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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 3, 2001
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 019774
United Retail Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 51 0303670
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
365 West Passaic Street, Rochelle Park, NJ 07662
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 845-0880
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Securities registered pursuant to Section 12(b) of the 1934 Act:
Title of each class Name of each exchange on which registered
- ------------------------ -----------------------------------------
Securities registered pursuant to Section 12(g) of the 1934 Act:
Common Stock, $.001 par value per share, with Stock Purchase Right attached
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(Title of class)
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 _______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 3, 2001, the aggregate market value of the voting stock of the
registrant (the "Corporation" also referred to herein, together with its
subsidiaries, as the "Company") held by non-affiliates of the registrant
was approximately $48.2 million. For purposes of the preceding sentence
only, affiliate status was determined on the basis that all stockholders of
the registrant are non-affiliates except stockholders who have filed
statements with the Securities and Exchange Commission (the "SEC") under
Section 16(a) of the 1934 Act and the holdings of affiliates are based upon
the contents of the filed statements.
APPLICABLE ONLY TO REGISTRANTS 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 REGISTRANTS:
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
As of March 3, 2001, 13,268,633 shares of the registrant's common stock,
$.001 par value per share, were outstanding. One Stock Purchase Right is
attached to each outstanding share.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's proxy statement on Schedule 14A for its 2001 annual
meeting of stockholders (the "2001 Proxy Statement") to be filed with the
SEC is incorporated in part by reference in Part III of this Form 10-K.
PART I
Item 1. Business.
OVERVIEW
The Company is a leading nationwide specialty retailer featuring AVENUE
brand apparel and accessories for large-size women and CLOUDWALKERS.COM
brand women's shoes.
HISTORY
United Retail Group, Inc. was incorporated in 1987 and completed its
initial public offering in 1992. The Company's current business resulted
from an internal reorganization at The Limited, Inc. ("The Limited") in
1987, in which The Limited combined its underperforming AVENUE store group
(then operating under the Lerner Woman trade name) with the Sizes Unlimited
store group. Raphael Benaroya, the Chairman of the Board, President and
Chief Executive Officer of United Retail Group, Inc., and his management
team were selected to manage the combined businesses.
CUSTOMER BASE
The Company serves the mass market and targets fashion-conscious women
between 25 and 55 years of age who wear size 14 or larger apparel. However,
CLOUDWALKERS.COM shoes are available in a complete size range. The Company
believes that the large-size customer often has fewer specialty store
alternatives in nearby shopping malls and strip shopping centers than her
smaller-size counterpart although in recent years new entrants in the
market segment have expanded the available alternatives.
MERCHANDISING AND MARKETING
The Company's strategy is to offer its customers the proprietary AVENUE
brand of apparel and accessories in its retail stores, through its catalog
and on its Internet website (www.avenue.com). Most AVENUE products are
custom designed, principally by the Company's design staff. The Company
emphasizes a contemporary brand image and consistency of merchandise
quality and fit. The Company often updates its merchandise selections to
reflect customer demand and fashion trends. (The apparel industry is
subject to rapidly changing consumer fashion preferences and the Company's
performance depends on its ability to respond quickly to changes in
fashion.) The Company offers most of its merchandise at popular or moderate
price points.
The Company exclusively promotes merchandise with its own brands, which
generally have higher profit margins than national brands would have if
they were marketed by the Company. The Company believes that its brands
have created an image that helps distinguish it from competitors. Through
careful brand management, including consistent imaging of its brands, the
Company believes it has enhanced brand recognition and the customer's
perception of value. Products are packaged and presented in a manner
consistent with more expensive merchandise with national brand names. This
paragraph includes forward-looking information under the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), which is subject to the
uncertainties and other risk factors referred to under the caption "Future
Results."
STORES
Each store operated by the Company offers selections of AVENUE brand casual
wear, career apparel, specialty items and accessories. The casual wear
assortment includes comfortably fitted jeans, slacks, T-shirts, skirts,
active wear and sweaters. Casual wear comprises the majority of the
Company's sales. The career assortment includes skirts, soft blouses and
dresses. Specialty items include sleepwear, lingerie and body lotions.
Accessories include earrings, pins, scarves and a selection of gift items.
Most stores also carry CLOUDWALKERS.COM shoes.
The Company develops new AVENUE brand apparel assortments on average four
to six times each year. Merchandise selection is allocated to each store
based on many factors, including store location, store profile and sales
experience. The Company regularly updates each store's profile based on its
customers' fashion and price preferences and local demographics. The
Company's point-of-sale systems gather financial, credit, inventory and
other statistical information from each store daily. This information is
then used to evaluate and adjust each store's merchandise mix.
The Company uses creative merchandise displays, distinctive signage and
upscale packaging to create an attractive store atmosphere.
SHOP @ HOME INITIATIVE
The Company is entering an additional channel of distribution for its
merchandise, Internet and catalog ("shop @ home") sales, to seek to expand
its customer base and to attract more business, both online and in-store,
from its existing customers.
The Company has mailed catalogs and operated an Internet site
(www.cloudwalkers.com) for the sale of its CLOUDWALKERS.COM brand women's
shoes since the third quarter of fiscal 1999. (A full size range is
offered.) The Company has mailed catalogs for AVENUE brand merchandise
since September 2000. The Company launched a site (www.avenue.com) for the
sale of its AVENUE brand merchandise in November 2000. Shop @ home sales
were not material in relation to total sales in fiscal 2000. Fulfillment of
shop @ home sales has been outsourced.
MERCHANDISE DISTRIBUTION AND INVENTORY MANAGEMENT
The Company believes that short production schedules and rapid delivery of
merchandise from manufacturers are vital to minimize business risks arising
from changing fashion trends.
For its stores, the Company uses a centralized distribution system, under
which all merchandise is received, processed and distributed through the
Company's distribution complex in Troy, Ohio. The Company maintains a
worldwide logistics network of agents and space availability arrangements
to support the in-bound movement of merchandise into the distribution
complex where it is promptly repacked and shipped to the stores. The
out-bound system consists of common carrier line haul routes to a network
of delivery agents. This system enables the Company to provide every store
with frequent deliveries. (The Company does not own or operate trucks or
trucking facilities.) The Company manages its inventory levels, merchandise
allocation to stores and sales replenishing for each store through its
computerized management information systems, which enable the Company to
profile each store and evaluate and adjust each store's merchandise mix on
a weekly basis. New merchandise is allocated by style, color and size
immediately before shipment to stores to achieve a merchandise assortment
that is suited to each store's customer base.
For both its stores and its shop @ home activities, the Company's inventory
management strategy is to maintain targeted inventory turnover rates and
minimize the amount of unsold merchandise at the end of a season by closely
comparing sales and fashion trends with on-order merchandise and making
necessary purchasing adjustments. The preceding sentence constitutes
forward-looking information under the Reform Act and is subject to the
uncertainties and other risk factors referred to under the caption "Future
Results." Additionally, the Company uses markdowns and promotions.
MANAGEMENT INFORMATION SYSTEMS
The Company's management information systems consist of a full suite of
financial and merchandising systems, including credit, inventory
distribution and control, sales reporting, accounts payable, cash/credit,
merchandise reporting and planning.
All of the Company's stores have point-of-sale terminals that transmit
daily information on sales by merchandise category, style, color and size,
as well as customer data. The Company evaluates this information, together
with its report on merchandise shipments to the stores, to implement
merchandising decisions regarding markdowns, reorders of fast-selling items
and allocation of merchandise. In addition, the Company's headquarters and
distribution center are linked through an interactive computer network,
which is accessible to district sales managers in the field.
Company employees located at its headquarters maintain and support the
applications software, operations, networking and point-of-sale functions
of the Company's management information systems. The hardware and systems
software for the Company's management information systems are maintained by
Integrated Systems Solutions Corporation, a wholly-owned subsidiary of IBM.
PURCHASING
Separate groups of merchants are responsible for different categories of
merchandise. Most of the merchandise purchased by the Company consists of
custom designed products produced for the Company by contract
manufacturing, under one of the Company's two proprietary brands. An item
of merchandise is test marketed, whenever possible, in limited quantities
prior to mass production to help identify the current fashion preferences
of the Company's customers.
The Company provides manufacturers with strict guidelines for size
specifications and gradings to ensure proper, consistent fit. The Company
and independent sourcing agents monitor production by manufacturers in the
United States and abroad to ensure that size specifications, grading
requirements and other specifications are met.
In Fiscal 2000, each of two purchasing agents accounted for approximately
9% of the Company's merchandise purchases and another purchasing agent
accounted for approximately 15% of the Company's merchandise purchases.
