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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 December 30, 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 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. 627,924 shares of common
stock, $5 par value as of February 10, 1995.
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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 30, 1994 and
December 31, 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 changes in
accounting methods not of a normal recurring nature are separately disclosed.
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.
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UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 30, 1994, and September 30, 1994
<TABLE>
<CAPTION>
(Unaudited) (Audited)
ASSETS 12/30/94 09/30/94
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 13,635,393 $ 12,984,028
Investments 41,051,094 36,939,578
Accounts and notes receivable 54,932,471 60,290,461
Inventories 77,499,755 74,307,422
Other current assets 8,001,769 5,367,295
Deferred income taxes 2,811,914 2,811,914
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Total current assets 197,932,396 192,700,698
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NON-CURRENT ASSETS:
Notes receivable 31,256,240 33,155,543
Investment in affiliated companies 7,832,484 7,832,484
Other receivables and investments 5,744,767 6,899,133
Other non-current assets 9,737,156 7,730,575
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Total non-current assets 54,570,647 55,617,735
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PROPERTY, PLANT AND EQUIPMENT -
(Net of accumulated depreciation) 59,924,185 58,517,120
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TOTAL $312,427,228 $306,835,553
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UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1994, and SEPTEMBER 30, 1994
(continued)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
LIABILITIES AND MEMBERS' EQUITY 12/30/94 09/30/94
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<S> <C> <C>
CURRENT LIABILITIES:
Notes payable - bank $ 46,942,102 $ 31,020,667
Accounts payable 58,659,198 64,629,410
Insurance reserves 34,116,374 32,038,408
Compensation and taxes payable 3,023,386 2,952,534
Other accrued expenses 4,232,744 3,159,900
Members' patronage payable 910,000 6,865,736
Current installments on
long-term liabilities 6,760,758 6,776,197
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Total current liabilities 154,644,562 147,442,852
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LONG-TERM LIABILITIES 112,610,745 114,669,266
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DEFERRED INCOME TAXES 3,744,109 3,744,109
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DEFERRED INCOME 554,469 554,469
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MEMBERS' EQUITY:
Common stock (Authorized, 10,000,000
shares at $5.00 par value;issued
and outstanding, 612,702 shares at
December 30, 1994 and 619,881 shares
at September 30, 1994) 3,293,007 3,256,080
Additional paid-in capital 22,559,380 22,472,564
Retained earnings 15,020,956 14,696,213
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Total members' equity 40,873,343 40,424,857
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TOTAL $312,427,228 $306,835,553
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UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Unaudited)
Quarter Quarter
Ended Ended
12/30/1994 12/31/1993
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<S> <C> <C>
Net sales and operations $243,288,734 $229,399,822
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Costs and expenses:
Cost of sales 207,493,311 195,195,792
Operating expenses 24,288,709 23,929,411
Selling and administrative expenses 2,370,275 2,439,540
Depreciation 1,387,178 1,303,129
Interest:
Interest expense 2,459,753 2,130,365
Interest income 866,478 1,138,635
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Interest expense, net 1,593,275 991,730
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Total cost and expenses 237,132,748 223,859,602
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Income before members' allowances, patronage
dividends and income taxes 6,155,986 5,540,220
Members' allowances 3,866,201 3,546,359
Members' patronage dividends 1,400,000 1,300,000
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Income before income taxes 889,785 693,861
Provision for income taxes 373,476 245,400
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Net Income $ 516,309 $ 448,461
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</TABLE>
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UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
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December 30 December 31
CASH FLOWS FROM OPERATING ACTIVITIES: 1994 1993
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<S> <C> <C>
Net income $ 516,309 $ 448,461
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 1,387,178 1,303,129
Provision for doubtful accounts
and notes 506,992 506,688
Patronage dividends payable in
common stock 793,776 853,325
(Gain)loss on sale of assets ( 67,789) ( 52,479)
Decrease (increase) in non-cash
current assets:
Accounts and notes receivable 5,357,990 ( 6,629,603)
Inventories ( 3,192,333) ( 2,289,122)
Other current assets ( 9,581,692) ( 2,879,823)
Increase (decrease) in non-cash
current liabilities:
Accounts payable and insurance
reserves ( 3,892,246) ( 2,800,067)
Compensation and taxes payable 70,852 ( 228,266)
Other accrued expenses 1,072,844 ( 45,181)
Members' patronage and other
refunds ( 5,955,736) ( 6,369,927)
Decrease (increase) in non-current
other assets ( 852,215) ( 594,324)
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Net cash provided by (used in)
operating activities ( 13,836,070) ( 18,777,189)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to members ( 5,115,806) ( 7,467,671)
Collections on loans to members 3,609,748 1,607,567
Proceeds from sale of member loans 2,898,369 50,000
Sale and redemption of investments 4,433,139 164,258
Purchase of investments ( 1,597,437) ( 3,034,814)
Sale of property/plant/equipment 23,546 146,756
Purchase-property/plant/equipment ( 2,750,000) ( 2,356,839)
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Net cash provided by (used in)
investing activities 1,501,559 ( 10,890,743)
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UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(Unaudited)
<CAPTION>
Three months ended
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December 30 December 31
1994 1993
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<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 11,400 409,944
Repurchase of common stock ( 872,999) ( 335,809)
Proceeds of long-term liabilities:
Revolving bank lines of credit 225,900,000 189,800,000
Other loans 4,215,691 -0-
Redeemable notes and certificates 3,600,600 3,155,200
Repayment of long-term liabilities:
Revolving bank lines of credit (209,850,405) (160,151,392)
Mortgages and notes ( 4,593,338) ( 669,346)
Redeemable notes and certificates ( 5,425,073) ( 6,268,128)
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Net cash provided by (used in)
financing activities 12,985,876 25,940,469
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Net increase (decrease) in cash and
cash equivalents 651,365 ( 3,727,463)
Cash and cash equivalents, beginning of year 12,984,028 18,807,473
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Cash and cash equivalents, end of quarter $ 13,635,393 $ 15,080,010
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</TABLE>
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three months ended December 30, 1994 ("1995") compared to three months ended
December 31, 1993 ("1994").
