<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1995
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
---- ----
Commission File No. 0-4584
------
THE UNITED GROUP, INC.
---------------------------
(Name of small business issuer as specified in its charter)
NORTH CAROLINA 56-0931793
---------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
SUITE 203, 5960 FAIRVIEW ROAD, CHARLOTTE, NORTH CAROLINA 28210
-------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (704) 554-9280
--------------
Securities Registered Pursuant to Section 12 (b) of the act: none
Securities Registered Pursuant to Section 12 (g) of the act:
COMMON STOCK, NO PAR VALUE
--------------------------
(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 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-B 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-KSB or any amendment to
this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ended September 30, 1995 were
$10,853,057.
Aggregate market value of the voting stock held by non-affiliates of the
registrant at September 30,1995: $1,227,078.
Number of shares of registrant's common stock outstanding as of September
30,1995: 981,097.
Documents Incorporated by Reference
-----------------------------------
1. 1995 Annual Report to Shareholders (incorporated by reference into Parts II
and III).
2. Shareholder Information Statement for the 1996 Annual Meeting of
Shareholders (incorporated by reference into Part III).
Transitional Small Business Disclosure Format: Yes No X
--- ---
<PAGE> 2
PART I
Item 1. Business
The information set forth on pages 2 through 4 of Exhibit B, the Company's 1995
Annual Report to Shareholders, under the caption "Description of Business" is
hereby incorporated herein by reference.
Item 2. Properties
The consumer finance subsidiaries of the Company lease office space for the
operation of its business in each city where a branch is located. The
remaining terms of such leases range from one year to ten years. All leased
facilities are adequate for anticipated needs for the present and the immediate
future. These subsidiaries own office furniture, machinery equipment and motor
vehicles used in its consumer finance business. During the year ended
September 30, 1988 the Company formed a subsidiary named United Landmark, Inc.
for the purpose of building branch office facilities to be leased to United
Financial Services, Inc. At September 30, 1995, this subsidiary owned four
buildings with one located in Moncks Corner, South Carolina and one located in
each of the North Carolina cities of Lenoir, Taylorsville and West Jefferson.
The Company intends to seek future opportunities to construct buildings for use
by United Financial branch offices where such ownership is believed by
management to be beneficial to the Company.
Item 3. Legal Proceedings
From time to time the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company
believes that it is not presently a party to any pending legal proceedings that
would have a material adverse effect on its financial condition.
Item 4 Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of shareholders during the quarter ended
September 30, 1995.
PART II
Item 5 Market for Registrant's Common Stock and Related Security Holder
Matters
The information set forth on page 23 of Exhibit B, the Company's 1995 Annual
Report to Shareholders, under the caption "Common Stock Market Prices and
Dividends" is hereby incorporated herein by reference. On September 30, 1995
there were 1,020 holders of record of the Company's common stock.
1
<PAGE> 3
Item 6. Management's Discussion and Analysis or Plan of Operation
The information set forth on pages 19 through 20 of Exhibit B, the Company's
1995 Annual Report to Shareholders, under the caption "Management Discussion
and Analysis of Financial Condition and Results of Operations" is hereby
incorporated herein by reference.
Item 7. Financial Statements
The consolidated statements of income, changes in stockholders' equity and cash
flows for the years ended September 30, 1995 and 1994, and the related
consolidated balance sheets as of September 30, 1995 and 1994, together with
the related notes thereto and the report of independent auditors, all set forth
on pages 5 through 18 of Exhibit B, the company's 1995 Annual Report to
Shareholders, is hereby incorporated herein by reference.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with the Company's independent
auditors regarding accounting and financial disclosure required to be reported
pursuant to this item.
PART III
Item 9. Directors and Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
Information required by this Item is included in the Company's Shareholder
Information Statement for the 1996 Annual Meeting of shareholders which is
hereby incorporated herein by reference.
Item 10. Executive Compensation
Information required by this Item is included in the Company's Shareholder
Information Statement for the 1996 Annual Meeting of Shareholders which is
hereby incorporated herein by reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Information required by this Item is included in the Company's Shareholder
Information Statement for the 1996 Annual Meeting of Shareholders which is
hereby incorporated herein by reference.
Item 12. Certain Relationships and Related Transactions
Information required by this Item is included in the Company's Shareholder
Information Statement for the 1996 Annual Meeting of Shareholders which is
hereby incorporated herein by reference.
2
<PAGE> 4
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
13. The 1995 Annual Report to Shareholders.
27. Financial Data Schedule (for SEC use only)
99. An organization chart of The United Group, Inc. as of
September 30, 1995.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
fiscal quarter ended September 30, 1995.
3
<PAGE> 5
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.
THE UNITED GROUP, INC.
By: /s/ Bill G. Beaver
------------------
Bill G. Beaver
President and Director
DATE: 12-7-95
-------
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.
DATE: 12-7-95 DATE: 12-7-95
-------------------------- --------------------------
By: /s/ Jack F. Anderson By: /s/ Shelton Gorelick
-------------------------- --------------------------
Jack F. Anderson, Director Shelton Gorelick, Director
DATE: DATE: 12-7-95
-------------------------- --------------------------
By: By: /s/ Glenn Johnson
-------------------------- -------------------------
Don G. Angell, Director Glenn Johnson, Director
DATE: 12-7-95 DATE: 12-7-95
-------------------------- --------------------------
By: /s/ R. Steven Lackey By: /s/ Dennis E. Savell
-------------------------- --------------------------
R. Steven Lackey, Director Dennis E. Savell, Director
DATE: 12-7-95 DATE: 12-7-95
-------------------------- --------------------------
By: /s/ Gordon E. Rhodes By: /s/ Dennis A. Young
-------------------------- --------------------------
Gordon E. Rhodes, Director Dennis A. Young, Director
DATE: 12-7-95
--------------------------
By: /s/ Kenneth M. O'Connell
--------------------------
Kenneth M. O'Connell, Secretary-Treasurer,
Chief Financial Officer and Director
4
<PAGE> 1
EXHIBIT 13
[DANIEL PROFESSIONAL GROUP LOGO]
The Daniel Professional Group, Inc.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of The United Group, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of The United
Group, Inc. and Subsidiaries as of September 30, 1995 and 1994, and the related
consolidated statements of income, changes in stockholders' equity and of cash
flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The United Group,
Inc. and Subsidiaries as of September 30, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ The Daniel Professional Group, Inc.