There is no assurance that the replacement of these agents would not have
a materially adverse effect on the Company's operations.
Domestic purchases (some of which are foreign-made products) are executed
by Company purchase orders. Import purchases are made in U.S. dollars and
are generally supported by letters of credit.
CREDIT SALES
The Company permits its customers to use several methods of payment,
including cash, personal checks, third-party credit cards, layaways and its
own proprietary credit card.
COMPETITION
All aspects of the women's retail apparel and shoe businesses are highly
competitive. Many of the competitors are units of large national chains
that have substantially greater resources than the Company. Management
believes its principal competitors include all major national and regional
department stores, specialty retailers, discount stores, mail order
companies, television shopping channels and Internet web sites. Management
believes its proprietary brands, merchandise selection, prices, consistency
of merchandise quality and fit, and appealing shopping experience
emphasizing strong merchandise presentations, together with its experienced
management team, management information systems and logistics capabilities,
enable it to compete in the marketplace. The preceding sentence constitutes
forward-looking information under the Reform Act and is subject to the
uncertainties and other risk factors referred to under the caption "Future
Results."
TRADE NAME AND TRADEMARKS
The Company is the owner in the United States of its trade name, AVENUE,
used on storefronts, and principal trademarks, AVENUE and CLOUDWALKERS.COM,
used on merchandise labels. The Company is not aware of any use of its
trade name or trademarks by its competitors that has a material effect on
the Company's operations or any material claims of infringement or other
challenges to the Company's right to use its trade name and trademarks in
the United States.
EMPLOYEES
As of March 3, 2001, the Company employed approximately 5,200 associates,
of whom approximately 2,000 worked full-time and the balance of whom worked
part-time. Considerable seasonality is associated with employment levels.
Approximately 60 store associates are covered by collective bargaining
agreements. The Company believes that its relations with its associates are
good.
CORPORATE ACQUISITION REVIEW
As a matter of routine, United Retail Group, Inc. has evaluated financial
data provided to it by competing businesses that are either for sale as a
going concern or are in liquidation. From time to time, the Company has
purchased assets being liquidated. It has not acquired a going concern but
it would consider making a bid on a suitable corporate acquisition at an
opportune price if adequate financing at acceptable rates were available.
FUTURE RESULTS
The Company's business is subject to significant uncertainties and risks.
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) cost overruns, (vi) increase in
prevailing rents, (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,
(ix) disruptions in the sourcing of merchandise abroad, (x) exchange rate
fluctuations, (xi) trade sanctions or restrictions, (xii) changes in quota
and duty regulations, (xiii) delays in shipping, or (xiv) increased costs
of transportation.
Item 2. Properties.
As of March 6, 2001, the Company leased stores in 37 states:
Alabama 6 Missouri 7
Arizona 6 Nevada 2
Arkansas 1 New Hampshire 2
California 74 New Jersey 39
Connecticut 12 New Mexico 2
Delaware 2 New York 51
Florida 27 North Carolina 9
Georgia 19 Ohio 23
Illinois 39 Oklahoma 4
Indiana 10 Oregon 6
Iowa 1 Pennsylvania 17
Kansas 1 Rhode Island 1
Kentucky 4 South Carolina 6
Louisiana 12 Tennessee 9
Maine 1 Texas 43
Maryland 17 Virginia 10
Massachusetts 18 Washington 11
Michigan 26 Wisconsin 6
Mississippi 1
Total: 525
The Company leases its executive offices, which consist of approximately
65,000 square feet in an office building at 365 West Passaic Street,
Rochelle Park, New Jersey. The office lease has a term ending in August
2006.
The Company owns a 128-acre site on Interstate 75 in Troy, Ohio, on which
its national distribution center is located. The national distribution
center is equipped to service 900 stores. The site is adequate for a total
of four similar facilities.
Item 3. Legal Proceedings.
The Company is defending various routine legal proceedings incidental to
the conduct of its business and is maintaining reserves that include, among
other things, the estimated cost of uninsured payments to accident victims
and payments to landlords and vendors of goods and services resulting from
certain disputes. Based on legal advice that it received, management
believes that, giving effect to reserves and insurance coverage, these
legal proceedings are not likely to have a material adverse effect on the
financial position or results of operations of the Company.
Certain pending legal proceedings to which the Company was a party were
terminated during the fourth quarter of Fiscal 2000 in the ordinary course
of business. The termination of pending legal proceedings during that
fiscal quarter did not have a material effect on the financial position
or results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Common Stock of United Retail Group, Inc. is quoted on the
Nasdaq National Market under the symbol "URGI." The last reported
sale price of the Common Stock on the Nasdaq National Market on
March 12, 2001 was 5 7/8.
The following table sets forth the reported high and low sales prices of
the Common Stock as reported by Nasdaq for each fiscal quarter indicated.
1999 2000
---- ----
High Low High Low
---- --- ---- ---
First Quarter $11.5000 $8.3750 $12.5625 $7.6250
Second Quarter $15.2500 $10.0000 $9.2500 $6.0312
Third Quarter $14.0000 $9.3750 $6.7500 $5.0625
Fourth Quarter $10.9375 $7.9688 $7.3750 $4.6875
United Retail Group, Inc. has not paid dividends on its Common
Stock and has no present intention of doing so. Also, the
Financing Agreement between United Retail Group, Inc. and certain
of its subsidiaries and The CIT Group/Business Credit, Inc., dated
August 15, 1997, as amended, forbids the payment of dividends.
The transfer agent and registrar for the Common Stock is
Continental Stock Transfer and Trust Co., 2 Broadway, New York, New
York 10004.
At March 6, 2001 there were 411 record owners of Common Stock.
All securities offerings by United Retail Group, Inc. in Fiscal 2000 were
registered under the Securities Act of 1933 on Registration Statements on
Form S-8 except as indicated in Quarterly Reports on Form 10-Q filed during
the year.
Item 6. Selected Financial Data.
52 WEEKS 52 WEEKS 52 WEEKS 52 WEEKS 53 WEEKS
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED
FEB. 1, JAN. 31, JAN. 30, JAN. 29, FEB. 3,
1997 1998 1999 2000 2001
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(SHARES AND DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Net sales.............. $363,074 $361,751 $378,562 $382,631 $419,712
Cost of goods sold,
including buying
and occupancy costs.... 289,421 278,078 275,811 282,754 323,153
Gross profit........... 73,653 83,673 102,751 99,877 96,559
General, administrative
and store operating
expenses.............. 80,063 80,469 79,221 77,778 91,474
Operating (loss) income.. (6,410) 3,204 23,530 22,099 5,085
Non-operating income..... 0 0 3,113 0 0
Interest (expense)
income, net........... (413) (154) 1,201 1,688 1,854
(Loss) income before
taxes................ (6,823) 3,050 27,844 23,787 6,939
(Benefit from) provision
for income taxes....... (676) (1,781) 9,864 7,638 2,719
Net (loss) income........ (6,147) 4,831 17,980 16,149 4,220
Net (loss) income
per common share:....
Basic.............. ($.50) $.40 $1.38 $1.23 $0.32
Diluted ........... ($.50) $.37 $1.31 $1.17 $0.31
Weighted average number
of common shares
outstanding:
Basic.............. 12,190 12,190 13,056 13,156 13,302
Diluted............ 12,190 13,187 13,736 13,852 13,515
BALANCE SHEET DATA
(AT PERIOD END):
Working capital........ $36,941 $43,875 $60,343 $61,098 $49,567
Total assets........... 138,331 142,614 163,096 180,338 191,630
Long-term debt......... 0 0 0 0 0
Distribution center
financing............ 11,355 10,308 9,172 7,944 6,616
Total stockholders'
equity.............. 80,213 85,044 101,147 117,757 121,796
The Selected Financial Data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and with the Company's Consolidated Financial Statements,
including the notes thereto. The data for the periods indicated has been
derived from the Company's Consolidated Financial Statements, which have
been audited by PricewaterhouseCoopers LLP, independent accountants, whose
report for the three fiscal years ended February 3, 2001 appears elsewhere
in this Form 10-K.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
FISCAL 2000 VERSUS FISCAL 1999
Net sales for fiscal 2000 increased 9.7% from fiscal 1999, to $419.7
million from $382.6 million, principally from an increase in average price.
Comparable store sales for fiscal 2000 increased 3.8%. There is no
assurance that the increases in net sales and comparable store sales will
be maintained. Average stores open increased from 502 to 511. Sales in
channels of distribution other than retail stores were not material (see,
"Shop @ Home Initiative").
