-----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, N3KuOgu1rpTm9+zrdiMLRhUlta5I2t1PfWJB6D1EcATXEcSj8hLS8vm422CwdDri ZNNq1SqUT+r3Qm1Dko4GYQ== /in/edgar/work/20000822/0000950172-00-001499/0000950172-00-001499.txt : 20000922 0000950172-00-001499.hdr.sgml : 20000922 ACCESSION NUMBER: 0000950172-00-001499 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000729 FILED AS OF DATE: 20000822 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED RETAIL GROUP INC/DE CENTRAL INDEX KEY: 0000881905 STANDARD INDUSTRIAL CLASSIFICATION: [5621 ] IRS NUMBER: 510303670 STATE OF INCORPORATION: DE FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19774 FILM NUMBER: 707643 BUSINESS ADDRESS: STREET 1: 365 WEST PASSAIC ST CITY: ROCHELLE PARK STATE: NJ ZIP: 07662 BUSINESS PHONE: 2018450880 MAIL ADDRESS: STREET 1: 365 W PASSAIC STREET STREET 2: 365 W PASSAIC STREET CITY: ROCHELLE PARK STATE: NJ ZIP: 07662 10-Q 1 0001.txt 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 -------- United Retail Group, Inc. ------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 51 0303670 - ------------------------------ -------------------------- State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 365 West Passaic Street, Rochelle Park, NJ 07662 - ------------------------------------------ ---------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (201) 845-0880 --------------- - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "1934 Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- ---- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the 1934 Act subsequent to the distribution of securities under a plan confirmed by a court. YES NO --- ---- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of 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
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) 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 -------------------- -------------- -------------- 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.
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share amounts) (Unaudited)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED ----------------------------------- ------------------------------------ July 29, July 31, July 29, July 31, 2000 1999 2000 1999 ---------------- --------------- --------------- ---------------- 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.
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited)
TWENTY-SIX WEEKS ENDED JULY 29, JULY 31, 2000 1999 ---------------- ---------------- 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) ---------------- ---------------- Net Cash Provided From Operating Activities 20,121 23,646 ---------------- ---------------- INVESTING ACTIVITIES: Capital expenditures (9,877) (10,794) Deferred payment for property and equipment 53 518 ---------------- ---------------- Net Cash Used In Investing Activities (9,824) (10,276) ---------------- ---------------- 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.
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:
Thirteen Weeks Ended Twenty-Six Weeks Ended ------------------------------ -------------------------------- July 29, July 31, July 29, July 31, 2000 1999 2000 1999 ------------ ---------- ------------ --------- 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
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):
Thirteen Weeks Ended Twenty-Six Weeks Ended ------------------------------- ------------------------------ July 29, July 31, July 29, July 31, 2000 1999 2000 1999 -------------- ------------- --------------- -------------- Currently payable: Federal $853 $3,316 $2,307 $5,868 State 134 289 279 408 ------- -------- -------- -------- 987 3,605 2,586 6,276 ------- -------- -------- -------- Deferred: Federal (140) (129) 7 187 State (81) (28) 80 40 ------- -------- -------- -------- (221) (157) 87 227 ------- -------- -------- -------- $766 $3,448 $2,673 $6,503 ======= ======== ======== ========
Reconciliation of the provision for income taxes from the U.S. Federal statutory rate to the Company's effective rate is as follows (dollars in thousands):
Thirteen Weeks Ended ------------------------------------------- July 29, 2000 July 31, 1999 --------------------- ---------------- 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% ===================== =================
Twenty-Six Weeks Ended --------------------------------------------- July 29, 2000 July 31, 1999 ------------------- ------------------ 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% ==================== ===================
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. EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 1,000 FEB-03-2001 APR-30-2000 JUL-29-2000 3-MOS 54,819 0 1,405 0 49,346 115,481 130,160 61,668 191,169 55,580 7,293 14 0 0 121,982 191,169 108,513 108,513 84,991 84,991 22,073 0 (574) 2,023 766 1,257 0 0 0 1,257 $0.09 $0.09
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