FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to _____________________
Commission file number 00019774
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
- --------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 ____
APPLICABLE ONLY TO ISSUERS 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 ISSUERS:
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date.
As of October 30, 1999, a total of 13,160,088 of the registrant's
units were outstanding, each consisting of one share of the registrant's
common stock, $.001 par value per share, and one right to purchase one
one-hundredth of a share of the registrant's preferred stock, $.001 par
value per share (hereinafter referred to as "shares of Common Stock").
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Item 1. FINANCIAL STATEMENTS UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
October 30, January 30, October 31,
1999 1999 1998
------------------- ------------------- -------------------
ASSETS (Unaudited) (Unaudited)
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents 31,773 45,894 30,720
Accounts receivable 2,890 513 1,434
Inventory 62,712 45,564 54,171
Prepaid rents 3,889 3,946 4,010
Other prepaid expenses 3,377 2,429 3,307
------------------- ------------------- -------------------
Total current assets 104,641 98,346 93,642
Property and equipment, net 59,669 48,017 47,272
Deferred charges and other intangible assets,
net of accumulated amortization of $2,398, $2,130
and $2,041 7,128 6,746 6,826
Deferred income taxes 828 1,120 1,383
Other assets 399 363 363
------------------- ------------------- -------------------
Total assets 172,665 154,592 149,486
=================== =================== ===================
LIABILITIES
Current liabilities:
Current portion of distribution center financing 1,205 1,136 1,115
Accounts payable, trade 21,973 14,208 14,099
Accrued expenses 21,735 22,659 20,847
------------------- ------------------- -------------------
Total current liabilities 44,913 38,003 36,061
Distribution center financing 8,260 9,172 9,464
Other long-term liabilities 6,063 6,270 6,573
------------------- ------------------- -------------------
Total liabilities 59,236 53,445 52,098
------------------- ------------------- -------------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized
1,000,000; none issued
Series A junior participating preferred stock,
$.001 par value; authorized 150,000; none issued
Common stock, $.001 par value; authorized 14 14 14
30,000,000; issued 13,833,400, 13,762,900
and 13,762,900; outstanding 13,160,088,
13,089,588, and 13,089,588
Additional paid-in capital 77,907 77,458 77,420
Retained earnings 37,167 25,334 21,613
Treasury stock 673,312 shares at cost (1,659) (1,659) (1,659)
------------------- ------------------- -------------------
Total stockholders' equity 113,429 101,147 97,388
------------------- ------------------- -------------------
Total liabilities and stockholders' equity 172,665 154,592 149,486
=================== =================== ===================
The accompanying notes are an integral part of the Consolidated Financial Statements.
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UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------------------- ------------------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
---------------- --------------- ---------------- ----------------
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Net sales 86,802 85,174 282,408 282,292
Cost of goods sold, including
buying and occupancy costs 66,905 62,859 206,803 204,101
---------------- --------------- ---------------- ----------------
Gross profit 19,897 22,315 75,605 78,191
General, administrative and
store operating expenses 19,128 18,884 58,069 59,738
---------------- --------------- ---------------- ----------------
Operating income 769 3,431 17,536 18,453
Non-operating income - - - 3,113
Interest income, net 467 388 1,313 883
---------------- --------------- ---------------- ----------------
Income before income taxes 1,236 3,819 18,849 22,449
Provision for income taxes 513 1,368 7,016 8,190
---------------- --------------- ---------------- ----------------
Net income $723 $2,451 $11,833 $ 14,259
================ =============== ================ ================
Net income per share
Basic $0.06 $0.19 $0.90 $ 1.09
================ =============== ================ ================
Diluted $0.05 $0.18 $0.85 $ 1.04
================ =============== ================ ================
Weighted average number of
shares outstanding:
Basic 13,144,559 13,089,076 13,121,197 13,044,368
Common stock equivalents
(stock options) 765,027 654,244 786,146 676,481
---------------- --------------- ---------------- ----------------
Diluted 13,909,586 13,743,320 13,907,343 13,720,849
================ =============== ================ ================
The accompanying notes are an integral part of the Consolidated Financial Statements.
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UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
Thirty-Nine Weeks Ended
-----------------------------------
October 30, October 31,
1999 1998
---------------- ----------------
Cash Flows From Operating Activities:
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Net income 11,833 14,259
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization of property and equipment 5,060 5,438
Amortization of deferred charges and other
intangible assets 295 266
Loss (gain) on disposal of assets 281 (56)
Gain on sale of investments - (3,113)
Compensation expense 233 138
Benefit from deferred income taxes 292 1,302
Deferred lease assumption revenue amortization (312) (536)
Changes in operating assets and liabilities:
Accounts receivable (2,377) (863)
Income taxes (1,091) (590)
Inventory (17,148) (16,168)
Accounts payable and accrued expenses 7,673 4,495
Prepaid expenses (891) (711)
Other (1,019) (333)
---------------- ----------------
Net Cash Provided From Operating Activities 2,829 3,528
---------------- ----------------
Investing Activities:
Capital expenditures (17,193) (4,643)
Deferred payment for property and equipment 571 202
Proceeds from sale of lease and investment 200 3,345
---------------- ----------------
Net Cash Used For Investing Activities (16,422) (1,096)
---------------- ----------------
Financing Activities:
Repayments of long-term debt (843) (781)
Issuance of loans to officers (23) (2,073)
Exercise of stock options 338 20
---------------- ----------------
Net Cash Used In Financing Activities (528) (2,834)
---------------- ----------------
Net decrease in cash and cash equivalents (14,121) (402)
Cash and cash equivalents, beginning of period 45,894 31,122
---------------- ----------------
Cash and cash equivalents, end of period 31,773 30,720
================ ================
The accompanying notes are an integral part of the Consolidated Financial Statements.