Fiscal 2000 consisted of 53 weeks and fiscal 1999 consisted of 52 weeks.
The extra week was excluded from the computation of comparable store sales.
Gross profit was $96.6 million in fiscal 2000 compared with $99.9 million
in fiscal 1999, decreasing as a percentage of net sales to 23.0% from
26.1%. The decrease in gross profit as a percentage of net sales was
attributable primarily to lower margins, higher direct marketing expenses,
including direct marketing for shop @ home activities, and increased
in-store merchandise shrinkage.
General, administrative and store operating expenses increased to $91.5
million in fiscal 2000 from $77.8 million in fiscal 1999, principally as a
result of an increase in (i) shop @ home expense, including shipping and
handling expense, (ii) store payroll and (iii) real estate department
payroll and legal fees related to the Company's store expansion program
(see, "Store Expansion Program"). As a percentage of net sales, general,
administrative and store operating expenses increased to 21.8% from 20.3%.
During fiscal 2000, operating income was $5.1 million compared with $22.1
million in fiscal 1999.
Net interest income was $1.9 million in fiscal 2000 and $1.7 million in
fiscal 1999, principally as a result of higher rates.
The Company had a provision for income taxes of $2.7 million in fiscal 2000
and of $7.6 million in fiscal 1999.
The Company had net income of $4.2 million in fiscal 2000 and of $16.1
million for fiscal 1999. Net income for fiscal 1999 included recognition of
the deferred state net operating loss carryforward asset in the amount of
$1.2 million.
Both direct marketing expenses and general and administrative expenses
related to shop @ home activities materially reduced operating income that
otherwise would have been derived from retail store sales in fiscal 2000
and are expected to continue to do so in fiscal 2001.
FISCAL 1999 VERSUS FISCAL 1998
Net sales for fiscal 1999 increased 1.1% from fiscal 1998, to $382.6
million from $378.6 million, principally from an increase in average price.
Average stores open decreased from 514 to 502. Comparable store sales for
fiscal 1999 increased 2.5%.
Gross profit was $99.9 million in fiscal 1999 compared with $102.8 million
in fiscal 1998 decreasing as a percentage of net sales to 26.1% from 27.1%.
The decrease in gross profit as a percentage of net sales was primarily
attributable to an increase in marketing expenses and lower margins. The
increase in marketing expenses related principally to the conversion of
stores and proprietary credit cards to the Company's AVENUE trade name and
to shop @ home tests.
General, administrative and store operating expenses were $77.8 million in
fiscal 1999 compared to $79.2 million in fiscal 1998 principally as a
result of reductions in incentive compensation and insurance costs. As a
percentage of net sales, general, administrative and store operating
expenses decreased to 20.3% from 20.9%.
During fiscal 1999, the Company had operating income of $22.1 million
compared to $23.5 million in fiscal 1998.
Net interest income was $1.7 million in fiscal 1999 and $1.2 million in
fiscal 1998 from a higher level of cash and cash equivalents and higher
interest rates.
The Company had a provision for income taxes of $7.6 million in fiscal 1999
and of $9.9 million in fiscal 1998.
The Company had net income of $16.1 million for fiscal 1999 and of $18.0
million for fiscal 1998. Net income for fiscal 1998 included a capital gain
on the sale of the Company's minority interest in a privately held apparel
design and manufacturing concern in the amount of $3.1 million ($2.0
million after tax).
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities in fiscal 2000 was $18.1
million.
The Company's cash and cash equivalents decreased to $36.8 million at
February 3, 2001 from $45.2 million at January 29, 2000. Property and
equipment, net increased to $77.7 million at February 3, 2001 from $63.3
million at January 29, 2000, primarily from constructing new stores and
remodeling existing stores.
Inventory increased to $59.0 million at February 3, 2001 from $55.3 million
at January 29, 2000 to build inventories for the AVENUE shop @ home
business and as a result of higher store count. During fiscal 2000, the
highest inventory level was $69.9 million.
Accounts payable increased to $32.7 million at February 3, 2001 from $27.0
million at January 29, 2000, principally as a result of a change in vendor
payment terms.
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 59% of total purchases in
fiscal 2000.
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 February 3, 2001,
letters of credit for the account of the Companies and supported by CIT
were outstanding in the amount of $26.0 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 February 3, 2001, the combined
availability of the Companies was $14.0 million; the Pledged Account had a
zero balance; the Companies' 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.
At February 3, 2001, the principal amount of the long term indebtedness
secured by liens on the Company's national distribution center real estate
and material handling equipment had been paid down from $15.0 million to
$8.0 million.
The Company believes that its cash on hand, the availability of short-term
trade credit and of credit under the Financing Agreement on a revolving
basis, the possibility of refinancing the national distribution center and
material handling equipment 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 catalogs and marketing
its Internet selling sites and (iii) store construction costs. 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. 61,000 shares have been repurchased on the open
market under this authorization at an average price of $5.04, in addition
to shares acquired in connection with the exercise of employee stock
options. Management intends to make additional purchases on the open market
if shares become available at opportune prices.
STORE EXPANSION PROGRAM
The Company leased 523 stores at February 3, 2001, of which 362 stores were
located in strip shopping centers, 140 stores were located in malls and 21
stores were located in downtown shopping districts. Total retail square
footage was 2.2 million square feet at February 3, 2001 and 2.0 million
square feet a year earlier. In fiscal 2000, the Company opened 59 new
stores with an average of 4,600 square feet of retail selling space and
closed 32 smaller stores.
The Company plans to lease and open approximately 50 new large stores
during fiscal 2001. See, "Liquidity and Capital Resources." Start-up costs
will be expensed but are not expected to have a material effect on general,
administrative and store operating expenses. During fiscal 2001, the
Company plans to close approximately 25 stores, the term of 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".
Substantially all the construction cost of new stores has been capitalized.
Depreciation and amortization were approximately $9.2 million in fiscal
2000 and $7.0 million in fiscal 1999 and related principally to assets in
stores.
SHOP @ HOME INITIATIVE
The Company is entering an additional channel of distribution for its
merchandise, Internet and catalog ("shop @ home") sales, to seek to expand
its customer base and to attract more business, both online and in-store,
from its existing customers.
The Company has mailed catalogs and operated an Internet site
(www.cloudwalkers.com) for the sale of its CLOUDWALKERS.COM brand women's
shoes since the third quarter of fiscal 1999. The Company has mailed
catalogs for AVENUE brand merchandise since September 2000. The Company
launched a site (www.avenue.com) for the sale of its AVENUE brand
merchandise in November 2000. Shop @ home sales were not material in
relation to total sales in fiscal 2000 but related direct marketing costs
materially reduced gross profit for the year. Fulfillment of shop @ home
sales has been outsourced.
The Company's shop @ home activities will not require material long term
financial commitments to be made in fiscal 2001.
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 disallowance of a refund claim by the auditor, which has been
affirmed by an IRS appeals officer. The refund claim, which has not been
recorded, would affect stockholders' equity positively rather than increase
the Company's earnings, if the disallowance were overruled.
FUTURE RESULTS
The Company's business is subject to significant uncertainties and risks.
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) cost overruns, (vi) increase in
prevailing rents, (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,
(ix) disruptions in the sourcing of merchandise abroad, (x) exchange rate
fluctuations, (xi) trade sanctions or restrictions, (xii) changes in quota
and duty regulations, (xiii) delays in shipping, or (xiv) increased costs
of transportation.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
UNITED RETAIL GROUP, INC.:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, cash flows and stockholders'
equity present fairly, in all material respects, the financial position of
United Retail Group, Inc. and its subsidiaries (the "Company") at January
29, 2000 and February 3, 2001, and the results of their operations and
their cash flows for each of the three years in the period ended February
3, 2001, in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted
in the United States of America which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 16, 2001
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
JANUARY 29, FEBRUARY 3,
2000 2001
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $45,223 $36,781
Accounts receivable 1,146 2,573
Inventory 55,323 59,002
Prepaid rents 3,900 4,425
Deferred income taxes 1,647 -
Other prepaid expenses 2,365 3,555
--------------- ---------------
Total current assets 109,604 106,336
Property and equipment, net 63,302 77,651
Deferred charges and other intangible assets,
net of accumulated amortization of $2,495
and $2,656 7,010 6,786
Deferred income taxes - 589
Other assets 422 268
--------------- ---------------
Total assets $180,338 $191,630
=============== ===============
LIABILITIES
Current liabilities:
Current portion of distribution center financing $1,228 $1,367
Accounts payable and other 26,993 32,746
Accrued expenses 20,285 22,373
Deferred income taxes - 283
--------------- ---------------
Total current liabilities 48,506 56,769
Distribution center financing 7,944 6,616
Other long-term liabilities 6,131 6,449
--------------- ---------------
Total liabilities 62,581 69,834
--------------- ---------------
Commitments and contingencies
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
30,000,000; issued 14,190,800 and 14,231,000;
outstanding 13,289,433 and 13,268,633 14 14
Additional paid-in capital 80,143 80,269
Retained earnings 41,483 45,703
Treasury stock (901,367 and 962,367 shares), at cost (3,883) (4,190)
--------------- ---------------
Total stockholders' equity 117,757 121,796
--------------- ---------------
Total liabilities and stockholders' equity $180,338 $191,630
=============== ===============
The accompanying notes are an integral part of the Consolidated Financial
Statements.
