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.
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.
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.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5.
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.
Item 6. Selected Financial Data.
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.
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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8.
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)
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 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:
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:
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:
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:
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)
* * * SUPPLEMENTARY DATA
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10.
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.
Item 11. Executive Compensation.
The section captioned "Executive Compensation" in the 2001 Proxy Statement is incorporated herein by reference.
Item 12.
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.
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.
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.