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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 December 31, 1993
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 identification no.)
incorporation or organization)
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. 633,604 shares of
common stock, $5 par value, as of December 31, 1993.
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following unaudited consolidated financial statements of United
Grocers, Inc., and subsidiaries for the periods ended December 31, 1993 and
January 1, 1993, include all adjustments which management considers
necessary for a fair presentation of the results for the interim periods.
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., 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., 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.
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UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993, and OCTOBER 1, 1993
<TABLE>
<CAPTION>
(Unaudited) (Audited)
ASSETS 12/31/93 10/1/93
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 15,080,010 $ 18,807,473
Investments 38,429,947 34,397,583
Accounts and notes receivable 47,143,619 40,514,016
Inventories 76,155,538 73,866,416
Other current assets 5,195,048 3,477,033
Deferred income taxes 2,823,829 2,823,829
Total current assets 184,827,991 173,886,350
NON-CURRENT ASSETS:
Notes receivable 38,553,976 33,250,562
Investment in affiliated company 1,929,929 1,929,929
Other receivables 9,207,419 8,875,247
Other non-current assets 3,418,453 3,156,301
Total non-current assets 53,109,777 47,212,039
PROPERTY, PLANT AND EQUIPMENT -
(Net of accumulated depreciation
and amortization) 60,449,455 59,501,356
TOTAL $298,387,223 $280,599,745
</TABLE>
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UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993, and OCTOBER 1, 1993
(continued)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
LIABILITIES AND MEMBERS' EQUITY 12/31/93 10/1/93
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable - bank $ 40,988,581 $ 24,730,400
Accounts payable 53,181,148 57,886,107
Insurance reserves 30,926,168 29,021,276
Compensation and other taxes payable 2,122,809 2,256,970
Other accrued expenses 4,003,986 4,143,272
Members' patronage and other refunds payable 845,000 7,214,927
Current installments on long-term debt 6,942,534 6,814,221
Total current liabilities 139,010,226 132,067,173
LONG-TERM DEBT 115,019,069 105,539,231
DEFERRED INCOME TAXES 3,281,135 3,281,135
DEFERRED INCOME 588,470 599,804
MEMBERS' EQUITY:
Common stock (Authorized, 10,000,000 shares
at $5.00 par value; issued and outstanding,
633,604 shares at December 31, 1993 and
632,312 shares at October 1, 1993) 3,332,125 3,285,755
Additional paid-in capital 22,042,363 21,006,563
Retained earnings 15,113,835 14,820,084
Total members' equity 40,488,323 39,112,402
TOTAL $298,387,223 $280,599,745
</TABLE>
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UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED DECEMBER 31, 1993 AND JANUARY 1, 1993
<TABLE>
<CAPTION>
12/31/1993 1/1/1993
<S> <C> <C>
Net sales and operations $229,399,822 $214,567,030
Costs and expenses:
Cost of sales 195,195,792 184,491,236
Operating expenses 23,929,411 20,942,604
Selling and administrative expenses 2,439,540 2,298,435
Depreciation and amortization 1,303,129 1,227,620
Interest:
Interest expense 2,130,365 2,180,155
Interest income 1,138,635 1,314,429
Interest expense, net 991,730 865,726
Total cost and expenses 223,859,602 209,825,621
Net income before members' allowances, patronage
dividends and income taxes 5,540,220 4,741,409
Members' allowances 3,546,359 2,635,439
Members' patronage dividends 1,300,000 1,400,000
Net income before income taxes 693,861 705,970
Provision for income taxes 245,400 268,921
Net Income $ 448,461 $ 437,049
</TABLE>
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UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
December 31 January 1
CASH FLOWS FROM OPERATING ACTIVITIES: 1993 1993
<S> <C> <C>
Net income $ 448,461 $ 437,049
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 1,303,129 1,227,620
Provision for doubtful accounts 506,688 518,136
Patronage dividends payable in common stock 853,325 741,924
(Gain)loss on sale of assets ( 52,479) (438,511)
Decrease (increase) in non-cash current assets:
Accounts and notes receivable (6,629,603) ( 7,470,354)
Inventories (2,289,122) (3,116,277)
Other current assets (2,879,823) (2,952,283)
Increase (decrease) in non-cash current liabilities:
Accounts payable and insurance reserves (2,800,067) 2,040,182
Compensation and other taxes payable ( 228,226) 519,902
Other accrued expenses ( 45,181) 1,317,178
Members' patronage and other refunds (6,369,927) (6,086,527)
Decrease (increase) in non-current other
assets (594,324) 1,087,103
Net cash provided by (used in) operating
activities (18,777,189) (12,174,858)
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to members ( 7,467,671) ( 1,094,936)
Collections on loans to members 1,607,567 2,714,140
Sale (buyback) of member loans 50,000 71,845
Sale and redemption of investments 164,258 2,500,000
Purchase of investments (3,034,814) (4,281,048)
Sale of property, plant and equipment 146,756 2,950,456
Purchase of property, plant and equipment ( 2,356,839) (323,210)
Net cash provided by (used in) investing
activities (10,890,743) 2,537,247
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 409,944 68,586
Repurchase of common stock ( 335,809) (1,773,900)
Proceeds of long-term debt:
Revolving bank lines of credit 189,800,000 123,585,106
Mortgages and notes - 0 - 154,274
Redeemable notes and certificates 3,155,200 6,127,700
Repayment of long-term debt:
Revolving bank lines of credit (160,151,392) (118,850,000)
Mortgages and notes ( 669,346) (670,798)
Redeemable notes and certificates (6,268,128) (5,001,658)
Net cash provided by (used in) financing
activities 25,940,469 3,639,310
Net increase (decrease) in cash and cash
equivalents (3,727,463) (5,998,301)
Cash and cash equivalents, beginning of year 18,807,473 18,390,835
CASH AND CASH EQUIVALENTS, END OF QUARTER $15,080,010 $12,392,534
/TABLE
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Three months ended December 31, 1993 ("1994") compared to three months ended
January 1, 1993 ("1993").
