FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to _____________________
Commission file number 00019774
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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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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "1934 Act") during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.
YES ___X___ NO _______
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15(d) of
the 1934 Act subsequent to the distribution of securities under a plan
confirmed by a court.
YES _______ NO _______
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date.
As of August 3, 2002, 12,937,304 units, each consisting of one
share of the registrant's common stock, $.001 par value per share, and one
stock purchase right, were outstanding. The units are referred to herein as
"shares."
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
August 3, February 2, August 4,
2002 2002 2001
-------------- ------------- --------------
ASSETS (Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $28,978 $27,812 $37,873
Accounts receivable 1,721 1,455 1,959
Inventory 58,148 61,793 56,463
Prepaid rents 4,921 4,860 4,719
Other prepaid expenses 3,913 3,454 3,839
-------------- ------------- --------------
Total current assets 97,681 99,374 104,853
Property and equipment, net 89,397 88,621 82,053
Deferred charges and other intangible assets,
net of accumulated amortization of $2,793, $2,761
and $2,868 6,200 6,232 7,339
Deferred income taxes 1,839 1,184 1,078
Other assets 1,059 1,871 249
-------------- ------------- --------------
Total assets $196,176 $197,282 $195,572
============== ============= ==============
LIABILITIES
Current liabilities:
Short-term distribution center financing $1,491 $1,435 $1,449
Short-term capital leases 1,803 1,491 -
Accounts payable and other 31,494 32,963 33,567
Accrued expenses 23,386 20,339 23,212
Deferred income taxes 138 423 32
-------------- ------------- --------------
Total current liabilities 58,312 56,651 58,260
Long-term distribution center financing 4,421 5,181 5,913
Long-term capital leases 6,506 7,213 -
Other long-term liabilities 6,756 6,433 6,267
-------------- ------------- --------------
Total liabilities 75,995 75,478 70,440
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STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized
1,000,000 shares; 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 shares; issued 14,248,200; 14,236,000;
14,236,000 shares; outstanding 12,937,304;
13,203,633; 13,263,633 shares 14 14 14
Additional paid-in capital 83,473 80,408 80,351
Retained earnings 44,370 46,133 49,043
Treasury stock (1,310,896; 1,032,367; 972,367
shares) at cost (7,676) (4,751) (4,276)
-------------- ------------- --------------
Total stockholders' equity 120,181 121,804 125,132
-------------- ------------- --------------
Total liabilities and stockholders' equity $196,176 $197,282 $195,572
============== ============= ==============
The accompanying notes are an integral part of the Consolidated Financial Statements.
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------------------- -------------------------------
August 3, August 4, August 3, August 4,
2002 2001 2002 2001
-------------- --------------- -------------- --------------
Net sales $113,674 $107,272 $229,248 $216,149
Cost of goods sold, including
buying and occupancy costs 92,609 82,082 177,398 162,597
-------------- --------------- -------------- --------------
Gross profit 21,065 25,190 51,850 53,552
General, administrative and
store operating expenses 28,142 25,063 54,155 48,622
-------------- --------------- -------------- --------------
Operating (loss) income (7,077) 127 (2,305) 4,930
Interest (expense) income, net (184) 214 (388) 408
-------------- --------------- -------------- --------------
(Loss) income before income taxes (7,261) 341 (2,693) 5,338
(Benefit) provision for income taxes (2,622) 134 (930) 1,998
-------------- --------------- -------------- --------------
Net (loss) income ($4,639) $207 ($1,763) $3,340
============== =============== ============== ==============
Net (loss) income per share
Basic ($0.35) $0.02 ($0.13) $0.25
============== =============== ============== ==============
Diluted ($0.35) $0.02 ($0.13) $0.25
============== =============== ============== ==============
Weighted average number of
shares outstanding
Basic 13,107,544 13,272,787 13,155,831 13,263,732
Common stock equivalents
(stock options) 0 359,230 0 267,826
-------------- --------------- -------------- --------------
Diluted 13,107,544 13,632,017 13,155,831 13,531,558
============== =============== ============== ==============
The accompanying notes are an integral part of the Consolidated Financial Statements.
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
Twenty-Six Weeks Ended
----------------------------------
August 3, August 4,
2002 2001
-------------- -------------
Cash Flows From Operating Activities:
Net (loss) income ($1,763) $3,340
Adjustments to reconcile net (loss) income to net cash
provided from operating activities:
Depreciation and amortization of property and equipment 6,053 5,247
Amortization of deferred charges and other
intangible assets 311 224
Loss on disposal of assets 254 71
Deferred compensation 156 166
Provision for deferred income taxes (940) (740)
Deferred lease assumption revenue amortization (76) (157)
Changes in operating assets and liabilities:
Accounts receivable (266) 614
Income taxes 1,899 3,499
Inventory 3,645 2,539
Accounts payable and accrued expenses (308) (1,544)
Prepaid expenses (520) (578)
Other assets and liabilities 856 (940)
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Net Cash Provided from Operating Activities 9,301 11,741
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Investing Activities:
Capital expenditures (7,084) (9,720)
Deferred payment for property and equipment 528 (148)
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Net Cash Used in Investing Activities (6,556) (9,868)
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Financing Activities:
Repayments of long-term debt (704) (621)
Payments on capital lease obligations (859) -
Issuance of loans to officers (52) (100)
Treasury stock acquired - (86)
Proceeds from exercise of stock options 36 26
-------------- -------------
Net Cash Used in Financing Activities (1,579) (781)
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Net increase in cash and cash equivalents 1,166 1,092
Cash and cash equivalents, beginning of period 27,812 36,781
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Cash and cash equivalents, end of period $28,978 $37,873
============== =============
UNITED RETAIL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated financial statements include the accounts of
United Retail Group, Inc. and its subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated.
The consolidated financial statements as of and for the thirteen
weeks ended August 3, 2002 and August 4, 2001 are unaudited and are
presented pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, the consolidated financial statements
should be read in conjunction with the financial statement disclosures
contained in the Company's 2001 Annual Report and 2001 Form 10-K. In the
opinion of management, the accompanying consolidated financial statements
reflect all adjustments necessary (which are of a normal recurring nature)
to present fairly the financial position and results of operations and cash
flows for the interim periods, but are not necessarily indicative of the
results of operations for a full fiscal year.
Certain prior year balances have been reclassified to conform with
the current year presentation.