November 22, 1995
Charlotte, North Carolina
<TABLE>
<S> <C> <C>
4400 Silas Creek Pkwy., Suite 200 5605 77 Center Dr., Suite 270 Hwy. 150, Westfield Office Ctr., Ste. 101
Winston-Salem, NC 27104 Charlotte, NC 28217 Mooresville, NC 28115
910-768-3290 704-527-1402 704-663-0193
Fax 910-768-7666 Fax 704-527-2818 Fax 704-663-1779
</TABLE>
4
<PAGE> 2
THE UNITED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30,
<TABLE>
<CAPTION>
========================================================================================
ASSETS 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Cash $ 1,646,501 $ 1,507,360
----------- -----------
Marketable securities (Note 2) 1,843,814 1,508,858
----------- -----------
Finance receivables (Notes 3 and 5):
Cash loans and other contracts 36,589,554 32,291,324
Less:
Unearned insurance commissions 1,886,645 1,790,234
Allowance for credit losses 606,346 550,399
----------- -----------
2,492,991 2,340,633
----------- -----------
Net finance receivables 34,096,563 29,950,691
----------- -----------
Notes and accounts receivable:
Due from affiliates (Note 9) 976,666 1,032,647
Other 637,389 430,749
----------- -----------
1,614,055 1,463,396
----------- -----------
Property and equipment at cost, less accumulated
depreciation and amortization (Note 4) 691,634 710,775
----------- -----------
Deferred loan costs and other intangible assets at cost, less
accumulated amortization 62,048 87,090
----------- -----------
Deferred income taxes (Note 7) 12,000 -
----------- -----------
Other assets 91,121 129,127
----------- -----------
$40,057,736 $35,357,297
=========== ===========
</TABLE>
5
<PAGE> 3
<TABLE>
<CAPTION>
=================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C>
Notes payable (Note 5 and 9):
Notes payable to banks $30,346,607 $26,794,607
Mortgage loans payable 224,282 237,796
Other notes payable 3,008,216 2,878,030
Senior subordinated notes payable 300,000 300,000
Accounts payable and accrued expenses 2,051,702 2,249,563
Deferred income taxes (Note 7) - 35,000
----------- -----------
35,930,807 32,494,996
----------- -----------
Stockholders' equity:
Preferred stock, no par value, stated value of $2 per
share; 500,000 shares authorized; no shares issued
and outstanding - -
Common stock, no par value, total stated value of
$100,000; 25,000,000 shares authorized;
1,060,461 and 1,053,925 shares issued, respectively 100,000 100,000
Additional paid-in capital 127,623 69,015
Retained earnings 4,211,129 2,999,615
----------- -----------
4,438,752 3,168,630
Less:
Cost of common stock held by subsidiary
(79,364 and 90,084 shares, respectively) 311,823 306,329
----------- -----------
4,126,929 2,862,301
----------- -----------
$40,057,736 $35,357,297
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 4
THE UNITED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
=====================================================================
1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Credit income:
Interest and fees on loans $8,863,556 $7,603,729
Investment income and other interest 177,509 108,126
---------- ----------
9,041,065 7,711,855
Less:
Interest expense 3,130,529 2,500,664
Provision for credit losses 497,524 403,829
---------- ----------
Net credit income 5,413,012 4,807,362
---------- ----------
Insurance income:
Insurance commissions and premiums 1,991,992 1,851,335
Less, insurance losses and loss expenses 380,702 353,452
---------- ----------
Net insurance income 1,611,290 1,497,883
---------- ----------
Operating expenses:
Salaries and benefits 3,437,640 3,065,405
Other operating expenses 1,552,606 1,741,655
---------- ----------
Total operating expenses 4,990,246 4,807,060
---------- ----------
Income before provision for income taxes 2,034,056 1,498,185
Provision for income taxes (Note 7) 539,000 444,000
---------- ----------
Net income $1,315,056 $1,054,185
========== ==========
Net income per common share $ 1.25 $ 0.98
========== ==========
Weighted average shares outstanding 1,053,135 1,078,135
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 5
THE UNITED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
=============================================================================================
COMMON
ADDITIONAL STOCK
OUTSTANDING COMMON PAID-IN RETAINED HELD BY
SHARES STOCK CAPITAL EARNINGS SUBSIDIARY TOTAL
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
SEPTEMBER 30, 1993 1,032,886 $100,000 $ 716,334 $2,049,400 $ (362,907) $2,502,827
DIVIDENDS - - - (103,970) - (103,970)
STOCK ISSUED TO
STOCK BONUS PLAN 27,355 - 195,726 - 48,637 244,363
PURCHASE OF STOCK (145,022) - (1,168,065) - 36,000 (1,132,065)
SALE OF STOCK 48,622 - 325,020 - (28,059) 296,961
NET INCOME - - - 1,054,185 - 1,054,185
----------------------------------------------------------------------
BALANCE AT
SEPTEMBER 30, 1994 963,841 100,000 69,015 2,999,615 (306,329) 2,862,301
DIVIDENDS - - - (103,542) - (103,542)
STOCK ISSUED TO
STOCK BONUS PLAN 28,531 - 249,184 - - 249,184
PURCHASE OF STOCK (13,422) - (120,799) - - (120,799)
PURCHASE OF
STOCK HELD BY
SUBSIDIARY - - (117,000) - 22,406 (94,594)
SALE OF STOCK 2,147 - 19,323 - - 19,323
SALE OF STOCK
TO SUBSIDIARY - - 27,900 - (27,900) -
NET INCOME - - - 1,315,056 - 1,315,056
----------------------------------------------------------------------
BALANCE AT
SEPTEMBER 30, 1995 981,097 $100,000 $ 127,623 $4,211,129 $ (311,823) $4,126,929
======================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE> 6
THE UNITED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
==========================================================================================
1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Interest and fees on loans collected $ 9,552,241 $ 8,061,518
Investment income and other interest income received 143,665 148,666
