##### Table of Contents



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 July 31, 2010
 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
(State or other jurisdiction of 
incorporation or organization)
    
    36-3685240
(I.R.S. Employer
Identification No.)
 1000 Remington Blvd., Suite 120
Bolingbrook, Illinois
(Address of principal executive offices)
    
    60440
(Zip code)
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filerþ
    
    Non- accelerated filero
(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
    
    
    7Notes to Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21Part II   Other Information
    
    
    21Item 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3. Defaults Upon Senior Securities
    
    
    22Item 4. [Reserved]
    
    
    22Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    23SIGNATURES
    
    
    24
  2




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##### Table of Contents



Part I   Financial Information
 
 Item 1. Financial Statements
 Ulta Salon, Cosmetics & Fragrance, Inc.
 
 Balance Sheets
 July 31,
    
    January 30,
    
    August 1,(In thousands)
    
    2010
    
    2010
    
    2009(unaudited)
    
    
    
    
    
    (unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    15,916
    
    
    $
    4,017
    
    
    $
    3,663Receivables, net
    
    
    11,418
    
    
    
    13,477
    
    
    
    13,135Merchandise inventories, net
    
    
    224,329
    
    
    
    206,948
    
    
    
    209,152Prepaid expenses and other current assets
    
    
    30,989
    
    
    
    30,272
    
    
    
    25,373Prepaid income taxes
    
    
    7,280
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    8,060
    
    
    
    8,060
    
    
    
    8,097Total current assets
    
    
    297,992
    
    
    
    262,774
    
    
    
    259,420Property and equipment, net
    
    
    301,333
    
    
    
    290,861
    
    
    
    288,537Total assets
    
    $
    599,325
    
    
    $
    553,635
    
    
    $
    547,957Liabilities and stockholders equityCurrent liabilities:Current portion  notes payable
    
    $
    
    
    
    $
    
    
    
    $
    23,086Accounts payable
    
    
    61,316
    
    
    
    56,387
    
    
    
    40,393Accrued liabilities
    
    
    68,833
    
    
    
    59,189
    
    
    
    53,350Accrued income taxes
    
    
    
    
    
    
    10,781
    
    
    
    3,846Total current liabilities
    
    
    130,149
    
    
    
    126,357
    
    
    
    120,675Notes payable  less current portion
    
    
    
    
    
    
    
    
    
    
    42,365Deferred rent
    
    
    120,313
    
    
    
    113,718
    
    
    
    108,245Deferred income taxes
    
    
    20,952
    
    
    
    20,952
    
    
    
    17,616Total liabilities
    
    
    271,414
    
    
    
    261,027
    
    
    
    288,901
  See accompanying notes to financial statements.
 3




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##### Table of Contents



Ulta Salon, Cosmetics & Fragrance, Inc.
Balance Sheets (continued)
 July 31,
    
    January 30,
    
    August 1,(In thousands, except per share data)
    
    2010
    
    2010
    
    2009(unaudited)
    
    
    
    
    
    (unaudited)Stockholders equity:Common stock, $.01 par value, 400,000 shares
authorized; 59,365, 58,674 and 58,389 shares
issued; 58,860, 58,169 and 57,884 shares
outstanding; at July 31, 2010 (unaudited),
January 31, 2009 and August 1, 2009
(unaudited), respectively
    
    $
    594
    
    
    $
    586
    
    
    $
    583Treasury stock-common, at cost
    
    
    (4,179
    )
    
    
    (4,179
    )
    
    
    (4,179
    )Additional paid-in capital
    
    
    309,273
    
    
    
    300,701
    
    
    
    296,205Retained earnings (accumulated deficit)
    
    
    22,223
    
    
    
    (4,500
    )
    
    
    (33,186
    )Accumulated other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    (367
    )Total stockholders equity
    
    
    327,911
    
    
    
    292,608
    
    
    
    259,056Total liabilities and stockholders equity
    
    $
    599,325
    
    
    $
    553,635
    
    
    $
    547,957
 See accompanying notes to financial statements.
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Ulta Salon, Cosmetics & Fragrance, Inc.
 
