<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended December 31, 1996
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or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-4584
THE UNITED GROUP, INC.
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(Name of small business issuer specified in its charter)
56-0931793
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(I.R.S. Employer Id. No.)
Suite 203, 5960 Fairview Road
Charlotte, NC
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(address of principal executive offices)
NORTH CAROLINA
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(state or other jurisdiction of incorporation or organization)
28210 (704) 554-9280
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(Zip code) (Issuer's telephone number, including area code)
Not applicable
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(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common stock, No Par Value - 1,064,765 shares as of December 31, 1996
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<PAGE> 2
INDEX
THE UNITED GROUP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of December 31, 1996 and
September 30, 1996.
Consolidated Statements of Income for the three months ended
December 31, 1996 and 1995.
Consolidated Statements of Cash Flows for the three months ended
December 31, 1996 and 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE> 3
THE UNITED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
============================================================================================
ASSETS DECEMBER 31, SEPTEMBER 30,
1996 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Cash $ 762,640 $ 932,208
----------- -----------
Marketable securities 1,693,982 1,870,865
----------- -----------
Finance receivables:
Cash loans and other contracts 39,526,439 38,166,028
Less:
Unearned insurance commissions 1,843,394 1,786,606
Allowance for credit losses 648,245 659,600
----------- -----------
2,491,639 2,446,206
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Net finance receivables 37,034,800 35,719,822
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Notes and finance receivables:
Due from affiliates 934,315 934,315
Other 1,317,973 1,039,307
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2,252,288 1,973,622
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Property and equipment at cost, less accumulated
depreciation and amortization 802,123 805,706
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Deferred loan costs and other intangible assets at cost,
less accumulated amortization 37,459 43,120
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Deferred income taxes 32,000 67,000
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Other assets 491,468 101,371
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$43,106,760 $41,513,714
=========== ===========
</TABLE>
3
<PAGE> 4
THE UNITED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
=====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY DECEMBER 31, SEPTEMBER 30,
1996 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Notes payable:
Notes payable to banks $30,773,607 $30,073,606
Mortgage loans payable 304,173 308,939
Other notes payable 3,208,900 3,024,648
Senior subordinated notes payable 200,000 200,000
Accounts payable and accrued expenses 2,521,895 2,345,039
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37,008,575 35,952,232
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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; 1,067,993 issued and
outstanding 100,000 100,000
Additional paid-in capital 192,640 101,600
Retained earnings 6,096,658 5,650,995
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6,389,298 5,852,595
Less:
Cost of common stock held by subsidiary 291,113 291,113
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6,098,185 5,561,482
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$43,106,760 $41,513,714
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</TABLE>
4
<PAGE> 5
THE UNITED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31,
(Unaudited)
<TABLE>
<CAPTION>
================================================================================
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Credit income:
Interest and fees on loans $2,532,739 $2,411,160
Investment income and other interest 41,974 45,830
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2,574,713 2,456,990
Less:
Interest expense 754,976 811,501
Provision for credit losses 225,257 131,761
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Net credit income 1,594,480 1,513,728
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Insurance income:
Insurance commissions and premiums 563,880 543,760
Less, insurance losses and loss expenses 115,284 131,802
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Net insurance income 448,596 411,958
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Operating expenses:
Salaries and benefits 939,979 887,215
Other operating expenses 447,435 372,068
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Total operating expenses 1,387,414 1,259,283
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Income before provision for income taxes 655,662 666,403
Provision for income taxes 210,000 221,000
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Net income $ 445,662 $ 445,403
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Net income per common share $ 0.42 $ 0.42
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Weighted average shares outstanding 1,059,321 1,064,211
========== ==========
</TABLE>
5
<PAGE> 6
THE UNITED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(Unaudited)
<TABLE>
<CAPTION>
=================================================================================================
1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Interest and fees on loans collected $ 2,477,258 $ 2,390,259
Investment income and other interest income received 36,416 46,713
Insurance commissions and premiums collected 212,356 744,953
Interest paid (680,377) (526,923)
Insurance expenses and losses paid (115,284) (131,802)
Cash paid to suppliers and employees (1,574,924) (1,224,057)
Income taxes paid (16,388) --
----------- -----------
339,057 1,299,143
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Cash flows from investing activities:
