FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year ended June 1, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 (I.R.S. Employer Identification
of incorporation or Number)
organization)
P.O. Box 2328, 418-A Battlefield Pkwy., Ft. Oglethorpe, GA 30742
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (706) 861-3347
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.10 par value
(Title of Class)
<PAGE>
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ X ]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date
within 60 days prior to the date of filing.
AS OF AUGUST 12, 1996, THE AGGREGATE MARKET VALUE OF THE VOTING STOCK
HELD BY NON-AFFILIATES OF THE REGISTRANT WAS APPROXIMATELY $198,256.
(Calculated for these purposes by multiplying the total number of
outstanding shares held by non-affiliates by available bid price
information.)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
924,653 SHARES OF COMMON STOCK, $0.10 PAR VALUE, AS OF AUGUST 12, 1996.
List hereunder the following documents, if incorporated by reference
and the Part of the Form 10-K into which the document is incorporated:
(1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule
424(b) or (c) under the Securities Act of 1933. The listed documents
should be clearly described for identification purposes:
(1) SPECIFIED PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO
SHAREHOLDERS FOR THE FISCAL YEAR ENDED JUNE 1, 1996, INCORPORATED BY
REFERENCE INTO PART II OF THIS REPORT ON FORM 10-K.
(2) SPECIFIED PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE REGISTRANT'S
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 12, 1996
INCORPORATED BY REFERENCE INTO PART III OF THIS REPORT ON FORM 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS
Incorporated in Georgia in 1968, American Consumers, Inc. (the
"COMPANY"), operates six (6) supermarkets within a compact geographical
area that comprises Northwest Georgia, Northeast Alabama, and Southeast
Tennessee.
All of the Company's supermarkets are operated under the name "Shop-
Rite." All of the Company's supermarkets are self-service and are
engaged in the retail selling of groceries including meats, fresh
produce, dairy products, frozen foods, bakery products, tobacco
products, and miscellaneous other non-food items. The Company's
supermarkets feature national brand merchandise with only a minor part
of sales from controlled-label, private-label or generic merchandise.
"Controlled-label" or "private-label" merchandise is merchandise
purchased from national or local suppliers under a trade name chosen by
the wholesaler supplying the merchandise. The Company's supermarkets
offer milk and certain dairy products, as well as frozen vegetables and
jellies, under the controlled-labels "Hyde Park," "Rainbow" and
"Marquee." Bread and related bakery items are also offered as
controlled-label groceries.
During the fiscal year ended June 1, 1996, Company's major supplier of
staple groceries was Fleming Co., Inc. ("FLEMING") formerly, Malone &
Hyde, Inc., with its principal corporate offices in Oklahoma City,
Oklahoma. For the fiscal year ended June 1, 1996, approximately 75% of
the Company's total inventory purchases of $23,802,567 were made from
Fleming. Prior years purchases from Fleming were approximately 69%.
One of the Company's stores was supplied by another wholesaler for
about five months of the 1995 year. The inventory purchases from
Fleming covered all lines of the Company's groceries. Fleming was the
Company's principal supplier of tobacco products and meat products.
Purchases from Specialty Produce Company, a local produce supplier,
account for the majority of the Company's produce purchases.
Various local suppliers within the geographical area served by the
Company's supermarkets provide the Company with approximately half of
its requirements of certain perishable items, including produce, and
account for approximately 25% of the Company's total inventory
purchases. The Company believes that there are other adequate and
convenient sources of groceries, including several area and local
suppliers, which could meet its needs. Accordingly, the Company is not
dependent upon any particular supplier for its requirements of
groceries.
The supermarket industry is highly competitive, and the principal
method of competition has been, in previous years, the pricing of
groceries. The Company's current major competitors now
<PAGE>
include various local and three regional chains. The nature of such
price competition now includes the sale of selected items at below cost
prices as "loss-leaders" or "advertised specials", the practice of
"double couponing" or matching coupon discounts with additional cash
discounts, as well as the sale of certain main line items at prices
below the Company's wholesale cost. The Company believes that its
major competitors have been and are able to obtain preferential
treatment from suppliers in the form of advertising allowances, lower
prices and other concessions not available to the Company which put the
Company at a competitive disadvantage. The Company will continue to
strive to remain competitive; however, the Company's current major
competitors are much larger operations than the Company and, it
believes, are in a better position to withstand prolonged price
competition. The two locations closed during the 1992-1993 fiscal year
were closed in response, primarily, to intense price competition. As
part of its response to such price competition, the Company seeks to
retain supermarket locations in areas where competition from larger
chains is less direct.
Backlog is not a significant factor in the business of the
Company.
The Company employs approximately 97 full-time employees and
approximately 101 part-time and seasonal employees.
The Company believes it is in compliance with all federal, state
and local laws relating to environmental protection. No capital
expenditures for equipment relating to environmental protection are
presently anticipated.
