10-K/A 1 uni0ka.txt FORM 10-K - AMENDMENT NO. 1 FORM 10-K/A AMENDMENT NO. 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 1, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to ______________________ Commission file number 019774 United Retail Group, Inc. ------------------------- (Exact name of registrant as specified in its charter) Delaware 51 0303670 -------- ---------- State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 365 West Passaic Street, Rochelle Park, NJ 07662 ------------------------------------------ ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (201) 845-0880 -------------- Securities registered pursuant to Section 12(b) of the 1934 Act: Title of each class Name of each exchange on which registered ---------------------------- ----------------------------------------- Securities registered pursuant to Section 12(g) of the 1934 Act: Common Stock, $.001 par value per share, with Stock Purchase Right attached --------------------------------------------------------------------------- (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "1934 Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES___X___ NO _______ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the 1934 Act). YES NO X ----- ----- On April 2, 2003, the aggregate market value of the voting and non-voting common equity of the registrant (the "Corporation" also referred to herein, together with its subsidiaries, as the "Company") held by non-affiliates of the registrant was approximately $65.2 million computed by reference to the $7.00 price at which the common equity was last sold as of August 2, 2002. For purposes of the preceding sentence only, affiliate status was determined on the basis that all stockholders of the registrant are non-affiliates except the two non-institutional stockholders who have filed statements with the Securities and Exchange Commission (the "SEC" or the "Commission") under Section 16(a) of the 1934 Act reporting holdings of 10% or more of the shares outstanding. The holdings of affiliates are based upon the contents of the filed statements. APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the 1934 Act subsequent to the distribution of securities under a plan confirmed by a court. YES _______ NO _______ APPLICABLE ONLY TO CORPORATE REGISTRANTS: Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of April 2, 2003 there were 12,937,304 shares of the registrant's common stock, $.001 par value per share, outstanding. One Stock Purchase Right is attached to each outstanding share. INTRODUCTORY NOTE: This Amendment No. 1 on Form 10-K/A (this "Amendment") amends the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2003 filed on April 3, 2003 (the "Original Filing"). The Company is filing this Amendment in order to (a) amend the Report of Independent Accountants as required by Generally Accepted Auditing Standards to include a paragraph noting the Company's adoption, effective February 3, 2002, of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," issued by the Financial Accounting Standards Board ("SFAS 142") in July 2001 and (b) correcting typographical errors in note 3 of the notes to the Consolidated Financial Statements, which deals only with SFAS 142. Except for the additional paragraph, the Report of Independent Accountants included in this Amendment has not changed in any respect from the Report included in the Original Filing. The Company's Consolidated Financial Statements included in this Amendment have not changed in any respect from the Consolidated Financial Statements included in the Original Filing except with respect to correcting typographical errors in note 3, which deals only with SFAS 142. Exhibit No. 23.1 and Exhibit No. 99.1 to this Amendment are being currently dated but are otherwise unchanged. Item 8. Financial Statements and Supplementary Data. UNITED RETAIL GROUP, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Accountants (as amended August 12, 2003) Consolidated Balance Sheets as of February 2, 2002 and February 1, 2003 Consolidated Statements of Operations for each of the three fiscal years in the period ended February 1, 2003 Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended February 1, 2003 Consolidated Statements of Stockholders' Equity for each of the three fiscal years in the period ended February 1, 2003 Notes to Consolidated Financial Statements 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 operations, 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 February 2, 2002 and February 1, 2003, and the results of their operations and their cash flows for each of the three fiscal years in the period ended February 1, 2003, 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. As discussed in Note 3 to the consolidated financial statements, effective February 3, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets". /s/ PricewaterhouseCoopers LLP New York, New York February 14, 2003 UNITED RETAIL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands)
