<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
Amendment No. 3
to
Annual Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended September 30, 1994
Commission File Number 2-60487
UNITED GROCERS, INC.
OREGON 93-0301970
6433 S.E. Lake Road (Milwaukie, Oregon)
Post Office Box 22187, Portland, Oregon 97222
Registrant's telephone number, including area code: (503) 833-1000
<PAGE>
The undersigned registrant hereby amends Part II, Item 8, of its Annual
Report on Form 10-K for the fiscal year ended September 30, 1994, as follows:
Item 8. Financial Statements and Supplementary Data
The following financial statements are filed as part of this report.
Independent Auditor's Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Members' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor's Report on Financial Statement Schedules
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
AUDIT REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE FISCAL YEARS ENDED SEPTEMBER 30, 1994
TABLE OF CONTENTS
Page
Independent auditor's report 1
Consolidated financial statements
Balance sheets 2
Statements of income 3
Statements of members' equity 4
Statements of cash flows 5-6
Notes to financial statements 7-28
Independent auditor's report on financial
statement schedules 29
Financial statement schedules included
Schedule V - Property, plant and equipment 30
Schedule VI - Accumulated depreciation, depletion
and amortization of property, plant
and equipment 31
Schedule VIII - Valuation and qualifying accounts 32-33
Schedule IX - Short-term borrowings 34
Schedule X - Supplementary income statement
information 35
Schedule XIV - Supplementary information concerning
property-casualty insurance
operations 36
Financial statement schedules not included Reason
Schedule I - Marketable Securities - Disclosure in notes to
Other Investments financial statements
Schedule II - Accounts Receivable from
Related Parties and
Underwriters, Promoters
and Employees Other Than
Related Parties Not applicable
<PAGE>
Schedule III - Condensed Financial Disclosure in notes to
Information of financial statements
Registrant
Schedule IV - Indebtedness of and to
Related Parties - Not
Current Not applicable
Schedule VII - Guarantees of Securities
of Other Issuers Not applicable
Schedule XI - Real Estate and
Accumulated Not applicable
Depreciation
Schedule XII - Mortgage Loans on Real
Estate Not applicable
Schedule XIII - Other Investments Disclosure in notes to
financial statements
<PAGE>
Board of Directors
United Grocers, Inc.
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheets of United
Grocers, Inc. and subsidiaries as of September 30, 1994 and October 1, 1993,
and the related consolidated statements of income, members' equity and cash
flows for each of the three years in the period ended September 30, 1994.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United Grocers,
Inc. and subsidiaries as of September 30, 1994 and October 1, 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note 12 to the consolidated financial statements, the Company
changed its method of accounting for reinsurance in 1993-94. Also, as
discussed in Notes 4 and 7, the Company changed its method of accounting for
inventories in 1992-93 and for income taxes in 1991-92.
DeLap, White & Raish
Portland, Oregon
November 30, 1994, except
for Members' equity disclosure
and Note 1.o., as to which
the date is February 28, 1995
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1994 AND OCTOBER 1, 1993
ASSETS
1994 1993
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,984,028 $ 18,807,473
Investments maintained
for insurance reserves (Note 1.f. & 2) 36,939,578 34,397,583
Accounts and notes receivable
(Note 3 & 12) 60,290,461 44,008,137
Inventories (Note 1.d. & 4) 74,307,422 73,866,416
Other current assets (Note 12) 5,367,295 4,724,764
Deferred income taxes (Note 7 & 8) 2,811,914 2,823,829
------------ -----------
Total current assets 192,700,698 178,628,202
------------ -----------
Non-current assets:
Notes receivable (Note 3) 33,155,543 33,250,562
Investment in affiliated
companies (Note 1.c. & 17) 7,832,484 1,929,929
Other receivables and investments 6,899,133 8,875,247
Other non-current assets (Note 5) 7,730,575 3,156,301
---------- ----------
Total non-current assets 55,617,735 47,212,039
---------- ----------
Property, plant and equipment - (net
of accumulated depreciation) (Note 6) 58,517,120 59,501,356
---------- ----------
Total $306,835,553 $285,341,597
============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND MEMBERS' EQUITY
1994 1993
------------ ------------
<S> <C> <C>
Current liabilities:
Notes payable - bank (Note 10) $ 31,020,667 $ 24,730,400
Accounts payable (Note 12) 64,629,410 59,133,838
Insurance reserves supported
by investments (Note 1.f., 2 and 12) 32,038,408 32,515,397
Compensation and taxes payable 2,952,534 2,688,137
Other accrued expenses 3,159,900 3,712,105
Members' patronage payable 6,865,736 7,214,927
Current installments on long-term
liabilities (Note 11) 6,776,197 6,814,221
----------- -----------
Total current liabilities 147,442,852 136,809,025
----------- -----------
Long-term liabilities (Note 11) 114,669,266 105,539,231
----------- -----------
Deferred income taxes (Note 7 & 8) 3,744,109 3,281,135
----------- -----------
Deferred income (Note 15) 554,469 599,804
----------- -----------
Members' equity (Members' equity is
subject to redemption due to the
occurrence of certain events, e.g.,
termination of membership. See Note 1.o.):
Common stock (authorized, 10,000,000
shares at $5.00 par value; issued
and outstanding, 619,881 shares in
1994 and 632,312 shares in 1993)
(shares owned by a member in excess
of 4,000 are subject to repurchase, see
Common Stock Note below, and Note 1.o.) 3,256,080 3,285,755
Additional paid-in capital 22,472,564 21,006,563
Retained earnings 14,696,213 14,820,084
----------- -----------
Total members' equity 40,424,857 39,112,402
----------- -----------
Commitments and contingencies (Note 19)
Total $306,835,553 $285,341,597
============ ============
</TABLE>
Common stock note:
At September 30, 1994, and October 1,
1993, there were 22,409 and
20,920 shares, respectively, subject
to repurchase in the amount of
$1,227,313 and $1,128,425, respectively.
At September 30, 1994, and October 1,
1993, there were 2,869 and 4,551 shares,
respectively, held for possible
redemption in the amount of $163,533
and $245,481, respectively.
