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 28, 2000
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.
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(Exact name of registrant as specified in its charter)
Delaware 51 0303670
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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
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(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 28, 2000, 13,314,033 units, each consisting of one
share of the registrant's common stock, $.001 par value per share, and one
stock purchase right, were outstanding. The units are referred to herein as
"shares."
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. FINANCIAL STATEMENTS
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
October 28, January 29, October 30,
2000 2000 1999
-------------------- -------------- --------------
ASSETS (Unaudited) (Unaudited)
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $39,503 $45,223 $43,394
Accounts receivable 3,927 1,146 2,890
Inventory 68,527 55,323 62,712
Prepaid rents 4,196 3,900 3,889
Other prepaid expenses 4,121 2,365 3,377
Deferred taxes 581 1,647 0
-------------------- -------------- --------------
Total current assets 120,855 109,604 116,262
Property and equipment, net 75,197 63,302 59,669
Deferred charges and other intangible assets,
net of accumulated amortization of $2,823, $2,495
and $2,398 6,883 7,010 7,128
Deferred income taxes 0 0 828
Other assets 299 422 399
-------------------- -------------- --------------
Total assets $203,234 $180,338 $184,286
==================== ============== ==============
LIABILITIES
Current liabilities:
Current portion of distribution center financing $1,302 $1,228 $1,205
Accounts payable and other 44,425 26,993 33,594
Accrued expenses 23,388 20,285 21,735
-------------------- -------------- --------------
Total current liabilities 69,115 48,506 56,534
Distribution center financing 6,958 7,944 8,260
Other long-term liabilities 6,280 6,131 6,063
-------------------- -------------- --------------
Total liabilities 82,353 62,581 70,857
-------------------- -------------- --------------
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 (14,215,400; 14,190,800
and 13,833,400); outstanding (13,314,033;
13,289,433 and 13,160,088)
Additional paid-in capital 80,239 80,143 77,907
Retained earnings 44,511 41,483 37,167
Treasury stock (901,367; 901,367 and 673,312
shares) at cost (3,883) (3,883) (1,659)
-------------------- -------------- --------------
Total stockholders' equity 120,881 117,757 113,429
-------------------- -------------- --------------
Total liabilities and stockholders' equity $203,234 $180,338 $184,286
==================== ============== ==============
The accompanying notes are an integral part of the Consolidated Financial Statements.
</TABLE>
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
-------------------- -----------------------
October 28, October 30, October 28, October 30,
2000 1999 2000 1999
-------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
Net sales $92,301 $86,802 $300,400 $282,408
Cost of goods sold, including
buying and occupancy costs 71,653 66,905 230,311 206,803
-------------- -------------- -------------- --------------
Gross profit 20,648 19,897 70,089 75,605
General, administrative and
store operating expenses 22,813 19,128 66,293 58,069
-------------- -------------- -------------- --------------
Operating (loss) income (2,165) 769 3,796 17,536
Interest income, net 515 467 1,392 1,313
-------------- -------------- -------------- --------------
(Loss) income before income taxes (1,650) 1,236 5,188 18,849
(Benefit) provision for income taxes (513) 513 2,160 7,016
-------------- -------------- -------------- --------------
Net (loss) income ($1,137) $723 $3,028 $11,833
============== ============== ============== ==============
Net (loss) income per share
Basic ($0.09) $0.06 $0.23 $0.90
Diluted ($0.09) $0.05 $0.22 $0.85
============== ============== ============== ==============
Weighted average number of
shares outstanding
Basic 13,314,033 13,144,559 13,309,666 13,121,197
Common stock equivalents
(stock options) 0 765,027 263,411 786,146
-------------- -------------- -------------- --------------
Diluted 13,314,033 13,909,586 13,573,077 13,907,343
============== ============== ============== ==============
The accompanying notes are an integral part of the Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Thirty-nine Weeks Ended
October 28, October 30,
