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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 1, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________________ to ______________________
Commission file number 019774
United Retail Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 51 0303670
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
365 West Passaic Street, Rochelle Park, NJ 07662
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 845-0880
Securities registered pursuant to Section 12(b) of the 1934 Act:
Title of each class Name of each exchange on which registered
___________________________________________________________________________
____________________________________________________________________________
Securities registered pursuant to Section 12(g) of the 1934 Act:
Common Stock, $.001 par value per share
(Title of class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "1934 Act") during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YES _X__ NO _______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of April 7, 1997, the aggregate market value of the voting stock of the
registrant (also referred to herein as the "Company") held by non-affiliates of
the registrant was approximately $35.2 million. For purposes of the preceding
sentence only, affiliate status was determined on the basis that all
stockholders of the registrant are non-affiliates except stockholders who are
filing statements with the Securities and Exchange Commission (the "SEC") under
Section 16(a) of the 1934 Act.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the 1934 Act
subsequent to the distribution of securities under a plan confirmed by a court.
YES _______ NO _______
APPLICABLE ONLY TO CORPORATE REGISTRANTS:
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
As of April 5, 1997, 12,190,375 shares of the registrant's common stock,
$.001 par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's annual report for the year ended February 1, 1997 (the
"1996 Annual Report to Stockholders") is incorporated in part by reference in
Part I and Part II of this Form 10-K.
The registrant's proxy statement on Schedule 14A for its 1997 annual
meeting of stockholders (the "1997 Proxy Statement") is incorporated in part by
reference in Part I and Part III of this Form 10-K.
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PART I
Item 1. Business.
OVERVIEW
The Company is a leading nationwide specialty retailer of large-size
women's apparel and accessories, offering private label merchandise using the
AVENUE [by design] trademark. The Company's merchandising strategy is to offer
its customers merchandise of the same quality and variety available in smaller
sizes. The Company operates 565 stores principally under the names THE AVENUE(R)
and Sizes Unlimited.
CUSTOMER BASE
The Company serves the mass market and targets fashion-conscious
women between 18 and 50 years of age who wear size 14 or larger. The Company
believes that this market is underserved by many department and specialty retail
stores that do not offer wide selections of fashionable large-size women's
apparel. In addition, the large-size customer often has fewer store alternatives
in nearby shopping malls and strip shopping centers than her smaller-size
counterpart.
HISTORY
The Company was incorporated in 1987 and completed its initial
public offering in 1992. The Company's current business resulted from an
internal reorganization at The Limited, Inc. ("The Limited") in 1987, in which
The Limited combined its underperforming The Avenue(R)store group (then
operating under the Lerner Woman trade name) with the Sizes Unlimited store
group. Raphael Benaroya, the Company's Chairman of the Board, President and
Chief Executive Officer, and his management team were selected to manage the
combined businesses.
MERCHANDISING AND MARKETING
The Company's strategy is to offer its customers a brand name look
in moderately priced private label merchandise. It emphasizes consistency of
merchandise quality and fit and updates its merchandise selections to reflect
customer demand and fashion trends. The apparel industry is subject to rapidly
changing consumer fashion preferences and the Company's performance depends on
its ability to respond quickly to changes in fashion.
Each store operated by the Company offers selections of casual wear,
career apparel, specialty items and accessories. The casual wear assortment
includes comfortably fitted jeans, slacks, T-shirts, skirts, active wear and
sweaters. Casual wear comprises the majority of the Company's sales. The career
assortment includes skirts, soft blouses, jackets, suits, dresses and coats.
Specialty items include a full line of sleepwear and lingerie. Accessories
include earrings, pins, scarves, socks, hosiery and a selection of gift items.
The Company offers most of its merchandise at popular or moderate price points,
including blouses in the $20 to $40 price range, jeans and slacks in the $20 to
$35 price range and dresses and suits in the $49 to $99 price range.
The Company promotes private label merchandise, which has higher
gross profit margins. The Company believes that its brand, AVENUE [by design],
creates an image that helps distinguish it from competitors. Through careful
brand management, including consistent imaging of its private label merchandise,
the Company believes it enhances brand recognition and the customer's perception
of value. Private label garments are tagged, packaged and presented at the
Company's stores in a manner consistent with more expensive garments with
national brand names.
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The Company develops new merchandise assortments on average six
times each year. Merchandise selection is allocated to each store based on many
factors, including store location, store profile and sales experience. The
Company regularly updates each store's profile based on its customers' fashion
and price preferences and local demographics. The Company's point-of-sale
systems gather financial, credit, inventory and other statistical information
from each store on a daily basis. This information is then used to evaluate and
adjust each store's merchandise mix on a weekly basis.
The Company uses creative merchandise displays, distinctive signage
and upscale packaging to create an attractive store atmosphere. To further
stimulate store traffic, the Company frequently uses credit card inserts with
announcements of upcoming events.
MERCHANDISE DISTRIBUTION AND INVENTORY MANAGEMENT
The Company believes that short production schedules and rapid
movement of merchandise from manufacturers to its stores are vital to minimize
business risks arising from changing fashion trends.
The Company uses a centralized distribution system, under which all
merchandise is received, processed and distributed through a distribution
complex located in Troy, Ohio. Merchandise received at the distribution center
is promptly assigned to individual stores, packed for delivery and shipped to
the stores.
The Company maintains a worldwide logistics network of agents and
space availability arrangements to support the in-bound movement of merchandise
into the distribution complex. The out-bound system consists of common carrier
line haul routes connecting the distribution complex to a network of delivery
agents. This system enables the Company to provide every store with frequent
deliveries. The Company does not own or operate trucks or trucking facilities.
The Company manages its inventory levels, merchandise allocation to
stores and sales replenishing for each store through its computerized management
information systems, which enable the Company to profile each store and evaluate
and adjust each store's merchandise mix on a weekly basis. New merchandise is
allocated by style, color and size immediately before shipment to stores to
achieve a merchandise assortment that is suited to each store's customer base.
The Company's inventory management strategy is designed to maintain
targeted inventory turnover rates and minimize the amount of unsold merchandise
at the end of a season by closely comparing sales and fashion trends with
on-order merchandise and making necessary purchasing adjustments. Additionally,
the Company uses markdowns and promotions as necessary.
MANAGEMENT INFORMATION SYSTEMS
The applications software for the Company's management information
systems was acquired by the Company from The Limited. The Company's management
information systems consist of a full range of store, financial and
merchandising systems, including credit, inventory distribution and control,
sales reporting, accounts payable, cash/credit, merchandise reporting and
planning. All of the Company's stores have point-of-sale terminals that transmit
daily information on sales by merchandise category as well as style, color and
size. The Company evaluates this information, together with its report on
merchandise shipments to the stores, to implement merchandising decisions
regarding markdowns, reorders of fast-selling items and allocation of
merchandise. In addition, the Company's headquarters and distribution center are
linked through an interactive computer network.
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Company employees located at its headquarters maintain and support
the applications software, operations, networking and point-of-sale functions of
the Company's management information systems. The hardware and systems software
for the Company's management information systems are maintained by Integrated
Systems Solutions Corporation ("ISSC"), a wholly-owned subsidiary of IBM. The
computer hardware used in processing is located in Lexington, Kentucky, at a
facility operated by ISSC. See, "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Computer Systems." (Management's
Discussion and Analysis of Financial Condition and Results of Operations is a
section in the Company's 1996 Annual Report to Stockholders.)
PURCHASING
Separate groups of merchants are responsible for different
categories of merchandise. See, also, "Management's Discussion and Analysis of
Financial Condition and Results of Operations - A Single Merchandise Assortment
Commencing in Mid-Spring 1996." Most of the merchandise purchased by the Company
consists of either manufacturer's "line merchandise" produced under the
Company's private label or custom designed garments produced for the Company by
contract manufacturing, also under the Company's private label. An item of
merchandise is test marketed, whenever possible, in limited quantities prior to
mass production to help identify the current fashion preferences of the
Company's customers.
The Company provides manufacturers with strict guidelines for size
specifications and gradings to ensure proper, consistent fit across product
categories. The Company and independent sourcing agents monitor production by
manufacturers in the United States and abroad to ensure that size
specifications, grading requirements and other specifications are met.
In Fiscal 1996, one manufacturer accounted for more than 5% but less
than 10% of the Company's merchandise purchases. Another manufacturer accounted
for more than 10% but less than 15% of the Company's merchandise purchases.
Domestic purchases (some of which are foreign-made products) are
executed by Company purchase orders. Import purchases are made in U.S. dollars
and are generally supported by letters of credit. See, "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
CREDIT SALES
The Company permits its customers to use several methods of payment,
including cash, personal checks, third-party credit cards, layaways and its own
credit cards.
All of the Company's proprietary credit cards are issued by Citibank
(South Dakota) N.A., which purchases credit card charges from the Company daily
at a discount that is adjusted annually.
COMPETITION
All aspects of the women's retail apparel business are highly
competitive. Many of the competitors are units of large national chains that
have substantially greater resources than the Company. Management believes its
principal competitors include all major national and regional department stores,
specialty retailers (including Lane Bryant, Inc. which is a subsidiary of The
Limited, and which management believes is the largest specialty retailer of
large-size women's apparel), discount stores, mail order companies, television
shopping channels and interactive electronic media. Management believes its
merchandise selection, prices, consistency of merchandise quality and fit, and
appealing shopping experience emphasizing strong merchandise presentations,
together with its experienced management team, management information systems
and logistics capabilities, enable it to compete in the marketplace.
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OPERATIONAL FACTORS
The Company's operations may be adversely affected by circumstances
beyond its control. See, "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Future Results."
TRADE NAMES AND TRADEMARKS
The Company is the owner in the United States of its principal
trademarks, THE AVENUE, used on store fronts, and AVENUE [by design], used on
garment labels. The Company is also the sublicensee of certain national brand
names. See, "Certain Transactions" in the 1997 Proxy Statement. The Company is
not aware of any use of its principal trademarks by its competitors that has a
material effect on the Company's operations or any material claims of
infringement or other challenges to the Company's right to use its principal
trademarks in the United States.
EMPLOYEES
As of March 31, 1997, the Company employed approximately 5,500
associates, of whom approximately 2,000 worked full-time and the balance of whom
worked part-time. Considerable seasonality is associated with employment levels.
Approximately 80 store associates are covered by collective bargaining
agreements. The Company believes that its relations with its associates are
good.
SEASONALITY
The Company's business is usually seasonal, with the first half of
the fiscal year providing a greater portion of the Company's annual net sales
and operating income. See, "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Seasonality."
Item 2. Properties.
As of March 31, 1997, the Company operated stores in 36 states:
Alabama 6 Nevada 2
Arizona 5 New Hampshire 2
Arkansas 1 New Jersey 43
California 87 New Mexico 1
Connecticut 12 New York 57
Delaware 2 North Carolina 9
Florida 20 Ohio 23
Georgia 21 Oklahoma 3
Illinois 47 Oregon 7
Indiana 12 Pennsylvania 20
Iowa 2 Rhode Island 1
Kentucky 5 South Carolina 8
Louisiana 11 Tennessee 11
Maine 1 Texas 36
Maryland 16 Utah 1
Massachusetts 20 Virginia 12
Michigan 29 Washington 12
Missouri 9 Wisconsin 11
Total: 565
Stores generally range in size from 2,500 to 6,000 net square feet.
The Company leases all its store locations. See, "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Properties."
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The Company leases its executive offices, which consist of
approximately 56,000 square feet in an office building at 365 West Passaic
Street, Rochelle Park, New Jersey. The office lease has a term ending in August
1999.
The Company owns a 128-acre site on Interstate 75 in Troy, Ohio, on
which its national distribution center is located. The national distribution
center is equipped to service 900 stores. The site is adequate for a total of
four similar facilities.
Item 3. Legal Proceedings.
The Company is involved in various routine legal proceedings
incidental to the conduct of its business and maintains reserves that include,
among other things, the estimated cost of uninsured payments to accident victims
and payments to landlords and vendors of goods and services resulting from
certain disputes. Management believes that, giving effect to reserves, these
legal proceedings will not have a material adverse effect on the financial
condition or results of operations of the Company.
No material pending legal proceeding to which the Company was a
party was terminated during the fourth quarter of the fiscal year ended February
1, 1997.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The section captioned "Shareholder Information" in the 1996 Annual
Report to Stockholders is incorporated herein by reference. (Only those portions
of the 1996 Annual Report to Stockholders incorporated by reference in another
document filed with the SEC shall be deemed "filed" in accordance with the rules
and regulations promulgated by the SEC.)
During Fiscal 1996, the Company issued two stock options under its
1996 Stock Option Plan, one to purchase 25,000 shares issued on December 2, 1996
and one to purchase 20,000 shares issued on August 22, 1996. Both options are
exercisable at a price of $3.00 per share for a 10-year term with five-year
vesting and are incentive stock options under the Internal Revenue Code. Options
issued under the 1996 Stock Option Plan are not registered under the Securities
Act of 1933.
Item 6. Selected Financial Data.
The section captioned "Selected Financial Data" in the 1996 Annual
Report to Stockholders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The section captioned "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the 1996 Annual Report to
Stockholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The section captioned "Consolidated Financial Statements" in the
1996 Annual Report to Stockholders is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant.
The subsections captioned "Election of Directors - Nominees" and " -
Business Experience" in the 1997 Proxy Statement is incorporated herein by
reference.
In addition to Raphael Benaroya and George R. Remeta, the executive
officers of the registrant or its subsidiaries are:
Kenneth P. Carroll, age 54, was the Company's Vice President -
General Counsel from April 1992 to March 1996, when he was elected the Senior
Vice President - General Counsel.
Ellen Demaio, age 39, was a Vice President - Merchandise of United
Retail Incorporated from March 1992 to March 1994, when she was elected the
Senior Vice President - General Merchandising Manager of United Retail
Incorporated.
Carrie Cline-Tunick, age 36, has been the Vice President - Product
Design and Development of United Retail Incorporated since April 1996.
Previously, she was the Design Director of Norton McNaughton, Inc., a garment
manufacturer, from April 1996 to before 1992.
Julie L. Daly, age 42, has been the Vice President - Strategic
Planning of United Retail Incorporated since December 1996. Previously, she was
the Vice President - Planning and Distribution of United Retail Incorporated
since prior to 1992.
Kent Frauenberger, age 50, has been the Vice President - Logistics
of United Retail Logistics Operations Incorporated since May l993. Previously,
he was Manager of Business Development of Exel Logistics Inc., a logistics firm,
since before 1992.
Jon Grossman, age 39, has been the Vice President - Finance of the
Company since May 1992. Previously, he served the Company as its Director of
Financial Reporting.
Sharon Harp, age 52, has been the Vice President - Planning and
Distribution of United Retail Incorporated since December 1996. She was the
Senior Vice President - Planning and Distribution of Petrie Retail Corp. between
November 1996 and November 1994 and was the Vice President - Planning and
Distribution of a division of The Limited between October 1994 and prior to
1992. Petrie Retail Corp. filed as debtor-in-possession under the United States
Bankruptcy Code.
Alan R. Jones, age 49, has been the Vice President - Real Estate of
United Retail Incorporated since November 1994. Previously, he was Vice
President - Real Estate of Payless Shoesource, a division of May Department
Stores, Inc., since before 1992.
Charles E. Naff, age 53, has been the Vice President - Sales of
United Retail Incorporated since August 1996 and was the Director of Stores of
United Retail Incorporated from March 1994 to November 1993. He was the Vice
President - Store Operations of Leejay Bed and Bath, a retail chain, between
August 1996 and March 1994 and was the Senior Vice President - Operations of The
Children's Place, a retail chain, from November 1993 to before 1992.
Bradley Orloff, age 39, has been the Vice President - Marketing of
United Retail Incorporated since before 1992.
Robert Portante, age 45, has been the Vice President - MIS of United
Retail Incorporated since November 1994. Previously, he was Vice President - MIS
of Brooks Fashion Stores, Inc. ("Brooks"), a retail store chain, since before
1992. Brooks filed as debtor in possession under the United States Bankruptcy
Code.
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Fredric E. Stern, age 48, has been the Vice President - Controller
of United Retail Incorporated since before 1992.
The term of office of these executive officers will expire at the
1997 annual meeting of stockholders, scheduled to be held in May 1997.
The section captioned "Section 16(a) Beneficial Ownership Reporting
Compliance" in the 1997 Proxy Statement is incorporated herein by reference.
Item 11. Executive Compensation.
The sections captioned "Executive Compensation" and "Report of
Compensation Committee" in the 1997 Proxy Statement are incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The section captioned "Security Ownership of Principal Stockholders
and Management" in the 1997 Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The section captioned "Certain Transactions" in the 1997 Proxy
Statement is incorporated herein by reference.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Not applicable.