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1994, OCTOBER 1, 1993, AND OCTOBER 2, 1992
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Net sales and operations $954,220,350 $876,985,353 $896,587,372
------------ ------------ ------------
Costs and expenses:
Cost of sales (Note 1.d.) 816,721,077 749,447,130 772,846,658
Operating expenses 93,991,529 88,046,293 83,656,610
Selling and administrative expenses 9,533,741 9,441,916 9,866,765
Depreciation 5,609,779 4,737,401 4,290,543
Interest:
Interest expense 9,156,822 8,217,017 8,724,766
Interest income (3,535,802) (3,552,107) (3,547,423)
------------ ------------ ------------
Interest expense, net 5,621,020 4,664,910 5,177,343
------------ ------------ ------------
Total costs and expenses 931,477,146 856,337,650 875,837,919
------------ ------------ ------------
Income before members' allowances
and patronage dividends, income
taxes and cumulative effect of
change in accounting principle 22,743,204 20,647,703 20,749,453
Members' allowances (11,449,305) (9,356,885) (7,435,167)
Members' patronage dividends (Note 9) (8,730,168) (9,000,000) (10,211,000)
------------ ------------ ------------
Income before income taxes and
cumulative effect of change in
accounting principle 2,563,731 2,290,818 3,103,286
Provision for income taxes (Note 8) (1,000,341) (576,435) (906,690)
Cumulative effect of change in
accounting principle (Note 7) -- -- 526,314
------------ ------------ ------------
Net income $ 1,563,390 $ 1,714,383 $ 2,722,910
============ ============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1994, OCTOBER 1, 1993, AND OCTOBER 2, 1992
<TABLE>
<CAPTION>
Common stock Additional
Number paid-in Retained
Description of shares Amount capital earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance, September 27, 1991 632,100 $3,563,500 $19,556,361 $13,973,938 $37,093,799
Stock: Issued 87,069* 32,345 334,723 -- 367,068
Repurchased (67,919) (339,595) (1,291,015) (1,662,395) (3,293,005)
Patronage dividend To be issued
41,697 shares -- 208,485 2,042,059 -- 2,250,544
Net income -- -- -- 2,722,910 2,722,910
Balance, October 2, 1992 651,250 3,464,735 20,642,128 15,034,453 39,141,316
Stock: Issued 57,448* 78,755 759,972 -- 838,727
Repurchased (76,386) (381,930) (1,687,165) (1,928,752) (3,997,847)
Patronage dividend To be issued
24,839 shares -- 124,195 1,291,628 -- 1,415,823
Net income -- --- 1,714,383 1,714,383
Balance, October 1, 1993 632,312 3,285,755 21,006,563 14,820,084 39,112,402
Stock: Issued 54,457* 148,090 1,515,656 -- 1,663,746
Repurchased (66,888) (334,440) (1,757,412) (1,687,261) (3,779,113)
Patronage dividend To be issued
31,335 shares -- 156,675 1,707,757 -- 1,864,432
Net income -- -- -- 1,563,390 1,563,390
Balance, September 30, 1994 619,881 $3,256,080 $22,472,564 $14,696,213 $40,424,857
* Includes prior year
patronage dividend to
be issued.
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1994, OCTOBER 1, 1993, AND OCTOBER 2, 1992
1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 1,563,390 $ 1,714,383 $ 2,722,910
Adjustments to reconcile net
income to net cash (used in)
provided by operating activities:
Depreciation 5,609,779 4,737,401 4,290,543
Provision for doubtful accounts
and notes 1,992,589 2,182,551 2,108,346
Patronage dividends payable
in common stock 1,864,432 1,415,823 2,250,544
Loss (gain) on sale of assets 174,927 (472,126) (173,596)
Equity in loss (earnings) of
affiliates 191,760 (772) (1,170)
Deferred income taxes 474,889 341,209 (227,982)
Decrease (increase) in non-cash
current assets:
Accounts and notes receivable (15,343,787) 1,564,454 10,034,315
Inventories (441,006) (3,358,014) 623,364
Other current assets (642,531) 134,362 (639,411)
Increase (decrease) in non-cash
current liabilities:
Accounts payable and
insurance reserves 5,018,583 9,768,705 (1,588,806)
Compensation and taxes payable 264,397 (1,107,883) 122,475
Other accrued expenses (552,204) 239,803 872,465
Members' patronage and other
refunds (349,191) (525,047) 1,187,271
Decrease (increase) in other
non-current assets (2,598,160) 518,142 (1,955,120)
Net cash (used in) provided
by operating activities (2,772,133) 17,152,991 19,626,148
Cash flows from investing activities:
Loans to members (17,768,465) (18,766,639) (15,158,344)
Collections on loans to members 6,325,619 6,155,085 5,044,961
Proceeds from sale of member loans 8,606,739 900,373 5,805,685
Sale and redemption of investments 5,591,463 3,857,384 242,223
Purchase of investments (8,133,459) (8,039,512) (5,079,844)
Investment in affiliated companies (6,094,315) -- --
Sale of property, plant
and equipment 408,777 2,936,809 3,361,255
Purchase of property, plant
and equipment (5,254,582) (11,990,981) (20,479,941)
Net cash used in investing
activities (16,318,223) (24,947,481) (26,264,005)
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1994, OCTOBER 1, 1993, AND OCTOBER 2, 1992
1994 1993 1992
<S> <C> <C> <C>
Cash flows from financing activities:
Sale of common stock $ 1,663,746 $ 838,727 $ 367,068
Repurchase of common stock (3,779,113) (3,997,847) (3,293,005)
Proceeds of long-term liabilities:
Revolving bank lines of credit 807,500,000 510,100,000 519,500,000
Mortgages and notes 12,104,717 5,505,830 6,014,106
Redeemable notes and certificates 22,395,400 25,322,100 22,887,400
Repayment of long-term liabilities:
Revolving bank lines of credit (801,209,733)(499,918,520)(522,001,080)
Mortgages and notes (2,789,206) (10,893,362) (5,809,105)
Redeemable notes and certificates (22,618,900) (18,745,800) (13,957,700)
Net cash provided by
financing activities 13,266,911 8,211,128 3,707,684
Net (decrease) increase in cash
and cash equivalents (5,823,445) 416,638 (2,930,173)
Cash and cash equivalents,
beginning of year 18,807,473 18,390,835 21,321,008
Cash and cash equivalents,
end of year $12,984,028 $18,807,473 $18,390,835
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1994
1. Summary of significant accounting policies
a. Reporting year
United Grocers, Inc. and subsidiaries (the Company) reports on a
fiscal year of 52 or 53 weeks which is the fiscal year of the
distribution segment. The Company's fiscal closing date is the
Friday nearest September 30. The fiscal year of the subsidiaries
included in the insurance segment is September 30.
