<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 June 30, 1995
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. 621,018 shares of common
stock, $5 par value as of August 10, 1995.
<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 June 30, 1995 and July
1, 1994, 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 the last quarter of 1993-94 the Company adopted FASB #113 (Accounting
for Reinsurance Contracts). This change on the balance sheet had the effect
of grossing up amounts related to reinsurance rather than netting them. There
was no effect to the income statement.
In the second quarter of 1994-95 the Company adopted FASB #115
(Accounting for Certain Investments in Debt and Equity Securities). This
change on the balance sheet had the effect of increasing current assets and
equity by $170,110. There was no effect to the income statement.
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., Rich and Rhine, Inc. and Northwest Process,
Inc. All intercompany balances and transactions have been eliminated upon
consolidation.
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 and SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
(Unaudited) (Audited)
ASSETS 6/30/95 09/30/94
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 12,967,796 $ 12,984,028
Investments maintained for
insurance reserves 42,763,040 36,939,578
Accounts and notes receivable 70,237,532 60,290,461
Inventories 79,832,722 74,307,422
Other current assets 2,148,410 5,367,295
Deferred income taxes 2,942,855 2,811,914
------------ ------------
Total current assets 210,892,355 192,700,698
------------ ------------
NON-CURRENT ASSETS:
Notes receivable 29,658,664 33,155,543
Investment in affiliated companies 7,832,484 7,832,484
Other receivables and investments 10,000,091 6,899,133
Other non-current assets 10,698,922 7,730,575
------------ ------------
Total non-current assets 58,190,161 55,617,735
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
(Net of accumulated depreciation) 64,581,971 58,517,120
------------ ------------
TOTAL $333,664,487 $306,835,553
============ ============
</TABLE>
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 and SEPTEMBER 30, 1994
(continued)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
LIABILITIES AND MEMBERS' EQUITY 6/30/95 09/30/94
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable - bank $ 45,995,407 $ 31,020,667
Accounts payable 58,465,082 64,629,410
Insurance reserves supported by
investments 35,726,426 32,038,408
Compensation and taxes payable 3,385,099 2,952,534
Other accrued expenses 6,069,652 3,159,900
Members' patronage payable 2,535,000 6,865,736
Current installments on
long-term liabilities 6,511,654 6,776,197
------------ ------------
Total current liabilities 158,688,320 147,442,852
------------ ------------
LONG-TERM LIABILITIES 128,135,092 114,669,266
------------ ------------
DEFERRED INCOME TAXES 3,871,793 3,744,109
------------ ------------
DEFERRED INCOME 703,139 554,469
------------ ------------
MEMBERS' EQUITY (Members' Equity is
subject to redemption due to the
occurrence of certain events, e.g.,
termination of membership):
Common stock (Authorized, 10,000,000
shares at $5.00 par value;issued
and outstanding, 622,222 shares at
June 30, 1995 and 619,881 shares
at September 30, 1994) Shares owned
by a member in excess of 4,000 are subject
to repurchase. See Note below) 3,200,881 3,256,080
Additional paid-in capital 23,107,329 22,472,564
Retained earnings 15,787,823 14,696,213
Valuation reserve per FASB 115 170,110 ---
------------ ------------
Total members' equity 42,266,143 40,424,857
------------ ------------
TOTAL $333,664,487 $306,835,553
============ ============
</TABLE>
Common stock note: 22,107 shares are subject to repurchase at June 30, 1995
and 22,409 at September 30, 1994 in the amounts of $1,315,367 and $1,277,213
respectively. At June 30, 1995 and September 30, 1994 there were 1,781 and
2,869 shares, respectively, held for possible redemption in the amounts of
$105,970 and $163,533 respectively.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Unaudited)
QUARTER ENDED NINE MONTHS ENDED
06/30/95 07/01/94 06/30/95 07/01/94
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales and operations 263,212,128 242,071,225 754,640,069 698,086,509
----------- ----------- ----------- ------------
Costs and expenses:
Cost of sales 223,060,063 207,381,082 642,161,619 595,373,220
Operating expenses 26,514,176 24,150,402 76,725,754 71,407,280
Selling and administrative
expenses 3,186,285 2,278,475 8,005,753 6,973,222
Depreciation 1,497,860 1,270,273 4,401,302 3,986,987
Interest:
Interest expense 3,528,202 2,391,141 9,471,106 6,753,471
Interest income (961,271) (990,576) (3,215,907) (2,652,989)
----------- ----------- ----------- ----------
Interest expense, net 2,566,931 1,400,565 6,255,199 4,100,482
----------- ----------- ----------- ----------