</TABLE>
UNITED RETAIL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The consolidated financial statements include the accounts of United
Retail Group, Inc. and its subsidiaries (the "Company"). All significant
intercompany accounts and transactions have been eliminated.
The consolidated financial statements as of and for the thirteen and
thirty-nine weeks ended October 30, 1999 and October 31, 1998 are unaudited
and are presented pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, the consolidated financial statements
should be read in conjunction with the financial statement disclosures
contained in the Company's 1998 Annual Report and 1998 Form 10-K. In the
opinion of management, the accompanying consolidated financial statements
reflect all adjustments necessary (which are of a normal recurring nature)
to present fairly the financial position and results of operations and cash
flows for the interim periods, but are not necessarily indicative of the
results of operations for full fiscal year.
2. NET INCOME PER SHARE
At the end of fiscal 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128 "Earnings Per Share".
Basic per share data has been computed based on the weighted average number
of shares of common stock outstanding. Diluted per share data has been
computed on the basic plus the dilution of stock options.
Options to purchase shares of common stock which were outstanding
but were not included in the computation of diluted net income per share
because the exercise prices were greater than the average market price of
the common shares were as follows:
Thirteen Weeks Ended
---------------------------------
October 30, October 31,
1999 1998
---------- ----------
Options 53,000 53,000
Range of Option Prices per share $12.08 - $26.75 $11.50 - $26.75
Thirty-Nine Weeks Ended
---------------------------------
October 30, October 31,
1999 1998
---------- ----------
Options 53,000 53,000
Range of Option Prices per share $12.08 - $26.75 $11.50 - $26.75
3. FINANCING ARRANGEMENTS
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 United Retail Incorporated, its subsidiary,
(collectively, the "Companies") are parties to a Financing Agreement, dated
August 15, 1997 (the "Financing Agreement"), with The CIT Group/Business
Credit, Inc.("CIT"). The Financing Agreement provides a revolving line of
credit for a term ending August 15, 2001 in the aggregate amount of $40 million
for the Companies, subject to availability of credit according to a borrowing
base computation. The line of credit may be used on a revolving basis by
either of the Companies to support trade letters of credit and standby
letters of credit and to finance loans.
The line of credit is secured by a security interest in inventory
and proceeds and by the balance on deposit from time to time in a bank
account that has been pledged to the lenders.
The Companies are required to maintain unused at all times combined
availability of at least $5 million. Except for the maintenance of a
minimum availability of $5 million and a limit on capital expenditures, the
Financing Agreement does not contain any significant financial covenants.
At October 30, 1999, after giving effect to the $5 million minimum
availability, the Companies had usable credit under the Financing Agreement
of $13.7 million, no balance was in the pledged account, the aggregate
outstanding amount of letters of credit arranged by CIT was $24.3 million
and no loan had been drawn down.
In the event a loan is made to one of the Companies, interest is
payable monthly based on a 360-day year at the prime rate or at two percent
plus the LIBOR rate on a per annum basis, at the borrower's option.
4. INCOME TAXES
The provision for income taxes consists of (dollars in thousands):
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Thirteen Weeks Ended Thirty-Nine Weeks Ended
------------------------- -------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------- ------------ ----------- -----------
Currently payable:
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Federal $372 $1,457 $6,240 $6,502
State 76 122 484 386
----- ------ ------ ------
448 1,579 6,724 6,888
----- ------ ------ ------
Deferred:
Federal 53 (174) 240 1,071
State 12 (37) 52 231
----- ------ ------ ------
65 (211) 292 1,302
----- ------ ------ ------
$513 $1,368 $7,016 $8,190
===== ====== ====== ======
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Reconciliation of the provision for income taxes from the U.S.
Federal statutory rate to the Company's effective rate is as follows
(dollars in thousands):
Thirteen Weeks Ended
----------------------------------------
October 30, 1999 October 31, 1998
---------------- ------------------
Tax at Federal rate $433 35.0% $1,337 35.0%
State income taxes, net of 56 4.6% 55 1.4%
federal benefit
Goodwill amortization 18 1.5% 18 0.5%
Other 6 0.4% (42) (1.1%)
---- ----- ------ -----
$513 41.5% $1,368 35.8%
==== ===== ====== ======
Thirty-Nine Weeks Ended
----------------------------------------
October 30, 1999 October 31, 1998
---------------- ------------------
Tax at Federal rate $6,597 35.0% $7,857 35.0%
State income taxes, net of 348 1.8% 401 1.8%
federal benefit
Goodwill amortization 54 0.3% 54 0.2%
Other 17 0.1% (122) (0.5%)
------ ----- ------ -----
$7,016 37.2% $8,190 36.5%
====== ===== ====== =====
The net deferred tax asset reflects the tax impact of temporary
differences. The components of the net deferred tax asset as of October 30,
1999 are as follows (dollars in thousands):
Assets:
Inventory $ 218
Accruals and reserves 2,921
Compensation 193
------
3,332
------
Liabilities:
Depreciation 2,504
------
2,504
------
Net deferred tax asset $828
======
Future realization of the tax benefits attributable to these
existing deductible temporary differences ultimately depends on the
existence of sufficient taxable income at the time of the tax deduction.
Based on management's assessment, it is more likely than not that the net
deferred tax asset will be realized through future taxable earnings.
The Company's federal income tax returns for fiscal 1994, fiscal
1995 and fiscal 1996 are being audited by the Internal Revenue Service.
Management believes that the results of the audits will not have a material
adverse effect on the Company's financial position or results of
operations.
5. ADVANCES TO OFFICERS
Raphael Benaroya, the Chairman of the Board, President and Chief
Executive Officer of the Company, and George R. Remeta, the Vice Chairman
and Chief Administrative Officer of the Company, borrowed money from the
Company to finance taxes arising from their exercises of employee stock
options on February 13, 1998. (The advances had previously been authorized
by the Compensation Committee.) In Fiscal 1998, advances were made of
approximately $1.6 million to Mr. Benaroya and $0.2 million to Mr. Remeta.
