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 October 31, 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
Bolingbrook, Illinois
(Address of principal executive offices)
    
    60440
(Zip code)
  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 ofOperations
    
    
    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
    
    
    24Item 5.
    
    Other Information
    
    
    25Item 6.
    
    Exhibits
    
    
    25SIGNATURES
    
    
    25
 2




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##### 



Part I  Financial Information
 Item 1.
    
    Financial Statements
 Ulta Salon, Cosmetics & Fragrance, Inc.
Balance Sheets
 October 31,
    
    January 31,
    
    November 1,(In thousands)
    
    2009
    
    2009
    
    2008(unaudited)
    
    
    
    
    
    (unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    3,795
    
    
    $
    3,638
    
    
    $
    3,648Receivables, net
    
    
    13,340
    
    
    
    18,268
    
    
    
    20,488Merchandise inventories, net
    
    
    273,978
    
    
    
    213,602
    
    
    
    268,928Prepaid expenses and other
current assets
    
    
    28,386
    
    
    
    24,294
    
    
    
    24,960Prepaid income taxes
    
    
    
    
    
    
    8,628
    
    
    
    Deferred income taxes
    
    
    7,984
    
    
    
    8,278
    
    
    
    9,088Total current assets
    
    
    327,483
    
    
    
    276,708
    
    
    
    327,112Property and equipment, net
    
    
    293,746
    
    
    
    292,224
    
    
    
    292,120Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    4,080Total assets
    
    $
    621,229
    
    
    $
    568,932
    
    
    $
    623,312Liabilities and stockholders equityCurrent liabilities:Current portion  notes payable
    
    $
    14,635
    
    
    $
    18,000
    
    
    $
    51,590Accounts payable
    
    
    117,520
    
    
    
    47,811
    
    
    
    97,768Accrued liabilities
    
    
    57,811
    
    
    
    51,202
    
    
    
    50,532Accrued income taxes
    
    
    5,682
    
    
    
    
    
    
    
    5,798Total current liabilities
    
    
    195,648
    
    
    
    117,013
    
    
    
    205,688Notes payable  less current portion
    
    24,527
        
    
    88,047
    
    
    
    86,390Deferred rent
    
    
    113,184
    
    
    
    101,288
    
    
    
    100,126Deferred income taxes
    
    
    17,616
    
    
    
    17,616
    
    
    
    Total liabilities
    
    
    350,975
    
    
    
    323,964
    
    
    
    392,204
  See accompanying notes to financial statements.
 3




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##### 



Ulta Salon, Cosmetics & Fragrance, Inc.
Balance Sheets (continued)
 October 31,
    
    January 31,
    
    November 1,(In thousands, except per share data)
    
    2009
    
    2009
    
    2008(unaudited)
    
    
    
    
    
    (unaudited)Stockholders equity:Common stock, $.01 par value, 400,000
shares authorized; 58,609, 58,245 and
58,168 shares issued; 58,104, 57,740
and 57,663 shares outstanding; at
October 31, 2009 (unaudited), January
31, 2009 and November 1, 2008
(unaudited), respectively
    
    $
    586
    
    
    $
    582
    
    
    $
    582Treasury stock-common, at cost
    
    
    (4,179
    )
    
    
    (4,179
    )
    
    
    (4,179
    )Additional paid-in capital
    
    
    298,762
    
    
    
    293,052
    
    
    
    291,362Accumulated deficit
    
    
    (24,726
    )
    
    
    (43,856
    )
    
    
    (56,144
    )Accumulated other comprehensive loss
    
    
    (189
    )
    
    
    (631
    )
    
    
    (513
    )Total stockholders equity
    
    
    270,254
    
    
    
    244,968
    
    
    
    231,108Total liabilities and stockholders equity
    
    $
    621,229
    
    
    $
    568,932
    
    
    $
    623,312
 See accompanying notes to financial statements.
 4




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##### 



Ulta Salon, Cosmetics & Fragrance, Inc.
Statements of Income
(unaudited)
 Three months ended
    
    Nine months endedOctober 31,
    
    November 1,
    
    October 31,
    
    November 1,(In thousands, except per share data)
    
    2009
    
    2008
    
    2009
    
    2008Net sales
    
    $
    284,043
    
    
    $
    254,843
    
    
    $
    826,407
    
    
    $
    743,252Cost of sales
    
    
    193,498
    
    
    
    175,368
    
    
    
    578,008
    
    
    
    516,710Gross profit
    
    
    90,545
    
    
    
    79,475
    
    
    
    248,399
    
    
    
    226,542Selling, general and administrative expenses
    
    
    73,671
    
    
    
    65,176
    
    
    
    209,130
    
    
    
    189,130Pre-opening expenses
    
    
    2,183
    
    
    