Total costs and expenses 256,825,315 236,480,797 737,549,627 681,841,191
----------- ----------- ----------- -----------
Income before members' allowances,
patronage dividends and income
taxes 6,386,813 5,590,428 17,090,442 16,245,318
Members' allowances (3,730,293) (3,749,828) (11,160,586)(10,770,890)
Members' patronage dividends (1,350,000) (1,300,000) ( 3,250,000)( 3,500,000)
----------- ----------- ----------- -----------
Income before income taxes 1,305,520 540,600 2,679,856 1,974,428
Provision for income taxes ( 522,609) ( 200,000) (1,071,943) ( 676,500)
----------- ----------- ----------- -----------
Net Income $ 783,911 $ 340,600 1,607,913 1,297,928
=========== =========== =========== ===========
</TABLE>
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------
JUNE 30 JULY 1
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994
----------- ------------
<S> <C> <C>
Net income $ 1,607,913 $1,297,927
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 4,401,302 3,986,987
Provision for doubtful accounts
and notes 1,518,698 1,523,261
Patronage dividends payable in
common stock 1,205,978 2,012,017
(Gain)loss on sale of assets ( 29,508) 65,279
Deferred income taxes 145,413 -0-
Decrease (increase) in non-cash
current assets:
Accounts and notes receivable (9,947,070) (6,627,953)
Inventories (5,525,300) 2,642,408
Other current assets 233,832 (4,593,618)
Increase (decrease) in non-cash
current liabilities:
Accounts payable and insurance
reserves (2,476,310) (2,571,740)
Compensation and taxes payable 432,565 316,698
Other accrued expenses 2,909,752 2,991,153
Members' patronage and other
refunds (4,330,736) (4,939,927)
Decrease (increase) in non-current
other assets (6,069,305) 2,777,798
----------- ------------
Net cash provided by (used in)
operating activities (15,922,776) (1,119,710)
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to members (13,453,504) (17,755,137)
Collections on loans to members 7,355,866 14,121,340
Proceeds from sale (buyback) of member loans 8,075,821 (120,496)
Sale of investments 1,898,972 1,171,000
Redemption of investments 4,708,311 3,262,139
Purchase of investments (9,269,370) (10,875,805)
Sale of property/plant/equipment 169,546 226,756
Purchase-property/plant/equipment (10,612,405) ( 5,181,559)
-------------- ------------
Net cash provided by (used in)
investing activities (11,126,763) (15,151,762)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 71,400 525,241
Repurchase of common stock (1,214,115) (3,121,609)
Proceeds of long-term liabilities:
Revolving bank lines of credit 526,700,000 606,400,000
Mortgages and notes 3,749,547 1,882,801
Redeemable notes and certificates 10,842,698 13,353,800
Repayment of long-term liabilities:
Revolving bank lines of credit (499,945,645) (589,243,207)
Mortgages and notes ( 1,869,013) ( 2,131,276)
Redeemable notes and certificates ( 11,301,565) ( 15,823,947)
------------ ------------
Net cash provided by (used in)
financing activities 27,033,307 11,841,803
----------- ------------
Net increase (decrease) in cash and
cash equivalents (16,232) ( 4,429,669)
Cash and cash equivalents, beginning of year 12,984,028 18,807,473
----------- ------------
Cash and cash equivalents, end of quarter $ 12,967,796 $ 14,377,804
============ ============
</TABLE>
<PAGE>
Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Nine Months ended June 30, 1995 compared to nine months ended July 1, 1994
RESULTS OF OPERATIONS
OVERVIEW
In 1995, net sales and operations increased 8.1% to $754.6 million. This
compares to a 7.4% increase in 1994 to $698.1 million. Net income before
member allowances, patronage dividends, and income taxes totaled $17.1 million
(2.3% of sales) compared to $16.2 million (2.3% of sales).
During 1995, the increase in net sales and operations was due primarily
to higher unit volume in the distribution segment, increased written premiums
in the insurance segment, offset by lower volume from retail store operations.
Profitability improved due to the increase in unit volume, and lower retail
store operating losses. Offsetting these improvements were increased property
and casualty losses, and higher interest expenses due to increased borrowing
rates and average debt outstanding.
NET SALES AND OPERATIONS
Warehouse and Cash & Carry distribution segment sales increased 4.4% to
$684.3 million. Warehouse sales increased 2.0%. Cash & Carry sales increased
15.6% due to sales at new units (4.6%), and an increase in same store sales of
11.0%.
Insurance segment net premiums commissions and fees increased 15.2% in
1995 to $17.1 million, primarily due to increases in written premiums and
commissions offset by increased reinsurance premiums ceded.
In 1995, the company purchased the assets of Rich & Rhine, Inc., a
convenience store distributor. Rich & Rhine sales were $19.4 million in 1995,
and are included in the company's distribution segment results.