February 2, February 1, 2002 2003 ---------------- ---------------- ASSETS Current assets: Cash and cash equivalents $27,812 $17,540 Accounts receivable 1,455 2,994 Inventory 61,793 61,569 Prepaid rents 4,860 4,972 Other prepaid expenses 2,589 2,290 ---------------- -------------- Total current assets 98,509 89,365 Property and equipment, net 89,191 87,720 Deferred charges and other intangible assets, net of accumulated amortization of $3,238 and $325 6,232 557 Deferred income taxes 1,184 - Other assets 2,166 1,667 ---------------- -------------- Total assets $197,282 $179,309 ================ ============== LIABILITIES Current liabilities: Curent portion of distribution center financing $1,435 $1,220 Current portion of capital leases 1,491 1,963 Accounts payable and other 20,673 26,596 Disbursement accounts 12,290 11,922 Accrued expenses 20,339 22,023 Deferred income taxes 423 - ---------------- -------------- Total current liabilities 56,651 63,724 Long-term distribution center financing 5,181 3,961 Long-term capital leases 7,213 5,764 Other long-term liabilities 6,433 6,865 ---------------- -------------- Total liabilities 75,478 80,314 ---------------- -------------- Commitments and contingencies STOCKHOLDERS' EQUITY Preferred stock, $.001 par value; authorized 1,000,000; none issued Series A junior participating preferred stock, $.001 par value; authorized 150,000; none issued Common stock, $.001 par value; authorized 30,000,000; issued 14,236,000 and 14,248,200; outstanding 13,203,633 and 12,937,304 14 14 Additional paid-in capital 80,408 83,601 Retained earnings 46,133 23,056 Treasury stock (1,032,367 and 1,310,896 shares), at cost (4,751) (7,676) ---------------- -------------- Total stockholders' equity 121,804 98,995 ---------------- -------------- Total liabilities and stockholders' equity $197,282 $179,309 ================ ============== 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)
53 Weeks 52 Weeks 52 Weeks Fiscal Year Fiscal Year Fiscal Year Ended Ended Ended February 3, February 2, February 1, 2001 2002 2003 ------------------ ------------------ ------------------ Net sales $419,712 $427,040 $431,964 Cost of goods sold, including buying and occupancy costs 323,153 326,101 343,625 ------------------ ------------------ ------------------ Gross profit 96,559 100,939 88,339 General, administrative and store operating expenses 91,474 100,299 105,499 Goodwill impairment - - 5,611 ------------------ ------------------ ------------------ Operating income (loss) 5,085 640 (22,771) Interest income (expense), net 1,854 361 (827) ------------------ ------------------ ------------------ Income (loss) before income taxes 6,939 1,001 (23,598) Provision for (benefit from) income taxes 2,719 571 (7,771) Provision for the valuation allowance for the net deferred tax assets - - 7,250 ------------------ ------------------ ------------------ Net income (loss) $4,220 $430 ($23,077) ================== ================== ================== Earnings (loss) per share Basic $0.32 $0.03 ($1.77) ================== ================== ================== Diluted $0.31 $0.03 ($1.77) ================== ================== ================== Weighted average number of shares outstanding Basic 13,301,510 13,241,110 13,046,568 Common stock equivalents (stock options) 213,213 200,773 - ------------------ ------------------ ------------------ Diluted 13,514,723 13,441,883 13,046,568 ================== ================== ================== 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)
53 Weeks 52 Weeks 52 Weeks Fiscal Year Fiscal Year Fiscal Year Ended Ended Ended February 3, February 2, February 1, 2001 2002 2003 --------------- ----------------- -------------- Cash Flows From Operating Activities: Net income (loss) $4,220 $430 ($23,077) Adjustments to reconcile net income (loss) to net cash provided from operating activities: Depreciation and amortization of property and equipment 9,202 10,975 12,381 Amortization of deferred charges and other intangible assets 462 607 576 Goodwill impairment - - 5,611 Loss on disposal of assets 779 405 503 Compensation expense 311 311 311 Provision for (benefit from) deferred income taxes 1,452 (455) 761 Deferred lease assumption revenue amortization (360) (300) (140) Tax benefit from exercise of stock options 16 - - Changes in operating assets and liabilities: Accounts receivable (1,427) 1,118 (1,539) Inventory (3,679) (2,791) 224 Accounts payable and accrued expenses 8,681 (1,929) 6,922 Prepaid expenses (1,641) (95) 187 Income taxes payable (95) 311 504 Other assets and liabilities 160 (771) 419 ------------ ----------------- ----------------- Net Cash Provided from Operating Activities 18,081 7,816 3,643 ------------ ----------------- ----------------- Investing Activities: Capital expenditures (24,490) (22,948) (11,413) Proceeds from sale-leaseback transaction - 8,249 - Deferred payment for property and equipment (536) 101 773 Proceeds from sale of investment and lease 200 28 - ------------ ----------------- ----------------- Net Cash Used in Investing Activities (24,826) (14,570) (10,640) ------------ ----------------- ----------------- Financing Activities: Issuance of loans to officers (235) (180) (52) Treasury stock acquired (307) (561) - Proceeds from exercise of stock options 164 26 49 Repayments of long-term debt (1,189) (1,367) (1,435) Payments on capital lease obligations - (115) (1,797) Other (130) (18) (40) ------------ ----------------- ----------------- Net Cash Used in Financing Activities (1,697) (2,215) (3,275) ------------ ----------------- ----------------- Net decrease in cash and cash equivalents (8,442) (8,969) (10,272) Cash and cash equivalents, beginning of period 45,223 36,781 27,812 ------------ ----------------- ----------------- Cash and cash equivalents, end of period $36,781 $27,812 $17,540 ============ ================= ================= The accompanying notes are an integral part of the Consolidated Financial Statements.