Insurance commissions and premiums collected 1,844,244 2,016,722
Interest paid (3,123,234) (2,593,239)
Insurance expenses and losses paid (380,702) (353,452)
Cash paid to suppliers and employees (4,460,047) (4,227,039)
Income taxes paid (819,000) (234,072)
------------ ------------
2,757,167 2,819,104
------------ ------------
Cash flows from investing activities:
Cash proceeds of loans made (24,487,975) (19,807,403)
Cash received as repayment of loans 18,879,483 16,039,724
Purchase of marketable securities (335,664) (705,328)
Cash paid to purchase property and equipment (138,021) (183,315)
Proceeds from sale of equipment 36,263 20,550
Cash paid for intangible assets (18,187) (31,132)
Proceeds from sale of intangible assets - 134,124
Proceeds from sale or maturity of investments 21,034 488,165
------------ ------------
(6,043,067) (4,044,615)
------------ ------------
Cash flow from financing activities:
Notes payable to banks:
Borrows 5,502,000 6,091,000
Repayments (1,950,000) (2,010,000)
Repayment of mortgage loans (13,514) (13,939)
Other notes:
Borrows 781,019 756,241
Repayments (650,833) (2,647,641)
Repayment of subordinated debt - (400,000)
Common stock activity:
Proceeds from issuance of stock - 318,470
Payments to acquire outstanding stock (196,070) (565,209)
Cash dividends to shareholders (47,561) (47,989)
------------ ------------
3,425,041 1,480,933
------------ ------------
Net increase in cash 139,141 255,422
Cash at beginning of year 1,507,360 1,251,938
------------ ------------
Cash at end of year $ 1,646,501 $ 1,507,360
============ ============
</TABLE>
9
<PAGE> 7
<TABLE>
<CAPTION>
==========================================================================================
1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Reconciliation of net income to net cash provided by operating
activities:
Net income $1,315,056 $1,054,185
Adjustments to reconcile net income to net cash provided:
Depreciation and amortization 164,128 329,022
Investment income not providing cash (20,326) -
Provision for credit losses 497,524 403,829
Provision for deferred income taxes (47,000) 25,000
Provision for stock bonus plan expense 249,184 222,854
Change in unearned interest charges 868,685 457,789
Change in accrued investment income (13,518) (2,167)
Change in unearned insurance commissions and premiums 96,411 118,347
Change in accounts receivable (193,122) (61,843)
Change in accounts payable 27,844 82,369
Change in income taxes payable (233,000) 184,928
Change in interest payable 7,295 (32,763)
Change in other assets 38,006 37,554
---------- ----------
Total adjustments 1,442,111 1,764,919
---------- ----------
Net cash provided by operating activities $2,757,167 $2,819,104
========== ==========
</TABLE>
Summary of significant noncash transactions:
During the year ended September 30, 1995, the Company paid dividends of $55,981
through a reduction in notes and accounts receivable from affiliates.
During the year ended September 30, 1994, the Company redeemed $567,048 of
common stock and paid dividends of $55,981 through a reduction in notes and
accounts receivable from affiliates.
See accompanying notes to consolidated financial statements.
10
<PAGE> 8
THE UNITED GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
================================================================================
Note 1 - Summary of accounting policies
- --------------------------------------------------------------------------------
Organization
The United Group, Inc. is a holding company providing financing and management
assistance to its operating subsidiary, United Financial Services, Inc. which
is engaged in the business of making direct cash loans to individuals and
purchasing sales finance contracts from retailers through branch offices in
North and South Carolina.
Basis of consolidation
The consolidated financial statements include the accounts of The United Group,
Inc. and all majority and wholly-owned subsidiaries, which include its consumer
finance subsidiary, United Financial Services, Inc. and its subsidiaries,
United Financial Services, Inc. of N.C., UFS Life Reinsurance Company and
United Landmark, Inc. Intercompany balances and transactions are eliminated in
the consolidated financial statements.
Balance sheet presentation
Since the most significant asset of the Company is finance receivables, the
balance sheets at September 30, 1995 and 1994, have been prepared on an
unclassified basis as to current and long-term assets and liabilities in
accordance with the American Institute of Certified Public Accountants Guide
for Audits of Finance Companies.
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.
Cash flows
For purposes of reporting cash flows, cash includes cash on hand and in banks,
plus any other short-term investments with original maturities of three months
or less.
Marketable securities
Marketable securities, comprised principally of corporate and government bonds,
are the invested assets of the Company's life reinsurance subsidiary and are
restricted for use by such subsidiary. These investments are carried at the
lower of amortized cost or market. Realized gains and losses are included in
the determination of net income, using the specific identification method.
Property and equipment
Property and equipment are stated at cost. Expenditures for maintenance and
repairs that will not improve or extend the life of an asset are charged to
expense as incurred. Major renewals and improvements are charged to the
property accounts. Upon retirement or sale of an asset, its cost and related
accumulated depreciation or amortization is removed from the property accounts
and any gain or loss is recorded in income or expense. Depreciation is
provided on the straight-line method for financial reporting purposes.
