UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 4, 2009
ULTA SALON, COSMETICS & FRAGRANCE, INC.
(Exact Name of Registrant as Specified in its Charter)
 	 	 	 	 	
Delaware	 	001-33764	 	36-3685240	
(State or Other
Jurisdiction
of Incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	
1000 Remington Blvd., Suite 120
Bolingbrook, Illinois 60440
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: ( 630) 410-4800
Not Applicable
(Former Name or Former Address, if Changed Since Last Report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

   

 
Item 2.02 Results of Operations and Financial Condition.
On June 4, 2009, Ulta Salon, Cosmetics & Fragrance, Inc. issued a press release regarding its financial results for the first quarter ended May 2, 2009. A copy of the press release is furnished as Exhibit 99.1 to this report.
The information in this report, including the Exhibit attached hereto, is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
      (d) Exhibits
 	 	 	
Exhibit No.	 	Description	
99.1	 	Press release issued by Ulta Salon, Cosmetics & Fragrance, Inc. on June 4, 2009 announcing financial results for the first quarter ended May 2, 2009 furnished herewith.	

 
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 	 	 	 	 	
 	ULTA SALON, COSMETICS & FRAGRANCE, INC.
 	 	
Date: June 4, 2009 	By:  	/s/ Robert S. Guttman  	 	
 	 	Robert S. Guttman 	 	
 	 	Senior Vice President, General Counsel and Secretary 	 	

 
EXHIBIT INDEX
 	 	 	
Exhibit No.	 	Description	
 	 	 	
99.1	 	Press release issued by Ulta Salon, Cosmetics & Fragrance, Inc. on June 4, 2009 announcing financial results for the first quarter ended May 2, 2009 furnished herewith.	

Exhibit 99.1

Company Contact:
Gregg Bodnar
Chief Financial Officer
(630) 410-4633
Investors/Media Contacts:
ICR, Inc.
Allison Malkin/Alecia Pulman
(203) 682-8225/(646) 277-1220
ULTA ANNOUNCES FIRST QUARTER FISCAL YEAR 2009 RESULTS
First Quarter Net Sales Increases 12.3%
First Quarter Diluted EPS of $0.08
Generates $5.6 Million of Free Cash Flow
     Romeoville, IL — June 4, 2009 — Ulta Salon, Cosmetics & Fragrance, Inc. [NASDAQ:ULTA], today announced financial results for the thirteen-week period (“First Quarter”) ended May 2, 2009, which compare to the first quarter ended May 3, 2008.
For the First Quarter:

 	•	 	Net sales increased 12.3% to $268.8 million from $239.3 million in the first quarter of fiscal 2008;	
 		
 	•	 	Comparable store sales (sales for stores open at least 14 months) decreased 2.3% compared to an increase of 3.9% in the first quarter of fiscal 2008;	
 		
 	•	 	Pre-opening expenses decreased $2.6 million to $1.2 million in the first quarter fiscal 2009 due to the planned decrease in the Company’s new store program;	
 		
 	•	 	Operating income increased 10.8% to $9.0 million compared to $8.1 million in the first quarter of fiscal 2008;	
 		
 	•	 	Net income increased to $4.9 million compared to $4.3 million in the first quarter of fiscal 2008;	
 		
 	•	 	Income per diluted share increased to $0.08, compared to $0.07 in the first quarter of fiscal 2008, which included $0.01 per share of severance costs for the management change in March 2008.	

 