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (shares and dollars in thousands)
Common Common Stock Stock Additional Treasury Total Shares $.001 Paid-in Retained Stock, Stockholders' Outstanding Par Value Capital Earnings at Cost Equity Balance, January 29, 2000 13,289 $14 $80,143 $41,483 ($3,883) $117,757 -------- -------- -------- -------- -------- -------- Exercise of stock options 41 164 164 Treasury stock (61) (307) (307) Loans to officers (235) (235) Compensation expense 311 311 Tax benefit from exercise of stock options 16 16 Other (130) (130) Net income 4,220 4,220 -------- -------- -------- -------- -------- -------- Balance, February 3, 2001 13,269 14 80,269 45,703 (4,190) 121,796 -------- -------- -------- -------- -------- -------- Exercise of stock options 5 26 26 Treasury stock (70) (561) (561) Loans to officers (180) (180) Compensation expense 311 311 Other (18) (18) Net income 430 430 -------- -------- -------- -------- -------- -------- Balance, February 2, 2002 13,204 14 80,408 46,133 (4,751) 121,804 -------- -------- -------- -------- -------- -------- Exercise of stock options 12 49 49 Treasury stock (279) (2,925) (2,925) Loans to officers 2,873 2,873 Compensation expense 311 311 Other (40) (40) Net income (23,077) (23,077) -------- -------- -------- -------- -------- -------- Balance, February 1, 2003 12,937 $14 $83,601 $23,056 ($7,676) $ 98,995 ======== ======== ======== ======== ======== ======== 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 550 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 2000 consisted of 53 weeks and ended on February 3, 2001. Fiscal 2001 and fiscal 2002 consisted of 52 weeks and ended on February 2, 2002 and February 1, 2003, respectively. 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. 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. During fiscal 2000, fiscal 2001 and fiscal 2002, shipping and handling costs were $1,354,000, $1,093,000 and $572,000, respectively. Marketing Costs The Company expenses marketing costs when the event occurs. Marketing expense, included in cost of goods sold in the accompanying consolidated statements of operations, was $16.0 million, $15.3 million, and $15.5 million in fiscal 2000, 2001, and 2002, respectively. Earnings Per Share Basic per share data has been computed based on the weighted average number of shares of common stock outstanding. Earnings per diluted share includes the weighted average effect of dilutive options on the weighted average shares outstanding. The computation of earnings per diluted share excludes options to purchase 458,572 shares and 845,072 shares in fiscal 2000 and 2001, respectively, because the options' exercise prices were greater than the average market price of the common shares. During fiscal 2002, 1,826,072 shares were excluded from the computation of earnings per diluted share as a result of the Company's net loss. 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, when purchased, as cash and cash equivalents. Cash and cash equivalents also include proceeds from credit card sales prior to the end of the fiscal period that were remitted as cash within five days after the end of such fiscal period. 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 lesser of the useful life or 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 and repairs are charged to expense as incurred. Betterments which extend service lives are capitalized. The Company acquired certain trademarks during fiscal 2001 in the amount of $12,000. 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 inventory, insurance, useful lives of assets and deferred tax 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 sufficient negative evidence exists concerning the realization of those deferred tax assets. Stock Options The Company has several stock option plans in operation which are more fully described in Note 13. The Company uses the intrinsic value method to account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, "Accounting For Stock Issued To Employees" ("Opinion No. 25") and has adopted the disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting For Stock-Based Compensation" ("SFAS No. 123"). 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 stockholders ratified the issuance of 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. All other stock options were granted at the market price of the stock at the measurement date. The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provision under SFAS No. 123 to stock-based employee compensation:
