-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BJGcrHew6dfcj7og8OWuF9psXo4uOHDlPrbFFPTWWeTKh1DyVLWAMgLDMW/gxx+W q+5x+jMEQnS7swJFyZIcog== 0000950117-01-501815.txt : 20020413 0000950117-01-501815.hdr.sgml : 20020413 ACCESSION NUMBER: 0000950117-01-501815 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011103 FILED AS OF DATE: 20011218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: G&G RETAIL INC CENTRAL INDEX KEY: 0001088811 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] STATE OF INCORPORATION: DE FISCAL YEAR END: 0129 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-81307 FILM NUMBER: 1816051 BUSINESS ADDRESS: STREET 1: 520 EIGHTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2122794961 10-Q 1 a31749.txt G+G RETAIL, INC. FORM 10-Q Securities and Exchange Commission Washington, D.C. 20549 Form 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended November 3, 2001 --------------------------------- Commission File Number 333-81307 --------- G+G Retail, Inc. --------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 22-3596083 - ------------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 520 Eighth Avenue, New York, New York 10018 ------------------------------------------------------------------ (Address of principal executive offices and zip code) Registrant's telephone number, including area code (212) 279-4961 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 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. Class B Outstanding at December 14, 2001 - --------------------- -------------------------------- Common $.01 par value 10 shares Contents
Page No. -------- Part I. Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - November 3, 2001 and February 3, 2001 3 Condensed Consolidated Statements of Operations - Three and Nine Months Ended November 3, 2001 and October 28, 2000 4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended November 3, 2001 and October 28, 2000 5 Notes to Unaudited Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-13 Item 3. Quantitative and Qualitative Disclosures about Market Risk 13 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 14 Signature Page 15
Part I. Financial Information Item 1. Financial Statements G+G Retail, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands)
November February 3, 2001 3, 2001 ------------- ------------- Assets Current assets: Cash and short-term investments $ - $ 14,568 Accounts receivable 839 866 Merchandise inventories 27,990 15,329 Prepaid taxes and other expenses 1,702 1,771 Deferred tax assets 465 465 ----------- ---------- Total current assets 30,996 32,999 Property and equipment, net 53,940 51,796 Intangible assets, net 108,851 112,083 Deferred tax assets 4,057 - Other assets 270 291 ----------- ---------- Total assets $198,114 $197,169 =========== ========== Liabilities and stockholder's equity Current liabilities: Accounts payable $ 23,344 $ 14,643 Accrued expenses 15,309 16,937 Accrued interest 5,460 2,515 Short-term borrowings 1,395 - Current portion of capital lease 1,502 1,269 ----------- ---------- Total current liabilities 47,010 35,364 Deferred tax liability - 2,168 Capital lease 3,056 3,894 Long-term debt 101,263 100,571 ----------- ---------- Total liabilities 151,329 141,997 Commitments and contingencies Stockholder's equity: Class B common stock, par value $.01 per share, 1,000 shares authorized, 10 shares issued and outstanding - - Additional paid-in capital 50,298 50,298 Retained (deficit) earnings (3,513) 4,874 ---------- ---------- Total stockholder's equity 46,785 55,172 ---------- ---------- Total liabilities and stockholder's equity $198,114 $197,169 ========== ==========
3 See accompanying notes. G+G Retail, Inc. Condensed Consolidated Statements of Operations (Unaudited) (In thousands)
--------------------------------------------------------------------- Three months Three months Nine months Nine months ended November ended October ended November ended October 3, 2001 28, 2000 3, 2001 28, 2000 --------------------------------------------------------------------- Net sales $90,601 $85,661 $264,593 $236,377 Cost of sales (including occupancy costs) 56,529 53,502 170,082 154,756 Selling, general, administrative and buying expenses 30,023 26,551 87,428 76,001 Depreciation and amortization expense 3,553 3,317 10,986 9,604 --------------------------------------------------------------------- Operating income (loss) 496 2,291 (3,903) (3,984) Interest expense 3,624 3,581 10,831 10,573 Interest income 13 16 122 229 --------------------------------------------------------------------- Loss before benefit from income taxes (3,115) (1,274) (14,612) (14,328) Benefit from income taxes (1,327) (543) (6,225) (6,104) --------------------------------------------------------------------- Net loss $(1,788) $ (731) $ (8,387) $ (8,224) =====================================================================
