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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the quarterly period ended November 1, 2003
------------------------------------------------
Commission file number 333-81307
G+G Retail, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-3596083
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
520 Eighth Avenue, New York, New York 10018
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(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 December 15, 2003
- ------------------------------------- --------------------------------
Common Stock par value $.01 per share 10 shares
CONTENTS
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - November 1, 2003 and 3
February 1, 2003
Condensed Consolidated Statements of Operations - Three and Nine Months
Ended November 1, 2003 and November 2, 2002 4
Condensed Consolidated Statements of Cash Flows - Nine Months
Ended November 1, 2003 and November 2, 2002 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 7-12
Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
Item 4. Controls and Procedures 12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
Signature Page 14
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)
November February
1, 2003 1, 2003
---------------------------------
Assets
Current assets:
Cash and short-term investments $ 755 $ 21,526
Accounts receivable 964 1,782
Merchandise inventories 25,451 15,575
Prepaid taxes and other expenses 2,120 1,791
Deferred tax assets 2,436 2,436
---------------------------------
Total current assets 31,726 43,110
Property and equipment, net 51,325 52,983
Deferred financing cost, net 2,287 2,971
Goodwill 57,720 57,720
Trademarks 45,900 45,900
Other assets 178 184
---------------------------------
Total assets $189,136 $202,868
=================================
Liabilities and stockholder's equity
Current liabilities:
Accounts payable $ 21,592 $ 16,756
Accrued expenses 18,904 20,609
Accrued interest 5,460 2,517
Short-term borrowings 7,738 -
Current portion of capital lease 1,376 1,719
---------------------------------
Total current liabilities 55,070 41,601
Deferred tax liability 2,203 3,220
Capital lease - 944
Long-term debt 103,430 102,563
---------------------------------
Total liabilities 160,703 148,328
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 (21,865) 4,242
---------------------------------
Total stockholder's equity 28,433 54,540
---------------------------------
Total liabilities and stockholder's equity $189,136 $202,868
=================================
See accompanying notes.
3
G+G Retail, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands)
Three months Three months Nine months Nine months
ended November ended November ended November ended November
1, 2003 2, 2002 1, 2003 2, 2002
------------------------------------------------------------------
Net sales $90,218 $97,364 $268,829 $291,151
Cost of sales (including occupancy costs) 60,357 61,540 179,840 184,324
Selling, general, administrative and buying expenses 33,105 32,383 96,931 95,066
Depreciation and amortization 2,650 2,686 8,475 8,304
------------------------------------------------------------------
Operating (loss) income (5,894) 755 (16,417) 3,457
Interest expense 3,594 3,596 10,761 10,777
Interest income 4 33 54 106
------------------------------------------------------------------
Loss before benefit from income taxes (9,484) (2,808) (27,124) (7,214)
Benefit from income taxes (10) (1,194) (1,017) (3,065)
------------------------------------------------------------------
Net loss $(9,474) $(1,614) $(26,107) $ (4,149)
==================================================================
See accompanying notes.