    4,693
    
    
    
    5,388
    
    
    
    12,515Operating income
    
    
    14,691
    
    
    
    9,606
    
    
    
    33,881
    
    
    
    24,897Interest expense
    
    
    441
    
    
    
    1,124
    
    
    
    1,757
    
    
    
    3,055Income before income taxes
    
    
    14,250
    
    
    
    8,482
    
    
    
    32,124
    
    
    
    21,842Income tax expense
    
    
    5,790
    
    
    
    3,465
    
    
    
    12,994
    
    
    
    8,862Net income
    
    $
    8,460
    
    
    $
    5,017
    
    
    $
    19,130
    
    
    $
    12,980Net income per common share:Basic
    
    $
    0.15
    
    
    $
    0.09
    
    
    $
    0.33
    
    
    $
    0.23Diluted
    
    $
    0.14
    
    
    $
    0.09
    
    
    $
    0.32
    
    
    $
    0.22Weighted average common shares outstanding:Basic
    
    
    57,979
    
    
    
    57,591
    
    
    
    57,847
    
    
    
    57,328Diluted
    
    
    59,376
    
    
    
    59,013
    
    
    
    59,081
    
    
    
    59,005
 See accompanying notes to financial statements.
 5




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##### 



Ulta Salon, Cosmetics & Fragrance, Inc.
Statements of Cash Flows
(unaudited)
 Nine months endedOctober 31,
    
    November 1,(In thousands)
    
    2009
    
    2008Operating activitiesNet income
    
    $
    19,130
    
    
    $
    12,980Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    46,766
    
    
    
    37,619Non-cash stock compensation charges
    
    
    4,214
    
    
    
    2,644Excess tax benefits from stock-based compensation
    
    
    (602
    )
    
    
    (1,565
    )Loss on disposal of property and equipment
    
    
    199
    
    
    
    219Change in operating assets and liabilities:Receivables
    
    
    4,928
    
    
    
    155Merchandise inventories
    
    
    (60,376
    )
    
    
    (92,819
    )Prepaid expenses and other assets
    
    
    (4,092
    )
    
    
    (5,776
    )Income taxes
    
    
    14,310
    
    
    
    734Accounts payable
    
    
    69,709
    
    
    
    45,646Accrued liabilities
    
    
    8,850
    
    
    
    754Deferred rent
    
    
    11,896
    
    
    
    28,891Net cash provided by operating activities
    
    
    114,932
    
    
    
    29,482Investing activitiesPurchases of property and equipment
    
    
    (49,390
    )
    
    
    (96,608
    )Net cash used in investing activities
    
    
    (49,390
    )
    
    
    (96,608
    )Financing activitiesProceeds on long-term borrowings
    
    
    863,237
    
    
    
    874,139Payments on long-term borrowings
    
    
    (930,122
    )
    
    
    (810,929
    )Proceeds from issuance of common stock under stock plans
    
    
    898
    
    
    
    2,269Excess tax benefits from stock-based compensation
    
    
    602
    
    
    
    1,565Initial public offering issuance costs
    
    
    
    
    
    
    (59
    )Net cash (used in) provided by financing activities
    
    
    (65,385
    )
    
    
    66,985Net increase (decrease) in cash and cash equivalents
    
    
    157
    
    
    
    (141
    )Cash and cash equivalents at beginning of period
    
    
    3,638
    
    
    
    3,789Cash and cash equivalents at end of period
    
    $
    3,795
    
    
    $
    3,648
 See accompanying notes to financial statements.
 6




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##### 



Ulta Salon, Cosmetics & Fragrance, Inc.
Statements of Cash Flows (continued)
(unaudited)
 Nine months endedOctober 31,
    
    November 1,(In thousands)
    
    2009
    
    2008Supplemental cash flow informationCash paid for interest
    
    $
    1,946
    
    
    $
    3,437Cash paid (received) for income taxes
    
    $
    (1,918
    )
    
    $
    6,589Noncash investing and financing activities:Change in property and equipment included in accrued
liabilities
    
    $
    (903
    )
    
    $
    (3,039
    )Unrealized gain on interest rate swap hedge, net of tax
    
    $
    442
    
    
    $
    206
 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
    
    
    364
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    894
    
    
    
    
    
    
    
    
    
    
    
    898Unrealized gain on interest rate swap hedge,
net of $294 income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    442
    
    
    
    442Net income for the nine months ended October 31,
2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,130
    
    
    
    
    
    
    
    19,130Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,572Excess tax benefits from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    602
    
    
    
    
    
    
    
    
    
    
    
    602Stock compensation charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,214
    
    
    
    
    
    
    
    
    
    
    
    4,214Balance  October 31, 2009
    
    
    58,609
    
    
    $
    586
    
    
    
    (505
    )
    
