the stockholder sponsored plan. Amounts are presented on a post reorganization basis. Number of Exchangeable Shares Number of LIPO USA Shares...

  • Page 75
    ... approximates the yield on benchmark Government of Canada bonds for terms similar to the contract life of the options. The total fair value of awards under the stockholder sponsored plans that vested during the years ended January 30, 2011, January 31, 2010 and February 1, 2009 was $261, $464,and...

  • Page 76
    ...2011, January 31, 2010, and February 1, 2009, and changes during the years then ended is presented below: Number of Stock Options WeightedAverage Exercise Price Number of Performance Share Units WeightedAverage Grant Fair Value Number of Restricted Shares WeightedAverage Grant Fair Value Balance at...

  • Page 77
    ... operating leases for its office, distribution centers and corporate-owned store premises in Canada, the United States, Australia and Hong Kong. As of January 30, 2011, the lease terms of various leases are from two to 10 years. A substantial number of the Company's leases for corporate-owned store...

  • Page 78
    ...continued financial position, results of operations or cash flows except as follows: On September 7, 2010, a former hourly employee filed a class action lawsuit in the United States District Court For the Northern District of Illinois, Eastern Division entitled Lydia Brown v. lululemon athletica inc...

  • Page 79
    ... Contents lululemon athletica inc. and Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 15 SUPPLEMENTAL CASH FLOW INFORMATION Changes in non-cash working capital items: January 30, 2011 January 31, 2010 February 1, 2009 (Increase) in accounts receivable (Increase) decrease...

  • Page 80
    ... reportable segments for financial statement disclosure. Based on financial information provided to the chief operating decision maker of the Company and the manner in which the Company operates its outlets and other operations, the Company determined that each store, showroom and warehouse sales...

  • Page 81
    ...net revenue in future years. Therefore, the Company has re-evaluated segment reporting in the first quarter of fiscal 2010. The Company's reportable segments are comprised of corporate-owned stores, direct to consumer and other. Direct to consumer includes sales from the Company's e-commerce website...

  • Page 82
    ... of Contents lululemon athletica inc. and Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company operates in four geographic areas - Canada, the United States, Asia and Australia. Revenues from these regions for the years ended January 30, 2011, January 31, 2010, and...

  • Page 83
    ... of Contents lululemon athletica inc. and Subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) A reconciliation of the associated accrued liability is as follows: Lease Exit and Other Related Costs Asset Impairment Total Accrued liability at January 31, 2010 Costs incurred Cash...

  • Page 84
    ... for any future quarter or for a full year. Fourth Quarter Fiscal 2010 Third Second Quarter Quarter First Fourth Quarter Quarter (In thousands) (unaudited) Fiscal 2009 Third Second Quarter Quarter First Quarter Consolidated statements of income: Net revenue Cost of goods sold Gross profit Operating...

  • Page 85
    ... designed to reasonably ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Inherent Limitations Over Internal Controls Our internal...

  • Page 86
    ... directors, officers and employees, including our principal executive officer and our principal financial and accounting officer. Our Code of Business Conduct and Ethics is available on our internet website, www.lululemon.com and can be obtained by writing to Investor Relations, lululemon athletica...

  • Page 87
    ...to our 2011 Proxy Statement under the caption "Principal Accounting Fees and Services." PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Documents filed as part of this report: 1. Financial Statements. The financial statements as set forth under Item 8 of this Annual Report on Form 10...

  • Page 88
    ... Goods For the year ended February 1, 2009 For the year ended January 31, 2010 For the year ended January 30, 2011 Sales Allowances For the year ended February 1, 2009 For the year ended January 31, 2010 For the year ended January 30, 2011 Valuation Allowance on Deferred Income Taxes For the year...

  • Page 89
    ... (including Plan of Arrangement and Exchangeable Share Provisions) Credit Facility between lululemon canada inc. and Royal Bank of Canada dated as of April 11, 2007 Form of Indemnification Agreement between lululemon athletica inc. and its directors and certain officers Purchase and Sale Agreement...

  • Page 90
    ... lululemon athletica inc., Slinky Financial ULC and each of the other parties named therein lululemon athletica inc. Employee Share Purchase Plan Executive Employment Agreement with Christine M. Day, dated effective as of August 1, 2008 2010 Executive Bonus Plan of lululemon athletica inc. Executive...

  • Page 91
    ...of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LULULEMON ATHLETICA INC. By: /s/ CHRISTINE M. DAY Christine M. Day Chief Executive Officer (Principal Executive Officer) KNOW ALL...

