UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended August 1, 2009
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number: 001-33764
 ULTA SALON, COSMETICS & FRAGRANCE, INC.
  Delaware
    
    36-3685240(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)1000 Remington Blvd., Suite 120
    
    60440Bolingbrook, Illinois
    
    (Zip code)(Address of principal executive offices)
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



ULTA SALON, COSMETICS & FRAGRANCE, INC.
TABLE OF CONTENTS
 Part I  Financial InformationItem 1. Financial StatementsBalance Sheets
    
    
    3Statements of Income
    
    
    5Statements of Cash Flows
    
    
    6Statement of Stockholders Equity
    
    
    8Notes to Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23Part II  Other Information
    
    
    24Item 1. Legal Proceedings
    
    
    24Item 1A. Risk Factors
    
    
    24Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3. Defaults Upon Senior Securities
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26
  2




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##### 



Part I   Financial Information
 
 Item 1. Financial Statements
 Ulta Salon, Cosmetics & Fragrance, Inc.

Balance Sheets
 August 1,
    
    January 31,
    
    August 2,(In thousands)
    
    2009
    
    2009
    
    2008(unaudited)
    
    
    
    
    
    (unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    3,663
    
    
    $
    3,638
    
    
    $
    3,255Receivables, net
    
    
    13,135
    
    
    
    18,268
    
    
    
    19,164Merchandise inventories, net
    
    
    209,152
    
    
    
    213,602
    
    
    
    197,028Prepaid expenses and other current assets
    
    
    25,373
    
    
    
    24,294
    
    
    
    22,699Prepaid income taxes
    
    
    
    
    
    
    8,628
    
    
    
    Deferred income taxes
    
    
    8,097
    
    
    
    8,278
    
    
    
    9,063Total current assets
    
    
    259,420
    
    
    
    276,708
    
    
    
    251,209Property and equipment, net
    
    
    288,537
    
    
    
    292,224
    
    
    
    278,378Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    4,080Total assets
    
    $
    547,957
    
    
    $
    568,932
    
    
    $
    533,667Liabilities and stockholders equityCurrent liabilities:Current portion  notes payable
    
    $
    23,086
    
    
    $
    18,000
    
    
    $
    31,766Accounts payable
    
    
    40,393
    
    
    
    47,811
    
    
    
    40,630Accrued liabilities
    
    
    53,350
    
    
    
    51,202
    
    
    
    52,865Accrued income taxes
    
    
    3,846
    
    
    
    
    
    
    
    4,374Total current liabilities
    
    
    120,675
    
    
    
    117,013
    
    
    
    129,635Notes payable  less current portion
    
    
    42,365
    
    
    
    88,047
    
    
    
    86,390Deferred rent
    
    
    108,245
    
    
    
    101,288
    
    
    
    93,291Deferred income taxes
    
    
    17,616
    
    
    
    17,616
    
    
    
    Total liabilities
    
    
    288,901
    
    
    
    323,964
    
    
    
    309,316
  See accompanying notes to financial statements.
 3




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##### 



Ulta Salon, Cosmetics & Fragrance, Inc.
Balance Sheets (continued)
 August 1,
    
    January 31,
    
    August 2,(In thousands, except per share data)
    
    2009
    
    2009
    
    2008(unaudited)
    
    
    
    
    
    (unaudited)Stockholders equity:Common stock, $.01 par value, 400,000 shares
authorized; 58,389, 58,245 and 58,028
shares
issued; 57,884, 57,740 and 57,523 shares
outstanding; at August 1, 2009 (unaudited),
January 31, 2009 and August 2, 2008
(unaudited), respectively
    
    $
    583
    
    
    $
    582
    
    
    $
    580Treasury stock-common, at cost
    
    
    (4,179
    )
    
    
    (4,179
    )
    
    
    (4,179
    )Additional paid-in capital
    
    
    296,205
    
    
    
    293,052
    
    
    
    289,587Accumulated deficit
    
    
    (33,186
    )
    
    
    (43,856
    )
    
    
    (61,161
    )Accumulated other comprehensive loss
    
    
    (367
    )
    
    
    (631
    )
    
    
    (476
    )Total stockholders equity
    
    
    259,056
    
    
    
    244,968
    
    
    
    224,351Total liabilities and stockholders equity
    
    $
    547,957
    
    
    $
    568,932
    
    
    $
    533,667
 See accompanying notes to financial statements.
 4




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##### 



Ulta Salon, Cosmetics & Fragrance, Inc.