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
52 Weeks 52 Weeks 53 Weeks
Fiscal Year FISCAL YEAR FISCAL YEAR
Ended Ended Ended
January 30, January 29, February 3,
1999 2000 2001
-------------------------------------------
Net sales $378,562 $382,631 $419,712
Cost of goods sold, including
buying and occupancy costs 275,811 282,754 323,153
----------- -------- ---------
Gross profit 102,751 99,877 96,559
General, administrative and
store operating expenses 79,221 77,778 91,474
----------- -------- ---------
Operating income 23,530 22,099 5,085
Non-operating income 3,113 - -
Interest income, net 1,201 1,688 1,854
----------- --------- ---------
Income before income taxes 27,844 23,787 6,939
Provision for income taxes 9,864 7,638 2,719
----------- --------- ---------
Net income $17,980 $16,149 $4,220
=========== ========= ========
Net income per share
Basic $1.38 $1.23 $0.32
=========== ========= ========
Diluted $1.31 $1.17 $0.31
=========== ========= =========
Weighted average number of
shares outstanding
Basic 13,055,673 13,156,310 13,301,510
Common stock equivalents
(stock options) 680,340 695,794 213,213
----------- ----------- ----------
Diluted 13,736,013 13,852,104 13,514,723
=========== =========== ==========
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)
52 WEEKS 52 WEEKS 53 WEEKS
FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
JANUARY 30, JANUARY 29, FEBRUARY 3,
1999 2000 2001
---------- ----------- ------------
Cash Flows From Operating Activities:
Net income $17,980 $16,149 $4,220
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization of property
and equipment 7,027 7,031 9,202
Amortization of deferred charges and other
intangible assets 353 416 462
(Gain) loss on disposal of assets (30) 568 779
Gain on sale of investments (3,113) - -
Compensation expense 216 311 311
Provision for (benefit from) deferred income taxes 1,956 (527) 1,452
Deferred lease assumption revenue amortization (648) (402) (360)
Tax benefit from exercise of stock options - 710 16
Changes in operating assets and liabilities:
Accounts receivable 58 (633) (1,427)
Inventory (7,561) (9,759) (3,679)
Accounts payable and accrued expenses 6,725 2,443 8,681
Prepaid expenses 231 110 (1,715)
Income taxes payable (469) (402) (95)
Other assets and liabilities (643) (878) 234
---------- ---------- --------
Net Cash Provided from Operating Activities 22,082 15,137 18,081
---------- ---------- --------
INVESTING ACTIVITIES:
Capital expenditures (7,003) (23,271) (24,490)
Deferred payment for property and equipment 110 268 (536)
Proceeds from sale of investment and lease 3,345 387 200
---------- ---------- --------
Net Cash Used in Investing Activities (3,548) (22,616) (24,826)
---------- ---------- ---------
FINANCING ACTIVITIES:
Issuance of loans to officers (2,113) (604) (235)
Treasury stock acquired - (214) (307)
Proceeds from exercise of stock options 20 373 164
Repayments of long-term debt (1,052) (1,136) (1,189)
Other - (115) (130)
---------- ---------- --------
Net Cash Used in Financing Activities (3,145) (1,696) (1,697)
---------- ---------- ---------
Net increase (decrease) in cash and cash equivalents 15,389 (9,175) (8,442)
Cash and cash equivalents, beginning of period 39,009 54,398 45,223
---------- ---------- ---------
Cash and cash equivalents, end of period $54,398 $45,223 $36,781
========== ========= =========
The accompanying notes are an integral part of the Consolidated Financial
Statements.
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(SHARES AND DOLLARS IN THOUSANDS)
COMMON COMMON
STOCK STOCK ADDITIONAL TREASURY TOTAL
SHARES $.001 PAID-IN RETAINED STOCK, STOCKHOLDERS'
OUTSTANDING PAR VALUE CAPITAL EARNINGS AT COST EQUITY
Balance, January 31,
1998 12,190 $13 $78,259 $7,354 ($582) $85,044
------- ------- ------- ------ ------ -------
Exercise of stock options 1,083 1 1,096 1,097
Treasury stock (183) (1,077) (1,077)
Loans to officers (2,113) (2,113)
Compensation expense 216 216
Net income 17,980 17,980
------- ------ ------- ------ ------- --------
Balance, January 30, 1999 13,090 14 77,458 25,334 (1,659) 101,147
------- ------ ------- ------ ------- --------
Exercise of stock options 427 2,123 2,123
Treasury stock (228) (2,224) (2,224)
Loans to officers (344) (344)
Compensation expense 311 311
Tax benefit from exercise
of stock options 710 710
Other (115) (115)
Net income 16,149 16,149
------- ------ ------- ------ ------ -------
Balance, January 29, 2000 13,289 14 80,143 41,483 (3,883) 117,757
------- ------ ------ ------ ------- -------
Exercise of stock options 41 164 164
Treasury stock (61) (307) (307)
Loans to officers (235) (235)
Compensation expense 311 311
Tax benefit from exercise
of stock options 16 16
Other (130) (130)
Net income 4,220 4,220
------- ------ -------- ------- -------- ---------
Balance, February 3, 2001 13,269 $14 $80,269 $45,703 ($4,190) $121,796
======= ====== ========= ======= ======== =========
The accompanying notes are an integral part of the Consolidated Financial
Statements.
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. COMPANY DESCRIPTION AND BASIS OF PRESENTATION
United Retail Group, Inc. ("United Retail") is a specialty retailer of
large-size women's fashion apparel, footwear and accessories, featuring
AVENUE(R) brand merchandise, operating over 500 stores throughout the
United States.
The consolidated financial statements include the accounts of United Retail
and its subsidiaries (the "Company"). All significant intercompany balances
and transactions have been eliminated in consolidation.
Certain prior year balances have been reclassified to conform with the
current year presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to January 31.
Fiscal years are designated in the financial statements and notes by the
calendar year in which the fiscal year commences. Fiscal 1998 and fiscal
1999 consisted of 52 weeks and ended on January 30, 1999 and January 29,
2000, respectively. Fiscal 2000 consisted of 53 weeks and ended on February
3, 2001.
NET REVENUES
Revenues include sales from all stores operating during the period, the
Company's catalog and website operations. Revenues are net of returns and
exclude sales tax. Revenue is recognized when title and risk of loss have
passed to the customer, which, for stores is at the point of sale and for
catalog and internet sales is at the point of destination. The Company
recognizes sales upon redemption of gift certificates. In accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 101
"Revenue Recognition in Financial Statements", 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 picked up by the customer. The
Company adopted the change in accounting principle by recording a
cumulative effect adjustment in the first quarter of fiscal 2000. The
revenue adjustment related to this change was $98,000. This change in
accounting did not have a material effect on the Company's financial
position or annual results of operations.
SHIPPING AND HANDLING COSTS
Shipping and handling revenue is included in net sales. Shipping and
handling costs are included in general, administrative and store operating
expenses.
MARKETING COSTS
The Company expenses marketing costs when the event occurs. Marketing
expense, which includes Shop@Home in fiscal 1999 and 2000, included in cost
of goods sold in the accompanying consolidated statements of income, was
$9.5 million, $12.6 million, and $16.0 million in fiscal 1998, 1999, and
2000, respectively.
COMPUTATION OF INCOME PER COMMON SHARE
The computation of income per basic common share 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 outstanding but 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:
FISCAL FISCAL FISCAL
1998 1999 2000
--------------------------------------------------
Options 58,000 65,500 458,572
Range of option prices per share $10.75 - $26.75 $11.50 - $26.75 $7.56 - $15.13
CASH AND CASH EQUIVALENTS
The Company considers cash on hand, bank deposits, money market funds and
short term investments with maturities of less than 90 days as cash and
cash equivalents.
