Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 2, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File No. 0-5815
AMERICAN CONSUMERS, INC.
=========================================================================
(Exact name of registrant as specified in its charter)
GEORGIA 58-1033765
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
P.O. BOX 2328, 418A BATTLEFIELD PKWY., FORT OGLETHORPE, GA 30742
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (706) 861-3347
N/A
=========================================================================
(Former name, former address and former fiscal year, if changed since
last report)
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 ( )
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at January 9, 1996
COMMON STOCK - $.10 PAR VALUE 925,753
NON VOTING COMMON STOCK - $.00 PAR VALUE 0
NON VOTING PREFERRED STOCK - $.00 PAR VALUE 0
Exhibit Index on Page 10
1
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
December 2, November 26, December 2, November 26,
1995 1994 1995 1994
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
NET SALES $7,217,438 $6,883,305 $14,502,059 $13,981,051
COST OF GOODS SOLD 5,739,345 5,465,075 11,497,333 11,102,549
---------- ---------- ---------- ----------
Gross Margin 1,478,093 1,418,230 3,004,726 2,878,502
OPERATING EXPENSES 1,455,486 1,373,253 2,928,874 2,758,329
---------- --------- ---------- ----------
Operating Income 22,607 44,977 75,852 120,173
OTHER INCOME (EXPENSE)
Interest income 7,115 6,147 12,163 14,011
Other income 13,157 13,089 25,096 23,232
Loss on sale of assets (5,792) - - - - - (5,792) - - - - - -
Interest expense (4,686) (4,266) (9,633) (8,384)
-------- ------- -------- -------
Income Before Income 32,401 59,947 97,686 149,032
Taxes
PROVISION FOR
INCOME TAXES 6,890 20,928 29,133 52,100
------ ------- ------- -------
NET INCOME 25,511 39,019 68,553 96,932
RETAINED EARNINGS:
Beginning 1,492,129 1,410,216 1,467,651 1,371,264
Cash dividends (18,544) (18,805) (37,093) (37,641)
Redemption of common (73) (778) (88) (903)
stock ---- ----- ----- -----
Ending 1,499,023 1,429,652 1,499,023 1,429,652
========= ========= ========= =========
PER SHARE:
Net income $0.028 $0.041 $0.074 $0.103
====== ====== ====== ======
Cash dividends ($0.020) ($0.020) ($0.040) ($0.040)
======= ======== ======== ========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 927,330 940,415 927,263 939,413
======= ======= ======= =======
</TABLE>
See Notes to Financial Statements
2
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED BALANCE SHEETS
December 2, June 3,
1995 1995
----------- ----------
- - ASSETS- -
<S> <C> <C>
CURRENT ASSETS:
Cash $ 841,880 $ 416,456
Securities purchased under agreement
to resell ------- 187,700
Certificate of deposit 346,633 337,021
Accounts receivable 205,433 238,523
Inventories 1,763,656 1,599,435
Prepaid expenses 97,902 80,624
------ ------
Total current assets 3,255,504 2,859,759
--------- ---------
PROPERTY - At cost:
Property 2,306,211 2,295,587
Less accumulated depreciation 1,519,476 1,458,153
--------- ---------
Property - Net 786,735 837,434
------- -------
OTHER ASSETS 38,529 39,442
------ ------
TOTAL ASSETS $4,080,768 $3,736,635
========== ==========
- -LIABILITIES AND STOCKHOLDERS' EQUITY- -
CURRENT LIABILITIES:
Accounts payable $ 803,100 $ 718,368
Short-term borrowings 376,528 198,000
Accrued sales tax 174,572 168,993
Other accrued liabilities 183,004 122,912
------- -------
Total Current Liabilities 1,537,204 1,208,273
--------- ---------
DEFERRED INCOME TAX LIABILITY 22,419 26,759
------ ------
DEFERRED INCOME 157,195 167,793
------- -------
COMMITMENTS AND CONTINGENCIES (Note 2)
STOCKHOLDERS' EQUITY:
Non voting preferred stock; authorized 5,000,000
shares of no par value; no shares issued ------- -------
Non voting common stock; authorized 5,000,000
shares of $.10 par value; no shares issued ------- -------
Common stock; authorized 5,000,000 shares
of $.10 par value; issued 926,120 92,612 92,744
Additional paid-in capital 772,315 773,415
Retained earnings 1,499,023 1,467,651
--------- ---------
Total Stockholders' Equity 2,363,950 2,333,810
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $4,080,768 $3,736,635
========== ==========
</TABLE>
See Notes to Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED STATEMENT OF CASH FLOWS
TWENTY-SIX WEEKS ENDED
December 2, November 26,
1995 1994
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 68,553 $ 96,932
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 77,997 83,742