Statements of Income
(unaudited)
 Three months ended
    
    Six months endedAugust 1,
    
    August 2,
    
    August 1,
    
    August 2,(In thousands, except per share data)
    
    2009
    
    2008
    
    2009
    
    2008Net sales
    
    $
    273,539
    
    
    $
    249,111
    
    
    $
    542,364
    
    
    $
    488,409Cost of sales
    
    
    195,028
    
    
    
    175,965
    
    
    
    384,510
    
    
    
    341,342Gross profit
    
    
    78,511
    
    
    
    73,146
    
    
    
    157,854
    
    
    
    147,067Selling, general and administrative expenses
    
    
    66,265
    
    
    
    61,889
    
    
    
    135,459
    
    
    
    123,954Pre-opening expenses
    
    
    2,010
    
    
    
    4,050
    
    
    
    3,205
    
    
    
    7,822Operating income
    
    
    10,236
    
    
    
    7,207
    
    
    
    19,190
    
    
    
    15,291Interest expense
    
    
    645
    
    
    
    1,016
    
    
    
    1,316
    
    
    
    1,931Income before income taxes
    
    
    9,591
    
    
    
    6,191
    
    
    
    17,874
    
    
    
    13,360Income tax expense
    
    
    3,841
    
    
    
    2,503
    
    
    
    7,204
    
    
    
    5,397Net income
    
    $
    5,750
    
    
    $
    3,688
    
    
    $
    10,670
    
    
    $
    7,963Net income per common share:Basic
    
    $
    0.10
    
    
    $
    0.06
    
    
    $
    0.18
    
    
    $
    0.14Diluted
    
    $
    0.10
    
    
    $
    0.06
    
    
    $
    0.18
    
    
    $
    0.13Weighted average common shares outstanding:Basic
    
    
    57,819
    
    
    
    57,435
    
    
    
    57,781
    
    
    
    57,196Diluted
    
    
    59,045
    
    
    
    59,012
    
    
    
    58,914
    
    
    
    59,000
 See accompanying notes to financial statements.
 5




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##### 



Ulta Salon, Cosmetics & Fragrance, Inc.

Statements of Cash Flows
(unaudited)
 Six months endedAugust 1,
    
    August 2,(In thousands)
    
    2009
    
    2008Operating activitiesNet income
    
    $
    10,670
    
    
    $
    7,963Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    31,360
    
    
    
    24,354Non-cash stock compensation charges
    
    
    2,648
    
    
    
    1,544Excess tax benefits from stock-based compensation
    
    
    (283
    )
    
    
    (1,101
    )Loss on disposal of property and equipment
    
    
    184
    
    
    
    252Change in operating assets and liabilities:Receivables
    
    
    5,133
    
    
    
    1,479Merchandise inventories
    
    
    4,450
    
    
    
    (20,919
    )Prepaid expenses and other assets
    
    
    (1,079
    )
    
    
    (3,515
    )Income taxes
    
    
    12,474
    
    
    
    (690
    )Accounts payable
    
    
    (7,418
    )
    
    
    (11,492
    )Accrued liabilities
    
    
    4,775
    
    
    
    1,123Deferred rent
    
    
    6,957
    
    
    
    22,056Net cash provided by operating activities
    
    
    69,871
    
    
    
    21,054Investing activitiesPurchases of property and equipment
    
    
    (29,756
    )
    
    
    (68,072
    )Net cash used in investing activities
    
    
    (29,756
    )
    
    
    (68,072
    )Financing activitiesProceeds on long-term borrowings
    
    
    561,662
    
    
    