(dollars in thousands except per share data) Fiscal Fiscal Fiscal 2000 2001 2002 ------------------------------------------------- Reported net income (loss) $4,220 $430 ($23,077) Add back: Compensation expense 311 311 311 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (508) (722) (787) ------- ------- --------- Pro forma net income (loss) $4,023 $19 ($23,553) Earnings (loss) per share: Basic - as reported $0.32 $0.03 ($1.77) Basic - pro forma $0.30 $0.00 ($1.81) Diluted - as reported $0.31 $0.03 ($1.77) Diluted - pro forma $0.30 $0.00 ($1.81) For the pro forma information disclosed above, 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 2000 2001 2002 ------------------------------------------------- Expected dividend yield 0.00% 0.00% 0.00% Expected stock price volatility 50.00% 50.00% 50.00% Risk-free interest rate 5.15% 4.59% 2.94% 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. New Accounting Pronouncements In July 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS No. 146"). SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. 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. The Company has adopted the provisions of this standard. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" ("SFAS No. 148"), which amends SFAS No. 123. SFAS No. 148 provides three transition methods for companies that adopt SFAS No. 123's provisions for fair value recognition. In addition, SFAS No. 148 requires that companies disclose for each period for which a statement of operations is presented an accounting policy footnote that includes: i) the method of accounting for stock options, ii) total stock compensation cost that is recognized in the statement of operations and would have been recognized had SFAS No. 123 been adopted for recognition purposes, and iii) pro forma net income and earnings per share that would have been reported had SFAS No. 123 been adopted for recognition purposes. This statement requires that companies having a year-end after December 15, 2002 follow the prescribed format and provide the additional disclosures in their annual reports. The Company has provided the disclosures required by SFAS No. 148 in these notes to the financial statements. The Company does not currently intend to change its method of accounting for stock options and does not expect the adoption of this statement to have a material effect on its financial statements. 3. Goodwill Effective February 3, 2002, the Company adopted the provisions of SFAS No. 142 "Goodwill and Other Intangible Assets", which required that goodwill be subject to an impairment test. The Company's valuation at time of adoption, which utilized a multiple of EBITDA (earnings before interest, taxes, depreciation and amortization) as well as a comparison to the Company's current market capitalization, indicated that no impairment existed. The Company ceased amortization of goodwill in fiscal 2002. The Company conducted a similar valuation in the fourth quarter of fiscal 2002 and on the basis of both considerations concluded that the entire amount of goodwill, $5.6 million, was impaired. In addition to the aforementioned valuation considerations, other compelling reasons for recording the impairment included the significant losses incurred in the current year and the recent downward trend in earnings. The statement of operations adjusted to exclude amortization expense for fiscal 2000 and 2001 related to goodwill are as follows (dollars in thousands except per share data): Fiscal Fiscal 2000 2001 ------------------------------ Reported net income $4,220 $430 Add back: Goodwill amortization 205 205 Pro forma net income $4,425 $635 Earnings per share: Basic - as reported $0.32 $0.03 Basic - pro forma $0.33 $0.05 Diluted - as reported $0.31 $0.03 Diluted - pro forma $0.33 $0.05 At February 3, 2001 and February 2, 2002, goodwill was $5.8 million and $5.6 million, respectively. The reduction in goodwill of $205 during fiscal 2001 represents the annual amortization. 4. Property and Equipment Property and equipment, at cost, consists of (dollars in thousands): February 2, February 1, 2002 2003 ---------------------------------- Land $2,176 $2,176 Buildings 10,574 10,574 Furniture, fixtures and equipment 88,307 92,820 Leasehold improvements 48,266 50,887 Beneficial leaseholds 5,082 4,884 Construction in progress 696 128 ---------------------------------- 155,101 161,469 Accumulated depreciation and amortization, including beneficial leaseholds of $4,872 and $4,774 (65,910) (73,749) ---------------------------------- Property and equipment, net $89,191 $87,720 ================================== Furniture, fixtures and equipment include approximately $8.2 million of assets under capital leases arising under a sale and leaseback agreement (See Note 6). 5. Accrued Expenses Accrued expenses consist of (dollars in thousands): February 2, February 1, 2002 2003 ----------- ----------- Insurance payable $2,695 $4,465 Payroll related expenses 2,940 3,393 Gift cards and other customer credits 2,795 3,242 Occupancy expenses 3,391 2,557 Credit processing 1,431 1,496 Sales taxes payable 1,237 1,301 Other 5,850 5,569 ----------- ----------- $20,339 $22,023 =========== =========== 6. Leased Facilities and Commitments The Company leases its retail store locations, office facilities and certain equipment under operating leases. 