INVENTORY
Inventory is stated at the lower of cost or market utilizing the retail
method. An average cost flow assumption is used.
LONG-LIVED ASSETS
Depreciation and amortization of property and equipment are computed for
financial reporting purposes on a straight-line basis, using service lives
of 40 years for the distribution center building, the life of the lease for
leasehold improvements and furniture and fixtures, 20 years for material
handling equipment and 5 years for other property. The cost of assets sold
or retired and the related accumulated depreciation or amortization are
removed from the accounts with any resulting gain or loss included in net
income. Maintenance, repairs and minor renewals are charged to expense as
incurred. Renewals and betterments which extend service lives are
capitalized.
Goodwill, as of January 29, 2000 and February 3, 2001 of $6.0 million and
$5.8 million, respectively, represents the excess cost over the fair market
value of the net assets of businesses acquired by the Company. Goodwill is
being amortized over a 40-year period using the straight-line method.
The Company acquired certain trademarks during fiscal 1999 and fiscal 2000
in the amounts of $318,000 and $100,000, respectively. These trademarks are
being amortized over 15-year periods using the straight-line method.
The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining estimated useful life of long-lived
assets may warrant revision or that the remaining balance may not be
recoverable. When factors indicate that the asset should be evaluated for
possible impairment, the Company uses an estimate of the undiscounted net
cash flows over the remaining life of the asset in measuring whether the
asset is recoverable.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentrations of credit risk, are primarily cash equivalents. The Company
places its cash and cash equivalents in highly liquid investments with high
quality financial institutions.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. The more significant estimates and assumptions relate to
deferred tax assets, inventory and useful lives of assets.
INCOME TAXES
The Company provides for income taxes in accordance with SFAS No.109,
"Accounting for Income Taxes". This statement requires the use of the
liability method of accounting for income taxes. Under the liability
method, deferred taxes are determined based on the difference between the
financial reporting and tax bases of assets and liabilities using enacted
tax rates in effect in the years in which the differences are expected to
reverse. Deferred tax expense (benefit) represents the change in the
deferred tax asset/liability balance. The Company establishes valuation
allowances against deferred tax assets when it is more likely than not that
the deferred tax asset will not be realized.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities" in June 1998.This
statement, as amended, is effective in fiscal years beginning after June 15,
2000, although early adoption is permitted. This statement requires the
recognition of the fair value of any derivative financial instruments on
the balance sheet. Changes in fair value of the derivative and, in certain
instances, changes in the fair value of an underlying hedged asset or
liability, are recognized through either income or as a component of other
comprehensive income. Management of the Company believes that, due to its
limited use of derivative instruments, the adoption of SFAS 133 will not
have a significant impact on the Company's financial position or results of
operations.
3. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consists of (dollars in thousands):
JANUARY 29, FEBRUARY 3,
2000 2001
---- ----
Land $2,176 $2,176
Buildings 10,574 10,574
Furniture, fixtures and equipment 68,907 76,830
Leasehold improvements 32,962 40,880
Beneficial leaseholds 6,942 5,825
Construction in progress 1,280 1,586
------------------------
122,841 137,871
Accumulated depreciation and
amortization, including
beneficial leaseholds of
$6,272 and $5,485 (59,539) (60,220)
----------------------
Property and equipment, net $63,302 $77,651
=====================
4. ACCRUED EXPENSES
Accrued expenses consist of (dollars in thousands):
JANUARY 29, FEBRUARY 3,
2000 2001
---- ----
Occupancy expenses $3,649 $3,795
Payroll related expenses 3,011 3,298
Insurance payable 2,131 2,305
Credit processing 1,508 2,115
Marketing 2,027 1,531
Sales taxes payable 1,152 1,258
Other 6,807 8,071
---------------------
$20,285 $22,373
======================
5. LEASED FACILITIES AND COMMITMENTS
Annual store rent is composed of a fixed minimum amount, plus contingent
rent based upon a percentage of sales exceeding a stipulated amount. Store
lease terms generally require additional payments to the landlord covering
taxes, maintenance and certain other expenses.
Rent expense was as follows (dollars in thousands):
FISCAL FISCAL FISCAL
1998 1999 2000
-----------------------------------
Store rent
Fixed minimum $36,986 $36,815 $39,550
Percentage 77 126 121
---------------------------------
Total store rent 37,063 36,941 39,671
Equipment and other 360 381 393
---------------------------------
Total rent expense $37,423 $37,322 $40,064
=================================
At February 3, 2001, the Company was committed under store leases with
initial terms ranging from 1 to 20 years and with varying renewal options.
At January 30, 1999, January 29, 2000 and February 3, 2001, accrued rent
expense amounted to $5.8 million, $6.0 million and $6.5 million,
respectively, of which $5.1 million, $5.3 million and $6.0 million,
respectively, is included in "Other long-term liabilities".
A summary of approximate non-cancelable lease commitments under leases
follows (dollars in thousands) for the fiscal years:
2001 $40,490
2002 40,496
2003 34,294
2004 30,664
2005 26,706
Thereafter 111,821
--------
Total minimum obligations $284,471
========
6. LONG-TERM DEBT
Long-term debt consists of (dollars in thousands):
JANUARY 29, FEBRUARY 3,
2000 2001
---- ----
Distribution center financing:
7.30% Note due 2003 $3,151 $2,373
8.64% Mortgage due 2009 6,021 5,610
---------------------
Total distribution center financing $9,172 $7,983
Less current maturities 1,228 1,367
--------------------
Long-term portion of distribution
center financing $7,944 $6,616
====================
A summary of principal maturities of long-term debt are as follows (dollars
in thousands) for the fiscal years:
2001 $1,367
2002 1,435
2003 1,220
2004 636
2005 693
Thereafter 2,632
------
Total $7,983
======
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.
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 1, 1994. The loan is collateralized by a
mortgage on the national distribution center owned by the Company in Troy,
Ohio.
The Company 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 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 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 an account that
has been pledged to the lenders.
At February 3, 2001, the combined availability of the Companies was $14.0
million, no balance was in the pledged account, the aggregate outstanding
amount of letters of credit arranged by CIT was $26.0 million and no loan
had been drawn down. The Company's cash on hand was unrestricted.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable and
trade payables approximate fair value because of the short-term maturity of
these instruments. Advances to an officer approximate fair value because
interest is payable annually in cash at the prime rate. The fair value of
long-term debt, including the current portion, is estimated to be $8.1
million for fiscal 2000 based on the current rates quoted to the Company
for debt of the same or similar issues.
8. INCOME TAXES
The provision for income taxes consists of (dollars in thousands):
FISCAL FISCAL FISCAL
1998 1999 2000
--------------------------
Currently payable:
Federal $7,350 $7,539 $977
State 558 626 290
--------------------------
7,908 8,165 1,267
--------------------------
Deferred:
Federal 1,899 537 1,342
State 57 (1,064) 110
------------------------
1,956 (527) 1,452
-------------------------
$9,864 $7,638 $2,719
==========================
Reconciliation of the provision for income taxes from the U.S. Federal
statutory rate to the Company's effective rate is as follows:
FISCAL FISCAL FISCAL
1998 1999 2000
-------------------------------
Statutory Federal income
tax rate 35.0% 35.0% 35.0%
State income taxes, net of
Federal benefit 3.7 4.1 5.4
Benefit from state net operating
losses ("NOL's") (2.2) (2.1) (2.6)
Goodwill amortization 0.3 0.3 1.1
Other (0.6) (0.3) 0.3
------------------------------
Sub-total 36.2 37.1 39.2
Deferred tax asset recognized
for state NOL's 0.0 (5.0) 0.0
Write-up of the compensation
related deferred tax asset (0.8) 0.0 0.0
------------------------------
35.4% 32.1% 39.2%
==============================
The Company's net deferred tax asset reflects the tax impact of temporary
differences. The components of the net deferred tax asset are as follows
(dollars in thousands):
JANUARY 29, FEBRUARY 3,
2000 2001
---- ----
Assets:
Inventory $550 $749
Accruals and reserves 2,832 3,011
Compensation 205 324
State NOL's 1,180 1,360
----------------------
4,767 5,444
----------------------
Liabilities:
Prepaid rent 0 1,701
Depreciation 3,120 3,437
----------------------
3,120 5,138
----------------------
Net deferred tax asset $1,647 $306
=====================
On February 13, 1998, underlying stock options relating to $1.8 million
of the compensation related deferred tax asset were exercised, which
resulted in an additional $0.2 million tax benefit in fiscal 1998. In
fiscal 1999, the Company recorded a $1.2 million deferred tax asset related
to state NOL's, which had previously not been recognized because the
realization of any tax benefit from the state NOL's had been considered
remote.