In Fiscal 1999, an additional advance of approximately $0.1 million was
made to Mr. Benaroya. Interest is payable annually at the prime rate.
Accrued interest at February 13, 1999 has been paid in full in the
respective amounts of approximately $137,000 for Mr. Benaroya and $21,000
for Mr. Remeta. The advances mature on February 13, 2002 subject
to acceleration under certain circumstances and to a call by the Company on
February 13, 2000 with respect to half of the principal amount. Payment of
the advances is secured by a pledge of the shares of the Company's Common
Stock in the respective amounts of 800,000 shares issued to Mr. Benaroya and
116,888 shares issued to Mr. Remeta. Each advance is a full recourse
obligation of the borrower.
6. STOCK OPTIONS
In May 1999, at the annual meeting of stockholders of the Company,
the stockholders approved the adoption of the 1999 Stock Option Plan,
including a stock option reserve of 400,000 shares of common stock.
7. SUPPLEMENTAL CASH FLOW INFORMATION
Net cash flow from operating activities includes cash payments for
interest and income taxes as follows (dollars in thousands):
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Thirteen Weeks Ended Thirty-Nine Weeks Ended
------------------------- -------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------- ------------ ----------- -----------
Cash interest:
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Interest income, net per
statements of operations $467 $388 $1,313 $883
Plus: Non-cash
interest expense 69 3 82 20
----- ----- ------ -----
Net cash interest income
including interest income
of $714, $608,
$2,031 and $1,662 $536 $391 $1,395 $903
===== ===== ====== =====
Income tax payments $3,576 $5,548 $7,803 $7,478
====== ====== ====== ======
</TABLE>
Financing activities for the thirty-nine weeks ended October 31,
1998 include the non-cash exercise of 1,076,955 stock options, with the
exercise price paid by exchanging common stock held equal to the cash
payment due.
8. OTHER INCOME
In May 1998, the Company realized a capital gain of $3.1 million on
the sale of its minority interest in a privately held apparel design and
manufacturing firm for cash. The gain is reported as non-operating income.
9. CONTINGENCY FOOTNOTE
The Company is involved in legal actions and claims arising in the
ordinary course of business. Management believes (based on advice of legal
counsel) that such litigation and claims will not have a material adverse
effect on the Company's financial position or results of operations.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER FISCAL 1999 VERSUS THIRD QUARTER FISCAL 1998
Net sales for the third quarter of Fiscal 1999 increased 1.9% from
the third quarter of Fiscal 1998, to $86.8 million from $85.2 million, from
an increase in unit volume. Average stores open decreased 1.8% from 509 to
500 as underperforming stores were closed selectively. Comparable store
sales for the quarter increased 3.0%. There is no assurance that sales and
comparable store sales will continue to increase. (Net sales for November
1999 decreased 1.2% from November 1998 to $28.2 million from $28.5 million.
Comparable store sales declined 1.8% in November 1999.)
Gross profit was $19.9 million in the third quarter of Fiscal 1999
compared with $22.3 million in the third quarter of Fiscal 1998, decreasing
as a percentage of net sales to 22.9% from 26.2%. The decrease in gross
profit as a percentage of net sales was primarily attributable to an
increase in marketing expenses and a decrease in the merchandise margin
rate. The stores operated by the Company under trade names that predate the
Company's AVENUE(R) trade name were converted to the AVENUE(R) trade name
in the third quarter of Fiscal 1999. The increase in marketing expenses
related principally to the conversion of stores to the Company's AVENUE(R)
trade name. The marketing campaign for trade name conversion was completed
in the third quarter of Fiscal 1999.
General, administrative and store operating expenses were $19.1
million in the third quarter of Fiscal 1999 compared to $18.9 million in
the third quarter of Fiscal 1998. As a percentage of net sales, general,
administrative and store operating expenses decreased to 22.0% from 22.2%.
During the third quarter of Fiscal 1999, operating income
decreased to $0.8 million from $3.4 million in the third quarter of Fiscal
1998.
Net interest income was $0.5 million in the third quarter of
Fiscal 1999 and $0.4 million in the third quarter of Fiscal 1998, primarily
from interest earned at higher rates on a higher level of cash and cash
equivalents.
The Company had a provision for income taxes of $0.5 million in
the third quarter of Fiscal 1999 and $1.4 million in the third quarter of
Fiscal 1998. The effective rate increased to 41.5% in the third quarter of
Fiscal 1999 from 35.8% in the third quarter of Fiscal 1998.
The Company had net income of $0.7 million for the third quarter
of Fiscal 1999 and $2.5 million for the third quarter of Fiscal 1998.
FIRST NINE MONTHS FISCAL 1999 VERSUS FIRST NINE MONTHS FISCAL 1998
Net sales for the first nine months of Fiscal 1999 were $282.4
million compared with $282.3 million for the first nine months of Fiscal
1998. Average stores open decreased 2.9% from 516 to 501 as underperforming
stores were closed selectively. Comparable store sales for the first nine
months increased 2.0%.
Gross profit was $75.6 million in the first nine months of Fiscal
1999 compared with $78.2 million in the first nine months of Fiscal 1998,
decreasing as a percentage of net sales to 26.8% from 27.7%. The decrease
in gross profit as a percentage of net sales was primarily attributable to
an increase in marketing expenses, largely in connection with the trade
name conversion.
General, administrative and store operating expenses were $58.1
million in the first nine months of Fiscal 1999 compared to $59.7 million
in the first nine months of Fiscal 1998, decreasing principally as a result
of reduced computer software expenses, insurance expenses and administrative
expenses. As a percentage of net sales, general, administrative and store
operating expenses decreased to 20.6% from 21.2%.
During the first nine months of Fiscal 1999, operating income was
$17.5 million compared with $18.5 million in the first nine months of
Fiscal 1998.
