-----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, T6O9gfJE7meBac+/LCLAb0hSeA8A0OTe/5IpvIpLwwE56NfOhFDbQwp51tQfxdpd i92k2/mWf0pyeqb66w7CGg== 0000950117-03-002576.txt : 20030616 0000950117-03-002576.hdr.sgml : 20030616 20030616150753 ACCESSION NUMBER: 0000950117-03-002576 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030503 FILED AS OF DATE: 20030616 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: 03745453 BUSINESS ADDRESS: STREET 1: 520 EIGHTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2122794961 10-Q 1 a35555.txt G&G RETAIL, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended May 3, 2003 ----------- 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 333-81307 G+G Retail, Inc. ---------------- (Exact Name of Registrant as Specified in Its Charter) Delaware 22-3596083 -------- ---------- (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 520 Eighth Avenue, New York, New York 10018 - -------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (212) 279-4961 -------------- ______________________________________________________________________ Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report. Indicate by check [X] 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 by check mark [X] whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class B Outstanding at June 16, 2003 ------- ---------------------------- Common $.01 par value 10 shares CONTENTS
Page No. -------- Part I. Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - May 3, 2003 and February 1, 2003 3 Condensed Consolidated Statements of Operations - Three Months Ended May 3, 2003 and May 4, 2002. 4 Condensed Consolidated Statements of Cash Flows - Three Months Ended May 3, 2003 and May 4, 2002. 5 Notes to Unaudited Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-11 Item 3. Quantitative and Qualitative Disclosures about Market Risk 11 Item 4. Controls and Procedures 11 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 12 Signature Page 13 Certifications 14-15
2 Part I. Financial Information Item 1. Financial Statements G+G Retail, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except par value and share data)
May February 3, 2003 1, 2003 --------- -------- Assets Current assets: Cash and short-term investments $ 6,751 $ 21,526 Accounts receivable 1,691 1,782 Merchandise inventories 22,640 15,575 Prepaid taxes and other expenses 5,923 1,791 Deferred tax assets 2,436 2,436 --------- -------- Total current assets 39,441 43,110 Property and equipment 54,057 52,983 Deferred financing cost 2,716 2,971 Goodwill, net 57,720 57,720 Trademarks, net 45,900 45,900 Other assets 182 184 --------- -------- Total assets $ 200,016 $202,868 ========= ======== Liabilities and stockholder's equity Current liabilities: Accounts payable $ 20,081 $ 16,756 Accrued expenses 19,567 20,609 Accrued interest 5,460 2,517 Current portion of capital lease 1,770 1,719 --------- -------- Total current liabilities 46,878 41,601 Deferred tax liability 2,032 3,220 Capital lease 473 944 Long-term debt 102,842 102,563 --------- -------- Total liabilities 152,225 148,328 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 (Accumulated deficit) retained earnings (2,507) 4,242 --------- -------- Total stockholder's equity 47,791 54,540 --------- -------- Total liabilities and stockholder's equity $ 200,016 $202,868 ========= ========
See accompanying notes. 3 G+G Retail, Inc. Condensed Consolidated Statements of Operations (Unaudited)
Three months Three months ended ended May 3, 2003 May 4, 2002 ------------ ------------ (In Thousands) Net sales $ 87,793 $ 95,494 Cost of sales (including occupancy costs) 57,227 59,455 Selling, general, administrative and buying expenses 32,046 30,764 Depreciation and amortization 2,928 2,773 -------- -------- Operating (loss) income (4,408) 2,502 Interest expense 3,569 3,584 Interest income 43 47 -------- -------- Loss before benefit for income taxes (7,934) (1,035) Benefit for income taxes (1,185) (440) -------- -------- Net loss $ (6,749) $ (595) ======== ========
See accompanying notes. 4 G+G Retail, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months Three months ended ended May 3, 2003 May 4, 2002 ------------ ------------ Operating activities Net loss $ (6,749) $ (595) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,928 2,773 Amortization of debt issue costs 534 504 Write-off of closed store fixed assets 33 37 Deferred taxes (1,185) (440) Changes in assets and liabilities: Accounts receivable, prepaid expenses and other assets (4,042) (3,606) Merchandise inventories (7,065) (7,131) Accounts payable, accrued expenses and accrued interest 5,226 5,200 -------- ------- Net cash used in operating activities (10,320) (3,258) Investing activities Capital expenditures (4,035) (2,906) -------- ------- Net cash used in investing activities (4,035) (2,906) Financing activities Payment of capital lease obligations (420) (370) -------- ------- Net cash used in financing activities (420) (370) -------- ------- Net decrease in cash and short-term investments (14,775) (6,534) Cash and short-term investments, beginning of period 21,526 15,328 -------- ------- Cash and short-term investments, end of period $ 6,751 $ 8,794 ======== ======= Supplemental cash flow disclosures Cash paid for: Interest $ 94 $ 139 ======== ======= Income taxes, net of cash refunds of $0 and $3, respectively $ 58 $ 51 ======== =======