RESULTS OF OPERATIONS
OVERVIEW
In 1995, net sales and operations increased 6.1% to 243.3 million. This
compares to a 7.1% increase in 1994 to $229.4 million. Net income before
member allowances, patronage dividends, and income taxes increased 0.7
million to $6.2 million (2.5% of sales). This compares to a net income of
$5.5 million (2.4% of sales) in 1994.
During 1995, the increase in net sales and operations was due primarily
to higher unit volume in the distribution segment, offsetting decreased
written premiums in the insurance segment, and lower sales volume from the
retail store operations. Profitability improved due to the increase in unit
volume, as well as lower retail store losses. Offsetting these improvements
were higher loss ratios in the insurance segment and increased member
allowances.
NET SALES AND OPERATIONS
Warehouse and Cash & Carry distribution segment sales increased 6.3% to
$226.3 million. Warehouse sales increased 4.5 % reflecting higher unit
volume. Cash & Carry sales increased 16.0%, due to higher unit volumes
(10.3%) and sales at new units (4.1%).
Insurance segment's net premiums, commissions and fees increased 7.1% in
1995 to $5.6 million, primarily due to reductions in reinsurance expenses and
favorable changes in unearned premium reserves.
COSTS AND EXPENSES
In 1995, total costs and expenses increased $13.3 million to 237.1
million (97.5 of sales). This compares to $223.9 million (97.6% of sales) in
1994. The components of costs and expenses are outlined below:
Costs and Expenses as a Percent of Net Sales and Operations:
For the Three months ended:
12/30/94 12/31/93
-------- --------
Cost of Sales 85.3 85.1
Operating expenses 10.0 10.4
Selling and administrative
expenses 1.0 1.1
Depreciation and amortization 0.6 0.6
Interest expense, net 0.7 0.4
Total 97.5 97.6
Cost of sales as a percent of net sales and operations increased to
85.3% in 1995 from 85.1% in 1994 primarily due to increased loss ratios
offset by increased sales mix towards Cash & Carry and perishable
departments.
Operating expenses as a percent of net sales and operations decreased
0.4% to 10.0% in 1995 due to decreased operating expenses in the retail store
operations and higher unit volume.
MEMBER ALLOWANCES AND PATRONAGE DIVIDENDS
In 1995, member allowances and patronage dividends were $5.3 million
(2.2% of sales). This compares to $4.8 million (2.1% of sales) in 1994. The
increase is due to higher member allowances.
NET INCOME AND INCOME TAXES
Net income after member allowances, patronage dividends, and before
taxes was $0.9 million (0.4% of sales) in 1995 compared to $0.7 million (0.3%
of sales) in 1994. Net income after taxes was $0.5 million (0.2% of sales)
compared to $0.4 million (0.2% of sales) in 1994.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATING ACTIVITIES
In 1995, the Company used $13.8 million in cash in its operations, an
decrease of $4.9 million in cash used compared to 1994. Merchandise
inventories increased primarily due to increased volume.
At the beginning of the prior 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 1995, the Company received $1.5 million in cash in investing
activities. This compares to the $10.9 million in cash used by investing
activities in 1994. The main components of the shift in the cash flow from
investing activities was the $2.9 million increase in sale of members loans,
and increase in the sale of investments.
CASH FLOWS FROM FINANCING ACTIVITIES
In 1995, the Company's financing activities provided $13.0 million in
cash compared to $25.9 million in 1994. Cash was primarily provided through
the utilization of the Company's bank credit lines.
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.
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 10, 1995 UNITED GROCERS, INC.
(Registrant)
By /s/ John W. White
John W. White
Vice President
(Principal Accounting Officer)
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