Intangible assets
Intangible assets include principally deferred loan costs and deferred software
costs. The former are incurred for certain expenditures in conjunction with
notes payable to banks. The costs are being amortized on a straight-line basis
over the estimated life of the expenditure. Deferred software costs represent
expenditures made for development of electronic data processing software to be
used in the Company's recording process. Deferred software costs are being
amortized on a straight-line basis over five years.
11
<PAGE> 9
Interest and loan fees
Interest and loan fee revenues are recognized on an accrual basis under the
interest method. Under this method, estimates are determined for certain
direct loan origination costs that are then recognized over the lives of the
related loans as a reduction of the loans' yield. The objective of the
interest method is to arrive at a periodic interest income (including
recognition of costs) at a constant effective yield on the net investment in
the receivable (that is, the principal amount of the receivable adjusted by
unamortized costs). Accrual of income is made without regard to delinquency
status. As discussed below, provision is made in the allowance for credit
losses to cover uncollectible accrued income.
Insurance income
Commission and premium income is recognized as revenue over the life of the
contracts using the interest method for credit life insurance, the mean of
straight-line and sum-of-digits methods for credit disability insurance, the
sum-of-digits method for decreasing coverage credit property and auto insurance
and the straight-line method for level coverage credit property insurance. All
insurance products are written under agency agreements with unaffiliated
insurers. UFS Life Reinsurance Company ("UFS Life") is engaged primarily in
the business of reinsuring credit life and credit disability policies
originated by the Company. Premiums are ceded to UFS Life on a written basis
and are earned over the life of the contracts using the methods described
above. Policy liabilities and claim reserves have been established by UFS
Life. Claim reserves are based upon accumulated estimates of claims reported,
plus estimates of incurred but unreported claims.
Allowance for credit losses
An allowance for credit losses is established based on a review of
contractually delinquent accounts in the loan portfolio for probable
uncollectible accounts at the balance sheet date, and a review of historical
loss ratios and industry loss averages to determine a reasonable allowance for
accounts that are uncollectible at the balance sheet date but are not yet
delinquent, or otherwise impaired. The allowance for credit losses includes
amounts for estimates of uncollectible accrued income. When an account becomes
eight months contractually past due, the balance of the account and any accrued
income is written off. Bankrupt accounts and deficiency balance accounts are
written off when losses on such accounts become known.
Advertising expense
The Company from time to time initiates various forms of advertising, including
direct-response advertising. The Company does not believe that direct-response
advertising generates significant future benefits and, accordingly, all
advertising costs, including direct-response advertising, are expensed when
incurred.
Income taxes
The Company provides for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, which requires the use of the asset and liability
method and recognizes deferred income taxes for the tax consequences of
"temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts
and the tax bases of existing assets and liabilities. These differences result
principally from the recognition of finance income on the interest method for
financial statement purposes and on the Rule of 78's method for tax purposes,
the recognition of insurance income on the accrual method for financial
statement purposes and on the modified cash method for tax purposes, bad debt
reserves expensed for book purposes but not for tax purposes, deferred
compensation expensed for financial statement purposes but deductible only in
the year paid for tax purposes, and differences in financial statement and tax
depreciation methods. The effect on deferred taxes for a change in tax rates
is recognized in income in the period that includes the enactment date.
The Company and its subsidiaries file a consolidated federal income tax return.
Loss subsidiaries receive the benefit of any related tax savings they may
generate for the consolidated group, while income subsidiaries pay income tax
to their next tier parent based upon the applicable federal tax rates, both
based upon the separated return basis. State income tax laws do not generally
permit consolidated income tax returns; accordingly, applicable state income
tax returns are filed for each company.
The Company's reinsurance subsidiary meets requirements to be taxed as a small
property and casualty company under which only investment income is subject to
tax. The Company anticipates that this subsidiary will continue to meet these
requirements until premium volume grows enough to make the cost of meeting the
requirements outweigh the benefits.
12
<PAGE> 10
Per share amounts
Per share amounts have been computed using the weighted shares outstanding of
1,053,153 for the year ended September 30, 1995, and 1,078,135 for the year
ended September 30, 1994. For purposes of calculating earnings per share,
outstanding shares include shares held by a subsidiary for the benefit of
employees under deferred compensation arrangements.
Segment information
The company operates in only one business segment, the finance business
segment, for industry segment report purposes. Insurance business is included
in the finance business segment in accordance with the American Institute of
Certified Public Accountants Guide for Audits of Finance Companies.
===============================================================================
NOTE 2 - MARKETABLE SECURITIES
- -------------------------------------------------------------------------------
The Company's marketable securities consist principally of corporate and
government bonds. Such securities are usually held to maturity and valued at
the lower of amortized cost or market. The Company had no significant realized
or unrealized gains or losses on such securities during the years ended
September 30, 1995 and 1994. A summary of such securities is as follows as of
September 30:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
AMORTIZED AMORTIZED
FAIR VALUE COST FAIR VALUE COST
<S> <C> <C> <C> <C>
Mortgage-backed securities $ 537,888 $ 543,860 $ 504,512 $ 520,786
Corporate and other 1,317,267 1,299,954 953,819 988,072
- -------------------------------------------------------------------------------
$1,855,155 $1,843,814 $1,458,331 $1,508,858
- -------------------------------------------------------------------------------
</TABLE>
At September 30, 1995, investments in debt securities had maturities as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
MATURITY
- -------------------------------------------------------------------------------
WITHIN ONE ONE THROUGH FIVE THROUGH AFTER TEN
YEAR FIVE YEARS TEN YEARS YEARS
<S> <C> <C> <C> <C>
Mortgage-backed securities $ 8,758 $ 35,003 $ 13,412 $486,687
Corporate and other 278,520 248,659 623,898 148,877
- -------------------------------------------------------------------------------
$287,278 $283,662 $637,310 $635,564
- -------------------------------------------------------------------------------
</TABLE>
Mortgaged-backed securities have been allocated to the above maturity
categories based upon the scheduled amount of principal to be received by year.