See accompanying notes. 5 G+G Retail, Inc. Notes to Unaudited Condensed Consolidated Financial Statements 1. Principles of Consolidation and Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("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 condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly: (1) its financial position as of May 3, 2003, (2) the results of its operations for the three-month period ended May 3, 2003 and May 4, 2002 and (3) its cash flows for the three-month period ended May 3, 2003 and May 4, 2002. The balance sheet at February 1, 2003 has been derived from financial statements at that date but does not include all of the information and footnotes required by GAAP 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 1, 2003 filed on April 30, 2003. The interim operating results are not necessarily indicative of the results that may be expected for an entire year. 2. Short-Term Borrowings The Company is party to a Loan and Security Agreement that expires on May 1, 2006 or alternatively, on May 1, 2007 if either of the following events occur before May 1, 2006: (a) the maturity date of all of the Company's senior notes due May 15, 2006 (the "Senior Notes") have been extended until after May 1, 2007; or (b) all of the Senior Notes have been redeemed, retired, purchased or otherwise acquired with proceeds of equity securities sold by the Company or with the proceeds of indebtedness incurred by the Company with a maturity date after May 1, 2007. The Loan and Security Agreement provides for a revolving credit facility (the "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 no outstanding borrowings under the Facility at May 3, 2003. Outstanding letters of credit under the Facility totaled $432,500 at May 3, 2003. Interest on outstanding borrowings can range either from Prime to Prime plus 0.25% 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. 3. Goodwill and Other Indefinite Lived Intangible Assets The Company adheres to Statement of Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." Under SFAS 142, goodwill and other intangible assets that have indefinite useful lives are no longer amortized, but are subject to at least an annual assessment of impairment by applying a fair value based test, as specifically provided in the Statement. The Company performed an impairment test in the first quarter of fiscal 2004 on its goodwill and its indefinite lived intangible assets (trademarks). It was determined that there was no impairment to its recorded goodwill or indefinite lived intangible assets. The accumulated amortization of goodwill and trademarks as of May 3, 2003 and February 1, 2003 was $13.3 million. 6 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, Rave Girl, R4R, and Shut Eye, which provide our customers with fashionable, high 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 May 2003, we had 582 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 G+G/Rave 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. As of May 2003, there were 110 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. Results of Operations Comparison of The First Quarter of Fiscal 2004 and The First Quarter of Fiscal 2003 Net sales decreased to $87.8 million in the first quarter of fiscal 2004 from $95.5 million in the first quarter of fiscal 2003. The $7.7 million or 8.0% decrease in net sales was due to a $12.7 million or 13.8% decrease in same store sales compared to the first quarter of fiscal 2003. This decrease was offset by the opening of new stores, which contributed $5.0 million to net sales in the first quarter of fiscal 2004. Average sales per gross square foot decreased 12.3% to $64 in the first quarter of fiscal 2004 from $73 in the first quarter of fiscal 2003. We operated 582 stores at the end of the first quarter of fiscal 2004 as compared to 547 stores at the end of fiscal 2003, as a result of opening 53 stores and closing 18 stores. Cost of sales, including occupancy costs, decreased 3.9% to $57.2 million in the first quarter of fiscal 2004 from $59.5 million in the first quarter of fiscal 2003. As a percentage of net sales, cost of sales including occupancy costs, increased 2.8% from 62.3% in the first quarter of fiscal 2003 to 65.1% in the first quarter of fiscal 2004. This 2.8% increase resulted from a 0.5% increase in the cost of sales and a 2.3% increase in occupancy costs as a