The following exhibits are filed herewith:
Number Description
------ -----------
10.1 Amendment No. 9, dated January 31, 1997, to Letter of
Credit Agreement among the Corporation, its
subsidiaries and The Chase Manhattan Bank ("Chase")
10.2 Amendment No. 8, dated January 31, 1997 to Credit
Agreement among the Corporation, its subsidiaries and
Chase
10.3 Financial Statements of Retirement Savings Plan for
year ended December 31, 1996
13 Sections of 1996 Annual Report to Stockholders
(including opinion of Independent Public Accountants)
that are incorporated by reference in response to the
items of the Annual Report on Form 10-K
23.1 Consent of Independent Public Accountants for the
Corporation
23.2 Consent of Independent Public Accountants for
Retirement Savings Plan
27 Financial Data Schedule
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The following exhibit to the Corporation's Quarterly Report on Form 10-Q for the
period ended November 2, 1996 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* Restated Supplemental Retirement Savings Plan
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended August 3, 1996 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amendment No. 8, dated August 22, 1996, to Letter of
Credit Agreement among the Corporation, its
subsidiaries and Chase
10.2 Amendment No. 7, dated August 22, 1996, to Credit
Agreement among the Corporation, its subsidiaries and
Chase
10.3 Letter, dated August 23, 1996, with respect to Credit
Agreement between the Corporation and Citibank (South
Dakota) N.A. ("Citibank")
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended May 4, 1996 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* Severance Pay Agreement, dated May 28, 1996, between
the Corporation and Raphael Benaroya
10.2* Severance Pay Agreement, dated May 28, 1996, between
the Corporation and George R. Remeta
10.3 Amended and Restated Term Sheet Agreement for Hosiery,
dated as of December 29, 1995, between The Avenue, Inc.
and American Licensing Group, Inc. (Confidential
portions have been deleted and filed separately with
the Secretary of the Commission)
The Corporation's 1996 Stock Option Plan set forth as Exhibit A to the
Corporation's proxy statement on Schedule 14A for its 1996 annual meeting of
stockholders is incorporated herein by reference.*
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The following exhibits to the Corporation's Current Report on Form 8-K, dated
March 22, 1996, are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amendment No. 7, dated March 5, 1996, to Letter of
Credit Agreement among the Corporation, its
subsidiaries and Chase
10.2 Amendment No. 6, dated March 5, 1996, to the Credit
Agreement among the Corporation, its subsidiaries and
Chase
10.3* Employment Agreement, dated March 1, 1996 , between the
Corporation and Kenneth P. Carroll
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended July 29, 1995 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amendment No. 5, dated January 31, 1995, to the Credit
Agreement among the Corporation, its subsidiaries and
Chase
10.2 Amendment No. 6, dated January 31, 1995, to the Letter
of Credit Agreement among the Corporation, its
subsidiaries and Chase
The following exhibits to the Corporation's Amended Current Report on Form 8-KA,
dated May 22, 1995, are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amended and Restated Gloria Vanderbilt Intimate Apparel
Sublicense Agreement, dated May 22, 1995, between
United Retail Incorporated and American Licensing Group
Limited Partnership ("ALGLP")
10.2 Gloria Vanderbilt Sleepwear Sublicense Agreement, dated
May 22, 1995, between United Retail Incorporated and
ALGLP
The following exhibits to the Corporation's Annual Report on Form 10-K for the
year ended January 28, 1995 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* Incentive Compensation Program Summary
21 Subsidiaries of the Corporation
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The following exhibit to the Corporation's Quarterly Report on Form 10-Q for the
period ended July 30, 1994 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
l0.2* Letter from the Corporation to Raphael Benaroya and
George R. Remeta, dated May 20, 1994, regarding their
respective Restated Employment Agreements, dated
November 1, 1991
The following exhibits to the Corporation's amended Annual Report on Form 10-KA
for the year ended January 29, 1994 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.3 Amendment, dated December 6, 1993, to Credit Agreement
between the Corporation and Citibank
10.4 Term Sheet Agreement, dated as of May 4, 1993, with
respect to Amended and Restated Gloria Vanderbilt
Hosiery Sublicense Agreement
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended October 30, 1993 are incorporated herein by reference.
Number in Filing Description
---------------- -----------
10.1 Amendment Nos. 3 and 4, dated September 30, 1993 and
November 18, 1993, respectively, to Credit Agreement
among the Corporation, its subsidiaries and Chase
10.2 Amendment Nos. 4 and 5, dated September 30, 1993 and
November 18, 1993, respectively, to Letter of Credit
Agreement among the Corporation, its subsidiaries and
Chase
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended July 31, 1993 are incorporated herein by reference.
Number in Filing Description
---------------- -----------
4.1 Amended By-Laws of the Corporation, as amended June 1,
1993
4.2 Amendment No. 1, dated June 1, 1993, to Restated
Stockholders' Agreement, dated December 23, 1992,
between the Corporation and certain of its stockholders
The Corporation's Restated 1990 Stock Option Plan set forth as Exhibit A to the
Corporation's proxy statement on Schedule 14A for its 1993 annual meeting of
stockholders is incorporated herein by reference.*
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The following exhibits to the Corporation's Current Report on Form 8-K, dated
January 6, 1993, are incorporated herein by reference:
Number in Filing Description
---------------- -----------
4.2 Restated Stockholders' Agreement, dated December 23,
1992, between the Corporation and certain of its
stockholders
10.1 Amendment No. 1, dated March 17, 1992, to Letter of
Credit Agreement between the Corporation, its
subsidiaries and Chase
10.2 Amendment No. 2, dated May 4, 1992, to Letter of Credit
Agreement between the Corporation, its subsidiaries and
Chase
10.3 Amendment No. 3, dated July 2, 1992, to Letter of
Credit Agreement between the Corporation , its
subsidiaries and Chase
10.4 Amendment No. 1, dated May 4, 1992, to Credit Agreement
between the Corporation, its subsidiaries and Chase
10.5 Amendment No. 2, dated July 2, 1992, to Credit
Agreement between the Corporation, its subsidiaries and
Chase
10.6 Second Amendment to Lease, dated June 30, 1992, to
Office Lease between Mack Passaic Street Properties Co.
and Sizes Unlimited, Inc. (now known as United Retail
Incorporated)
10.7 Guaranty of Lease, dated June 30, 1992, made by Sizes
Unlimited Holding Corporation (now known as United
Retail Holding Corporation) to Mack Passaic Street
Properties Co.
The following exhibits to the Corporation's Registration Statement on Form S-1
(Registration No. 33-44499), as amended, are incorporated herein by reference:
Number in Filing Description
---------------- -----------
3.1 Amended and Restated Certificate of Incorporation of
Registrant
4.1 Specimen Certificate for Common Stock of Registrant
10.2.1 Software License Agreement, dated as of April 30, 1989,
between The Limited Stores, Inc. and Sizes Unlimited,
Inc.
10.2.2 Amendment to Software License Agreement, dated December
10, 1991
10.7 Amended and Restated Gloria Vanderbilt Hosiery
Sublicense Agreement, dated as of April 30, 1989,
between American Licensing Group, Inc. (Licensee) and
Sizes Unlimited, Inc. (Sublicensee)
10.11 Office Lease, dated June 12, 1987, between Mack Passaic
Street Properties Co. and Sizes Unlimited, Inc. and
Amendment thereto dated August 21, 1988
10.12 Amended and Restated Master Affiliate Sublease
Agreement, dated as of July 17, 1989, among Lane
Bryant, Inc., Lerner Stores, Inc. (Landlord) and Sizes
Unlimited, Inc. (Tenant) and Amendment thereto, dated
July 17, 1989
10.23* Restated Employment Agreement, dated November 1, 1991,
between the Corporation and Raphael Benaroya
10.25* Restated Employment Agreement, dated November 1, 1991,
between the Corporation and George R. Remeta
10.29* Restated 1989 Management Stock Option Plan, dated
November 1, 1991
10.30* Performance Option Agreement, dated July 17, 1989,
between the Corporation, then known as Lernmark, Inc.,
and Raphael Benaroya and First Amendment thereto dated
November 1, 1991
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10.31* Performance Option Agreement, dated July 17, 1989,
between the Corporation and George R. Remeta and First
Amendment thereto dated November 1, 1991
10.32* Second Amendment, dated November 1, 1991, to
Performance Option Agreements with Raphael Benaroya and
George R. Remeta
10.33* 1991 Stock Option Agreement, dated November 1, 1991,
between the Corporation and Raphael Benaroya
10.34* 1991 Stock Option Agreement, dated November 1, 1991,
between the Corporation and George R. Remeta
10.38 Management Services Agreement, dated August 26, 1989,
between American Licensing Group, Inc. and ALGLP
10.39 First Refusal Agreement, dated as of August 31, 1989,
between the Corporation and ALGLP
10.40 Credit Agreement, dated as of February 24, 1992, among
the Corporation, its subsidiaries and Chase
10.41 Letter of Credit Agreement, dated as of February 24,
1992, among the Corporation, its subsidiaries and Chase
The following exhibit to the Restated Schedule 13D, dated February 5, 1997, of
Raphael Benaroya with respect to shares of Common Stock of the Corporation is
incorporated herein by reference:
Number in Filing Description
---------------- -----------
99.10 Amendment No. 2, dated February 1, 1997, to Restated
Stockholders' Agreement, dated December 23, 1992,
between the Corporation and certain of its stockholders
- -------------------------
*A compensatory plan for the benefit of the Corporation's management or a
management contract.
- -------------
(b) No Current Reports on Form 8-K were filed by the Corporation during
the fiscal quarter ended February 1, 1997.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
(Registrant) UNITED RETAIL GROUP, INC.
----------------------------------------------------------
By: /S/ RAPHAEL BENAROYA
----------------------------------------------------
Raphael Benaroya, Chairman of the Board,
President and Chief Executive Officer
Date: April 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/S/ RAPHAEL BENAROYA
- -------------------------
Raphael Benaroya Chairman of the Board, April 21, 1997
Principal Executive Officer President, Chief Executive
Officer and Director
/S/ GEORGE R. REMETA
- -------------------------
George R. Remeta Vice Chairman, April 21, 1997
Principal Financial Officer Chief Financial Officer,
Secretary and Director
/S/ JON GROSSMAN
- -------------------------
Jon Grossman Vice President - Finance April 21, 1997
Principal Accounting Officer
/S/ JOSEPH A. ALUTTO
- -------------------------
Joseph A. Alutto Director April 21, 1997
/S/ RUSSELL BERRIE
- -------------------------
Russell Berrie Director April 21, 1997
/S/ JOSEPH CIECHANOVER
- -------------------------
Joseph Ciechanover Director April 21, 1997
/S/ ILAN KAUFTHAL
- -------------------------
Ilan Kaufthal Director April 21, 1997
/S/ VINCENT LANGONE
- -------------------------
Vincent Langone Director April 21, 1997
/S/ CHRISTINA A. MOHR
- -------------------------
Christina A. Mohr Director April 21, 1997
/S/ RICHARD W. RUBENSTEIN
- -------------------------
Richard W. Rubenstein Director April 21, 1997
16
<PAGE> 17
UNITED RETAIL GROUP, INC. EXHIBIT INDEX
The following exhibits are filed herewith:
Number Description
------ -----------
10.1 Amendment No. 9, dated January 31, 1997, to Letter of
Credit Agreement among the Corporation, its
subsidiaries and The Chase Manhattan Bank ("Chase")
10.2 Amendment No. 8, dated January 31, 1997 to Credit
Agreement among the Corporation, its subsidiaries and
Chase
10.3 Financial Statements of Retirement Savings Plan for
year ended December 31, 1996
13 Sections of 1996 Annual Report to Stockholders
(including opinion of Independent Public Accountants)
that are incorporated by reference in response to the
items of the Annual Report on Form 10-K
23.1 Consent of Independent Public Accountants for the
Corporation
23.2 Consent of Independent Public Accountants for
Retirement Savings Plan
27 Financial Data Schedule
The following exhibit to the Corporation's Quarterly Report on Form 10-Q for the
period ended November 2, 1996 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* Restated Supplemental Retirement Savings Plan
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended August 3, 1996 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amendment No. 8, dated August 22, 1996, to Letter of
Credit Agreement among the Corporation, its
subsidiaries and Chase
10.2 Amendment No. 7, dated August 22, 1996, to Credit
Agreement among the Corporation, its subsidiaries and
Chase
10.3 Letter, dated August 23, 1996, with respect to Credit
Agreement between the Corporation and Citibank (South
Dakota) N.A. ("Citibank")
17
<PAGE> 18
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended May 4, 1996 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* Severance Pay Agreement, dated May 28, 1996, between
the Corporation and Raphael Benaroya
10.2* Severance Pay Agreement, dated May 28, 1996, between
the Corporation and George R. Remeta
10.3 Amended and Restated Term Sheet Agreement for Hosiery,
dated as of December 29, 1995, between The Avenue, Inc.
and American Licensing Group, Inc. (Confidential
portions have been deleted and filed separately with
the Secretary of the Commission)
The Corporation's 1996 Stock Option Plan set forth as Exhibit A to the
Corporation's proxy statement on Schedule 14A for its 1996 annual meeting of
stockholders is incorporated herein by reference.*
The following exhibits to the Corporation's Current Report on Form 8-K, dated
March 22, 1996, are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amendment No. 7, dated March 5, 1996, to Letter of
Credit Agreement among the Corporation, its
subsidiaries and Chase
10.2 Amendment No. 6, dated March 5, 1996, to the Credit
Agreement among the Corporation, its subsidiaries and
Chase
10.3* Employment Agreement, dated March 1, 1996 , between the
Corporation and Kenneth P. Carroll
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended July 29, 1995 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amendment No. 5, dated January 31, 1995, to the Credit
Agreement among the Corporation, its subsidiaries and
Chase
10.2 Amendment No. 6, dated January 31, 1995, to the Letter
of Credit Agreement among the Corporation, its
subsidiaries and Chase
The following exhibits to the Corporation's Amended Current Report on Form 8-KA,
dated May 22, 1995, are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1 Amended and Restated Gloria Vanderbilt Intimate Apparel
Sublicense Agreement, dated May 22, 1995, between
United Retail Incorporated and American Licensing Group
Limited Partnership ("ALGLP")
10.2 Gloria Vanderbilt Sleepwear Sublicense Agreement, dated
May 22, 1995, between United Retail Incorporated and
ALGLP
18
<PAGE> 19
The following exhibits to the Corporation's Annual Report on Form 10-K for the
year ended January 28, 1995 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.1* Incentive Compensation Program Summary
21 Subsidiaries of the Corporation
The following exhibit to the Corporation's Quarterly Report on Form 10-Q for the
period ended July 30, 1994 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
l0.2* Letter from the Corporation to Raphael Benaroya and
George R. Remeta, dated May 20, 1994, regarding their
respective Restated Employment Agreements, dated
November 1, 1991
The following exhibits to the Corporation's amended Annual Report on Form 10-KA
for the year ended January 29, 1994 are incorporated herein by reference:
Number in Filing Description
---------------- -----------
10.3 Amendment, dated December 6, 1993, to Credit Agreement
between the Corporation and Citibank
10.4 Term Sheet Agreement, dated as of May 4, 1993, with
respect to Amended and Restated Gloria Vanderbilt
Hosiery Sublicense Agreement
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended October 30, 1993 are incorporated herein by reference.
Number in Filing Description
---------------- -----------
10.1 Amendment Nos. 3 and 4, dated September 30, 1993 and
November 18, 1993, respectively, to Credit Agreement
among the Corporation, its subsidiaries and Chase
10.2 Amendment Nos. 4 and 5, dated September 30, 1993 and
November 18, 1993, respectively, to Letter of Credit
Agreement among the Corporation, its subsidiaries and
Chase
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended July 31, 1993 are incorporated herein by reference.
Number in Filing Description
---------------- -----------
4.1 Amended By-Laws of the Corporation, as amended June 1,
1993
4.2 Amendment No. 1, dated June 1, 1993, to Restated
Stockholders' Agreement, dated December 23, 1992,
between the Corporation and certain of its stockholders
The Corporation's Restated 1990 Stock Option Plan set forth as Exhibit A to the
Corporation's proxy statement on Schedule 14A for its 1993 annual meeting of
stockholders is incorporated herein by reference.*
19
<PAGE> 20
The following exhibits to the Corporation's Current Report on Form 8-K, dated
January 6, 1993, are incorporated herein by reference:
Number in Filing Description
---------------- -----------
4.2 Restated Stockholders' Agreement, dated December 23,
1992, between the Corporation and certain of its
stockholders
10.1 Amendment No. 1, dated March 17, 1992, to Letter of
Credit Agreement between the Corporation, its
subsidiaries and Chase
10.2 Amendment No. 2, dated May 4, 1992, to Letter of Credit
Agreement between the Corporation its subsidiaries and
Chase
10.3 Amendment No. 3, dated July 2, 1992, to Letter of
Credit Agreement between the Corporation , its
subsidiaries and Chase
10.4 Amendment No. 1, dated May 4, 1992, to Credit Agreement
between the Corporation, its subsidiaries and Chase
10.5 Amendment No. 2, dated July 2, 1992, to Credit
Agreement between the Corporation, its subsidiaries and
Chase
10.6 Second Amendment to Lease, dated June 30, 1992, to
Office Lease between Mack Passaic Street Properties Co.
and Sizes Unlimited, Inc. (now known as United Retail
Incorporated)
10.7 Guaranty of Lease, dated June 30, 1992, made by Sizes
Unlimited Holding Corporation (now known as United
Retail Holding Corporation) to Mack Passaic Street
Properties Co.
