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As filed with the Securities and Exchange Commission on July 6, 2007
Registration No. 333-      
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
 
 
Form S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
 
 
 
 
ULTA SALON, COSMETICS & FRAGRANCE, INC.
(Exact name of Registrant as specified in its charter)
 
         
Delaware
  5999f   36-3685240
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification No.)
 
1135 Arbor Drive
Romeoville, Illinois 60446
(630) 226-0020
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
 
 
 
 
Lynelle P. Kirby
President, Chief Executive Officer and Director
Ulta Salon, Cosmetics & Fragrance, Inc.
1135 Arbor Drive
Romeoville, Illinois 60446
(630) 226-0020
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
Copies to:
 
     
Christopher D. Lueking, Esq.    Leland Hutchinson, Esq.
Latham & Watkins LLP   Winston & Strawn LLP
233 S. Wacker Drive, Suite 5800   35 W. Wacker Drive
Chicago, Illinois 60606   Chicago, Illinois 60601
(312) 876-7700   (312) 558-5600
 
 
 
 
Approximate date of commencement of proposed sale to the public:   As soon as practicable after this Registration Statement becomes effective.
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box.   o
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o
 
 
 
 
CALCULATION OF REGISTRATION FEE
 
         
    Proposed Maximum
  Amount of
Title of Each Class of Securities
  Aggregate
  Registration
to be Registered   Offering Price(1)   Fee

Common Stock, par value $.01 per share
  $115,000,000   $3,531
 
(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. Includes shares of common stock subject to the underwriters’ option.
 
 
 
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
Subject to completion, dated          , 2007
 
Prospectus
 
           shares
 
(ULTA LOGO)
 
Common stock
 
 
This is an initial public offering of shares of common stock of Ulta Salon, Cosmetics & Fragrance, Inc. We are selling           shares of common stock. Prior to this offering, there has been no public market for our common stock. The estimated initial public offering price is between $      and $      per share.
 
We are applying to have our common stock listed on The NASDAQ Global Select Market under the symbol “ULTA.”
 
             
    Per share   Total
 
Public offering price
  $                   $                
Underwriting discounts and commissions
  $     $  
Proceeds to ULTA, before expenses
  $     $  
 
 
 
We have granted the underwriters an option for a period of 30 days to purchase up to           additional shares of our common stock to cover over-allotments, if any.
 
Investing in our common stock involves a high degree of risk. See “Risk factors” beginning on page 8.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
 
The underwriters expect to deliver the shares of common stock to purchasers on          , 2007.
 
JPMorgan Wachovia Securities
 
Thomas Weisel Partners LLC
 
  Cowen and Company
 
  Piper Jaffray
 
          , 2007


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  Consent of Ernst & Young LLP
 
 
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different. We are offering to sell and seeking offers to buy shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.
 
Unless the context requires otherwise, the words “ULTA,” “we,” “company,” “us” and “our” refer to Ulta Salon, Cosmetics & Fragrance, Inc. For purposes of this prospectus, the term “stockholder” shall refer to the holders of our common stock.


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Prospectus summary
 
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before buying shares of our common stock. You should read the entire prospectus carefully, including the “Risk factors” section and our consolidated financial statements and the related notes included in this prospectus before making an investment in our common stock. In this prospectus, our fiscal years ended January 29, 2000, February 3, 2001, February 2, 2002, February 1, 2003, January 31, 2004, January 29, 2005, January 28, 2006, February 3, 2007 and February 2, 2008 are referred to as fiscal 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006 and 2007, respectively.
 
Our company
 
We are the largest beauty retailer that provides one-stop shopping for prestige, mass and salon products and salon services in the United States. We provide affordable indulgence to our customers by combining the product breadth, value and convenience of a beauty superstore with the distinctive environment and experience of a specialty retailer. Key aspects of our business include:
 
One-Stop Shopping . We offer 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. We also offer a full-service salon in all of our stores.
 
Our Value Proposition . We believe our focus on delivering a compelling value proposition to our customers across all of our product categories is fundamental to our customer loyalty. For example, we run frequent promotions and gift certificates for our mass brands, gift-with-purchase offers and multi-product gift sets for our prestige brands, and a comprehensive loyalty program.
 
An Off-Mall Location . We are conveniently located in high-traffic, off-mall locations such as power centers and lifestyle centers with other destination retailers. Our typical store is approximately 10,000 square feet, including approximately 950 square feet dedicated to our full-service salon. As of May 31, 2007, we operated 207 stores across 26 states.
 
