<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarterly period ended July 1, 1994
Commission File Number 2-60487
United Grocers, Inc.
(Exact name of registrant as specified in its charter)
Oregon 93-0301970
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
6433 S.E. Lake Road
Post Office Box 22187, Milwaukie, Oregon 97269
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 833-1000
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 the number of shares outstanding for each of the issuer's
classes of common stock, as of the latest practicable date.
603,016 shares of common stock, $5 par value, as of August 10,
1994. <PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following unaudited consolidated financial statements of United
Grocers, Inc., and subsidiaries for the periods ended July 1, 1994 and July
2, 1993, include all adjustments which management considers necessary for a
fair presentation of the results for the interim periods. All adjustments to
prior period figures are for the purpose of making the results comparable and
are of a normal recurring nature. Any change in accounting methods not of a
normal recurring nature are separately disclosed.
In 1992-93 the Company changed its method of accounting for the general
wholesale grocery category of inventories from the last-in, first-out (LIFO)
method to the first-in, first-out (FIFO) method. Refer to the Company's
annual report on Form 10-K for the year ended October 1, 1993, for details of
changes.
In 1993-94 the Company adopted FASB #113 (Accounting for Reinsurance
Contracts). Refer to Part I, Item 2, for a description of the effect of this
change on the balance sheet.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Grocers Insurance Group, Inc., Grocers
Insurance Agency, Inc., UGIC, Ltd., Grocers Insurance Company (formerly
United Employers Insurance Co.), United Workplace Consultants, Inc., U.G.
Resources, Inc., United Resources, Inc., BAT Enterprises, Inc., Western
Passage Express, Inc., United Store Development, Ltd., Premier Consulting,
Inc. (formerly Employee Management Services, Inc.), Western Security
Services, Inc., Affiliated General Agency, Inc. and Northwest Process, Inc.
All intercompany balances and transactions have been eliminated upon
consolidation.
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 1, 1994, and OCTOBER 1, 1993
<TABLE>
<CAPTION>
(Unaudited) (Audited)
ASSETS 07/01/94 10/01/93
----------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 14,377,804 $ 18,807,473
Investments 38,413,756 34,397,583
Accounts and notes receivable 47,141,969 40,514,016
Inventories 71,224,008 73,866,416
Other current assets 4,686,571 3,477,033
Deferred income taxes 3,338,660 2,823,829
------------ ------------
Total current assets 179,182,768 173,886,350
------------ ------------
NON-CURRENT ASSETS:
Notes receivable 35,481,594 33,250,562
Investment in affiliated companies 7,679,929 1,929,929
Other receivables 5,840,437 8,875,247
Other non-current assets 3,413,313 3,156,301
------------ ------------
Total non-current assets 52,415,273 47,212,039
============ ============
PROPERTY, PLANT AND EQUIPMENT -
(Net of accumulated depreciation
and amortization) 59,915,635 59,501,356
------------ ------------
TOTAL $291,513,676 $280,599,745
============ ============
</TABLE>
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 1, 1994, and OCTOBER 1, 1993
(continued)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
LIABILITIES AND MEMBERS' EQUITY 07/01/94 10/01/93
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable - bank $ 31,284,191 $ 24,730,400
Accounts payable 54,916,622 57,886,107
Insurance reserves 29,419,021 29,021,276
Compensation and other taxes payable 2,573,668 2,256,970
Other accrued expenses 7,134,425 4,143,272
Members' patronage and other
refunds payable 2,275,000 7,214,927
Current installments on long-term debt 7,057,044 6,814,221
------------ ------------
Total current liabilities 134,659,971 132,067,173
------------ ------------
LONG-TERM DEBT 113,180,787 105,539,231
------------ ------------
DEFERRED INCOME TAXES 3,281,135 3,281,135
------------ ------------
DEFERRED INCOME 565,803 599,804
------------ ------------
MEMBERS' EQUITY:
Common stock (Authorized, 10,000,000 shares at
$5.00 par value;issued and outstanding,
607,901 shares at July 1, 1994 and
632,312 shares at October 1, 1993) 3,232,965 3,285,755
Additional paid-in capital 21,947,799 21,006,563
Retained earnings 14,645,216 14,820,084
------------ ------------
Total members' equity 39,825,980 39,112,402
------------ ------------
TOTAL $291,513,676 $280,599,745