The following exhibits to the Corporation's Registration Statement on Form S-1
(Registration No. 33-44499), as amended, are incorporated herein by reference:
Number in Filing Description
---------------- -----------
3.1 Amended and Restated Certificate of Incorporation of
Registrant
4.1 Specimen Certificate for Common Stock of Registrant
10.2.1 Software License Agreement, dated as of April 30, 1989,
between The Limited Stores, Inc. and Sizes Unlimited,
Inc.
10.2.2 Amendment to Software License Agreement, dated December
10, 1991
10.7 Amended and Restated Gloria Vanderbilt Hosiery
Sublicense Agreement, dated as of April 30, 1989,
between American Licensing Group, Inc. (Licensee) and
Sizes Unlimited, Inc. (Sublicensee)
10.11 Office Lease, dated June 12, 1987, between Mack Passaic
Street Properties Co. and Sizes Unlimited, Inc. and
Amendment thereto dated August 21, 1988
10.12 Amended and Restated Master Affiliate Sublease
Agreement, dated as of July 17, 1989, among Lane
Bryant, Inc., Lerner Stores, Inc. (Landlord) and Sizes
Unlimited, Inc. (Tenant) and Amendment thereto, dated
July 17, 1989
10.23* Restated Employment Agreement, dated November 1, 1991,
between the Corporation and Raphael Benaroya
10.25* Restated Employment Agreement, dated November 1, 1991,
between the Corporation and George R. Remeta
10.29* Restated 1989 Management Stock Option Plan, dated
November 1, 1991
10.30* Performance Option Agreement, dated July 17, 1989,
between the Corporation, then known as Lernmark, Inc.,
and Raphael Benaroya and First Amendment thereto dated
November 1, 1991
20
<PAGE> 21
10.31* Performance Option Agreement, dated July 17, 1989,
between the Corporation and George R. Remeta and First
Amendment thereto dated November 1, 1991
10.32* Second Amendment, dated November 1, 1991, to
Performance Option Agreements with Raphael Benaroya and
George R. Remeta
10.33* 1991 Stock Option Agreement, dated November 1, 1991,
between the Corporation and Raphael Benaroya
10.34* 1991 Stock Option Agreement, dated November 1, 1991,
between the Corporation and George R. Remeta
10.38 Management Services Agreement, dated August 26, 1989,
between American Licensing Group, Inc. and ALGLP
10.39 First Refusal Agreement, dated as of August 31, 1989,
between the Corporation and ALGLP
10.40 Credit Agreement, dated as of February 24, 1992, among
the Corporation, its subsidiaries and Chase
10.41 Letter of Credit Agreement, dated as of February 24,
1992, among the Corporation, its subsidiaries and Chase
The following exhibit to the Restated Schedule 13D, dated February 5, 1997, of
Raphael Benaroya with respect to shares of Common Stock of the Corporation is
incorporated herein by reference:
Number in Filing Description
99.10 Amendment No. 2, dated February 1, 1997, to Restated
Stockholders' Agreement, dated December 23, 1992,
between the Corporation and certain of its stockholders
- -------------------------
*A compensatory plan for the benefit of the Corporation's management or a
management contract.
21
<PAGE> 1
Exhibit 10.1
AMENDMENT NO. 9
AMENDMENT NO. 9 dated as of January 31, 1997, between UNITED
RETAIL GROUP, INC. (the "Company"); each of the Subsidiaries of the Company
identified under the caption "SUBSIDIARY GUARANTORS" on the signature pages
hereto (individually, a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors" and, together with the Company, the "Obligors"); and THE
CHASE MANHATTAN BANK (successor in interest of The Chase Manhattan Bank, N.A.),
as collateral agent for itself under the Letter of Credit Agreement (the
"Collateral Agent").
The Company, the Subsidiary Guarantors and the Collateral
Agent are parties to a Letter of Credit Agreement dated as of February 24, 1992
(as heretofore amended, the "Letter of Credit Agreement"), providing, subject to
the terms and conditions thereof, for letters of credit to be issued by the
Collateral Agent to the Company in an aggregate face amount not exceeding
$25,000,000.
The Company has requested the Collateral Agent to consent to
certain amendments to the Letter of Credit Agreement, all on the terms and
conditions set forth herein and, accordingly, the parties hereto agree as
follows:
Section 1. Definitions. Terms defined in the Letter of Credit
Agreement are used herein as defined therein unless amended hereby.
Section 2. Amendments. Subject to the execution and delivery
hereof by the Company, each Subsidiary Guarantor and the Collateral Agent (and
the payment to the Collateral Agent of an amendment fee in the amount of
$10,000), but effective as of the date hereof, the Letter of Credit Agreement is
hereby amended as follows:
A. Definitions. The definition of "Fixed Charges Ratio" in
Section 1.01 of the Letter of Credit Agreement is hereby amended in its entirety
to read as follows:
"Fixed Charges Ratio" shall mean, for any period of
determination thereof, (a) Cash Flow for the period of four consecutive
fiscal quarters then ended plus the aggregate amount of payments by the
Company and its Subsidiaries made in respect of Operating Lease
Obligations during such period to (b) Fixed Charges for such period;
provided however, that, up to and including the fiscal month ending
January 3, 1998, Fixed Charges Ratio shall mean, for any period of
determination thereof, (a) Cash Flow for the period of 12 consecutive
fiscal months then ended, if the determination date is the end of a
fiscal month or, if otherwise, as at
Amendment No. 9 to Letter of Credit Agreement
<PAGE> 2
- 2 -
the end of the preceding fiscal month for the period of 12 consecutive
fiscal months then ended; plus the aggregate amount of payments by the
Company and its Subsidiaries made in respect of Operating Lease
Obligations during such period to (b) Fixed Charges for such period.
B. Tangible Net Worth. Section 9.11 of the Letter of
Credit Agreement is hereby amended in its entirety to read as
follows:
"9.11 Tangible Net Worth. The Company will not permit Tangible
Net Worth on any date (each such date a 'Determination Date') to be
less than $70,000,000 plus for each complete fiscal year ending after
February 3, 1996 and on or before such Determination Date for which Net
Income shall be positive, an amount equal to 50% of such Net Income
minus as at the last day of the fiscal year ending February 1, 1997,
and any date thereafter, any write-down in the deferred tax asset
account resulting from management options associated with the IPO as
determined by the Company's auditors and reflected on its balance sheet
as at the last day of such fiscal year."
C. Fixed Charges Ratio. Section 9.12 of the Letter of Credit
Agreement is hereby amended in its entirety to read as follows:
"9.12 Fixed Charges Ratio. The Company will not permit the
Fixed Charges Ratio on any date on or after February 1, 1997 to be less
than 1.0 to 1."
D. Capital Expenditures. Section 9.13 of the Letter of Credit
Agreement is hereby amended (i) by deleting subsection (a) thereof and
substituting the following therefor:
"(a) Capital Expenditures of the Company and its
Subsidiaries (i) in the fiscal year ending February 1, 1997,
in an aggregate amount not exceeding $6,500,000, (ii) in the
fiscal year ending January 31, 1998, in an aggregate amount
not exceeding $6,500,000 and (iii) thereafter, in an aggregate
amount not exceeding $10,000,000 in any other fiscal year;"
and (ii) by deleting subsection (c) thereof and substituting the
following therefor:
"(c) additional Capital Expenditures made during the
period from and after February 1, 1997 in an aggregate amount
not exceeding (i) $10,000,000 plus (ii) if Adjusted Cash Flow
for such period is positive,
Amendment No. 9 to Letter of Credit Agreement
<PAGE> 3
- 3 -
75% of Adjusted Cash Flow for such period; provided that the
Company has delivered audited financial statements pursuant to
Section 9.01(b) hereof for the fiscal year ending February 1,
1997."
E. Cash Flow. Section 9.22 of the Letter of Credit Agreement
is hereby amended in its entirety to read as follows:
"9.22 Cash Flow. The Company shall not permit the Cash Flow
for the following respective periods to be less than the amounts
indicated below opposite the respective periods:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
From December 1, 1996
through February 1, 1997 $1,000,000
January 5, 1997
through March 1, 1997 ($9,000,000)
From February 2, 1997
through March 29, 1997 ($1,500,000)
From March 2, 1997
through May 3, 1997 $3,000,000
From March 30, 1997
through May 31, 1997 $3,400,000
From May 4, 1997
through June 28, 1997 $4,300,000
From June 1, 1997
through August 2, 1997 $0
From June 29, 1997
through August 30, 1997 ($4,500,000)
From August 3, 1997
through September 27, 1997 ($1,600,000)
From August 31, 1997
through November 1, 1997 $0
From September 28, 1997
through November 29, 1997 $ 500,000
From November 2, 1997
through January 3, 1998 $8,000,000
</TABLE>
Amendment No. 9 to Letter of Credit Agreement
<PAGE> 4
- 4 -
<TABLE>
<S> <C>
From November 30, 1997
through January 31, 1998 $2,600,000".
</TABLE>
F. Liquidity. Section 9.23 of the Letter of Credit
Agreement is hereby amended in its entirety to read as follows:
"9.23 Liquidity. The Company will not permit the sum of (x)
the aggregate amount of cash and Cash Equivalents held by the Company
and its Subsidiaries plus (y) the aggregate unused amount of the
obligation of the Banks to extend credit under the Credit Agreement (by
means of Loans or Letters of Credit) under the caption "Commitment" (as
the same may be reduced at any time or from time to time pursuant to
Section 2.04 thereto) to be less than the amounts indicated below at
any time during each respective period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
From December 29, 1996
through February 1, 1997 $21,000,000
From February 2, 1997
through March 1, 1997 $16,000,000
From March 2, 1997
through March 29, 1997 $16,300,000
From March 30, 1997
through May 3, 1997 $15,100,000
From May 4, 1997
through May 31, 1997 $20,500,000
From June 1, 1997
through June 28, 1997 $26,700,000
From June 29, 1997
through August 2, 1997 $25,500,000
From August 3, 1997
through August 30, 1997 $21,800,000
From August 31, 1997
through September 27, 1997 $21,200,000
From September 28, 1997
through November 1, 1997 $15,600,000
From November 2, 1997
</TABLE>
Amendment No. 9 to Letter of Credit Agreement
<PAGE> 5
- 5 -
<TABLE>
<S> <C>
through November 29, 1997 $13,800,000
From November 30, 1997
through January 3, 1998 $31,500,000
From January 4, 1998
through January 31, 1998 $26,600,000"
</TABLE>
Section 3. Miscellaneous. Except as herein provided, the
Letter of Credit Agreement shall remain unchanged and in full force and effect.
This Amendment No. 9 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument and any
of the parties hereto may execute this Amendment No. 9 by signing any such
counterpart. This Amendment No. 9 shall be governed by, and construed in
accordance with, the law of the State of New York.
Amendment No. 9 to Letter of Credit Agreement
<PAGE> 6
- 6 -
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 9 to be duly executed and delivered as of the day and year first
above written.
UNITED RETAIL GROUP, INC. THE CHASE MANHATTAN BANK,
individually and as
Collateral Agent
By /s/ GEORGE R. REMETA By /s/ CAROL ULMER
--------------------------- ------------------------------
Title: Vice Chairman Title: Vice President
Each of the Subsidiary Guarantors, by its signature below,
hereby consents to the foregoing Amendment No. 9 for purposes of its Guarantee
under Section 6 of the Letter of Credit Agreement and agrees that the
obligations of the Company under the Letter of Credit Agreement, as amended by
said Amendment No. 9, shall constitute "Guaranteed Obligations" for all purposes
of said Section 6 and the Security Documents (as defined in the Letter of Credit
Agreement).
SUBSIDIARY GUARANTORS
UNITED RETAIL HOLDING UNITED RETAIL INCORPORATED
CORPORATION (formerly (formerly known as Sizes
known as Sizes Unlimited Unlimited, Inc.)
Holding Corporation)
By /s/ KENNETH P. CARROLL By /s/ KENNETH P. CARROLL
---------------------------------- -------------------------------
Title: President Title: President
SMART SIZE, INC. UNITED RETAIL LOGISTICS
OPERATIONS INCORPORATED
(formerly known as Sizes
Unlimited Florida, Inc.)
By /s/ KENNETH P. CARROLL By /s/ KENNETH P. CARROLL
---------------------------------- -------------------------------
Title: President Title: President
UNITED DISTRIBUTION THE AVENUE, INC.
SERVICES,INC.
By /s/ KENNETH P. CARROLL By /s/ BARRY GOLDIN
---------------------------------- -------------------------------
Title: President Title: President
Amendment No. 9 to Letter of Credit Agreement
<PAGE> 1
Exhibit 10.2
AMENDMENT NO. 8
AMENDMENT NO. 8 dated as of January 31, 1997, between UNITED
RETAIL GROUP, INC. (the "Company"); each of the Subsidiaries of the Company
identified under the caption "SUBSIDIARY GUARANTORS" on the signature pages
hereto (individually, a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors" and, together with the Company, the "Obligors"); each of
the lenders that is a signatory hereto identified under the caption "BANKS" on
the signatory pages hereto; and THE CHASE MANHATTAN BANK (successor in interest
of The Chase Manhattan Bank, N.A.), as agent for the Banks (the "Agent") and as
collateral agent for the Banks under the Credit Agreement and for itself under
the Letter of Credit Agreement (the "Collateral Agent").
The Company, the Subsidiary Guarantors, the Banks, the Agent
and the Collateral Agent are parties to a Credit Agreement dated as of February
24, 1992 (as heretofore amended, the "Credit Agreement"), providing, subject to
the terms and conditions thereof, for extensions of credit (by making of loans
and issuing letters of credit) to be made by said Banks to the Company in an
aggregate principal or face amount not exceeding $15,000,000.
The Company has requested the Banks to consent to certain
amendments to the Credit Agreement, all on the terms and conditions set forth
herein and, accordingly, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit
Agreement are used herein as defined therein unless amended
hereby.
Section 2. Amendments. Subject to the execution and delivery
hereof by the Company, each Subsidiary Guarantor, each Bank and the Agent (and
the payment to the Agent for account of the Banks of an amendment fee in the
amount of $10,000), but effective as of the date hereof, the Credit Agreement is
hereby amended as follows:
A. Definitions. The definition of "Fixed Charges
Ratio" in Section 1.01 of the Credit Agreement is hereby amended
in its entirety to read as follows:
"Fixed Charges Ratio" shall mean, for any period of
determination thereof, (a) Cash Flow for the period of four consecutive
fiscal quarters then ended plus the aggregate amount of payments by the
Company and its Subsidiaries made in respect of Operating Lease
Obligations during such period to (b) Fixed Charges for such period;
provided however, that, up to and including the fiscal month ending
January 3, 1998, Fixed Charges Ratio shall mean, for any period of
determination thereof, (a) Cash Flow for the period of 12
Amendment No. 8 to Credit Agreement
<PAGE> 2
- 2 -
consecutive fiscal months then ended, if the determination date is the
end of a fiscal month or, if otherwise, as at the end of the preceding
fiscal month for the period of 12 consecutive fiscal months then ended;
plus the aggregate amount of payments by the Company and its
Subsidiaries made in respect of Operating Lease Obligations during such
period to (b) Fixed Charges for such period.
B. Tangible Net Worth. Section 9.11 of the Credit
Agreement is hereby amended in its entirety to read as follows:
"9.11 Tangible Net Worth. The Company will not permit Tangible
Net Worth on any date (each such date a 'Determination Date') to be
less than $70,000,000 plus for each complete fiscal year ending after
February 3, 1996 and on or before such Determination Date for which Net
Income shall be positive, an amount equal to 50% of such Net Income
minus as at the last day of the fiscal year ending February 1, 1997,
and any date thereafter, any write-down in the deferred tax asset
account resulting from management options associated with the IPO as
determined by the Company's auditors and reflected on its balance sheet
as at the last day of such fiscal year."
C. Fixed Charge Coverage Ratio. Section 9.12 of the Credit
Agreement is hereby amended in its entirety to read as follows:
"9.12 Fixed Charges Ratio. The Company will not
permit the Fixed Charges Ratio on any date on or after
February 1, 1997 to be less than 1.0 to 1."