2000 1999
--------------- -------------
Cash Flows From Operating Activities:
<S> <C> <C>
Net income $3,028 $11,833
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization of property and equipment 6,722 5,060
Amortization of deferred charges and other
intangible assets 353 295
Loss on disposal of assets 728 281
Compensation expense 233 233
Deferred income taxes 1,177 292
Deferred lease assumption revenue amortization (270) (312)
Tax benefit from exercise of stock options 16 0
Changes in operating assets and liabilities:
Accounts receivable (2,781) (2,377)
Income taxes (295) (1,091)
Inventory (13,204) (17,148)
Accounts payable and accrued expenses 19,537 10,789
Prepaid expenses (2,052) (891)
Other 46 (1,019)
--------------- ---------------
Net Cash Provided From Operating Activities 13,238 5,945
--------------- ---------------
INVESTING ACTIVITIES:
Capital expenditures (19,346) (17,193)
Deferred payment for property and equipment 1,453 571
Proceeds from sale of lease 0 200
--------------- ---------------
Net Cash Used In Investing Activities (17,893) (16,422)
--------------- ---------------
FINANCING ACTIVITIES:
Repayments of long-term debt (912) (843)
Issuance of loans to officers (146) (23)
Exercise of stock options 108 338
Other (115) 0
--------------- ---------------
Net Cash Used In Financing Activities (1,065) (528)
--------------- ---------------
Net decrease in cash and cash equivalents (5,720) (11,005)
Cash and cash equivalents, beginning of period 45,223 54,399
--------------- ---------------
Cash and cash equivalents, end of period $39,503 $43,394
=============== ===============
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 28, 2000 and October 30, 1999 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 1999 Annual Report and 1999 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 a full fiscal year.
Certain prior year balances have been reclassified to conform with
the current year presentation.
2. Change in Accounting
--------------------
The Company has changed its method of accounting for layaway sales.
Historically, layaway revenue was recorded at the time of the initial
payment. The Company now defers revenue on layaway sales until the
merchandise is delivered to the customer. This change was made after the
issuance of the recent Securities and Exchange Commission Staff Accounting
Bulletin No. 101 "Revenue Recognition in Financial Statements".
The Company adopted the change in accounting principle by recording
a cumulative effect adjustment as of the beginning of the quarter ended
April 29, 2000. The revenue adjustment related to this change was $98,000.
The effect of this change in accounting is not expected to be material to
the financial position or annual results of operations of the Company, but
it is expected to increase results of operations in the second and fourth
quarters of the Company's fiscal year with offsetting decreases in the
first and third quarters.
3. Net Income 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 with
the exception of the thirteen weeks ended October 28, 2000, where the
effect of stock options is anti-dilutive. For the thirteen weeks ended
October 28, 2000, 87,764 options were not included.
Options to purchase shares of common stock which 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:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
------------------------ -----------------------
Oct 28, Oct 30, Oct 28, Oct 30,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Options 941,100 53,000 941,100 53,000
Range of option prices per share $5.88 - $15.13 $12.08 - $26.75 $5.88 - $15.13 $11.50 - $26.75
</TABLE>
4. Financing Arrangements
----------------------
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.
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.
The Company and certain of its subsidiaries, (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, 2004 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 any of the Companies to support trade letters of credit and
standby letters of credit and to finance loans.
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.
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.
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.
At October 28, 2000, the combined availability of the Companies was
$16.4 million, no balance was in the pledged account, the aggregate
outstanding amount of letters of credit arranged by CIT was $23.6 million
and no loan had been drawn down. The Company's cash on hand was
unrestricted.