    579,492Payments on long-term borrowings
    
    
    (602,258
    )
    
    
    (536,106
    )Proceeds from issuance of common stock under
stock plans
    
    
    223
    
    
    
    2,056Excess tax benefits from stock-based compensation
    
    
    283
    
    
    
    1,101Initial public offering issuance costs
    
    
    
    
    
    
    (59
    )Net cash (used in) provided by financing activities
    
    
    (40,090
    )
    
    
    46,484Net increase (decrease) in cash and cash equivalents
    
    
    25
    
    
    
    (534
    )Cash and cash equivalents at beginning of period
    
    
    3,638
    
    
    
    3,789Cash and cash equivalents at end of period
    
    $
    3,663
    
    
    $
    3,255
 See accompanying notes to financial statements.
 6




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##### 



Ulta Salon, Cosmetics & Fragrance, Inc.
Statements of Cash Flows (continued)
(unaudited)
 Six months endedAugust 1,
    
    August 2,(In thousands)
    
    2009
    
    2008Supplemental cash flow informationCash paid for interest
    
    $
    1,406
    
    
    $
    2,175Cash paid (received) for income taxes
    
    $
    (5,553
    )
    
    $
    4,987Noncash investing and financing activities:Change in property and equipment included in
accrued liabilities
    
    $
    (1,899
    )
    
    $
    (1,477
    )Unrealized gain on interest rate swap hedge,
net of tax
    
    $
    264
    
    
    $
    243
 See accompanying notes to financial statements.
 7




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##### 



Ulta Salon, Cosmetics & Fragrance, Inc.

Statement of Stockholders Equity
(unaudited)
 Treasury -
    
    
    
    
    
    
    
    
    
    AccumulatedCommon Stock
    
    Common Stock
    
    Additional
    
    
    
    
    
    Other
    
    TotalIssued
    
    
    
    
    
    Treasury
    
    
    
    
    
    Paid-In
    
    Accumulated
    
    Comprehensive
    
    Stockholders(In thousands, except per share data)
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Deficit
    
    Loss
    
    EquityBalance  January 31, 2009
    
    
    58,245
    
    
    $
    582
    
    
    
    (505
    )
    
    $
    (4,179
    )
    
    $
    293,052
    
    
    $
    (43,856
    )
    
    $
    (631
    )
    
    $
    244,968Common stock options exercised
    
    
    144
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    222
    
    
    
    
    
    
    
    
    
    
    
    223Unrealized gain on interest rate swap hedge,
net of $181 income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    264
    
    
    
    264Net income for the six months ended August 1, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,670
    
    
    
    
    
    
    
    10,670Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,934Excess tax benefits from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    283
    
    
    
    
    
    
    
    
    
    
    
    283Stock compensation charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,648
    
    
    
    
    
    
    
    
    
    
    
    2,648Balance  August 1, 2009
    
    
    58,389
    
    
    $
    583
    
    
    
    (505
    )
    
    $
    (4,179
    )
    
    $
    296,205
    
    
    $
    (33,186
    )
    
    $
    (367
    )
    
    $
    259,056
 See accompanying notes to financial statements.
 8




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##### 



Ulta Salon, Cosmetics & Fragrance, Inc.

Notes to Financial Statements
(unaudited)
 1. Business and basis of presentation
  Number ofState
    