D. Capital Expenditures. Section 9.13 of the Credit Agreement
is hereby amended (i) by deleting subsection (a) thereof and substituting the
following therefor:
"(a) Capital Expenditures of the Company and its
Subsidiaries (i) in the fiscal year ending February 1, 1997,
in an aggregate amount not exceeding $6,500,000, (ii) in the
fiscal year ending January 31, 1998, in an aggregate amount
not exceeding $6,500,000 and (iii) thereafter, in an aggregate
amount not exceeding $10,000,000 in any other fiscal year;"
and (ii) by deleting subsection (c) thereof and substituting the
following therefor:
"(c) additional Capital Expenditures made during the
period from and after February 1, 1997 in an aggregate amount
not exceeding (i) $10,000,000 plus
Amendment No. 8 to Credit Agreement
<PAGE> 3
- 3 -
(ii) if Adjusted Cash Flow for such period is positive, 75% of
Adjusted Cash Flow for such period; provided that the Company
has delivered audited financial statements pursuant to Section
9.01(b) hereof for the fiscal year ending February 1, 1997."
E. Cash Flow. Section 9.22 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"9.22 Cash Flow. The Company shall not permit the
Cash Flow for the following respective periods to be less
than the amounts indicated below opposite the respective
periods:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
From December 1, 1996
through February 1, 1997 $1,000,000
January 5, 1997
through March 1, 1997 ($9,000,000)
From February 2, 1997
through March 29, 1997 ($1,500,000)
From March 2, 1997
through May 3, 1997 $3,000,000
From March 30, 1997
through May 31, 1997 $3,400,000
From May 4, 1997
through June 28, 1997 $4,300,000
From June 1, 1997
through August 2, 1997 $0
From June 29, 1997
through August 30, 1997 ($4,500,000)
From August 3, 1997
through September 27, 1997 ($1,600,000)
From August 31, 1997
through November 1, 1997 $0
From September 28, 1997
through November 29, 1997 $ 500,000
From November 2, 1997
</TABLE>
Amendment No. 8 to Credit Agreement
<PAGE> 4
- 4 -
<TABLE>
<S> <C>
through January 3, 1998 $8,000,000
From November 30, 1997
through January 31, 1998 $2,600,000".
</TABLE>
F. Liquidity. Section 9.23 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"9.23 Liquidity. The Company will not permit the sum of (x)
the aggregate amount of cash and Cash Equivalents held by the Company
and its Subsidiaries plus (y) the aggregate unused amount of the
Commitment to be less than the amounts indicated below at any time
during each respective period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
From December 29, 1996
through February 1, 1997 $21,000,000
From February 2, 1997
through March 1, 1997 $16,000,000
From March 2, 1997
through March 29, 1997 $16,300,000
From March 30, 1997
through May 3, 1997 $15,100,000
From May 4, 1997
through May 31, 1997 $20,500,000
From June 1, 1997
through June 28, 1997 $26,700,000
From June 29, 1997
through August 2, 1997 $25,500,000
From August 3, 1997
through August 30, 1997 $21,800,000
From August 31, 1997
through September 27, 1997 $21,200,000
From September 28, 1997
through November 1, 1997 $15,600,000
From November 2, 1997
through November 29, 1997 $13,800,000
</TABLE>
Amendment No. 8 to Credit Agreement
<PAGE> 5
- 5 -
<TABLE>
<S> <C>
From November 30, 1997
through January 3, 1998 $31,500,000
From January 4, 1998
through January 31, 1998 $26,600,000"
</TABLE>
Section 3. Miscellaneous. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect. This
Amendment No. 8 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument and any
of the parties hereto may execute this Amendment No. 8 by signing any such
counterpart. This Amendment No. 8 shall be governed by, and construed in
accordance with, the law of the State of New York.
Amendment No. 8 to Credit Agreement
<PAGE> 6
- 6 -
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 8 to be duly executed and delivered as of the day and year first
above written.
UNITED RETAIL GROUP, INC. THE CHASE MANHATTAN BANK,
individually and as Agent
and Collateral Agent
By /s/ George R. Remeta By /s/ Carol Ulmer
---------------------------- ------------------------------
Title: VICE CHAIRMAN Title: VICE PRESIDENT
Each of the Subsidiary Guarantors, by its signature below,
hereby consents to the foregoing Amendment No. 8 for purposes of its Guarantee
under Section 6 of the Credit Agreement and agrees that the obligations of the
Company under the Credit Agreement, as amended by said Amendment No. 8, shall
constitute "Guaranteed Obligations" for all purposes of said Section 6 and the
Security Documents (as defined in the Credit Agreement).
SUBSIDIARY GUARANTORS
UNITED RETAIL HOLDING CORPORATION
(formerly known as Sizes Unlimited Holding Corporation)
UNITED RETAIL INCORPORATED
(formerly known as Sizes
Unlimited, Inc.)
By /s/ Kenneth P. Carroll By /s/ Kenneth P. Carroll
---------------------------- ----------------------------
Title: PRESIDENT Title: PRESIDENT
SMART SIZE, INC. UNITED RETAIL LOGISTICS
OPERATIONS INCORPORATED
(formerly known as Sizes
Unlimited Florida, Inc.)
By /s/ Kenneth P. Carroll By /s/ Kenneth P. Carroll
--------------------------- ----------------------------
Title: PRESIDENT Title: PRESIDENT
UNITED DISTRIBUTION THE AVENUE, INC.
SERVICES,INC.
By /s/ Kenneth P. Carroll By /s/ Barry Goldin
---------------------------- ----------------------------
Title: PRESIDENT Title: PRESIDENT
Amendment No. 8 to Credit Agreement
<PAGE> 1
EXHIBIT 10.3
[ARY, EARMAN AND ROEPCKE LETTERHEAD]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
United Retail Group, Inc. and the
Plan Administrator of the United
Retail Group Retirement Savings Plan:
We have audited the accompanying statements of net assets available for
benefits of the United Retail Group Retirement Savings Plan as of December 31,
1996 and 1995, and the related statements of changes in net assets available for
benefits for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for benefits of the
Plan as of December 31, 1996 and 1995, and the changes in net assets available
for benefits for each of the three years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles.
/s/ Ary, Earman, and Roepcke
Columbus, Ohio,
February 28, 1997.
<PAGE> 2
UNITED RETAIL GROUP RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Company Balanced Fixed Equity
Total Stock Fund Fund Fund Fund
---------- ----------- ----------- ---------- -----------
ASSETS
<S> <C> <C> <C> <C> <C>
Investments, at Fair Value:
Determined by Quoted Market
Price:
United Retail Group, Inc.
Stock (Cost $509,200) $ 176,306 $ 176,306 $ -- $ -- $ --
Warburg Pincus International
Equity Fund (Cost $317,478) 342,048 -- -- -- --
Cash Equivalents (Cost
Approximates Fair Value)
Schwab Money Market Fund 12,198 -- -- 12,198 --
Schwab Government Money
Market Fund 190 -- -- 190 --
Participant Loans 334,515 -- -- -- --
---------- ----------- ----------- ---------- -----------
Total Investments 865,257 176,306 -- 12,388 --
Interfund Transfers -- (1,231) (818) 108 (834)
Cash 5,514,267 -- 1,497,827 2,055,557 1,439,275
---------- ----------- ----------- ---------- -----------
Total Assets 6,379,524 175,075 1,497,009 2,068,053 1,438,441
LIABILITIES
Administrative Expense Payable 52,208 2,413 16,185 22,763 7,281
---------- ----------- ----------- ---------- -----------
NET ASSETS AVAILABLE FOR
BENEFITS $6,327,316 $ 172,662 $ 1,480,824 $2,045,290 $ 1,431,160
========== =========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Aggressive International Loan
Fund Fund Fund
-------- -------- --------
<S> <C> <C> <C>
Investments, at Fair Value:
Determined by Quoted Market
Price:
United Retail Group, Inc.
Stock (Cost $509,200) $ -- $ -- $ --
Warburg Pincus International
Equity Fund (Cost $317,478) -- 342,048 --
Cash Equivalents (Cost
Approximates Fair Value)
Schwab Money Market Fund -- -- --
Schwab Government Money
Market Fund -- -- --
Participant Loans -- -- 334,515
-------- -------- --------
Total Investments -- 342,048 334,515
Interfund Transfers 1,405 1,370 --
Cash 521,608 -- --
-------- -------- --------
Total Assets 523,013 343,418 334,515
LIABILITIES
Administrative Expense Payable 1,800 1,766 --
-------- -------- --------
NET ASSETS AVAILABLE FOR
BENEFITS $521,213 $341,652 $334,515
======== ======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-1
<PAGE> 3
UNITED RETAIL GROUP RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Company Balanced Fixed Equity Aggressive
Total Stock Fund Fund Fund Fund Fund
---------- --------- ----------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at Fair Value:
Determined by Quoted Market
Price:
Vanguard Wellesley Income
Fund (Cost $1,443,745) $1,588,578 $ -- $ 1,588,578 $ -- $ -- $ --
United Retail Group, Inc.
Stock (Cost $586,955) 175,779 175,779 -- -- -- --
Fidelity Contra Fund
(Cost $853,076) 978,643 -- -- -- 978,643 --
Columbia Special Fund, Inc.
(Cost $293,113) 314,248 -- -- -- -- 314,248
Warburg Pincus International
Equity Fund (Cost $143,071) 160,270 -- -- -- -- --
Cash Equivalents (Cost
Approximates Fair Value)
Schwab Money Market Fund 2,471,042 -- -- 2,471,042 -- --
Schwab Government Money
Market Fund 33,453 -- -- 33,453 -- --
Participant Loans 288,402 -- -- -- -- --
---------- --------- ----------- ---------- ----------- --------
Total Investments 6,010,415 175,779 1,588,578 2,504,495 978,643 314,248
Interfund Transfers -- (47) (30) 77 (74) 74
Accrued Income 122,350 -- -- -- 82,336 40,014
Cash
17,285 1,171 -- 16,114 -- --
---------- --------- ----------- ---------- ----------- --------
Total Assets 6,150,050 176,903 1,588,548 2,520,686 1,060,905 354,336
LIABILITIES
Administrative Expense Payable
56,080 -- 18,182 26,137 8,462 2,190
---------- --------- ----------- ---------- ----------- --------
NET ASSETS AVAILABLE FOR
BENEFITS $6,093,970 $ 176,903 $ 1,570,366 $2,494,549 $ 1,052,443 $352,146
========== ========= =========== ========== =========== ========
</TABLE>
<TABLE>
<CAPTION>
International Loan
Fund Fund
-------- --------
<S> <C> <C>
Investments, at Fair Value:
Determined by Quoted Market
Price:
Vanguard Wellesley Income
Fund (Cost $1,443,745) $ -- $ --
United Retail Group, Inc.
Stock (Cost $586,955) -- --
Fidelity Contra Fund
(Cost $853,076) -- --
Columbia Special Fund, Inc.
(Cost $293,113) -- --
Warburg Pincus International
Equity Fund (Cost $143,071) 160,270 --
Cash Equivalents (Cost
Approximates Fair Value)
Schwab Money Market Fund -- --
Schwab Government Money
Market Fund -- --
Participant Loans -- 288,402
-------- --------
Total Investments 160,270 288,402
Interfund Transfers -- --
Accrued Income -- --
Cash
-- --
-------- --------
Total Assets 160,270 288,402
LIABILITIES
Administrative Expense Payable 1,109 --
-------- --------
NET ASSETS AVAILABLE FOR
BENEFITS $159,161 $288,402
======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-2
<PAGE> 4
UNITED RETAIL GROUP RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Company Balanced Fixed Equity
Total Stock Fund Fund Fund Fund
----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment Income:
Mutual Funds $ 255,316 $ -- $ 126,428 $ -- $ 115,497
Increase (Decrease) In Net
Unrealized Appreciation (213,774) 70,390 (144,833) -- (125,567)
Interest 131,073 -- -- 108,864 --
Realized Gain (Loss) on
Sale of Securities 389,480 (124,135) 164,547 -- 272,195
----------- --------- ----------- ----------- -----------
Total Investment Income (Loss) 562,095 (53,745) 146,142 108,864 262,125
----------- --------- ----------- ----------- -----------
Contributions:
Employer 53,786 3,141 11,464 10,826 17,002
Participants 827,229 37,653 171,907 262,203 204,029
----------- --------- ----------- ----------- -----------
Total Contribution 881,015 40,794 183,371 273,029 221,031
----------- --------- ----------- ----------- -----------
Loan Repayments -- 5,343 28,271 31,599 26,793
Loans Issued -- (1,912) (46,542) (133,414) (19,455)
Interfund Transfers -- 31,554 (32,855) (345,119) 141,231
Administrative Expense (47,408) (3,958) (11,064) (16,793) (9,494)
Benefits to Participants (1,162,356) (22,317) (356,865) (367,425) (243,514)
----------- --------- ----------- ----------- -----------
Increase (Decrease) in Net
Assets Available for Benefits 233,346 (4,241) (89,542) (449,259) 378,717
Beginning Net Assets Available
for Benefits 6,093,970 176,903 1,570,366 2,494,549 1,052,443
----------- --------- ----------- ----------- -----------
Ending Net Assets Available
for Benefits $ 6,327,316 $ 172,662 $ 1,480,824 $ 2,045,290 $ 1,431,160
=========== ========= =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Aggressive International Loan
Fund Fund Fund
--------- --------- ---------
<S> <C> <C> <C>
Investment Income:
Mutual Funds $ -- $ 13,391 $ --
Increase (Decrease) In Net
Unrealized Appreciation (21,135) 7,371 --
Interest -- -- 22,209
Realized Gain (Loss) on
Sale of Securities 73,705 3,168 --
--------- --------- ---------
Total Investment Income (Loss) 52,570 23,930 22,209
--------- --------- ---------
Contributions:
Employer 8,339 3,014 --
Participants 97,671 53,766 --
--------- --------- ---------
Total Contribution 106,010 56,780 --
--------- --------- ---------
Loan Repayments 20,324 6,341 (118,671)
Loans Issued (13,407) (3,849) 218,579
Interfund Transfers 85,631 119,558 --
Administrative Expense (3,360) (2,739) --
Benefits to Participants (78,701) (17,530) (76,004)
--------- --------- ---------
Increase (Decrease) in Net
Assets Available for Benefits 169,067 182,491 46,113
Beginning Net Assets Available
for Benefits 352,146 159,161 288,402
--------- --------- ---------
Ending Net Assets Available
for Benefits $ 521,213 $ 341,652 $ 334,515
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE> 5
UNITED RETAIL GROUP RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Company Balanced Fixed Equity
Total Stock Fund Fund Fund Fund
----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment Income:
Mutual Funds $ 234,785 $ -- $ 107,498 $ -- $ 82,336
Increase (Decrease) In Net
Unrealized Appreciation 336,792 (76,265) 266,074 -- 104,360
Interest 149,953 -- -- 136,633 --
Realized Gain (Loss) on
Sale of Securities 25,208 (65,411) 1,617 -- 79,621
----------- --------- ----------- ----------- -----------
Total Investment Income (Loss) 746,738 (141,676) 375,189 136,633 266,317
Participants' Contributions 708,082 45,347 170,923 196,575 173,240
Loan Repayments -- 3,860 22,149 21,050 13,050
Loans Issued -- (10,779) (52,820) (86,990) (43,494)
Interfund Transfers -- 16,381 (241,569) (104,416) 178,480
Administrative Expense (52,540) -- (14,920) (25,722) (7,957)
Benefits to Participants
(634,477) (35,503) (250,906) (220,253) (95,133)
----------- --------- ----------- ----------- -----------
Increase (Decrease) in Net
Assets Available for Benefits 767,803 (122,370) 8,046 (83,123) 484,503
Beginning Net Assets Available
for Benefits 5,326,167 299,273 1,562,320 2,577,672 567,940
----------- --------- ----------- ----------- -----------
Ending Net Assets Available
for Benefits $ 6,093,970 $ 176,903 $ 1,570,366 $ 2,494,549 $ 1,052,443
=========== ========= =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Aggressive International Loan
Fund Fund Fund
--------- --------- ---------
<S> <C> <C> <C>
Investment Income:
Mutual Funds $ 40,014 $ 4,937 $ --
Increase (Decrease) In Net
Unrealized Appreciation 25,424 17,199 --
Interest -- -- 13,320
Realized Gain (Loss) on
Sale of Securities 6,449 2,932 --
--------- --------- ---------
Total Investment Income (Loss) 71,887 25,068 13,320
Participants' Contributions 88,600 33,397 --
Loan Repayments 12,263 1,039 (73,411)
Loans Issued (29,286) (8,939) 232,308
Interfund Transfers 36,716 114,408 --
Administrative Expense (2,747) (1,194) --
Benefits to Participants
(13,927) (4,618) (14,137)
--------- --------- ---------
Increase (Decrease) in Net
Assets Available for Benefits 163,506 159,161 158,080
Beginning Net Assets Available
for Benefits 188,640 -- 130,322
--------- --------- ---------
Ending Net Assets Available
for Benefits $ 352,146 $ 159,161 $ 288,402
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE> 6
UNITED RETAIL GROUP RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Company Balanced Fixed Equity Aggressive Loan
Total Stock Fund Fund Fund Fund Fund Fund
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Mutual Funds $ 173,742 $ - $ 155,184 $ - $ 6,596 $ 11,962 $ -
Increase (Decrease) in Net
Unrealized Appreciation (281,010) (40,360) (245,717) - 9,356 (4,289) -
Interest 87,528 67 - 85,553 - - 1,908
Realized Gain (Loss) on
Sale of Securities (77,425) (56,910) (28,831) - 7,811 505 -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Investment Income (97,165) (97,203) (119,364) 85,553 23,763 8,178 1,908
---------- ---------- ---------- ---------- ---------- ---------- ----------
Contributions:
Employer 36,398 7,567 13,122 6,637 3,791 5,281 -
Participants 782,876 58,714 258,240 260,503 145,290 60,129 -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Contribution 819,274 66,281 271,362 267,140 149,081 65,410 -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Loan Repayments - 372 1,761 2,578 2,877 614 (8,202)
Loans Issued - - (45,463) (44,455) (26,366) (20,332) 136,616
Interfund Transfers - (790) (829,034) 574,052 118,309 137,463 -
Administrative Expense (50,660) - (22,874) (21,421) (5,633) (732) -
Benefits to Participants (917,349) (42,786) (336,335) (362,777) (173,490) (1,961) -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Increase (Decrease) in Net
Assets Available for Benefits (245,900) (74,126) (1,079,947) 500,670 88,541 188,640 130,322
Beginning Net Assets Available
for Benefits 5,572,067 373,399 2,642,267 2,077,002 479,399 - -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Ending Net Assets Available
for Benefits $5,326,167 $ 299,273 $1,562,320 $2,577,672 $ 567,940 $ 188,640 $ 130,322
========== ========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE> 7
UNITED RETAIL GROUP RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF THE PLAN
General
The United Retail Group Retirement Savings Plan (the "Plan") is a
defined contribution plan covering certain employees of United
Retail Group, Inc. and its affiliates (the "Employer") who are at
least 21 years of age and have completed 1,000 or more hours of
service during their first consecutive twelve months of
employment or any calendar year beginning in or after their first
consecutive twelve months of employment. Certain employees of the
Employer, who are covered by a collective bargaining agreement,
are not eligible to participate in the Plan. At December 31, 1996
there were 979 participants in the Plan.