See accompanying notes. 4 G+G Retail, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Nine months Nine months ended November ended October 3, 2001 28, 2000 --------------- ------------- Operating activities Net loss $ (8,387) $ (8,224) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 10,986 9,604 Amortization of debt issue costs 1,410 1,324 Write-off of closed store fixed assets 145 -- Deferred taxes (6,225) (2,748) Changes in assets and liabilities: Accounts receivable, prepaid expenses and other assets 117 (341) Income taxes receivable -- (280) Merchandise inventories (12,661) (11,746) Accounts payable, accrued expenses and accrued interest 10,018 15,658 Income taxes payable -- (3,250) ---------- --------- Net cash used in operating activities (4,597) (3) Investing activities Capital expenditures, net (10,350) (22,560) ---------- --------- Net cash used in investing activities (10,350) (22,560) Financing activities Proceeds from short-term borrowings 19,395 11,300 Proceeds from capital lease 375 3,678 Payment of debt issuance costs (411) -- Payment of short-term borrowings (18,000) (10,100) Payment of capital lease (980) (518) ---------- --------- Net cash provided by financing activities 379 4,360 ---------- --------- Net decrease in cash and short-term investments (14,568) (18,203) Cash and short-term investments, beginning of period 14,568 19,093 ---------- --------- Cash and short-term investments, end of period $ -- $ 890 ========== ========= Supplemental cash flow disclosures Cash paid for: Interest $ 6,417 $ 6,205 ========== ========= Income taxes, net of cash refunds of $1,171 for the nine months ended October 28, 2000 $ 118 $ 227 ========== =========
See accompanying notes 5 G+G Retail, Inc. Notes to Unaudited Condensed Consolidated Financial Statements Note 1 The accompanying financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company's management, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) considered necessary to present fairly: (1) its financial position as of November 3, 2001, (2) the results of its operations for the three and nine months ended November 3, 2001 and October 28, 2000 and (3) its cash flows for the nine month period ended November 3, 2001 and October 28, 2000. The balance sheet at February 3, 2001 has been derived from financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the fiscal year ended February 3, 2001 filed on May 4, 2001. The interim operating results are not necessarily indicative of the results that may be expected for an entire year. Note 2 On May 17, 1999, the Company and G+G Retail Holdings, Inc. ("Holdings" or the "Parent") completed a private placement of 107,000 units consisting in the aggregate of $107.0 million face amount of 11% Senior Notes ("Senior Notes") due May 15, 2006 with interest payable semi-annually and warrants to purchase 8,209 shares of non-voting class D Common Stock of Holdings at an exercise price of $.01 per share. On November 2, 1999, all of the Senior Notes were exchanged for an equal amount of exchange notes that are freely tradable. Note 3 The Company is a party to a Loan and Security Agreement, which expires in May 2004, and provides for a revolving credit facility ("Facility"), subject to eligible inventory and credit card receivables, not to exceed $30.0 million, of which $10.0 million can be used for letters of credit. There were approximately $1.4 million of outstanding borrowings under the Facility at November 3, 2001. Outstanding letters of credit under the Facility totaled $491,000 at November 3, 2001. Interest on outstanding borrowings can range either from Prime to Prime plus .25% or from 1.50% over the Eurodollar Rate to a maximum 2.25% over the Eurodollar Rate, based on the profitability and amount of indebtedness of the Company. 6 Note 4 In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. The Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of fiscal 2003. Application of the nonamortization provisions of the Statement is expected to result in an increase in net income. During fiscal 2003, the Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of February 2, 2002 and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company. In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (FAS 143), which requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. FAS 143 is effective for fiscal years beginning after June 15, 2002, with earlier application encouraged. The Company expects to adopt FAS 143 beginning in the first quarter of fiscal 2003 and it has not yet determined the effect, if any, the adoption of FAS 143 will have on the Company's financial position and results of operations. In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (FAS 144), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations for a disposal of a segment of a business. FAS 144 is effective for fiscal years beginning after December 15, 2001, with earlier application encouraged. The Company expects to adopt FAS 144 beginning in the first quarter fiscal 2003 and it has not yet determined the effect, if any, the adoption of FAS 144 will have on the Company's financial position and results of operations. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview We are a leading national mall-based retailer of popular price female junior and pre-teen apparel. For over 30 years, we and our predecessors have built a reputation for providing fashion apparel and accessories distinctly targeted at teenaged women. Our core customers are young women principally between the ages of 13 to 19 years old. We sell substantially all of our merchandise under private label names including Rave, Rave Up, In Charge, R4R, Rave City and Rave Girl, which provide our customers with fashionable, quality apparel and accessories at lower prices than brand name merchandise. Our emphasis on sourcing merchandise domestically and our efficient distribution system allow for short inventory lead times, which facilitates quick response to the latest fashion trends. As of November 3, 2001, we had 543 operating stores principally located in major enclosed regional shopping malls throughout the United States, Puerto Rico, and the U.S. Virgin Islands primarily under the G+G, Rave and Rave Girl names. Our stores average approximately 2,400 gross square feet with approximately 25 feet of mall frontage and are designed to create a lively and exciting shopping experience for teenaged customers. In July 1999, we started our Rave Girl chain of stores, which sells fashion apparel and accessories targeted at girls aged 7 to 12 years old. At November 3, 2001, there were 80 Rave Girl stores in operation throughout the United States and Puerto Rico. Our Rave Girl stores are approximately 2,000 gross square feet and are designed with bright colors, unique lighting and exciting graphics. In August 1998, we acquired the business of G&G Shops, Inc. and the stores operated by subsidiaries of Petrie Retail, Inc. and the trademarks and other assets used in that business. We obtained financing for the acquisition by a net capital contribution by G+G Retail Holdings, Inc., our parent company, to us of $49.8 million and by borrowing $90.0 million under senior bridge notes that we subsequently repaid with the issuance of our senior notes. We accounted for the acquisition under the purchase method of accounting. Results of Operations Comparison of The Third Quarter of Fiscal 2002 and The Third Quarter of Fiscal 2001 Net sales increased $4.9 million or 5.7% to $90.6 million in the third quarter of fiscal 2002 as compared to $85.7 million in the third quarter of fiscal 2001. The increase in net sales was due to the opening of new stores which contributed $3.7 million to net sales in the third quarter of fiscal 2002 and a $1.2 million, or 1.5%, increase in same store sales compared to the third quarter of fiscal 2001. Average sales per gross square foot were $71 in both the third quarter fiscal 2002 and 2001. We operated 543 stores at the end of the third quarter of fiscal 2002 as compared to 515 stores at the end of the third quarter of fiscal 2001, as a result of opening 49 new stores and closing 21 stores. 8 Cost of sales, including occupancy costs, increased 5.6% to $56.5 million in the third quarter of fiscal 2002 from $53.5 million in the third quarter of fiscal 2001. As a percentage of net sales, cost of sales including occupancy costs was 62.4% in both the third quarter of fiscal 2002 and fiscal 2001. This was the result of a 1.0% decrease in cost of sales and a 1.0% increase in occupancy costs. The decrease in the cost of sales as a percentage of net sales was due to an increase in the initial mark-on. The increase in occupancy costs as a percentage of net sales resulted primarily from an overall increase in occupancy costs. Selling, general, administrative and buying expenses increased 12.8% from $26.6 million in the third quarter of fiscal 2001 to $30.0 million in the third quarter of fiscal 2002. As a percentage of net sales, these expenses increased to 33.1% in the third quarter of fiscal 2002 as compared to 31.0% in the third quarter of fiscal 2001. The $3.4 million increase resulted from additional selling costs related to new store openings, an increase in same store selling expenses and an increase in administrative costs. Depreciation and amortization expense for the third quarter of fiscal 2002 was $3.6 million as compared to $3.3 million for the third quarter of fiscal 2001. The increase of $300,000 is attributable to the additional depreciation and amortization expense related to new stores, remodels and relocations. Interest expense in the third quarter of fiscal 2002 was $3.6 million or 4.0% of net sales as compared to $3.6 million or 