percent of sales compared to the first quarter of fiscal 2003. The increase in the cost of sales as a percentage of net sales was due to an increase in markdowns in the first quarter of fiscal 2004 compared to the first quarter of fiscal 2003 offset by an increase in the initial mark-on. The occupancy cost increase as a percent of sales resulted from an increase in occupancy costs and the associated decrease in same store sales. In the first quarter of fiscal 2004, selling, general, administrative and buying expenses totaled $32.0 million compared to $30.8 million in the first quarter of fiscal 2003. As a percent of sales, these expenses increased from 32.3% in the first quarter of fiscal 2003 to 36.4% in the first quarter of fiscal 2004. Fiscal 2004 expenses reflect additional selling costs related to new store openings, an increase in same store 7 selling expenses and an increase in administrative costs. The increase as a percent of sales resulted from the additional selling costs coupled with the decrease in same store sales. Depreciation and amortization expense for the first quarter of fiscal 2004 was $2.9 million as compared to $2.8 million for the first quarter of fiscal 2003. Interest expense in the first quarter of fiscal 2004 was $3.6 million or 4.1% of net sales as compared to $3.6 million or 3.8% of net sales for the first quarter of fiscal 2003. Net interest expense in both the first quarter of fiscal 2004 and 2003 reflect interest on our senior notes, amortization of the $7.3 million original issue discount on our senior notes, the $470,000 value assigned to the warrants issued by G&G Retail Holdings, Inc., our parent company, the deferred financing costs associated with the senior notes and interest on our capital leases. The income tax benefit for the first quarter of fiscal 2004 was $1.2 million or a 15.0% income tax benefit rate as compared to $440,000, or an income tax benefit rate of 42.5% in the first quarter of fiscal 2003. The income tax benefit rate of 15.0 % for fiscal 2004 is based on the estimated realization of the deferred tax asset. The net loss increased from $595,000 in the first quarter of fiscal 2003 to a loss of $6.7 million in the first quarter of fiscal 2004 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; (iv) upgrading and maintaining our computer system; and (v) interest on our senior notes. As of May 1, 2003, we extended the expiration date of our revolving credit facility without change to the other terms and conditions thereof. Our revolving credit facility now expires on May 1, 2006 or alternatively on May 1, 2007 if either of the following events occur before May 1, 2006: (a) the maturity date of all of the Senior Notes have been extended until after May 1, 2007 or (b) all of the Senior Notes have been redeemed, retired, purchased or otherwise acquired with proceeds of equity securities sold by us or with the proceeds of indebtedness incurred by us with a maturity date after May 1, 2007. 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). We may use the revolving credit facility for general operating, working capital and other corporate purposes. Amounts available under the revolving credit facility are subject to the value of our eligible inventory and credit card receivables, subject to 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 0.25% 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. If the excess availability under the facility is $7.5 million or less during any month, the revolving credit facility subjects us to a minimum net worth, as defined, covenant of $40.0 million. The facility also contains other customary restrictive covenants including limitations on changes of ownership, transactions with affiliates, dividends, additional indebtedness, creation of liens, asset sales, acquisitions, conduct of business and capital expenditures. Our obligations under the revolving credit facility are secured by a lien on all or substantially all of our assets, excluding our leasehold interests. As of May 3, 2003, we had no borrowings outstanding under the revolving credit facility, but had approximately $432,500 of letters of credit outstanding. 8 Net cash used in operating activities in the first quarter of fiscal 2004 was $10.3 million as compared to $3.3 million in the first quarter of fiscal 2003. The increase in net cash used in operating activities in the first quarter of fiscal 2004, as compared to the first quarter of fiscal 2003, was principally due to an increase of $6.9 million in our loss before benefit for income taxes. Capital expenditures for the first quarter of fiscal 2004 and the first quarter of fiscal 2003 were $4.0 million and $2.9 million, respectively. The increase in capital expenditures was due to our opening more stores in the first quarter of fiscal 2004, as compared to the first quarter of fiscal 2003. Management has reduced planned capital