Net interest income was $1.3 million in the first nine months of
Fiscal 1999 and $0.9 million in the first nine months of Fiscal 1998,
primarily from interest earned at higher rates on a higher level of cash
and cash equivalents.
The Company had a provision for income taxes of $7.0 million in
the first nine months of Fiscal 1999 and $8.2 million in the first nine
months of Fiscal 1998. The effective rate increased to 37.2% in the first
nine months of Fiscal 1999 from 36.5% in the first nine months of Fiscal
1998.
The Company had net income of $11.8 million for the first nine
months of Fiscal 1999 and $14.3 million for the first nine months of Fiscal
1998. Excluding non-operating income of $3.1 million, net of taxes, net
income for the first nine months of Fiscal 1998 was $12.3 million.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities in the first nine
months of Fiscal 1999 was $2.8 million.
The Company's cash on hand increased to $31.8 million at October
30, 1999 from $30.7 million at October 31, 1998. Cash on hand at January
30, 1999 was $45.9 million.
Inventory increased to $62.7 million at October 30, 1999 from
$54.2 million at October 31, 1998. Inventory was $45.6 million at January
30, 1999. The Company's inventory levels peak in early May and
November/December. During Fiscal 1998, the highest inventory level was
$54.2 million.
Import purchases are made in U.S. dollars, are generally financed
by trade letters of credit and constituted approximately two-thirds of
total purchases during the year ended October 30, 1999.
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.
United Retail Group, Inc. and United Retail Incorporated, its
subsidiary (collectively, the "Companies"), are parties to a Financing
Agreement, dated August 15, 1997, as amended (the "Financing Agreement"),
with The CIT Group/Business Credit, Inc. ("CIT"). The Financing Agreement
provides a revolving line of credit for a term ending August 15, 2001 in
the aggregate amount of $40 million for the Companies, subject to
availability of credit as described in the following paragraphs. The line
of credit may be used on a revolving basis by either of the Companies to
support trade letters of credit and standby letters of credit and to
finance loans. As of October 30, 1999, trade letters of credit for the
account of the Company and supported by CIT were outstanding in the amount
of $24.3 million. (A standby letter of credit supported by CIT was also
outstanding for $2.0 million as collateral for obligations in the ordinary
course of business under general liability insurance policies.)
Subject to the following paragraph, the availability of credit
(within the aggregate $40 million line of credit) to either of the
Companies at any time is the excess of its borrowing base over the sum of
(x) the aggregate outstanding amount of its letters of credit and its
revolving loans, if any, and (y) at CIT's option, the sum of (i) unpaid
sales taxes, and (ii) up to $500,000 in total liabilities of the Companies
under permitted encumbrances (as defined in the Financing Agreement). The
borrowing base, as to either of the Companies, is the sum of (x) a
percentage of the book value of its eligible inventory (both on hand and
unfilled purchase orders financed with letters of credit), ranging from 60%
to 65% depending on the season, and (y) the balance in an account in its
name that has been pledged to the lenders (a "Pledged Account").
The provisions of the preceding paragraph to the contrary
notwithstanding, the Companies are required to maintain unused at all times
combined availability of at least $5 million. Except for the maintenance of
a minimum availability of $5 million and a limit on capital expenditures,
the Financing Agreement does not contain any financial covenants. (At
October 30, 1999, after giving effect to the $5 million minimum availability,
the Companies had usable credit under the Financing Agreement of $13.7
million; the Pledged Account had a zero balance; the Company's cash on hand
was unrestricted; and no loan had been drawn down.)
In the event a revolving loan is made to one of the Companies,
interest is payable monthly based on a 360-day year at the prime rate or at
two percent plus the LIBOR rate on a per annum basis, at the borrower's
option.
The line of credit is secured by a security interest in inventory
and proceeds and by the balance from time to time in the Pledged Account.
The Financing Agreement also includes certain restrictive
covenants that impose limitations (subject to certain exceptions) on the
Companies with respect to, among other things, making certain investments,
declaring or paying dividends, making loans, engaging in certain
transactions with affiliates, or consolidating, merging or making
acquisitions outside the ordinary course of business.
The Company believes that its cash on hand, the availability of
credit under the Financing Agreement on a revolving basis and cash flows
from future operating activities will be adequate to meet anticipated
working capital needs, including seasonal financing needs, for the next 12
months. This paragraph constitutes forward-looking information under the
1995 Private Securities Litigation Reform Act (the "Reform Act") and is
subject to the uncertainties and other risk factors referred to under the
caption "Future Results."
STORES
The Company leased 500 retail stores at October 30, 1999, of which
307 stores were located in strip shopping centers, 172 stores were located
in malls and 21 stores were located in downtown shopping districts. Total
retail square footage was 2.0 million square feet both at October 30, 1999
and a year earlier.
The stores operated by the Company under trade names that predate
the Company's AVENUE(R) trade name were converted to the AVENUE(R) trade
name in the third quarter of Fiscal 1999.
In the fourth quarter of Fiscal 1999, the Company intends to pay
the costs of opening new stores and remodeling certain existing stores from
its cash on hand. (Substantially all of these costs will be capital costs.)
This paragraph contains forward-looking information under the Reform Act,
which is subject to the uncertainties and other risk factors referred to
under the caption "Future Results".
E-COMMERCE
The Company launched a test site (www.cloudwalkers.com) during the
third quarter of Fiscal 1999 for the sale of its Cloudwalkers(R) brand
women's shoes on the Internet. A catalogue for the shoes was also
distributed. Internet and catalogue sales of shoes were not material during
the third quarter of Fiscal 1999 and are not planned to be material in the
fourth quarter of Fiscal 1999.
TAX MATTERS
The Company's federal income tax returns for Fiscal 1994, Fiscal
1995 and Fiscal 1996 are being audited by the Internal Revenue Service.
Management believes that the results of the audit will not have a material
adverse effect on the Company's financial position or results of
operations.