2. Net (Loss) Income Per Share
Basic per share data has been computed based on the weighted
average number of shares of common stock outstanding. Diluted per share
data has been computed on the basic plus the dilution of stock options with
the exception of the thirteen and twenty-six weeks ended August 3, 2002,
where the effect of stock options is anti-dilutive.
Options to purchase shares of common stock which were not included
in the computation of diluted net income per share because the exercise
prices were greater than the average market price of the common shares were
as follows:
Thirteen Weeks Ended Twenty-Six Weeks Ended
----------------------------- -------------------------------
August 3, August 4, August 3, August 4,
2002 2001 2002 2001
----------- ---------- ---------- ---------
Options 791,072 542,500 798,572 832,572
Range of option prices per share $8.50 - $15.13 $9.13 - $15.13 $8.13 - $15.13 $7.56 - $15.13
3. Financing Arrangements
In 1993, the Company executed a ten-year $7.0 million note bearing
interest at 7.3%. Interest and principal are payable in equal monthly
installments beginning November 1993. The note is collateralized by the
material handling equipment in the distribution center.
In 1994, the Company executed a fifteen-year $8.0 million loan
bearing interest at 8.64%. Interest and principal are payable in equal
monthly installments beginning May 1994. The loan is collateralized by a
mortgage on the 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
(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, 2005 in the aggregate amount of $40 million
for the Companies, subject to availability of credit according to a
borrowing base computation. The line of credit may be used on a revolving
basis by any of the Companies to support trade letters of credit and
standby letters of credit and to finance loans.
The Companies are required to maintain unused at all times
combined availability of at least $5 million. Except for the maintenance of
a minimum availability of $5 million and a limit on capital expenditures,
the Financing Agreement does not contain any significant financial
covenants.
In the event a loan is made to one of the Companies, interest is
payable monthly based on a 360-day year at the prime rate or at two percent
plus the LIBOR rate on a per annum basis, at the borrower's option.
The line of credit is secured by a security interest in inventory
and proceeds and by the balance on deposit from time to time in a bank
account that has been pledged to the lenders.
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 August 3, 2002, the combined availability of the Companies was
$15.0 million, no balance was in the pledged account, the aggregate
outstanding amount of letters of credit, including $1.6 million of standby
letters of credit, arranged by CIT was $25.0 million and no loan had been
drawn down. The Company's cash on hand was unrestricted.
In January 2002, the Company executed a five-year $8.2 million sale and
lease back agreement for certain fixtures in new and remodeled stores. The
lease bears an interest rate of 7.0% per annum. The Company was required to
pay sales tax as part of the agreement. The agreement provides for equal
monthly rent payments beginning February 2002 and gives the Company the
option of buying back the fixtures at the end of the term for a nominal
price.
Between January 2002 and July 2002, the Company executed a series of
three-year capital lease agreements bearing interest at rates from 6.09% to
6.44% per annum in the aggregate of approximately $1.0 million for call
center systems at the Company's national distribution center in Troy, Ohio.
The Company has the option of buying the systems at the end of the term for
a nominal price.
4. Income Taxes
The (benefit) provision for income taxes consists of (dollars in
thousands):
Thirteen Weeks Ended Twenty-Six Weeks Ended
------------------------ --------------------------
August 3, August 4, August 3, August 4,
2002 2001 2002 2001
--------- --------- --------- ---------
Currently payable:
Federal ($1,720) $665 ($156) $2,483
State 30 96 166 255
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(1,690) 761 10 2,738
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Deferred:
Federal (767) (516) (774) (609)
State (165) (111) (166) (131)
---- ------ ----- -----
(932) (627) (940) (740)
-------- ------ ----- -------
($2,622) $134 ($930) $1,998
======== ====== ===== =======
Reconciliation of the (benefit) provision for income taxes from
the U.S. Federal statutory rate to the Company's effective rate is as follows
(dollars in thousands):
Thirteen Weeks Ended
-----------------------------------------------
August 3, 2002 August 4, 2001
------------------ ------------------
Tax at Federal rate ($2,541) (35.0%) $ 119 35.0%
State income taxes, net of
Federal benefit (88) (1.2%) (9) (2.7%)
Other 7 0.1% 6 1.7%
Goodwill amortization - 0.0% 18 5.3%
--------- ------ ------ -----
($2,622) (36.1%) $ 134 39.3%
========== ======= ======= =====
Twenty-Six Weeks Ended
---------------------------------------------
August 3, 2002 August 4, 2001
------------------ -------------------
Tax at Federal rate ($943) (35.0%) $ 1,868 35.0%
State income taxes, net of
federal benefit - 0.0% 81 1.5%
Goodwill amortization - 0.0% 36 0.7%
Other 13 0.5% 13 0.2%
----- ------ ------- -------
($930) (34.5%) $ 1,998 37.4%
====== ======= ======= =======
The net deferred tax asset reflects the tax impact of temporary
differences. The components of the net deferred tax asset as of August 3,
2002 are as follows (dollars in thousands):
Net long-term asset:
Accruals and reserves $3,171
State NOL's 1,240
Compensation 504
Depreciation (3,076)
-------
$1,839
Net current liability:
Prepaid rent $1,861
State NOL's (120)
Accruals and reserves (583)
Inventory (1,020)
-------
$138
-------
Net deferred tax asset $1,701
========
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
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 tax years ending fiscal 2003 through fiscal 2017.
5. Advances To Officers
Advances were made by the Company in February 1998, February 1999 and
November 1999 to Raphael Benaroya, the Company's Chairman of the Board,
President and Chief Executive Officer. The purpose of the advances was to
finance payment of income taxes incurred in connection with the exercise of
stock options, totaling approximately $2.3 million. Cumulative interest on the
advances at the prime rate through November 30, 2001 was approximately $0.5
million. On November 30, 2001 Mr. Benaroya signed a consolidated promissory
note in the amount of approximately $2.8 million, representing the cumulative
advances and accrued interest as of that date, with a term of two years. Mr.
Benaroya repaid the note with accrued interest as of July 1, 2002 by
surrendering 278,529 shares of Company common stock. The surrendered shares
had a value equivalent to the consolidated note based on the closing price on
the NASDAQ Stock Market on the preceding trading day. The Compensation
Committee of the Board of Directors, which administers the stock option
program, met on the morning of July 1, 2002, and approved the transaction.
