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 July 29, 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
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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
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(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
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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
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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 July 29, 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
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ITEM 1. FINANCIAL STATEMENTS UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
JULY 29, JANUARY 29, JULY 31,
2000 2000 1999
-------------------- -------------- --------------
ASSETS (unaudited) (unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $54,819 $45,223 $67,358
Accounts receivable 1,405 1,146 2,316
Inventory 49,346 55,323 40,518
Prepaid rents 4,134 3,900 3,881
Other prepaid expenses 4,106 2,365 3,020
Deferred taxes 1,671 1,647 0
-------------------- -------------- --------------
Total current assets 115,481 109,604 117,093
Property and equipment, net 68,492 63,302 55,206
Deferred charges and other intangible assets,
net of accumulated amortization of $2,720, $2,495
and $2,311 6,861 7,010 6,883
Deferred income taxes 0 0 893
Other assets 335 422 441
-------------------- -------------- --------------
Total assets $191,169 $180,338 $180,516
==================== ============== ==============
LIABILITIES
Current liabilities:
Current portion of distribution center financing $1,277 $1,228 $1,181
Accounts payable and other 31,978 26,993 25,506
Accrued expenses 22,325 20,285 26,708
-------------------- -------------- --------------
Total current liabilities 55,580 48,506 53,395
Distribution center financing 7,293 7,944 8,570
Other long-term liabilities 6,300 6,131 6,090
-------------------- -------------- --------------
Total liabilities 69,173 62,581 68,055
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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; 14,190,200
and 13,812,200); outstanding (13,314,033;
13,289,433 and 13,138,888)
Additional paid-in capital 80,217 80,143 77,662
Retained earnings 45,648 41,483 36,444
Treasury stock (901,367; 901,367 and 673,312
shares) at cost (3,883) (3,883) (1,659)
-------------------- -------------- --------------
Total stockholders' equity 121,996 117,757 112,461
-------------------- -------------- --------------
Total liabilities and stockholders' equity $191,169 $180,338 $180,516
==================== ============== ==============
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 TWENTY-SIX WEEKS ENDED
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July 29, July 31, July 29, July 31,
2000 1999 2000 1999
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Net sales $108,513 $98,913 $207,903 $195,606
Cost of goods sold, including
buying and occupancy costs 84,991 70,179 158,658 139,898
---------------- --------------- --------------- ----------------
Gross profit 23,522 28,734 49,245 55,708
General, administrative and
store operating expenses 22,073 19,934 43,284 38,941
---------------- --------------- --------------- ----------------
Operating income 1,449 8,800 5,961 16,767
Interest income, net 574 499 877 846
---------------- --------------- --------------- ----------------
Income before income taxes 2,023 9,299 6,838 17,613
Provision for income taxes 766 3,448 2,673 6,503
---------------- --------------- --------------- ----------------
Net income $1,257 $5,851 $4,165 $11,110
================ =============== =============== ================
Net income per share
Basic $0.09 $0.45 $0.31 $0.85
Diluted $0.09 $0.42 $0.31 $0.80
================ =============== =============== ================
Weighted average number of
shares outstanding
Basic 13,313,209 13,125,718 13,307,482 13,109,504
Common stock equivalents
(stock options) 250,844 880,208 341,393 796,691
---------------- --------------- --------------- ----------------
Diluted 13,564,053 14,005,926 13,648,875 13,906,195
================ =============== =============== ================
The accompanying notes are an integral part of the Consolidated Financial Statements.
</TABLE>
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
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<CAPTION>
TWENTY-SIX WEEKS ENDED
JULY 29, JULY 31,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $4,165 $11,110
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization of property and equipment 4,389 3,329
Amortization of deferred charges and other
intangible assets 246 182
Loss on disposal of assets 298 276
Compensation expense 156 156
Deferred income taxes 87 227
Deferred lease assumption revenue amortization (180) (221)
Tax benefit from exercise of stock options 17 0
Changes in operating assets and liabilities:
Accounts receivable (259) (1,803)
Income taxes 1,352 2,036
Inventory 5,977 5,046
Accounts payable and accrued expenses 5,689 4,510
Prepaid expenses (1,975) (526)
Other 159 (676)
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Net Cash Provided From Operating Activities 20,121 23,646
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INVESTING ACTIVITIES:
Capital expenditures (9,877) (10,794)
Deferred payment for property and equipment 53 518
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Net Cash Used In Investing Activities (9,824) (10,276)
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FINANCING ACTIVITIES:
Repayments of long-term debt (602) (557)
Issuance of loans to officers (91) (82)
Exercise of stock options 107 229
Other (115) 0
---------------- ----------------
Net Cash Used In Financing Activities (701) (410)
---------------- ----------------
Net increase in cash and cash equivalents 9,596 12,960
Cash and cash equivalents, beginning of period 45,223 54,398
---------------- ----------------
Cash and cash equivalents, end of period $54,819 $67,358
================ ================
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 balances and transactions have been eliminated.