b. Organization
As a cooperative, the Company's stock is owned by its member
customers. Sales to these members account for approximately 80% of
wholesale grocery sales.
c. Principles of consolidation
The consolidated financial statements include the accounts of
United Grocers, Inc. and its wholly-owned subsidiaries as follows:
Grocers Insurance Group, Inc., Grocers Insurance Agency, Inc.,
UGIC, Ltd., Grocers Insurance Company (formerly United Employers
Insurance Co.), United Workplace Consultants, Inc., Western Passage
Express, Inc., United Store Development, Ltd., Northwest Process,
Inc., UG Resources, Inc., United Resources, Inc., Affiliated
General Agency, Inc., Premier Consulting, Inc. (formerly Employee
Management Services, Inc.), Western Security Services, Ltd. and BAT
Enterprises, Inc. All intercompany balances and transactions have
been eliminated upon consolidation. Investment in affiliated
companies is stated at cost plus the Company's share of
undistributed earnings since acquisition (see Note 17).
d. Inventories and cost of sales
Inventories are valued at the lower of cost or market. The cost of
all inventories is determined under the first-in, first-out (FIFO)
method. See Note 4 for change in accounting for inventories.
Cost of sales includes the cost of distribution and insurance
operations. The distribution operation costs include the purchases
of product, the net of allowances paid and received on purchases,
less the net advertising department margins, plus the handling
allowances made to members based upon the cost of servicing their
accounts. The insurance operation costs include losses reported, a
provision for losses incurred but not reported and premium refunds.
e. Treasury stock
The Company uses the par value method of accounting for treasury
stock. Under Oregon corporation law, treasury stock must be
canceled upon redemption.
f. Investments
Investments are primarily in non-equity securities and as such are
carried at cost. The Company's intent is to hold these securities
until maturity. Sales and redemptions of investments are primarily
the result of maturities. Any realized gains or losses are usually
the result of immaterial differences between the called amount and
amortized cost. The market value of these investments at September
30, 1994 and October 1, 1993 is $36,487,841 and $36,464,552,
respectively.
g. Property, plant and equipment
Property, plant and equipment is carried at cost and includes
expenditures for new facilities and those which substantially
increase the useful lives of the existing plant and equipment. The
Company capitalizes interest as a component of the cost of
significant construction projects. During the year ended October
1, 1993 and October 2, 1992, interest was capitalized in the amount
of $64,929 and $578,611, respectively, out of a total interest of
$8,281,946 and $9,303,377, respectively, which resulted in an
increase in the net income of approximately $49,000 and $410,000.
Depreciation is computed using the straight-line method over the
estimated useful lives of the respective assets. Estimated useful
lives are generally as follows:
Buildings 40 - 75 years
Building improvements Balance of building life
Warehouse equipment 5 - 20 years
Truck equipment 3 - 8 years
Office equipment 5 - 10 years
h. Amortization
Long-term liability loan costs, software costs, and non-competition
agreements are being amortized and charged to operating expenses on
a straight-line basis over five to twenty years.
i. Reinsurance
In the normal course of business, the Company seeks to reduce the
loss that may arise from catastrophes or other events that cause
unfavorable underwriting results by reinsuring certain levels of
risk in various areas of exposure with other insurance enterprises
or reinsurers. Amounts recoverable from reinsurers are estimated
in a manner consistent with the claim liability associated with the
reinsured policy. Amounts paid for prospective reinsurance are
reported as prepaid reinsurance premiums and amortized over the
remaining contract period in proportion to the amount of insurance
protection provided.
j. Income taxes
The Company and its subsidiaries file a consolidated federal income
tax return. The Company operates and is taxed as a cooperative.
Accordingly, amounts distributed as patronage dividends are not
included in its taxable income but are instead taxed to the
individual members receiving the patronage dividends. Deferred
income taxes are recorded to reflect the tax consequences on future
years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each year end.
No valuation allowances were considered necessary to reduce
deferred tax assets to the amount expected to be realized. See
Note 8 for details of timing differences and Note 7 for change in
accounting method.
<PAGE>
k. Earnings per common share
The Company's policy is to distribute earnings only in the form of
patronage dividends. No dividends have ever been declared on the
common stock of the Company, and all earnings not distributed as
patronage dividends have been retained. Earnings per common share
are not shown because no earnings are available for the purpose of
paying dividends on the common stock.
l. Statement of cash flows
For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
m. Restricted assets and net assets
Restricted assets and net assets that may not be transferred to the
parent company in the form of loans, advances, or cash dividends by
the insurance company subsidiary without the consent of various
state insurance agencies as of September 30, 1994 are as follows:
Cash and cash equivalents $ 725,000
Investments 15,370,300
-----------
Total $16,095,300
===========
In addition, although not formally restricted, the balance of the
investments of $21,569,278 represents assets that have been
accumulated for the possible payment of claims against the
insurance reserves.
n. Reclassifications
Certain reclassifications have been made to prior year balances to
conform to the current year classification.
o. Common stock
United's common stock is not transferable and is not negotiable.
Under United's Bylaws, all shares of United's common stock are sold
at adjusted book value and, upon a member's death, retirement,
voluntary withdrawal, expulsion, or cessation of purchases from
United, will be repurchased by United at adjusted book value as
determined by United's annual audited balance sheet as of the end
of each fiscal year, effective the following January 1. Adjusted
book value per share is computed by subtracting from total members'
equity, stock to be issued from patronage and paid-in capital on
such stock and undistributed equity from investments accounted for
on the equity method, net of the tax effect, and dividing the
resulting amount by shares outstanding at fiscal year end (as
restated for any stock splits, stock dividends, or similar
changes). United's Bylaws provide that the repurchase price for
any shares over and above the number of shares the member was
required to purchase as a condition of membership for a retail
store or stores may, in the discretion of United's board of
directors, be paid in 20 quarterly installments with interest at
the same rate being paid from time to time (presently 6.5%) on
United's Capital Investment Notes then being offered or in such
other manner as the board of directors may from time to time
determine.