Cash proceeds of loans made (5,704,284) (5,611,694)
Cash received as repayment of loans 4,162,742 4,878,675
Purchase of marketable securities (72,192) (14,772)
Proceeds from sale or maturity of marketable securities 249,077 16,021
Cash paid to purchase property and equipment (31,693) (27,848)
Proceeds from sale of equipment 8,238 --
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(1,388,112) (759,618)
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Cash flow from financing activities:
Notes payable to banks:
Borrowings 1,450,001 250,000
Repayments (750,000) (1,000,000)
Repayment of mortgage loans (4,766) (3,574)
Other notes:
Borrowings 331,708 110,945
Repayments (147,456) (60,838)
Common stock activity:
Proceeds from issuance of stock -- 1,876
Payments to acquire outstanding stock -- --
879,487 (701,591)
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Net increase (decrease) in cash (169,568) (162,066)
Cash at beginning of period 932,208 1,646,501
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Cash at end of period $ 762,640 $ 1,484,435
=========== ===========
</TABLE>
6
<PAGE> 7
THE UNITED GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE THREE MONTHS ENDED DECEMBER 31,
(Unaudited)
<TABLE>
<CAPTION>
=================================================================================================
1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net income $ 445,662 $ 445,403
Adjustments to reconcile net income to net cash provided:
Depreciation and amortization 32,697 38,574
Provision for credit losses 225,257 131,761
Provision for stock bonus plan 91,040 83,979
Provision for deferred income taxes 35,000 4,000
Change in unearned interest charges (55,481) (20,901)
Change in accrued investment income (5,558) 883
Change in unearned insurance commissions and premiums 56,788 10,086
Change in accounts receivable (273,108) (32,916)
Change in accounts payable (56,354) 199,334
Change in income taxes payable 158,612 217,000
Change in interest payable 74,599 284,578
Change in other assets (390,097) (62,638)
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Total adjustments (106,605) 853,740
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Net cash provided by operating activities $ 339,057 $1,299,143
========= ==========
</TABLE>
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Net income for the three months ended December 31, 1996 was $445,662 compared to
$445,403 for the same period ending December 31, 1995. Interest income is up by
5.0% for the three months due to an increase in average finance receivables. Net
insurance income increased by 8.9% for the three months. Insurance commissions
and premiums increased by 3.7%. In addition, insurance losses decreased by
$16,518 further increasing net insurance income. The increase in commissions and
premiums can be also attributed to the increase in finance receivables. Average
net receivables for the three months are as follows:
<TABLE>
<CAPTION>
Percentage
1996 1995 Increase
----------- ----------- -----------
<S> <C> <C> <C>
Three months ended December 31 $36,377,311 $34,370,385 5.8%
</TABLE>
Salaries and benefits increased by 5.9% for the three months ended December 31,
1996 compared to 1995. This increase is believed by management to be in-line
with current inflation rates and the need to provide merit salary increases in
order to retain valued, experienced employees. Other operating expenses
increased by $75,367 or 20.2%. However, in excess of one-half of this increase
was expenses related to the anticipated merger with Norwest. Interest expense
has decreased by $56,525 for the three months ended December 31, 1996 compared
to 1995. All of this decrease can be attributed to rate decreases experienced
during the quarter utilizing the ability to borrow based on LIBOR rates as
opposed to prime rate based borrowings.
At December 31, 1996, the Company had a line of credit with its banks totaling
$35,500,000 of which $29,596,606 was being used, leaving $4,726,393 available
for loan portfolio growth. In addition, the management believes that an increase
in the line of credit could be obtained. Also, internally generated cash flow
continues to be strong with total cash flow generated by operations of $339,057
for the three months ended December 31, 1996. These resources are anticipated to
adequately fund the cash needs of the Company.
The Company continues to adhere to its conservative lending policies. The
benefits of these policies are demonstrated in continued low charge-off and
delinquency ratios. The provision for credit losses was .61% of average
receivables for the three months ended December 31, 1996 and .38% for the same
period in 1995. Total delinquency stood at 2.3% of receivables at December 31,
1996 compared to 1.9% at December 31, 1995. These ratios, although increases
when compared to the previous years, are significantly better than accepted
industry ratios.
PART II. OTHER INFORMATION
Item 1. 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 2. Changes in securities: None
Item 3. Defaults upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: None
Item 5. Other information: None
Item 6. Exhibits and reports of Form 8-K: The Company did not file any
reports on Form 8-K during the three months ended December 31, 1996.
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements 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.
-----------------------------------
(Registrant)
Date February 17, 1997 /s/ Kenneth M. O'Connell
-------------------------------- -----------------------------------
Kenneth M. O'Connell, Treasurer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 762,640
<SECURITIES> 1,693,982
<RECEIVABLES> 37,034,800
<ALLOWANCES> 648,245
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,478,698
<DEPRECIATION> 676,575
<TOTAL-ASSETS> 43,106,760
<CURRENT-LIABILITIES> 0
<BONDS> 304,173
0
0
<COMMON> 100,000
<OTHER-SE> 5,998,185
<TOTAL-LIABILITY-AND-EQUITY> 43,106,760
<SALES> 0
<TOTAL-REVENUES> 3,138,593
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 225,257
<INTEREST-EXPENSE> 754,976
<INCOME-PRETAX> 655,662
<INCOME-TAX> 210,000
<INCOME-CONTINUING> 445,662
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 445,662
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