In addition to these fundamental elements of a beauty superstore, we strive to offer an uplifting shopping experience through what we refer to as “The Four E’s”: Escape , Education , Entertainment and Esthetics .
 
Escape . Our customer can immerse herself in our extensive product selection, indulge herself in our hair or skin treatments, or discover new and exciting products in an interactive setting. We offer her a timely escape without the intimidating, commission-oriented and brand-dedicated sales approach found in most department stores and with a level of service typically unavailable in drug stores and mass merchandisers.
 
Education . We reinforce our authority as a beauty resource by staffing our stores with a team of well-trained beauty consultants and professionally licensed estheticians and stylists whose mission is to educate, inform and advise our customers regarding their beauty needs. Our beauty consultants are trained to service customers across all prestige


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lines and within our prestige “boutiques”, where customers can receive a makeover or skin analysis.
 
Entertainment . Our catalogs are designed to introduce our customers to our newest products and promotions and to be invitations to come to ULTA to play, touch, test, learn and explore. We further enhance the shopping experience through live demonstrations from our licensed salon professionals and beauty consultants, and through customer makeovers and in-store videos.
 
Esthetics . Our store and salon design features sleek, modern lines that reinforce our status as a fashion authority, together with wide aisles that make the store easy to navigate and pleasant lighting to create a luxurious and welcoming environment.
 
We were founded in 1990 as a discount beauty retailer at a time when prestige, mass and salon products were sold through distinct channels—department stores for prestige products, drug stores and mass merchandisers for mass products, and salons and authorized retail outlets for professional hair care products. When Lyn Kirby, our current President and Chief Executive Officer, joined us in December 1999, we embarked on a multi-year strategy to understand and embrace what women want in a beauty retailer and transform ULTA into the shopping experience that it is today. We pioneered this unique combination of beauty superstore and specialty store attributes that focuses on all aspects of how women prefer to shop for beauty. In October 2005, Ms. Kirby was recognized by Cosmetics Executive Women (CEW) with a 2005 Achiever Award for achievement in the beauty industry. In May 2007, we received a 2007 Hot Retailer Award from the International Council of Shopping Centers (ICSC) for being an innovative retail concept.
 
We believe our strategy provides us with competitive advantages that have contributed to our strong financial performance. Our net sales have increased from $206.5 million in fiscal 1999 to $755.1 million in fiscal 2006, representing a 20.3% compounded annual growth rate. In that same period, we grew our store base from 75 to 196 stores while growing our net income from $1.2 million in fiscal 1999 to $22.5 million in fiscal 2006, representing a 51.6% compounded annual growth rate. In addition, we have achieved 29 consecutive quarters of positive comparable store sales growth since fiscal 2000.
 
Our competitive strengths
 
We believe the following competitive strengths differentiate us from our competitors and are critical to our continuing success:
 
Differentiated merchandising strategy with broad appeal . Our broad selection of merchandise across categories, price points and brands offers a unique shopping experience for our customers. While the products we sell can be found in department stores, specialty stores, salons, drug stores and mass merchandisers, we offer all of these products in one retail format so that our customer can find everything she needs in one shopping trip. We appeal to a wide range of customers by offering over 500 brands, such as Bare Escentuals cosmetics , Chanel and Estée Lauder fragrances , L’Oréal haircare and cosmetics and Paul Mitchell haircare.
 
Our unique customer experience.  We combine the value and convenience of a beauty superstore with the distinctive environment and experience of a specialty retailer. We cater to the woman who loves to indulge in shopping for beauty products as well as the woman who is time constrained. Our unique retail shopping experience reinforces our emotional connection


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with our customers, thereby creating loyalty and increasing both the frequency and length of their visits.
 
Retail format poised to benefit from shifting channel dynamics.  Over the past several years, the approximately $75 billion beauty products and salon services industry has experienced significant changes, including a shift in how manufacturers distribute and customers purchase beauty products. We are capitalizing on these trends by being the only retailer to offer an off-mall, service-oriented specialty retail concept with a comprehensive product mix across categories and price points.
 
Loyal and active customer base.  We have approximately six million loyalty program members, the majority of whom have shopped at one of our stores within the past 12 months. We utilize this valuable proprietary database to drive traffic, better understand our customers’ purchasing patterns and support new store site selection.
 
Strong vendor relationships across product categories.  We have strong, active relationships with over 300 vendors. We believe the scope and extent of these relationships, which span the three distinct beauty categories of prestige, mass and salon and have taken years to develop, create a significant impediment for other retailers to replicate our model.
 