United's board of directors has adopted a policy, subject to change
without notice, requiring United to repurchase upon request the
number of shares a member owns in excess of 4,000. The excess
shares are repurchased over a five-year period at the current
adjusted book value each year, payable in cash.
United's obligation to repurchase the shares of members is subject
to the general limitations imposed by the Oregon Business
Corporation Act that United may not purchase shares if, after
giving the purchase effect, United would not be able to pay its
debts as they became due in the normal course of business, or
United's total assets would be less than its total liabilities.
2. Investments
The amortized cost and estimated market values of investments in debt
securities and other investments at the balance sheet date are as
follows:
<PAGE>
Carrying
amount and
Number amortized Market
Name of issuer and of shares cost of value of
title of each issue or units each issue each issue
------------------- ---------- ---------- ----------
1994:
United States Government
and its agencies 18,670,000 $19,303,713 $18,846,955
Any state of the United
States and its agencies 3,395,000 3,539,142 3,531,561
Political subdivision of
a state of the United
States and its agencies 8,275,000 8,604,835 8,615,517
Corporate bonds 5,410,000 5,490,407 5,487,134
---------- ----------
Subtotal - debt securities 36,938,097 36,481,167
Corporate stock 271 1,481 6,674
----------- -----------
Total $36,939,578 $36,487,841
=========== ===========
1993:
United States Government
and its agencies 16,010,000 $16,634,109 $17,824,552
Any state of the United
States and its agencies 2,275,000 2,375,434 2,480,717
Political subdivision of
a state of the United
States and its agencies 8,320,000 8,691,136 9,076,131
Corporate bonds 6,160,000 6,218,187 6,598,802
---------- ----------
Subtotal - debt securities 33,918,866 35,980,202
Corporate stock 271 1,481 7,114
Real estate mortgage -- 477,236 477,236
---------- ----------
Total $34,397,583 $36,464,552
=========== ===========
The amortized cost and estimated market value of debt securities at the
balance sheet date, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<PAGE>
1994 1993
--------------------- ---------------------
Amortized Market Amortized Market
cost value cost value
--------- --------- --------- ---------
Due in one year or less $ 4,136,043 $ 4,176,752 $ 3,546,086 $ 3,645,477
Due after one year
through five years 16,869,731 17,046,729 19,073,123 20,498,132
Due after five years
through ten years 15,882,892 15,207,218 9,852,844 10,323,560
Due after ten years 49,431 50,468 1,446,813 1,513,033
---------- ---------- ---------- ----------
Total $36,938,097 $36,481,167 $33,918,866 $35,980,202
=========== =========== =========== ===========
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities." The Company plans to
adopt this Statement in 1995 and does not anticipate any significant
change as a result of this Statement on the present accounting for
investments.
3. Accounts and notes receivable
These consist of amounts due principally from members at the balance
sheet date as follows:
1994 1993
----------- -----------
Accounts receivable $46,640,928 $31,048,455
Insurance premiums and related balances 10,898,715 10,503,463
Less allowance for doubtful accounts (1,270,987) (1,283,681)
----------- -----------
Net accounts receivable 56,268,656 40,268,237
----------- -----------
Notes receivable - current portion 4,057,961 3,788,864
Less allowance for doubtful notes (36,156) (48,964)
----------- -----------
Net current notes receivable 4,021,805 3,739,900
----------- -----------
Net current accounts and
notes receivable $60,290,461 $44,008,137
=========== ===========
Notes receivable - non-current portion $33,454,161 $33,577,706
Less allowance for doubtful notes (298,618) (327,144)
----------- -----------
Net non-current notes receivable $33,155,543 $33,250,562
=========== ===========
The notes receivable from members are generally for periods of two years
to ten years at interest rates of 4.25% to 10.00%. The annual
maturities for each of the next five fiscal years following September
30, 1994 are as follows:
Year Amount
---- -----------
1995 $ 4,057,961
1996 4,112,058
1997 4,289,174
1998 4,161,963
1999 4,089,972
The provision for doubtful accounts and notes charged to operating
expenses for the three years ended September 30, 1994 amounted to
$1,992,589, $2,182,551, and $2,108,346, respectively.
4. Change in accounting for inventories
Effective October 3, 1992, the Company changed its method of accounting
for the cost of the general wholesale grocery category of inventories
from the last-in, first-out (LIFO) method to the first-in, first-out
(FIFO) method. The Company believes that the use of the FIFO method
better matches current costs with current revenues and more
appropriately reflects its financial condition. This change has also
been made for income tax purposes.
The change has been applied retroactively and comparative amounts for
prior periods have been restated. The effect of this change on retained
earnings and net income for restated 1991-92 is as follows:
Change in beginning retained earnings:
As previously reported in 1991-92 $13,311,329
-----------
LIFO inventory adjustment 958,912
Less tax effect (296,303)
-----------
Net adjustment 662,609
-----------
As restated $13,973,938
===========
Change in net income:
As previously reported in 1991-92 $ 3,275,772
-----------
LIFO inventory adjustment (780,878)
Less tax effect 228,016
-----------
Net adjustment (552,862)
-----------
As restated $ 2,722,910
===========
Cumulative effect on ending
retained earnings October 2, 1992:
As previously reported in 1991-92 $14,924,706
-----------
LIFO inventory adjustment 178,034
Less tax effect (68,287)
-----------
Net adjustment 109,747
-----------
As restated $15,034,453
===========
5. Other non-current assets
Other non-current assets at the balance sheet date consist of the
following:
<PAGE>
1994 1993
----------- -----------
Covenant not to compete - net
of accumulated amortization of
$802,445 in 1994 and $518,059
in 1993 $ 765,953 $ 1,014,338
Software - net of accumulated
amortization of $1,295,466 in
1994 and $730,587 in 1993 4,802,562 1,559,449
Loan fees - net of accumulated
amortization of $584,847 in
1994 and $490,814 in 1993 460,097 322,630
Other 1,701,963 259,884
----------- -----------
Total $ 7,730,575 $ 3,156,301
=========== ===========
6. Property, plant and equipment (at cost)
Property, plant and equipment as of the balance sheet date consists of
the following:
1994 1993
----------- -----------
Land $ 3,421,277 $ 3,032,145
Buildings and improvements 54,204,591 50,265,721
Warehouse and truck equipment 34,291,075 32,212,528
Office equipment 8,564,659 7,515,498
Construction in progress 640,035 4,366,038
----------- -----------
Total property, plant and
equipment 101,121,637 97,391,930
Less accumulated depreciation (42,604,517) (37,890,574)
----------- -----------
Net property, plant and
equipment $58,517,120 $59,501,356
=========== ===========
7. Change in accounting for income taxes
The Company adopted, effective September 28, 1991, the Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes, issued in February, 1992. Under the method specified by SFAS No.