5. Income Taxes
------------
The provision for income taxes consists of (dollars in thousands):
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<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
------------------------- ----------------------------
October 28, October 30, October 28, October 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
Currently payable:
<S> <C> <C> <C> <C>
Federal $(1,538) $372 $769 $6,240
State (65) 76 214 484
----------- ----------- ----------- -----------
(1,603) 448 983 6,724
----------- ----------- ----------- -----------
Deferred:
Federal 961 53 968 240
State 129 12 209 52
----------- ----------- ----------- -----------
1,090 65 1,177 292
----------- ----------- ----------- -----------
$(513) $513 $2,160 $7,016
=========== =========== =========== ===========
</TABLE>
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 28, 2000 October 30, 1999
---------------- ----------------
Tax at Federal rate $(578) (35.0%) $433 35.0%
State income taxes, net of 42 2.5% 56 4.6%
federal benefit
Goodwill amortization 18 1.1% 18 1.5%
Other 5 0.3% 6 0.4%
------ ------- ----- -----
$(513) (31.1%) $513 41.5%
====== ======= ===== =====
Thirty-Nine Weeks Ended
-----------------------------------------
October 28 , 2000 October 30, 1999
----------------- -------------------
Tax at Federal rate $1,816 35.0% $6,597 35.0%
State income taxes, net of 275 5.3% 348 1.8%
federal benefit
Goodwill amortization 54 1.0% 54 0.3%
Other 15 0.3% 17 0.1%
------ ----- ------ -----
$2,160 41.6% $7,016 37.2%
====== ===== ====== =====
The net deferred tax asset reflects the tax impact of temporary
differences. The components of the net deferred tax asset as of October 28,
2000 are as follows (dollars in thousands):
Assets:
Inventory $ 571
Accruals and reserves 2,901
Compensation 294
State NOL's 1,180
------
4,946
------
Liabilities:
Depreciation 3,091
Prepaid Rent 1,274
------
4,365
Net deferred tax asset $ 581
======
Future realization of the tax benefits attributable to these
existing deductible temporary differences and NOL carryforwards ultimately
depends on the existence of sufficient taxable income within the
carryforward period available under the tax law at the time of the tax
deduction. Based on management's assessment, it is more likely than not
that the net deferred tax assets will be realized through future taxable
earnings or available carrybacks.
6. Advances To Officers
--------------------
Advances were made by the Company in February, 1998 and February, 1999
in the amounts of $1.6 million and $0.1 million to Raphael Benaroya, the
Company's Chairman of the Board, President and Chief Executive Officer. The
purpose of the advances was to finance payment of income taxes incurred in
connection with the exercise of stock options. These advances and their
related interest were refinanced as part of an issuance of a new note which
aggregated $2.4 million, which includes an additional advance of $0.7
million, in November 1999. The additional advance was to finance payment of
income taxes incurred in connection with the exercise of stock options and
to pay interest accrued on the note that was refinanced. Interest is
payable annually at the prime rate. The note has a term of four years
but can be called by the Company after two years with respect to half
of the principal amount. Payment of the advances to Mr. Benaroya is secured
by a pledge of the shares of the Company's common stock issued upon the
option exercises in the amount of 899,719 shares. The note is a full
recourse obligation of the borrower.
An advance was made to George R. Remeta, the Company's Vice Chairman and
Chief Administrative Officer, in the amount of $0.2 million in February,
1998 to finance payment of income taxes incurred in connection with the
exercise of stock options. Mr. Remeta repaid the advance in November, 1999
by surrendering shares of common stock having an equivalent market value.
7. Stock Appreciation Rights Plan
------------------------------
In May 2000, each nonmanagement Director received an award under
the Company's Stock Appreciation Rights Plan that provides for a cash
payment by the Company when the Director exercises the stock option granted
at the same time under the Company's 1999 Stock Option Plan. The payment
will be an amount equivalent to the equity in the option that is being
exercised, that is, the excess of the then current market price of the
shares issued over the exercise price paid by the Director.
8. Contingencies
-------------
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 annual results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIRD QUARTER FISCAL 2000 VERSUS THIRD QUARTER FISCAL 1999
Net sales for the third quarter of fiscal 2000 increased 6.3% from
the third quarter of fiscal 1999, to $92.3 million from $86.8 million,
principally from an increase in average price. Average stores open
increased from 500 to 505. Comparable store sales for the third quarter of
fiscal 2000 increased 2.8%. Sales in channels of distribution other than
retail stores were not material (see, "Shop @ Home").
Gross profit was $20.6 million in the third quarter of fiscal 2000
compared with $19.9 million in the third quarter of fiscal 1999, decreasing
as a percentage of net sales to 22.4% from 22.9%. The decrease in gross
profit as a percentage of net sales was attributable primarily to direct
marketing expenses, including direct marketing for shop @ home tests.