COSTS AND EXPENSES
In 1995, total costs and expenses increased $55.7 million to $737.5
million (97.7% of sales). This compares to $681.8 million (97.7% 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 nine months ended :
6/30/95 7/1/94
------- ------
Cost of Sales 85.1 85.3
Operating Expenses 10.1 10.2
Selling and Administrative
Expenses 1.1 1.0
Depreciation and
Amortization 0.6 0.6
Interest Expense, net 0.8 0.6
Total 97.7 97.7
Cost of Sales as a percent of net sales and operations decreased to
85.1% in 1995 from 85.3% in 1994 primarily due to improved gross margins in
the Cash & Carry and retail store operations offset by increased loss and loss
adjustment expenses in the insurance segment.
Operating expenses as a percent of net sales and operations decreased
0.1% to 10.1% in 1995 due to decreased operating expenses in the retail store
operations.
Interest expense, net, increased $2.2 million to $6.3 million (0.8% of
sales) in 1995. The increased interest expense was caused by increased bank
borrowing rates, and increased borrowings to support the company's operations
and investment activities.
MEMBER ALLOWANCES AND PATRONAGE DIVIDENDS
In 1995, member allowances and patronage dividends were $14.4 million
(1.9% of sales). This compares to $14.3 million (2.0% of sales) in 1994.
NET INCOME AND INCOME TAXES
Net income after member allowances and patronage dividends, and before
income taxes was $2.7 million (0.4% of sales)in 1995, compared to $2.0 million
(0.3% of sales) in 1994. Net income after taxes was $1.6 million (0.2% of
sales) compared to $1.3 million (0.2% of sales) in 1994.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATING ACTIVITIES
In 1995, the Company used $15.9 million in cash in its operations, an
increase of $14.7 million in cash used compared to 1994. Merchandise
inventories increased primarily due to increased volume. Use of cash for Notes
and Accounts Receivable increased $3.3 million due to increased volume and
retail member loan activity. Other non-current assets increased $8.8 million
due to increased investments in software assets, increased member project
accounts receivable, the purchase of good will in the Rich & Rhine acquisition
($1.5 million), and the purchase of a non compete agreement in connection with
the acquisition of Commissary Cash & Carry assets ($1.0 million).
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 used $11.1 million in cash in investing activities.
This compares to the $15.1 million in cash used by investing activities in
1994. In 1995, the Company provided $8.1 million in cash from the sale of
member loans compared to the use of cash of $0.1 million from buying back
member loans in 1994.
Purchases of plant, property, and equipment increased $5.5 million to
$10.6 million in 1995 due to distribution segment acquisitions, and new store
fixture and equipment investments.
CASH FLOWS FROM FINANCING ACTIVITIES
In 1995, the Company's financing activities provided $27.0 million in
cash compared to $11.8 million in 1994. Cash was primarily provided through
the utilization of the Company's bank credit lines. Proceeds of mortgages and
notes increased $3.7 million primarily due to the long term debt associated
with the Rich & Rhine and Commissary Cash & Carry acquisitions, and the
issuance of new residual stock redemption notes.
Part II. OTHER INFORMATION
Item 6. (a) Exhibits.
27. FDS for Article 5 of Regulation S-X
(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.
UNITED GROCERS. INC.
(Registrant)
Dated: August 11, 1995 By /s/John W. White
John W. White
Vice President
(Principal Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from the consolidated financial statements
of United Grocers, Inc., for the fiscal quarter ended
June 30, 1995 and is qualified in its entirety by
reference to such financial statements.
<MULTIPLIER> 1
<FISCAL-YEAR-END> SEP-29-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 3-MOS
<S> <C>
<CASH> 12,967,796
<SECURITIES> 42,763,041
<RECEIVABLES> 70,237,532
<ALLOWANCES> 2,187,049
<INVENTORY> 79,832,722
<CURRENT-ASSETS> 210,892,355
<PP&E> 111,361,607
<DEPRECIATION> 46,779,636
<TOTAL-ASSETS> 333,664,487
<CURRENT-LIABILITIES> 158,688,320
<BONDS> 128,135,092
0
0
<COMMON> 26,308,210
<OTHER-SE> 15,782,936
<TOTAL-LIABILITY-AND-EQUITY> 333,664,487
<SALES> 754,640,069
<TOTAL-REVENUES> 754,640,069
<CGS> 642,161,619
<TOTAL-COSTS> 76,725,754
<OTHER-EXPENSES> 8,005,753
<LOSS-PROVISION> 1,518,696
<INTEREST-EXPENSE> 9,471,106
<INCOME-PRETAX> 2,679,856
<INCOME-TAX> 1,071,942
<INCOME-CONTINUING> 1,607,913
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,607,913
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