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 2000 2001 2002 ---------------------------------------- Fixed minimum $41,395 $45,924 $48,052 Percentage 121 103 48 Total real estate rent 41,516 46,027 48,100 Equipment and other 393 414 596 ---------------------------------------- Total rent expense $41,909 $46,441 $48,696 ======================================== At February 1, 2003, the Company was committed under store leases with initial terms typically ranging from 1 to 15 years and with varying renewal options. Many leases entered into by the Company include options that may extend the lease term beyond the initial commitment period. Some leases also include early termination options which can be exercised under specific conditions. At February 3, 2001, February 2, 2002 and February 1, 2003, accrued rent expense amounted to $6.5 million, $7.2 million and $7.2 million, respectively, of which $6.0 million, $6.4 million and $6.9 million, respectively, is included in "Other long-term liabilities". 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 January 2003, the Company executed a series of three-year capital lease agreements for call center systems at the Company's national distribution center in Troy, Ohio, bearing interest at rates between 6.09% and 6.64% per annum aggregating approximately $1.4 million. The Company has the option of buying the systems at the end of the term for a nominal price. The following is a schedule by year of approximate minimum lease payments (dollars in thousands) under operating and capital leases: Operating Capital --------- ------- 2003 $43,742 $2,429 2004 39,737 2,453 2005 35,856 2,103 2006 32,162 1,797 2007 27,969 - Thereafter 115,095 - --------- -------- Total minimum lease payments $294,561 $8,782 Less: imputed interest (1,055) -------- Present value of minimum lease payments $7,727 ======== 7. Long-term Debt Long-term distribution center financing consists of (dollars in thousands): February 2, February 1, 2002 2003 ------------------------------ 7.30% Note due 2003 $1,536 $637 8.64% Mortgage due 2009 5,080 4,544 ------------------------------ Total debt $6,616 $5,181 Less current maturities 1,435 1,220 ------------------------------ Long-term debt $5,181 $3,961 ============================== Principal maturities of long-term distribution center financing by year are as follows (dollars in thousands): Debt Maturities ---------- 2003 $1,220 2004 636 2005 693 2006 755 2007 823 Thereafter 1,054 ------- Total $5,181 ======= In 1993, the Company executed a ten-year $7.0 million note bearing interest at 7.3% per annum. Interest and principal are payable in equal monthly installments beginning November 1993. The note is collateralized by the material handling equipment in the distribution center owned by the Company in Troy, Ohio. In 1994, the Company executed a fifteen-year $8.0 million loan bearing interest at 8.64% per annum. Interest and principal are payable in equal monthly installments beginning May 1994. The loan is collateralized by a mortgage on its national distribution center. 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, 2005 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 which could be used for working capital and general corporate purposes. 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 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. 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 1, 2003, the combined availability of the Companies was $13.3 million, no balance was in the pledged account, the aggregate outstanding amount of letters of credit arranged by CIT was $26.7 million and no loan had been drawn down. The Company's cash and cash equivalents of $17.5 million was unrestricted. 8. 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 items. The fair value of long-term debt (distribution center financing and capital leases), including the current portion, is estimated to be $13.4 million for fiscal 2002 based on the current rates quoted to the Company for debt of the same or similar issues. 