6. Stock Appreciation Rights Plan
In May 2000, May 2001 and May 2002, each non-management Director
received an annual award (a "SAR 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 to him
contemporaneously. The payment will be an amount equivalent to the after
tax 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
of the corresponding option net of any personal income tax withholding on
the gain arising from the exercise.
7. Segment Information
The Company operates its business in two reportable segments:
Avenue Retail and Shop @ Home (see Management's Discussion and Analysis of
Financial Condition and Results of Operations in the Quarterly Report on
Form 10-Q for the period ended August 3, 2002). In deciding how to allocate
resources and assess performance, the Company regularly evaluates the
performance of its operating segments on the basis of net sales and
earnings from operations.
Certain information relating to the Company's reportable operating
segments is set forth below (dollars in thousands):
Thirteen Weeks Ended Twenty-Six Weeks Ended
------------------------- ----------------------
August 3, August 4, August 3, August 4,
2002 2001 2002 2001
-------------- --------- --------- ---------
Net sales:
Avenue Retail $111,946 $103,790 $225,120 $208,811
Shop @ Home 1,728 3,482 4,128 7,338
-------- -------- -------- --------
$113,674 $107,272 $229,248 $216,149
======== ======== ======== ========
(Loss) Earnings from operations*:
Avenue Retail ($2,849) $4,382 $5,187 $13,226
Shop @ Home (1,429) (1,259) (2,513) (3,324)
-------- -------- ------- --------
($4,278) $3,123 $2,674 $9,902
======== ======== ======= ========
* Represents (loss) earnings from operations before unallocated
corporate expenses.
The Company evaluates the performance of its assets on a
consolidated basis. Therefore, separate financial information for the
Company's assets on a segment basis is not available.
The following table sets forth a reconciliation of the reportable
segment's earnings from operations to the Company's consolidated income
before income taxes (dollars in thousands):
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------------- -------------------------
August 3, August 4, August 3, August 4,
2002 2001 2002 2001
--------- ---------- --------- ---------
(Loss) Earnings from operations
for reportable segments ($4,278) $ 3,123 $ 2,674 $ 9,902
Unallocated
corporate expenses (2,799) (2,996) (4,979) (4,972)
Interest (expense) income, net (184) 214 (388) 408
------- ------- ------- -------
(Loss) income before
income taxes ($7,261) $ 341 ($2,693) $ 5,338
======= ======= ======= =======
8. New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board (FASB)
issued SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142).
This statement is effective for fiscal years beginning after December 15,
2001 and may not be retroactively applied to financial statements of prior
periods. Companies are required to reassess the useful lives of all
intangible assets and will no longer amortize goodwill. Additionally,
goodwill will be subject to an impairment test initially and annually
thereafter. The impairment test for goodwill is a two-step process. The
first step of the transitional impairment test consists of comparing the
carrying amount of the net assets of each reporting unit identified (a
concept introduced within SFAS No. 142), including goodwill, to its fair
value. If the carrying amount exceeds the fair value, the second step of
the goodwill impairment test must be completed as soon as possible, but no
later than the end of the year of adoption. The second impairment test
consists of comparing the implied fair value (as defined in SFAS No. 142)
of the reporting unit's goodwill to its carrying value.
The Company adopted SFAS No. 142 in the first quarter of fiscal
2002. The Company has approximately $5,611,000 in goodwill as of February
2, 2002 and amortized approximately $206,000 in fiscal 2001. As a result of
the adoption of SFAS No. 142, the Company will no longer amortize its
goodwill, which will reduce operating expense. (The Company does not have
any intangible assets with indefinite lives, other than goodwill.)
Management has completed the transitional goodwill impairment test and has
determined that no impairment exists as a result of the adoption of SFAS
No. 142. The Company will continue to test goodwill for impairment on an
annual basis and between annual tests if events occur or circumstances
change that would more likely than not reduce the fair value of a reporting
unit below its carrying value.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). This statement
is effective for fiscal years beginning after December 15, 2001. The
objectives of SFAS No. 144 are to address significant issues relating to
the implementation of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed Of," establish a single
accounting model for the disposal of long-lived assets, provide impairment
criteria for all amortizable intangible assets and eliminate the exception
to consolidation for a subsidiary for which control is likely to be
temporary. SFAS No. 144 extends discontinued operations reporting to any
component of an entity with operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from the
rest of the entity. SFAS No. 144 was adopted by the Company at the
beginning of fiscal 2002.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." This statement rescinds or amends existing
authoritative pronouncements to make various technical corrections, clarify
meanings or describe their applicability under changed conditions. SFAS No.
145 is effective for transactions occurring after May 15, 2002. The Company
has adopted the provisions of this standard and such adoption had no impact
on the Company's financial position, results of operations or cash flows.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 is effective for
exit or disposal activities that are initiated after December 31, 2002,
with early application encouraged. This statement nullifies EITF No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
liability is incurred. FASB Concept Statement No. 6, "Elements of Financial
Statements" defines when a liability is incurred.
9. Supplemental Cash Flow Information
Non-cash financing activities include the repayment of an officer
loan with accrued interest as of July 1, 2002 with the repayment made by
surrendering 278,529 shares of Company common stock with a market value
equal to the principal and interest, in lieu of cash payment.
Non-cash investing activities include $0.5 million related to
capital lease obligations incurred during fiscal 2002.
10. 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second quarter of fiscal 2002 versus second quarter of fiscal 2001
Net sales for the second quarter of fiscal 2002 increased 6.0% from the
second quarter of fiscal 2001, to $113.7 million from $107.3 million from
an increase in units sold. Comparable store sales for the second quarter of
fiscal 2002 increased 3.7%. Average stores open increased from 538 to 555.
Internet and catalog (collectively, "shop@home") sales were $1.7 million in
the second quarter of fiscal 2002 compared with $3.5 million in the second
quarter of fiscal 2001, primarily from a reduction in the number of
catalogs mailed.
Gross profit was $21.1 million in the second quarter of fiscal 2002 compared
with $25.2 million in the second quarter of fiscal 2001, decreasing as a
percentage of net sales to 18.5% from 23.5%. The decrease in gross profit as a
percentage of net sales was from lower merchandise margins. Gross profit levels
in the future will be subject to the uncertainties and other risk factors
referred to under the caption "Future Results."
General, administrative and store operating expenses increased to
$28.1 million in the second quarter of fiscal 2002 from $25.1 million in the
second quarter of fiscal 2001, primarily from increases in insurance expense,
store payroll and group health insurance claims as percentages of net sales.
