Ulta Beauty, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income taxes

Income taxes

12 Months Ended

Feb. 01, 2014

Income Tax Disclosure [Abstract]

Income taxes

6. Income taxes

The provision for income taxes consists of the following:


(In thousands)	Fiscal 2013			Fiscal 2012			Fiscal 2011
Current:
Federal	$	105,731		$	83,606		$	53,495
State		15,310			14,832			11,022

Total current		121,041			98,438			64,517
Deferred:
Federal		3,891			8,950			10,796
State		(75	)		(144	)		31

Total deferred		3,816			8,806			10,827

Provision for income taxes	$	124,857		$	107,244		$	75,344

A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows:


	Fiscal 2013			Fiscal 2012			Fiscal 2011
Federal statutory rate		35.0	%		35.0	%		35.0	%
State effective rate, net of federal tax benefit		3.0	%		3.4	%		3.7	%
Other		0.1	%		(0.1	%)		(0.2	%)

Effective tax rate		38.1	%		38.3	%		38.5	%

Significant components of the Company’s deferred tax assets and liabilities are as follows:


(In thousands)	February 1, 2014			February 2, 2013
Deferred tax assets:
Reserves not currently deductible	$	24,721		$	18,160
Employee benefits		6,290			5,029
Net operating loss & credit carryforwards		402			208
Accrued liabilities		3,927			3,854
Inventory valuation		1,708			1,280

Total deferred tax assets		37,048			28,531
Deferred tax liabilities:
Property and equipment		44,288			39,357
Deferred rent obligation		28,529			21,638
Prepaid expenses		8,703			8,140

Total deferred tax liabilities		81,520			69,135

Net deferred tax liability	$	(44,472	)	$	(40,604	)

At February 1, 2014, the Company had $402 credit carryforwards for state income tax purposes.

The Company accounts for uncertainty in income taxes in accordance with the ASC rules for income taxes. The reserve for uncertain tax positions was $795 at February 1, 2014. The balance is the Company’s best estimate of the potential liability for uncertain tax positions. The increase in the liability for income taxes associated with uncertain tax positions relates to a current year position. There was no reserve for uncertain tax positions at February 2, 2013. A reconciliation of the Company’s unrecognized tax benefits, excluding interest and penalties, is as follows:


(In thousands)	February 1, 2014		February 2, 2013
Balance at beginning of the period	$	—	$	—
Increase due to a current year position		795		—
Decrease due to a prior period position		—		—

Balance at the end of the period	$	795	$	—

The Company acknowledges that the amount of unrecognized tax benefits may change in the next twelve months. However, it does not expect the change to have a significant impact on its consolidated financial statements. Income tax-related interest and penalties were insignificant for fiscal 2013, 2012 and 2011.

The Company files tax returns in the U.S. Federal and State jurisdictions. The Company is no longer subject to U.S. Federal examinations by the Internal Revenue Services for the years before 2011 and, this applies to examinations by the State authorities before 2009.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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