    $
    (4,179
    )
    
    $
    298,762
    
    
    $
    (24,726
    )
    
    $
    (189
    )
    
    $
    270,254
 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
    
    
    3Missouri
    
    
    3Nebraska
    
    
    2Nevada
    
    
    6New Jersey
    
    
    11New York
    
    
    13North Carolina
    
    
    13Ohio
    
    
    7Oklahoma
    
    
    7Oregon
    
    
    3Pennsylvania
    
    
    16Rhode Island
    
    
    1South Carolina
    
    
    5Tennessee
    
    
    3Texas
    
    
    45Utah
    
    
    2Virginia
    
    
    10Washington
    
    
    5Wisconsin
    
    
    3Total
    
    
    345
    Reverse stock split
  9




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##### 



Initial public offering
  2. Summary of significant accounting policies
  Fiscal quarter
  Reclassifications
  Share-based compensation
  Nine months endedOctober 31, 2009
    
    November 1, 2008Volatility rate
    
    
    60.6
    %
    
    
    48.1
    %Average risk-free interest rate
    
    
    2.5
    %
    
    
    2.3
    %Average expected life (in years)
    
    
    5.3
    
    
    
    5.1Dividend yield
    
    None
    
    None
   10




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##### 



Comprehensive income
  Three months ended
    
    Nine months endedOctober 31,
    
    November 1,
    
    October 31,
    
    November 1,2009
    
    2008
    
    2009
    
    2008Net income
    
    $
    8,460
    
    
    $
    5,017
    
    
    $
    19,130
    
    
    $
    12,980Unrealized gain
(loss) on interest
rate swap hedge,
net of income tax
    
    
    178
    
    
    
    (37
    )
    
    
    442
    
    
    
    206Comprehensive income
    
    $
    8,638
    
    
    $
    4,980
    
    
    $
    19,572
    
    
    $
    13,186
 Recent accounting pronouncements
 TM
 3. Commitments and contingencies
 Leases 
 Securities litigation 
  General litigation
 11




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##### 



4. Notes payable
   5. Financial instruments
     12




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##### 



Derivative LiabilitiesOctober 31, 2009(unaudited)
    
    January 31, 2009Balance Sheet
    
    
    
    
    
    Balance SheetLocation
    
    Fair Value
    
    Location
    
    Fair ValueInterest rate swap liability
    
    Accrued liabilities
    
    $
    306
    
    
    Accrued liabilities
    
    $
    1,042
  Amount of Gain (Loss)
    
    Amount of Gain Reclassfied
    
    Amount of Gain RecognizedRecognized in AOCL on
    
    from AOCL into Income
    
    in Income on DerivativeDerivative (Effective Portion)
    
    (Effective Portion)
    
    (Ineffective Portion)Three months ended
    
    Three months ended
    
    Three months endedOctober 31,
    
    November 1,
    
    October 31,
    
    November 1,
    
    October 31,
    
    November 1,2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008Interest rate swap,
net of tax
    
    $
    178
    
    
    $
    (37
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Amount of Gain Recognized
    
    Amount of Gain Reclassfied
    
    Amount of Gain Recognizedin AOCL on Derivative
    
    from AOCL into Income
    
    in Income on Derivative(Effective Portion)
    
    (Effective Portion)
    
    (Ineffective Portion)Nine months ended
    
    Nine months ended
    
    Nine months endedOctober 31,
    
    November 1,
    
    October 31,
    
    November 1,
    
    October 31,
    
    November 1,2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008Interest rate swap,
net of tax
    
    $
    442
    
    
    $
    206
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 6. 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.
 
    
    Level 3  unobservable inputs in which there is little or no market data, which would
require the Company to develop its own assumptions.
 13




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##### 



Fair value measurement usingLevel 1
    
    Level 2
    
    Level 3Deferred compensation liabilities
    
    $
    
    
    
    $
    195
    
    
    $
    Interest rate swap liability
    
    $
    
    
    
    $
    306
    
    
    $
    
 7. Net income per common share
  Three months ended
    
    Nine months endedOctober 31,
    
    November 1,
    
    October 31,
    
    November 1,2009
    
    2008
    
    2009
    
    2008Net income
    
    $
    8,460
    
    
    $
    5,017
    
    
    $
    19,130
    
    
    $
    12,980Denominator for basic net income per share 
weighted-average common shares
    
    
    57,979
    
    
    
    57,591
    
    
    
    57,847
    
    
    
    57,328Dilutive effect of stock options
    
    
    1,397
    
    
    
    1,422
    
    
    
    1,234
    
    
    
    1,677Denominator for diluted net income per share
    
    
    59,376
    
    
    
    59,013
    
    
    
    59,081
    
    
    