expenditures for fiscal 2004 from $14.0 million to approximately $10.0 million. We review the operating performance of our stores on an ongoing basis to determine which stores, if any, to expand or close. We closed 17 stores in fiscal 2003, two stores in the first quarter of fiscal 2004 and anticipate closing an additional 13 stores during the remaining nine months of fiscal 2004. One store was closed in the first quarter of fiscal 2003. As of May 3, 2003, our capital lease obligation for the purchase of the point of sale equipment and software was $2.2 million. The lease term is five years from the date the initial equipment was financed with variable interest rates, based on the purchase date. Principal and interest payments are $1.9 million and $961,000 for the fiscal years ending 2004 and 2005, respectively. As of May 3, 2003, we had $6.7 million in cash. 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. As of May 3, 2003, our indebtedness under our senior notes totaled $102.8 million, which reflects the aggregate face amount of the notes of $107.0 million, net of $4.0 million of unamortized original issue discount, and approximately $204,000 of unamortized value assigned to the warrants issued by G&G Retail, Inc., our parent company, in connection with our senior note issuance. The senior notes are due May 15, 2006 and bear interest at 11% per annum, which is payable semi-annually on May 15 and November 15. We have minimum lease commitments (excluding percentage rents and early termination provisions) under noncancelable operating leases as follows:
Fiscal year ending in: (In Thousands) - ---------------------- -------------- 2004 $ 31,356 2005 28,035 2006 24,862 2007 19,367 2008 15,327 Thereafter 41,235 -------- $160,182 ========
We believe that our cash flow from operating activities, cash on hand and borrowings available under the revolving credit facility will be sufficient to meet our operating and capital expenditure requirements through the end of fiscal 2004. In addition, we believe that cash flow from operations will be sufficient to cover the interest expense arising from the revolving credit facility, our capitalized leases 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" below. 9 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 of control, we could be in default under the indenture. In addition, upon a change of control our parent company may not have sufficient funds to redeem its preferred stock unless we pay a dividend of such amount to it. Critical Accounting Policies The preparation of the foregoing condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These estimates and assumptions are based on management's judgment and available information and, consequently, actual results could be different from these estimates. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2003 for a description of our critical accounting policies involving significant judgment by our management. 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 2003, our first quarter and fourth quarter accounted for approximately 23.2% and 29.2% 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. Statement Regarding Forward Looking Disclosures 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 10 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 Item 1. Business - Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended February 1, 2003, filed with the Securities and Exchange Commission on April 30, 2003. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable Item 4. Controls and Procedures Within the 90-day period prior to the filing date of this report, an evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective to ensure that material information relating to the Company and its consolidated subsidiaries is made know to them, particularly during the period when our periodic reports are being prepared. Subsequent to the date of management's evaluation, there were no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses. 11 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. 10.01 First Amendment to Loan and Security Agreement between The CIT Group/Business Credit, Inc. and G+G Retail, Inc., dated as of May 1, 2003. 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K None 12 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: June 16, 2003 By:/s/ Michael Kaplan ---------------------------------------- Michael Kaplan, Chief Financial Officer (signing on behalf of the registrant and as principal financial officer) 13 CERTIFICATION PURSUANT TO RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Jay Galin, Chief Executive Officer of G + G Retail, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of G+G Retail, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: June 16, 2003 /s/ Jay Galin --------------------------------- Jay Galin Chief Executive Officer CERTIFICATION PURSUANT TO RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael Kaplan, Chief Financial Officer of G + G Retail, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of G+G Retail, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: June 16, 2003 /s/ Michael Kaplan --------------------------------- Michael Kaplan Chief Financial Officer 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. 