109, the deferred tax asset or liability is determined based on the
difference between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates which will be in effect
when these differences reverse. Deferred tax expense is the result of
changes in the liability for deferred taxes. The principal types of
differences between assets and liabilities for financial statement and
tax return purposes are accumulated depreciation, insurance loss
reserves, allowance for doubtful accounts, and capitalized costs in
inventory.
The deferred method, used in the years prior to 1992, required the
Company to provide for deferred tax expense based on certain items of
income and expense which were reported in different years in the
financial statements and the tax returns as measured by the tax rate in
effect for the year the difference occurred.
As allowed by SFAS No. 109, the Company did not restate the years prior
to the year ended October 2, 1992 and, accordingly, the cumulative
effect of the accounting change on the prior years of $526,314 is
included in the earnings for the year ended October 2, 1992.
8. Income taxes
The provision for income taxes for the three years consists of the
following:
1994 1993 1992
---------- ---------- ----------
Current payable (refund):
Federal $ 439,200 $ 162,758 $ 624,516
State 86,252 72,468 (16,158)
Deferred 474,889 341,209 298,332
---------- ---------- ----------
Total $1,000,341 $ 576,435 $ 906,690
========== ========== ==========
The effective income tax rate for the three years ended September 30,
1994 does not correspond with the Federal tax rate. The reconciliation
of this rate to the effective income tax rate is as follows:
1994 1993 1992
---------- ---------- ----------
Statutory income tax rate (34%) $ 871,668 $ 778,878 $1,055,117
State income taxes, net of
Federal income tax benefit 56,926 47,829 (10,664)
Tax exempt interest (158,673) (133,080) (104,537)
Refunds as a result of carrybacks -- (184,980) --
Prior year under accrual 179,235 -- --
Other 51,185 67,788 (33,226)
---------- ---------- ----------
Income tax expense $1,000,341 $ 576,435 $ 906,690
========== ========== ==========
Effective income tax rate 39.0 % 25.2 % 29.2 %
==== ==== ====
The significant components of the deferred income taxes - current asset
and non-current liability as of the balance sheet date are as follows:
1994 1993
---------- ----------
Deferred income taxes -
current asset:
Insurance reserves $1,041,678 $1,230,094
Inventories 738,842 712,212
Unearned insurance premiums 541,417 496,405
Allowance for doubtful accounts 471,288 478,866
Other 18,689 (93,748)
---------- ----------
Total $2,811,914 $2,823,829
========== ==========
Deferred income taxes -
non-current liability:
Accumulated depreciation $4,589,568 $4,173,575
Deferred income (216,243) (230,325)
Allowance for doubtful notes (143,653) (140,364)
Deferred compensation (129,398) (89,598)
Advance deposits (52,004) (16,128)
Alternative minimum tax
(AMT) credit (304,161) (416,025)
---------- ----------
Total $3,744,109 $3,281,135
========== ==========
The significant components of deferred income tax expense for the
three years are as follows:
1994 1993 1992
---------- ---------- -----------
Decrease (increase) in deferred
income taxes - asset $ 11,915 $ 157,747 $ (273,942)
Increase in deferred income
taxes - liability after applying
AMT credit 462,974 183,462 572,274
---------- ---------- -----------
Total $ 474,889 $ 341,209 $ 298,332
========== ========== ===========
The Company has net operating loss carryovers of approximately
$3,500,000 to apply against future years' State income taxes,
expiring in years 2007 through 2009. These operating loss carryovers
are the result of the insurance company subsidiary being required to
file a separate calendar year State tax return and not giving the
parent the benefit of this offset on its State tax return. The
Company also has unused State energy tax credits of approximately
$45,000, expiring in 1998.
9. Members' patronage dividends
The Company's income from sales to members, before income taxes and
patronage dividends, is available at the discretion of the Board of
Directors, to be returned to the members in the form of patronage
dividends. As of year end, the Board of Directors voted to
distribute the following in patronage dividends:
1994 1993 1992
---------- ---------- -----------
Payable in cash and shown as
a current liability $ 6,865,736 $ 7,584,177 $ 7,960,456
Distributable in the form
of common stock 1,864,432 1,415,823 2,250,544
---------- ---------- ----------
Total $ 8,730,168 $ 9,000,000 $10,211,000
=========== =========== ===========
10. Notes payable - bank
Notes payable - bank consists of borrowings on bank lines of credit
at an average interest rate of 5.72% at September 30, 1994 and 3.95%
at October 1, 1993.
At September 30, 1994 and October 1, 1993, the Company had unused
lines of credit totaling $19,000,000 and $10,300,000, respectively;
and unused letters of credit totaling $350,000 and $450,000,
respectively.
In April of 1993, the Company entered into a three year reverse
interest swap agreement with a bank. Under the agreement, the
Company receives a fixed rate of 4.40% on $20 million (notional
amount) and pays a floating rate based on LIBOR, as determined in six
month intervals. The transaction effectively changes a portion of
the Company's interest rate exposure from a fixed rate to a floating
rate basis, accordingly, all gains or losses have been recognized as
adjustments to interest expense. This swap agreement has been
entered into with a major financial institution which is expected to
fully perform under the terms of the agreement thereby further
mitigating the risk from the transaction.
11. Long-term liabilities
Long-term liabilities at the balance sheet date consist of the
following:
1994 1993
------------ ------------
Notes payable - bank:
Credit agreement notes maturing
on April 30, 1995 with interest
rates of 5.77% per annum at
September 30, 1994 and 3.98% per
annum at October 1, 1993. The
interest rates ranged from 3.84%
to 5.89% in 1994 and from 3.94%
to 4.78% in 1993. $ 35,000,000 $ 25,000,000
Notes payable - insurance companies:
Senior notes payable to six
insurance companies with an
interest rate of 9.15% per annum.