As a percentage of net sales, general, administrative and store operating
expenses increased to 24.8% from 23.4%.
The Company incurred an operating loss of $7.1 million in the
second quarter of fiscal 2002 compared with operating income of $0.1
million in the second quarter of the previous year. Operating income
reflects the combined results of two business segments, retail store sales
and shop@home sales. During the second quarter of fiscal 2002, the loss
from operations before unallocated corporate expenses was $2.8 million from
retail store sales and $1.4 million from shop@home sales. During the second
quarter of fiscal 2001, income (loss) from operations before unallocated
corporate expenses was $4.4 million from retail store sales and ($1.3
million) from shop@home sales.
Net interest expense was $0.2 million in the second quarter of fiscal 2002 and
net interest income was $0.2 million in the second quarter of fiscal 2001, as a
result of lower cash balances, lower interest rates on cash balances and higher
borrowings.
The Company had a (benefit) provision for income taxes of ($2.6 million) in the
second quarter of fiscal 2002 and $0.1 million in the second quarter of fiscal
2001.
The Company incurred a net loss of $4.6 million in the second quarter of fiscal
2002 and had net income of $0.2 million in the second quarter of fiscal 2001.
See, "Critical Accounting Policies" for a discussion of estimates made by
management in preparing financial statements in accordance with generally
accepted accounting principles.
First half of fiscal 2002 versus first half of fiscal 2001
Net sales for the first half of fiscal 2002 increased 6.1% from the first half
of fiscal 2001 to $229.2 million from $216.1 million from an increase in units
sold. The average number of transactions per store increased. Comparable store
sales for the first half of fiscal 2002 increased 3.2%. Average stores open
increased from 532 to 555. Shop@home sales were $4.1 million in the first half
of fiscal 2002 compared with $7.3 million in the first half of fiscal 2001,
primarily from a reduction in the number of catalogs mailed.
Gross profit was $51.9 million in the first half of fiscal 2002 compared with
$53.6 million in the first half of fiscal 2001, decreasing as a percentage of
net sales to 22.6% from 24.8%. The decrease in gross profit as a percentage of
net sales was from lower merchandise margins.
General administrative and store operating expenses increased to $54.2 million
in the first half of fiscal 2002 from $48.6 million in the first half of
fiscal 2001, primarily from increases in insurance expense, store payroll and
group health insurance claims as percentages of net sales. As a percentage of
net sales, general, administrative and store operating expenses increased to
23.6% from 22.5%.
The Company incurred an operating loss of $2.3 million in the first half of
fiscal 2002 compared with operating income of $4.9 million in the first half of
the previous year. Operating income reflects the combined results of two
business segments, retail store sales and shop@home sales. During the first half
of fiscal 2002, the income (loss) from operations before unallocated corporate
expenses was $5.2 million from retail store sales and ($2.5 million) from
shop@home sales. During the first half of fiscal 2001, income (loss) from
operations before unallocated corporate expenses was $13.2 million from retail
store sales and ($3.3 million) from shop@home sales.
Net interest expense was $0.4 million in the first half of fiscal 2002 and net
interest income was $0.4 million in the first half of fiscal 2001, as a result
of lower cash balances, lower interest rates on cash balances and higher
borrowings.
The Company had a (benefit) provision for income taxes of ($0.9 million) in the
first half of fiscal 2002 and $2.0 million in the first half of fiscal 2001.
The Company incurred a net loss of $1.8 million in the first half of fiscal 2002
and had net income of $3.3 million in the first half of fiscal 2001.
August Sales
Net sales for August 2002 increased 3.6% from August 2001, to $27.3 million
from $26.3 million. Comparable store sales for the month increased 1.7%.
Liquidity and Capital Resources
Net Cash from Operations
During the 26 weeks ended August 3, 2002, net cash provided from operating
activities was $9.3 million.
Balance Sheet Sources of Liquidity
The Company's cash and cash equivalents decreased to $29.0 million at August 3,
2002 from $37.9 million at August 4, 2001, principally from capital expenditures
and an increase in inventory. Cash and cash equivalents were $27.8 million at
February 2, 2002.
Inventory increased to $58.1 million at August 3, 2002 from $56.5 million at
August 4, 2001 principally as a result of a 3.8 % increase in retail selling
square footage. At February 2, 2002, inventory was $61.8 million. See, "Critical
Accounting Policies - Inventory" for a discussion of estimates made by
management in stating inventory in financial statements prepared in accordance
with generally accepted accounting principles.
Property and equipment, net increased to $89.4 million at August 3, 2002 from
$82.1 million at August 4, 2001 and $88.6 million at February 2, 2002, primarily
from a new shop@home call center and fulfillment capability at the Company's
national distribution center in Troy, Ohio, and from constructing new stores and
remodeling existing stores.
Other Liquidity Sources
Import purchases by the Company are made in U.S. dollars, are generally financed
by trade letters of credit and constituted approximately 54% of total purchases
in fiscal 2001.
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, 2005 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 August 3, 2002, trade letters of credit for the account of the
Companies and supported by CIT were outstanding in the amount of $23.4 million
and standby letters of credit were outstanding in the amount of $1.6 million,
principally in connection with insurance policies issued to the Company.
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 from time to time in an
account in its name that has been pledged to the lenders (a "Pledged Account").
(At August 3, 2002, the combined availability of the Companies was $15.0
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.
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 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. 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
LIBOR plus two percent on a per annum basis, at the borrower's option.
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. The availability of trade credit depends on the Company's liquidity in
general and the amount of its cash and cash equivalents and availability of
unused credit under the Financing Agreement in particular.
As of July 1, 2002, an outstanding loan to an officer in the
principal amount of approximately $2.8 million plus accrued interest was
paid by the surrender and cancellation of 278,529 shares of Company stock
that the officer owned. The cancelled shares became treasury stock. The
cancelled shares had a value equivalent to the loan based on the closing
price on the NASDAQ Stock Market on the preceding trading day. (The
exchange was approved in advance by the Compensation Committee of the Board
of Directors on the morning of July 1, 2002.)
Capital Expenditure Budget, Principal Contractual Obligations and Other
Commercial Commitments
Capital expenditures for the second half of fiscal 2002 are budgeted at
approximately $7.9 million. See, "Store Expansion."
The Company's principal contractual obligations and commercial commitments at
August 3, 2002 (see, also "Critical Accounting Policies - Incurred But Not
Reported Claims For Personal Injuries and Medical Benefits" and "Store
Expansion") are summarized in the following charts.