General, administrative and store operating expenses increased to
$22.8 million in the third quarter of fiscal 2000 from $19.1 million in the
third quarter of fiscal 1999, principally as a result of an increase in
shop @ home expense and a decrease in private credit card income. As a
percentage of net sales, general, administrative and store operating
expenses increased to 24.7% from 22.0%.
During the third quarter of fiscal 2000, the Company incurred an
operating loss of $2.2 million compared with operating income of $0.8
million in the third quarter of fiscal 1999.
Net interest income was $0.5 million in the third quarter of both
fiscal 2000 and fiscal 1999.
The Company had an income tax benefit of $0.5 million in the third
quarter of fiscal 2000 and a provision for income taxes of $0.5 million in
the third quarter of fiscal 1999.
The Company incurred a net loss of $1.1 million in the third
quarter of fiscal 2000 and had net income of $0.7 million for the third
quarter of fiscal 1999.
FIRST NINE MONTHS FISCAL 2000 VERSUS FIRST NINE MONTHS FISCAL 1999
Net sales for the first nine months of fiscal 2000 increased 6.4%
from the first nine months of fiscal 1999, to $300.4 million from $282.4
million, principally from an increase in average price. Average stores open
increased from 501 to 504. Comparable store sales for the first nine months
of fiscal 2000 increased 4.0%. There is no assurance that the increases in
net sales and comparable store sales will be maintained.
Gross profit was $70.1 million in the first nine months of fiscal
2000 compared with $75.6 million in the first nine months of fiscal 1999
decreasing as a percentage of net sales to 23.3% from 26.8%. The decrease
in gross profit as a percentage of net sales was primarily attributable to
a decrease in the merchandise margin rate, an increase in direct marketing
expenses, including direct marketing for shop @ home tests, and an increase
in buying and occupancy costs.
General, administrative and store operating expenses were $66.3
million in the first nine months of fiscal 2000 compared to $58.1 million
in the first nine months of fiscal 1999 principally as a result of an
increase in shop @ home expense. As a percentage of net sales, general,
administrative and store operating expenses increased to 22.1% from 20.6%.
During the first nine months of fiscal 2000, the Company had
operating income of $3.8 million compared to operating income of $17.5
million in the first nine months of fiscal 1999.
Net interest income was $1.4 million in the first nine months of
fiscal 2000 and $1.3 million in the first nine months of fiscal 1999.
The Company had a provision for income taxes of $2.2 million in
the first nine months of fiscal 2000 and of $7.0 million in the first nine
months of fiscal 1999.
The Company had net income of $3.0 million for the first nine
months of fiscal 2000 and of $11.8 million for the first nine months of
fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities in the first nine
months of fiscal 2000 was $13.2 million.
The Company's cash and cash equivalents decreased to $39.5 million
at October 28, 2000 from $43.4 million at October 30, 1999 and $45.2
million at January 29, 2000. Property and equipment, net increased to $75.2
million at October 28, 2000 from $59.7 million at October 30, 1999, and
$63.3 million at January 29, 2000 reflecting primarily constructing new
stores and remodeling existing stores.
Inventory increased to $68.5 million at October 28, 2000 from $62.7
million at October 30, 1999 and $55.3 million at January 29, 2000.
Inventory levels increased to build inventories for the Company's planned
shop@home business and new stores that will open during the fourth quarter
of fiscal 2000. The Company's inventory levels have peaked in early May and
November/December. During fiscal 1999, the highest inventory level was
$66.5 million.
Accounts payable increased to $44.4 million at October 28, 2000
from $33.6 million at October 30, 1999, and $27.0 million at January 29,
2000 principally as a result of increased inventory levels.
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.
Import purchases are made in U.S. dollars, are generally financed
by trade letters of credit and constituted approximately 60% of total
purchases in fiscal 1999.