9. Income Taxes The provision for (benefit from) income taxes consists of (dollars in thousands): Fiscal Fiscal Fiscal 2000 2001 2002 ------------------------------------------- Current: Federal $977 $754 ($1,588) State 290 272 306 ------------------------------------------- 1,267 1,026 ($1,282) ------------------------------------------- Deferred: Federal 1,342 (374) (500) State 110 (81) 1,261 ------------------------------------------- 1,452 (455) 761 ------------------------------------------- Provision for (benefit from) income taxes $2,719 $571 ($521) -========================================== Reconciliation of the provision for (benefit from) income taxes from the U.S. Federal statutory rate to the Company's effective rate is as follows: Fiscal Fiscal Fiscal 2000 2001 2002 ------------------------------------------- Statutory Federal income tax rate 35.0% 35.0% (35.0%) State income taxes, net of Federal benefit 5.4 12.4 0.5 Benefit from state net operating losses ("NOL's") (2.6) 0.0 0.0 Goodwill amortization 1.1 7.2 0.0 Goodwill impairment 0.0 0.0 8.3 Other 0.3 2.4 0.1 ------------------------------------------- Sub-total 39.2 57.0 (26.1) Deferred tax valuation allowance 0.0 0.0 23.9 ------------------------------------------- 39.2% 57.0% (2.2%) =========================================== Significant components of the Company's deferred tax assets and liabilities are summarized below (dollars in thousands): February 2, February 1, 2002 2003 ----------- ----------- Net long-term asset: Federal NOL $ - $4,128 Accruals and reserves 2,911 3,317 State NOL's 1,360 2,974 Compensation 444 564 Depreciation (3,531) (3,139) ------------------------------ 1,184 7,844 ------------------------------ Net current liability: Prepaid rent 1,861 2,134 Accruals and reserves (385) (428) Inventory (1,053) (1,112) ------------------------------ 423 594 ------------------------------ Valuation allowance - (7,250) ------------------------------ Net deferred tax asset $761 $ - =============================== The Company recorded a $7.3 million non-cash charge to establish a valuation allowance for its net deferred tax assets and net operating loss carryforwards in the fourth quarter of fiscal 2002. The valuation allowance was calculated in accordance with the provisions of SFAS No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which places primary importance on the Company's operating results in the most recent three-year period when assessing the need for a valuation allowance. The Company's cumulative loss in the most recent three-year period, including the net loss reported in the fourth quarter of fiscal 2002, was sufficient to require a full valuation allowance under the provisions of SFAS No. 109. The Company intends to maintain a valuation allowance for its net deferred tax assets and net operating loss carryforwards until sufficient positive evidence exists to support its reversal. 10. Related Party Transactions The Company previously shared a store location with a subsidiary of Limited Brands, Inc. ("The Limited") and was charged by The Limited for occupancy costs through January 2001. These occupancy charges increased cost of goods sold, including buying and occupancy costs, by $73,000 in fiscal 2000. From fiscal 2000 through fiscal 2001, an affiliate of the Chairman of the Board of the Company, American Licensing Group, L.P. ("ALGLP") (in which he holds an 80% interest), provided 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 2000 and fiscal 2001, the Company incurred expenses under certain Sublicensing Agreements with respect to trademarks to American Licensing Group, Inc. in the amounts of $306,000 and $0, respectively, and to ALGLP in the amounts of $181,000 and $12,000, 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 Sublicensing Agreements between the Company and American Licensing Group, Inc. and ALGLP, respectively, were terminated as of November 30, 2000. 11. Retirement Plan The Company maintains a qualified 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. 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 2000, fiscal 2001 and fiscal 2002 were approximately $338,000, $396,000 and $404,000, respectively. 12. 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 million 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. Additionally, certain loan agreements, to which the Company is a party, impose restrictions on the payment of dividends. 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. 13. Stock Options The Company has two stock option plans with options available to be granted. Under these two plans, 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 also receive annual grants of options. The options granted vest beginning one year from the date of grant, and vest fully after five years, subject to acceleration under certain circumstances. The options granted expire ten years after the date of grant. Options are granted, and the plans are administered, by the Compensation Committee of the Board of Directors, composed of non-employees of the Company. Other option plans are in operation with no options available for grant. A summary of stock option activity follows:
Weighted Number of Average Fiscal 2000 Shares Exercise Price ------------------------------------ Options outstanding at beginning of period 1,275,600 $6.61 Options granted 151,500 $8.15 Options exercised 40,200 $4.08 Options canceled 57,828 $8.33 Options outstanding at end of period 1,329,072 $6.79 Options available for grant at end of period 204,500 Options exercisable at end of period 671,072 $6.72 Weighted Number of Average Fiscal 2001 Shares Exercise Price ------------------------------------ Options outstanding at beginning of period 1,329,072 $6.79 Options granted 500,500 $8.71 Options exercised 5,000 $5.23 Options canceled 108,700 $5.62 Options outstanding at end of period 1,715,872 $7.42 Options available for grant at end of period 209,000 Options exercisable at end of period 854,847 $6.66 Weighted Number of Average Fiscal 2002 Shares Exercise Price ------------------------------------ Options outstanding at beginning of period 1,715,872 $7.42 Options granted 168,200 $6.73 Options exercised 12,200 $4.00 Options canceled 45,800 $7.75 Options outstanding at end of period 1,826,072 $7.37 Options available for grant at end of period 82,000 Options exercisable at end of period 1,093,622 $6.93
A summary of stock options outstanding at year-end fiscal 2002 is as follows:
Options Outstanding Options Exercisable ------------------------------------------------------------------------- ---------------------------------- Weighted Average Remaining Average Weighted Range of Number Contractual Exercise Number Average Exercise Prices Outstanding Life Price Exercisable Exercise Price --------------- ----------- ------------ -------- ----------- -------------- $ 3.13 - $ 3.25 77,300 4.2 $3.19 77,300 $3.19 $ 4.13 - $ 5.88 463,300 5.2 $5.24 327,800 $5.18 $ 6.25 - $ 8.80 752,472 5.3 $7.28 507,122 $7.34 $ 9.13 - $ 12.08 512,000 7.7 $9.76 167,600 $10.13 $ 15.13 - $ 15.13 21,000 6.3 $15.13 13,800 $15.13 ------------------------------------------------------------------------- ---------------------------------- $ 3.13 - $15.13 1,826,072 5.9 $7.37 1,093,622 $6.93
Certain outstanding options were authorized directly by the Company's stockholders but most were issued in accordance with stock option plans authorized by them and administered by the Compensation Committee of the Board of Directors. 14. 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. 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. 15. Stock Appreciation Rights Plan In May 2000, May 2001 and May 2002, each nonmanagement Director received annual awards 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 under the Company's Stock Option Plans in May 2000, May 2001 or May 2002, as the case may be. 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 sum of the exercise price of the corresponding option plus any personal income tax withholding on the gain arising from the exercise. 16. 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 2000 2001 2002 --------------------------------------- Interest income (expense), net per statements of income $1,854 $361 ($827) Non-cash interest expense (income) 122 (259) 40 Net cash interest income (expense), including interest income of $2,638, $920 and $339 $1,976 $102 ($787) ======================================= Income taxes paid (refunded) $1,346 $715 ($1,786) ======================================= Investing activities includes $8.8 million related to capital lease obligations incurred during fiscal 2001. Non-cash investing activities include $1.4 million related to capital lease obligations incurred between January 2002 and January 2003. Non-cash financing activities include the repayment of officer advances 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. 17. Segment Information The Company operated its business in two reportable segments split by channels of distribution: Avenue Retail (retail stores) and Shop @ Home (internet and catalog). In deciding how to allocate resources and assess performance, the Company regularly evaluated the performance of its operating segments on the basis of net sales and earnings (losses) from operations. Certain information relating to the Company's reportable operating segments is set forth below (dollars in thousands): Fiscal Fiscal 2001 2002 -------- -------- Net sales: Avenue Retail $415,553 $423,816 Shop @ Home 11,487 8,148 -------- -------- $427,040 $431,964 ======== ======== Earnings (loss) from operations (1): Avenue Retail $16,987 ($864) Shop @ Home (6,856) (5,901) ------ ------ $10,131 ($6,765) ======= ======= (1) Represents earnings (loss) from operations before unallocated corporate expenses and net interest income (expense). 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 segments' earnings (loss) from operations to the Company's consolidated income (loss) before income taxes (dollars in thousands): Fiscal Fiscal 2001 2002 -------- --------- Earnings (loss) from operations for reportable segments $10,131 ($6,765) Unallocated corporate expenses (9,491) (16,006) Interest income (expense), net 361 (827) ------- --------- Income (loss) before income taxes $1,001 ($23,598) ======= ========= 18. Contingencies The Company is involved in various 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. 19. Supplemental Financial Data (Unaudited) (dollars in thousands, except per share data)