 Statements of Income
(unaudited)
 Three months ended
    
    Six months endedJuly 31,
    
    August 1,
    
    July 31,
    
    August 1,(In thousands, except per share data)
    
    2010
    
    2009
    
    2010
    
    2009Net sales
    
    $
    321,804
    
    
    $
    273,539
    
    
    $
    642,000
    
    
    $
    542,364Cost of sales
    
    
    217,846
    
    
    
    194,825
    
    
    
    433,507
    
    
    
    384,108Gross profit
    
    
    103,958
    
    
    
    78,714
    
    
    
    208,493
    
    
    
    158,256Selling, general and administrative expenses
    
    
    79,909
    
    
    
    66,468
    
    
    
    160,638
    
    
    
    135,861Pre-opening expenses
    
    
    1,793
    
    
    
    2,010
    
    
    
    2,267
    
    
    
    3,205Operating income
    
    
    22,256
    
    
    
    10,236
    
    
    
    45,588
    
    
    
    19,190Interest expense
    
    
    214
    
    
    
    645
    
    
    
    332
    
    
    
    1,316Income before income taxes
    
    
    22,042
    
    
    
    9,591
    
    
    
    45,256
    
    
    
    17,874Income tax expense
    
    
    8,980
    
    
    
    3,841
    
    
    
    18,533
    
    
    
    7,204Net income
    
    $
    13,062
    
    
    $
    5,750
    
    
    $
    26,723
    
    
    $
    10,670Net income per common share:Basic
    
    $
    0.22
    
    
    $
    0.10
    
    
    $
    0.46
    
    
    $
    0.18Diluted
    
    $
    0.22
    
    
    $
    0.10
    
    
    $
    0.44
    
    
    $
    0.18Weighted average common shares outstanding:Basic
    
    
    58,727
    
    
    
    57,819
    
    
    
    58,517
    
    
    
    57,781Diluted
    
    
    60,672
    
    
    
    59,045
    
    
    
    60,505
    
    
    
    58,914
 See accompanying notes to financial statements.
 5




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Ulta Salon, Cosmetics & Fragrance, Inc.
 
 Statements of Cash Flows
 (unaudited)
 Six months endedJuly 31,
    
    August 1,(In thousands)
    
    2010
    
    2009Operating activitiesNet income
    
    $
    26,723
    
    
    $
    10,670Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    31,593
    
    
    
    31,360Non-cash stock compensation charges
    
    
    4,222
    
    
    
    2,648Excess tax benefits from stock-based compensation
    
    
    (924
    )
    
    
    (283
    )Loss on disposal of property and equipment
    
    
    157
    
    
    
    184Change in operating assets and liabilities:Receivables
    
    
    2,059
    
    
    
    5,133Merchandise inventories
    
    
    (17,381
    )
    
    
    4,450Prepaid expenses and other assets
    
    
    (717
    )
    
    
    (1,079
    )Income taxes
    
    
    (17,137
    )
    
    
    12,474Accounts payable
    
    
    4,929
    
    
    
    (7,418
    )Accrued liabilities
    
    
    6
    
    
    
    4,775Deferred rent
    
    
    6,595
    
    
    
    6,957Net cash provided by operating activities
    
    
    40,125
    
    
    
    69,871Investing activitiesPurchases of property and equipment
    
    
    (32,584
    )
    
    
    (29,756
    )Net cash used in investing activities
    
    
    (32,584
    )
    
    
    (29,756
    )Financing activitiesProceeds on long-term borrowings
    
    
    
    
    
    
    561,662Payments on long-term borrowings
    
    
    
    
    
    
    (602,258
    )Proceeds from issuance of common stock under stock plans
    
    
    3,434
    
    
    
    223Excess tax benefits from stock-based compensation
    
    
    924
    
    
    
    283Net cash provided by (used in) financing activities
    
    
    4,358
    
    
    
    (40,090
    )Net increase in cash and cash equivalents
    
    
    11,899
    
    
    