RENOVATING COMPUTERIZED SYSTEMS AND REPLACING EMBEDDED TECHNOLOGY
The Company operates a nationwide chain of specialty apparel
retail stores, imports a significant portion of its inventory, and makes
proprietary credit cards available to its customers. The Company's
operations are heavily dependent on date sensitive computerized systems and
embedded technology, including (i) its management information systems, (ii)
the technology, including microcontrollers, embedded in equipment at the
Company's national distribution center, (iii) the system for issuing and
processing a trade letter of credit for each of the Company's purchase
orders used by the bank (the "Letter of Credit Provider") that finances the
Company's purchases of inventory abroad and (iv) links to another bank (the
"Credit Card Bank") to authorize purchases by customers using the Company's
proprietary credit cards. The Company's headquarters uses a date sensitive
voicemail system. The Company's headquarters and stores are leased and are
generally affected by date sensitive embedded technology used to control
heating and ventilation and lighting.
Generally, computer programs and embedded technology often will
mishandle data that includes a year after 1999 (referred to below as "Year
2000 risks").
The mainframe operating systems used by the Company's vendor have
been represented by the vendor to be Year 2000 compliant in all material
respects.
The Company's management information systems department (the "MIS
Department") has renovated substantially all of the Company's applications
software, systems software and hardware (collectively referred to below as
"Systems") to accommodate dates after 1999.
The Systems that are essential to the Company's management
information systems ("Essential Systems") and the mainframe operating
systems were successfully tested together. (There is no assurance, however,
that the integrated testing revealed all Year 2000 risks.) (The renovation,
validation and testing of the Essential Systems are referred to below as
the "Year 2000 Project.")
The Company has obtained representations from the manufacturers of
the equipment that performs essential functions at the national
distribution center to the effect that the equipment is Year 2000 compliant
in all material respects. There is no assurance, however, that all the
essential equipment at the national distribution center will function
properly after 1999 or that any malfunctions that occur will not have a
material adverse effect on the Company's logistics operations.
The Letter of Credit Provider has advised the Company that its
trade letter of credit system and telecommunications interfaces are Year
2000 complaint in all material respects. There is no assurance, however,
that such system and interfaces will function properly after 1999.
The Credit Card Bank has advised the Company that its credit card
transaction processing system has been renovated and certified to be Year
2000 compliant in all material respects. The Credit Card Bank's
telecommunications interfaces for point of sale credit authorizations were
successfully tested by the Company. There is no assurance, however, that
these processing systems and telecommunications interfaces will function
properly after 1999 or that any malfunctions that occur will not have a
material adverse effect on the Company's sales.
The Company replaced its voicemail system with one that is
guaranteed to be Year 2000 compliant by the manufacturer.
The Company believes that in most cases the embedded technology
used in energy management systems to control heating and ventilation and
lighting at its headquarters and its stores can quickly be bypassed
manually in the event of a malfunction because of an inability to
accommodate dates after 1999. There is no assurance, however, that any
malfunctions that occur will not have a material adverse effect on the
Company's operations. This paragraph contains forward-looking information
under the Reform Act, which is subject to uncertainty.
The Company does not have a project tracking system for the time
that its associates spent on the Year 2000 Project. The Company's internal
costs for the Year 2000 Project are principally the related payroll costs
for the MIS Department, estimated to have been $1.1 million from February
3, 1996 to October 30, 1999, of which $0.1 million is estimated to have
been expensed in the third quarter of Fiscal 1999. The cost of special
purchases for the Year 2000 Project was approximately $0.6 million,
substantially all of which was incurred in Fiscal 1998. Amounts equal to
the internal and external costs of the Year 2000 Project, however, probably
would have been spent on other software development projects, if the Year
2000 Project had not been necessary. Other software development projects
deferred because of the Year 2000 Project probably would have improved the
Company's operational efficiency but management does not believe that any
of the deferred operational improvements would have been material to its
operations.
Budgeted MIS Department payroll costs and special purchases for
the Year 2000 Project in the fourth quarter of Fiscal 1999 are not material
in relation to the Company's general, administrative and store operating
expenses in the fourth quarter of Fiscal 1998. However, there is no
assurance that unexpected additional costs will not be incurred.
The inability of computerized systems and embedded technology in
general to accommodate dates after 1999 may cause disruptions in the United
States and abroad in the telecommunications, banking, credit card,
transportation, utilities and apparel manufacturing industries and in
government services. If such disruptions occur, they could have a material
adverse effect on the entire specialty apparel retail industry, including
the Company. The Company has not assessed industry-wide Year 2000 risks
that are not unique to the Company's operations. The Company's contingency
plan for Year 2000 risks that might affect the entire industry is to have
multiple, geographically diverse vendors of each major category of goods,
to the extent feasible. The Company will address industry-wide Year 2000
risks on an ad hoc basis as problems arise, principally by shifting
purchase orders to vendors that are less troubled by Year 2000 problems
than their competitors. There is no assurance, however, that any vendors
will be Year 2000 compliant.
There is no commercially viable alternative course of action, so
the Company will not develop contingency plans for prolonged failure of its
Essential Systems and lengthy constructive eviction from its headquarters.
Such Systems failure and constructive eviction would have a material
adverse effect on the Company's results of operations, net cash provided
from operating activities and financial condition.
The Company's contingency plan for Year 2000 risks at its national
distribution center is to replace as quickly as possible any essential
equipment that malfunctions because of inability to accommodate dates after
1999. There is no assurance, however, that Year 2000 compliant replacement
equipment will be available.
The Company's contingency plan with respect to the unavailability
of a trade letter of credit for each of the Company's purchase orders is to
deliver blanket trade letters of credit to the Company's major foreign
vendors, by courier, if necessary. (A blanket trade letter of credit would
finance all Company purchase orders to be given to the vendor.)