The following description of the Plan provides only general
information. Participants should refer to the Plan agreement for
a more complete description of the Plan's provisions. The Plan is
subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA) as amended.
Amendments
Effective January 1, 1994, the Plan was amended and restated to, among
other things, (1) permit participant loans as noted under
"Participant Loans" below and (2) make certain changes in the
Plan as were required by law.
Contributions
Employer Contributions:
The Employer may provide a 50% matching contribution on the first 3% of
a participant's voluntary contributions.
Participant Voluntary Contribution:
A participant may elect to make a voluntary tax-deferred
contribution of 1% to 12% of his or her annual compensation up to
the maximum permitted under Section 402(g) of the Internal
Revenue Code adjusted annually ($9,500 at December 31, 1996). The
annual compensation of each participant taken into account under
the Plan is limited to the maximum amount permitted under Section
401(a)(17) of the Internal Revenue Code. The annual compensation
limit for the Plan year ended December 31, 1996, was $150,000.
Participants earning annually more than $66,000 for the years
ended December 31, 1996, 1995 and 1994, respectively, may be
limited to voluntary contributions of less than 12% due to
requirements by Section 401(k) of the Internal Revenue Code based
on the current levels of participant voluntary contributions.
Vesting
A participant is fully and immediately vested for voluntary
contributions. A summary of vesting percentages in the Employer's
contributions follows:
<TABLE>
<CAPTION>
Years of Continuous Service Percentage
--------------------------- ----------
<S> <C>
Less than 3 years 0%
3 years 20
4 years 40
5 years 60
6 years 80
7 years 100
</TABLE>
F-6
<PAGE> 8
Payment of Benefits
The full value of participants' accounts becomes payable upon
retirement, disability, or death. Upon termination of employment
for any other reason, participants' accounts, to the extent
vested, become payable. Participants will receive any benefit to
which they are entitled in the form of, (1) lump-sum cash
distribution, with those participants holding more than 100 shares
of Employer Securities receiving shares for the portion of their
account invested in Employer Securities, (2) if eligible a payment
directly to an eligible retirement plan specified by the
Participant or (3) if the account balance is greater than $3,500
and the Participant has attained age 70-1/2, cash installments
over a period not extending beyond the life expectancy of the
Participant or the joint and last survivor life expectancies of
the Participant and a designated Beneficiary. Those participants
with vested account balances more than $3,500 have the option of
leaving their accounts invested in the Plan until age 65.
Participant Loans
Effective July 1, 1994, participants are permitted to borrow from
their account the lesser of $50,000 or 50% of the vested balance
of their account for a term of not more than five years with
repayment made from payroll deductions. All loans become due and
payable in full upon a participant's termination of employment
with the Employer. The borrowing constitutes a separate earmarked
investment of the participant's account. Interest on the borrowing
is based on a formula using the published money call rate on the
date of application.
Amounts Allocated Participants Withdrawn from the Plan
The vested portion of net assets available for plan benefits
allocated to participants withdrawn from the Plan as of December
31, 1996, 1995, and 1994, is set forth below:
<TABLE>
<CAPTION>
Stock Balanced Fixed Equity Aggressive Int'l
Total Fund Fund Fund Fund Fund Fund
----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996 $ 56,829 $ 928 $ 16,680 $ 5,585 $ 17,911 $ 6,477 $ 9,248
December 31, 1995 $161,004 $ 4,079 $ 40,493 $ 50,281 $ 45,127 $ 16,919 $ 4,105
December 31, 1994 $180,460 $ 4,870 $ 82,250 $ 77,040 $ 14,024 $ 2,276 $ -
</TABLE>
Benefits undeliverable due to addresses are invested in the Schwab
Government Money Market Fund and held within the Fixed Fund. At
December 31, 1996, 1995 and 1994, the Plan was holding $31,269,
$33,453 and $31,756, respectively of such assets which are
reflected in the above amounts. Prior to 1994 these assets were
held in a separate trust account by the Trustee.
Forfeitures
Forfeitures are used to reduce the Employer's required
contributions. Utilized forfeitures for 1996, 1995 and 1994, is
set forth below:
<TABLE>
<CAPTION>
Stock Balanced Fixed Equity Aggressive Int'l
Total Fund Fund Fund Fund Fund Fund
----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996 $151,071 $ 8,899 $ 33,028 $ 44,021 $ 39,644 $ 17,935 $ 7,544
December 31, 1995 $169,076 $ 13,502 $ 41,877 $ 55,369 $ 35,752 $ 16,488 $ 6,088
December 31, 1994 $135,690 $ 9,130 $ 49,171 $ 49,127 $ 27,334 $ 928 $ -
</TABLE>
F-7
<PAGE> 9
Forfeitures not utilized as of December 31, 1996, 1995 and 1994
represent unallocated assets in the investment funds as follows:
<TABLE>
<CAPTION>
Stock Balanced Fixed Equity Aggressive Int'l
Total Fund Fund Fund Fund Fund Fund
----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996 $ - $ - $ - $ - $ - $ - $ -
December 31, 1995 $124,930 $ 770 $ 15,777 $101,957 $ 4,945 $ 1,241 $ 240
December 31, 1994 $223,064 $ 3,852 $ 48,717 $158,215 $ 12,176 $ 104 $ -
</TABLE>
Expenses
Brokerage fees, transfer taxes, and other expenses incurred in
connection with the investment of the Plan's assets will be added
to the cost of such investments or deducted from the proceeds
thereof, as the case may be. Administrative expenses of the Plan,
not to exceed .25% of the net asset value of the Plan valued as of
the last day of each quarter, will be paid from the Plan from
earnings not allocated to participants' accounts. The remainder
will be paid by the Employer, unless the Employer elects to pay
more or all of such costs.
Tax Determination
The Plan obtained its latest determination letter on November 21,
1994, in which the Internal Revenue Service stated that the Plan,
as amended and restated January 1, 1994, was in compliance with
the applicable requirements of the Internal Revenue Code.
Accordingly, the following Federal income tax rules will apply to
the Plan:
Voluntary tax-deferred contributions made under the Plan by a
participant and contributions made by the Employer to
participant accounts are generally not taxable until such
amounts are distributed.
The participants are not subject to Federal income tax on
interest, dividends, or gains in their particular accounts
until distributed.
The foregoing is only a brief summary of certain tax implications
and applies only to Federal tax regulations currently in effect.
(2) SUMMARY OF ACCOUNTING POLICIES
The Plan's financial statements are prepared on the accrual basis
of accounting. Assets of the Plan are valued at fair value. If
available, quoted market prices are used to value investments. The
amounts for investments that have no quoted market price are shown
at their estimated fair value, which is determined based on yields
equivalent for such securities or for securities of comparable
maturity, quality, and type as obtained from market makers.
Realized gains or losses on the distribution or sale of securities
represent the difference between the average cost of such
securities held and the market value on the date of distribution
or sale.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires the plan
administrator to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual
results may differ from those estimates.
F-8
<PAGE> 10
(3) INVESTMENTS
Net unrealized appreciation (depreciation), equal to the difference between cost
and market value of all investments at the applicable valuation dates, is
recognized in determining the value of each fund. The unrealized
appreciation (depreciation) as of December 31, 1996, 1995, and 1994, is set
forth below:
<TABLE>
<CAPTION>
Unrealized Appreciation (Depreciation)
--------------------------------------
Stock Balanced Fixed Equity Aggressive Int'l
Total Fund Fund Fund Fund Fund Fund
----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996 $(308,324) $(332,894) $ - $ - $ - $ - $ 24,570
December 31, 1995 $(102,442) $(411,176) $ 144,833 $ - $ 125,567 $ 21,135 $ 17,199
December 31, 1994 $(436,274) $(331,951) $(121,241) $ - $ 21,207 $ (4,289) $ -
</TABLE>
The following is a summary of the net gain (loss) on securities
sold during the periods ended December 31, 1996, 1995, and 1994:
Realized Gain (Loss)
--------------------
<TABLE>
<CAPTION>
Stock Balanced Fixed Equity Aggressive Int'l
Total Fund Fund Fund Fund Fund Fund
----------- --------- ----------- ---------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended
December 1996
Proceeds $ 7,580,312 $ 40,890 $ 2,091,472 $3,024,858 $1,746,402 $649,107 $27,583
Cost 7,190,832 165,025 1,926,925 3,024,858 1,474,207 575,402 24,415
----------- --------- ----------- ---------- ---------- -------- -------
Realized $ 389,480 $(124,135) $ 164,547 $ -- $ 272,195 $ 73,705 $ 3,168
=========== ========= =========== ========== ========== ======== =======
Year Ended
December 1995
Proceeds $ 2,268,219 $ 45,138 $ 634,850 $ 710,031 $ 768,143 $ 71,648 $38,409
Cost 2,243,011 110,549 633,233 710,031 688,522 65,199 35,477
----------- --------- ----------- ---------- ---------- -------- -------
Realized $ 25,208 $ (65,411) $ 1,617 $ -- $ 79,621 $ 6,449 $ 2,932
=========== ========= =========== ========== ========== ======== =======
Year Ended
December 1994
Proceeds $ 4,279,914 $ 61,533 $ 1,226,336 $2,699,562 $ 268,648 $ 23,835 $ --
Cost 4,357,339 118,443 1,255,167 2,699,562 260,837 23,330 --
----------- --------- ----------- ---------- ---------- -------- -------
Realized $ (77,425) $ (56,910) $ (28,831) $ -- $ 7,811 $ 505 $ --
=========== ========= =========== ========== ========== ======== =======
</TABLE>
Contributions under the Plan are invested in one of six investment funds: (1)
The Company Stock Fund, consisting of common stock of the United Retail
Group, Inc., (2) the Balanced Fund, which is invested in the Vanguard
Wellesley Income Fund, (3) the Fixed Fund, which is invested in the Schwab
Money Market Fund, prior to October of 1994 the assets were invested in the
Vanguard Money Market Reserves Prime Portfolio Fund, (4) the Equity Fund,
which is invested in the Fidelity Contra Fund and prior to February of 1995
the Vanguard World Fund - U.S. Growth Portfolio, (5) effective July 1, 1994
the Aggressive Fund, which is invested in the Columbia Special Fund, Inc.,
and (6) effective January 1, 1995 the International Fund, which invests in
the Warburg Pincus International Equity Fund.
Participants' voluntary and the Employer's contributions may be invested in any
one or more of the funds, at the election of the participant. There are 145
participants in the Company Stock Fund, 465 in the Balanced Fund, 365 in the
Fixed Fund, 403 in the Equity Fund, 264 in the Aggressive Fund, and 154 in
the International Fund at December 31, 1996.
During the year ended December 31, 1996 the Employer adopted a resolution to
change the Plan's trustee effective January 1, 1997. To facilitate the
transfer of assets the investments held under the Balanced Fund, the Fixed
Fund, the Equity Fund, and the Aggressive Fund were sold December 30, 1996,
since they would not be available under the new trustee. These funds were
transferred in 1997 and reinvested in funds of like investment objectives as
follows: (1) the Balanced Fund, invested in Scudder Balanced Fund, (2) the
Fixed Fund, invested in the Scudder Cash Investment Trust, (3) the Equity
Fund, invested in the Scudder Growth and Income Fund, and (4) the Aggressive
Fund, invested in the Janus Enterprise Fund.
F-9
<PAGE> 11
(4) PLAN ADMINISTRATION
The Plan is administered by a Committee, the members of which are appointed by
the Board of Directors of the Employer.
(5) PLAN TERMINATION
Although the Employer has not expressed any intent, the Employer has the right
under the Plan to discontinue their contributions at any time. United Retail
Group, Inc. has the right at any time, by action of its Board of Directors,
to terminate the Plan subject to the provisions of ERISA. Upon Plan
termination or partial termination, participants will become fully vested in
their accounts.
F-10
<PAGE> 1
EXHIBIT 13
TABLE OF CONTENTS
Management's Discussion and Analysis PAGE 6
Report of Independent Accountants PAGE 12
Consolidated Balance Sheets PAGE 13
Consolidated Statements of Operations PAGE 14
Consolidated Statements of Cash Flows PAGE 15
Consolidated Statements of Stockholders' Equity PAGE 16
Notes to Consolidated Financial Statements PAGE 17
Selected Financial Data PAGE 27
UNITED RETAIL GROUP, INC.
is a leading specialty retailer of private label large-size women's apparel and
accessories, operating 569 stores in 36 states. The Company seeks to create a
fashion-current, upscale image at prices that appeal to the middle mass market.
[AVENUE BY DESIGN LOGO]
[SIZES UNLIMITED LOGO]
[16 PLUS LOGO]
UNITED RETAIL GROUP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Fiscal
1995 1996
(53 weeks) (52 weeks)
- --------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 369,173 $ 363,074
Loss before income taxes (3,668) (6,823)
Benefit from income taxes (957) (1,018)
Provision for write-down of the
compensation related deferred
tax asset 1,928 342
Net loss (4,639) (6,147)
Net loss per common share (0.38) (0.50)
Net loss excluding the
deferred tax asset write-down:
Net loss (2,711) (5,805)
Net loss per common share (0.22) (0.48)
Weighted average outstanding shares
(in thousands) 12,190 12,190
Stores open at end of period 576 569
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FISCAL 1996 VERSUS FISCAL 1995
Net sales for Fiscal 1996 (52 weeks) decreased to $363.1 million from
$369.2 million in Fiscal 1995 (53 weeks), principally from a decrease in
sales volume rather than a change in average price. Average stores open
increased from 552 to 581; see, however, "Properties," regarding the
Company's real estate plan. Comparable store sales for the comparable 52
week periods decreased 3.6% for Fiscal 1996. There is no assurance that
sales and comparable store sales will not continue to decrease. (Net sales
for the two fiscal months ended April 5, 1997 were $57.7 million compared
to $58.2 million in the comparable period in 1996; comparable store sales
for the two month period increased 0.5%.)
Gross profits decreased by $2.7 million to $73.7 million in Fiscal 1996
from $76.4 million in Fiscal 1995, decreasing as a percentage of net sales
to 20.3% from 20.7%. The decrease in gross profits as a percentage of net
sales was primarily attributable to higher occupancy costs as a percentage
of net sales, partially offset by a reduction in payroll costs for
merchants and planners. There is no assurance that gross profits will not
continue to decrease.
The women's apparel industry is subject to rapidly changing consumer
fashion preferences. The Company's performance depends on the operational
flexibility to respond to such changes quickly. See, "A Single Merchandise
Assortment in Mid-Spring 1996." The industry has also been subject to
shifting shopping patterns, both within the Company's sector (the
specialty store sector) and in other channels of distribution, such as
department stores, catalogues and electronic media. The Company also
believes that consumer pressure to reduce prices throughout the women's
apparel industry has become a permanent influence on the retail
marketplace. Finally, in Fiscal 1996 the Company replaced its older
proprietary brands of clothing with its new AVENUE [by design] brand.