    storesAlabama
    
    
    7Arizona
    
    
    24Arkansas
    
    
    1California
    
    
    30Colorado
    
    
    11Connecticut
    
    
    1Delaware
    
    
    1Florida
    
    
    24Georgia
    
    
    17Illinois
    
    
    32Indiana
    
    
    6Iowa
    
    
    3Kansas
    
    
    1Kentucky
    
    
    2Louisiana
    
    
    2Maryland
    
    
    6Massachusetts
    
    
    4Michigan
    
    
    9Minnesota
    
    
    6Mississippi
    
    
    1Missouri
    
    
    3Nebraska
    
    
    2Nevada
    
    
    6New Jersey
    
    
    10New York
    
    
    12North Carolina
    
    
    13Ohio
    
    
    6Oklahoma
    
    
    7Oregon
    
    
    3Pennsylvania
    
    
    14Rhode Island
    
    
    1South Carolina
    
    
    4Tennessee
    
    
    3Texas
    
    
    43Utah
    
    
    2Virginia
    
    
    10Washington
    
    
    4Wisconsin
    
    
    2Total
    
    
    333
    Reverse stock split
  9




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##### 



Initial public offering
  2. Summary of significant accounting policies
  Fiscal quarter
  Reclassifications
  Share-based compensation
 Share-Based Payment
 Six months endedAugust 1, 2009
    August 2, 2008Volatility rate
    
    
    62.5
    %
    
    
    50.5
    %Average risk-free interest rate
    
    
    2.0
    %
    
    
    1.9
    %Average expected life (in years)
    
    
    4.6
    
    
    
    4.7Dividend yield
    
    None
    
    None
   10




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##### 



Comprehensive income
  Three months ended
    
    Six months endedAugust 1,
    
    August 2,
    
    August 1,
    
    August 2,2009
    
    2008
    
    2009
    
    2008Net income
    
    $
    5,750
    
    
    $
    3,688
    
    
    $
    10,670
    
    
    $
    7,963Unrealized gain on
interest rate swap
hedge, net of
income tax
    
    
    157
    
    
    
    100
    
    
    
    264
    
    
    
    243Comprehensive income
    
    $
    5,907
    
    
    $
    3,788
    
    
    $
    10,934
    
    
    $
    8,206
 Recent accounting pronouncements
 Interim Disclosures about Fair Value
of Financial Instruments Disclosures about Fair Values of Financial Instruments
 Subsequent Events
 The FASB Accounting Standards CodificationTM
and the Hierarchy of Generally Accepted Accounting Principles 
 3. Commitments and contingencies
 Leases 
 Securities litigation 
 11




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##### 



General litigation
  4. Notes payable
   5. Financial instruments
 Accounting
for Derivative Instruments and Certain Hedging Activities, as amended.
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of SFAS No. 133.
  12




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##### 



Derivative LiabilitiesAugust 1, 2009
    
    January 31, 2009(unaudited)Balance Sheet
    
    
    
    
    
    Balance SheetLocation
    
    Fair Value
    
    Location
    
    Fair ValueInterest rate swap liability
    
    Accrued liabilities
    
    $
    597
    
    
    Accrued liabilities
    
    $
    1,042
  Amount of Gain
    
    Amount of Gain
    
    Amount of GainRecognized in
    
    Reclassfied from
    
    Recognized in IncomeAOCL on Derivative
    
    AOCL into Income
    
    on Derivative(Effective Portion)
    
    (Effective Portion)
    
    (Ineffective Portion)Three months ended
    
    Three months ended
    
    Three months endedAugust 1,
    
    August 2,
    
    August 1,
    
    August 2,
    
    August 1,
    
    August 2,2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008Interest rate swap, net of tax
    
    $
    157
    
    
    $
    100
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Amount of Gain
    
    Amount of Gain
    
    Amount of GainRecognized in
    
    Reclassfied from
    
    Recognized in IncomeAOCL on Derivative
    
    AOCL into Income
    
    on Derivative(Effective Portion)
    
    (Effective Portion)
    
    (Ineffective Portion)Six months ended
    
    Six months ended
    
    Six months endedAugust 1,
    
    August 2,
    
    August 1,
    
    August 2,
    
    August 1,
    
    August 2,2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008Interest rate swap, net of tax
    
    $
    264
    
    
    $
    243
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 6. Fair Value Measurements
  Fair Value Measurements,
 
    
    Level 1  observable inputs such as quoted prices for identical instruments in active
markets.
    