The Company's contingency plan with respect to downtime in
proprietary credit card operations by the Credit Card Bank is to continue
credit sales on the Company's own account with its own systems until the
Credit Card Bank resumes operations or is replaced by another bank. While
other banks would be available to replace the Credit Card Bank, there is no
assurance that any bank will be Year 2000 compliant.
The Company has contingency plans with respect to heating and
ventilation and lighting controls in its stores that malfunction because of
an inability to accommodate dates after 1999. For stores located in strip
shopping centers, the Company will arrange as quickly as possible for local
maintenance contractors to bypass manually any controls that have
malfunctioned. There is no assurance, however, that local maintenance
contractors will have time available to bypass controls that have
malfunctioned. For stores located in malls and downtown shopping districts,
the Company will promptly notify landlords of systems that have
malfunctioned and request immediate restoration of service. There is no
assurance, however, that landlords will be able to restore service. In the
case of any unheated stores that have lights, the Company will also ask
store managers to keep the stores open if weather conditions permit.
There is no assurance that the Company's contingency plans will
diminish the possible adverse consequences of Year 2000 risks.
The Company believes that a reasonably likely worst case scenario
resulting from Year 2000 risks that are unique to its operations would be a
decline in net sales for the fourth quarter of Fiscal 1999 having a
material adverse effect on the Company's results of operations and net cash
provided from operating activities for that quarter but not on the
Company's financial condition (see, "Liquidity and Capital Resources"). While
management does not believe that such risks will have a material adverse
effect on the Company's operations in Fiscal 2000, there is no assurance
that such risks will not have such a material adverse effect, regardless of
the Company's remediation efforts and contingency plans. Further, there is
no assurance that Year 2000 risks that affect the entire specialty apparel
retail industry, and not just the Company, will not have a material adverse
effect on the Company's operations and financial condition in the fourth
quarter of Fiscal 1999 and in Fiscal 2000.
Certain of the eight preceding paragraphs contain forward-looking
information under the Reform Act, which is subject to the uncertainties and
other risk factors referred to under the caption "Future Results."
FUTURE RESULTS
Future results could differ materially from those currently
anticipated by the Company due to unforeseeable problems that might arise
and possible (i) extreme or unseasonable weather conditions, (ii)
miscalculation of fashion trends, (iii) shifting shopping patterns, both
within the specialty store sector and in other channels of distribution,
(iv) disruptions in the telecommunications, banking, credit card,
transportation, utilities and apparel manufacturing industries in the
United States and abroad caused by the inability of their computerized
systems and embedded technology to accommodate dates after 1999, (v)
economic downturns, weakness in overall consumer demand, and variations in
the demand for women's fashion apparel, (vi) imposition by vendors, or
their third-party factors, of more onerous payment terms for domestic
merchandise purchases, (vii) acceleration in the rate of business failures
and inventory liquidations in the specialty store sector of the women's
apparel industry, and (viii) disruptions in the sourcing of merchandise
abroad, including (a) political instability and economic distress in South
Asia, (b) China's claims to sovereignty over Taiwan, (c) North Korea's
claims to sovereignty over South Korea, (d) exchange rate fluctuations, (e)
trade sanctions or restrictions, (f) changes in quota and duty regulations,
(g) delays in shipping, (h) increased costs of transportation or (i)
disruptions in government services in the United States and abroad caused
by the inability of computerized systems and embedded technology to
accommodate dates after 1999, including delays in the issuance by the
United States Customs Service of clearances on imported merchandise.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
Options to purchase shares of Company Common Stock were issued
without registration under the Securities Act of 1933 (the "Securities
Act"), as follows:
Grant Date No. of Underlying Shares Exercise Price
---------- ------------------------ --------------
9/23/99 1,500 $13.5625
8/2/99 10,000 $10.25
The options become exercisable in five equal annual installments
commencing one year after the date of grant.
The grants were exempt from the registration provisions of the
Securities Act under Section 4(2) thereof because the grantees are
employees of the issuer. Nevertheless, the Company intends to file a
registration statement with respect to the options before they become
exercisable.
ITEM 6. EXHIBITS
The following exhibits are filed herewith:
Number Description
------ -----------
10 Amendment, dated October 6, 1999, to
Financing Agreement among the
Corporation, United Retail Incorporated
and The CIT Group/Business Credit, Inc.
("CIT")
27 Financial Data schedule
The promissory note, dated November 18, 1999, from Raphael Benaroya to
the Corporation filed as the exhibit to Mr. Benaroya's Schedule 13D, dated
November 18, 1999, is incorporated herein by reference.
The following exhibits to the Corporation's Current Report on Form
8-K, filed September 23, 1999, are incorporated herein by reference:
Number in Filing Description
---------------- -----------
3 Certificate of Designation, Preferences
and Rights of Series A Junior
Participating Preferred Stock
10.1.1 Right of First Refusal Agreement, dated
as of September 17, 1999, between the
Corporation and Limited Direct
Associates, L.P.
10.1.2 Right of First Refusal Agreement, dated
as of September 17, 1999, between the
Corporation and The Limited,
Inc./Intimate Brands, Inc. Foundation
The following exhibit to the Corporation's Current Report on Form
8-K, filed September 17, 1999 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
3 Restated By-Laws of the Corporation
The stockholders' rights plan filed as the exhibit to the
Corporation's Registration Statement on Form 8-A, dated September 15, 1999, is
incorporated herein by reference.