10.01 First Amendment to Loan and Security Agreement between The CIT Group/Business Credit, Inc. and G+G Retail, Inc., dated as of May 1, 2003. 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. EX-10 3 ex10-1.txt EXHIBIT 10.01 Exhibit 10.01 FIRST AMENDMENT dated as of May 1, 2003 (the "Amendment") to LOAN AND SECURITY AGREEMENT dated as of May 2, 2001 (as amended, modified, supplemented or restated from time to time, the "Loan Agreement") between THE CIT GROUP/BUSINESS CREDIT, INC. (the "Lender") and G+G Retail, Inc. (the "Borrower"). Terms which are capitalized in this Amendment and not otherwise defined shall have the meanings ascribed to such terms in the Loan Agreement. WHEREAS, Borrower has requested that Lender (i) extend the initial maturity date of the Loan Agreement to May 2, 2007 and (ii) consent to the modification of certain terms and provisions contained in the Loan Agreement; and WHEREAS, Lender has agreed to the foregoing request, on the terms and conditions contained in this Amendment; NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section One. Amendments. Upon the satisfaction of the conditions set forth in Section Two hereof, the Loan Agreement shall be and is hereby amended as follows: (a) Section 6.3. Collection of Accounts. Section 6.3 (b) is amended by deleting the second sentence thereof in its entirety. (b) Section 12.1. Term. Section 12.1 is amended by (i) deleting the first sentence of paragraph (a) thereof in its entirety, and substituting the following in lieu thereof, and (ii) deleting paragraph (c) thereof in its entirety, and substituting the following in lieu thereof: "(a) This Agreement and the other Financing Agreements shall become effective on the Closing Date and, unless sooner terminated pursuant to the terms hereof, shall continue in full force and effect for a term ending on the Renewal Date, as hereinafter defined, and from year to year thereafter, provided, that this Agreement and the other Financing Agreements may be terminated by (i) Lender (x) effective on the Renewal Date or on any anniversary of the Renewal Date, by giving to the Borrowers at least sixty (60) days prior written notice of intent to terminate or (y) effective immediately, in accordance with the terms of Section 10.2 (b) hereof, or (ii) Borrowers at any time, by giving to Lender at least sixty (60) days prior written notice of intent to terminate, and by the payment to Lender on the effective date of such termination the applicable fee described in paragraph (c) hereof, if such effective date occurs on or before April 30, 2007. This Agreement and all other Financing Agreements must be terminated simultaneously. As used herein, the term "Renewal Date" shall mean May 1, 2006, unless, prior to such date, either of the following events (each an "Extension Event") shall have occurred: (x) the maturity date of all of the Senior Notes shall have been extended to a date occurring after May 1, 2007 or (y) all of the Senior Notes shall have been redeemed, retired, defeased, purchased or otherwise acquired with proceeds of equity securities or indebtedness (including indebtedness evidenced by Replacement Senior Notes), the maturity date of which occurs after May 1, 2007. If either of the Extension Events shall have occurred before May 1, 2006, then the term Renewal Date shall mean May 1, 2007, provided, however, that at least thirty (30) days prior to the occurrence of any such Extension Event, Borrowers shall have given Lender written notice thereof, together with a reasonably detailed description of such Extension Event, and promptly following its request for same, Lender shall have had a reasonable opportunity to review to its reasonable satisfaction all documents, instruments and agreements material in nature and which are to be executed or delivered in connection with such Extension Event. "(c) If for any reason this Agreement is terminated prior to the Renewal Date or prior to any anniversary of the Renewal Date, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of Lender's lost profits as a result thereof, Borrowers agree to pay to Lender, upon the effective date of such termination, an early termination fee in the amount set forth below if such termination is effective in the period indicated:
Amount Period ------ ------ 1.00% of the Maximum Credit From the Closing Date to and including April 30, 2005 .5% of the Maximum Credit From May 1, 2005 to and including April 30, 2006 .25% of the Maximum Credit From May 1, 2006 to and including April 30, 2007.