Interest payable monthly. Principal
repayments annually commencing
October 1, 1992 in the amount of
$3,336,000 and each October 1
thereafter in the amount of
$3,333,000, maturing in full
October 2, 2000. 23,331,000 23,331,000
Notes payable - other:
Capital stock residual notes, payable
in twenty quarterly installments with
a variable interest rate based on the
current capital investment note rate. 3,810,679 2,878,311
Two notes (three in 1993) with
interest at 9.25% per annum
payable in monthly installments
of $28,136 ($50,660 in 1993)
beginning January 21, 1988
(secured by equipment). $ 83,123 $ 715,022
A real property contract for the
purchase of an office building,
payable in 180 monthly installments
of $2,346 including interest at
12.5% per annum until 1999 (secured
by real property). 101,734 116,171
Other note payable 27,500 55,000
Mortgage notes (secured by real property):
A note payable in monthly installments
of $41,449 including interest at 9%
until 1996. 878,279 1,276,922
A note payable in monthly installments
of $43,721 including interest at 10.30%
per annum until 1995. 457,059 909,026
A note payable in monthly installments
of $31,615 including interest at 7.25%
until 2013. 3,907,589 4,000,000
Redeemable notes and certificates:
Capital investment notes
(subordinated), interest ranging
from 5.75% to 8%. Maturity dates
range from 1993 to 2003 which is
ten years from dates of issue. 50,319,700 50,395,400
Registered redeemable building
notes (subordinated), interest
at 8%. No fixed maturity date. 3,482,400 3,615,600
Redeemable transferable notes,
(subordinated), interest at
5.75%. No fixed maturity. $ 46,400 $ 61,000
------------ ------------
Total 121,445,463 112,353,452
Less current installments (6,776,197) (6,814,221)
Total long-term liabilities $114,669,266 $105,539,231
============ ============
Total maturities of long-term liabilities in each of the next five
fiscal years are as follows:
Year Amount
---- ------------
1995 $ 6,776,197
1996 41,394,636
1997 6,971,062
1998 5,360,233
1999 5,706,690
The Company's bank loan agreements require the maintenance of certain
financial ratios and a minimum amount of capital and subordinated
debt. The Company was in compliance with these requirements as of
September 30, 1994 and October 1, 1993.
12. Reinsurance
The Company in 1994 adopted the Statement of Financial Accounting
Standards (SFAS) No. 113, Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts, issued in December, 1992.
The Statement requires that transactions relating to reinsurance
transactions be reported at gross amounts rather than net amounts.
The effect on the consolidated financial statements of the Company is
to gross up the insurance liabilities by reclassifying the ceded
reinsurance amounts for reinsurance recoverables and prepaid
reinsurance premiums as assets. The change had the effect of
increasing 1993 total assets and total liabilities by $4,741,852 as
follows:
<PAGE>
Increase in current assets:
Reinsurance recoverables for ceded
loss reserves - now classified as
accounts and notes receivable $3,494,121
Prepaid reinsurance premiums - now
classified as other current assets 1,247,731
----------
Total $4,741,852
==========
Increase in current liabilities:
Insurance reserves $3,494,121
Unearned premiums - classified
as accounts payable 1,247,731
----------
Total $4,741,852
==========
There is no effect or change to the consolidated income statement as
the income statement classifications did not change. Net premiums
earned continue to be reported as net sales and operations while net
losses and loss adjustment expenses continue to be reported as cost
of sales.
Reinsurance contracts do not relieve the Company from its obligation
to policyholders. Failure of reinsurers to honor their obligations
could result in losses to the Company. The Company evaluates the
financial condition of its reinsurers and monitors concentrations of
credit risk arising from similar geographic regions, activities, or
economic characteristics of the reinsurers to minimize its exposure
to significant losses from reinsurer insolvencies. The Company holds
collateral under related reinsurance agreements in the form of
letters of credit totaling $338,000 that can be drawn on for amounts
that remain unpaid for more than 60 days.
Reinsurance amounts reflected in the financial statements are as
follows:
<PAGE>
1994 1993
For the balance sheet:
Reinsurance recoverable for
ceded losses $ 3,792,152 $ 3,494,121
Prepaid reinsurance premiums 1,394,254 1,247,731
----------- -----------
Total $ 5,186,406 $ 4,741,852
=========== ===========
1994 1993 1992
----------- ----------- -----------
For the income statement:
Premiums written:
Gross $23,992,639 $24,430,854 $23,861,615
Assumed 860,953 715,760 1,183,691
Ceded (6,652,410) (6,597,150) (5,067,239)
----------- ----------- -----------
Net premiums written $18,201,182 $18,549,464 $19,978,067
=========== =========== ===========
Percentage of amount
assumed to net 4.73 % 3.86 % 6.33 %
======= ====== ======
Premiums earned:
Gross $23,736,321 $24,185,628 $21,969,296
Assumed 829,978 750,619 1,151,517
Ceded (6,505,887) (6,493,811) (4,920,045)
----------- ----------- -----------
Net premiums earned $18,060,412 $18,442,436 $18,200,768
=========== =========== ===========
Percentage of amount
assumed to net 4.60 % 4.07 % 5.92 %
======= ====== ======
Expenses:
Losses and loss adjustment
expenses $15,079,858 $17,481,462 $15,604,171
Reinsurance recoveries (3,389,844) (2,121,602) (1,867,112)
----------- ----------- -----------
Net losses and loss
adjustment expenses $11,690,014 $15,359,860 $13,737,059
=========== =========== ===========
13. Segment reporting
The Company has two operating segments which are located primarily in
the Pacific Northwest. The distribution segment includes all
operations relating to wholesale grocery and related product sales,
retail grocery sales, service department revenues, and financing
income and fees. The insurance segment includes all operations
relating to insurance underwriting, commissions, and reinsurance
primarily to provide workers' compensation and property-casualty
coverage.