4
G+G Retail, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months Nine months
ended ended
November 1, 2003 November 2, 2002
--------------------------------------
Operating activities
Net loss $(26,107) $(4,149)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization 8,475 8,304
Amortization of debt issue costs 1,656 1,539
Write-off of closed store fixed assets 206 216
Deferred taxes (1,017) (3,065)
Changes in assets and liabilities:
Accounts receivable, prepaid expenses and other assets 495 (1,070)
Merchandise inventories (9,876) (13,552)
Accounts payable, accrued expenses and accrued interest 6,074 15,260
--------- --------
Net cash (used in) provided by operating activities (20,094) 3,483
Investing activities
Capital expenditures (7,023) (10,590)
--------- --------
Net cash used in investing activities (7,023) (10,590)
Financing activities
Proceeds from short-term borrowings 11,187 -
Payment of short-term borrowings (3,449) -
Payment of debt issuance costs (105) -
Payment of capital lease obligations (1,287) (1,127)
--------- --------
Net cash provided by (used in) financing activities 6,346 (1,127)
--------- --------
Net decrease in cash and short-term investments (20,771) (8,234)
Cash and short-term investments, beginning of period 21,526 15,328
--------- --------
Cash and short-term investments, end of period $ 755 $ 7,094
========= ========
Supplemental cash flow disclosures
Cash paid for:
Interest $ 6,118 $ 6,312
========= ========
Income taxes, net of cash refunds of $25 and $31,
respectively $ 119 $ 286
========= ========
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 November 1, 2003, (2) the
results of its operations for the three and nine months ended November 1, 2003
and November 2, 2002 and (3) its cash flows for the three and nine months ended
November 1, 2003 and November 2, 2002. The balance sheet at February 1, 2003 has
been derived from the consolidated 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. The outstanding borrowings under the Facility at November 1,
2003 totaled $7,738,000. Outstanding letters of credit under the Facility
totaled $974,852 at November 1, 2003. Interest on outstanding borrowings can
range either from Prime to Prime plus .25% or from 1.50% over the Eurodollar
Rate to a maximum 2.25% over the Eurodollar Rate, based on the profitability and
amount of indebtedness of the Company. On September 25, 2003, the Company
amended its credit facility, eliminating its minimum net worth covenant and
replaced it with a minimum maintained excess availability requirement of $3.75
million (as defined by the agreement). The $3.75 million excess availability
requirement is in effect until February 1, 2004, at which time it will be
re-established but it shall not exceed $7.5 million.
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 net
loss for the nine-month period may be an impairment indicator of goodwill.
The Company believes that goodwill impairment is probable but not estimable
at this time. An impairment test will be performed in the fourth quarter of
fiscal 2004 at which time an impairment charge, if any, will be recorded.
The Company believes that there will be no impairment to its trademarks.
The accumulated amortization of goodwill and trademarks as of November 1,
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
A decline of 13.8% in same store sales during the first nine months of fiscal
2004 (compared to the same period in fiscal 2003) resulted in a net loss of
$26.1 million (including interest expense of $10.8 million) during this period.
We are discussing with our Senior Note holders the restructuring of our Senior
Note obligations to reduce our debt service. We are also in discussions
regarding the investment of additional capital. If these efforts are
unsuccessful, we may be unable to meet our fiscal 2005 cash requirements. The
discussions concerning restructuring of our Senior Note obligations and
investment of additional capital are progressing; however, there can be no
assurance these efforts will be successful.
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
November 1, 2003, we had 599 operating stores principally located in major
enclosed regional shopping malls throughout the United States, Puerto Rico, and
the U.S. Virgin Islands 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 November
1, 2003, there were 108 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 Third Quarter of Fiscal 2004 and The Third Quarter of Fiscal
2003
Net sales decreased to $90.2 million in the third quarter of fiscal 2004 from
$97.4 million in the third quarter of fiscal 2003. The $7.2 million or 7.4%
decrease in net sales was due to a $13.1 million or 13.9% decrease in same store
sales compared to the third quarter of fiscal 2003. This decrease was offset by
the opening of new stores, which contributed $5.9 million to net sales in the
third quarter of fiscal 2004. Average sales per gross square foot decreased
12.5% to $63 in the third quarter of fiscal 2004 from $72 in the third quarter
of fiscal 2003. We operated 599 stores at the end of the third quarter of fiscal
2004 as compared to 574 stores at the end of the third quarter of fiscal 2003,
as a result of opening 44 stores and closing 19 stores.
Cost of sales, including occupancy costs, decreased 1.8% to $60.4 million in the
third quarter of fiscal 2004 from $61.5 million in the third quarter of fiscal
2003. As a percentage of net sales, cost of sales including occupancy costs,
increased 3.9% from 63.1% in the third quarter of fiscal 2003 to 67.0% in the
third quarter of fiscal 2004. This 3.9% increase resulted from a 1.4% increase
in the cost of sales and a 2.5% increase in occupancy costs as a percent of
sales compared to the third 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
third quarter of fiscal 2004 compared to the third quarter of fiscal 2003 offset
by an increase in the initial mark-on. The
7
occupancy cost increase as a percent of sales resulted from increases in
occupancy costs coupled with the decrease in same store sales.