Future realization of the tax benefits attributable to the existing
deductible temporary differences and NOL carryforwards ultimately depends
on the existence of sufficient taxable income within the carryback and/or
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 asset will be realized through future taxable
earnings or available carrybacks. The NOL's are scheduled to expire
beginning in fiscal 2001 through fiscal 2015.
9. RELATED PARTY TRANSACTIONS
The Company shared a store location with a subsidiary of The Limited, Inc.
("The Limited") through January 2001 and was charged by The Limited for
occupancy costs. The impact on the statements of income of these occupancy
charges was as follows (dollars in thousands):
FISCAL FISCAL FISCAL
1998 1999 2000
------------------------------
Cost of goods sold, including
buying and occupancy costs $73 $73 $73
An affiliate of the Chairman of the Board of the Company, American
Licensing Group, L.P. ("ALGLP"), (in which he holds an 80% interest)
provides management and administrative services to a subsidiary of The
Limited, American Licensing Group, Inc., for a base annual fee and profit
sharing fee, the profit sharing fee being the lower of one-third of net
profits or $150,000 per annum.
During fiscal 1998, fiscal 1999, and fiscal 2000, the Company incurred
expenses under certain Sublicensing Agreements with respect to trademarks
to American Licensing Group, Inc. in the amounts of $361,000, $353,000, and
$306,000, respectively, and to ALGLP in the amounts of $442,000, $365,000
and $181,000 respectively. American Licensing Group, Inc. and ALGLP, in
turn, incurred expenses with respect to the trademarks under certain
Licensing Agreements with the owner of the trademarks. The licensing
agreements between the Company and American Licensing Group, Inc. and
ALGLP, respectively, were terminated as of November 30, 2000.
The Company made investments in a vendor from which the Company purchased
apparel. In fiscal 1998, the Company realized a capital gain of $3.1
million on the sale of its investments back to the vendor. The gain was
reported as non-operating income. Purchases of apparel from the vendor
during fiscal 1998 totaled $12,000.
10. RETIREMENT PLAN
The Company maintains a defined contribution pension plan. Generally, an
employee is eligible to participate in the plan if the employee has
completed one year of full-time continuous service. The Company makes a 50%
match of a portion of employee savings contributions.
The Company also maintains a non-qualified defined contribution pension
plan, known as the Supplemental Retirement Savings Plan. The Company makes
a 50% match of a portion of employee savings contributions for those
associates whose contributions to the qualified plan are limited by IRS
regulations, as well as retirement contributions for certain grandfathered
associates equal to 6% of those associates' compensation.
Pension costs for all benefits charged to income during fiscal 1998, fiscal
1999 and fiscal 2000 approximated $522,000, $365,000 and $338,000,
respectively.
11. STOCKHOLDERS' EQUITY
Coincident with the completion of its initial public offering on March 17,
1992, the Company's certificate of incorporation was amended to provide for
only one class of Common Stock, par value $.001 per share, with 30 million
shares authorized. The Company also authorized 1,000,000 shares of
Preferred Stock, par value $.001 per share, to be issued from time to time,
in one or more classes or series, each such class or series to have such
preferences, voting powers, qualifications and special or relative rights
and privileges as shall be determined by the Board of Directors in a
resolution or resolutions providing for the issuance of such class or
series of Preferred Stock. The Company has paid no cash dividends and
expects to retain any future earnings for expansion of its business rather
than to pay cash dividends in the foreseeable future. Additionally, certain
loan agreements, to which the Company is a party, impose restrictions on
the payments of dividends.
In September 1999, the Company entered into right of first refusal
agreements for any proposed sales of shares of its Common Stock held by
Limited Direct Associates, L.P. and The Limited Inc./Intimate Brands Inc.
Foundation (collectively, "Limited"). Each right has a term expiring on
October 15, 2001, subject to extension by mutual agreement, and applies to
any sales that Limited may propose to make from time to time on the Nasdaq
National Market System and in negotiated or block transactions. If the
Company exercises the right of first refusal, any shares that are proposed
to be sold on the Nasdaq National Market System will be sold to the Company
instead (i) after the market closes and before it opens again and (ii) at a
purchase price equal to that day's closing price. The Company has no
obligation, however, to exercise the right and purchase shares. Limited
holds 1,600,000 shares of the Company's common stock, representing
approximately 12% of the shares outstanding.
In September 1999, the Company adopted a Shareholder Rights Plan and
distributed rights as a dividend at the rate of one Right for each share of
Common Stock of the Company. The rights will expire on September 28, 2009.
Each Right initially entitles a shareholder to buy for $65 one
one-hundredth of a share of a series of preferred stock which is
convertible to shares of Common Stock. Among other things, the Rights will
be exercisable, subject to certain exceptions, if a person or group
acquires beneficial ownership of 15% or more of the Company's Common Stock
or commences a tender or exchange offer upon consummation of which such
person or group would beneficially own 15% or more of the Company's Common
Stock. Until the Rights become exercisable, each share of common stock of
the Company has a Right attached and the securities trade as a unit.
12. STOCK OPTIONS
Under the 1989 Management Stock Option Plan (the "1989 Plan") established
on July 17, 1989, options to purchase 1,078,125 shares and 50,000 shares at
exercise prices of $1.00 and $5.00 per share, respectively, were granted.
All options granted under the 1989 Plan became vested and exercisable upon
completion of the IPO and the payment of certain obligations to The
Limited, Inc. On February 13, 1998, 1,078,125 of the 1989 Plan options were
exercised by management. On November 18, 1999, the remaining 50,000 options
were exercised.
Under 1991 Stock Option Agreements between the Company and certain
executive officers (the "1991 Options"), the Board of Directors approved
and granted, on July 24, 1991, options to purchase 300,000 shares at an
exercise price of $5.00 per share. These options became vested and
exercisable upon completion of the initial public offering and the payment
of certain obligations to The Limited, Inc. On November 18, 1999, all
300,000 options were exercised by management.
The Restated 1990 Stock Option Plan (as amended, the "1990 Plan") was
established in June 1990, amended in November 1991, December 1992 and May
1993, and terminated in May 1996. Exercise prices were not less than the
fair market value of the Company's common stock on the date of grant. The
options granted under the 1990 Plan expire between seven and ten years
after the date of grant. As of January 30, 1999, January 29, 2000, and
February 3, 2001 options to purchase 612,300, 537,300, and 478,072 shares,
respectively, were outstanding under the Plan at average exercise prices of
$6.90, $6.75 and $6.55 per share, respectively. The options granted vest
beginning one year from the date of grant, and vest fully after four or
five years, subject to acceleration under certain circumstances. Options
were granted, and the 1990 Plan is administered, by the Compensation
Committee of the Board of Directors, composed of non-employees of the
Company.
A summary of stock option transactions under the 1990 Plan is as follows:
FISCAL FISCAL FISCAL
1998 1999 2000
------------------------------
Options outstanding at beginning of period 619,300 612,300 537,300
Options granted 0 0 0
Options exercised 3,200 45,500 23,100
Options expired 0 0 0
Options canceled 3,800 29,500 36,128
Options outstanding at end of period 612,300 537,300 478,072
Options available for grant at end
of period 0 0 0
Options vested and outstanding at
end of period 323,570 385,406 426,072
Options exercisable at end of
period and having an exercise
price that is less than the respective
year end common stock closing price 305,570 377,406 207,000
Range of option prices per share for
outstanding options $4.13-$26.75 $4.13-$26.75 $4.13-$11.63
The 1996 Stock Option Plan (the "1996 Plan") was established in May 1996
and terminated in May 1999. Exercise prices were not less than the fair
market value of the Company's common stock on the date of grant. The
options granted under the 1996 Plan expire ten years after the date of
grant. As of January 30, 1999, January 29, 2000, and February 3, 2001
options to purchase 373,300, 345,500 and 310,200 shares were outstanding
under the Plan at an average exercise price of $5.24, $5.78 and $5.80 per
share. The options granted vest beginning one year from the date of grant,
and vest fully after five years, subject to acceleration under certain
circumstances. Options were granted, and the 1996 Plan is administered, by
the Compensation Committee of the Board of Directors, composed of
non-employees of the Company.