  • Page 92
    Table of Contents Signature Title Date /s/ RHODA M. PITCHER Rhoda M. Pitcher /s/ THOMAS G. STEMBERG Thomas G. Stemberg Director March 16, 2011 Director March 16, 2011 87

  • Page 93
    ... (including Plan of Arrangement and Exchangeable Share Provisions) Credit Facility between lululemon canada inc. and Royal Bank of Canada dated as of April 11, 2007 Form of Indemnification Agreement between lululemon athletica inc. and its directors and certain officers Purchase and Sale Agreement...

  • Page 94
    ... lululemon athletica inc., Slinky Financial ULC and each of the other parties named therein lululemon athletica inc. Employee Share Purchase Plan Executive Employment Agreement with Christine M. Day, dated effective as of August 1, 2008 2010 Executive Bonus Plan of lululemon athletica inc. Executive...

  • Page 95
    Exhibit 10.12 KVAERNER CHEMETICS BUILDING 1818 CORNWALL STREET VANCOUVER, BRITISH COLUMBIA PURCHASE AND SALE AGREEMENT BETWEEN 2725312 CANADA INC. AND LULULEMON ATHLETICA CANADA INC. DECEMBER 22, 2010

  • Page 96
    ...Lease Changes 4.7 Service Contract Changes ARTICLE 5 PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS 5.1 Purchaser's Representations and Warranties 5.2 As Is - Where Is 5.3 Purchaser's Covenants 5.4 Service Contracts 5.5 Indemnity 5.6 Environmental and Physical Condition - Release 5.7 Survival...

  • Page 97
    ... 8.4 Concurrent Requirements 8.5 Discharge of Encumbrances by Vendor 8.6 Closing Deliveries 8.7 Election ARTICLE 9 MISCELLANEOUS 9.1 Time 9.2 No Waiver 9.3 Tender 9.4 Fees and Expenses 9.5 Harmonized Sales Tax 9.6 Commission 9.7 Entire Agreement 9.8 Amendment 9.9 Further Assurances 9.10 No Merger...

  • Page 98
    PURCHASE AND SALE AGREEMENT THIS AGREEMENT dated for reference December 22, 2010 BETWEEN : 2725312 CANADA INC. Suite 1800 - 1055 Dunsmuir Street Vancouver, British Columbia V7X 1B1 (the " Vendor ") AND : LULULEMON ATHLETICA CANADA INC. 1818 Cornwall Avenue Vancouver, British Columbia V6J 1C7 (the " ...

  • Page 99
    ...of Dangerous Goods Act (Canada) and the Environmental Management Act (British Columbia); " Equipment " means all the chattels, personal property, goods, equipment, inventory and supplies used by the Vendor or anyone on the Vendor's behalf in connection with the operation, use, enjoyment, maintenance...

  • Page 100
    ... means the Lower Mainland Land Title Office; " Lululemon Lease " means the lease dated May 21, 2010, as amended from time to time, between the Vendor, as landlord, and the Purchaser, as tenant, in respect of the Lands; " Order " means any written directive, decision, order, notice including a notice...

  • Page 101
    ... set forth in section 4.5; " RJC Report " has the meaning set forth in section 4.1(b)(iv); " Service Contracts " means all written agreements entered into by or on behalf of the Vendor with respect to the furnishing of supplies or services to the Lands or with respect to the management or operation...

  • Page 102
    ... or internal studies, investigations or reports in connection with the Purchased Property or any matters contemplated by or otherwise dealt with in this Agreement, except that each of Ms. Burns and Mr. Purcell will consult with such asset managers, portfolio managers and leasing managers within...

  • Page 103
    ... AND SALE 2.1 AGREEMENT OF PURCHASE AND SALE. Subject to the terms and conditions of this Agreement and based on the warranties and representations herein contained, the Vendor agrees to sell and the Purchaser agrees to purchase the Purchased Property on the Closing Date for the Purchase Price, all...

  • Page 104
    ... OF DEPOSIT. The amount paid at any time on account of the Deposit will be: (a) paid to the Vendor: (i) (ii) on the Completion Date on account of the Purchase Price, if the Vendor and the Purchaser complete the sale and purchase of the Purchased Property on the Completion Date; or together...

  • Page 105
    ... years of the term thereof, and the Purchaser will receive a credit on the Statement of Adjustments for the portion of such basic rent that is attributable to the period from and after the Completion Date; and pursuant to the Lululemon Lease, the Vendor is obligated to undertake certain future work...