In the third quarter of fiscal 2004, selling, general, administrative and buying
expenses totaled $33.1 million compared to $32.4 million in the third quarter of
fiscal 2003. As a percent of sales, these expenses increased from 33.3% in the
third quarter of fiscal 2003 to 36.7% in the third quarter of fiscal 2004. The
increase in selling, general, administrative and buying expenses is the result
of additional costs related to the new store openings. The increase as a percent
of sales is primarily due to the decrease in same store sales.
Depreciation and amortization expense for the third quarter of fiscal 2004 and
the third quarter of fiscal 2003 was $2.7 million.
Interest expense in the third quarter of fiscal 2004 was $3.6 million or 4.0% of
net sales as compared to $3.6 million or 3.7% of net sales for the third quarter
of fiscal 2003. Net interest expense reflects interest on our senior notes,
short-term borrowings, 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 third quarter of fiscal 2004 was $10,000 as
compared to a $1.2 million or a 42.5% income tax benefit in the third quarter of
fiscal 2003. The $10,000 benefit recorded in the third quarter of fiscal 2004
was the result of determining the estimated realization of the deferred tax
asset as of November 1, 2003.
The net loss increased from $1.6 million in the third quarter of fiscal 2003 to
a net loss of $9.5 million in the third quarter of fiscal 2004 due to the
factors discussed above.
Comparison of The First Nine Months of Fiscal 2004 and The First Nine Months of
Fiscal 2003
Net sales decreased $22.4 million or 7.7% to $268.8 million in the first nine
months of fiscal 2004 as compared to $291.2 million in the first nine months of
fiscal 2003. The decrease in net sales was due to a $38.9 million or 13.8%
decrease in same store sales compared to the first nine months of fiscal 2003.
This decrease was offset by the opening of new stores, which contributed $16.5
million to net sales in the first nine months of fiscal 2004. Average sales per
gross square foot decreased 11.9% to $193 in the first nine months of fiscal
2004 from $219 in the first nine months of fiscal 2003.
Cost of sales, including occupancy costs, decreased 2.4% to $179.8 million in
the first nine months of fiscal 2004 from $184.3 million in the first nine
months of fiscal 2003. As a percentage of net sales, cost of sales including
occupancy costs increased 3.6% from 63.3% in the first nine months of fiscal
2003 to 66.9% in the first nine months of fiscal 2004. This 3.6% increase
resulted from a 1.4% increase in the cost of merchandise and a 2.2% increase in
occupancy costs as a percent of sales. The increase in the cost of merchandise
as a percentage of net sales was due to an increase in markdowns in the first
nine months of fiscal 2004 compared to the first nine months of fiscal 2003.
This increase in markdowns was offset by an increase in the initial mark-on. The
occupancy cost increase as a percent of sales resulted mainly from the decrease
in same store sales, coupled with increases in occupancy costs.
In the first nine months of fiscal 2004, selling, general, administrative and
buying expenses totaled $96.9 million compared to $95.1 million in the first
nine months of fiscal 2003. As a percent of sales, these expenses increased from
32.7% in the first nine months of fiscal 2003 to 36.0% in the first nine months
of fiscal 2004. The $1.8 million increase resulted from additional selling costs
related to new store openings,
8
and an increase in administrative costs. The increase as a percent of sales
resulted from the decrease in same store sales.
Depreciation and amortization expense for the first nine months of fiscal 2004
was $8.5 million as compared to $8.3 million for the first nine months of fiscal
2003.
Interest expense in the first nine months of fiscal 2004 was $10.7 million or
4.0% of net sales as compared to $10.8 million or 3.7% of net sales for the
first nine months of fiscal 2003. Net interest expense reflects interest on our
senior notes, short-term borrowings, 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 nine months of fiscal 2004 was $1.0 million
as compared to $3.1 million, or an income tax benefit rate of 42.5% for the
first nine months of fiscal 2003. The income tax benefit rate of 3.7% for the
nine months of fiscal 2004 is predicated on the estimated realization of the
deferred tax asset.