Deferred income taxes (4,340) (1,000)
(Gain) loss on sale of property 5,792 (2,000)
Deferred income (10,598) (10,241)
Change in operating assets and liabilities:
Certificate of deposit (9,612) (7,365)
Accounts receivable 33,090 (10,386)
Inventories (164,221) (152,520)
Prepaid expenses (17,278) (17,663)
Accounts payable 84,732 (49,980)
Accrued sales tax 5,579 (31,049)
Accrued income taxes ------ (121,455)
Other accrued liabilities 60,092 24,948
--------- ----------
Net cash provided by (used in) operating activities 129,786 (198,037)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property (35,590) (72,969)
Proceeds from disposal of property 2,500 2,000
Other 913 (80,189)
---------- ----------
Net cash used in investing activities (32,177) (151,158)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in short-term borrowings 178,528 20,840
Net increase in long-term borrowings ------ 36,898
Cash dividends (37,093) (37,641)
Redemption of common stock (1,320) (13,670)
---------- ----------
Net cash provided by financing activities 140,115 6,427
---------- ----------
Net increase in cash 237,724 (342,768)
Cash and cash equivalents at beginning of period 604,156 974,716
---------- ----------
Cash and cash equivalents at end of period $ 841,880 $ 631,948
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 42,819 $ 176,505
========= =========
Interest 9,633 8,383
========= =========
</TABLE>
See Notes to Financial Statements
4
<PAGE>
AMERICAN CONSUMERS, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Basis of Presentation.
The financial statements have been prepared in conformity
with generally accepted accounting principles and general
practices within the industry.
The interim financial statements should be read in
conjunction with the notes to the financial statements
presented in the Corporation's 1994 Annual Report to
Shareholders. The quarterly financial statements reflect all
adjustments which are, in the opinion of management, necessary
for a fair presentation of the results for interim periods.
The results for interim periods are not necessarily indicative
of results to be expected for the complete fiscal year.
(2) Commitments and Contingencies.
The Company has begun the process of installing direct
store delivery equipment and replacing cash registers with
registers capable of scanning at the checkout in each of its
stores. Annual lease payments on the delivery and scanning
equipment, when fully installed in all stores are expected to
aggregate approximately $200,000.
The new front-end equipment will also allow the acceptance
of certain credit cards and acceptance of electronic
authorization and transfers associated with food stamps and
WIC related benefits. The equipment will also facilitate the
Company's collection of sales tax in its Georgia stores when
the State of Georgia implements exemption of certain items from
sales tax. Other capital expenditures for asset additions are
not expected to exceed $100,000 during the next fiscal year.
The Company adopted a retirement plan effective January 1,
1995. The plan is a 401(k) plan administered by BISYS
Qualified Plan Services. Participation in the plan is
available to all full-time employees after one year of service
and age 19. Any contribution by the Company will be at the
discretion of the Board of Directors, which will make such
decisions annually at its quarterly meeting in January.
None of the Company's employees are represented by a union.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
December 2, November 26, December 2, November 26,
-----------------------------------------------------
1995 1994 1995 1994
=====================================================
<S> <C> <C> <C> <C>
Sales $7,217,438 $6,883,305 $14,502,059 $13,981,051
% Sales Increase 4.85 (3.05) 3.73 (2.36)
(Decrease)
Gross Margin % 20.48 20.60 20.72 20.59
Operating and
Administrative
Expense:
Amount 1,455,486 1,272,253 2,928,874 2,758,329
% of Sales 20.17 19.95 20.20 19.73
Net Income 25,511 39,019 68,553 96,932
</TABLE>
Overall sales increased 4.85% from sales for the same quarter last
year. This increase is attributable to increased sales at five of the
Company's six stores. Management believes this increase is due, in part,
to favorable customer response to an advertising program which the
Company has implemented and to favorable competition with the successor
to one of the Company's major competitors. In addition to other means of
improving results, the Company seeks to improve its profitability by
obtaining the lowest cost available for its goods.