Experienced management team.  Our senior management team averages over 25 years of combined beauty and retail experience and brings a creative merchandising approach and a disciplined operating philosophy to our business.
 
Growth strategy
 
We intend to expand our presence as a leading retailer of beauty products and salon services by:
 
•  Growing our store base to our long-term potential of over 1,000 stores.
 
•  Increasing our sales and profitability by expanding our prestige brand offerings.
 
•  Improving our profitability by leveraging our fixed costs.
 
•  Continuing to enhance our brand awareness to generate sales growth.
 
•  Driving increased customer traffic to our salons.
 
•  Expanding our online business.
 
Risks relating to our company
 
Investing in our common stock involves a high degree of risk. In particular, we may not be able to successfully implement our growth strategy or capitalize on our competitive strengths. Additionally:
 
•  We may be unable to compete effectively in our highly competitive markets.
 
•  If we are unable to gauge beauty trends and react to changing consumer preferences in a timely manner, our sales will decrease.
 
•  Our failure to retain our existing senior management team and to continue to attract qualified new personnel could adversely affect our business.


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•  We intend to continue to open new stores, which could strain our resources and have a material adverse effect on our business and financial performance.
 
•  The capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans, which could prevent the successful implementation of these plans or cause us to incur costs to expand this infrastructure.
 
•  Any material disruption of our information systems could negatively impact financial results and materially adversely affect our business operations.
 
If any of the foregoing events or circumstances occur, an investment in our common stock may be impaired. You should read “Risk factors” beginning on page 8 for a more complete discussion of certain factors you should consider together with all other information included in this prospectus before making an investment decision.
 
Company information
 
We were incorporated in Delaware on January 9, 1990 under the name “R.G. Trends Corporation.” On June 7, 1990, we changed our name to “Ulta3, Inc.,” on February 7, 1992, we changed our name to “Ulta 3 The Cosmetic Savings Store, Inc.,” on July 12, 1995, we changed our name to “Ulta 3 Cosmetics & Salon, Inc.,” and on July 29, 1999, we changed our name to “Ulta Salon, Cosmetics & Fragrance, Inc.” Our principal executive offices are located at 1135 Arbor Drive, Romeoville, Illinois 60446 and our telephone number is (630) 226-0020. Our primary website is www.ulta.com. The information contained in, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website as part of this prospectus.
 
ULTA tm , our logo, Basically U tm , Formativ tm , Ulta 3 tm , Ulta 3 and design tm , Ulta 3 Beauty Club tm , Ulta 3 Cosmetics Savings Store tm , Ulta 3 Salon Cosmetics Fragrance design tm , Ulta 3 The Ultimate Beauty Store tm , Ulta Beauty tm , Ulta Salon-Cosmetics-Fragrance tm , Ulta Salon-Cosmetics-Fragrance and design tm , Ulta.com tm and What a Woman Wants tm are our trademarks. All service marks, trademarks and trade names referred to in this prospectus are the property of their respective owners. We do not intend our use or display of other parties’ service marks, trademarks or trade names or to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by these other parties.


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The offering
 
Common stock offered by us            shares
 
Common stock to be outstanding after the offering            shares
 
Use of proceeds We intend to use the net proceeds of approximately $91.9 million from this offering to pay approximately $91.9 million of accumulated dividends in arrears on our preferred stock.
 
If the underwriters exercise their over-allotment option, we intend to use the net proceeds thereof to reduce our borrowings under our third amended and restated loan and security agreement.
 
Dividends We have never paid any dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. See “Dividend policy.”
 
Proposed NASDAQ Global Select Market symbol “ULTA”
 
Risk factors See “Risk factors” and other information included in this prospectus for a discussion of some of the factors you should consider before deciding to purchase our common stock.
 
The number of shares of common stock to be outstanding after this offering is based on 77,411,747 shares outstanding as of May 5, 2007 and excludes:
 
•  861,011 shares of common stock issuable upon exercise of outstanding options under our Second Amended and Restated Restricted Stock Option Plan, as amended, or the Old Plan, at a weighted average exercise price of $0.48 per share. No further awards will be made under the Old Plan; and
 
•  5,189,390 shares of common stock issuable upon exercise of outstanding options under our 2002 Equity Incentive Plan, or the 2002 Plan, at a weighted average exercise price of $2.65.
 