- ----------------------------- --------------- ------------------------------------------------------------------
Payments Due by Period (000's omitted)
- ----------------------------- --------------- ------------------------------------------------------------------
Principal Contractual Item Total Less than After
Obligations (000's 1 Year 1-3 Years 4-5 Years 5 Years
omitted)
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------
Distribution Center Note $1,095 $933 $162 $0 $0
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------
Distribution Center Mortgage $4,817 $558 $1,273 $1,512 $1,474
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------
Fixture Sale and Lease Back $7,428 $1,487 $3,305 $2,636 $0
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------
Call Center Capital Lease $881 $316 $565 $0 $0
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------
Total Obligations $14,221 $3,294 $5,305 $4,148 $1,474
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------
- ----------------------------- --------------- ---------------- ---------------- ---------------- ---------------
Amount of Commitment per Period (000's omitted)
- ----------------------------- --------------- ------------------------------------------------------------------
Other Commercial Commitments Item Total Less than Over
(000's 1 Year 1-3 Years 4-5 Years 5 Years
omitted)
- ----------------------------- --------------- --------------- ---------------- ---------------- ----------------
Trade Letters of Credit $23,384 $23,384 $0 $0 $0
- ----------------------------- --------------- --------------- ---------------- ---------------- -----------------
Standby Letters of Credit $1,613 $ 1,613 $0 $0 $0
- ----------------------------- --------------- --------------- ---------------- ---------------- -----------------
Operating Leases $322,729 $44,334 $82,211 $67,785 $128,399
- ----------------------------- --------------- --------------- ---------------- ---------------- -----------------
Total Commitments $347,726 $69,331 $82,211 $67,785 $128,399
- ----------------------------- --------------- --------------- ---------------- ---------------- -----------------
The Company expects that net cash will be provided from operating activities
during the second half of fiscal 2002 and the first half of fiscal 2003. On that
assumption, the Company believes that its cash on hand and the availability of
short-term trade credit and of credit under the Financing Agreement on a
revolving basis will be adequate for the next 12 months to meet its cash
requirements, including (i) anticipated working capital needs, including
seasonal inventory financing, (ii) investing activities, including construction
costs for the stores that it is committed to open (see, "Store Expansion") and
(iii) financing activities, including payments due on its principal contractual
obligations. This paragraph constitutes forward-looking information under the
Private Securities Litigation Reform Act of 1995 (the "Reform Act") and is
subject to the uncertainties and other risk factors referred to under the
caption "Future Results."
Critical Accounting Policies
Introduction
Financial statements prepared by companies in accordance with generally accepted
accounting principles are affected by the policies followed by their managements
in preparing them. Some accounting policies require difficult, subjective or
complex judgments by corporate management, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain. Among the
most important accounting policies of the Company that involve such management
judgments are (i) the use of the retail method of accounting for inventory, (ii)
the use of estimates of incurred but not reported claims for uninsured damages
for personal injuries, for self-insured workers' compensation benefits and for
benefits under the Company's self-insured medical, dental and prescription plans
for its associates, as well as future development costs of reported claims
(collectively, "IBNR Claims") and (iii) the treatment of tax benefits from the
Company's net deferred tax asset.
Inventory
The margins at which the Company's inventories can be sold are central to its
business. In accordance with generally accepted accounting principles,
inventories are stated at the lower of cost or market. At August 3, 2002,
inventories were stated at $58.1 million. The Company utilizes the retail
method, under which a cost-to-price relationship is developed on the basis of
original cost as compared to initial retail selling price. The valuation of
inventories at cost and the resulting margins are calculated by applying this
cost-to-price relationship to the retail value of inventories. Permanent
markdowns, when taken, reduce both the price and cost components of inventory on
hand, which maintains the established cost-to-price relationship. Consequently,
the use of the retail inventory method results in valuing inventories at lower
of cost or market.
Inherent in the retail inventory method are management estimates on current and
future selling value of the inventory which can significantly impact the ending
inventory valuation at cost, as well as resulting margins. The necessity for
management estimates, coupled with the fact that the retail inventory method is
an averaging process, can produce inventory valuations at any point in time that
are inexact.
Further, deferred markdowns can result in an overstatement of inventory cost
under the lower of cost or market principle. Accordingly, at the end of each
fiscal quarter, management conducts a thorough review of inventory on hand and,
based on its business judgment, may reduce further the carrying value of
inventory by recording a markdown reserve for inventory with sales performance
below expectations and/or unsold quantities in excess of expectations.
Taking a markdown reserve reduces the inventory recorded on the Company's
balance sheet and is charged against the Company's cost of goods sold for the
quarter just ended. If inventories, net of reserves, were overestimated at the
end of a quarter, assets and income for that quarter would be overstated and
margins for the beginning of the next quarter would come in lower. (The opposite
would be true if inventories were underestimated.)
Consistency in inventory valuation practices is one of the Company's important
accounting objectives.
The Company's management believes that the inventory shown on the balance sheets
at August 3, 2002 and August 4, 2001 included in the financial statements
contained in this Quarterly Report (this "Report") were properly stated in all
material respects, subject to (i) changes in consumer spending patterns,
consumer preferences and overall economic conditions, (ii) changes in weather
patterns, (iii) the seasonality of the retail industry, (iv) risks related to
consumer acceptance of the Company's products, and (v) war risks.
Incurred But Not Reported Claims For Personal Injuries and Medical Benefits
In accordance with generally accepted accounting principles, the Company records
a liability for IBNR Claims, which is reflected in general, administrative and
store operating expenses as at the end of each fiscal quarter. This liability is
based on (i) the number and size of outstanding claims, (ii) a comparison
between the dates claims were incurred in prior years and the dates they were
paid, (iii) an analysis of the amounts previously paid, (iv) projections of
inflation in medical costs and (v) advice from time to time from its insurance
broker and carriers with respect to damages for personal injuries and for
workers' compensation benefits and from an insurance consultant with respect to
its benefit plans for associates. (The Company has insurance policies with
coverage for personal injury claims but it remains liable for a self-insured
retention. The Company is self-insured for most workers' compensation benefits
and for its medical, dental and prescription plans for associates but it has
stop loss insurance policies to limit its liability.)
If the subsequent outcome of IBNR Claims were to exceed the IBNR liability as at
the end of a fiscal quarter, the liabilities on the balance sheet would have
been understated and income would have been overstated for the quarter in
question.