United Retail Group, Inc. and certain of its subsidiaries
(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, 2004 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 any of the Companies to support trade letters of
credit and standby letters of credit and to finance loans. As of October
28, 2000, trade letters of credit for the account of the Companies and
supported by CIT were outstanding in the amount of $23.6 million.
Subject to the following paragraph, the availability of credit
(within the aggregate $40 million line of credit) to any 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 any 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"). (At October 28,
2000, the combined availability of the Companies was $16.4 million; the
Pledged Account had a zero balance; the Company's cash on hand was
unrestricted; and no loan had been drawn down.)
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.
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 for the next 12 months to
meet its cash requirements, including (i) anticipated working capital
needs, including seasonal inventory financing, (ii) the cost of
distributing catalogs, (iii) the cost of marketing internet test sites (see
"Shop @ Home") and (iv) store construction costs (see, "Stores"). 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."
The Company's Board of Directors has authorized management, in its
discretion, to repurchase up to a total of 1,600,000 shares of Common Stock
of the Company from time to time in private transactions and on the NASDAQ
National Market System. 44,000 shares have been repurchased under this
authorization.
STORES
The Company leased 513 stores at October 28, 2000, of which 340
stores were located in strip shopping centers, 151 stores were located in
malls and 22 stores were located in downtown shopping districts. Total
retail square footage was 2.1 million square feet at October 28, 2000 and
2.0 million square feet a year earlier.
The Company plans to open 24 new stores during the fourth quarter
of fiscal 2000 and approximately 60 new stores during fiscal 2001.
Substantially all the construction cost of new stores will be capitalized.
Start-up costs will be expensed but are not expected to have a material
effect on general, administrative and store operating expenses. During the
fourth quarter of fiscal 2000, the Company plans to close approximately 10
stores, the term of whose leases shall have expired. This paragraph
constitutes forward-looking information under the Reform Act, which is
subject to the uncertainties and other risk factors referred to under the
caption "Future Results".
SHOP @ HOME
The Company intends to enter a new channel of distribution for its
merchandise, internet and catalog sales ("shop @ home"), in order to expand
its customer base and attract more business from its existing customers.
The Company has operated a test site (www.cloudwalkers.com) for
the sale of its Cloudwalkers(R) brand women's shoes on the internet since
the third quarter of fiscal 1999. Catalogs for Cloudwalkers(R) have also
been tested. The Company began testing catalogs for AVENUE(R) merchandise
in September 2000. The Company launched a test site (www.avenue.com) on
November 17, 2000 for the sale of its AVENUE(R) merchandise. Shop @ home
sales have not been material. Fulfillment of shop @ home sales has been
outsourced.
The Company's shop @ home activities will not require material
long term financial commitments to be made in the fourth quarter of fiscal
2000 or the first half of fiscal 2001.
This Shop @ Home section constitutes forward looking information
under the Reform Act, which is subject to the uncertainties and other risk
factors referred to under the caption "Future Results."
There is no assurance of gross profit on shop @ home sales.
TAX MATTERS
The Company's federal income tax returns for fiscal 1994, fiscal
1995 and fiscal 1996 were audited by the Internal Revenue Service and
settled except for the auditor's disallowance of a refund claim, which the
Company protested. The refund claim, which has not been recorded, would
affect stockholders' equity rather than the Company's earnings. It is being
reviewed by an IRS appeals officer pursuant to the Company's protest.
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 the shop @ home channel of
distribution, (iv) economic downturns, weakness in overall consumer demand,
and variations in the demand for women's fashion apparel, (v) increase in
prevailing rents, (vi) cost overruns, (vii) imposition by vendors, or their
third-party factors, of more onerous payment terms for domestic merchandise
purchases, (viii) acceleration in the rate of business failures and
inventory liquidations in the specialty store sector of the women's apparel
industry, and (ix) 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, or (h) increased costs of transportation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
The following exhibits are filed herewith:
Number Description
------ -----------
10.1* Amendment, dated August 18, 2000, to Employment
Agreement, dated November 20, 1998, between the
Corporation and Raphael Benaroya
10.2* Amendment, dated August 18, 2000, to Employment
Agreement, dated November 20, 1998, between the
Corporation and Kenneth P. Carroll
10.3 Amendment, dated October 15, 2000, to Right of
First Refusal Agreement, dated as of September
17, 1999, between the Corporation and Limited
Direct Associates, L.P.