============ ============
</TABLE>
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Unaudited)
Quarters Ended Nine Months Ended
-------------- -----------------
07/01/94 07/02/93 07/01/94 07/02/93
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales and operations $242,071,225 $219,543,847 $698,086,509 $650,161,965
------------ ------------ ------------ ------------
Costs and expenses
Cost of sales 207,381,082186,556,285 595,373,220 554,411,673
Operating expenses 24,150,402 22,068,403 71,407,280 65,479,310
Selling and
administrative expenses 2,278,475 2,374,943 6,973,222 7,130,287
Depreciation and
amortization 1,270,273 1,241,696 3,986,987 3,652,688
Interest:
Interest expense 2,391,141 2,010,329 6,753,471 6,339,237
Interest income 990,576 855,804 2,652,989 2,775,544
------------ ------------ ------------ ------------
Interest
expense, net 1,400,565 1,154,525 4,100,482 3,563,693
------------ ------------ ------------ ------------
Total costs and expenses 236,480,797 213,395,852 681,841,191 634,237,651
------------ ------------ ------------ ------------
Income before members' allowances,
patronage dividends and income taxes5,590,4286,147,99516,245,31815,924,314
Members' allowances 3,749,828 3,975,379 10,770,890 9,734,502
Members' patronage dividends 1,300,000 1,781,013 3,500,000 4,340,182
------------ ------------ ------------ ------------
Income before income taxes 540,600 391,603 1,974,428 1,849,630
Provision for income taxes 200,000 100,000 676,500 600,000
------------ ------------ ------------ ------------
Net income $ 340,600 $ 291,603 $ 1,297,928 $ 1,249,630
============ ============ ============ ============
</TABLE>
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
July 1 July 2
CASH FLOWS FROM OPERATING ACTIVITIES: 1994 1993
-------------- -------------
<S> <C> <C>
Net income $ 1,297,927 $ 1,249,630
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 3,986,987 3,652,688
Provision for doubtful accounts 1,523,261 1,719,229
Patronage dividends payable in common stock 2,012,017 2,346,501
(Gain) loss on sale of assets 65,279 ( 414,791)
Decrease (increase) in non-cash current assets:
Accounts and notes receivable (6,627,953) (1,182,998)
Merchandise inventories 2,642,408 4,364,062
Other current assets (4,593,618) (2,563,395)
Increase (decrease) in non-cash current liabilities:
Accounts payable and insurance reserves (2,571,740) 1,665,544
Compensation and other taxes payable 316,698 209,178
Other accrued expenses 2,991,153 2,416,186
Members' patronage and other refunds (4,939,927) (3,830,947)
Decrease in non-current other assets 2,777,798 143,155
------------ ------------
Net cash provided by (used in) operating activities (1,119,710) 9,774,042
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to members (17,755,137) ( 6,031,931)
Collections on loans to members 14,121,340 6,352,002
Sale (buy back) of member loans (120,496) 697,353
Sale and redemption of investments 4,433,139 6,178,473
Purchase of investments (10,875,805) ( 6,003,602)
Sale of property, plant and equipment 226,756 3,476,627
Purchase of property, plant and equipment (5,181,559) ( 9,635,049)
------------ ------------
Net cash used in investing activities (15,151,762) ( 4,966,127)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 525,241 128,165
Repurchase of stock (3,121,609) (3,950,208)
Proceeds of long-term debt:
Revolving bank lines of credit 606,400,000 380,685,106
Mortgages and notes 1,882,801 1,092,638
Redeemable notes and certificates 13,353,800 16,760,600
Repayment of long-term debt:
Revolving bank lines of credit (589,243,207)(384,043,163)
Mortgages and notes (2,131,276) (2,101,910)
Redeemable notes and certificates (15,823,947) (11,190,055)
------------ ------------
Net cash provided by (used in) financing activities 11,841,803 ( 2,618,827)
------------ ------------
Net increase (decrease) in cash and cash equivalents(4,429,669) 2,189,088
Cash and cash equivalents, beginning of year 18,807,473 18,390,835
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,377,804$ 20,579,923
============ ============
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Nine months ended July 1, 1994 compared to nine months ended July 2, 1993.
RESULTS OF OPERATIONS
OVERVIEW
In 1994, net sales and operations increased 7.4% to 698.1 million. This
compares to a 0.9% decline in 1993 to $650.1 million. Income before member
allowances, patronage dividends, and income taxes increased 0.3 million to
$16.2 million (2.3% of sales). This compares to income before member
allowances, patronage dividends, and income taxes of $15.9 million (2.4% of
sales) in 1993.