    25Cash and cash equivalents at beginning of period
    
    
    4,017
    
    
    
    3,638Cash and cash equivalents at end of period
    
    $
    15,916
    
    
    $
    3,663Supplemental cash flow informationCash paid for interest
    
    $
    189
    
    
    $
    1,406Cash paid (received) for income taxes
    
    $
    35,670
    
    
    $
    (5,553
    )Noncash investing and financing activities:Change in property and equipment included in accrued
liabilities
    
    $
    9,638
    
    
    $
    (1,899
    )Unrealized gain on interest rate swap hedge, net of tax
    
    $
    
    
    
    $
    264
 See accompanying notes to financial statements.
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Ulta Salon, Cosmetics & Fragrance, Inc.
 
 Statement of Stockholders Equity
 (unaudited)
 Treasury 
    
    
    
    
    
    RetainedCommon Stock
    
    Common Stock
    
    Additional
    
    Earnings
    
    TotalIssued
    
    
    
    
    
    Treasury
    
    
    
    
    
    Paid-In
    
    (Accumulated
    
    Stockholders(In thousands, except per share data)
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Deficit)
    
    EquityBalance  January 30, 2010
    
    
    58,674
    
    
    $
    586
    
    
    
    (505
    )
    
    $
    (4,179
    )
    
    $
    300,701
    
    
    $
    (4,500
    )
    
    $
    292,608Common stock options 
exercised
    
    
    691
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    3,426
    
    
    
    
    
    
    
    3,434Net income
for the six 
months ended July 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,723
    
    
    
    26,723Excess tax benefits from stock-
based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    924
    
    
    
    
    
    
    
    924Stock compensation charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,222
    
    
    
    
    
    
    
    4,222Balance  July 31, 2010
    
    
    59,365
    
    
    $
    594
    
    
    
    (505
    )
    
    $
    (4,179
    )
    
    $
    309,273
    
    
    $
    22,223
    
    
    $
    327,911
 See accompanying notes to financial statements.
 7




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Ulta Salon, Cosmetics & Fragrance, Inc.
 
 Notes to Financial Statements
 (unaudited)
 1. Business and basis of presentation
  State
    
    Number of storesAlabama
    
    7Arizona
    
    23Arkansas
    
    1California
    
    32Colorado
    
    11Connecticut
    
    2Delaware
    
    1Florida
    
    25Georgia
    
    16Illinois
    
    33Indiana
    
    6Iowa
    
    3Kansas
    
    1Kentucky
    
    2Louisiana
    
    3Maryland
    
    6Massachusetts
    
    4Michigan
    
    9Minnesota
    
    8Mississippi
    
    3Missouri
    
    3Nebraska
    
    2Nevada
    
    6New Jersey
    
    11New York
    
    12North Carolina
    
    13Ohio
    
    8Oklahoma
    
    7Oregon
    
    3Pennsylvania
    
    17Rhode Island
    
    1South Carolina
    
    6Tennessee
    
    4Texas
    
    46Utah
    
    2Virginia
    
    10Washington
    
    6Wisconsin
    
    3Total
    

356
    2. Summary of significant accounting policies
  8




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Fiscal quarter
  Reclassifications
  Share-based compensation
  Six months endedJuly 31, 2010
    
    August 1, 2009Volatility rate
    
    
    58.8
    %
    
    
    62.5
    %Average risk-free interest rate
    
    
    2.2
    %
    
    
    2.0
    %Average expected life (in years)
    
    
    4.8
    
    
    
    4.6Dividend yield
    
    None
    
    None
   Comprehensive income
  Three months ended
    
    
    Six months endedJuly 31,
    
    
    August 1,
    
    
    July 31,
    
    
    August 1,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income
    
    $
    13,062
    
    
    $
    5,750
    
    
    $
    26,723
    
    
    
    10,670Unrealized gain on
interest rate swap
hedge, net of
income tax
    
    
    
    
    
    
    157
    
    
    
    
    
    
    