(Substantially all clothing carried a proprietary brand.) The transition
from the older proprietary brands of clothing may have had an adverse
effect on sales and merchandise margin rates and there is no assurance
that the brand transition will not have an adverse effect in Fiscal 1997.
General, administrative and store operating expenses were $80.1 million in
Fiscal 1996, compared to $80.2 million in the previous year. As a
percentage of net sales, general, administrative and store operating
expenses increased to 22.1% from 21.7%, principally from higher store
payroll costs as a percentage of net sales partially offset by lower
administrative costs and insurance costs.
During Fiscal 1996, the Company incurred an operating loss of $6.4 million
compared to an operating loss of $3.8 million for Fiscal 1995. The Fiscal
1996 operating loss was 1.8% of net sales. There is no assurance that the
Company will not continue to incur operating losses.
Net interest expense was $0.4 million for Fiscal 1996, compared to net
interest income of $0.1 million in 1995, principally as a result of lower
interest income in Fiscal 1996.
The Company had an income tax benefit of $1.0 million both in Fiscal 1996
and in Fiscal 1995 and recorded write-downs of the deferred tax asset, as
explained below. The income tax benefit in Fiscal 1996 and Fiscal 1995
resulted from operating losses, the effect of which was partially offset
in Fiscal 1996 by a $1.8 million valuation allowance in the full amount of
the net deferred tax asset remaining after the write-down taken in Fiscal
1996.
<PAGE> 3
As part of certain non-recurring charges in Fiscal 1992, the Company
incurred a non-cash compensation expense of $15.6 million because the
stock options ("Performance Options") previously granted to Raphael
Benaroya, Chairman of the Board, President and Chief Executive Officer of
the Company, and George R. Remeta, Vice Chairman and Chief Financial
Officer of the Company, vested in March 1992 and became exercisable until
December 1999. The non-cash compensation expense resulted in the
recognition of certain future tax benefits realizable at the time
Performance Options are exercised based on an assumption that the market
price of the Common Stock at the time of exercise will be $15 per share
(the price of the initial public offering in March 1992). The write-downs
occurred because the market price of Common Stock at the end of Fiscal
1996 and Fiscal 1995, respectively, was $3.125 and $3.875, respectively,
and the future tax benefits had been based on an assumed market price of
$15 per share. The write-down of the compensation related deferred tax
asset was $0.3 million in Fiscal 1996 and $1.9 million in Fiscal 1995.
The Company incurred a net loss of $6.1 million for Fiscal 1996 compared
to a net loss of $4.6 million for Fiscal 1995. The net loss for each year
reflected a write-down of the compensation related deferred tax asset. The
net loss for Fiscal 1996 also reflected a valuation allowance in the full
amount of the deferred tax asset. The write-down and the allowance, net of
certain other tax entries, totaled $1.4 million for Fiscal 1996 and the
write-down was $1.9 million for Fiscal 1995. Excluding the write-downs and
allowance, the Company would have incurred a net loss of $4.7 million in
Fiscal 1996 and a net loss of $2.7 million in Fiscal 1995.
FISCAL 1995 VERSUS FISCAL 1994
Net sales for Fiscal 1995 increased 3.2% from Fiscal 1994, to $369.2
million from $357.7 million, principally from an increase in sales volume
rather than a change in average price. Average stores open increased from
518 to 552. Comparable store sales decreased 1.9% for Fiscal 1995.
Gross profits decreased by $5.3 million to $76.4 million in Fiscal 1995
from $81.6 million in Fiscal 1994, decreasing as a percentage of net sales
to 20.7% from 22.8%. The decrease in gross profits as a percentage of net
sales was primarily attributable to a decrease in the merchandise margin
rate and higher occupancy costs as a percentage of net sales.
General, administrative and store operating expenses were $80.2 million in
Fiscal 1995, compared to $75.0 million in the previous year, principally
from higher payroll costs, resulting principally from an increase in the
number of stores. As a percentage of net sales, general, administrative
and store operating expenses increased to 21.7% from 21.0%.
During Fiscal 1995, the Company incurred an operating loss of $3.8 million
compared to operating income of $6.7 million for Fiscal 1994. The
operating loss was 1.0% of net sales.
Net interest income was $0.1 million for Fiscal 1995, compared to net
interest expense of $0.5 million in Fiscal 1994, principally as a result
of mortgage origination fees incurred only in Fiscal 1994.
The Company had an income tax benefit of $1.0 million in Fiscal 1995 and a
provision for income taxes of $2.3 million in Fiscal 1994.
The Company incurred a net loss of $4.6 million for Fiscal 1995, compared
to net income of $3.0 million for Fiscal 1994. Excluding write-downs of
the compensation related deferred tax asset, the Company would have
incurred a net loss of $2.7 million in Fiscal 1995 and would have had net
income of $3.9 million in Fiscal 1994.
<PAGE> 4
A SINGLE MERCHANDISE ASSORTMENT COMMENCING IN MID-SPRING 1996
The Company's merchandising had a divisional structure in most of Fiscal
1995, with one team of merchants providing inventory for stores located
principally in malls and a separate team of merchants providing different
inventory for stores concentrated in strip shopping centers. In order to
improve its merchandise assortments, the Company changed from a divisional
merchandising methodology to one in which a single team provides the same
inventory for all the Company's stores. The separate teams of merchants
for mall stores and strip shopping center stores were unified in the third
quarter of Fiscal 1995. The first unified merchandise assortment arrived
in Mid-Spring 1996.
The unified merchandising structure for Fiscal 1997 has three specialized
components. Product development, that is, developing fashion content and
design, is a new function that was added to the existing merchandising
function and product quality function. In April 1996, the Company
recruited an experienced executive to handle product development of
merchandise assortments arriving in Fiscal 1997 and thereafter.
The Company believes Fiscal 1997 will be a period of transition for the
unified team of merchants and the new product development team. There is
no assurance that the new merchandising structure will increase sales and
improve merchandise margin rates.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities in Fiscal 1996 was $7.6
million. The Company's cash on hand increased to $18.3 million at February
1, 1997 from $17.0 million at February 3, 1996. Income taxes receivable
decreased to $0.2 million at February 1, 1997 from $2.7 million at
February 3, 1996, principally as a result of refunds received in Fiscal
1996 with respect to net operating loss carrybacks.
Inventory was $40.8 million at February 1, 1997 and $40.4 million at
February 3, 1996. The Company's inventory levels peak in early May and
December. During Fiscal 1996, the highest inventory level was $50.6
million. Import purchases are made in U.S. dollars and are generally
financed by trade letters of credit. Short-term trade credit represents a
significant source of financing for domestic merchandise purchases. Trade
credit arises from the willingness of the Company's domestic vendors to
grant extended payment terms for inventory purchases and is generally
financed either by the vendor or a third-party factor. In Fiscal 1996,
domestic purchases and import purchases each constituted approximately
one-half of total purchases.
The Company has agreements with The Chase Manhattan Bank ("Chase")
providing two credit facilities until February 1999. The first facility
provides for the issuance by Chase of trade letters of credit for the
account of the Company in an aggregate amount at any time of up to $25.0
million, of which $22.5 million was utilized at February 1, 1997. The
second facility provides for revolving credit loans totaling a maximum of
$15.0 million, of which up to $10.0 million would be available for standby
letters of credit for general corporate purposes. The credit facilities
are secured by a pledge of the stock of the Company's subsidiaries and the
Company's investments in cash equivalents. Also, merchandise purchased
under trade letters of credit is subject to a security interest pursuant
to the Letter of Credit Agreement. Finally, the Company is required to
maintain most of its deposit account balances at Chase, where the deposits
are subject to a right of offset by Chase. Loans under the revolving
credit facility will bear interest, at the option of the Company, at
either (i) the higher of the Federal Funds Rate plus 0.5% or the prime
commercial lending rate of Chase, or (ii) the London Interbank Offered
Rate plus 1.5%.
<PAGE> 5
The Company has not drawn upon its revolving credit facility except to
issue standby letters of credit totaling $4.0 million at February 1, 1997
as collateral for obligations in the ordinary course of business under
casualty insurance policies.
The agreements for the credit facilities contain a number of financial
covenants, including (i) tangible net worth to equal at least $70.0
million plus, for each fiscal year ending after February 3, 1996, for
which net income shall be positive, an amount equal to 50% of net income,
minus as of the end of Fiscal 1996 and thereafter any write-down or
valuation allowance with respect to the deferred tax asset relating to
Performance Options, and (ii) capital expenditures not to exceed $6.5
million in Fiscal 1997 and thereafter $10.0 million per annum, plus during
the period after Fiscal 1996 (y) $10 million plus (z) if adjusted cash
flow (as defined in the agreements) after February 1, 1997 is positive,
75% of adjusted cash flow for the period. The agreements also require: (i)
the ratio of total debt (excluding accrued and payable expenses incurred
in the ordinary course of business) to tangible net worth not be .45 to
1.0 or more, (ii) the fixed charges ratio (as defined in the agreements)
not be less than 1.0 to 1.0, (iii) the ratio of current assets to current
liabilities not be less than 1.25 to 1.0, (iv) cash flow (as defined and
calculated in the agreements) not be less than minimum amounts specified
in the agreements, and (v) liquidity, defined as the sum of cash plus cash
equivalents plus the unused commitment under the revolving credit
facility, not be less than:
Month Ended Amount
05/03/97 $15.1 million
05/31/97 $20.5 million
06/28/97 $26.7 million
08/02/97 $25.5 million
08/30/97 $21.8 million
09/27/97 $21.2 million
11/01/97 $15.6 million
11/29/97 $13.8 million
01/03/98 $31.5 million
01/31/98 $26.6 million
The agreements also include certain restrictive covenants that impose
limitations (subject to certain exceptions) on the Company with respect
to, among other things, making or owning certain investments, declaring or
paying dividends, acquiring Common Stock or preferred stock of the
Company, making loans, engaging in any line of business other than apparel
retailing, engaging in certain transactions with affiliates, or
consolidating, merging or making acquisitions outside the ordinary course
of business.
It would constitute an event of default under the agreements if a majority
of the Company's outstanding Common Stock were to be held by one person,
or an investment group, other than an affiliate of The Limited, Inc., or
Raphael Benaroya, the Chairman of the Board, President and Chief Executive
Officer of the Company.
The Company does not believe that continued compliance with the covenants
under the agreements for the credit facilities will materially restrict
its anticipated operations. The Company also believes that its credit
facilities, together with anticipated cash flows from operating
activities, will be adequate to meet anticipated working capital needs,
including seasonal financing needs, for the next 12 months. The preceding
sentences in this paragraph constitute forward-looking information under
the 1995 Private Securities Litigation Reform Act (the "Reform Act") and
are subject to the factors referred to under the caption "Future Results."
<PAGE> 6
The accounts receivable from the Company's proprietary credit cards are
purchased daily by Citibank (South Dakota), N.A. ("Citibank") at a
discount that is adjusted annually. There is no assurance that the annual
adjustment in the discount rate will not increase materially the cost of
the Company's proprietary credit card programs.
Overseas production of merchandise purchased by the Company is mainly in
South Asia (principally Hong Kong, Taiwan, India, and South Korea) and
Turkey and is obtained through independent agents. The Company's
operations may be adversely affected by political instability resulting in
disruption of trade with foreign countries in which the Company's foreign
suppliers are located, the adoption of additional regulations relating to
imports or duties, the imposition of taxes or other charges on imports,
any significant fluctuation of the value of the dollar against foreign
currencies, and restrictions on the transfer of funds.
PROPERTIES
The Company leased 569 retail stores at February 1, 1997, of which 311
stores were located in strip shopping centers, 228 stores were located in
malls and 30 were located in downtown shopping districts. The Company's
retail square footage was 2.2 million square feet both at February 3, 1996
and at February 1, 1997. The Company presently plans to reduce the amount
of retail square footage by 4% to 6% in Fiscal 1997. The Company plans to
open new mall stores only in exceptional circumstances. The Company will
decrease the retail square footage in mall locations gradually by letting
underperforming leases expire. The Company intends to pay the costs of new
store openings from net cash provided by operating activities. The
preceding sentences of this paragraph constitute forward-looking
information under the Reform Act and are subject to the factors referred
to under the caption "Future Results".
New stores and newly remodeled stores will use The Avenue(R) trade name.
The Company conducted an experiment with a total of 55 new stores and
remodeled stores that sold both large size merchandise and smaller "missy"
sizes in separate departments. The Company discontinued "missy"
assortments in those stores and sells large sizes there exclusively. The
conversion was completed in the second quarter of Fiscal 1996.
COMPUTER SYSTEMS
The Company intends to modify its computer software programs to
accommodate dates after 1999. The cost of modifications is expected to be
less than $1.0 million in Fiscal 1997.
SEASONALITY
The Company's business is usually seasonal. From Fiscal 1991 through
Fiscal 1995, the first half of each year provided a greater portion of the
Company's annual operating income. In Fiscal 1996, however, the operating
loss in the first half exceeded the operating loss in the second half.
INFLATION AND CHANGING PRICES
Inflation has not had a significant effect on the Company's operations.
<PAGE> 7
FUTURE RESULTS
Future results could differ materially from those currently anticipated
due to possible (i) miscalculation of fashion trends, (ii) shifting
shopping patterns, both within the specialty store sector and in other
channels of distribution, (iii) extreme or unseasonable weather
conditions, (iv) economic downturns, weakness in overall consumer demand,
and variations in the demand for women's fashion apparel, (v) imposition
by vendors, or their third-party factors, of more onerous payment terms
for domestic merchandise purchases, (vi) acceleration in the rate of
business failures and inventory liquidations in the specialty store sector
of the women's apparel industry, (vii) increase in the rate of bad debt
expense among the Company's proprietary credit card holders, (viii)
disruptions in the sourcing of merchandise abroad, including (a) China's
assumption of control of Hong Kong in 1997, (b) China's claims to
sovereignty over Taiwan, (c) North Korea's claims to sovereignty over
South Korea, (d) exchange rate fluctuations, (e) political instability,
(f) trade sanctions or restrictions, (g) changes in quota and duty
regulations, (h) delays in shipping or (i) increased costs of
transportation, and (ix) adverse reaction to the replacement of the
Company's older proprietary brands of clothing with its new AVENUE [by
design] brand.