RESULTS OF OPERATIONS
OVERVIEW
In 1994, net sales and operations increased 7.1% to 229.4 million. This
compares to a 3.6% decline in 1993 to $214.6 million. Net income before member
allowances, patronage dividends, and income taxes increased 0.8 million to $5.5
million (2.4% of sales). This compares to net income of $4.7 million (2.2% of
sales) in 1993.
During 1994, the increase in net sales and operations was due primarily to
higher unit volume in the distribution segment, and increased written premiums
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.
NET SALES AND OPERATIONS
Warehouse and Cash & Carry distribution segment sales increased 4.9% to
$212.9 million. Warehouse sales increased 3.7 % reflecting higher unit volume.
Cash & Carry sales increased 10.7%, due to higher unit volumes (6.5%) and sales
at new units (4.2%).
Insurance segment's net premiums, commissions and fees increased 8.3% in 1994
to $5.3 million.
COSTS AND EXPENSES
In 1994, total costs and expenses increased $14.5 million to 223.9 million
(97.6% of sales). This compares to $209.8 million (97.8% of sales) in 1993.
The components of costs and expenses are outlined below:
Costs and Expenses as a Percent of Net Sales and Operations:
<TABLE>
<CAPTION>
For the three months ended:
12/31/93 1/1/93
<S> <C> <C>
Cost of Sales 85.1 85.9
Operating expenses 10.4 9.8
Selling and administrative expenses 1.1 1.1
Depreciation and amortization 0.6 0.6
Interest expense, net 0.4 0.4
Total 97.6 97.8
</TABLE>
Cost of sales as a percent of net sales and operations reduced to 85.0%
in 1994 from 85.8% in 1993 primarily due to improved loss ratios in the
insurance segment and a shift in distribution segment sales from grocery sales
to Cash & Carry sales and perishable department sales, offset by higher costs
on Cash & Carry and retail store sales.
Operating expenses as a percent of net sales and operations increased
0.6% to 10.4% in 1994 due to increased operating expenses in retail store
operations, and increased non-labor expenses in the distribution segment
resulting from higher unit volume.
MEMBER ALLOWANCES AND PATRONAGE DIVIDENDS
In 1994, member allowances and patronage dividends were $4.8 million
(2.1% of sales). This compares to $4.0 million (1.9% 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.
NET INCOME AND INCOME TAXES
Net income after member allowances, patronage dividends, and before
taxes was $0.7 million (0.3% of sales) in 1994 compared to $0.7 million (0.3%
of sales) in 1993. Net income after taxes was $0.4 million (0.2% of sales)
compared to $0.4 million (0.2% of sales) in 1993.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATING ACTIVITIES
In 1994, the Company used $18.8 million in cash in its operations, an
increase of $6.7 million in cash used compared to 1993. Merchandise
inventories and receivables increased primarily due to increased volume.
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.
CASH FLOWS FROM INVESTING ACTIVITIES
In 1994, the Company used $10.9 million in cash in investing activities.
This compares to the $2.5 million in cash provided by investing activities in
1993. The main components of the shift in the cash flow from investing
activities was the $6.3 million increase in loans to members, decreases in the
sale of insurance investments and property, plant and equipment, and increased
levels of capital expenditures.
CASH FLOWS FROM FINANCING ACTIVITIES
In 1994, the Company's financing activities provided $25.9 million in
cash compared to $3.6 million in 1993. Cash was primarily provided through the
utilization of the Company's bank credit lines.
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SUBSEQUENT EVENTS
During January 1994, an agreement was reached with the National
Cooperative Bank to provide a market for loans the Company provides its members
through its subsidiary, United Resources, Inc.
During January 1994, the Company reached an agreement to sell inventory
and equipment at two of its retail locations to DFS, LLC., a company controlled
by Craig Danielson, a director of the Company. DFS, LLC. also entered into
real estate and equipment sublease agreements for the two locations.
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Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(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: February 9, 1994 UNITED GROCERS, INC.
(Registrant)
By /s/ John W. White
John W. White
Vice President
(Principal Accounting Officer)
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