Lyn Kirby, Ulta’s President and Chief Executive Officer, stated: “In a difficult retail environment, we continue to build our customer base and grow loyalty to the Ulta brand, as evidenced by the 2% increase in traffic and expansion in our market share. As a result, our comparable store sales were at the top end of our first quarter guidance and with careful expense control we achieved earnings ahead of our guidance. Additionally, the prudent management of working capital and capital investment drove $5.6 million in free cash flow for the quarter.”
“As we begin the second quarter, we remain confident in our ability to win market share by continuing to execute on our core strategies, new brand expansion, and unique merchandising and marketing,” Ms. Kirby continued. “Quarter-to-date, our comparable store sales are consistent with our performance in the first quarter and we are excited about the expanded rollout of Benefit cosmetics that begins this week.”
“With a balanced approach to optimizing both top- and bottom-line performance, we expect to navigate this tough environment while continuing to position Ulta for stronger performance when the economy improves. Our continued focus on inventory management and expense control has resulted in permanent efficiency gains that are expected to improve our profit potential in both the short and long term. We expect the market share gains that we are currently achieving to broaden our loyalty club membership, and we will be poised to capitalize on our strengthened customer base, in a better economy. We remain confident in our 1,000 store target and are prepared to accelerate store growth in 2010 based on the availability of quality real estate,” Ms. Kirby concluded.
Balance Sheet and Cash Flow
     Merchandise inventories at the end of the first quarter totaled $230.3 million, compared to $212.6 million at the end of first quarter fiscal 2008, representing an increase of $17.7 million due to the addition of 55 net new stores opened since May 3, 2008. Average inventory per store decreased 4.8% after adjusting for the initial incremental inventory set up for our Phoenix, Arizona distribution center that began operation in the first quarter last year.
     For the first quarter, the Company generated free cash flow of $5.6 million. Free cash flow is defined as net cash provided by operating activities less purchases of property and equipment. A reconciliation of free cash flow, a non-GAAP measure, is included at Exhibit 4.
Store Expansion
     During the first quarter, the Company opened 9 stores, 1 each in Opelika, AL; Oro Valley, AZ; Queen Creek, AZ; Brentwood, CA; Fresno, CA; Grand Junction, CO; Rochester Hills, MI; Cherry Hill, NJ; and Horseheads, NY. The Company ended the first quarter with 320 stores and square footage of 3,334,485, which represents a 21% increase compared to the first quarter of fiscal 2008.
Outlook
     For the second quarter of fiscal 2009, the Company currently expects net sales in the range of $264 million to $272 million, compared to actual net sales of $249.1 million in the second

 

quarter of fiscal 2008. This assumes comparable stores sales decrease 2% to 5%, compared to an increase of 3.7% in the second quarter last year.
     Income per diluted share for the second quarter of fiscal 2009 is estimated to be in the range of $0.03 to $0.05. This compares to income per diluted share for second quarter fiscal 2008 of $0.06.
For fiscal 2009, the Company plans to:

 	•	 	generate free cash flow of at least $15 million, compared to a $35.7 million net cash out flow in fiscal 2008;	
 		
 	•	 	reduce expenses by approximately $15 million including supply chain, store and other operating costs;	
 		
 	•	 	open approximately 35 new stores;	
 		
 	•	 	incur capital expenditures in a range of $72 million to $74 million, compared to $110.9 million in capital expenditures reported in fiscal 2008; and	
 		
 	•	 	reduce inventory by 5% - 7% on an average per store basis by year end 2009.	

 

Conference Call Information
     A conference call to discuss first quarter results is scheduled for today, June 4, 2009, at 5:00 p.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-0784 approximately ten minutes prior to the start of the call. The conference call will also be web-cast live at http://ir.ulta.com and remain available for 90 days. A replay of this call will be available until 11:59 p.m. (ET) on June 11, 2009 and can be accessed by dialing (877) 660-6853 and entering account number 3055 and conference ID number 324320.
About Ulta
     Ulta is the largest beauty retailer that provides one-stop shopping for prestige, mass and salon products and salon services in the United States. Ulta provides affordable indulgence to its customers by combining the product breadth, value and convenience of a beauty superstore with the distinctive environment and experience of a specialty retailer. Ulta offers a unique combination of over 21,000 prestige and mass beauty products across the categories of cosmetics, fragrance, haircare, skincare, bath and body products and salon styling tools, as well as salon haircare products. Ulta also offers a full-service salon in all of its stores. The Company currently operates 320 retail stores across 36 states and also distributes its products through the Company’s website: www.ulta.com.
Forward-Looking Statements
      This press release 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 press release 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 our Annual Report on Form 10-K for the year ended January 31, 2009. Our filings with the SEC are available at www.sec.gov. The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

 
Exhibit 1
Ulta Salon, Cosmetics & Fragrance, Inc.
Statements of Income
(In thousands, except per share amounts)
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	13 Weeks Ended	 	13 Weeks Ended	
 	 	May 2,	 	May 3,	
 	 	2009	 	2008	
Net sales	 	$	268,825	 	 	 	100.0	%	 	$	239,298	 	 	 	100.0	%	
Cost of sales	 	 	189,482	 	 	 	70.5	%	 	 	165,377	 	 	 	69.1	%	
 	 	 	 	 	