Dated : April 14, 1997
<PAGE> 8
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF UNITED RETAIL GROUP, INC.:
We have audited the accompanying consolidated balance sheets of United Retail
Group, Inc. and Subsidiaries (the "Company") as of February 1, 1997 and
February 3, 1996 and the related consolidated statements of income, cash flows
and stockholders' equity for each of the three Fiscal years ended February 1,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of United Retail Group, Inc. and Subsidiaries as of February 1, 1997 and
February 3, 1996 and the consolidated results of their operations and their
cash flows for each of the three Fiscal years ended February 1, 1997 in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand, LLP
New York, New York
February 14, 1997
<PAGE> 9
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
ASSETS February 3, 1996 February 1, 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 17,040 $ 18,264
Income taxes receivable 2,719 229
Accounts receivable 1,770 1,297
Inventory 40,401 40,778
Prepaid rents 4,473 4,485
Other prepaid expenses 2,936 2,656
----------------------------------------------------------------------------------------------------------
Total current assets 69,339 67,709
Property and equipment, net 60,737 54,892
Deferred charges and other intangible assets, net of
accumulated amortization of $1,265 and $1,490 6,846 7,031
Deferred income taxes 811 --
Other assets 1,300 715
----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 139,033 130,347
----------------------------------------------------------------------------------------------------------
LIABILITIES
Current liabilities:
Current portion of distribution center financing $ 901 $ 978
Accounts payable, trade 15,210 16,543
Accrued expenses 14,834 13,247
----------------------------------------------------------------------------------------------------------
Total current liabilities 30,945 30,768
Distribution center financing 12,333 11,355
Other long-term liabilities 9,472 8,011
----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 52,750 50,134
----------------------------------------------------------------------------------------------------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized 1,000,000; none issued
Common stock, $.001 par value; authorized 30,000,000;
issued 12,680,375; and outstanding 12,190,375 13 13
Additional paid-in capital 78,182 78,259
Retained earnings 8,670 2,523
Treasury stock (490,000 shares) at cost (582) (582)
----------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 86,283 80,213
----------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 139,033 $ 130,347
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
<PAGE> 10
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
52 weeks 53 weeks 52 weeks
Fiscal Year Ended January 28, 1995 February 3, 1996 February 1, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 357,684 $ 369,173 $ 363,074
Cost of goods sold, including
buying and occupancy costs 276,038 292,790 289,421
- ------------------------------------------------------------------------------------------------------------
Gross profit 81,646 76,383 73,653
General, administrative and
store operating expenses 74,986 80,170 80,063
- ------------------------------------------------------------------------------------------------------------
Operating income (loss) 6,660 (3,787) (6,410)
Interest (income) expense, net 491 (119) 413
- ------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 6,169 (3,668) (6,823)
Provision (benefit) for income taxes 2,276 (957) (1,018)
Provision for write-down of the
compensation related deferred tax asset 917 1,928 342
- ------------------------------------------------------------------------------------------------------------
Net income (loss) $ 2,976 $( 4,639) $( 6,147)
- ------------------------------------------------------------------------------------------------------------
Net income (loss) per common share $ 0.22 $( 0.38) $( 0.50)
- ------------------------------------------------------------------------------------------------------------
Weighted average number of common and
common equivalent shares outstanding 13,313,085 12,190,294 12,190,375
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
<PAGE> 11
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended Jan. 28, 1995 Feb. 3, 1996 Feb. 1, 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,976 $( 4,639) $( 6,147)
Adjustments to reconcile net income (loss) to
net cash provided from operating activities:
Depreciation and amortization
of property and equipment 10,768 10,101 9,983
Amortization of deferred charges, other intangible
assets and original issue discount 350 224 225
Loss on disposal of assets 164 379 463
Compensation expense 120 246 77
Provision for deferred income taxes 1,653 3,645 811
Deferred lease assumption revenue amortization -- (455) (531)
Lease assumption proceeds -- 3,523 --
Changes in operating assets and liabilities:
Accounts receivable 85 647 473
Income taxes receivable -- (2,719) 2,490
Inventory 383 (2,883) (377)
Accounts payable and accrued expenses (8,797) 2,194 656
Prepaid expenses (512) (1,004) 268
Income taxes payable 14 (1,627) --
Other assets and liabilities 12 505 (768)
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Provided from Operating Activities 7,216 8,137 7,623
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Capital expenditures (10,294) (10,523) (4,602)
Deferred payment for property and equipment (5,330) 934 (896)
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Used for Investing Activities (15,624) (9,589) (5,498)
- ---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of distribution
center financing 8,000 -- --
Net proceeds from issuance of common stock 256 4 --
Repayments of long-term debt (729) (832) (901)
- ---------------------------------------------------------------------------------------------------------------------
Net Cash Provided From (Used In) Financing Activities 7,527 (828) (901)
- ---------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (881) (2,280) 1,224
Cash and cash equivalents, beginning of period 20,201 19,320 17,040
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 19,320 $ 17,040 $ 18,264
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
<PAGE> 12
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(shares and dollars in thousands)
<TABLE>
<CAPTION>
Common Common
Stock Stock Additional Treasury Total
Shares $.001 Paid-in Retained Stock, Stockholders'
Outstanding Par Value Capital Earnings at Cost Equity
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 30, 1994 12,157 $13 $77,556 $10,333 $(582) $87,320
Exercise of stock options 32 256 256
Compensation expense 120 120
Net income 2,976 2,976
- ------------------------------------------------------------------------------------------------------------
Balance, January 28, 1995 12,189 13 77,932 13,309 (582) 90,672
- ------------------------------------------------------------------------------------------------------------
Exercise of stock options 1 4 4
Compensation expense 246 246
Net loss (4,639) (4,639)
- ------------------------------------------------------------------------------------------------------------
Balance, February 3, 1996 12,190 13 78,182 8,670 (582) 86,283
- ------------------------------------------------------------------------------------------------------------
Compensation expense 77 77
Net loss (6,147) (6,147)
- ------------------------------------------------------------------------------------------------------------
Balance, February 1, 1997 12,190 $13 $78,259 $ 2,523 $(582) $80,213
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
<PAGE> 13
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On July 17, 1989, Sizes Unlimited Acquisition Corporation was merged with
and into Lernmark, Inc. ("Lernmark"), a wholly-owned subsidiary of The
Limited, Inc. ("The Limited") with Lernmark being the surviving
corporation. Lernmark was the holding company for Lerner Woman/Sizes
Unlimited, a division of The Limited. Lernmark subsequently changed its
name to United Retail Group, Inc. ("United Retail"). The Limited,
through an affiliate, initially retained a one-third interest in United
Retail through its acquisition of 2.5 million shares of United Retail's
Common Stock. For financial reporting purposes, the acquisition was
accounted for using the purchase method and, accordingly, the results of
operations have been included in the financial statements from April 30,
1989, which is considered to be the effective date. The total cost of the
acquisition, which includes costs directly related to the acquisition, was
allocated among the net assets acquired on the basis of the respective
fair values of such net assets adjusted for the one-third interest
initially retained by The Limited.
The consolidated financial statements include the accounts of United
Retail and its subsidiaries (the "Company"). All significant intercompany
balances and transactions have been eliminated in consolidation.
Certain prior year balances have been reclassified to conform with the
Fiscal 1996 presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
The Company's Fiscal year ends on the Saturday closest to January 31.
Fiscal years are designated in the financial statements and notes by the
calendar year in which the Fiscal year commences. Fiscal year 1996
consisted of 52 weeks and ended on February 1, 1997. Fiscal year 1995
consisted of 53 weeks and ended on February 3, 1996. Fiscal year 1994
consisted of 52 weeks and ended on January 28, 1995.
NET RETAIL SALES AND REVENUES
Sales are net of returns and exclude sales tax. Revenues include sales
from all stores operating during the period.
MARKETING COSTS
Marketing costs are charged to operations as incurred.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include amounts on deposit with financial
institutions with maturities of less than 90 days.
INVENTORY
Inventory is stated at the lower of cost or market, on a first-in,
first-out basis, utilizing the retail method.
<PAGE> 14
PROPERTY AND DEPRECIATION
Depreciation and amortization of property and equipment are computed for
financial reporting purposes on a straight-line basis, using service lives
of 40 years for the distribution center building, the life of the lease
for leaseholds, improvements, furniture and fixtures, 20 years for
material handling equipment and 5 years for other property. The cost of
assets sold or retired and the related accumulated depreciation or
amortization are removed from the accounts with any resulting gain or loss
included in net income. Maintenance, repairs and minor renewals are
charged to expense as incurred. Renewals and betterments which extend
service lives are capitalized.
Inasmuch as the fair values of furniture and fixtures and leasehold
improvements, in management's opinion, approximated the net book value at
April 29, 1989, no adjustment was required to record these assets at their
fair value as of the acquisition date. Leasehold interests were ascribed
an additional $7.5 million as of April 30, 1989, which represents
two-thirds of the fair value of leaseholds in excess of their historical
carrying value at the acquisition date. The fair values ascribed to the
leasehold interests were determined based on current market rental rates
for comparable store locations.
In the third quarter of Fiscal 1994, the Company changed the estimated
useful lives of furniture and fixtures at new store locations opened after
Fiscal 1991 from 7 years to the life of the lease. This change in estimate
resulted in a reduction of depreciation expense of approximately $700,000
in Fiscal 1994.
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed using the weighted average
number of common and common equivalent shares (stock options) outstanding
during the period. Shares issuable upon the exercise of stock options have
not been included in the primary earnings per share computation for Fiscal
1995 and Fiscal 1996 because the effect of such would be anti-dilutive.
For Fiscal 1994, 1995 and 1996, the net income (loss) per share would have
been $.29, ($.22) and ($.48) per share, respectively, if the provision for
the write-down of the compensation related deferred tax asset of $0.9
million, $1.9 million and $0.3 million, respectively, was excluded (see
Note 8).
In February 1997, Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings per Share", was issued which establishes standards for
computing and presenting earnings per share. SFAS No. 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods. The Company has not yet determined the impact
of implementing the statement on earnings per share.
DEFERRED CHARGES AND OTHER INTANGIBLE ASSETS
Certain loan facility fees and other costs of obtaining financing are
being amortized on a straight-line basis over the term of the related
loan. Goodwill, as of February 1, 1997, of $6,640,000 represents the
excess cost over the fair market value of the net assets of the businesses
acquired. Goodwill is being amortized over a 40-year period using the
straight-line method.
The Company acquired certain trademarks during Fiscal 1996 in the amount
of $410,000. These amounts are being amortized over 10 and 15 year periods
using the straight-line method.
<PAGE> 15
The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining estimated useful life of deferred
charges and other intangible assets may warrant revision or that the
remaining balance may not be recoverable. When factors indicate that the
asset should be evaluated for possible impairment, the Company uses an
estimate of the related business segment's undiscounted net cash flows
over the remaining life of the asset in measuring whether the asset is
recoverable.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
STORE OPENING COSTS
All costs associated with the opening of new stores are being expensed as
incurred.
3. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consists of (dollars in thousands):
<TABLE>
<CAPTION>
February 3, 1996 February 1, 1997
-------------------------------------------------------------------------
<S> <C> <C>
Land $ 2,176 $ 2,176
Buildings 10,574 10,574
Furniture, fixtures and equipment 59,766 61,414
Leasehold improvements 31,232 31,348
Beneficial leaseholds 11,397 10,005
Construction in progress 611 228
-------- --------
115,756 115,745
Accumulated depreciation and
amortization, including beneficial
leaseholds of $8,934 and $8,339 (55,019) (60,853)
-------- --------
Property and equipment, net $ 60,737 $ 54,892
-------- --------
</TABLE>
4. ACCRUED EXPENSES
Accrued expenses consist of (dollars in thousands):
<TABLE>
<CAPTION>
February 3, 1996 February 1 ,1997
----------------------------------------------------------------
<S> <C> <C>
Fixed asset payable $ 934 $ 38
Occupancy expenses 2,731 3,308
Payroll related expenses 2,899 773
Insurance payable 2,914 2,905
Sales taxes payable 1,346 770
Other 4,010 5,453
------- -------
$14,834 $13,247
------- -------
</TABLE>
<PAGE> 16
5. LEASED FACILITIES AND COMMITMENTS
Annual store rent is composed of a fixed minimum amount, plus contingent
rent based upon a percentage of sales exceeding a stipulated amount. Store
lease terms generally require additional payments to the landlord covering
taxes, maintenance and certain other expenses.
Rent expense was as follows (dollars in thousands):
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1995 Fiscal 1996
--------------------------------------------------------------------
<S> <C> <C> <C>
Store rent
Fixed minimum $37,002 $39,300 $40,546
Percentage (31) 41 (26)
------- ------- -------
Total store rent 36,971 39,341 40,520
Equipment and other 404 517 424
------- ------- -------
Total rent expense $37,375 $39,858 $40,944
======= ======= =======
</TABLE>
At February 1, 1997, the Company was committed under store leases with
initial terms ranging from 1 to 20 years and with varying renewal options.
At January 28, 1995, February 3, 1996 and February 1, 1997, accrued rent
expense amounted to $5.5 million, $5.5 million and $5.7 million,
respectively, of which $5.6 million, $5.9 million and $5.5 million,
respectively, is included in "Other long-term liabilities".
A summary of approximate rent commitments under noncancelable leases
follows (dollars in thousands) for the Fiscal years:
<TABLE>
<S> <C>
1997 $38,750
1998 31,530
1999 27,241
2000 23,933
2001 21,441
Thereafter 80,624
--------
Total minimum obligations $223,519
========
</TABLE>
In July 1995, the Company agreed to assume the lease obligations of 21
stores previously operated by another retail chain. In order to induce the
Company to assume the leases, the assignor of the leases paid the Company
approximately $3.5 million. This payment has been recorded as accrued rent
payable and is being amortized against rent expense over the life of the
assumed leases. As of February 1, 1997, the unamortized balance was $2.5
million.
6. LONG-TERM DEBT
Long-term debt consists of (dollars in thousands):
<TABLE>
<CAPTION>
February 3, 1996 February 1, 1997
---------------------------------------------------------------------------
<S> <C> <C>
Distribution center financing:
Current portion $ 901 $ 978
Long-term portion 12,333 11,355
------- -------
Total distribution center financing $13,234 $12,333
======= =======
</TABLE>
<PAGE> 17
In 1994, the Company executed a fifteen-year $8.0 million loan bearing
interest at 8.64%. Interest and principal are payable in equal monthly
installments beginning May 1, 1994. The loan is collateralized by a
mortgage on the national distribution center owned by the Company in Troy,
Ohio.
In 1993, the Company executed a ten-year $7.0 million note bearing
interest at 7.3%. Interest and principal are payable in equal monthly
installments beginning November 1993. The note is collateralized by the
material handling equipment in the distribution center.
The Company and The Chase Manhattan Bank ("Chase") are parties to
agreements providing two credit facilities, the term of which expires in
February 1999. The first facility provides for the issuance by Chase of
trade letters of credit for the account of the Company in an aggregate
amount at any time of up to $25.0 million, of which $22.5 million was
utilized at February 1, 1997. The second facility provides for revolving
credit loans totaling a maximum of $15.0 million, of which up to $10.0
million would be available for standby letters of credit for general
corporate purposes. As of February 1, 1997, the Company has not drawn upon
its revolving credit facility except to issue standby letters of credit
totaling $4.0 million as collateral for obligations under casualty
insurance policies.
The Company is obligated to maintain several financial covenants,
including a current ratio and a fixed charges ratio, and has restrictions
on paying dividends, as well as a limitation on aggregate capital
expenditures.
The Company has pledged to Chase as collateral the shares of common and
preferred stock of its subsidiaries.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following represents the fair value of the Company's financial
instruments:
<TABLE>
<CAPTION>
February 3, 1996 February 1, 1997
--------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents
Carrying Amount $17,040 $18,264
Fair Value $17,040 $18,264
Liabilities
Long term debt including current portion
Carrying Amount $13,234 $12,333
Fair Value $13,415 $12,084
</TABLE>
The carrying amounts of cash and cash equivalents approximates fair value
because of the short-term maturity of these instruments. The fair value of
long-term debt, including current portion, is estimated based on the
current rates quoted to the Company for debt of the same or similar
issues.
8. INCOME TAXES
The Company provides for income taxes in accordance with SFAS No.109,
"Accounting for Income Taxes". This statement requires the use of the
liability method of accounting for income taxes. Under the liability
method, deferred taxes are determined based on the difference between the
financial reporting and tax bases of assets and liabilities using enacted
tax rates in effect in the years in which the differences are expected to
reverse. Deferred tax expense represents the change in the deferred tax
asset/liability balance.
<PAGE> 18
The provision (benefit) for income taxes consists of (dollars in
thousands):
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1995 Fiscal 1996
---------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $1,455 $(2,523) ($ 1,584)
State 85 (151) 97
------ ------- --------
1,540 (2,674) (1,487)
------ ------- --------
Deferred:
Federal 1,353 2,850 696
State 300 795 115
------ ------- --------
1,653 3,645 811
------ ------- --------
$3,193 $ 971 ($ 676)
====== ======= ========
</TABLE>
Reconciliation of the provision (benefit) for income taxes from the U.S.
Federal statutory rate to the Company's effective rate are as follows:
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1995 Fiscal 1996
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Federal Income tax rate 34.0% (34.0%) (34.0%)
State income taxes, net of
Federal benefit 2.2 5.3 0.4
Goodwill amortization 1.1 1.9 1.0
Other (.4) .7 (1.0)
---- ----- -----
Sub-total 36.9 (26.1) (33.6)
Charitable contribution benefit .0 .0 (3.0)
Write-down of the compensation
related deferred tax asset 14.9 52.6 5.0
Valuation allowance 0.0 0.0 21.7
---- ----- -----
51.8% 26.5% (9.9%)
==== ===== =====
</TABLE>
The Company's net deferred tax asset reflects the tax impact of temporary
differences. The components of the net deferred tax asset as of February
1, 1997 are as follows:
<TABLE>
<S> <C>
Assets:
Inventory $245
Accruals and reserves 1,200
Compensation 1,553
NOL and credit carry forwards 2,440
------
5,438
------
Liabilities:
Depreciation 1,876
Prepaid rent 1,732
------
3,608
------
Valuation allowance 1,830
------
Net deferred tax asset $ 0
======
</TABLE>
Future realization of the tax benefits attributable to these existing
deductible temporary differences ultimately depends on the existence of
sufficient taxable income within the carry-back and/or carry-forward
period available under the tax law at the time of the tax deduction.
Because it is more likely than not that the net deferred tax asset will
not be realized, a valuation allowance has been recorded. Included in the
Fiscal 1994, Fiscal 1995 and Fiscal 1996 income tax expense is a $0.9
million, $1.9 million and $0.3 million write-down of the compensation
related deferred tax asset, respectively, which had been recorded in
Fiscal 1992 based upon the initial public offering price of $15 per share.
<PAGE> 19
As of February 1, 1997, the remaining compensation related deferred tax
asset will be fully realizable upon the exercise of all of the outstanding
options only if (i) the market price of the stock equals or exceeds $3.125
per share upon exercise, (ii) the compensation expense deduction is not
limited by future enacted tax laws and (iii) there is sufficient taxable
income within the carry-back and/or carry-forward period available. The
underlying options of the compensation related deferred tax asset are
exercisable through December 31, 1999.
At February 3, 1996 and February 1, 1997, the Company has pre-acquisition
net operating loss carry forwards aggregating approximately $0.6 million
and $0.5 million, respectively, available to reduce future taxable income
in certain states, expiring through 2004.