Such early termination fee shall be presumed to be the amount of damages sustained by Lender as a result of such early termination and Borrowers agree that it is reasonable under the circumstances currently existing. In addition, Lender shall be entitled to such early termination fee upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if Lender does not exercise its right to terminate this Agreement, but elects, 2 at its option, to provide financing to Borrowers or permit the use of cash collateral under the United States Bankruptcy Code. The early termination fee provided for in this Section 12.1 shall be deemed included in the Obligations." (c) Schedule 8.9. Credit Card Agreements. Schedule 8.9 to the Loan Agreement is deleted in its entirety and Schedule 8.9 to this Amendment is hereby substituted in lieu thereof. Section Two. Conditions Precedent. This Amendment shall become effective on the date when all of the following conditions, the satisfaction of each of which is a condition precedent to the effectiveness of this Amendment, shall have occurred or shall have been waived in writing by Lender. (a) Lender shall have received for its own account payment in cash of a non-refundable fee in the amount of $75,000. (b) Lender shall have received and reviewed to its reasonable satisfaction fully executed counterparts or originals of each of this Amendment and a Certificate of the Secretary or Assistant Secretary of Borrower (A) relating to the adoption of resolutions by Borrower's Board of Directors and the Class B Common Stockholders of the Parent (the "Class B Stockholders") approving this Amendment and the other documents executed or delivered in connection herewith, (B) certifying that no amendments have been made to Borrower's Certificate of Incorporation as amended, and Borrower's by-laws, as amended, since May 2, 2001, and (C) further certifying the names and incumbency of officers of Borrower authorized to sign this Amendment and all other documents executed or delivered in connection herewith, and the names and validity of signatures of such officers. (c) All representations and warranties set forth in the Loan Agreement (except for such inducing representations and warranties that were only required to be true and correct as of a prior date) shall be true and correct in all material respects on and as of the effective date hereof, and no Event of Default shall have occurred and be continuing. (d) No event or development shall have occurred since February 1, 2003 which event or development has had or is reasonably likely to have a Material Adverse Effect. (e) Lender shall have received a certificate from Borrower, executed by its president and chief operating officer as to the truth and accuracy of paragraphs (c), (d) and (g) of this Section Two. (f) All corporate and legal proceedings and all documents and instruments executed or delivered in connection with this Amendment shall be satisfactory in form and substance to Lender and its counsel, and Lender and its counsel shall have received all information and copies of all documents which Lender and its counsel may have reasonably requested in connection herewith and the matters contemplated hereunder, such documents, when requested by them, to be certified by appropriate corporate authorities. (g) There shall be no action, suit or proceeding pending or to Borrower's knowledge overtly threatened against Borrower before any court (including any bankruptcy court), arbitrator 3 or governmental or administrative body or agency which challenges or relates to the consummation of this Amendment or the other transactions contemplated herein. (h) Lender shall have received such further agreements, consents, instruments and documents as may be necessary or proper in the reasonable opinion of Lender and its counsel to carry out the provisions and purposes of this Amendment. Section Three. Representations and Warranties. Borrower hereby represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to Lender that: (a) Borrower has the corporate or other power, authority and legal right to execute, deliver and perform this Amendment and the other instruments, agreements, documents and transactions contemplated hereby, and has taken all actions necessary to authorize the execution, delivery and performance of this Amendment and the other instruments, agreements, documents and transactions contemplated hereby; (b) No consent of any Person (including, without limitation, stockholders or creditors of Borrower, as the case may be) other than Lender and the Class B