================================================================================
NOTE 3 - FINANCE RECEIVABLES
- --------------------------------------------------------------------------------
Finance receivables consist of direct cash loans, secured real estate loans,
and sales finance contracts. These loans are principally made to individuals
in the blue collar segment of the population. The Company operates branch
offices in the states of North and South Carolina. Approximately seventy-five
percent (75%) of the net finance receivables were originated in branches
located in North Carolina and approximately twenty-five (25%) in branches in
South Carolina. Depending upon creditworthiness and loan size, loans are
either unsecured or secured by personal property, mobile homes, automobiles or
real estate. Sales finance contracts are secured by the respective personal
property, automobiles or mobile homes. The majority of loans are made with
maximum terms of thirty-six (36) months. Some loans, including those secured
by mortgages on real estate, are made with terms up to ten (10) years.
Experience of the Company has shown that a majority of the finance receivables
will be renewed before contractual maturity dates and, therefore, the foregoing
information is not to be regarded as a forecast of future cash collections.
During the years ended September 30, 1995 and 1994, cash
13
<PAGE> 11
collections were approximately $30,276,000 and $26,118,000, respectively. The
ratio of cash collections to average net finance receivable balances was
approximately ninety-four percent (94%) and ninety-three percent (93%) for the
years ended September 30, 1995 and 1994, respectively.
A schedule of delinquencies of direct cash loans and sales finance contracts
based on current contract terms at September 30, and percentage of such
delinquencies compared to gross finance receivables is presented below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
PAST DUE AMOUNT % AMOUNT %
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Four payments or more $347,418 .95 $292,626 .91
Three payments 83,504 .23 103,700 .32
Two payments 195,475 .53 134,324 .41
- --------------------------------------------------------------------------------
TOTALS $626,397 1.71 $530,650 1.64
- --------------------------------------------------------------------------------
</TABLE>
The allowance for credit losses was 1.66% of gross finance receivables at
September 30, 1995, and 1.70% at September 30, 1994. Changes in the allowance
for credit losses were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, BEGINNING OF YEAR $550,399 $566,399
- --------------------------------------------------------------------------------
Provision for credit losses 497,524 403,829
Loans charged-off (647,436) (524,158)
Recoveries 141,859 120,329
Other charges (credits) 64,000 (16,000)
- --------------------------------------------------------------------------------
BALANCE, END OF YEAR $606,346 $550,399
- --------------------------------------------------------------------------------
</TABLE>
================================================================================
NOTE 4 - PROPERTY AND EQUIPMENT
- --------------------------------------------------------------------------------
Property and equipment are summarized as follows at September 30:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 144,928 $ 144,928
Buildings 249,287 246,787
Equipment, furniture
and fixtures 931,813 1,342,577
---------- -----------
1,326,028 1,734,292
Less accumulated
depreciation (634,394) (1,023,517)
- --------------------------------------------------------------------------------
$ 691,634 $ 710,775
- --------------------------------------------------------------------------------
</TABLE>
Depreciation expense totaled approximately $112,000 and $141,000 for the years
ended September 30, 1995 and 1994, respectively.
14
<PAGE> 12
================================================================================
NOTE 5 - NOTES PAYABLE
- --------------------------------------------------------------------------------
Notes payable are as follows at September 30:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
Due to Banks:
Notes payable to banks, with
interest payable monthly,
collateralized by finance
receivables, all cash and noncash
proceeds of finance receivables
(See description of term,
interest rates and major
covenants below) $30,346,607 $26,794,607
----------- -----------
Senior subordinated notes payable:
Senior note payable to the
primary carrier of credit life
and disability insurance,
subordinated to short- term notes
payable to banks with interest
payable quarterly at prime plus
one percent (1%), to be not less
than nine percent (9%) nor more
than twelve percent (12%); due
June 30, 1999 300,000 300,000
----------- -----------
Other notes payable:
Various unsecured notes,
principally due on demand,
interest payable quarterly or
monthly at prime plus one percent
(1%) 3,008,216 2,878,030
----------- -----------
Mortgage loans payable:
Mortgage loan payable to bank at
$464 per month including
principal and interest through
September 2006, interest at eight
percent (8%) adjustable annually
to no more than fourteen percent
(14%) 40,619 42,348
Mortgage loan payable to bank at
$1,357 per month including
principal and interest through
October 2006, interest at seven
percent (7%) adjustable annually
to no more than fifteen percent
(15%) 125,238 131,923
Mortgage loan payable to bank at
$425 per month plus interest
through June 1997, with the
balance of $49,925 due July 1997,
interest at the prime rate plus
one percent (1%) 58,425 63,525
----------- -----------
224,282 237,796
- -----------------------------------------------------------------------------
TOTAL NOTES PAYABLE $33,879,105 $30,210,433
=============================================================================
</TABLE>
The loan agreement with respect to the notes payable to banks provides a line
of credit with borrowings of up to $35,500,000 or eighty-seven (87%), reducing
to eighty-five (85%) by March 31, 1996, of eligible receivables. The Company
may borrow, at its option, at the rate of prime plus one-fourth of one percent
(1/4 of 1%), or LIBOR plus two and one-half percent (2 1/2%). The Company
pays a facility fee of one-fourth of one percent (1/4 of 1%) on the total line
of credit. The notes are payable upon demand and are collateralized by
substantially all of the assets of the Company.