The consolidated financial statements as of and for the thirteen
and twenty-six weeks ended July 29, 2000 and July 31, 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.
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:
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Thirteen Weeks Ended Twenty-Six Weeks Ended
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July 29, July 31, July 29, July 31,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Options 420,072 36,000 193,500 53,000
Range of option prices per share $7.75 - $15.13 $15.13 - $26.75 $9.75 - $15.13 $12.08 - $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 owned by the Company
in Troy, Ohio.
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 1994. The loan is collateralized by a
mortgage on the distribution center.
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 either 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 July 29, 2000, the combined availability of the Companies was
$13.7 million, no balance was in the pledged account, the aggregate
outstanding amount of letters of credit arranged by CIT was $26.3 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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Thirteen Weeks Ended Twenty-Six Weeks Ended
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July 29, July 31, July 29, July 31,
2000 1999 2000 1999
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Currently payable:
Federal $853 $3,316 $2,307 $5,868
State 134 289 279 408
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987 3,605 2,586 6,276
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Deferred:
Federal (140) (129) 7 187
State (81) (28) 80 40
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(221) (157) 87 227
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$766 $3,448 $2,673 $6,503
======= ======== ======== ========
</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):
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<CAPTION>
Thirteen Weeks Ended
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July 29, 2000 July 31, 1999
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Tax at Federal rate $ 708 35.0% $ 3,255 35.0%
State income taxes, net of
federal benefit 35 1.7% 423 4.5%
Benefit from state net operating
losses ("NOL's") -- -- (253) (2.7%)
Goodwill amortization 18 0.9% 18 0.2%
Other 5 0.3% 5 0.1%
--------------------- -----------------
$ 766 37.9% $ 3,448 37.1%
===================== =================
</TABLE>
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
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July 29, 2000 July 31, 1999
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<S> <C> <C> <C> <C>
Tax at Federal rate $ 2,393 35.0% $ 6,164 35.0%
State income taxes, net of
federal benefit 234 3.4% 789 4.4%
Benefit from state net operating
losses ("NOL's") -- -- (497) (2.8%)
Goodwill amortization 36 0.5% 36 0.2%
Other 10 0.2% 11 0.1%
-------------------- -------------------
$ 2,673 39.1% $ 6,503 36.9%
==================== ===================
</TABLE>
The net deferred tax asset reflects the tax impact of temporary
differences. The components of the net deferred tax asset as of July 29,
2000 are as follows (dollars in thousands):
Assets:
Inventory $ 1,222
Accruals and reserves 2,922
Compensation 264
State NOL's 1,102
-------
5,510
-------
Liabilities:
Depreciation 2,989
Prepaid rent 850
-------
3,839
Net deferred tax asset $ 1,671
=======
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 in cash at the prime rate. The note has a term of four
years subject to acceleration under certain circumstances and to call 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
SECOND QUARTER FISCAL 2000 VERSUS SECOND QUARTER FISCAL 1999
Net sales for the second quarter of fiscal 2000 increased 9.7%
from the second quarter of fiscal 1999, to $108.5 million from $98.9
million, principally from an increase in unit volume. Average stores open
increased from 502 to 506. Comparable store sales for the second quarter of
fiscal 2000 increased 6.2%. Sales in channels of distribution other than
retail stores were not material (see, "Shop @ Home").
Gross profit was $23.5 million in the second quarter of fiscal
2000 compared with $28.7 million in the second quarter of fiscal 1999,
decreasing as a percentage of net sales to 21.7% from 29.0%. The decrease
in gross profit as a percentage of net sales was attributable primarily to
a decrease in the merchandise margin rate and increases in merchandise
"shrinkage" and direct marketing expenses, including direct marketing for
shop @ home tests. The rate of shop @ home marketing expenses is expected
to increase.
General, administrative and store operating expenses increased to
$22.1 million in the second quarter of fiscal 2000 from $19.9 million in
the second quarter of fiscal 1999, principally as a result of an increase
in store payroll expense, nonrecurring costs of enhancements to the
management information systems and shop @ home payroll expense. As a
percentage of net sales, general, administrative and store operating
expenses increased to 20.3% from 20.2%. Store payroll expense and shop @
home payroll expense are expected to increase.
During the second quarter of fiscal 2000, operating income was
$1.4 million compared with operating income of $8.8 million in the second
quarter of fiscal 1999.
Net interest income increased to $0.6 million in the second
quarter of fiscal 2000 from $0.5 million in the second quarter of fiscal
1999, from higher interest rates.
The Company had a provision for income taxes of $0.8 million in
the second quarter of fiscal 2000 and $3.4 million in the second quarter of
fiscal 1999.
The Company had net income of $1.3 million for the second quarter
of fiscal 2000 and $5.9 million for the second quarter of fiscal 1999.