Except as otherwise indicated, information in this prospectus reflects or assumes the following:
 
•  the conversion on a one-for-one basis of all outstanding shares of our Series I, Series II, Series IV, Series V and Series V-1 preferred stock into an aggregate of 65,702,530 shares of common stock effective upon the consummation of this offering pursuant to the terms of our restated certificate of incorporation;
 
•  the redemption of all outstanding shares of our Series III preferred stock effective upon the consummation of this offering pursuant to the terms of our restated certificate of incorporation; and
 
•  no exercise by the underwriters of their option to purchase           additional shares of common stock from us to cover over-allotments.


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Summary consolidated financial information
 
The following table sets forth our summary consolidated financial data for the periods indicated. You should read this information in conjunction with our consolidated financial statements, including the related notes, and “Management’s discussion and analysis of financial condition and results of operations” included elsewhere in this prospectus. The following summary consolidated balance sheet data as of January 28, 2006 and February 3, 2007 and the summary consolidated income statement data for each of the three fiscal years ended January 29, 2005, January 28, 2006 and February 3, 2007 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated balance sheet data as of May 5, 2007 and the summary consolidated statement of operations data for the three months ended April 29, 2006 and May 5, 2007 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The summary consolidated balance sheet data as of January 29, 2005 has been derived from our audited consolidated financial statements not included in this prospectus. The selected balance sheet data as of April 29, 2006 has been derived from our unaudited consolidated financial statements that are not included in this prospectus. Our unaudited summary consolidated financial data as of April 29, 2006 and May 5, 2007 and for the three months then ended, has been prepared on the same basis as the annual audited consolidated financial statements and includes all adjustments, consisting of only normal recurring adjustments necessary for the fair presentation of this data in all material respects. The results for any interim period are not necessarily indicative of the results of operations to be expected for a full fiscal year.
 
                                 
    Fiscal year ended(1)   Three months ended
    January 29,
    January 28,
  February 3,
  April 29,
  May 5,
(Dollars in thousands, except per share and per square foot data)   2005     2006   2007   2006   2007
     
Consolidated income statement data:
                               
Net sales(2)
  $ 491,152     $ 579,075   $ 755,113   $ 159,468   $ 194,113
Cost of sales
    346,585       404,794     519,929     108,813     134,600
         
         
Gross profit
    144,567       174,281     235,184     50,655     59,513
Selling, general, and administrative expenses
    121,999       140,145     188,000     41,316     47,982
Pre-opening expenses
    4,072       4,712     7,096     826     1,656
         
         
Operating income
    18,496       29,424     40,088     8,513     9,875
Interest expense
    2,835       2,951     3,314     742     996
         
         
Income before income taxes
    15,661       26,473     36,774     7,771     8,879
Income tax expense
    6,201       10,504     14,231     3,071     3,560
         
         
Net income
  $ 9,460     $ 15,969   $ 22,543   $ 4,700   $ 5,319
         
         
Net income (loss) per share:
                               
Basic
  $ (0.44 )   $ 0.47   $ 0.87   $ 0.18   $ 0.14
Diluted
  $ (0.44 )   $ 0.21   $ 0.29   $ 0.06   $ 0.07
Weighted average number of shares:
                               
Basic
    5,032,612       6,478,217     9,130,697     6,960,640     11,368,805
Diluted
    5,032,612       76,297,969     79,026,350     76,617,578     80,652,941


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    Fiscal year ended(1)   Three months ended
    January 29,
  January 28,
  February 3,
  April 29,
  May 5,
(Dollars in thousands, except per share and per square foot data)   2005   2006   2007   2006   2007
     
 
Other operating data:
                             
Comparable store sales increase(3)
    8.0%     8.3%     14.5%     12.8%     9.2%
Number of stores end of period
    142     167     196     170     203
Total square footage end of period
    1,464,330     1,726,563     2,023,305     1,755,280     2,096,275
Total square footage per store(4)
    10,312     10,339     10,323     10,325     10,326
Average total square footage(5)
    1,374,005     1,582,935     1,857,885     1,650,697     1,934,871
Net sales per average total square foot(6)
  $ 357   $ 366   $ 398   $ 370   $ 400
Capital expenditures
    34,807     41,607     62,331     5,304     17,757
Depreciation and amortization
    18,304     22,285     29,736     6,048     9,840
                               
                               
Consolidated balance sheet data:
                             
Cash and cash equivalents
  $ 3,004   $ 2,839   $ 3,645   $ 2,926   $ 3,161
Working capital
    69,955     76,473     88,105     75,733     85,870
Property and equipment, net
    114,912     133,003     162,080     131,