    59,005Net income per common share:Basic
    
    $
    0.15
    
    
    $
    0.09
    
    
    $
    0.33
    
    
    $
    0.23Diluted
    
    $
    0.14
    
    
    $
    0.09
    
    
    $
    0.32
    
    
    $
    0.22
   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 (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 are included in cost of sales; and
 
    
    legal, finance, information systems and other corporate overhead costs.
     Results of operations
  17




---



##### 



Three months ended
    
    Nine months endedOctober 31,
    
    November 1,
    
    October 31,
    
    November 1,(Dollars in thousands)
    
    2009
    
    2008
    
    2009
    
    2008Net sales
    
    $
    284,043
    
    
    $
    254,843
    
    
    $
    826,407
    
    
    $
    743,252Cost of sales
    
    
    193,498
    
    
    
    175,368
    
    
    
    578,008
    
    
    
    516,710Gross profit
    
    
    90,545
    
    
    
    79,475
    
    
    
    248,399
    
    
    
    226,542Selling, general and
administrative expenses
    
    
    73,671
    
    
    
    65,176
    
    
    
    209,130
    
    
    
    189,130Pre-opening expenses
    
    
    2,183
    
    
    
    4,693
    
    
    
    5,388
    
    
    
    12,515Operating income
    
    
    14,691
    
    
    
    9,606
    
    
    
    33,881
    
    
    
    24,897Interest expense
    
    
    441
    
    
    
    1,124
    
    
    
    1,757
    
    
    
    3,055Income before income taxes
    
    
    14,250
    
    
    
    8,482
    
    
    
    32,124
    
    
    
    21,842Income tax expense
    
    
    5,790
    
    
    
    3,465
    
    
    
    12,994
    
    
    
    8,862Net income
    
    $
    8,460
    
    
    $
    5,017
    
    
    $
    19,130
    
    
    $
    12,980Other operating data:Number stores end of period
    
    
    345
    
    
    
    304
    
    
    
    345
    
    
    
    304Comparable store sales
increase (decrease)
    
    
    1.5
    %
    
    
    2.0
    %
    
    
    (0.8
    )%
    
    
    3.2
    %
 Three months ended
    
    Nine months endedOctober 31,
    
    November 1,
    
    October 31,
    
    November 1,(Percentage of net sales)
    
    2009
    
    2008
    
    2009
    
    2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    68.1
    %
    
    
    68.8
    %
    
    
    69.9
    %
    
    
    69.5
    %Gross profit
    
    
    31.9
    %
    
    
    31.2
    %
    
    
    30.1
    %
    
    
    30.5
    %Selling, general and
administrative expenses
    
    
    25.9
    %
    
    
    25.6
    %
    
    
    25.3
    %
    
    
    25.4
    %Pre-opening expenses
    
    
    0.8
    %
    
    
    1.8
    %
    
    
    0.7
    %
    
    
    1.7
    %Operating income
    
    
    5.2
    %
    
    
    3.8
    %
    
    
    4.1
    %
    
    
    3.3
    %Interest expense
    
    
    0.2
    %
    
    
    0.4
    %
    
    
    0.2
    %
    
    
    0.4
    %Income before income taxes
    
    
    5.0
    %
    
    
    3.3
    %
    
    
    3.9
    %
    
    
    2.9
    %Income tax expense
    
    
    2.0
    %
    
    
    1.4
    %
    
    
    1.6
    %
    
    
    1.2
    %Net income
    
    
    3.0
    %
    
    
    2.0
    %
    
    
    2.3
    %
    
    
    1.7
    %
  18




---



##### 



Comparison of three months ended October 31, 2009 to three months ended November 1, 2008
 Net sales
   Gross profit
  Selling, general and administrative expenses
  Pre-opening expenses
  Interest expense
  Income tax expense
  Net income
  19




---



##### 



Comparison of nine months ended October 31, 2009 to nine months ended November 1, 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
     Nine months endedOctober 31,
    
    
    November 1,(In thousands)
    
    2009
    
    
    2008Net cash provided by operating activities
    
    $
    114,932
    
    
    $
    29,482Net cash used in investing activities
    
    
    (49,390
    )
    
    
    (96,608
    )Net cash (used in) provided by financing activities
    
    
    (65,385
    )
    
    
    66,985Net increase (decrease) in cash and cash equivalents
    
    $
    157
    
    
    $
    (141
    )
 Operating activities
     Investing activities
  21




---



##### 



Financing activities
  Credit facility
   Off-balance sheet arrangements
  Contractual obligations
  Critical accounting policies and estimates
  Share-based compensation
 TM
  22




---



##### 



Recent accounting pronouncements
  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
  23




---



##### 



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
  Item 4. Submission of Matters to a Vote of Security Holders
  24




---



##### 



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.
 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 25