4.2% of net sales for the third quarter of fiscal 2001. Interest expense for both the third quarter of fiscal 2002 and 2001 reflects interest on the capital lease, (as described in Liquidity and Capital Resources) short-term borrowings, senior notes and amortization of the $7.3 million original issue discount, the $470,000 value assigned to the warrants issued by Holdings, our parent company, and the deferred financing costs. The income tax benefit for the third quarter of fiscal 2002 was $1.3 million as compared to $543,000 in the third quarter of fiscal 2001. The income tax benefit rate was 42.6% in both fiscal quarters. The net loss increased from $731,000 in the third quarter of fiscal 2001 to a loss of $1.8 million in the third quarter of fiscal 2002 due to the factors discussed above. Comparison of The First Nine Months of Fiscal 2002 and The First Nine Months of Fiscal 2001 Net sales increased $28.2 million or 11.9% to $264.6 million in the first nine months of fiscal 2002 as compared to $236.4 million in the first nine months of fiscal 2001. The increase in net sales was due to the opening of new stores, which contributed $23.4 million to net sales in the first nine months of fiscal 2002, and a $4.8 million or 2.1% increase in same store sales. Average sales per gross square foot increased 3.5% to $207 in the first nine months of fiscal 2002 from $200 in the first nine months of fiscal 2001. 9 Cost of sales, including occupancy costs, increased 9.9% to $170.1 million in the first nine months of fiscal 2002 from $154.8 million in the first nine months of fiscal 2001. As a percentage of net sales, cost of sales including occupancy costs decreased 1.2% from 65.5% in the first nine months of fiscal 2001 to 64.3% in the first nine months of fiscal 2002. This 1.2% decrease resulted from a 1.7% decrease in the cost of sales and a 0.5% increase in occupancy costs as a percent of sales. The decrease in the cost of sales as a percentage of net sales was due to an increase in the initial mark-on and a decrease in markdowns as a percent of sales. The occupancy cost increase as a percent of sales resulted primarily from an overall increase in occupancy costs. In the first nine months of fiscal 2002, selling, general, administrative and buying expenses totaled $87.4 million compared to $76.0 million in the first nine months of fiscal 2001. As a percent of sales, these expenses increased from 32.1% in the first nine months of fiscal 2001 to 33.0% in the first nine months of fiscal 2002. The $11.4 million increase resulted from additional selling costs related to new store openings, an increase in same store selling expenses and an increase in administrative costs. Depreciation and amortization expense for the first nine months of fiscal 2002 was $11.0 million as compared to $9.6 for the first nine months of fiscal 2001. The increase is attributable to additional depreciation and amortization expense related to new stores, remodels and relocations. Interest expense in the first nine months of fiscal 2002 was $10.8 million or 4.1% of net sales as compared to $10.6 million or 4.5% of net sales for the first nine months of fiscal 2001. Interest expense for the first nine months of fiscal 2002 and 2001 reflects interest on the capital lease, short-term borrowings, senior notes and amortization of the $7.3 million original issue discount, the $470,000 value assigned to the warrants issued by Holdings, our parent company, and the deferred financing costs. The income tax benefit for the first nine months of fiscal 2002 was $6.2 million as compared to $6.1 million for the first nine months of fiscal 2001. The income tax benefit rate was 42.6% in both nine month periods. The net loss increased from $8.2 million in the first nine months of fiscal 2001 to a loss of $8.4 million in the first nine months of fiscal 2002 due to the factors discussed above. Liquidity and Capital Resources Our primary sources of liquidity are cash flow from operating activities and borrowings under our revolving credit facility. Our primary cash requirements are for: (i) seasonal working capital, (ii) the construction of new stores, (iii) the remodeling or upgrading of existing stores as necessary, and (iv) upgrading and maintaining our computer system. Our revolving credit facility provides for a line of credit in an amount of up to $30.0 million (including a sub limit of $10.0 million for letters of credit) and matures in May 2004. We may use the revolving credit facility for general operating, working capital and other ordinary corporate purposes. Amounts available under the revolving credit facility are subject to the value of our eligible inventory and credit card receivables, subject to 10 certain conditions. The borrowing base provides for seasonal fluctuations in inventory with peak borrowing availability during the months of July through November. Interest