A consistent approach to estimating liability for IBNR Claims reflected in the
Company's balance sheet is one of the Company's important accounting objectives.
The estimates underlying the liability for IBNR Claims are matters of judgment
on which insurance experts may differ. The use of different estimates or
assumptions would change the amount recorded.
The Company's management believes that the liability for IBNR Claims reflected
in the balance sheets at August 3, 2002 and August 4, 2001 included in the
financial statements contained in this Report were fairly stated in all material
respects, subject to the uncertainties of litigation and the risk of greater
than anticipated inflation in medical costs and delays in submitting claims.
Realization of Net Deferred Tax Asset
Future realization of the tax benefits, which totaled $1.7 million at August 3,
2002, attributable to the Company's net deferred tax asset ultimately depends on
the existence of sufficient taxable income in the pertinent tax jurisdictions
within the carryback and/or carryforward period available under the relevant tax
law at the time of the tax deduction. Management's assessment is that the
Company's net deferred tax asset will be realized through future taxable
earnings or available carrybacks, subject to (i) changes in consumer spending
patterns, consumer preferences and overall economic conditions, (ii) the impact
of competition and pricing, (iii) changes in weather patterns, (iv) the
seasonality of the retail industry, (v) risks related to consumer acceptance of
the Company's products, and (vi) war risks.
In assessing the likelihood of future taxable income, management analyzes
taxable income (loss) reported in recent years, current national retail
industry sales trends and long term national economic trends. Management's
assessment is most reliable with respect to the assets with expiration
dates farthest in the future because of the longer time in which income can
be earned to make the tax benefits from those assets available. (The state
tax net operating loss carryforwards included in the Company's net deferred
tax asset expire in 2003 through 2017.)
In the event new circumstances make the future realization of these tax
benefits less likely than not, the asset will be written off and charged to
income.
Private Label Credit Cards Issued By The Bank
The Company and World Financial Network National Bank (the "Bank") are parties
to a Private Label Credit Card Program Agreement, dated January 27, 1998 (as
amended, the "Credit Card Program Agreement").
Under the Credit Card Program Agreement, the Bank issues credit cards to Company
customers who apply to the Bank. Net credit transaction volume with the Bank was
$52.1 million in the first half of fiscal 2002 and $49.3 million in the first
half of fiscal 2001. Customers must meet standards for creditworthiness set by
the Bank with the approval of the Company, provided, however, that the Bank
shall take any actions required to prevent unsafe and unsound banking practices.
The credit cards issued by the Bank are co-branded with both the Company's
AVENUE(R) service mark and the Bank's name. The credit cards are used only for
merchandise offered by the Company. Credit card holders remit payments to the
Bank, generally by mailing personal checks. The Bank also handles all statement
processing, payment processing, cardholder customer service and collections from
delinquent cardholders.
In accordance with generally accepted accounting principles, the Company does
not include the receivable asset created under the Credit Card Program Agreement
in the Company's accounts receivable on its balance sheets because the Company
has no interest in the customer accounts or receivables and, depending on the
circumstances, might not purchase the accounts from the Bank upon the expiration
of the contractual term. In this connection, it should be noted that the Credit
Card Program Agreement states that (i) the Bank is the sole and exclusive owner
of all customer accounts, (ii) the Company has no interest in the customer
accounts and (iii) the Bank is the creditor in respect of receivables (defined
in the Credit Card Program Agreement as amounts owed with respect to retail
purchases, finance charges, deferred finance charges, other fees and charges for
sales tax). Receivables as defined in the Credit Card Program Agreement were
$74.0 million at August 3, 2002 and $76.0 million at August 4, 2001. Also, when
the Credit Card Program Agreement expires, currently scheduled for February 28,
2007, the Company shall have the right to purchase the customer accounts from
the Bank for a price equal to the receivables and the Bank shall have the right
to require the Company to purchase the customer accounts at that price if the
Company decides to commence a private label credit card program on its own or
through another issuer of credit cards.
As to the Company's income statements, general, administrative and store
operating expenses were offset in part by premiums received from the Bank of
$1.0 million in the first half of fiscal 2002 and $1.2 million in the first half
of fiscal 2001. The decrease in premiums from the Bank was due to a decrease in
finance income.
The credit card program premium (or discount) reflected in general,
administrative and store operating expenses is an amount equal to royalties paid
to the Company by the Bank minus costs charged by the Bank based on the volume
of credit card program processing activities performed by the Bank.
Royalties are based on program revenues minus receivables written off by the
Bank and the cost of funds for the program, which, for up to the first $85
million of receivables, means the one-year Constant Maturities Treasury ("CMT")
rate plus 25 basis points to be reset every three months (the published CMT rate
was 1.68% per annum at August 3, 2002), provided, however, that the total
contractual interest rate shall not be more than 7.00% per annum and shall not
be less than 5.25% per annum. (The Bank's receivables for the program were less
than $85 million at August 3, 2002, but, if they grew larger than that amount,
the cost of funds for the excess would be based primarily on the cost of
borrowing of a trust for the purpose of securitizing receivables.)
Store Expansion
The Company leased 551 stores at August 3, 2002, of which 400 stores were in
strip shopping centers, 124 stores were in malls, 21 stores were in downtown
shopping districts and 6 stores were in outlet malls. Retail selling space
averaged 2.4 million square feet during the first half of fiscal 2002 and 2.2
million square feet during the first half of the previous year. In the first
half of fiscal 2002, the Company opened six new stores with an average of
approximately 4,700 square feet of retail selling space and closed ten smaller
stores.
Substantially all the construction cost of new stores has been capitalized.
Depreciation and amortization of property and equipment were related principally
to assets in stores and amounted to $6.1 million in the first half of fiscal
2002 and $5.2 million in the first half of fiscal 2001.
The Company has made commitments to lease and open approximately 17 new stores
during the second half of fiscal 2002. Start-up costs will be expensed but are
not expected to have a material effect on general, administrative and store
operating expenses. This paragraph constitutes forward-looking information under
the Reform Act, which is subject to the uncertainties and other risk factors
referred to under the caption "Future Results."
Shop@Home
The Company has a supplemental channel of distribution for its merchandise,
Internet and catalog (collectively, "shop@home") sales.