    264Comprehensive income
    
    $
    13,062
    
    
    $
    5,907
    
    
    $
    26,723
    
    
    $
    10,934
 3. Commitments and contingencies
 Leases 
 9




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General litigation
   4. Notes payable
     5. Financial instruments
  10




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Amount of Gain (Loss)
    
    Amount of Gain
    
    Amount of GainRecognized in AOCL on
    
    Reclassfied
    
    Recognized in Income onDerivative (Effective
    
    from AOCL into Income
    
    Derivative (IneffectivePortion)
    
    (Effective Portion)
    
    Portion)Three months ended
    
    Three months ended
    
    Three months endedJuly 31, 2010
    
    August 1, 2009
    
    July 31, 2010
    
    August 1, 2009
    
    July 31, 2010
    
    August 1, 2009Interest rate swap,
net of tax
    
    $
    
    
    
    $
    157
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Amount of Gain (Loss)
    
    Amount of Gain
    
    Amount of GainRecognized in AOCL on
    
    Reclassfied
    
    Recognized in Income onDerivative (Effective
    
    from AOCL into Income
    
    Derivative (IneffectivePortion)
    
    (Effective Portion)
    
    Portion)Six months ended
    
    Six months ended
    
    Six months endedJuly 31, 2010
    
    August 1, 2009
    
    July 31, 2010
    
    August 1, 2009
    
    July 31, 2010
    
    August 1, 2009Interest rate swap,
net of tax
    
    $
    
    
    
    $
    264
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 6. Fair Value Measurements
  7. Net income per common share
  Three months ended
    
    Six months endedJuly 31,
    
    August 1,
    
    July 31,
    
    August 1,2010
    
    2009
    
    2010
    
    2009Net income
    
    $
    13,062
    
    
    $
    5,750
    
    
    $
    26,723
    
    
    $
    10,670Denominator for basic net income per share 
weighted-average common shares
    
    
    58,727
    
    
    
    57,819
    
    
    
    58,517
    
    
    
    57,781Dilutive effect of stock options and
non-vested stock
    
    
    1,945
    
    
    
    1,226
    
    
    
    1,988
    
    
    
    1,133Denominator for diluted net income per share
    
    
    60,672
    
    
    
    59,045
    
    
    
    60,505
    
    
    
    58,914Net income per common share:Basic
    
    $
    0.22
    
    
    $
    0.10
    
    
    $
    0.46
    
    
    $
    0.18Diluted
    
    $
    0.22
    
    
    $
    0.10
    
    
    $
    0.44
    
    
    $
    0.18
 11




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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 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 Item 1A, Risk Factors of
our Annual Report on Form 10-K for the year ended January 30, 2010. 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
     12




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Global economic conditions
  Current business trends
  Change in Management
   Basis of presentation
   13




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
    
    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;
    
    store occupancy costs including rent, depreciation and amortization, real estate taxes,
utilities, repairs and maintenance, insurance, licenses, and cleaning expenses;
    
    salon payroll and benefits;
    
    customer loyalty program expense; 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;
    
    stock-based compensation expense;
    
    depreciation and amortization for all assets except those related to our retail and
warehouse operations, which are included in cost of sales; and
 14




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
    
    legal, finance, information systems and other corporate overhead costs.
     15




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Results of operations
   Three months ended
    
    
    Six months endedJuly 31,
    
    
    August 1,
    
    
    July 31,
    
    
    August 1,(Dollars in thousands)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    $
    321,804
    
    
    $
    273,539
    
    
    $
    642,000
    
    
    $
    542,364Cost of sales
    
    
    217,846
    
    
    
    194,825
    
    
    
    433,507
    
    
    
    384,108Gross profit
    
    
    103,958
    
    
    
    78,714
    
    
    
    208,493
    
    
    
    158,256Selling, general and
administrative expenses
    
    
    79,909
    
    
    
    66,468
    
    
    
    160,638
    
    
    
    135,861Pre-opening expenses
    
    
    1,793
    
    
    
    2,010
    
    
    
    2,267
    
    
    
    3,205Operating income
    
    
    22,256
    
    
    