    Level 2  inputs other than quoted prices in active markets that are observable either
directly or indirectly through corroboration with observable market data.
 13




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##### 




    
    Level 3  unobservable inputs in which there is little or no market data, which would
require the Company to develop its own assumptions.
  Fair value measurement usingLevel 1
    
    Level 2
    
    Level 3Deferred compensation liabilities
    
    $
    
    
    
    $
    136
    
    
    $
    Interest rate swap liability
    
    $
    
    
    
    $
    597
    
    
    $
    
 7. Net income per common share
  Three months ended
    
    Six months endedAugust 1,
    
    August 2,
    
    August 1,
    
    August 2,2009
    
    2008
    
    2009
    
    2008Net income
    
    $
    5,750
    
    
    $
    3,688
    
    
    $
    10,670
    
    
    $
    7,963Denominator for basic net income per share 
weighted-average common shares
    
    
    57,819
    
    
    
    57,435
    
    
    
    57,781
    
    
    
    57,196Dilutive effect of stock options
    
    
    1,226
    
    
    
    1,577
    
    
    
    1,133
    
    
    
    1,804Denominator for diluted net income per share
    
    
    59,045
    
    
    
    59,012
    
    
    
    58,914
    
    
    
    59,000Net income per common share:Basic
    
    $
    0.10
    
    
    $
    0.06
    
    
    $
    0.18
    
    
    $
    0.14Diluted
    
    $
    0.10
    
    
    $
    0.06
    
    
    $
    0.18
    
    
    $
    0.13
   14




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##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis of our financial condition and results of operations should
be read in conjunction with our financial statements and related notes included elsewhere in this
quarterly report. This discussion contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934 and the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, which reflect our current views with respect to, among other things,
future events and financial performance. You can identify these forward-looking statements by the
use of forward-looking words such as outlook, believes, expects, plans, estimates, or
other comparable words. Any forward-looking statements contained in this Form 10-Q are based upon
our historical performance and on current plans, estimates and expectations. The inclusion of this
forward-looking information should not be regarded as a representation by us or any other person
that the future plans, estimates or expectations contemplated by us will be achieved. Such
forward-looking statements are subject to various risks and uncertainties, which include, without
limitation: the impact of weakness in the economy; changes in the overall level of consumer
spending; changes in the wholesale cost of our products; the possibility that we may be unable to
compete effectively in our highly competitive markets; the possibility that our continued opening
of new stores could strain our resources and have a material adverse effect on our business and
financial performance; the possibility that new store openings
and existing locations
may be impacted by developer or
co-tenant issues; the possibility that the capacity of our distribution and order fulfillment
infrastructure may not be adequate to support our recent growth and expected future growth plans;
the possibility of material disruptions to our information systems; weather conditions that could
negatively impact sales and other risk factors detailed in our public filings with the Securities
and Exchange Commission (the SEC), including risk factors contained in our Annual Report on Form
10-K for the year ended January 31, 2009. We assume no obligation to update any forward-looking
statements as a result of new information, future events or developments. References in the
following discussion to we, us, our, the Company, Ulta and similar references mean Ulta
Salon, Cosmetics & Fragrance, Inc. unless otherwise expressly stated or the context otherwise
requires.
 Overview
      15




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##### 



Global economic conditions
  Basis of presentation
    
    
    the general national, regional and local economic conditions and corresponding impact on
customer spending levels;
    
    the introduction of new products or brands;
    
    the location of new stores in existing store markets;
    
    competition;
    
    our ability to respond on a timely basis to changes in consumer preferences;
    
    the effectiveness of our various marketing activities; and
    
    the number of new stores opened and the impact on the average age of all of our
comparable stores.
  
    
    the cost of merchandise sold, including all vendor allowances, which are treated as a
reduction of merchandise costs;
    
    warehousing and distribution costs including labor and related benefits, freight, rent,
depreciation and amortization, real estate taxes, utilities, and insurance;
 16




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##### 




    
    store occupancy costs including rent, depreciation and amortization, real estate taxes,
utilities, repairs and maintenance, insurance, licenses, and cleaning expenses;
    
    salon payroll and benefits; and
    
    shrink and inventory valuation reserves.
    