10.4 Amendment, dated October 15, 2000, to Right of
First Refusal Agreement, dated as of September
17, 1999, between the Corporation and The
Limited, Inc./Intimate Brands, Inc. Foundation
27 Financial Data Schedule
The following exhibit to the Corporation's Quarterly Report on
Form 10-Q for the period ended April 29, 2000 is incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10* Stock Appreciation Rights Plan
The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended January 29, 2000 are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1* Incentive Compensation Program Summary
10.2 Amendment, dated December 28, 1999, to
Financing Agreement among the Corporation,
United Retail Incorporated and The CIT
Group/Business Credit, Inc., as Agent and
Lender ("CIT")
10.3 Amendment, dated January 31, 2000, to Financing
Agreement among the Corporation, United Retail
Incorporated, Cloudwalkers, Inc. and CIT
13 Sections of 1999 Annual Report to Stockholders
(including report of Independent Accountants)
that were incorporated by reference in the
Annual Report on Form 10-K
23.1 Consent of Independent Accountants
The following exhibit to the Corporation's Quarterly Report on
Form 10-Q for the period ended October 30, 1999 is incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1 Amendment, dated October 6, 1999, to Financing
Agreement among the Corporation, United Retail
Incorporated and CIT
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
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
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.
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 the Corporation
4.1 Specimen Certificate for Common Stock of the
Corporation
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
10.38 Management Services Agreement, dated August 26,
1989, between American Licensing Group, Inc.
and American Licensing Group, L.P.
--------------------
*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 October 28, 2000.
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 20, 2000
EXHIBIT INDEX
ITEM 14. EXHIBITS.
The following exhibits are filed herewith:
Number Description
------ -----------
10.1* Amendment, dated August 18, 2000, to Employment
Agreement, dated November 20, 1998, between the
Corporation and Raphael Benaroya
10.2* Amendment, dated August 18, 2000, to Employment
Agreement, dated November 20, 1998, between the
Corporation and Kenneth P. Carroll
10.3 Amendment, dated October 15, 2000, to Right
of First Refusal Agreement, dated as of
September 17, 1999, between the Corporation
and Limited Direct Associates, L.P.
10.4 Amendment, dated October 15, 2000, to Right
of First Refusal Agreement, dated as of
September 17, 1999, between the Corporation
and The Limited, Inc./Intimate Brands, Inc.
Foundation
27 Financial Data Schedule
The following exhibit to the Corporation's Quarterly Report on
Form 10-Q for the period ended April 29, 2000 is incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10* Stock Appreciation Rights Plan
The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended January 29, 2000 are incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1* Incentive Compensation Program Summary
10.2 Amendment, dated December 28, 1999, to
Financing Agreement among the Corporation,
United Retail Incorporated and The CIT
Group/Business Credit, Inc., as Agent and
Lender ("CIT")
10.3 Amendment, dated January 31, 2000, to
Financing Agreement among the Corporation,
United Retail Incorporated, Cloudwalkers,
Inc. and CIT
13 Sections of 1999 Annual Report to
Stockholders (including report of Independent
Accountants) that were incorporated by
reference in the Annual Report on Form 10-K
23.1 Consent of Independent Accountants
The following exhibit to the Corporation's Quarterly Report on
Form 10-Q for the period ended October 30, 1999 is incorporated herein by
reference:
Number in Filing Description
---------------- -----------
10.1 Amendment, dated October 6, 1999, to
Financing Agreement among the Corporation,
United Retail Incorporated and CIT
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
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
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.
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 the Corporation
4.1 Specimen Certificate for Common Stock of the
Corporation
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
10.38 Management Services Agreement, dated August
26, 1989, between American Licensing Group,
Inc. and American Licensing Group, L.P.
--------------------
*A compensatory plan for the benefit of the Corporation's
management or a management contract.