Major covenants of the loan agreement provide that United Financial Services,
Inc. (a) shall maintain a ratio of debt to tangible net worth as defined which
shall not exceed 6.5 to 1; (b) shall maintain a ratio of unsubordinated debt to
adjusted tangible net worth as defined which shall not exceed 5.5 to 1; (c)
shall maintain tangible net worth of not less than $5,900,000 to increase
annually by eighty percent (80%) of earnings after permitted dividends; (d)
shall maintain subordinated debt of not less than $600,000; (e) shall maintain
interest coverage as defined in excess of 1.2 to 1; and (f) is permitted to
make allocations of management fees, dividends and federal income taxes for the
purpose of servicing debt at the parent company level. The aggregate total of
such allocations in any one fiscal year may not exceed the total of federal
15
<PAGE> 13
income taxes calculated to be due from the Company and its subsidiaries,
without regard to payment of management fees, plus fifty percent (50%) of the
after tax consolidated net income of the Company and subsidiaries calculated
without regard to payment of management fees.
As described above, the Company's subsidiaries have various debt agreements
requiring various ratios and net tangible asset levels which, in effect,
restrict the distribution of assets to the parent company and correspondingly
the payment of cash dividends by the Company to stockholders. At September 30,
1995, restricted net assets of the consolidated subsidiaries were $5,227,000.
Senior subordinated notes payable are unsecured. Mortgage loans payable are
secured by all land and buildings owned by the Company.
Total short-term debt at September 30, 1995, amounted to $33,354,823. The
aggregate annual maturities of long-term debt of $524,282 are as follows for
years ending September 30:
<TABLE>
<S> <C> <C>
1996 - $14,450 1997 - $ 15,309
1998 - $16,233 1999 - $317,240
2000 - $18,339 balance thereafter - $142,711
</TABLE>
Following is a summary of information relating to short-term notes payable at
September 30:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
MAXIMUM AVERAGE MONTHLY WEIGHTED AVERAGE
OUTSTANDING AMOUNT INTEREST
AT ANY MONTH END OUTSTANDING RATE
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Line-of-credit due banks:
1995 $30,346,607 $28,555,838 9.31
1994 $26,794,607 $23,914,992 7.64
Other short-term borrowings:
1995 $ 3,026,088 $ 2,895,618 10.05
1994 $ 2,878,000 $ 2,717,000 8.70
</TABLE>
================================================================================
NOTE 6 - LEASE COMMITMENTS
- --------------------------------------------------------------------------------
The company leases office space for its home and branch offices. These leases
are all operating leases expiring at various dates through 2004. The future
minimum rental commitments required under all operating leases of $355,216 are
as follows for the years ending September 30:
<TABLE>
<S> <C> <C> <C>
1996 - $160,420 1997 - $95,648
1998 - $ 60,248 1999 - $29,650
2000 - $ 9,250
</TABLE>
The total rent expense for the years ended September 30, 1995 and 1994, was
approximately $222,000 and $204,000, respectively.
================================================================================
NOTE 7 - INCOME TAXES
- --------------------------------------------------------------------------------
The deferred income tax asset (liability) reflected on the balance sheet is
comprised of the following at September 30:
16
<PAGE> 14
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Insurance income adjustments $245,000 $ 256,000
Allowance for credit losses 221,000 202,000
Deferred compensation 238,000 215,000
State net economic loss carryforwards 50,000 100,000
Valuation allowance relating to
possible unrealizable benefits
attributable to state net economic
loss carryforwards - (50,000)
-------- ---------
754,000 723,000
-------- ---------
Deferred tax liabilities:
Unearned finance charge adjustments 478,000 473,000
Depreciation adjustments 14,000 35,000
Reserve for tax audit adjustments 250,000 250,000
-------- ---------
742,000 758,000
- --------------------------------------------------------------------------------
NET DEFERRED TAX ASSET (LIABILITY) $ 12,000 $ (35,000)
- --------------------------------------------------------------------------------
</TABLE>
The provision for income tax expense is summarized as follows for the years
ended September 30:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Current:
Federal income taxes currently payable $537,000 $365,000
State income taxes currently payable to
state taxing authorities included in
other accrued liabilities 49,000 54,000
-------- --------
586,000 419,000
-------- --------
Change in deferred income taxes payable:
Utilization of state net economic loss
carryforwards 50,000 33,000
Change in the valuation allowance
relating to utilization of state net
economic loss carryforwards (50,000) (33,000)
Changes in other components of deferred
tax assets and liabilities (47,000) 25,000
-------- --------
(47,000) 25,000
- -------------------------------------------------------------------------------
PROVISION FOR INCOME TAX EXPENSE $539,000 $444,000
- -------------------------------------------------------------------------------
</TABLE>
A reconciliation of the provision for income taxes to the federal statutory
rate is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Provision for income taxes at the federal statutory rate $630,000 34% $509,000 34%
State income taxes, less federal tax benefit 34,000 2% 75,000 5%
Other, principally effect of exempt income relating to
reinsurance subsidiary (125,000) (7%) (140,000) (9%)
- -------------------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES $539,000 29% $444,000 30%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 15
================================================================================
NOTE 8 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
For cash, marketable securities, accounts receivable and debt, management
estimates that the carrying amount is a reasonable estimate of fair value.
These estimates are based upon the carrying amounts for cash and accounts
receivable, upon quoted market prices for marketable securities and upon rates
currently available to the Company for debt. For finance receivables,
management estimates that the fair value of net finance receivables is
approximately $37,000,000 based upon estimated market prices of consumer
finance branch offices and residual income streams from insurance. Fair value
estimates are subjective in nature and involve uncertainties and matters of
significant judgement and, therefore, cannot be determined with precision.
Fair value estimates do not reflect the total value of the Company as a going
concern.