on outstanding borrowings can range either from Prime to Prime plus .25% or from 1.50% over the Eurodollar Rate to a maximum 2.25% over the Eurodollar Rate, based on our profitability and amount of indebtedness. The revolving credit facility subjects us to a minimum net worth covenant (as defined) of $40.0 million for any month during which the excess availability is equal to or less than $7.5 million. The facility also contains other customary restrictive covenants. Our obligations under the revolving credit facility are secured by a lien on substantially all of our assets, excluding our leasehold interests. As of November 3, 2001, we had approximately $1.4 million of borrowings outstanding under the revolving credit facility and $491,000 of letters of credit outstanding. Net cash used in operating activities in the first nine months of fiscal 2002 was $4.6 million as compared to approximately $3,000 in the first nine months of fiscal 2001. The increase in net cash used in operating activities was principally due to the fact that our accounts payable build in the first nine months of fiscal 2002 was less than in the first nine months of fiscal 2001. Capital expenditures for the first nine months of fiscal 2002 and the first nine months of fiscal 2001 were $10.4 million and $22.6 million, respectively. Management estimates that capital expenditures for the remaining three months of fiscal 2002 will be approximately between $2.0 million and $3.0 million. We have an agreement from a lending institution for $6.5 million of capital lease financing for the purchase of the point of sale equipment and software. The lease provides for monthly payments that depend on the amount of equipment leased. The lease terms include variable interest rates based on the purchase date and expire five years from the date of the initial equipment financed. The capital lease obligation outstanding as of November 3, 2001 was $4.6 million. We review the operating performance of our stores on an ongoing basis to determine which stores, if any, to close. We closed nineteen stores in fiscal 2001, eleven stores in the first nine months of fiscal 2002 and anticipate closing approximately ten additional stores during the remaining three months of fiscal 2002. We closed nine stores in the first nine months of fiscal 2001. We historically have maintained negligible accounts receivable balances since our customers primarily pay for their purchases with cash, checks and third-party credit cards which are promptly converted to cash. On May 17, 1999, we and Holdings completed a private placement of an aggregate of $107.0 million face amount of outstanding notes issued by us and warrants issued by Holdings to purchase 8,209 shares of its nonvoting Class D Common Stock at an exercise price of $0.01 per share. The net proceeds from this private placement were $93.9 million, after deducting the original issue discount of $7.3 million and fees of $5.8 million. We used the net proceeds to repay the senior bridge notes and for general corporate purposes. On November 2, 1999, our privately placed notes were exchanged for notes that are freely tradable. As of November 3, 2001, our indebtedness under our senior notes totaled $101.3 million, which reflects the aggregate face amount of the notes 11 of $107.0 million, net of $5.4 of unamortized original issue discount, and approximately $305,000 of unamortized value assigned to the warrants issued by Holdings. The interest on the notes is 11% per annum, payable semi-annually. We have minimum annual rental commitments of approximately $26.0 million in fiscal 2002 under existing store leases and the leases for our corporate headquarters and distribution center. We believe that our cash flow from operating activities, and borrowings available under the revolving credit facility will be sufficient to meet our operating requirements and currently planned capital expenditures through the end of fiscal 2003. In addition, we believe that cash flow from operations will be sufficient to cover the interest expense arising from the revolving credit facility, capital lease and our long-term debt. However, the sufficiency of our cash flow is affected by numerous factors affecting our operations, including factors beyond our control. See the statement regarding forward looking disclosures. If a "change of control" (as defined in the indenture agreement for our senior notes) occurs, we will be required under the indenture to offer to repurchase all the notes. However, we may not have sufficient funds at the time of the change of control to make the required repurchases, or restrictions in our revolving credit facility may prohibit the repurchases. We may not be able to raise enough money to finance the change of control offer required by the indenture related to the senior notes. If there is a change in control, we could