Operating and administrative expenses have increased slightly over
the same period last year, thereby increasing such expenses as a
percentage of sales. This increase is due to an increase in advertising
expense incurred through the ad group to which the Company belongs.
Also, an increase in repairs and services in the past quarter was
necessary to prepare three of the Company's stores for new delivery and
scanning equipment which the Company has begun to install.
Accounts payable increased $84,732 due to an increase in the amount
due the Company's principal supplier for inventory. Due to the holiday
season, inventory is high at the end of the Company's second quarter.
This increase in inventory is also the principal reason in the increase
in short-term borrowings as of December 2, 1995.
Income Taxes:
The provision for income taxes for the quarter ended December 2,
1995 was $6,890 and $20,928 for November 26, 1994. The provision for
income taxes does not vary significantly from the statutory rate of 34%.
Inflation:
Although not a current significant factor, the Company continues to
seek ways to cope with the threat of renewed inflation. To the extent
permitted by competition, increased costs of goods and services to the
Company are reflected in increased selling prices for the goods sold by
the Company.
6
<PAGE>
FINANCIAL CONDITION
Liquidity and Capital Resources:
The Company finances its working capital requirements principally
through its cash flow from operations and short-term borrowing. Short-
term borrowing to finance inventory purchases is provided by the
Company's $800,000 line of credit with a regional bank. An additional
line of credit in the amount of $300,000 is also available from its
principal inventory supplier. Long-term borrowing generally finances
capital expansion.
Short-term borrowings consist of unsecured notes payable to a
principal stockholder and amounts due to our lead bank under a line of
credit. Notes to stockholder, in the sum of $201,000 and $198,000 as of
December 2, 1995 and June 3, 1995 respectively, are payable on demand and
bear interest at .25% below the base rate charged by the regional bank
which provides the Company with its line of credit to finance inventory
purchases. The other $175,528 at December 2, 1995 is from the line of
credit.
The ratio of current assets to current liabilities was 2.12 to 1 at
the end of the latest quarter, December 2, 1995, as compared to 2.41 to 1
on November 26, 1994 and 2.37 to 1 at the end of the fiscal year ended
June 3, 1995. Cash and cash equivalents constituted 25.86% of the total
current assets at December 2, 1995 as compared to 21.95% at November 26,
1994 and 21.13% at June 3, 1995.
During the quarter ended December 2, 1995 retained earnings
increased as a result of the Company's net income for the quarter.
7
<PAGE>
AMERICAN CONSUMERS, INC.
PART II OTHER INFORMATION
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as a part of
the report.
(10) Lease renewal for the Company's office
in Fort Oglethorpe, Georgia.
(11) Statement re: computation of per share
earnings.
(b) During the most recent quarter, the Company has
not filed a report on Form 8-K.
8
<PAGE>
SIGNATURES
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.
AMERICAN CONSUMERS, INC.
(Registrant)
Date: January 16, 1996 /s/ Michael A. Richardson
--------------------------------------
Michael A. Richardson
CHAIRMAN
(Principal Executive Officer)
Date: January 16, 1996 /s/ Paul R. Cook
--------------------------------------
Paul R. Cook
EXECUTIVE VICE PRESIDENT - TREASURER
(Principal Financial Officer & Chief
Accounting Officer)
9
COMMERCIAL LEASE
This lease is made between David R. Kelley, herein called Lessor,
and American Consumers, INC. d/b/a Shop Rite, herein called Lessee.
Lessee hereby offers to lease from lessor the premises situated in
the City of Fort Oglethorpe, County of Catoosa, State of Georgia,
described as 418 A Battlefield Parkway, Fort Olgethorpe, GA 30742, upon
the following TERMS and CONDITIONS:
1. TERMS AND RENT. Lessor demises the above premises for a term of
three (3) years, commencing December 1, 1995 and terminating on
November 30, 1998 or sooner as provided herein at the annual rental
of Eight Thousand Nine Hundred Eighty Eight Dollars ($8,988.00),
payable in equal installments in advance on the first day of each
month for that month's rental, during the term of this lease. All
rental payments shall be made to Lessor, at 1509 East Crane Street,
Rossville, GA 30741 (Unless notified in writing of an address
change).