Fiscal 2001 ------------------------------------------------------------ Qtr 1 Qtr 2 Qtr 3 Qtr 4 ------------------------------------------------------------ Net sales $108,877 $107,272 $96,641 $114,250 Gross profit 28,362 25,190 20,783 26,604 Operating income (loss) 4,803 127 (3,540) (750) Net income (loss) $3,133 $207 ($2,286) ($624) Net income (loss) per common share: Basic $0.24 $0.02 ($0.17) ($0.05) Diluted $0.23 $0.02 ($0.17) ($0.05) Fiscal 2002 ------------------------------------------------------------ Qtr 1 Qtr 2 Qtr 3 Qtr 4 ------------------------------------------------------------ Net sales $115,574 $113,674 $97,019 $105,697 Gross profit 30,785 21,065 17,326 19,163 Operating income (loss) 4,772 (7,077) (7,687) (12,779) Net income (loss) $2,876 ($4,639) ($5,232) ($16,082) Net income (loss) per common share: Basic $0.22 ($0.35) ($0.40) ($1.24) Diluted $0.21 ($0.35) ($0.40) ($1.24)
20. Subsequent Events In February 2003, the Company announced its intention to suspend catalog operations in the first quarter of fiscal 2003 and operate the avenue.com website as a virtual store utilizing the same assortments as the retail stores. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) UNITED RETAIL GROUP, INC. Date: August 12, 2003 By: /s/ Raphael Benaroya ----------------------------- Raphael Benaroya, Chairman of the Board, President and Chief Executive Officer CERTIFICATIONS -------------- I, Raphael Benaroya, Chief Executive Officer of United Retail Group, Inc., certify that: 1. I have reviewed this annual report on Form 10-K of United Retail Group, Inc.; 2. based on my knowledge, this annual 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 annual report; 3. based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. the registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. the registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. the registrant's other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 12, 2003 /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 annual report on Form 10-K of United Retail Group, Inc.; 2. based on my knowledge, this annual 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 annual report; 3. based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. the registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. the registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. the registrant's other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 12, 2003 /s/ George R. Remeta ---------------------------- Chief Financial Officer EXHIBIT INDEX The following exhibits are filed herewith: Number Description ------ ----------- 3 Restated By-laws of the Corporation (filed on April 3, 2003) 10.1 Amendment, dated January 31, 2003, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and The CIT Group/Business Credit, Inc., as Agent and Lender ("CIT") (filed on April 3, 2003) 10.2 Amendment to Restated Supplemental Retirement Savings Plan (filed on April 3, 2003) 23.1 Consent of Independent Accountants for the Corporation 99.1 Certification pursuant to Section 906 The following exhibits to the Corporation's Quarterly Report on Form 10-Q for the period ended November 2, 2002, are incorporated herein by reference: Number in Filing Description ---------------- ----------- 10.1* Amendment, dated December 6, 2002, to Employment Agreement, dated November 20, 1998 between the Corporation and Raphael Benaroya ("Benaroya Employment Agreement") 10.2* Amendment, dated December 6, 2002, to Employment Agreement, dated November 20, 1998, between the Corporation and George R. Remeta ("Remeta Employment Agreement") 10.3* Amendment, dated December 6, 2002, to Employment Agreement, dated November 20, 1998, between the Corporation and Kenneth P. Carroll ("Carroll Employment Agreement") The following exhibits to the Corporation's Quarterly Report on Form 10-Q for the period ended August 3, 2002 are incorporated herein by reference: Number in Filing Description ---------------- ----------- 10.1 Amendment, dated August 2, 2002, to Financing Agreement among the Corporation, United Retail Incorporated, Cloudwalkers, Inc. and 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 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 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 Remeta Employment Agreement 10.3* Amendment, dated November 29, 2001, to 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 (paid 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 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.