The Company is engaged in a single line of business; namely, the
retail, self-service grocery business which is not divisible into
separate segments. The following table sets forth information for the
last three (3) fiscal years as to the total sales and revenue of the
Company contributed by each class of products which contributed a
significant percentage of the total retail sales and revenues of the
Company in the last three (3) fiscal years. 1995 consisted of 53 weeks
while 1996 and 1994 consisted of 52 weeks.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Meat $ 6,763,852 $ 6,698,449 $ 6,624,137
Produce 1,915,763 1,875,671 1,907,945
Grocery & Non-
Food Items 20,606,311 20,260,751 20,009,512
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
The executive offices of the Company are located in an 1,800 square-
foot office building on Battlefield Parkway in Fort Oglethorpe,
Georgia, which the Company holds under a lease for a term of three
years, expiring in November 1998, with a one year option to renew
through November, 1999.
The Company's supermarkets are located in Ringgold, LaFayette,
Chatsworth, and Chickamauga, Georgia; Stevenson, Alabama; and Dayton,
Tennessee. All of the six locations are leased from unaffiliated
landlords. These leases are presented below:
<TABLE>
<CAPTION>
Square Current Lease Renewal
Location Footage Term Options
- -------- ------- ----------------- -------------
<S> <C> <C> <C>
Ringgold, GA 14,400 12/01/92 - 11/30/97 2-5 yr. terms
LaFayette, GA 20,500 02/26/92 - 01/31/02 3-5 yr. terms
Chatsworth, GA 24,360 04/29/88 - 04/28/03 3-5 yr. terms
Chickamauga, GA 13,840 04/07/86 - 12/31/98 3-5 yr. terms
Stevenson, AL 23,860 06/01/94 - 05/31/04 3-5 yr. terms
Dayton, TN 23,004 08/01/92 - 07/31/02 2-5 yr. terms
119,964
</TABLE>
The supermarkets in Ringgold, LaFayette, and Chatsworth, Georgia;
Stevenson, Alabama; and Dayton, Tennessee, are located in strip
shopping centers. The store in Chickamauga, Georgia, is free standing.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is
a party, or of which any of its property is the subject, nor have any
material legal proceedings been terminated during the fourth quarter of
the Company's fiscal year.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE COMPANY
The Company's Board of Directors appoints the Company's Executive
Officers for a term of one year. The names, ages, offices held with
the Company, business experience during the past five years, and
certain directorships held by each of the Company's Executive Officers
are set forth in the following table:
<PAGE>
<TABLE>
<S> <C> <C>
Name and Year Office(s) Presently
First Elected as Held, Business Experience
Executive Officer and Certain Directorships Age
Michael A. Richardson Chairman of the Board of 50
1977 Directors, President, Chief
Executive Officer, member of
the Executive Committee of
the Board of Directors.
Virgil Bishop Vice-President, Director, 57
1974 member of the Executive
Committee and the Board
of Directors.
Paul R. Cook Executive Vice-President, 46
1987 Treasurer, Chief Financial
Officer, Director, member of
the Executive Committee and
the Board of Directors.
Director of Capital Bank,
Fort Oglethorpe, Georgia
since May 1993.
James E. Floyd Vice-President, member of 52
1991 the Executive Committee
(ex-officio). From 1966 to
1991, Mr. Floyd was
Grocery Supervisor for
the Company.
Reba S. Southern Secretary, member of the 43
1991 Executive Committee (ex-
officio). From 1972 to 1991,
Mrs. Southern was Administra-
tive Assistant for the Company.
</TABLE>
PART II
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ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The information required by this Item is incorporated herein by
reference to page 4 of the Company's annual report to security holders
for the fiscal year ended June 1, 1996.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by
reference to page 3 of the Company's annual report to security holders
for the fiscal year ended June 1, 1996.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by
reference to pages 5 through 7 of the Company's annual report to
security holders for the fiscal year ended June 1, 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by
reference to pages 8 through 19 of the Company's annual report to
security holders for the fiscal year ended June 1, 1996.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information concerning the Company's Executive Officers is set forth in
Part I of this report on Form 10-K under the caption "Executive
Officers of the Company." The remaining information required by this
Item is incorporated herein by reference to the Company's definitive
proxy statement filed with the Securities and Exchange Commission
pursuant to Regulation 14A for the Company's Annual Meeting of
Shareholders to be held September 12, 1996, under the heading
"INFORMATION ABOUT NOMINEES FOR DIRECTOR."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to the Company's definitive proxy statement filed with the
Securities and Exchange Commission pursuant to Regulation 14A for the
Company's Annual Meeting of Shareholders to be held September 12, 1996,
under the headings "EXECUTIVE COMPENSATION" and "COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated herein by
reference to the Company's definitive proxy statement filed with the
Securities and Exchange Commission pursuant to Regulation 14A for the
Company's Annual Meeting of Shareholders to be held September 12, 1996,
under the heading "PRINCIPAL SHAREHOLDERS."