    
    payroll, bonus and benefit costs for retail and corporate employees;
    
    advertising and marketing costs;
    
    occupancy costs related to our corporate office facilities;
    
    public company expense including Sarbanes-Oxley compliance expenses;
    
    stock-based compensation expense related to option grants which will result in increases
in expense as we implemented a structured stock option compensation program in 2007;
    
    depreciation and amortization for all assets except those related to our retail and
warehouse operations, which is included in cost of sales; and
    
    legal, finance, information systems and other corporate overhead costs.
     Results of operations
  17




---



##### 



Three months ended
    
    Six months endedAugust 1,
    
    August 2,
    
    August 1,
    
    August 2,(Dollars in thousands)
    
    2009
    
    2008
    
    2009
    
    2008Net sales
    
    $
    273,539
    
    
    $
    249,111
    
    
    $
    542,364
    
    
    $
    488,409Cost of sales
    
    
    195,028
    
    
    
    175,965
    
    
    
    384,510
    
    
    
    341,342Gross profit
    
    
    78,511
    
    
    
    73,146
    
    
    
    157,854
    
    
    
    147,067Selling, general and administrative
expenses
    
    
    66,265
    
    
    
    61,889
    
    
    
    135,459
    
    
    
    123,954Pre-opening expenses
    
    
    2,010
    
    
    
    4,050
    
    
    
    3,205
    
    
    
    7,822Operating income
    
    
    10,236
    
    
    
    7,207
    
    
    
    19,190
    
    
    
    15,291Interest expense
    
    
    645
    
    
    
    1,016
    
    
    
    1,316
    
    
    
    1,931Income before income taxes
    
    
    9,591
    
    
    
    6,191
    
    
    
    17,874
    
    
    
    13,360Income tax expense
    
    
    3,841
    
    
    
    2,503
    
    
    
    7,204
    
    
    
    5,397Net income
    
    $
    5,750
    
    
    $
    3,688
    
    
    $
    10,670
    
    
    $
    7,963Other operating data:Number stores end of period
    
    
    333
    
    
    
    283
    
    
    
    333
    
    
    
    283Comparable store sales (decrease) increase
    
    
    (1.7
    )%
    
    
    3.7
    %
    
    
    (2.0
    )%
    
    
    3.8
    %
 Three months ended
    
    Three months endedAugust 1,
    
    August 2,
    
    August 1,
    
    August 2,(Percentage of net sales)
    
    2009
    
    2008
    
    2009
    
    2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    71.3
    %
    
    
    70.6
    %
    
    
    70.9
    %
    
    
    69.9
    %Gross profit
    
    
    28.7
    %
    
    
    29.4
    %
    
    
    29.1
    %
    
    
    30.1
    %Selling, general and
administrative expenses
    
    
    24.2
    %
    
    
    24.8
    %
    
    
    25.0
    %
    
    
    25.4
    %Pre-opening expenses
    
    
    0.7
    %
    
    
    1.6
    %
    
    
    0.6
    %
    
    
    1.6
    %Operating income
    
    
    3.7
    %
    
    
    2.9
    %
    
    
    3.5
    %
    
    
    3.1
    %Interest expense
    
    
    0.2
    %
    
    
    0.4
    %
    
    
    0.2
    %
    
    
    0.4
    %Income before income taxes
    
    
    3.5
    %
    
    
    2.5
    %
    
    
    3.3
    %
    
    
    2.7
    %Income tax expense
    
    
    1.4
    %
    
    
    1.0
    %
    
    
    1.3
    %
    
    
    1.1
    %Net income
    
    
    2.1
    %
    
    
    1.5
    %
    
    
    2.0
    %
    
    
    1.6
    %
  18




---



##### 



Comparison of three months ended August 1, 2009 to three months ended August 2, 2008
 Net sales
   Gross profit
  Selling, general and administrative expenses
  Pre-opening expenses
  Interest expense
  Income tax expense
  Net income
  19