    10,236
    
    
    
    45,588
    
    
    
    19,190Interest expense
    
    
    214
    
    
    
    645
    
    
    
    332
    
    
    
    1,316Income before income taxes
    
    
    22,042
    
    
    
    9,591
    
    
    
    45,256
    
    
    
    17,874Income tax expense
    
    
    8,980
    
    
    
    3,841
    
    
    
    18,533
    
    
    
    7,204Net income
    
    $
    13,062
    
    
    $
    5,750
    
    
    $
    26,723
    
    
    $
    10,670Other operating data:Number stores end of period
    
    
    356
    
    
    
    333
    
    
    
    356
    
    
    
    333Comparable store sales
increase (decrease)
    
    
    10.8
    %
    
    
    (1.7
    )%
    
    
    10.8
    %
    
    
    (2.0
    )%
 Three months ended
    
    
    Six months endedJuly 31,
    
    
    August 1,
    
    
    July 31,
    
    
    August 1,(Percentage of net sales)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    67.7
    %
    
    
    71.2
    %
    
    
    67.5
    %
    
    
    70.8
    %Gross profit
    
    
    32.3
    %
    
    
    28.8
    %
    
    
    32.5
    %
    
    
    29.2
    %Selling, general and
administrative expenses
    
    
    24.8
    %
    
    
    24.3
    %
    
    
    25.0
    %
    
    
    25.0
    %Pre-opening expenses
    
    
    0.6
    %
    
    
    0.7
    %
    
    
    0.4
    %
    
    
    0.6
    %Operating income
    
    
    6.9
    %
    
    
    3.7
    %
    
    
    7.1
    %
    
    
    3.5
    %Interest expense
    
    
    0.1
    %
    
    
    0.2
    %
    
    
    0.1
    %
    
    
    0.2
    %Income before income taxes
    
    
    6.8
    %
    
    
    3.5
    %
    
    
    7.0
    %
    
    
    3.3
    %Income tax expense
    
    
    2.8
    %
    
    
    1.4
    %
    
    
    2.9
    %
    
    
    1.3
    %Net income
    
    
    4.1
    %
    
    
    2.1
    %
    
    
    4.2
    %
    
    
    2.0
    %
 16




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##### Table of Contents



Comparison of three months ended July 31, 2010 to three months ended August 1, 2009
 Net sales
   Gross profit
  
    
    160 basis points of leverage in fixed store costs due to a combination of less drag on
the relatively smaller new store program in the first half of fiscal 2010 and increased
comparable store sales levels;
    
    120 basis points improvement in merchandise margins driven by our marketing and
merchandising strategies; and
    
    20 basis points of leverage in supply chain due to efficiencies and increased comparable
store sales levels.
 Selling, general and administrative expenses
  
    
    90 basis points of deleverage in corporate overhead attributed to incremental
compensation expense related to the Companys new President and COO, net of
    
    40 basis points of leverage in marketing expense attributed to the benefit of our cost
efficiencies and stronger comparable store sales levels.
 Pre-opening expenses
  Interest expense
  Income tax expense
  17




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##### Table of Contents



Net income
  Comparison of six months ended July 31, 2010 to six months ended August 1, 2009
 Net sales
   Gross profit
  
    
    160 basis points of leverage in fixed store costs due to a combination of less drag on
the relatively smaller new store program in the first half of fiscal 2010 and increased
comparable store sales levels;
    
    100 basis points improvement in merchandise margins driven by our marketing and
merchandising strategies; and
    
    20 basis points of leverage in supply chain due to efficiencies and increased comparable
store sales.
 Selling, general and administrative expenses
  
    
    40 basis points of leverage in marketing expense attributed to the benefit of our
fiscal 2009 cost efficiencies and stronger comparable store sales, net of
    
    40 basis points of deleverage in corporate overhead attributed to incremental
compensation expense related to the Companys new President and COO.
 Pre-opening expenses
  Interest expense
  18




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##### Table of Contents



Income tax expense
  Net income
  Liquidity and capital resources
     Six months endedJuly 31,
    