be in default under the indenture. In addition, upon a change of control (as defined in the Holdings Certificate of Incorporation), Holdings may not have sufficient funds to redeem its preferred stock unless we pay a dividend of such amount to them. Seasonality and Quarterly Operating Results Our fourth fiscal quarter historically accounts for the largest percentage of our annual net sales. Our first fiscal quarter historically accounts for the smallest percentage of annual net sales. In fiscal 2001, our first quarter and fourth quarter accounted for approximately 21.2% and 32.5% of annual net sales, respectively. Our quarterly results of operations may also fluctuate significantly as a result of a variety of factors, including the timing of store openings, the amount of revenue contributed by new stores, changes in the mix of products sold, the timing and level of markdowns, the timing of store closings and expansions, competitive factors, weather fluctuations and general economic conditions. Inflation We do not believe that inflation has had a material effect on the results of operations during the past three fiscal years. However, our business may be affected by inflation in the future. 12 Statement Regarding Forward Looking Disclosure Certain sections of this Report, including the preceding "Management's Discussion and Analysis of Financial Condition and Results of Operations," contain various forward looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, which represent our expectations or beliefs concerning future events. We caution that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward looking statements, including, without limitation, our ability to expand and to increase comparable store sales, the sufficiency of our working capital and cash flows from operating activities, a decline in the demand for our merchandise, our ability to locate and obtain acceptable store sites and lease terms or renew existing leases, our ability to gauge the fashion tastes of our customers and provide merchandise that satisfies customer demand, our management's ability to manage expansion, the effect of economic conditions, changes in customer shopping habits, including the effect that the September 11, 2001 terrorist attacks had on the United States and events following the attacks may have on mall shopping, the effect of severe weather or natural disasters and the effect of competitive pressures from other retailers. For a discussion of these and other factors that could cause results to differ from the expectations and projections expressed in this report, see the Forward Looking Statements and Factors Affecting Future Performance section of the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2001, filed with the Securities and Exchange Commission on May 4, 2001. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable 13 Part II. Other Information Item 6 - Exhibits and Reports on Form 8-K: (a) Exhibits 3.01 Certificate of Incorporation of G+G Retail, Inc., incorporated by reference to the registrant's Registration Statement on Form S-4, declared effective by the SEC on October 4, 1999 (File No. 333-81307) (the "S-4"). 3.02 Amended and Restated By-Laws of G+G Retail, Inc., incorporated by reference to the S-4. 4.01 Indenture, dated as of May 17, 1999, by and between G+G Retail, Inc., as issuer, and U.S. Bank Trust National Association, as trustee, incorporated by reference to the S-4. 4.02 Form of 11% Senior Note due 2006 of G+G Retail, Inc., incorporated by reference to the S-4. 4.03 A/B Exchange Registration Rights Agreement, dated as of May 17, 1999, by and between G+G Retail, Inc. and U.S. Bancorp Libra, incorporated by reference to the S-4. (b) Reports on Form 8-K None 14 Signatures Pursuant to the requirements 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. G+G RETAIL, INC. Date December 14, 2001 By / s / Michael Kaplan ----------------- ------------------------------- Michael Kaplan, Chief Financial Officer (signing on behalf of the registrant and as principal financial officer)
15 EXHIBIT INDEX Exhibit Description 3.01 Certificate of Incorporation of G+G Retail, Inc., incorporated by reference to the registrant's Registration Statement on Form S-4, declared effective by the SEC on October 4, 1999 (File No. 333-81307) (the "S-4"). 3.02 Amended and Restated By-Laws of G+G Retail, Inc., incorporated by reference to the S-4. 4.01 Indenture, dated as of May 17, 1999, by and between G+G Retail, Inc., as issuer, and U.S. Bank Trust National Association, as trustee, incorporated by reference to the S-4. 4.02 Form of 11% Senior Note due 2006 of G+G Retail, Inc., incorporated by reference to the S-4. 4.03 A/B Exchange Registration Rights Agreement, dated as of May 17, 1999, by and between G+G Retail, Inc. and U.S. Bancorp Libra, incorporated by reference to the S-4. -----END PRIVACY-ENHANCED MESSAGE-----