A summary of information about the Company's operations by segment
before intersegment eliminations for the three years is as follows:
<PAGE>
1994 1993 1992
----------- ------------ ------------
Net sales and operations:
Distribution $936,266,067 $857,439,871 $878,146,111
Insurance 18,788,523 20,525,392 19,555,963
Less intersegment sales
of insurance (834,240) (979,910) (1,114,702)
------------ ------------ ------------
Total $954,220,350 $876,985,353 $896,587,372
============ ============ ============
Income before allowances,
dividends, income taxes
and accounting change:
Distribution $ 19,791,157 $ 18,162,132 $ 17,860,059
Insurance 2,952,047 2,485,571 2,889,394
------------ ------------ ------------
Total $ 22,743,204 $ 20,647,703 $ 20,749,453
============ ============ ============
Total assets:
Distribution $243,267,148 $226,346,768 $209,063,967
Insurance 64,923,598 64,591,472 59,875,762
------------ ------------ ------------
Total $308,190,746 $290,938,240 $268,939,729
============ ============ ============
Depreciation expense:
Distribution $ 5,408,896 $ 4,643,401 $ 4,163,138
Insurance 200,883 94,000 127,405
------------ ------------ ------------
Total $ 5,609,779 $ 4,737,401 $ 4,290,543
============ ============ ============
Capital expenditures:
Distribution $ 5,161,425 $ 11,310,048 $ 19,922,924
Insurance 93,157 680,933 557,017
------------ ------------ ------------
Total $ 5,254,582 $ 11,990,981 $ 20,479,941
============ ============ ============
For net sales and operations, wholesale grocery sales (primarily to
members) during the three years ended September 30, 1994 accounted
for approximately 95%, 93% and 95%, respectively, of the distribution
total. Premium revenue (primarily from members) accounted for
approximately 95%, 90% and 86%, respectively, of the insurance total.
The change in the method of accounting for inventories (Note 4)
related to and affected only the distribution segment.
14. Pension plans
The Company has a Company-sponsored pension plan that covers
substantially all of its salaried employees. The Company also has
separate Company-sponsored 401(k) plans for salaried and union
employees. The Company has made annual contributions to the plans
equal to the amount annually accrued for pension expense. The
Company's funding policy is to satisfy the funding requirements of
the Employees' Retirement Income Security Act.
The Company also participates in several multi-employer pension plans
for the benefit of its employees who are union members. The data
available from administrators of the multi-employer plans is not
sufficient to determine the accumulated benefit obligation, nor the
net assets attributable to the multi-employer plans in which the
Company union employees participate.
The financial statements include pension expense for the Company-
sponsored pension plan as determined using Statement of Financial
Accounting Standards No. 87 (SFAS 87). The effect of SFAS 87 was a
decrease of pension expense in the amount of $546,894 for 1994,
$484,020 for 1993, and $317,193 for 1992. The Company's unrecognized
net asset resulting from the initial application of SFAS 87 is being
amortized over eighteen years.
In determining the actuarial present value of the projected benefit
obligation, a discount rate of 8% and a future maximum compensation
increase rate of 4% were used. The expected long-term rate of return
on assets was 8%.
Pension costs for all plans for the three years consist of the
following:
1994 1993 1992
----------- ----------- -----------
Company-sponsored:
Service costs of benefits
earned $ 918,423 $ 910,214 $ 832,866
Interest cost on the projected
benefit obligation 1,448,447 1,339,393 1,102,517
Expected return on plan assets (1,688,595) (1,443,513) (1,199,657)
Net amortization of unrecognized
net asset (168,168) (168,168) (154,154)
Unrecognized net gain (4,414) -- --
Unrecognized prior service cost 73,760 73,760 1,164
----------- ----------- -----------
Net salaried pension cost 579,453 711,686 582,736
Multi-employer plan costs 2,395,300 2,180,280 2,183,086
Matching costs of 401(k) plans 391,605 437,413 395,731
----------- ----------- -----------
Total pension expense $ 3,366,358 $ 3,329,379 $ 3,161,553
=========== =========== ===========
The following table sets forth the Company-sponsored plan's funded
status as of year end:
<PAGE>
1994 1993 1992
----------- ----------- -----------
Actuarial present value of
benefit obligations:
Vested $13,337,570 $12,397,747 $10,951,935
Non-vested 823,015 819,479 675,609
----------- ----------- -----------
Accumulated benefit obligation 14,160,585 13,217,226 11,627,544
Effect of projected future
compensation levels 4,881,117 4,501,814 4,237,333
----------- ----------- -----------
Projected benefit obligation 19,041,702 17,719,040 15,864,877
Plan assets at fair value,
primarily listed stocks, fixed
income, and bond and equity
funds 22,030,725 21,056,267 17,981,115
----------- ----------- -----------
Excess of plan assets over
projected benefit obligation 2,989,023 3,337,227 2,116,238
Unrecognized prior service cost 778,471 1,031,162 14,965
Unrecognized net gain (1,422,307) (2,273,777) (273,680)
Unrecognized net asset, net of
amortization (1,897,503) (2,065,671) (2,233,839)
----------- ----------- -----------
Prepaid (accrued)
pension cost $ 447,684 $ 28,941 $ (376,316)
=========== =========== ===========
In addition to pension benefits, the Company provides health benefits
for certain retired salaried employees. The Financial Accounting
Standards Board has issued Statement of Financial Accounting Standards
No. 106, "Employer's Accounting for Post Retirement Benefits Other Than
Pensions." This statement will require accrual of such benefits during
the years an employee provides services. The costs of these benefits
are currently expensed on a pay-as-you-go basis. The cost of this
retiree health care is funded out of current operations and was
approximately $356,000 in 1994, $282,000 in 1993 and $257,000 in 1992.
The impact of this new standard has not been fully determined, but the
change likely will result in a greater liability and expense being
recognized for these benefits. The Company has until 1995-96 to adopt
this Statement because fewer than 500 employees will be affected.