---



##### 



Comparison of six months ended August 1, 2009 to six months ended August 2, 2008
 Net sales
   Gross profit
  Selling, general and administrative expenses
  Pre-opening expenses
  Interest expense
  Income tax expense
  Net income
  20




---



##### 



Liquidity and capital resources
     Six months endedAugust 1,
    
    August 2,(In thousands)
    
    2009
    
    2008Net cash provided by operating activities
    
    $
    69,871
    
    
    $
    21,054Net cash used in investing activities
    
    
    (29,756
    )
    
    
    (68,072
    )Net cash (used in) provided by financing activities
    
    
    (40,090
    )
    
    
    46,484Net increase (decrease) in cash and cash equivalents
    
    $
    25
    
    
    $
    (534
    )
 Operating activities
     Investing activities
  21




---



##### 



Financing activities
  Credit facility
   Off-balance sheet arrangements
  Contractual obligations
  Critical accounting policies and estimates
  Share-based compensation
 Share-Based Payment
 Share-Based Payment, Simplified Method for Plain Vanilla Share Options,
 22




---



##### 



Recent accounting pronouncements
 Interim Disclosures about Fair Value
of Financial Instruments Disclosures about Fair Values of Financial Instruments
 Subsequent Events
 The FASB Accounting Standards CodificationTM
and the Hierarchy of Generally Accepted Accounting Principles 
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  Interest rate sensitivity
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures over Financial Reporting
   23




---



##### 



Changes in Internal Control over Financial Reporting
  
 Part II   Other Information
 
 Item 1. Legal Proceedings
 Securities litigation 
  General litigation 
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  24




---



##### 



Item 4. Submission of Matters to a Vote of Security Holders
   For
    
    Against
    
    Abstain
    
    WithheldElection of Class II Directors:Hervé J.F. Defforey
    
    
    51,249,733
    
    
    
    
    
    
    
    
    
    
    
    602,695Robert F. DiRomualdo
    
    
    51,250,239
    
    
    
    
    
    
    
    
    
    
    
    602,189Lorna E. Nagler
    
    
    51,250,111
    
    
    
    
    
    
    
    
    
    
    
    602,317Ratification of the appointment of Ernst & Young LLP as our independent
registered public accounting firm
    
    
    51,707,566
    
    
    
    141,224
    
    
    
    3,638
    
    
    
    
 
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibitnumber
    
    Description of document3.1
    
    Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the Companys
Registration Statement on Form S-1 (file No. 333-144405)
filed with the Securities and Exchange Commission on August
17, 2007).3.2
    
    Amended and Restated Bylaws (incorporated by reference to
Exhibit 3.2 to the Companys Registration Statement on Form
S-1 (file No. 333-144405) filed with the Securities and
Exchange Commission on August 17, 2007).4.1
    
    Specimen Common Stock Certificate (incorporated by
reference to Exhibit 4.1 to the Companys Registration
Statement on Form S-1 (file No. 333-144405) filed with the
Securities and Exchange Commission on October 11, 2007).4.2
    
    Third Amended and Restated Registration Rights Agreement
between Ulta Salon, Cosmetics & Fragrance, Inc. and the
stockholders party thereto (incorporated by reference to
Exhibit 4.2 to the Companys Registration Statement on Form
S-1 (file No. 333-144405) filed with the Securities and
Exchange Commission on August 17, 2007).4.3
    
    Stockholder Rights Agreement (incorporated by reference to
Exhibit 4.4 to the Companys Registration Statement on Form
S-1 (file No. 333-144405) filed with the Securities and
Exchange Commission on August 17, 2007).31.1
    
    Certification of the Chief Executive Officer pursuant to
Rules 13a-14(a) and 15d-14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to
Rules 13a-14(a) and 15d-14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
 25




---



##### 



SIGNATURES
  ULTA SALON, COSMETICS & FRAGRANCE, INC.By:
    
    /s/ Lynelle P. KirbyLynelle P. KirbyPresident, Chief Executive Officer and DirectorBy:
    
    /s/ Gregg R. BodnarGregg R. BodnarChief Financial Officer
 26