Stockholders (whose consent has been given), and no consent, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority, is required in connection with the execution, delivery and performance by Borrower, or the validity or enforceability against Borrower, of this Amendment and the other instruments, agreements, documents and transactions contemplated hereby; (c) This Amendment has been duly executed and delivered on behalf of Borrower by its duly authorized officer, and constitutes the legal, valid and binding obligation of Borrower, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights of creditors generally or equitable remedies (whether arising in a proceeding at law or in equity); (d) Borrower is not in material default under any indenture, mortgage, deed of trust, agreement or other instrument to which it is a party or by which it may be bound. Neither the execution and delivery of each of this Amendment, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof will (i) violate any law or regulation, or (ii) result in or cause a violation by Borrower of any order or decree of any court or government instrumentality, or (iii) conflict with, or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, material agreement or other material instrument to which Borrower is a party or by which it may be bound, or (iv) result in the creation or imposition of any lien, charge, or encumbrance upon any of the property of Borrower, except in favor of Lender, to secure the Liabilities, or (v) violate any provision of the Certificate of Incorporation, By-Laws or any capital stock or similar equity instrument of Borrower; (e) After giving effect to this Amendment, no Event of Default has occurred and is continuing; and 4 (f) Since the date of Borrower's consolidated financial statements for the Fiscal Year ended February 1, 2003, no change or event has occurred which has had or is reasonably likely to have a Material Adverse Effect. Section Four. General Provisions. (a) Except as herein expressly amended, the Loan Agreement and all other agreements, documents, instruments and certificates executed in connection therewith, are ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. (b) All references in the Other Agreements to the Loan Agreement shall mean the Loan Agreement as amended hereby and as hereafter amended, supplemented or modified from time to time. From and after the date hereof, all references in the Loan Agreement to "this Agreement," "hereof," "herein," or similar terms, shall mean and refer to the Loan Agreement as amended by this Amendment. (c) This Amendment may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all which shall constitute one and the same agreement. (d) This Amendment shall be governed and controlled by the internal laws of the State of New York. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 5 IN WITNESS WHEREOF, Lender and Borrower have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. THE CIT GROUP/BUSINESS CREDIT, INC. By: /s/ Deborah Rogut ---------------------------------- Name: Deborah Rogut Title: Vice President G + G RETAIL, INC. By: /s/ Michael Kaplan --------------------------------- Name: Michael Kaplan Title: Chief Financial Officer 6 Schedule 8.9 Credit Card Agreements ---------------------- 1. Debit Card Agreement between National Processing Company and G+G Retail, Inc. 2. Merchant Services Agreement between Discover Card Services, Inc. and G+G Retail, Inc. 3. American Express Card Acceptance Agreement among G+G Retail, Inc. and American Express Travel Related Services Company, Inc. and certain of its affiliates. 4. Merchant Agreement among G+G Retail, Inc., National Processing Company and National City Bank of Kentucky. 5. Private Charge Program Agreement, dated May 23, 2001, between Shoppers Charge Accounts Co. and G+G Retail, Inc. 7 EX-99 4 ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of G+G Retail, Inc. (the "Company") on Form 10-Q for the period ending May 3, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jay Galin, Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Jay Galin - ----------------------------- Jay Galin Chief Executive Officer June 16, 2003 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of G+G Retail, Inc. (the "Company") on Form 10-Q for the period ending May 3, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael Kaplan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Michael Kaplan - ----------------------------- Michael Kaplan Chief Financial Officer June 16, 2003 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----