    
    August 1,(In thousands)
    
    2010
    
    
    2009Net cash provided by operating activities
    
    $
    40,125
    
    
    $
    69,871Net cash used in investing activities
    
    
    (32,584
    )
    
    
    (29,756
    )Net cash provided by (used in) financing activities
    
    
    4,358
    
    
    
    (40,090
    )Net increase in cash and cash equivalents
    
    $
    11,899
    
    
    $
    25
 Operating activities
     19




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##### Table of Contents



Investing activities
  Financing activities
   Credit facility
     Off-balance sheet arrangements
  20




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##### Table of Contents



Contractual obligations
  Critical accounting policies and estimates
  
 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
   Changes in Internal Control over Financial Reporting
  
 Part II   Other Information
 
 Item 1.
    
    Legal Proceedings
 General litigation 
 21




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##### Table of Contents



Item 1A.
    
    Risk Factors
  We
are currently undergoing a leadership change. The execution of our business plan and
development strategy may be adversely impacted if we are not able to successfully manage this
change.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    [Reserved]
  
 Item 5.
    
    Other Information
   22




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##### Table of Contents



Item 6.
    
    Exhibits
 Incorporated by ReferenceExhibit
    
    
    
    Filed
    
    
    
    Exhibit
    
    File
    
    FilingNumber
    
    Description of document
    
    Herewith
    
    Form
    
    Number
    
    Number
    
    Date3.1
    
    Amended and Restated Certificate
of Incorporation
    
    
    
    S-1
    
    
    3.1
    
    
    333-144405
    
    8/17/20073.2
    
    Amended and Restated Bylaws
    
    
    
    S-1
    
    
    3.2
    
    
    333-144405
    
    8/17/20074.1
    
    Specimen Common Stock Certificate
    
    
    
    S-1
    
    
    4.1
    
    
    333-144405
    
    10/11/20074.2
    
    Third Amended and Restated
Registration Rights Agreement
between Ulta Salon, Cosmetics &
Fragrance, Inc. and the
stockholders party thereto
    
    
    
    S-1
    
    
    4.2
    
    
    333-144405
    
    8/17/20074.3
    
    Stockholder Rights Agreement
    
    
    
    S-1
    
    
    4.4
    
    
    333-144405
    
    8/17/200710.1
    
    Succession agreement, dated as
of April 23, 2010, by and
between Ulta Salon, Cosmetics &
Fragrance, Inc. and Lyn Kirby.
    
    
    
    8-K
    
    
    10.1
    
    
    001-33764
    
    4/27/201010.2
    
    Employment Agreement, dated as
of April 12, 2010, by and
between Ulta Salon, Cosmetics &
Fragrance, Inc. and Carl Rubin.
    
    
    
    8-K
    
    
    10.2
    
    
    001-33764
    
    4/27/201010.2(a)
    
    First Amendment to Carl Rubin
Employment Agreement, dated
April 28, 2010.
    
    
    
    10-Q
    
    
    10.2
    (a)
    
    001-33764
    
    6/3/201010.3
    
    Restricted Stock Award
Agreement, dated May 10, 2010,
by and between Ulta Salon,
Cosmetics & Fragrance, Inc. and
Carl Rubin.
    
    
    
    8-K
    
    
    10.3
    
    
    001-33764
    
    4/27/201010.4
    
    Option Agreement, dated May 10,
2010, by and between Ulta Salon,
Cosmetics & Fragrance, Inc. and
Carl Rubin.
    
    
    
    8-K
    
    
    10.4
    
    
    001-33764
    
    4/27/201031.1
    
    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
    
    X31.2
    
    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
    
    X32.1
    
    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
    
    X
 23




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##### Table of Contents



SIGNATURES
  ULTA SALON, COSMETICS & FRAGRANCE, INC.By:
    /s/ Lynelle P. KirbyLynelle P. KirbyChief Executive Officer and DirectorBy:
    /s/ Gregg R. BodnarGregg R. BodnarChief Financial Officer 24