During 1994, the increase in net sales and operations was due primarily
to higher unit volume in the distribution segment, along with increased
financing activity, offsetting reduced commission income in the insurance
segment. Profitability improved due to these increases in unit volume and
improved loss ratios in the insurance segment, offset by increases in member
allowances and retail store losses. Member allowances for the nine month
periods in 1994 and 1993 totalled $10.8 million and $9.7 million,
respectively. Losses in the retail store segment, including expenses
associated with disposition of assets of closed stores, totalled $3.6 million
and $1.6 million, respectively for the nine month periods in 1994 and 1993.
NET SALES AND OPERATIONS
Warehouse and Cash & Carry distribution segment sales increased 6.6% to
$652.9 million. Warehouse sales increased 4.8 % reflecting higher unit
volume. Cash & Carry sales increased 14.6%, due to higher unit volumes
(8.5%) and sales at new units (6.1%).
Insurance segment's net premiums, commissions and fees decreased 2.0% in
1994 to $14.8 million.
COSTS AND EXPENSES
In 1994, total costs and expenses increased $47.6 million to 681.8
million (97.7% of sales). This compares to $634.2 million (97.6% of sales)
in 1993. The components of costs and expenses are outlined below:
<PAGE>
Costs and Expenses as a Percent of Net Sales and Operations:
<TABLE>
<CAPTION>
For the nine months ended:
07/1/94 7/2/93
------- ------
<S> <C> <C>
Cost of Sales 85.3 85.3
Operating expenses 10.2 10.1
Selling and administrative expenses 1.0 1.1
Depreciation and amortization 0.6 0.6
Interest expense, net 0.6 0.5
Total 97.7 97.6
</TABLE>
Cost of sales as a percent of net sales and operations remained at 85.3%
in 1994, same as it was in 1993. Operating expenses as a percent of net
sales and operations increased 0.2% to 10.2% in 1994 due to increased
operating expenses in retail store operations.
MEMBER ALLOWANCES AND PATRONAGE DIVIDENDS
In 1994, member allowances and patronage dividends were $14.3 million
(2.0% of sales). This compares to $14.1 million (2.2% of sales) in 1993.
The increase in member allowances and patronage dividends was due to
increased allowances paid under the Company's new "Partnership Incentive"
program.
INCOME BEFORE INCOME TAXES
Income after member allowances, patronage dividends, and before taxes
was $1.9 million (0.3% of sales) in 1994 compared to $1.8 million (0.3% of
sales) in 1993. Net income after taxes was $1.3 million (0.2% of sales)
compared to $1.2 million (0.2% of sales) in 1993.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATING ACTIVITIES
In 1994, the Company used $1.1 million in cash in its operations, an
increase of $10.9 million in cash used compared to 1993. Merchandise
inventories decreased due to warehouse efficiencies, with the other major
components being an increase in accounts receivable, decreased accounts
payable and decreased members' patronage and other refunds payable.
At the beginning of the current fiscal year, the Company adopted FASB
#113 (Accounting for Reinsurance Contracts). The adoption of this change had
the effect of increasing accounts receivable by $2.4 million, other current
assets by $1.5 million, and accounts payable by $3.9 million.
<PAGE>
CASH FLOWS FROM INVESTING ACTIVITIES
In 1994, the Company used $15.2 million in cash in investing activities.
This compares to the $5.0 million in cash used in investing activities in
1993. The main components of the shift in the cash flow from investing
activities was the $4.0 million net increase in loans to members, an
investment of $5.7 million in a retail grocery chain, decreases in the sale
of insurance investments, and a decrease in the level of capital
expenditures.
CASH FLOWS FROM FINANCING ACTIVITIES
In 1994, the Company's financing activities provided $11.8 million in
cash compared to $2.6 million used in 1993. Cash was primarily provided
through the utilization of the Company's bank credit lines.
WORKING CAPITAL
Working capital at July 1, 1994 increased $2.8 million to $44.6 million
from $41.8 million at July 2, 1993. Current ratio improved to 1.33 from 1.32.
CAPITAL RESOURCES
The Company had $16.4 million in unused credit lines available at
July 1, 1994. Management believes that current funding sources are adequate
to meet Company requirements.
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
<PAGE>
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.
Date: August 13, 1994 UNITED GROCERS, INC.
(Registrant)
By /s/ John W. White
John W. White
Vice President
(Principal Accounting Officer)
<PAGE>