A summary of stock option transactions under the 1996 Plan follows:
FISCAL FISCAL FISCAL
1998 1999 2000
---------------------------------
Options outstanding at beginning of period 163,000 373,300 345,500
Options granted 253,500 37,000 0
Options exercised 1,200 32,400 17,100
Options canceled 42,000 32,400 18,200
Options outstanding at end of period 373,300 345,500 310,200
Options available for grant at end of period 65,500 0 0
Options vested and outstanding at end of period 30,900 69,000 126,000
Options exercisable at end of period and having
an exercise price that is less than the respective
year end common stock closing price 30,900 67,200 109,600
Range of option prices per share for
outstanding options $2.63-$11.00 $2.63-$11.50 $2.63-$11.50
In May 1998, the Company issued non-qualified stock options to purchase a
total of 300,000 shares at $6.3125 per share (the fair market value on the
date of Board action) to two officers of the Company. These options expire
ten years after the date of grant. The options vest beginning one year from
the date of grant and vest fully after five years, subject to acceleration
under certain circumstances.
The 1999 Stock Option Plan (the "1999" Plan) was established in May 1999.
Exercise prices are required by the 1999 Plan to be not less than the fair
market value of the Company's common stock on the date of grant. The total
number of shares that may be optioned under the 1999 Plan is 400,000
shares. The options granted under the 1999 Plan expire ten years after the
date of grant. As of January 29, 2000 and February 3, 2001 outstanding
options to purchase 47,500 and 192,500 shares have been granted under the
Plan at average exercise prices of $12.34 and $9.21 per share. The options
granted vest beginning one year from the date of grant, and vest fully
after five years, subject to acceleration under certain circumstances.
Employees of the Company whose judgment, initiative and efforts may be
expected to contribute materially to the successful performance of the
Company are eligible to receive options. Non-employee Directors receive
annual grants of options under the 1999 Plan. Options are granted, and the
1999 Plan is administered, by the Compensation Committee of the Board of
Directors, composed of non-employees of the Company.
A summary of stock option transactions under the 1999 Plan follows:
FISCAL FISCAL
1999 2000
Options outstanding at beginning of period 0 47,500
Options granted 47,500 153,500
Options exercised 0 0
Options canceled 0 8,500
Options outstanding at end of period 47,500 192,500
Options available for grant at end of period 352,500 207,500
Options vested and outstanding at end of period 0 12,700
Options exercisable at end of period and having
an exercise price that is less than the respective
year end common stock closing price 0 0
Range of option prices per share for
outstanding options $9.13-$15.13 $5.50-$15.13
The Company records compensation expense for all stock-based compensation
plans using the intrinsic value method prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees." Under
Opinion No. 25, compensation expense, if any, is measured as the excess of
the market price of the stock over the exercise price on the measurement
date. In May 1998, the Company issued non-qualified stock options whose
market price at the date of grant exceeded the exercise price, which
equaled the market price on the date of Board action. In accordance with
Opinion No. 25, compensation expense is recorded ratably over the five-year
vesting period of the options. The Company recognized $216,000, $311,000
and $311,000 of related compensation expense in fiscal 1998, fiscal 1999
and fiscal 2000, respectively.
All of the above plans and individual options were approved by the
Company's stockholders.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which encourages companies to recognize expense for
stock-based awards based on their estimated value on the date of grant.
SFAS No. 123 does not require companies to change their existing accounting
for stock-based awards. The Company continues to account for stock-based
compensation plans using the intrinsic value method, and has supplementally
disclosed the following pro forma information required by SFAS No. 123.
FISCAL FISCAL FISCAL
1998 1999 2000
--------------------------------
Net income - as reported (dollars in
thousands) $17,980 $16,149 $4,220
Net income - pro forma (dollars in
thousands) $17,483 $15,585 $3,712
Earnings per diluted share - as reported $1.31 $1.17 $0.31
Earnings per diluted share - pro forma $1.27 $1.13 $0.27
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions:
FISCAL FISCAL FISCAL
1998 1999 2000
Expected dividend yield 0.00% 0.00% 0.00%
Expected stock price volatility 50.00% 50.00% 50.00%
Risk-free interest rate 4.55% 6.60% 5.15%
Expected life of options 5 years 5 years 5 years
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair
value of its employee stock options.
13. 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
advances financed 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 replacement note in November 1999
which aggregated $2.4 million, which includes an additional advance of $0.7
million. The additional advance financed payment of income taxes incurred
in connection with the excercise of additional stock options and paid
interest accrued on the note that was refinanced. The replacement 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 899,719 shares of the Company's Common Stock, equivalent to the
shares issued upon the option exercises. The replacement note is a full
recourse obligation of the borrower. The first payment of interest on the
replacement note was made in November 2000 by the issuance of another note
in the amount of $0.2 million with a term of one year. Future interest on
both notes is payable in cash at the prime rate.
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.
14. 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.
15. SUPPLEMENTAL CASH FLOW INFORMATION
Net cash flow from operating activities reflects cash payments for interest
and income taxes as follows (dollars in thousands):
FISCAL FISCAL FISCAL
1998 1999 2000
------------------------
Interest income, net
per statements of income $1,201 $1,688 $1,854
Non-cash interest 72 12 405
-------------------------
Net cash interest income,
including interest income
of $984, $2,235 and $2,429 $1,273 $1,700 $2,259
========================
Income taxes paid $8,376 $7,843 $1,346
========================
Financing activities include the non-cash exercise of 1,076,955 and 350,000
stock options, in fiscal 1998 and fiscal 1999, respectively with the
exercise price paid by surrendering common stock held with a market value
equal to the cash payment in lieu of cash payment. Also included in
financing activities is a repayment of an officer loan in fiscal 1999 with
the repayment made by surrendering common stock to the Company with a
market value equal to the loan, in lieu of cash payment.
16. 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, annual results of operations or cash
flows.
17. SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
Fiscal 1999 Fiscal 2000
-------------------------------------- ------------------------------------------
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4
-------------------------------------- ------------------------------------------
Net sales $96,693 $98,913 $86,802 $100,223 $99,479(2) $108,620(3) $92,301 $119,312
Gross profit 26,974 28,734 19,897 24,272 25,812(2) 23,629(3) 20,648 26,470
Operating
income (loss) 7,967 8,800 769 4,563 4,512 1,449 (2,165) 1,289
Net income (loss) $5,259 $5,851 $723 $4,316(1) $2,908 $1,257 ($1,137) $1,192
Net income (loss)
per common share:
Basic $0.40 $0.45 $0.06 $0.33 $0.22 $0.09 ($0.09) $0.09
Diluted $0.38 $0.42 $0.05 $0.32(1) $0.21 $0.09 ($0.09) $0.09
(1) Net income and net income per common share include recognition of the
deferred state net operating loss asset of $1.2 million. Pro forma net
income and diluted net income per share, excluding this nonrecurring tax item,
would have been $3,136 and $0.23, respectively.
(2) Net sales and gross profit reflect a reclass of $89,000 of shipping and
handling income from general, administrative and store operating expenses
in conformity with EIT 00-10 "Accounting for Shipping and Handling Fees and
Costs"
(3) Net sales and gross profit reflect a reclass of $107,000 of shipping
and handling income from general, administrative and store operating
expenses in conformity with EIT 00-10 "Accounting for Shipping and Handling
Fees and Costs"
* * *
SUPPLEMENTARY DATA
Fiscal 1999 Fiscal 2000
-------------------------------------- ------------------------------------------
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4
-------------------------------------- ------------------------------------------
Net sales $96,693 $98,913 $86,802 $100,223 $99,479(2) $108,620(3) $92,301 $119,312
Gross profit 26,974 28,734 19,897 24,272 25,812(2) 23,629(3) 20,648 26,470
Operating
income (loss) 7,967 8,800 769 4,563 4,512 1,449 (2,165) 1,289
Net income (loss) $5,259 $5,851 $723 $4,316(1) $2,908 $1,257 ($1,137) $1,192
Net income (loss)
per common share:
Basic $0.40 $0.45 $0.06 $0.33 $0.22 $0.09 ($0.09) $0.09
Diluted $0.38 $0.42 $0.05 $0.32(1) $0.21 $0.09 ($0.09) $0.09
(1) Net income and net income per common share include recognition of the
deferred state net operating loss asset of $1.2 million. Pro forma net
income and diluted net income per share, excluding this nonrecurring tax item,
would have been $3,136 and $0.23, respectively.
(2) Net sales and gross profit reflect a reclass of $89,000 of shipping and
handling income from general, administrative and store operating expenses
in conformity with EIT 00-10 "Accounting for Shipping and Handling Fees and
Costs"
(3) Net sales and gross profit reflect a reclass of $107,000 of shipping
and handling income from general, administrative and store operating
expenses in conformity with EIT 00-10 "Accounting for Shipping and Handling
Fees and Costs"
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The subsection captioned "Election of Directors - Business and Professional
Experience" in the 2001 Proxy Statement is incorporated herein by
reference.