The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended January 30, 1999 are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1 Amendment, dated March 29, 1999, to
Financing Agreement among the
Corporation, United Retail Incorporated
and CIT
10.2 Financial Statements of Retirement Savings
Plan for year ended December 31, 1998
13 Sections of 1998 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
21 Subsidiaries of the Corporation
The 1999 Stock Option Plan set forth as the Appendix to the
Corporation's proxy statement on Schedule 14A for its 1999 annual meeting
of stockholders is incorporated herein by reference.*
The following exhibits to the Corporation's Quarterly Report on
Form 10-Q for the period ended October 31, 1998 are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1* Employment Agreement, dated November 20,
1998, between the Corporation and
Raphael Benaroya
10.2* Employment Agreement, dated November 20,
1998, between the Corporation and
George R. Remeta
10.3* Employment Agreement, dated November 20,
1998, between the Corporation and
Kenneth P. Carroll
10.4* Employment Agreement, dated March 26,
1998, between the Corporation and
Carrie Cline-Tunick and amendment
thereto.
The following exhibits to the Corporation's Quarterly Report on
Form 10-Q for the period ended May 2, 1998 are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1* 1998 Stock Option Agreement, dated May 21,
1998, between the Corporation and
Raphael Benaroya
10.2* 1998 Stock Option Agreement, dated May 21,
1998, between the Corporation and
George R. Remeta
The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended January 31, 1998 are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1 Restated Stockholders' Agreement, dated
December 23, 1992, between the
Corporation and certain of its
stockholders and Amendment No. 1,
Amendment No. 2 and Amendment No. 3
thereto
10.2 Private Label Credit Program
Agreement, dated January 27, 1998,
between the Corporation, United Retail
Incorporated and World Financial
Network National Bank (Confidential
portions have been deleted and filed
separately with the Secretary of the
Commission)
10.4* Restated 1990 Stock Option Plan as of
March 6, 1998
10.5* Restated 1990 Stock Option Plan as of
May 28, 1996
10.6* Restated 1996 Stock Option Plan as of
March 6, 1998
10.7* Restated 1989 Performance Option Plan
as of May 6, 1998
The following exhibit to the Corporation's Quarterly Report on
Form 10-Q for the period ended November 1, 1997 is incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1 Amendment, dated September 15, 1997, to
Financing Agreement among the
Corporation, United Retail Incorporated
and CIT
The following exhibits to the Corporation's Quarterly Report on
Form 10-Q for the period ended August 2, 1997 are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1 Financing Agreement, dated August 15,
1997, among the Corporation, United
Retail Incorporated and CIT
10.2* Amendment No. 1 to Restated Supplemental
Retirement Savings Plan
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 exhibit to the Corporation's Quarterly Report on
Form 10-Q for the period ended May 4, 1996 is incorporated herein by
reference:
Number in Filing Description
---------------- -----------
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 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 exhibit to the Corporation's Annual Report on Form
10-K for the year ended January 28, 1995 is incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1* Incentive Compensation Program Summary
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.
(now known as United Retail
Incorporated)
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)
10.12 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
10.33* 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
- --------------------
*A compensatory plan for the benefit of the Corporation's
management or a management contract.
(b) Current Reports on Form 8-K were filed by the Corporation on
September 17, 1999 and September 23, 1999.
The September 17, 1999 filing reported (i) the adoption of a
stockholders' rights plan, (ii) the restatement of the Company's By-laws
and (iii) the approval of a stock repurchase program.
The September 23, 1999 filing reported (i) Right of First Refusal
Agreements, dated September 20, 1999, between the Company and Limited
Direct Associates, L.P. and The Limited, Inc./Intimate Brands, Inc.
Foundation, respectively, with respect to shares of Company Common Stock
held by the other parties and (ii) the Certificate of Designation,
Preferences and Rights of the Company's Series A Junior Participating
Preferred Stock.
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/ GEORGE R. REMETA
--------------------------------------------------------
George R. Remeta, Vice Chairman of the Board and Chief
Administrative Officer - Authorized Signatory
By: /S/ JON GROSSMAN
--------------------------------------------------------
Jon Grossman, Vice President - Finance and Chief
Accounting Officer
Date: November 30, 1999
EXHIBIT INDEX
The following exhibits are filed herewith:
Number Description
------ -----------
10 Amendment, dated October 6, 1999, to
Financing Agreement among the
Corporation, United Retail Incorporated
and The CIT Group/Business Credit, Inc.
("CIT")
27 Financial Data schedule
The promissory note, dated November 18, 1999, from Raphael Benaroya
to the Corporation filed as the exhibit to Mr. Benaroya's Schedule 13D, dated
November 18, 1999, is incorporated herein by reference.
The following exhibits to the Corporation's Current Report on Form
8-K, filed September 23, 1999, are incorporated herein by reference:
Number in Filing Description
---------------- -----------
3 Certificate of Designation, Preferences
and Rights of Series A Junior
Participating Preferred Stock
10.1.1 Right of First Refusal Agreement, dated
as of September 17, 1999, between the
Corporation and Limited Direct
Associates, L.P.
10.1.2 Right of First Refusal Agreement, dated
as of September 17, 1999, between the
Corporation and The Limited,
Inc./Intimate Brands, Inc. Foundation
The following exhibit to the Corporation's Current Report on Form
8-K, filed September 17, 1999 is incorporated herein by reference:
Number in Filing Description
---------------- -----------
3 Restated By-Laws of the Corporation
The stockholders' rights plan filed as the exhibit to the
Corporation's Registration Statement on Form 8-A, dated September 15, 1999,
is incorporated herein by reference.
The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended January 30, 1999 are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1 Amendment, dated March 29, 1999, to
Financing Agreement among the
Corporation, United Retail Incorporated
and CIT
10.2 Financial Statements of Retirement Savings
Plan for year ended December 31, 1998
13 Sections of 1998 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
21 Subsidiaries of the Corporation
The 1999 Stock Option Plan set forth as the Appendix to the
Corporation's proxy statement on Schedule 14A for its 1999 annual meeting
of stockholders is incorporated herein by reference.*
The following exhibits to the Corporation's Quarterly Report on
Form 10-Q for the period ended October 31, 1998 are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1* Employment Agreement, dated November 20,
1998, between the Corporation and
Raphael Benaroya
10.2* Employment Agreement, dated November 20,
1998, between the Corporation and
George R. Remeta
10.3* Employment Agreement, dated November 20,
1998, between the Corporation and
Kenneth P. Carroll
10.4* Employment Agreement, dated March 26,
1998, between the Corporation and
Carrie Cline-Tunick and amendment
thereto.