9. RELATED PARTY TRANSACTIONS
The Company shared certain store locations with subsidiaries of The
Limited and was charged by The Limited for occupancy costs. The impact on
the statements of income of these occupancy charges was as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1995 Fiscal 1996
--------------------------------------------------------------------------
<S> <C> <C> <C>
Cost of goods sold, including
buying and occupancy costs $636 $537 $367
</TABLE>
An affiliate of the Chairman of the Board of the Company (in which he
holds an 80% interest) provides management and administrative services to
a subsidiary of The Limited for a base annual fee and profit sharing fee,
the profit sharing fee being the lower of one-third of net profits or
$150,000 per annum. During Fiscal 1994, Fiscal 1995 and Fiscal 1996, the
aforementioned affiliate was paid $63,000, $114,000 and $105,000,
respectively, by that subsidiary of The Limited.
During Fiscal 1994, Fiscal 1995, and Fiscal 1996, the Company incurred
expenses to the aforementioned subsidiary of The Limited and to the
affiliate of the Chairman of the Board of the Company referred to above in
the combined amounts of $179,000, $639,000 and $1,009,000, respectively,
under certain Sublicensing Agreements with respect to trademarks.
In Fiscal 1994 and Fiscal 1996, the Company made investments in a vendor
from which the Company purchased apparel. The investments totaled $12,500
for approximately 22% of the outstanding common stock of the vendor and an
unsecured loan facility in the amount of $400,000, which expired on
January 31,1997. Purchases during Fiscal 1995 and Fiscal 1996 totaled $1.8
million and $2.7 million, respectively.
During Fiscal 1995, the Company made an investment in one of the
purchasing agents that acted on the Company's behalf in contracting for
apparel with foreign vendors. The investment made during Fiscal 1995
(which is the only investment made in the purchasing agent by the Company)
was $463,000 for 25% of the outstanding common stock of the purchasing
agent. Fees paid to the purchasing agent during Fiscal 1995 and Fiscal
1996 totaled $844,000 and $497,000, respectively, principally as
percentage commissions on apparel purchases. In Fiscal 1995, the Company
extended to the purchasing agent a loan of $125,000 with interest at 2
percentage points over the prime rate which was repaid in full in May
1996.
<PAGE> 20
10. RETIREMENT PLAN
The Company maintains a defined contribution pension plan. Generally, an
employee is eligible to participate in the plan if the employee has
completed one year of full-time continuous service. The Company makes a
50% match of a portion of employee savings contributions.
Pension costs for all benefits charged to income during Fiscal 1994,
Fiscal 1995 and Fiscal 1996 approximated $92,000, $248,000 and $335,000,
respectively.
11. STOCKHOLDERS' EQUITY
Coincident with the completion of its initial public offering on March 17,
1992, the Company's certificate of incorporation was amended to provide
for only one class of Common Stock, par value $.001 per share, with 30
million shares authorized. The Company also authorized 1,000,000 shares of
Preferred Stock, par value $.001 per share, to be issued from time to
time, in one or more classes or series, each such class or series to have
such preferences, voting powers, qualifications and special or relative
rights and privileges as shall be determined by the Board of Directors in
a resolution or resolutions providing for the issue of such class or
series of Preferred Stock. The Company has paid no cash dividends and
expects to retain any future earnings for expansion of its business rather
than to pay cash dividends in the foreseeable future. Additionally,
certain loan agreements, to which the Company is a party, impose
restrictions on the payments of dividends.
12. STOCK OPTIONS
Under the 1989 Management Stock Option Plan (the "1989 Plan") established
on July 17, 1989, options to purchase 1,078,125 shares and 50,000 shares
at exercise prices of $1.00 and $5.00 per share, respectively, have been
granted and are outstanding as of February 1, 1997. All options granted
under the 1989 Plan became vested and exercisable upon completion of the
Company's initial public offering (IPO) and the payment of certain
obligations to The Limited Inc. and expire on December 31, 1999.
Under 1991 Stock Option Agreements between the Company and certain
executive officers (the "1991 Options"), the Board of Directors approved
and granted, on July 24, 1991, options to purchase 300,000 shares at an
exercise price of $5.00 per share which are outstanding as of February 1,
1997. These options became vested and exercisable upon completion of the
IPO and the payment of certain obligations to The Limited Inc. and expire
on December 31, 1999.
The voluntary resignation of an optionee does not limit the above options'
expiration date or otherwise affect the exercisability of these options in
any way.
The Restated 1990 Stock Option Plan (as amended, the "1990 Plan") was
established in June 1990, amended in November 1991, December 1992 and May
1993, and terminated in May 1996. Exercise prices were not less than fair
market value of the Company's stock on the date of grant. The options
granted under the 1990 Plan expire between seven and ten years after the
date of grant. As of February 3, 1996 and February 1, 1997, outstanding
options to purchase 665,000 and 658,000 shares, respectively, were granted
under the Plan at average exercise prices of $8.80 and $6.78 per share,
respectively. The options granted vest beginning one year from the date of
grant, and vest fully after four or five years, subject to acceleration
under certain circumstances. to the 1990 Plan in Fiscal 1995 and Fiscal
1996 of $246,000 and $77,000, respectively.
<PAGE> 21
A summary of stock option transactions under the 1990 Plan follows:
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1995 Fiscal 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at beginning of period 586,250 636,750 665,000
Options granted (a) 169,500 111,500 99,000
Options exercised 32,625 1,000 0
Options canceled (a) 86,375 82,250 106,000
Options outstanding at end of period 636,750 665,000 658,000
Options available for grant at end of period 123,875 94,625 0
Options vested and outstanding
at end of period 109,900 141,900 102,895
Options exercisable at end of period and having
an exercise price that is less than the respective
year end common stock closing price 54,100 0 0
Range of option prices per share for
outstanding options $4.50-$26.75 $4.50-$26.75 $4.125-$26.75
</TABLE>
(a) Options granted and options canceled do not include the reissuance in
Fiscal 1994, Fiscal 1995 and Fiscal 1996 of 160,000, 210,000 and 271,500
options at exercise prices of $10.00, $8.50 and $5.125 per share,
respectively.
The 1996 Stock Option Plan (the "1996 Plan") was established in May 1996.
Exercise prices are required by the 1996 Plan to be not less than fair
market value of the Company's stock on the date of grant. The total number
of shares that may be optioned under the 1996 Plan is 440,000 shares. The
options granted under the 1996 Plan expire ten years after the date of
grant. As of February 1, 1997, outstanding options to purchase 45,000
shares have been granted under the Plan at an average exercise price of
$3.00 per share. The options granted vest beginning one year from the date
of grant, and vest fully after five years, subject to acceleration under
certain circumstances. Employees of the Company whose judgment, initiative
and efforts may be expected to contribute materially to the successful
performance of the Company are eligible to receive options. Public
Directors will receive annual grants of options under the 1996 Plan.
Options are granted, and the 1996 Plan is administered, by the
Compensation Committee of the Board of Directors composed of non-employees
of the Company.
A summary of stock option transactions under the 1996 Plan follows:
<TABLE>
<CAPTION>
Fiscal 1996
-------------------------------------------------------------------
<S> <C>
Options outstanding at beginning of period 0
Options granted 45,000
Options exercised 0
Options canceled 0
Options outstanding at end of period 45,000
Options available for grant at end of period 395,000
Options vested and outstanding at end of period 0
Options exercisable at end of period and having
an exercise price that is less than the respective
year end common stock closing price 0
Option price per share for
outstanding options $ 3.00
</TABLE>
The Company records compensation expense for all stock-based compensation
plans using the intrinsic value method prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees." Under
Opinion No. 25, compensation expense, if any, is measured as the excess of
the market price of the stock over the exercise price on the measurement
date.
<PAGE> 22
The Company records compensation expense for all stock-based compensation
plans using the intrinsic value method prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees." Under
Opinion No. 25, compensation expense, if any, is measured as the excess of
the market price of the stock over the exercise price on the measurement
date. In October 1995 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," which encourages companies to recognize expense
for stock-based awards based on their estimated value on the date of
grant. SFAS No. 123, which is first effective for Fiscal year 1996, does
not require companies to change their existing accounting for stock-based
awards. The Company continues to account for stock-based compensation
plans using the intrinsic value method, and has supplementally disclosed
pro forma information required by SFAS No. 123.
<TABLE>
<CAPTION>
Fiscal 1995 Fiscal 1996
----------------------------------------------------------------------
<S> <C> <C>
Net income (loss) - as reported ($4,639) ($6,147)
Net income (loss) - pro forma ($4,797) ($6,416)
Earnings (loss) per share - as reported ($ 0.38) ($ 0.50)
Earnings (loss) per share - pro forma ($ 0.39) ($ 0.53)
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
assumptions:
<TABLE>
<S> <C>
Expected dividend yield 0.00%
Expected stock price volatility 50%
Risk-free interest rate 5.72%
Expected life of options 5 years
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
13. SUPPLEMENTAL CASH FLOW INFORMATION
Net cash flow from operating activities reflects cash payments for
interest and income taxes as follows (dollars in thousands):
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1995 Fiscal 1996
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense (income), net
per statements of income $ 491 ($119) $ 413
Less: Non-cash interest
(expense) income (101) (41) 50
Net cash interest, including
interest income of
$1,170, $1,425 and $924 $ 390 ($160) $ 463
Income taxes paid (refunded) $1,605 $474 ($3,990)
</TABLE>
<PAGE> 23
United RETAIL GROUP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended Jan. 30, 1993 Jan. 29, 1994 Jan. 28, 1995 Feb. 3, 1996 Feb. 1, 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales $ 330,083 $ 344,090 $357,684 $ 369,173 $ 363,074
Cost of goods sold,including
buying and occupancy costs 236,827 261,920 276,038 292,790 289,421
Gross profit 93,256 82,170 81,646 76,383 73,653
General, administrative
and store operating expenses 73,192 75,744 74,986 80,170 80,063
Non-recurring general expenses 16,330
Operating income (loss) 3,734 6,426 6,660 (3,787) (6,410)
Interest expense (income), net (281) (143) 491 (119) 413
Non-recurring interest expense 6,083
Income (loss) before taxes (2,068) 6,569 6,169 (3,668) (6,823)
Provision (benefit)
for income taxes (748) 2,522 2,276 (957) (1,018)
Provision for write-down of
the compensation related
deferred tax asset 2,479 917 1,928 342
Net income (loss) (1,320) 1,568 2,976 (4,639) (6,147)
Net income (loss)
per common share $ (.04) $ .12 $ .22 $ (.38) $ (.50)
Weighted average number
of common shares outstanding
(in thousands) 12,974 13,528 13,313 12,190 12,190
BALANCE SHEET DATA (AT PERIOD END)
Working capital $ 28,981 $ 24,533 $ 37,614 $ 38,394 $ 36,941
Total assets 123,807 141,607 138,434 139,033 130,347
Long-term debt 0 0 0 0 0
Distribution center financing 0 6,293 13,233 12,333 11,355
Total stockholders' equity 84,832 87,320 90,672 86,283 80,213
</TABLE>
The Selected Financial Data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
with the Company's Consolidated Financial Statements, including the notes
thereto. The data for the periods indicated has been derived from the
consolidated financial statements of the Company, which have been audited by
Coopers & Lybrand, L.L.P., independent accountants, whose report for the
three Fiscal years ended February 1, 1997, appears elsewhere in this annual
report.
<PAGE> 24
UNITED RETAIL GROUP, INC.
EXECUTIVE OFFICERS AND DIRECTORS
RAPHAEL BENAROYA
Chairman of the Board, President
and Chief Executive Officer*
GEORGE R. REMETA
Vice Chairman - Chief Financial Officer,
Secretary and Director*
KENNETH P. CARROLL
Senior Vice President - General Counsel*
ELLEN DEMAIO
Senior Vice President - General Merchandising Manager
CARRIE CLINE-TUNICK
Vice President - Product Design and Development
JULIE L. DALY
Vice President - Strategic Planning
KENT FRAUENBERGER
Vice President - Logistics
JON GROSSMAN
Vice President - Finance*
SHARON HARP
Vice President - Planning and Distribution
ALAN R. JONES
Vice President - Real Estate
CHARLES E. NAFF
Vice President - Sales
BRADLEY ORLOFF
Vice President - Marketing
ROBERT PORTANTE
Vice President - MIS
FREDRIC E. STERN
Vice President - Controller
JOSEPH A. ALUTTO
A Director of the Company, is the Dean of Max M. Fisher School of Business at
Ohio State University
RUSSELL BERRIE
A Director of the Company, is the Chairman of the Board and Chief Executive
Officer of Russ Berrie and Company, Inc., an international gift manufacturer
JOSEPH CIECHANOVER
A Director of the Company, is the Chairman of the Board of El Al Israel Airlines
Ltd.
ILAN KAUFTHAL
A Director of the Company, is a Managing Director of Schroder Wertheim & Co.,
Inc., an investment banking firm
VINCENT P. LANGONE
A Director of the Company, is President and Chief Executive Officer of
Interbuild International, Inc., a venture capital firm
CHRISTINA A. MOHR
A Director of the Company, is a Managing Director of Salomon Brothers, Inc., an
investment banking firm
RICHARD W. RUBENSTEIN
A Director of the Company, is a Partner of Squire, Sanders & Dempsey, a law firm
- -------------------------------------
*An officer of the parent holding company rather than the operating subsidiary,
United Retail Incorporated or United Retail Logistics Operations Incorporated.
SHAREHOLDER INFORMATION
The Company's Annual Report on Form 10-K, including financial statement
schedules, filed with the Securities and Exchange Commission ("SEC"), is
available without charge upon written request to Kenneth P. Carroll, Esq.,
Senior Vice President - General Counsel, at the Company's headquarters. Mail
should be addressed to 365 West Passaic Street, Rochelle Park, New Jersey 07662;
E-mail should be addressed to [email protected]. The Annual Report on Form 10-K is
also available through the SEC at http://www.sec.gov.
The Common Stock is quoted on the NASDAQ National Market under the symbol
"URGI." The last reported sale price of the Common Stock on the NASDAQ National
Market on April 14, 1997 was $ 4 3/4. The following table sets forth the
reported high and low sale prices of the Common Stock as reported by NASDAQ for
each calendar quarter indicated.
<TABLE>
<CAPTION>
High Low
- --------------------------------------
<S> <C> <C>
1995
First Quarter $11 1/8 $7 5/8
Second Quarter $ 8 5/8 $5 3/8
Third Quarter $ 7 7/8 $4 1/8
Fourth Quarter $ 5 7/8 $3 7/8
1996
First Quarter $ 5 1/2 $3 7/8
Second Quarter $ 5 1/4 $4
Third Quarter $ 4 7/8 $2 3/8
Fourth Quarter $ 3 3/8 $1 1/2
</TABLE>
The Company's transfer agent and registrar is Continental Stock Transfer and
Trust Co., 2 Broadway, New York, New York 10004.
At March 31, 1997, there were approximately 2,000 beneficial owners of Common
Stock.
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statements of
United Retail Group, Inc. and Subsidiaries (the "Company") on Forms S-8 (File
No. 33-48500, No. 33-48501 and No. 33-67288) of our report dated February 14,
1997, on our audits of the consolidated financial statements of the Company as
of February 1, 1997 and February 3, 1996 and for each of the three fiscal years
ended February 1, 1997, which report is incorporated by reference in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
New York, New York
April 18, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
The undersigned hereby consents to the inclusion as an exhibit to this Annual
Report on Form 10-K for the year ended February 1, 1997 of our report dated
February 28, 1997, on our audits of the statements of net assets available for
benefits of the United Retail Group Retirement Savings Plan (the "Plan") as of
December 31, 1996 and 1995, and the related statements of changes in net assets
available for benefits for each of the three years in the period ended December
31, 1996.
The undersigned also hereby consents to the incorporation of such report by
reference in the Registration Statement on Form S-8 of United Retail Group, Inc.
(The "Company") with respect to the Plan and its investment in shares of common
stock of the Company.
/s/ Ary, Earman, and Roepcke
ARY, EARMAN AND ROEPCKE
Columbus, Ohio
April 8, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> FEB-01-1997
<CASH> 18,264
<SECURITIES> 0
<RECEIVABLES> 1,526
<ALLOWANCES> 0
<INVENTORY> 40,778
<CURRENT-ASSETS> 67,709
<PP&E> 115,745
<DEPRECIATION> 60,853
<TOTAL-ASSETS> 130,347
<CURRENT-LIABILITIES> 30,768
<BONDS> 11,355
0
0
<COMMON> 13
<OTHER-SE> 80,200
<TOTAL-LIABILITY-AND-EQUITY> 130,347
<SALES> 363,074
<TOTAL-REVENUES> 363,074
<CGS> 289,421
<TOTAL-COSTS> 289,421
<OTHER-EXPENSES> 80,063
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 413
<INCOME-PRETAX> (6,823)
<INCOME-TAX> (676)
<INCOME-CONTINUING> (6,147)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,147)
<EPS-PRIMARY> (0.50)
<EPS-DILUTED> (0.50)
</TABLE>
