Segment Information | 3 Months Ended |
Dec. 28, 2013 |
Segment Information | ' |
4. SEGMENT INFORMATION |
Unified is a retailer-owned, grocery wholesale cooperative serving supermarket, specialty and convenience store operators located primarily in the western United States and the Pacific Rim. The Company’s customers range in size from single store operators to regional supermarket chains. The Company sells a wide variety of products typically found in supermarkets. The Company’s customers include its owners (“Members”) and non-owners (“Non-Members”). The Company sells products through Unified or through its specialty food subsidiary and international sales subsidiary. The Company reports all product sales in its Wholesale Distribution segment. The Company also provides support services, including insurance and financing, to its customers through the Wholesale Distribution segment and through separate subsidiaries. Insurance activities are reported in Unified’s Insurance segment while finance activities are grouped within Unified’s All Other business activities. The availability of specific products and services may vary by geographic region. |
Management identifies segments based on the information monitored by the Company’s chief operating decision maker to manage the business and, accordingly, has identified the following two reportable segments: |
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| · | | The Wholesale Distribution segment includes the results of operations from the sale of groceries and general merchandise products to both Members and Non-Members, including a broad range of branded and corporate brand products in nearly all the categories found in a typical supermarket, including dry grocery, frozen food, deli, meat, dairy, eggs, produce, bakery, ethnic, gourmet, specialty foods, natural and organic, general merchandise and health and beauty care products. Support services (other than insurance and financing), including merchandising, retail pricing, advertising, promotional planning, retail technology, equipment purchasing and real estate services, are reported in the Wholesale Distribution segment. As of, and for the thirteen weeks ended, December 28, 2013, the Wholesale Distribution segment collectively represented approximately 84% of the Company’s total assets, and 99% of total net sales. | | | | | |
Non-perishable products consist primarily of dry grocery, frozen food, deli, ethnic, gourmet, specialty foods, natural and organic, general merchandise and health and beauty care products. They also include (1) retail support services and (2) products and shipping services provided to Non-Member customers through Unified International, Inc. Perishable products consist primarily of service deli, service bakery, meat, eggs, produce, bakery and dairy products. Net sales within the Wholesale Distribution segment include $620.0 million and $648.7 million, or 65.3% and 68.9% of total Wholesale Distribution segment net sales, for the thirteen weeks ended December 28, 2013 and December 29, 2012, respectively, attributable to sales of non-perishable products, and $329.3 million and $292.3 million, or 34.7% and 31.1% of total Wholesale Distribution segment net sales, for the thirteen weeks ended December 28, 2013 and December 29, 2012, respectively, attributable to sales of perishable products. Wholesale Distribution segment net sales also include revenues attributable to the Company’s retail support services, which comprised less than 1% of total Wholesale Distribution segment net sales, for each of the foregoing respective periods. |
Transactions involving vendor direct arrangements are comprised principally of sales of produce in the Pacific Northwest and Northern California and sales of branded ice cream in Southern California. “Gross billings,” a financial metric that adds back gross billings through vendor direct arrangements to net sales and is used by management to assess our operating performance, was $973.8 million and $948.4 million for the thirteen weeks ended December 28, 2013 and December 29, 2012, respectively. |
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| · | | The Insurance segment includes the results of operations for the Company’s three insurance subsidiaries (Unified Grocers Insurance Services, Springfield Insurance Company and Springfield Insurance Company, Limited). These subsidiaries provide insurance and insurance-related products, including workers’ compensation and liability insurance policies, to both the Company and its customers. Unified Grocers Insurance Services is an insurance agency that places business with insurance carriers, both non-affiliated and Springfield Insurance Company. Springfield Insurance Company, Limited is a captive re-insurer for Springfield Insurance Company. Unified Grocers Insurance Services is a licensed insurance agency in Alaska, Arizona, California, Idaho, New Mexico, Nevada, Oregon, Texas, Washington and Utah. Springfield Insurance Company is a licensed insurance carrier in Arizona, California, Colorado, Idaho, Montana, New Mexico, Nevada, Oregon, Texas, Washington, Wyoming and Utah. Springfield Insurance Company, Limited is a licensed insurance carrier in the Commonwealth of Bermuda. As of, and for the thirteen weeks ended, December 28, 2013, the Company’s Insurance segment collectively accounted for approximately 13% of the Company’s total assets, and 1% of total net sales. | | | | | |
The All Other category includes the results of operations for the Company’s other support businesses, including its finance subsidiary, whose services are provided to a common customer base, none of which individually meets the quantitative thresholds of a reportable segment. As of, and for the thirteen weeks ended, December 28, 2013, the All Other category collectively accounted for approximately 3% of the Company’s total assets, and less than 1% of total net sales. |
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Information about the Company’s operating segments is summarized below. |
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(dollars in thousands) | | | | | | |
| | Thirteen Weeks Ended | |
| | December 28, | | | December 29, | |
2013 | 2012 |
Net sales | | | | | | | | |
Wholesale distribution: Gross billings | | $ | 973,780 | | | $ | 948,436 | |
Less: Gross billings through vendor direct arrangements | | | (24,434 | ) | | | (7,403 | ) |
| | | | |
Wholesale distribution: Net sales | | | 949,346 | | | | 941,033 | |
Insurance | | | 8,062 | | | | 7,613 | |
All other | | | 242 | | | | 363 | |
Inter-segment eliminations | | | (2,931 | ) | | | (2,998 | ) |
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Total net sales | | $ | 954,719 | | | $ | 946,011 | |
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Operating income (loss) | | | | | | | | |
Wholesale distribution | | $ | 8,714 | | | $ | 5,688 | |
Insurance | | | 615 | | | | (922 | ) |
All other | | | (54 | ) | | | 121 | |
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Total operating income | | | 9,275 | | | | 4,887 | |
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Interest expense | | | (2,857 | ) | | | (3,191 | ) |
Estimated patronage dividends | | | (2,388 | ) | | | (2,536 | ) |
Income taxes | | | (1,241 | ) | | | 753 | |
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Net earnings (loss) | | $ | 2,789 | | | $ | (87 | ) |
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Depreciation and amortization | | | | | | | | |
Wholesale distribution | | $ | 6,584 | | | $ | 6,177 | |
Insurance | | | 67 | | | | 112 | |
All other | | | 2 | | | | 14 | |
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Total depreciation and amortization | | $ | 6,653 | | | $ | 6,303 | |
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Capital expenditures | | | | | | | | |
Wholesale distribution | | $ | 1,476 | | | $ | 4,998 | |
Insurance | | | — | | | | 82 | |
All other | | | — | | | | — | |
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Total capital expenditures | | $ | 1,476 | | | $ | 5,080 | |
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Identifiable assets at December 28, 2013 and December 29, 2012 | | | | | | | | |
Wholesale distribution | | $ | 754,656 | | | $ | 755,161 | |
Insurance | | | 119,749 | | | | 115,026 | |
All other | | | 30,025 | | | | 27,361 | |
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Total identifiable assets | | $ | 904,430 | | | $ | 897,548 | |
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The net sales presented within the Company’s Wholesale Distribution segment in the above table for the thirteen weeks ended December 29, 2012 have been adjusted to conform to ASC 605-45-45 as described in Note 1. As a result of such adjustment, Wholesale Distribution segment net sales and total net sales were each reduced by $7.4 million for the thirteen weeks ended December 29, 2012. This adjustment did not have an impact on any other items presented in the preceding table. |