The following exhibits to the Corporation's Quarterly Report on
Form 10-Q for the period ended May 2, 1998 are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1* 1998 Stock Option Agreement, dated May 21,
1998, between the Corporation and
Raphael Benaroya
10.2* 1998 Stock Option Agreement, dated May 21,
1998, between the Corporation and
George R. Remeta
The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended January 31, 1998 are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1 Restated Stockholders' Agreement, dated\
December 23, 1992, between the
Corporation and certain of its
stockholders and Amendment No. 1,
Amendment No. 2 and Amendment No. 3
thereto
10.2 Private Label Credit Program Agreement,
dated January 27, 1998, between the
Corporation, United Retail Incorporated
and World Financial Network National
Bank (Confidential portions have been
deleted and filed separately with the
Secretary of the Commission)
10.4* Restated 1990 Stock Option Plan as of
March 6, 1998
10.5* Restated 1990 Stock Option Plan as of
May 28, 1996
10.6* Restated 1996 Stock Option Plan as of
March 6, 1998
10.7* Restated 1989 Performance Option Plan
as of May 6, 1998
The following exhibit to the Corporation's Quarterly Report on
Form 10-Q for the period ended November 1, 1997 is incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1 Amendment, dated September 15, 1997, to
Financing Agreement among the
Corporation, United Retail Incorporated
and CIT
The following exhibits to the Corporation's Quarterly Report on
Form 10-Q for the period ended August 2, 1997 are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1 Financing Agreement, dated August 15,
1997, among the Corporation, United
Retail Incorporated and CIT
10.2* Amendment No. 1 to Restated Supplemental
Retirement Savings Plan
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 exhibit to the Corporation's Quarterly Report on
Form 10-Q for the period ended May 4, 1996 is incorporated herein by
reference:
Number in Filing Description
---------------- -----------
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 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 exhibit to the Corporation's Annual Report on Form
10-K for the year ended January 28, 1995 is incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1* Incentive Compensation Program Summary
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.
(now known as United Retail Incorporated)
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)
10.12 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
10.33* 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
- --------------------
*A compensatory plan for the benefit of the Corporation's management
or a management contract.
EXHIBIT 10
October 6, 1999
UNITED RETAIL GROUP, INC.
UNITED RETAIL INCORPORATED
365 West Passaic Street
Rochelle Park, NJ 07662
Gentlemen:
We refer to the Financing Agreement by and among United Retail Group, Inc.
("URGI"), United Retail Incorporated ("URI" and together with URGI the
"Companies"), The CIT Group/Business Credit, Inc., as Agent and Lender,
FirsTrust Bank, as Lender and other parties hereafter becoming the Lenders
thereunder, dated August 15, 1997, as amended (herein the "Agreement).
Capitalized terms used herein and defined in the Agreement shall have the
meanings specified therein unless otherwise specifically defined herein.
Effective immediately pursuant to mutual understanding, the Agreement shall
be and hereby is, amended as follows:
(1) the definition of "Permitted Transactions" shall be, and hereby is,
amended in its entirety to read as follows:
"PERMITTED TRANSACTIONS shall mean advances, loans (other than loans
and advances by URI to URGI), pledged deposits, investments,
guarantees, endorsements and/or stock redemptions, which would
otherwise be prohibited by Section 6, Paragraphs 8(F), (G) and (H);
provided that (i) the aggregate dollar amount thereof does not exceed
the sum of (x) $25,711,000 (herein "Cash On Hand At Closing") plus
(y) $7,500,000 and (ii) after giving effect thereto (A) the Companies
are in compliance with Section 6, Paragraph 8(I) and (B) no Default
and/or Event of Default has occurred hereunder."
(2) Section 6, Paragraph 8(G) shall be, and hereby is amended, in its
entirety to read as follows:
"G. Declare or pay any dividend of any kind on, or purchase, acquire,
redeem or retire, any of the capital stock or equity interest, of any
class whatsoever, whether now or hereafter outstanding, except that
(i) URGI may acquire, retire and/or redeem shares of its capital
stock in consideration of the issuance of other shares of capital
stock, (ii) URI may declare and pay dividends on its capital stock in
an amount sufficient to enable URGI to pay income or franchise taxes
of URI due as a result of the filing of a consolidated, combined or
unitary tax return in which the operations of URI are included and
(iii) URGI may redeem shares of its capital stock in Permitted
Transactions; provided that, in any instance under this paragraph G,
after giving effect thereto, no Default or Event of Default has
occurred hereunder;"
Except as hereinabove specifically provided no other change in or waiver of
the terms, provisions or conditions of the Agreement is intended or
implied. If the foregoing is in accordance with your understanding of our
agreement kindly so indicate by signing and returning the enclosed copy of
this letter.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC., as Agent and Lender
By: /s/ Karen Hoffman
Title: Vice President
FIRSTRUST BANK, as Lender
By: /s/ Kent Nelson
Title: Vice President
Read and Agreed to:
UNITED RETAIL GROUP, INC.
By: /s/ Kenneth P. Carroll
Title: Senior Vice President
UNITED RETAIL INCORPORATED
By: /s/ Jon Grossman
Title: Vice President
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<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-30-1999
<PERIOD-TYPE> 3-MOS
<CASH> 31,773
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<RECEIVABLES> 2,890
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<TOTAL-COSTS> 66,905
<OTHER-EXPENSES> 19,128
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (467)
<INCOME-PRETAX> 1,236
<INCOME-TAX> 513
<INCOME-CONTINUING> 723
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 723
<EPS-BASIC> $0.06
<EPS-DILUTED> $0.05
</TABLE>