2. USE. Lessee shall use and occupy the premises for corporate
offices. The premises shall be used for no other purpose. Lessor
represents that the premises may lawfully be used for such purpose.
3. CARE AND MAINTENANCE OF PREMISES. Lessee acknowledges that the
premises are in good order and repair, unless otherwise indicated
herein. Lessee shall at his own expense and at all times, maintain
the premises in good and safe condition, including plate glass,
electrical wiring, plumbing, heating installations, and any other
system or equipment on the premises and shall surrender the same, at
termination thereof, in as good condition as received, normal wear
and tear excepted. Lessee shall be responsible for all repairs
required, excepting the roof, exterior walls, and structural
foundations, which shall be maintained by Lessor.
4. ALTERNATIONS Lessee shall not, without first obtaining the written
consent of Lessor, make any alterations, additions, or improvements,
in, to or about the premises.
5. ORDINANCES AND STATUTES. Lessee shall comply at all statutes,
ordinances and requirements of all municipal, state, and federal
authorities now in force, or which may hereafter be in force,
pertaining to the premises, occasioned by or affecting the use
thereof by Lessee.
6. ASSIGNMENT AND SUBLETTING. Lessee shall not assign this lease or
sublet any portion of the premises without prior written consent of
the Lessor, which shall not be unreasonably withheld. Any such
assignment or subletting without consent shall be void and, at the
option of the Lessor, may terminate this lease.
7. UTILITIES. All applications and connections for necessary utility
services on the demised premises shall be made in the name of Lessee
only, and Lessee shall be solely liable for utility charges as they
become due, including those for gas, electricity, and telephone
service.
8. ENTRY AND INSPECTION. Lessee shall permit Lessor or Lessor's agent
to enter upon the premises at reasonable times upon reasonable
notice, for the purpose of inspecting the same, and will permit
Lessor at any time within sixty (60) days prior to expiration of
this lease, to place upon the premises any usual "To Let" or "For
Lease" signs, and permit persons desiring to lease the same to
inspect the premises thereafter.
9. INDEMNIFICATION OF LESSOR. Lessor shall not be liable for any
damage or injury to Lessee, or any other person, or to any property,
occurring on the demised premises or any part thereof, and Lessee
agrees to hold Lessor harmless from any claim for damages, no matter
how caused.
10. INSURANCE. Lessee, at his expense, shall maintain public liability
insurance including bodily injury and property damage insuring
Lessee for a minimum of One Million dollars ($1,000,000.00 U.S.
Currency). Proof of such insurance shall be furnished to the Lessor
at the time this lease is executed.
11. EMINENT DOMAIN. If the premises or any part thereof or any estate
therein, or any other part of the building materially affecting the
Lessee's use of the premises, shall be taken by eminent domain, this
lease shall terminate on the date when title vests pursuant to such
taking. The rent, and any additional rent, shall be apportioned as
of the termination date, and any rent paid for any period beyond
that date shall be repaid to Lessee. Lessee shall not be entitled
to any part of the award for such taking or any payment in lieu
thereof, but Lessee may file a claim for any taking of fixtures and
improvements owned by Lessee, and for moving expenses.
12. DESTRUCTION OF PREMISES. In the event of a partial destruction of
the premises during the term hereof, from any cause, Lessor shall
forthwith repair same, provided that such repairs can be made within
sixty (60) days under existing governmental laws and regulations,
but such partial destruction shall not terminate this lease, except
that Lessee shall be entitled to a proportionate reduction of rent
while such repairs are being made, based upon the extent to which
the making of such repairs shall interfere with the business of
Lessee on the premises. If such repairs cannot be made within said
sixty (60) days, Lessor, at his option, may make the same within a
reasonable time, this lease continuing in effect with the rent
proportionately abated
<PAGE>
as aforesaid, and in the event Lessor shall not elect to make such
such repairs which cannot be made within sixty (60) days, this lease
may be terminated at the option of either party. In the event
that the building in which the demised premises may be situated is
destroyed to an extent of not less than one-third of the replacement
costs thereof, Lessor may elect to terminate this lease whether the
demised premises be injured or not. A total destruction of the
building in which the premises may be situated shall terminate this
lease.