FIRST HALF FISCAL 2000 VERSUS FIRST HALF FISCAL 1999
Net sales for the first half of fiscal 2000 increased 6.3% from
the first half of fiscal 1999, to $207.9 million from $195.6 million,
principally from an increase in unit volume. Average stores open increased
from 502 to 503. Comparable store sales for the first half of fiscal 2000
increased 4.6%. There is no assurance that the increases in net sales and
comparable store sales will be maintained.
Gross profit was $49.2 million in the first half of fiscal 2000
compared with $55.7 million in the first half of fiscal 1999 decreasing as
a percentage of net sales to 23.7% from 28.5%. The decrease in gross profit
as a percentage of net sales was primarily attributable to a decrease in
the merchandise margin rate and increases in buying and occupancy costs and
merchandise "shrinkage."
General, administrative and store operating expenses were $43.3
million in the first half of fiscal 2000 compared to $38.9 million in the
first half of fiscal 1999 principally as a result of an increase in store
payroll expense, shop @ home payroll expense and nonrecurring costs of
enhancements to the management information systems. As a percentage of net
sales, general, administrative and store operating expenses increased to
20.8% from 19.9%.
During the first half of fiscal 2000, the Company had operating
income of $6.0 million compared to operating income of $16.8 million in the
first half of fiscal 1999.
Net interest income was $0.9 million in the first half of fiscal
2000 and $0.8 million in the first half of fiscal 1999, primarily from
higher interest rates.
The Company had a provision for income taxes of $2.7 million in
the first half of fiscal 2000 and of $6.5 million in the first half of
fiscal 1999.
The Company had net income of $4.2 million for the first half of
fiscal 2000 and of $11.1 million for the first half of fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities in the first half of
fiscal 2000 was $20.1 million.
The Company's cash and cash equivalents decreased to $54.8 million
at July 29, 2000 from $67.4 million at July 31, 1999. (Cash and cash
equivalents were $45.2 million at January 29, 2000.) Property and
equipment, net increased to $68.5 million at July 29, 2000 from $55.2
million at July 31, 1999, reflecting, among other things, constructing new
stores and remodeling existing stores. (Property and equipment, net was
$63.3 million at January 29, 2000.)
Inventory increased to $49.3 million at July 29, 2000 from $40.5
million at July 31, 1999. Inventory levels increased in the first half of
fiscal 2000 (i) in accordance with a plan to build inventories for the
Company's developing shoe business and its planned shop @ home business and
to maintain higher levels of inventories of basic items of apparel to
assure availability, and (ii) to stock new stores that will open during the
second half of fiscal 2000. Inventory was $55.3 million at January 29,
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 $32.0 million at July 29, 2000 from
$25.5 million at July 31, 1999, principally as a result of increased
inventory levels. Accounts payable were $27.0 million at January 29, 2000.
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 July 29,
2000, trade letters of credit for the account of the Companies and
supported by CIT were outstanding in the amount of $26.3 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 July 29, 2000,
the combined availability of the Companies was $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.)
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 AVENUE(R) catalogs, (iii) the cost of developing and marketing
the AVENUE(R) internet test site (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. No shares have been repurchased except in
connection with the exercise of employee stock options in which a portion
of the shares otherwise issuable was classified as treasury shares (i) in
lieu of the payment by the optionholder of the exercise price in cash and
(ii) to finance the payment of income taxes incurred by the optionholder
upon exercise of the option.
STORES
The Company leased 501 stores at July 29, 2000, of which 319
stores were located in strip shopping centers, 160 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 July 29, 2000 and 2.0
million square feet a year earlier.
The Company plans to open from 35 to 40 new stores during the
second half of fiscal 2000 and approximately 50 new stores during fiscal
2001. Substantially all of the cost of new stores will be capitalized
although start-up costs will be expensed. During the second half of fiscal
2000, the Company plans to close approximately 15 stores 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. Shop @ home sales of Cloudwalkers(R) have not been material.
Fulfillment of shop @ home sales has been outsourced.
The Company plans to launch a site (www.avenue.com) during the
second half of fiscal 2000 for the sale of its Avenue(R) brand apparel and
accessories on the internet.
The Company intends to begin distributing catalogs for AVENUE(R)
merchandise in September 2000.
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 exhibit is filed herewith:
Number Description
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 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
10.38 Management Services Agreement, dated August
26, 1989, between American Licensing Group,
Inc. and American Licensing Group, L.P.
("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) No Current Reports on Form 8-K were filed by the Corporation
during the fiscal quarter ended July 29, 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: August 22, 2000
EXHIBIT INDEX
ITEM 14. EXHIBITS.
The following exhibit is filed herewith:
Number Description
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 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
10.38 Management Services Agreement, dated August
26, 1989, between American Licensing Group,
Inc. and American Licensing Group, L.P.
("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.