The Company has mailed AVENUE catalogs since September 2000. The Company has
operated an Internet site (www.avenue.com) since November 2000. The catalog and
website feature the Company's proprietary brands, AVENUE(R) apparel and
accessories, AVENUE BODY(R) lingerie and CLOUDWALKERS(R) footwear.
CLOUDWALKERS(R) footwear is also available at another Internet site
(www.cloudwalkers.com) operated by the Company.
The Company operates a call center and fulfillment operation at its national
distribution center in Troy, Ohio.
There is no assurance of gross profit on shop@home sales.
Other Matters
Corporate Acquisition Reviews
As a matter of routine, the Company from time to time conducts "due diligence"
reviews of businesses that are either for sale as a going concern or are in
liquidation. The Company would consider making a bid on a suitable corporate
acquisition at an opportune price if adequate financing at acceptable rates were
available.
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. The disallowance by the auditor was affirmed by
an IRS appeals officer and was the subject of mediation but is still unresolved.
The refund claim, which has not been recorded, would affect stockholders' equity
positively rather than increasing the Company's earnings, if the disallowance
were reversed or reduced as a result of judicial proceedings.
Future Results
The Company cautions that any forward-looking statements (as such term is
defined in the Reform Act) contained in this Report or otherwise made by
management of the Company involve risks and uncertainties and are subject to
change based on various important factors, many of which may be beyond the
Company's control. Accordingly, the Company's future performance and financial
results may differ materially from those expressed or implied in any such
forward-looking statements. The following factors, among others, could affect
the Company's actual results and could cause actual results for fiscal 2002 to
differ materially from those expressed or implied in any forward-looking
statements included in this Report or otherwise made by management: war risk;
changes in consumer spending patterns, consumer preferences and overall economic
conditions; the impact of competition and pricing; changes in weather patterns;
the seasonality of the retail industry; risks related to consumer acceptance of
the Company's products and the ability to develop new merchandise; risks
associated with the financial performance of the World Financial Network
National Bank private label credit card program; increases in interest rates;
the ability to retain, hire and train key personnel; risks associated with the
ability of the Company's manufacturers to deliver products in a timely manner;
political instability and other risks associated with foreign sources of
production; postal rate increases; increases in paper and printing costs; and
availability of suitable store locations on appropriate terms.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not hold or issue financial instruments for trading
purposes. Management of the Company believes that its exposure to interest
rate and market risk associated with financial instruments is not material.
See, however, (i) the last paragraph under the Item 2 caption "Private
Label Credit Cards Issued By The Bank" for a discussion of the cost of
funds associated with the credit cards that are co-branded with the
Company's AVENUE(R) service mark and the name of the issuer of the cards,
World Financial Network National Bank, and (ii) the sixth paragraph under
the Item 2 caption "Liquidity and Capital Resources - Other Liquidity
Sources" for a description of the variable interest rate that would be
payable if a revolving loan were outstanding (none is outstanding at
present).
The Company has no foreign currency exchange rate risk.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The 10th Annual Meeting of Stockholders (the "Meeting") was held on
May 30, 2002.
(c) (i) The Meeting elected directors for terms ending at the 11th Annual
Meeting of Stockholders, by the following vote:
Name For Withhold Authority to Vote
---- --- --------------------------
Joseph A. Alutto 8,277,803 6,503
Raphael Benaroya 7,162,804 1,121,502
Russell Berrie 8,277,803 6,503
Joseph Ciechanover 8,277,803 6,503
Michael Goldstein 8,277,803 6,503
Ilan Kaufthal 8,276,903 7,403
Vincent P. Langone 8,277,803 6,503
George R. Remeta 8,277,803 6,503
Richard W. Rubenstein 8,275,803 8,503
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
The following exhibits are filed herewith:
Number Description
10.1 Amendment, dated August 2, 2002, to Financing
Agreement among the Corporation, United Retail
Incorporated, Cloudwalkers, Inc. and The CIT
Group/Business Credit, Inc., as Agent and Lender
("CIT")
10.2 Amendment to Restated Supplemental Retirement
Savings Plan
10.3 Purchase and Sale Agreement, dated as of July 1,
2002, between Raphael Benaroya and the Corporation
The following exhibit to the Corporation's Quarterly Report on Form
10-Q for the period ended May 4, 2002 is incorporated herein by reference:
Number in Filing Description
10.1* Amendment, dated May 30, 2002, to Employment
Agreement, dated November 20, 1998, between the
Corporation and Raphael Benaroya ("Benaroya
Employment Agreement")
The following exhibits to the Corporation's Annual Report on Form 10-K for
the year ended February 2, 2002 are incorporated herein by reference:
Number in Filing Description
10.1 Amendment, dated April 5, 2002, to Private Label
Credit Card Program Agreement, dated January 27,
1998, between the Corporation, United Retail
Incorporated and World Financial Network National
Bank ("Private Label Credit Card Program Agreement")
10.2 Amendment, dated December 29, 1999, to Private Label
Credit Card Program Agreement
10.3 Amendment, dated August 19, 1999, to Private Label
Credit Card Program Agreement
10.4* Letter, dated March 1, 2002, from the Corporation to
Raphael Benaroya with respect to the cost of living
adjustment under the Benaroya Employment Agreement
10.5 Financial Statements of the Corporation's Retirement
Savings Plan for the year ended December 31, 2001
The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended November 3, 2001 are incorporated herein by reference:
Number in Filing Description
10.1* Amendment, dated November 29, 2001, to Benaroya
Employment Agreement
10.2* Amendment, dated November 29, 2001, to Employment
Agreement, dated November 20, 1998, between the
Corporation and George R. Remeta ("Remeta Employment
Agreement")
10.3* Amendment, dated November 29, 2001, to Employment
Agreement, dated November 20, 1998, between the
Corporation and Kenneth P. Carroll ("Carroll
Employment Agreement")
10.4* Summary Plan Description for United Retail Group,
Inc. Incentive Compensation Program for Executives
10.5 Amendment, dated October 1, 2001, to Private Label
Credit Card Program Agreement (Confidential portions
filed separately with the Secretary of the
Commission)
10.6* Promissory note, dated November 30, 2001, from
Raphael Benaroya to the Corporation (cancelled as of
July 1, 2002)
The following exhibit to the Corporation's Quarterly Report on Form
10-Q for the period ended August 4, 2001 is incorporated herein by reference:
Number in Filing Description
10.1* Restated Stock Appreciation Rights Plan
The 2001 Stock Option Plan set forth as an appendix to the
Corporation's proxy statement on Schedule 14A for its 2001 annual meeting of
stockholders is incorporated herein by reference.*
The following exhibit to the Corporation's Registration Statement on
Form S-8 (Registration No. 333-44868) is incorporated herein by reference:
Number in Filing Description
10 Amendment, dated August 21, 2000, to Financing
Agreement among the Corporation, United Retail
Incorporated, Cloudwalkers, Inc. and CIT
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 Benaroya
Employment Agreement
10.2* Amendment, dated August 18, 2000, to Carroll
Employment Agreement
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
10.2 Amendment, dated December 28, 1999, to Financing
Agreement among the Corporation, United Retail
Incorporated and CIT ("Financing Agreement")
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
The following exhibit to the Corporation's Current Report on Form 8-K,
filed September 23, 1999, is incorporated herein by reference:
Number in Filing Description
3 Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock
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
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* Benaroya Employment Agreement
10.2* Remeta Employment Agreement
10.3* Carroll Employment Agreement
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 Card Program Agreement
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
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
10.2* Amendment 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 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) ("Software License")
10.2.2 Amendment, dated December 10, 1991, to Software
License
____________________
*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 August 3, 2002.