13. LESSOR'S REMEDIES ON DEFAULT. If Lessee defaults in the payment of
rent, or any additional rent, or defaults in the performance of any
of the other covenants or conditions hereof, Lessor may give Lessee
notice of such default and if Lessee does not cure any such default
within ten (10) days, after giving such notice (or if such other
default is of such a nature that it cannot be completely cured
within such period, if Lessee does not commence such curing within
such ten (10) days and thereafter proceed with reasonable diligence
and in good faith to cure such default), then Lessor may terminate
this lease on not less than ten (10) days notice to Lessee. On the
date specified in such notice the term of this lease shall
terminate, and Lessee shall then quit and surrender the premises to
Lessor, but Lessee shall remain liable as hereinafter provided. If
this lease shall have been terminated by Lessor, Lessor may at any
time thereafter resume possession of the premises by any lawful
means and remove Lessee or other occupants and their effect. No
failure to enforce any term shall be deemed a waiver.
14. ATTORNEY'S FEES. In case suit should be brought for recovery of the
premises, or for any suit hereunder, or because of any act which may
arise out of the possession of the premises, by either party, the
prevailing party shall be entitled to all costs incurred in
connection with such action, including a reasonable attorney's fee.
15. NOTICES. Any notice which either party may or is required to give,
shall be given by mailing the same, postage prepaid, to Lessee at
the premises, or Lessor at the address shown below, or at such other
places as may be designated by the parties from time to time.
16. HEIRS, ASSIGNS, SUCCESSORS. This lease is binding upon and inures
to the benefit of the heirs, assigns, and successors in interest of
the parties.
17. OPTION TO RENEW. Provided that Lessee is not in default in the
performance of this lease, Lessee shall have the option to renew the
lease for an additional term of twelve (12) months commencing at the
expiration of the initial lease term. All of the terms and
conditions of the lease shall apply during the renewal term except
that the monthly rent shall be the sum of Eight Hundred Dollars
($800.00). The option shall be exercised by written notice given to
Lessor not less than thirty (30) days prior to the expiration of the
initial lease term. If notice is not given in the manner provided
herein within the time specific, this option shall expire.
18. SUBORDINATION. This lease is and shall be subordinated to all
existing and future liens and encumbrances against the property.
19. ENTIRE AGREEMENT. The foregoing constitutes the entire agreement
between the parties and may be modified only by writing signed by
both parties.
Signed this 29th day of October, 1995
American Consumers, Inc. David R. Kelley
By: Lessee: By: Lessor:
s/ Michael A. Richardson s/ David R. Kelley
<TABLE>
<CAPTION>
AMERICAN CONSUMERS, INC.
NET INCOME PER COMMON SHARE
EXHIBIT 11
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
December 2, November 26, December 2, November 26,
----------------------------------------------------
1995 1994 1995 1994
====================================================
<S> <C> <C> <C> <C>
Net income for
computing earnings $ 25,511 $ 39,019 $ 68,553 $ 96,932
per common share ======== ======== ======== ========
Weighted average
number of common
shares outstanding $927,330 $940,415 $927,263 $939,413
during each period ======== ======== ======== ========
Net income per common $ 0.028 $ 0.041 $ 0.074 $ 0.103
share ======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICAN CONSUMERS, INC. FOR THE QUARTERLY PERIOD
ENDED DECEMBER 2, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-03-1995
<PERIOD-END> DEC-02-1995
<CASH> $ 1,188,513
<SECURITIES> 0
<RECEIVABLES> 205,433
<ALLOWANCES> 0
<INVENTORY> 1,763,656
<CURRENT-ASSETS> 3,255,504
<PP&E> 2,306,211
<DEPRECIATION> 1,519,476
<TOTAL-ASSETS> 4,080,768
<CURRENT-LIABILITIES> 1,537,204
<BONDS> 0
<COMMON> 92,612
0
0
<OTHER-SE> 2,271,338
<TOTAL-LIABILITY-AND-EQUITY> 4,080,768
<SALES> 14,502,059
<TOTAL-REVENUES> 14,502,059
<CGS> 11,497,333
<TOTAL-COSTS> 11,497,333
<OTHER-EXPENSES> 2,928,874
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,633
<INCOME-PRETAX> 97,686
<INCOME-TAX> 29,133
<INCOME-CONTINUING> 68,553
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,553
<EPS-PRIMARY> 0.074
<EPS-DILUTED> 0.074
</TABLE>