================================================================================
NOTE 9 - RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
The major related party transactions of The United Group, Inc. and Subsidiaries
are summarized below:
Related party notes and accounts receivable
Notes and accounts receivable - affiliates were as follows at September 30:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Accounts receivable from Angell Group Incorporated (AGI) $900,926 $ 900,926
Note receivable from Angell Care, Inc. (ACI), an
affiliate of AGI, bearing interest at the prime rate
plus one-quarter percent (1/4%) 75,740 131,721
- ------------------------------------------------------------------------------
$976,666 $1,032,647
- ------------------------------------------------------------------------------
</TABLE>
Accounts receivable from AGI, an affiliate of The United Group, Inc., has
arisen principally from income tax allocations in prior years when the Company
was part of the AGI consolidated group. Management of AGI and ACI intends to
repay the above notes and accounts receivable from future equity distributions
made by the Company to Don Angell, the sole shareholder of AGI, or through
future stock repurchase transactions between Don Angell and the Company.
Amounts due from AGI and its subsidiaries are secured by 249,933 shares of
common stock of The United Group, Inc. owned by Don Angell.
Related party notes payable
In addition to the items previously discussed, the Company had $294,529 and
$279,254 in notes payable to various affiliates, stockholders, directors and
officers outstanding at September 30, 1995 and 1994, respectively. These notes
are among those listed and further described in Note 4.
================================================================================
NOTE 10 - STOCK BONUS PLAN
- --------------------------------------------------------------------------------
The Company has a stock bonus plan as a vehicle to fund redemption of certain
parent company stock and to provide retirement benefits to employees. The
Company's stock bonus plan covers all full-time employees, and is funded
entirely with Company contributions. Contributions are discretionary and are
determined annually by the Board of Directors, up to a maximum of fifteen
percent (15%) of annual compensation. Contributions are funded as accrued.
Participants in the plan become vested after five (5) years of service.
Forfeitures are used to reduce annual contributions. Contributions in the form
of parent company stock are valued at fair market value determined annually via
independent appraisal of the stock at the contribution date. The expense
recorded under this plan was $253,184 and $225,492 for the years ended
September 30, 1995 and 1994, respectively.
================================================================================
NOTE 11 - CONCENTRATIONS OF CREDIT RISK
- --------------------------------------------------------------------------------
Concentrations of credit risk with respect to finance receivables are discussed
in Note 2. In addition, the Company and its subsidiaries had cash in bank
accounts that exceed the federally insured amount for individual account
holders by approximately $1,300,000 at September 30, 1995.
18
<PAGE> 16
THE UNITED GROUP, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================================================
COMPARISON OF FISCAL 1995 VERSUS FISCAL 1994
- --------------------------------------------------------------------------------
During the year ended September 30, 1995, the Company produced loan volume of
approximately $47,900,000 compared with $41,500,000 in Fiscal 1994. During the
current year, one branch office was opened in April. This branch produced loan
volume of approximately $664,000. A branch opened in June 1994 produced loan
volume of approximately $1,523,000. Therefore, branches opened more than one
year produced loan volume of $45,713,000 during Fiscal 1995 compared with
$37,600,000 in Fiscal 1994. The increased volume in existing branches is the
result of several factors including company incentive and motivation programs,
advertising campaigns and favorable economic conditions. A significant factor
in the increase volume was also the Company's movement from the smaller loan
market to the intermediate loan market resulting in substantial loan volume
involving financing automobiles, mobile homes and real estate. As a result,
the average loan made in Fiscal 1995 increased to $1,637 compared with $1,428
in 1994. Total sales volume increased from approximately $5,080,000 in 1994 to
approximately $7,770,000 in 1995. Most of this increase involved loans using
automobiles as collateral. The result of the increased loan volume was an
increase in net finance receivables from $29,950,691 at September 30, 1994 to
$34,096,563 at September 30, 1995 which is an increase of 13.8%. This compares
with an increase during 1994 of approximately $2,800,000 or 10%.
Profitability improved in Fiscal 1995 over 1994 due to several factors. First,
the increased finance receivables generated an increase in revenues. Interest
and fees on loans increased by $1,259,827 which is an increase of 16.6%.
Insurance commissions and premiums increased by $140,657 which is an increase
of 7.6%. Increases in insurance income do not follow increases in interest
income due to rate reductions, decreased penetration on larger loans and other
factors. Investment income and other interest improved by $69,383 due to
increases in invested assets in UFS Life and to favorable investment market
conditions. Other operating expenses actually declined by $189,049 or 10.8%.
Approximately $130,000 of this decrease is attributable to the elimination of
amortization of deferred loan costs on notes repaid by the parent company
during Fiscal 1994. The balance is a result of aggressive efforts to control
and reduce expenses where possible.
Interest expense for Fiscal 1995 increased over Fiscal 1994 by $629,865. This
amount was influenced by several factors. Some of these factors caused
interest expense to go up and some generated an interest expense savings.
First, the increased finance receivables were partially financed by increasing
the balance due on the bank line of credit. The average monthly balance
increased by $4,640,846 in 1995 compared with 1994. Approximately, $1,700,000
of this increase can be attributed to the payout of notes at the parent company
level in Fiscal 1994 on which interest rates of approximately 12% were being
paid. This resulted in an interest expense savings of approximately $45,000.
The balance of the increase in average balance due to the banks generated
interest expense of approximately $230,000. During Fiscal 1995, the average
rate paid on short-term bank debt increased from 7.64% to 9.31% generating
additional interest expense of approximately $475,000. The average rate on
other short-term debt increased from 8.70% to 10.05% generating an additional
$39,000 in interest expense.