15. Leases
The Company is obligated under one hundred and five significant leases
in 1994. Forty-five of these leases are for twenty to twenty-five
years with renewal options and involve supermarket properties which are
subleased to members. Twelve of these leases are subleased to
affiliated companies. The remaining leases represent property and
equipment used by the Company. The leases expire at various dates, the
last expiring in 2013. Rental expense for the three years consists of
the following:
1994 1993 1992
----------- ----------- -----------
Minimum rentals $13,690,702 $14,082,104 $12,447,688
Less sublease income (5,971,461) (6,554,855) (6,355,385)
----------- ----------- -----------
Net rental expense $ 7,719,241 $ 7,527,249 $ 6,092,303
=========== =========== ===========
The following is a schedule by years showing future minimum rental
payments required under operating leases that have initial or remaining
non-cancelable lease terms in excess of one year as of September 30,
1994:
Fiscal Minimum Minimum Net
year payments (A) receipts (B) minimum
--------- ------------ ------------ -----------
1994-1995 $ 14,259,330 $ 6,788,922 $ 7,470,408
1995-1996 13,364,382 6,654,450 6,709,932
1996-1997 11,079,707 6,335,846 4,743,861
1997-1998 9,456,613 5,963,962 3,492,651
1998-1999 9,364,253 5,935,555 3,428,698
Later years 80,530,013 57,103,637 23,426,376
------------ ------------ -----------
Total $138,054,298 $ 88,782,372 $49,271,926
============ ============ ===========
Summary:
Building leases $129,755,112 $ 88,465,191 $41,289,921
Equipment leases 8,299,186 317,181 7,982,005
------------ ------------ -----------
Total $138,054,298 $ 88,782,372 $49,271,926
============ ============ ===========
(A) Minimum payments are those required by the Company over the terms
of the significant leases.
(B) Minimum receipts are those to be received by the Company from
sublease agreements.
Twenty-one of the subleases as of September 30, 1994, are
insured by the Company's foreign subsidiary, UGIC, Ltd. The
annual rental for these leases is approximately $2,440,000.
The total minimum payments over the lease term for these same
leases is approximately $54,100,000.
In 1992 and 1991, the Company entered into sale-leaseback
transactions for three cash and carry outlets. The sales resulted in
deferred gains of approximately $800,000 which are being amortized
over the leaseback period of fifteen years. The total lease
commitments are approximately $2,500,000 over fifteen years with an
annual rental of approximately $155,000 for each of the first five
years.
16. Supplemental cash flow information
1994 1993 1992
----------- ----------- -----------
Supplemental disclosures:
Cash paid during the year for:
Interest $ 8,898,144 $ 8,292,247 $ 8,952,346
Income taxes 336,810 647,836 982,169
Supplemental schedule of
noncash investing and
financing activities:
Patronage dividends payable
in common stock 1,864,432 1,415,823 2,250,544
<PAGE>
17. Investment in and transactions with affiliated companies
The Company owns 22.42% of the outstanding common stock of Western
Family Holding Company (the Affiliate). The Company and certain
other retailer owned grocery wholesalers located primarily in the
Pacific Northwest organized the Affiliate to provide a source for the
Affiliate private label brand. An officer of the Company is a
director of the Affiliate. The amount of consolidated retained
earnings represented by undistributed earnings of the Affiliate as of
September 30, 1994 is $1,679,869 and $1,654,629 as of October 1, 1993
in addition to the original investment of $275,300.
An approximate summary of transactions with this Affiliate by year is
as follows:
1994 1993 1992
----------- ----------- -----------
Purchases $89,179,000 $70,334,000 $71,994,000
Volume incentive rebate 1,561,000 1,231,000 1,260,000
Open accounts payable 6,006,000 5,150,000 4,000,000
The Company in 1994 made an approximately 22% minority equity
investment of $6,094,315 in the retail store operations of two
members. The Company's share of losses in these operations in 1994
was $217,000. Transactions with these two members for the short
periods in 1994 were sales of approximately $22,945,000 and open
accounts receivable as of September 30, 1994 were approximately
$1,860,000.
UGIC, Ltd. paid cash dividends to the Parent in 1992 in the amount of
$500,000.
18. Concentrations of credit risk
The Company holds its cash and cash equivalents in several banks
located in the Pacific Northwest and a zero balance bank account
located in the Midwest. Each bank is covered by FDIC insurance;
balances in excess of coverage are not insured.
As a cooperative, the majority of the Company's accounts receivable
represent sales to its members who are located throughout the Pacific
Northwest. These accounts are not generally secured by collateral
but each member has stock holdings in the Company as well as
patronage rebates which the Company could apply against account
balances.
The Company makes store financing loans to members from time to time
mainly to finance the acquisition of grocery store properties and
equipment. These loans are represented by notes receivable which are
secured by collateral consisting of personal property, securities and
guarantees.
The insurance subsidiaries have investments primarily in federal
securities and state municipal bonds which are backed by the full
faith and credit of the respective governmental agency.
19. Commitments and contingencies
a. During 1994, 1991 and 1990, the Company entered into agreements
under which it sold and continues to sell certain of its notes
receivable from members subject to limited recourse provisions.
These are secured by collateral which usually consists of
personal property, securities and guarantees. The Company is
responsible for collection of the notes, for which it receives a
collection fee, and remits the net proceeds to the purchaser on a
monthly basis. In 1994, 1993 and 1992, the Company sold notes
totaling approximately $8,625,000, $900,000 and $5,800,000,
respectively. The balances of transferred notes that were
outstanding and subject to recourse provisions were $13,652,000,
$13,441,000 and $20,934,000 at September 30, 1994, October 1,
1993 and October 2, 1992, respectively.
b. In connection with its loan activities to members, the Company
has approved loan applications totaling approximately $8,000,000
for which funds have been committed, but not disbursed, as of
September 30, 1994.
c. The Company is guarantor of a covenant by a member as of
September 30, 1994 totaling $350,000 with annual principal
payments of approximately $50,000.
d. The Company is a party to various litigation and claims arising
in the ordinary course of business. While the ultimate effect of
such actions cannot be predicted with certainty, the Company
expects that the outcome of these matters will not result in a
material adverse effect on the Company's consolidated financial
position or results of operations.
<PAGE>
Board of Directors
United Grocers, Inc.
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULES
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in United
Grocers, Inc.'s annual report to stockholders incorporated by reference
in this Form 10-K, and have issued our report thereon dated November 30,
1994. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. Schedules V, VI, VIII, IX, X and XIV listed
in the index under Item 14(a)2, are presented for purposes of complying
with the Securities and Exchange Commission's rules and are not part of
the basic financial statements. These schedules have been subjected to
the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
DeLap, White & Raish
Portland, Oregon
November 30, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized.
UNITED GROCERS, INC.
(Registrant)
Dated: March 1, 1995 By: /s/ John W. White
John W. White
Vice President