Gross profit	 	 	79,343	 	 	 	29.5	%	 	 	73,921	 	 	 	30.9	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expense	 	 	69,194	 	 	 	25.7	%	 	 	62,065	 	 	 	25.9	%	
Pre-opening expenses	 	 	1,195	 	 	 	0.4	%	 	 	3,772	 	 	 	1.6	%	
 	 	 	 	 	
Operating income	 	 	8,954	 	 	 	3.3	%	 	 	8,084	 	 	 	3.4	%	
Interest expense	 	 	671	 	 	 	0.2	%	 	 	915	 	 	 	0.4	%	
 	 	 	 	 	
Income before income taxes	 	 	8,283	 	 	 	3.1	%	 	 	7,169	 	 	 	3.0	%	
Income tax expense	 	 	3,363	 	 	 	1.3	%	 	 	2,894	 	 	 	1.2	%	
 	 	 	 	 	
Net income	 	$	4,920	 	 	 	1.8	%	 	$	4,275	 	 	 	1.8	%	

Net income per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	0.09	 	 	 	 	 	 	$	0.08	 	 	 	 	 	
Diluted	 	$	0.08	 	 	 	 	 	 	$	0.07	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average common shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	57,743	 	 	 	 	 	 	 	56,956	 	 	 	 	 	
Diluted	 	 	58,750	 	 	 	 	 	 	 	58,980	 	 	 	 	 	

 
Exhibit 2
Ulta Salon, Cosmetics & Fragrance, Inc.
Condensed Balance Sheets
(Subject to Reclassification)
(In thousands)
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	May 2,	 	January 31,	 	May 3,	
 	 	2009	 	2009	 	2008	
 	 	(Unaudited)	 	 	 	 	 	(Unaudited)	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	3,840	 	 	$	3,638	 	 	$	3,975	 	
Receivables, net	 	 	12,392	 	 	 	18,268	 	 	 	19,533	 	
Merchandise inventories, net	 	 	230,286	 	 	 	213,602	 	 	 	212,564	 	
Prepaid expenses and other current assets	 	 	24,200	 	 	 	24,294	 	 	 	22,435	 	
Prepaid income taxes	 	 	5,890	 	 	 	8,628	 	 	 	—	 	
Deferred income taxes	 	 	8,195	 	 	 	8,278	 	 	 	9,129	 	
 	 	 	
Total current assets	 	 	284,803	 	 	 	276,708	 	 	 	267,636	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Property and equipment, net	 	 	286,140	 	 	 	292,224	 	 	 	255,123	 	
Deferred income taxes	 	 	—	 	 	 	—	 	 	 	4,080	 	
 	 	 	
Total assets	 	$	570,943	 	 	$	568,932	 	 	$	526,839	 	

Liabilities and stockholders’ equity	 	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	
Current portion — notes payable	 	$	12,534	 	 	$	18,000	 	 	$	18,143	 	
Accounts payable	 	 	53,500	 	 	 	47,811	 	 	 	66,508	 	
Accrued liabilities	 	 	43,757	 	 	 	51,202	 	 	 	49,618	 	
Accrued income taxes	 	 	—	 	 	 	—	 	 	 	6,872	 	
 	 	 	
Total current liabilities	 	 	109,791	 	 	 	117,013	 	 	 	141,141	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Notes payable — less current portion	 	 	88,047	 	 	 	88,047	 	 	 	86,391	 	
Deferred rent	 	 	104,168	 	 	 	101,288	 	 	 	80,411	 	
Deferred income taxes	 	 	17,616	 	 	 	17,616	 	 	 	—	 	
 	 	 	
Total liabilities	 	 	319,622	 	 	 	323,964	 	 	 	307,943	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total stockholders’ equity	 	 	251,321	 	 	 	244,968	 	 	 	218,896	 	
 	 	 	
Total liabilities and stockholders’ equity	 	$	570,943	 	 	$	568,932	 	 	$	526,839	 	

 
Exhibit 3
Ulta Salon, Cosmetics & Fragrance, Inc.
Statements of Cash Flows
(Subject to Reclassification)
(In thousands)
 	 	 	 	 	 	 	 	 	