================================================================================
FUTURE PROFITABILITY
- --------------------------------------------------------------------------------
The future profitability of the company is highly dependent upon the course of
short-term interest rates since the cost of the primary source funds, the bank
line of credit, is tied to the prime interest rate charged by the banks or to
LIBOR. Each percentage point increase in the prime rate increases the
Company's interest expense by approximately $330,000 at the current level of
borrowing. As stated above, rate increases generated additional interest
expense of approximately $514,000 in Fiscal 1995 compared with rates paid in
1994. This increase in expense can be somewhat mitigated by the fact that the
rates of interest charged in South Carolina are not subject to regulation and
can be increased somewhat if necessary. In addition, the Company intends to be
more aggressive in its control of operating expenses during times when interest
rates are high. As discussed above, these efforts generated savings during
Fiscal 1995. During 1995, the United Financial Services, Inc. negotiated an
adjustment in the interest rate paid to the banks so that the company can elect
to pay either prime plus one-fourth of one percent (1/4 of 1%) or LIBOR plus
two and one-half percent (2 and 1/2%). The company believes that on average,
the LIBOR rate will be elected which will generate an average reduction of
about three-fourths of one percent (3/4 of 1%) in the average interest rate
paid. At the current level of borrowing, this would translate to a savings of
approximately $225,000 annually. Experience has shown that periods of high
rates run in cycles and that such a cycle may currently be occurring or be in
its latter stages. Experience has also shown that these cycles eventually run
their course and rates return to lower levels.
19
<PAGE> 17
================================================================================
Credit Loss Experience
- -------------------------------------------------------------------------------
Delinquency is computed based on the amount past due according to the original
payment terms of a loan (known as the contractual method). Management closely
monitors delinquency to measure the quality of the loan portfolio and the
potential for credit losses. In addition, delinquency statistics give
management important information concerning trends in particular branches or
areas. Management uses this information to determine the need to adjust
collection efforts and to adjust credit policies in order to maintain the
quality of the loan portfolio.
The Company maintains an allowance for loan losses in an amount that, in
management's opinion, is adequate to cover losses expected to occur in the
existing loan portfolio. The Company charges against current earnings, as a
provision for loan losses, amounts added to the allowance to maintain it at
levels expected to cover future losses of principal. The Company's policy is
to charge-off loans that are 210 days past due contractually, or sooner if the
loan is deemed uncollectible. This policy was previously 240 days in Fiscal
1994 and 270 days in Fiscal 1993. Collection efforts on charged-off loans
continue until the obligation is satisfied or until it is determined such
obligation is not collectible or the cost of continued collection efforts will
exceed the potential for recovery. Accounts charged-off are debited to the
allowance for loan losses. Recoveries of previously charged-off loans are
credited to the allowance for loan losses.
The following table summarizes statistics relating to the condition of
receivables, the allowance for loan losses and credit loss experience over the
last five fiscal years:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Percentage of receivables past due:
Four payments or more 0.95 0.91 1.02 1.56 2.80
Three payments 0.23 0.32 0.27 0.32 0.49
Two payments 0.53 0.41 0.37 0.58 0.80
---------------------------------------------
Total 1.71 1.64 1.66 2.46 4.09
=============================================
Accounts two or more payments
past due known to have filed
under federal bankruptcy law 0.70 0.61 0.64 1.13 2.03
=============================================
Percentage of average net finance receivables:
Cash collections 94.00 93.00 87.00 83.00 81.00
Provision for credit losses 1.55 1.44 2.24 3.68 2.29
Charge-offs, net of recoveries 1.57 1.44 1.84 3.61 2.19
</TABLE>
================================================================================
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
The Company finances its operations and growth through cash flow from
operations and borrowings under the bank line of credit. In 1995, the Company
produced cash flow from operations of $2,757,167 compared with $2,819,104 in
1994. In addition, the Company collected cash as repayments on loans of
$18,879,483 in 1995 and $16,039,724 in 1994. An important element in these
cash collections is the condition of finance receivables discussed above.
The Company's primary ongoing cash requirements relate to funding growth in
loan receivables in both existing and new branch offices. The Company plans to
continue efforts to employ additional receivables in existing branch offices.
In addition, new offices will be opened as available personnel and locations
appear to make such openings attractive to management. The Company currently
has a total line of credit of $35,500,000 with its banks. Approximately
$5,150,000 of this line is not used as of September 30, 1995. The Company
believes that this line of credit along with internally generated cash flows is
adequate to fund anticipated growth.
================================================================================
INFLATION
- --------------------------------------------------------------------------------
The Company does not believe that inflation has a material adverse effect on
its financial condition or results of operations. The primary impact of
inflation on the operations of the Company is reflected in increased operating
costs. While increases in operating costs would adversely affect the Company's
operations, such effects can be offset in the long-term by increases in the
size of loans made as well as rate increases should interest rates remain at
high levels due to high levels of inflation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE UNITED GROUP, INC. FOR THE YEAR ENDED SEPTEMBER 30,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 1,646,501
<SECURITIES> 1,843,814
<RECEIVABLES> 36,589,554
<ALLOWANCES> 606,346
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,326,028
<DEPRECIATION> 634,394
<TOTAL-ASSETS> 40,057,736
<CURRENT-LIABILITIES> 0
<BONDS> 224,282
0
0
<COMMON> 100,000
<OTHER-SE> 4,025,929
<TOTAL-LIABILITY-AND-EQUITY> 4,125,929
<SALES> 11,033,057
<TOTAL-REVENUES> 11,033,057
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,370,948
<LOSS-PROVISION> 497,524
<INTEREST-EXPENSE> 3,130,529
<INCOME-PRETAX> 2,034,056
<INCOME-TAX> 539,000
<INCOME-CONTINUING> 1,315,056
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,315,056
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25
</TABLE>
<PAGE> 1
EXHIBIT 99
EXHIBIT A
ORGANIZATION OF THE COMPANY AS OF SEPTEMBER 30, 1995
DON GRAY ANGELL
|
THE UNITED GROUP, INC.
52.78% (1) (2)
|
---------------- UNITED FINANCIAL SERVICES, INC. ----------------
100% (2)
| |
UNITED LANDMARK, | UFS LIFE
INC. REINSURANCE
100% (2) COMPANY
100% (2)
UNITED
FINANCIAL
SERVICES, INC.
OF N.C.
100% (2)
(1) The Registrant.
(2) A North Carolina Corporation.
(3) An Arizona Corporation.