  • Page 106
    ... final cost or amount of an item will be determined by independent auditors, acceptable to the Vendor and the Purchaser, each acting reasonably, with the cost of such auditors' determination being shared equally between the Vendor and the Purchaser. On the Completion Date, the Parties will execute...

  • Page 107
    ..., and to pay to the Purchaser on closing an amount equal to the deductible under such insurance policies and to complete the sale and purchase of the Purchased Property; if necessary, the Completion Date will be extended until that day which is ten (10) Business Days after the delivery of the...

  • Page 108
    ..., (and will permit the Purchaser to make such copies thereof, at the Purchaser's cost, as the Purchaser may reasonably require), and deliver to the Purchaser at its address herein on or before the date which is three (3) Business Days after the Effective Date: (i) (ii) original or true and complete...

  • Page 109
    ... detailed inventory of the Equipment; (vii) (viii) original or true and complete copies of the Service Contracts and a summary of the state of accounts with respect to the Service Contracts as at the Effective Date; (ix) (x) (xi) (xii) a list of all warranties in favour of the Vendor currently in...

  • Page 110
    ... the Vendor or any director, officer or shareholder thereof, to execute in order for the Purchaser to conduct such due diligence searches with respect to the purchase of the Purchased Property as it determines to be necessary; and forward to the Purchaser within two (2) Business Days of the Vendor...

  • Page 111
    ... and legal notations save and except for the Permitted Encumbrances; the Vendor is a body corporate duly incorporated and validly existing under the laws of Canada and is duly qualified to own and sell the Purchased Property and has full power, authority and capacity to enter into this Agreement and...

  • Page 112
    ..., except as disclosed by the Vendor to the Purchaser pursuant to subsection 4.1(b); (n) (iii) (iv) (v) (p) each of the Service Contracts is in good standing and assignable to the Purchaser or can be terminated by the Vendor on not more than 30 days' notice, except as disclosed by the Vendor to...

  • Page 113
    ... relating to the Purchased Property or any business conducted thereon with any labour union or other association of employees; the Vendor has no employees in respect of the Vendor's operation of the Lands for whom the Purchaser will be responsible following the completion of the sale and purchase...

  • Page 114
    ... respond to any request for approval within three (3) Business Days after such request is made in writing to it and if it fails to respond within such time the Purchaser will be deemed to have approved such modification or new proposed Service Contract. Notwithstanding the foregoing, the Vendor may...

  • Page 115
    ... the Lands, including the existence of any encroachments; the rights to develop, build on, subdivide or otherwise extract value from the Lands; the existing or potential costs or obligations which might be imposed on the Purchaser by any governmental authority (including the City) including, and by...

  • Page 116
    ...not been released, spilled...development, or derivation of revenue. (iv) (c) it is the obligation of the Purchaser...Purchaser a "site profile" or any other environmental report for the Lands as may be required under any applicable Environmental Laws. (d) (e) 5.3 PURCHASER'S COVENANTS. The Purchaser...

  • Page 117
    ... or the Completion Date, and whether or not caused in whole or in part or directly or indirectly by the Vendor; and (b) from and after the Completion Date, the Purchaser hereby releases the Vendor from all Claims which the Purchaser may assert against the Vendor at law or in equity, arising out

  • Page 118
    ... related to projected revenues and expenses, the Other Leases, the Service Contracts and other relevant contracts, the geotechnical, engineering and environmental condition of the Lands, the title to the Lands and the physical condition of the Lands and fitness for use of the Purchased Property...

  • Page 119
    ..., and the Vendor's obligation to sell, the Purchased Property pursuant to this Agreement will be at an end and the Deposit and all interest accrued on it will be returned immediately to the Purchaser. ARTICLE 7 PREPARATION OF CLOSING DOCUMENTS 7.1 DELIVERY OF CLOSING DOCUMENTS BY THE VENDOR. On or...

  • Page 120
    ... by the Purchaser, executed by the Purchaser; the HST Certificate, executed by the Purchaser; and such further documentation relating to the completion of the transactions contemplated herein as the Vendor may reasonably require. 7.3 PREPARATION OF CLOSING DOCUMENTS. Except for the Statement of...

  • Page 121
    ... in section 7.2 to the Vendor and the Purchaser's Solicitors will be entitled to (and will be directed by the parties to) release to the Purchaser all interest earned on the Deposit (unless such interest has been adjusted for on the Vendor's Statement of Adjustments, in which event the interest will...