In addition to Raphael Benaroya and George R. Remeta, who are described in
the 2001 Proxy Statement, the executive officers of the Company are:
Kenneth P. Carroll, age 58, has been United Retail Group, Inc.'s Senior
Vice President - General Counsel for more than five years.
Ellen Demaio, age 43, has been Senior Vice President - Merchandise of
United Retail Incorporated since before 1996.
Carmen Blanco, age 44, has been Vice President - Sales of United Retail
Incorporated since March 2001. Previously, she was employed as an executive
for more than five years by The Gap, Inc., most recently as a Zone Vice
President for Old Navy stores, a retail chain.
James Broderick, age 47, has been Vice President - Shop @ Home of United
Retail Incorporated since February 2000. Previously, he was Vice President
- - Merchandising of Personal Creations, Inc., a catalog company, from
January 2000 to August 1999. Earlier, he was Vice President - Merchandising
of Spiegel, Inc., a catalog company, since before 1996.
Raymond W. Brown, age 41, has been Vice President - Associate Services of
United Retail Incorporated since May 1998. Previously, he was Vice
President - Human Resources of National Merchants Management Corp., a
management firm, since before 1996.
Carrie Cline-Tunick, age 40, has been Vice President - Product Design and
Development of United Retail Incorporated since April 1996. Previously, she
was the Design Director of Norton McNaughton, Inc., a garment manufacturer,
since before 1996.
Julie L. Daly, age 46, has been Vice President - Shop @ Home Operations of
United Retail Incorporated since November 2000. Previously, she was the
Company's Vice President - Strategic Planning since December 1996. Earlier,
she was Vice President - Planning and Distribution of United Retail
Incorporated since before 1996.
Jeff Fink, age 42, has been Vice President - Real Estate of United Retail
Incorporated since November 1999. Previously, he was the Vice President -
Real Estate of Party City, Inc., a retail chain, since August 1997.
Earlier, he was Vice President - Real Estate of Famous Footwear, Inc., a
retail chain, since before 1996.
Kent Frauenberger, age 54, has been Vice President - Logistics of United
Retail Logistics Operations Incorporated since before 1996.
Brian French, age 40, has been Vice President - Construction of United
Retail Incorporated since March 2001. Previously, he was the Director of
Store Construction of United Retail Incorporated since November 1999.
Earlier, he was the Director of Special Projects for Venator Group Realty,
Inc., a mall operator, from October 1999 to June 1998. He was Director of
Design and Project Development for Story Line Concepts, an amusement chain,
from May 1998 to June 1997. He was Director of Store Planning and
Construction for Warner Bros. Studio Stores, a retail chain, from May
1997 to before 1996.
Jon B. Grossman, age 43, has been Vice President - Finance of United Retail
Group, Inc. since before 1996.
Paul McFarren, age 38, has been Vice President - Chief Information Officer
of United Retail Incorporated since October 2000. Previously, he was the
Vice President of Worldwide Field Operations of LVMH, a consumer goods
manufacturer, since October 1998. Earlier, he was a Senior Director for
Corporate Systems of The Gap, Inc. from September 1998 to before 1996.
Bradley Orloff, age 43, has been Vice President - Marketing of United
Retail Incorporated since before 1996.
Gerald Schleiffer, age 49, has been Vice President - Planning and
Distribution of United Retail Incorporated since August 1999. Previously,
he was the Vice President - Planning and Allocation of Nine West, Inc., a
shoe retailer, between July 1999 and June 1998. Earlier, he was the
Director of Planning and Allocation of Value City Department Stores, Inc.
between May 1998 and February 1997. He was the Executive Vice President -
Planning and Allocation of Lane Bryant, Inc., a women's apparel retail
chain, from January 1997 to before 1996.
Fredric E. Stern, age 52, has been Vice President - Controller of United
Retail Incorporated since before 1996.
The term of office of the Company's executive officers will expire
immediately after the 2001 annual meeting of stockholders of United Retail
Group, Inc.
Item 11. Executive Compensation.
The section captioned "Executive Compensation" in the 2001 Proxy Statement
is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The sections captioned "Security Ownership of Principal Stockholders" and
"Security Ownership of Management" in the 2001 Proxy Statement are
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The sections captioned "Certain Transactions" and "Compensation Committee
Interlocks and Insider Participation" in the 2001 Proxy Statement are
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
The following exhibits are filed herewith:
Number Description
10.1* Promissory note, dated November 17,
2000, from Raphael Benaroya to the
Corporation
10.2 Consent of Independent Accountants for
the Corporation
The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended October 28, 2000 are incorporated herein by
reference:
Number in Filing Description
10.1* Amendment, dated August 18, 2000, to
Employment Agreement, dated November
20, 1998, between the Corporation and
Raphael Benaroya
10.2* Amendment, dated August 18, 2000, to
Employment Agreement, dated November
20, 1998, between the Corporation and
Kenneth P. Carroll
10.3 Amendment, dated October 15, 2000, to Right
of First Refusal Agreement, dated as of
September 17, 1999, between the Corporation
and Limited Direct Associates, L.P.
("LDA")
10.4 Amendment, dated October 15, 2000, to
Right of First Refusal Agreement,
dated as of September 17, 1999,
between the Corporation and The
Limited, Inc./Intimate Brands, Inc.
Foundation ("Foundation")
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
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 LDA
10.1.2 Right of First Refusal Agreement,
dated as of September 17, 1999,
between the Corporation and 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 the Corporation
4.1 Specimen Certificate for Common Stock
of the Corporation
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.
- --------------------
*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 February 3, 2001.
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.
----------------------------------------
Date: March 15, 2001 By: /s/Raphael Benaroya
-----------------------
Raphael Benaroya,
Chairman of the Board,
President and Chief Executive Officer
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature
appears below except Jon Grossman constitutes and appoints RAPHAEL BENAROYA
and GEORGE R. REMETA, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in his capacity
as a Director of United Retail Group, Inc., to sign any or all amendments
to this Annual Report, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the foregoing, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or
their substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Raphael Benaroya
- ----------------------
Raphael Benaroya Chairman of the Board, March 15, 2001
Principal Executive Officer President, Chief Executive
Officer and Director
/s/ George R. Remeta
- ----------------------
George R. Remeta Vice Chairman, March 15, 2001
Principal Financial Officer Chief Administrative
Officer, Secretary and
Director
/s/ Jon Grossman
- -----------------------
Jon Grossman Vice President - Finance March 15, 2001
Principal Accounting
Officer
/s/ Joseph A. Alutto
- ---------------------
Joseph A. Alutto Director March 15, 2001
/s/ Russell Berrie
- ---------------------
Russell Berrie Director March 15, 2001
- ---------------------
Joseph Ciechanover Director March , 2001
/s/ Michael Goldstein
- ---------------------
Michael Goldstein Director March 15, 2001
/s/ Ilan Kaufthal
- ---------------------
Ilan Kaufthal Director March 15, 2001
- ---------------------
Vincent P. Langone Director March , 2001
/s/ Richard W. Rubenstein
- -------------------------
Richard W. Rubenstein Director March 15, 2001
UNITED RETAIL GROUP, INC. EXHIBIT INDEX
The following exhibits are filed herewith:
Number Description
10.1* Promissory note, dated November 17,
2000, from Raphael Benaroya to the
Corporation
10.2 Consent of Independent Accountants for the
Corporation
The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended October 28, 2000 are incorporated herein by
reference:
Number in Filing Description
10.1* Amendment, dated August 18, 2000, to
Employment Agreement, dated November
20, 1998, between the Corporation and
Raphael Benaroya
10.2* Amendment, dated August 18, 2000, to
Employment Agreement, dated November
20, 1998, between the Corporation and
Kenneth P. Carroll
10.3 Amendment, dated October 15, 2000, to Right
of First Refusal Agreement, dated as of
September 17, 1999, between the Corporation
and Limited Direct Associates, L.P.
("LDA")
10.4 Amendment, dated October 15, 2000, to
Right of First Refusal Agreement,
dated as of September 17, 1999,
between the Corporation and The
Limited, Inc./Intimate Brands, Inc.
Foundation ("Foundation")
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
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 LDA
10.1.2 Right of First Refusal Agreement,
dated as of September 17, 1999,
between the Corporation and 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 the Corporation
4.1 Specimen Certificate for Common Stock
of the Corporation
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.
- --------------------
* A compensatory plan for the benefit of the Corporation's management
or a management contact.