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.
Date: September 9, 2002
UNITED RETAIL GROUP, INC. (Registrant)
By: /s/ GEORGE R. REMETA
-------------------------------------------
George R. Remeta, Vice Chairman of the Board
and Chief Administrative Officer -
Authorized Signatory
By: /s/ JON GROSSMAN
-------------------------------------------
Jon Grossman, Vice President - Finance
and Chief Accounting Officer
CERTIFICATIONS
--------------
I, Raphael Benaroya, Chief Executive Officer of United Retail
Group, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of United
Retail Group, Inc.;
2. based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report; and
3. based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
quarterly report.
Date: September 9, 2002 /s/ RAPHAEL BENAROYA
---------------------------
Chief Executive Officer
I, George R. Remeta, Chief Administrative Officer and Chief
Financial Officer of United Retail Group, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of United
Retail Group, Inc.;
2. based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report; and
3. based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
quarterly report.
Date: September 9, 2002 /s/ GEORGE R. REMETA
---------------------------
Chief Financial Officer
EXHIBIT INDEX
ITEM 14. EXHIBITS.
The following exhibits are filed herewith:
Number in Filing Description
10.1 Amendment, dated August 2, 2002, to Financing
Agreement among the Corporation, United Retail
Incorporated, Cloudwalkers, Inc. and The CIT
Group/Business Credit, Inc., as Agent and Lender
("CIT")
10.2 Amendment to Restated Supplemental Retirement
Savings Plan
10.3 Purchase and Sale Agreement, dated as of July 1,
2002, between Raphael Benaroya and the Corporation
The following exhibit to the Corporation's Quarterly Report on Form
10-Q for the period ended May 4, 2002 is incorporated herein by reference:
Number in Filing Description
10.1* Amendment, dated May 30, 2002, to Employment
Agreement, dated November 20, 1998, between the
Corporation and Raphael Benaroya ("Benaroya
Employment Agreement")
The following exhibits to the Corporation's Annual Report on Form
10-K for the year ended February 2, 2002 are incorporated herein by reference:
Number in Filing Description
10.1 Amendment, dated April 5, 2002, to Private Label
Credit Card Program Agreement, dated January 27,
1998, between the Corporation, United Retail
Incorporated and World Financial Network National
Bank ("Private Label Credit Card Program Agreement")
10.2 Amendment, dated December 29, 1999, to Private Label
Credit Card Program Agreement
10.3 Amendment, dated August 19, 1999, to Private Label
Credit Card Program Agreement
10.4* Letter, dated March 1, 2002, from the Corporation to
Raphael Benaroya with respect to the cost of living
adjustment under the Benaroya Employment Agreement
10.5 Financial Statements of the Corporation's Retirement
Savings Plan for the year ended December 31, 2001
The following exhibits to the Corporation's Quarterly Report on Form
10-Q for the period ended November 3, 2001 are incorporated herein by reference:
Number in Filing Description
10.1* Amendment, dated November 29, 2001, to Benaroya
Employment Agreement
10.2* Amendment, dated November 29, 2001, to Employment
Agreement, dated November 20, 1998, between the
Corporation and George R. Remeta ("Remeta Employment
Agreement")
10.3* Amendment, dated November 29, 2001, to Employment
Agreement, dated November 20, 1998, between the
Corporation and Kenneth P. Carroll ("Carroll
Employment Agreement")
10.4* Summary Plan Description for United Retail Group,
Inc. Incentive Compensation Program for Executives
10.5 Amendment, dated October 1, 2001, to Private Label
Credit Card Program Agreement (Confidential portions
filed separately with the Secretary of the
Commission)
10.6* Promissory note, dated November 30, 2001, from
Raphael Benaroya to the Corporation (cancelled as of
July 1, 2002)
The following exhibit to the Corporation's Quarterly Report on Form
10-Q for the period ended August 4, 2001 is incorporated herein by reference:
Number in Filing Description
10.1* Restated Stock Appreciation Rights Plan
The 2001 Stock Option Plan set forth as an appendix to the
Corporation's proxy statement on Schedule 14A for its 2001 annual meeting of
stockholders is incorporated herein by reference.*
The following exhibit to the Corporation's Registration Statement on
Form S-8 (Registration No. 333-44868) is incorporated herein by reference:
Number in Filing Description
10 Amendment, dated August 21, 2000, to Financing
Agreement among the Corporation, United Retail
Incorporated, Cloudwalkers, Inc. and CIT
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 Benaroya
Employment Agreement
10.2* Amendment, dated August 18, 2000, to Carroll
Employment Agreement
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
10.2 Amendment, dated December 28, 1999, to Financing
Agreement among the Corporation, United Retail
Incorporated and CIT ("Financing Agreement")
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
The following exhibit to the Corporation's Current Report on Form 8-K,
filed September 23, 1999, is incorporated herein by reference:
Number in Filing Description
3 Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock
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
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* Benaroya Employment Agreement
10.2* Remeta Employment Agreement
10.3* Carroll Employment Agreement
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 Card Program Agreement
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
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
10.2* Amendment 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 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) ("Software License")
10.2.2 Amendment, dated December 10, 1991, to Software
License
____________________
*A compensatory plan for the benefit of the Corporation's management or
a management contract.