  • Page 122
    ... three (3) Business Days after the Completion Date, the items listed below: (a) (b) (c) (d) (e) (f) originally executed copies of the Leases and all guarantees, indemnities and covenants in respect thereof; originally executed copies of the written Service Contracts assigned to the Purchaser; all...

  • Page 123
    ... including the day such payment is made. " Prime Rate ", as used herein, means that variable annual rate of interest quoted by the main branch of Royal Bank of Canada, Vancouver, British Columbia, from time to time as the rate of interest used by it as a reference rate for setting rates of interest...

  • Page 124
    ... delivered, transmitted by facsimile or electronic mail or sent by postage prepaid mail and addressed to the parties as follows: TO THE PURCHASER: lululemon athletica canada inc. 1818 Cornwall Avenue Vancouver, British Columbia V6J 1C7 Attention: Fax No.: Email: Wynn Spencer (604) 874-6124 wspencer...

  • Page 125
    ... 1700 - 666 Burrard Street Vancouver, British Columbia V6C 2X8 Attention: Fax No.: Email: Ross MacDonald (604) 631-1367 [email protected] or at such other address, fax number or electronic mail address as either party may specify in writing to the other. The time of giving and receiving any...

  • Page 126
    ...publicity release or communication to the general public concerning the proposed purchase and sale of the Purchased Property without the prior written approval of the other party, unless any such disclosure is otherwise required by law. 9.15 COUNTERPARTS. This Agreement may be executed in any number...

  • Page 127
    ... as if the parties had delivered an executed original Agreement. IN WITNESS WHEREOF the Parties have executed this Agreement on the 22nd day of December, 2010. LULULEMON ATHLETICA CANADA INC. By: /s/ John Currie Authorized Signatory 2725312 CANADA INC. By: /s/ Chrystal Burns Authorized Signatory...

  • Page 128
    SCHEDULE A LANDS AND PERMITTED ENCUMBRANCES Lands Parcel Identifier 007-095-333 Lot A Block 197 District Lot 526 Plan 18728 Permitted Encumbrances The Lands are subject to the following Permitted Encumbrances: Legal Notations None. Charges, Liens and Interests (a) (b) (c) (d) (e) (f) (g) (h) (i) (j)...

  • Page 129
    ... of the Lease will end on _____. There is no right to renew or extend the term except as set out in item 3 of the Notes herein. The monthly minimum rental is _____. The monthly additional rent (being charged for operating costs and realty taxes), exclusive of harmonized sales tax, is presently _____...

  • Page 130
    ... herein. The undersigned has no claims against the Landlord, financial or otherwise, except as set out in item 4 of the Notes herein. NOTES: 10. 11. 12. 13. 14. Sublet: Security Deposit: Renewals: Claims: Other Matters: DATED the _____ day of _____, 201__. (Tenant) By: Authorized Signing Officer

  • Page 131
    ...the " Vendor ") AND : LULULEMON ATHLETICA CANADA INC. (the " Purchaser ") WHEREAS : A. By a purchase and sale agreement dated for reference December 22, 2010 between the Vendor and the Purchaser (the " Purchase Agreement "), the Vendor agreed to sell and the Purchaser agreed to purchase, among other...

  • Page 132
    ... an executed original of this Agreement. 3. 4. 5. 6. IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the date first above written. 2725312 CANADA INC. By: /s/ Chrystal Burns Authorized Signatory /s/ John Purcell Authorized Signatory 2 LULULEMON ATHLETICA CANADA INC...

  • Page 133
    ...USA, Inc. ALBERTA Lululemon Callco ULC BRITISH COLUMBIA Lulu Canadian Holding Inc. lululemon athletica canada inc. 0902600 B.C. Ltd. VICTORIA lululemon athletica australia holdings Pty Ltd. lululemon australia Pty Ltd. NEW ZEALAND lululemon athletica new zealand limited HONG KONG Lululemon Hong Kong...

  • Page 134
    ...(No. 333-167985) of lululemon athletica inc. of our report relating to the consolidated financial statements and on the effectiveness of internal control over financial reporting dated March 16, 2011, which appears in the Form 10-K. /s/ PricewaterhouseCoopers LLP Vancouver, British Columbia March 16...

  • Page 135
    ...information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By: /s/ CHRISTINE M. DAY Christine M. Day Chief Executive Officer and Director (Principal Executive Officer...

  • Page 136
    ...in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who...

  • Page 137
    ... Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ CHRISTINE M. DAY Christine M. Day Chief Executive Officer and Director (Principal Executive Officer) Dated...