The net loss increased from $4.1 million in the first nine months of fiscal 2003
to a loss of $26.1 million in the first nine months 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.
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 .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. 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
November 1, 2003, we had borrowings outstanding under the revolving credit
facility totaling $7,738,000 and $974,852 of letters of credit outstanding. Our
revolving credit facility 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. On September
25, 2003 the Company amended its credit facility, by replacing its minimum net
worth covenant with a minimum maintained excess availability requirement of
$3.75 million (as defined by the agreement). The $3.75 million excess
availability requirement is in effect until February 1, 2004 at which time it
will be re-established but it shall not exceed $7.5 million. As of November 1,
2003, the availability under the revolving credit facility was $14.3 million
before the $3.75 million excess availability requirement.
9
Net cash used in operating activities in the first nine months of fiscal 2004
was $20.1 million as compared to net cash provided by operating activities of
$3.5 million in the first nine months of fiscal 2003. The increase in net cash
used in operating activities in the first nine months of fiscal 2004, as
compared to the first nine months of fiscal 2003, was principally due to an
increase of $22.0 million in our net loss.
Capital expenditures for the first nine months of fiscal 2004 and the first nine
months of fiscal 2003 were $7.0 million and $10.6 million, respectively.
Management continues to monitor its capital expenditures and estimates that
capital expenditures for the remaining three months of fiscal 2004 will be
approximately $1.0 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 seventeen stores
in fiscal 2003, ten stores in the first nine months of fiscal 2004 and
anticipate closing an additional eight stores during the remaining three months
of fiscal 2004. Eight stores were closed in the first nine months of fiscal
2003.
As of November 1, 2003, our capital lease obligation for the purchase of the
point of sale equipment and software was $1.4 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 November 1, 2003, we had $755,000 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 November 1, 2003, our indebtedness under our senior notes totaled $103.4
million, which reflects the aggregate face amount of the notes of $107.0
million, net of $3.4 million of unamortized original issue discount, and
approximately $171,000 of unamortized value assigned to the warrants issued by
G&G Retail Holdings, 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 our revolving credit facility will be sufficient to
meet our operating, capital expenditure and debt service requirements through
the end of fiscal 2004. See the first paragraph in the Overview discussion above
concerning fiscal 2005 cash requirements.
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.
10
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 as
required in such event under our parent company's certificate of incorporation
unless we pay a dividend of such amount to it.
Critical Accounting Policies
The preparation of the foregoing unaudited 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 unaudited 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 effect of economic conditions, changes in customer
shopping habits, including the effect that the September 11,
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
As of the end of the period covered by this report, our Chief Executive Officer
("CEO") and Chief Financial Officer ("CFO") have evaluated our disclosure
controls and procedures. Our CEO and CFO have concluded that our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in reports we file and submit and the Exchange Act of 1934 is
recorded, processed, summarized and reported to our management, CEO and CFO to
allow timely decisions regarding required disclosure within the time periods
specified in the Securities and Exchange Commission's rules and forms.
12
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.
*10.1 Second Amendment, dated as of September 25, 2003, to Loan and
Security Agreement, dated as of May 2, 2001, between The CIT
Group/Business Credit, Inc. and G+G Retail, Inc.
*31.1 Certification of Jay Galin required by Rule 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2 Certification of Michael Kaplan required by Rule 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
*32.1 Certification of Jay Galin pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
*32.2 Certification of Michael Kaplan 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
- -----------
* Filed herewith.
13
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
G+G RETAIL, INC.
Date: December 15, 2003 By: /s/ Michael Kaplan
-----------------------------------------
Michael Kaplan, Chief Financial Officer
(signing on behalf of the registrant and
as principal financial officer)
14
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.
*10.1 Second Amendment, dated as of September 25, 2003, to Loan and
Security Agreement, dated as of May 2, 2001, between The CIT
Group/Business Credit, Inc. and G+G Retail, Inc.
*31.1 Certification of Jay Galin required by Rule 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2 Certification of Michael Kaplan required by Rule 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
*32.1 Certification of Jay Galin pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
*32.2 Certification of Michael Kaplan pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
- -------------
* Filed herewith.
15