 	 	Three months ended	
 	 	May 2,	 	May 3,	
 	 	2009	 	2008	
 	 	(Unaudited)	
Operating activities	 	 	 	 	 	 	 	 	
Net income	 	$	4,920	 	 	$	4,275	 	
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	15,365	 	 	 	12,018	 	
Non-cash stock compensation charges	 	 	1,295	 	 	 	591	 	
Excess tax benefits from stock-based compensation	 	 	—	 	 	 	(1,083	)	
Loss on disposal of property and equipment	 	 	39	 	 	 	127	 	
Change in operating assets and liabilities:	 	 	 	 	 	 	 	 	
Receivables	 	 	5,876	 	 	 	1,110	 	
Merchandise inventories	 	 	(16,684	)	 	 	(36,455	)	
Prepaid expenses and other assets	 	 	94	 	 	 	(3,251	)	
Income taxes	 	 	2,738	 	 	 	1,808	 	
Accounts payable	 	 	5,689	 	 	 	14,386	 	
Accrued liabilities	 	 	(4,255	)	 	 	(4,119	)	
Deferred rent	 	 	2,880	 	 	 	9,176	 	
 	 	 	
Net cash provided by (used in) operating activities	 	 	17,957	 	 	 	(1,417	)	
 	 	 	 	 	 	 	 	 	
Investing activities	 	 	 	 	 	 	 	 	
Purchases of property and equipment	 	 	(12,320	)	 	 	(30,545	)	
 	 	 	
Net cash used in investing activities	 	 	(12,320	)	 	 	(30,545	)	
 	 	 	 	 	 	 	 	 	
Financing activities	 	 	 	 	 	 	 	 	
Proceeds on long-term borrowings	 	 	284,284	 	 	 	289,238	 	
Payments on long-term borrowings	 	 	(289,750	)	 	 	(259,474	)	
Proceeds from issuance of common stock under stock plans	 	 	31	 	 	 	1,360	 	
Excess tax benefits from stock-based compensation	 	 	—	 	 	 	1,083	 	
Initial public offering issuance costs	 	 	—	 	 	 	(59	)	
 	 	 	
Net cash (used in) provided by financing activities	 	 	(5,435	)	 	 	32,148	 	

Net increase in cash and cash equivalents	 	 	202	 	 	 	186	 	
Cash and cash equivalents at beginning of period	 	 	3,638	 	 	 	3,789	 	
 	 	 	
Cash and cash equivalents at end of period	 	$	3,840	 	 	$	3,975	 	

 

Exhibit 4
Ulta Salon, Cosmetics & Fragrance, Inc.
SEC Regulation G Disclosure
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
(In thousands)
 	 	 	 	 	 	 	 	 	
 	 	Three months ended	
 	 	May 2,	 	May 3,	
 	 	2009	 	2008	
 	 	(Unaudited)	 	
Net cash provided by (used in) operating activities	 	$	17,957	 	 	$	(1,417	)	
Less: purchases of property and equipment	 	 	(12,320	)	 	 	(30,545	)	
 	 	 	
Free cash flow (a)	 	$	5,637	 	 	$	(31,962	)	

			
(a)	 	Free cash flow is a non-GAAP financial measure. The Company believes free cash flow is an important metric as it represents a measure of how much cash the Company has available after the deduction of capital expenditures, as the Company requires regular capital expenditures to build and maintain stores and purchase new equipment to improve the business. The Company uses this metric internally as the Company believes the sustained ability to generate free cash flow is an important driver of value creation. However, this non-GAAP financial measure is not intended to supersede or replace the Company’s GAAP results.	

 
Exhibit 5
2009 Store Expansion
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Total stores open	 	Number of stores	 	Number of stores	 	Total stores open	
 	 	at beginning of the	 	opened during the	 	closed during the	 	at end of the	
Fiscal 2009	 	quarter	 	quarter	 	quarter	 	quarter	
1 st Quarter	 	 	311	 	 	 	9	 	 	 	0	 	 	 	320	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Gross square feet for	 	 	 	 	
 	 	Total gross square	 	stores opened or	 	Gross square feet for	 	Total gross square	
 	 	feet at beginning of	 	expanded during the	 	stores closed	 	feet at end of the	
Fiscal 2009	 	the quarter	 	quarter	 	during the quarter	 	quarter	
1 st Quarter	 	 	3,240,579	 	 	 	93,906	 	 	 	0	 	 	 	3,334,485