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by
reference to the Company's definitive proxy statement filed with the
Securities and Exchange Commission pursuant to Regulation 14A for the
Company's Annual Meeting of Shareholders to be held September 12, 1996,
under the headings "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION IN COMPENSATION DECISIONS" AND "CERTAIN TRANSACTIONS."
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. The following Financial Statements included in the Company's
1996 Annual Report to the security holders for the fiscal
year ended June 1, 1996, are incorporated by reference in
Item 8 hereof:
- Report of Independent Accountants
- Balance Sheets - June 1, 1996 and June 3, 1995
- Statements of Income and Retained Earnings - Fiscal
Years Ended June 1, 1996; June 3, 1995; and May 28,
1994
- Statements of Cash Flows - Fiscal Years Ended June 1,
1996; June 3, 1995; and May 28, 1994
- Notes to Financial Statements
2. None of the schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are required under the related
instructions, or else are inapplicable to the Company, and
therefore no such schedules have been filed.
3. The following exhibits are either incorporated by reference
or attached to and made a part of this report:
Exhibit 3 Articles of Incorporation and By-Laws.
Incorporated by reference to Exhibit 3
to Form 10-K for the year ended May 29,
1993.
Exhibit 10(a) Line of Credit Loan Agreement, related Note
and Security Agreement dated as of August
1992 by and between the Company and Wachovia
Bank of Georgia, N.A.
<PAGE>
Incorporated by reference to Exhibit 10(a) to
Form 10-K for the year ended May 29, 1993.
Exhibit 10(b) Financial Management Account Investment/
Commercial Loan Access Agreement dated
October 1, 1993, Amending Line of Credit Loan
Agreement dated as of August 1992 by and
between the Company and Wachovia Bank of
Georgia, N.A. Incorporated by reference to
Exhibit 10(b) to Form 10-K for the year ended
June 3, 1995.
Exhibit 10(c) Note and Security Agreement, together with
related Addendum to Financial Management
Account Investment/ Commercial Loan Access
Agreement between the Company and Wachovia
Bank of Georgia, N.A., dated July 6, 1994.
Incorporated by reference to Exhibit 10(c) to
Form 10-K for the year ended June 3, 1995.
Exhibit 10(d) Letter Agreement dated December 5, 1994
amending Financial Management Account
Investment/Commercial Loan Access Agreement
between the Company and Wachovia Bank of
Georgia, N.A. Incorporated by reference to
Exhibit 10(d) to Form 10-K for the year ended
June 3, 1995.
Exhibit 10(e) Promissory Notes to related stockholder.
Incorporated by reference to Exhibit 10(d) to
Form 10-K for the year ended May 29, 1993.
Exhibit 10(f) Lease for the Company's Ringgold, Georgia
location. Incorporated by reference to
Exhibit 10(e) to Form 10-K for the year ended
May 29, 1993.
Exhibit 10(g) Lease Agreement for the Company's LaFayette,
Georgia location. Incorporated by reference
to Exhibit 10(f) to Form 10-K for the year
ended May 29, 1993.
Exhibit 10(h) Lease Agreement for the Company's Chatsworth,
Georgia location. Incorpor- ated by reference
to Exhibit 10(g) to Form 10-K for the year
ended May 29, 1993.
<PAGE>
Exhibit 10(i) Lease Agreement for the Company's
Chickamauga, Georgia location. Incorporated
by reference to Exhibit 10(h) to Form 10-K
for the year ended May 29, 1993.
Exhibit 10(j) Renewal Lease Agreement for the Company's
Stevenson, Alabama location. Incorporated by
reference to Exhibit 10(h) to Form 10-K for
the year ended May 28, 1994.
Exhibit 10(k) Lease Agreement for the Company's Dayton,
Tennessee location. Incorporated by
referenced to Exhibit 10(j) to Form 10-K for
the year ended May 29, 1993.
Exhibit 10(l) Lease Agreement for the Company's Trenton,
Georgia location. Incorporated by reference
to Exhibit 10(k) to Form 10-K for the year
ended May 29, 1993.
Exhibit 10(m) Lease Agreement for the Company's Executive
offices. Incorporated by reference to
Exhibit 10(l) to Form 10-K for the year ended
May 29, 1993.
Exhibit 10(n) Equipment Lease and Master License Agreement
dated March 31, 1995 between the Company and
Fleming Companies, Inc. pertaining to the
equipment and software for the Company's
electronic cash registers and scanning
equipment.
Exhibit 13 Annual Report to Shareholders for the Fiscal
Year ended June 3, 1995.
Exhibit 24 Consent of Messrs. Hazlett, Lewis & Bieter.
(b) The Company has not filed any report on Form 8-K during the last
quarter of the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: August 21, 1996 By: s/Michael A. Richardson
-----------------------
Michael A. Richardson
Chairman of the Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
s/Michael A. Richardson Chairman of the Board, August 21, 1996
- ----------------------- President and Chief
Michael A. Richardson Executive Officer
s/Paul R. Cook Executive Vice- August 21, 1996
- ----------------------- President, Chief
Paul R. Cook Financial Officer,
Treasurer (Chief
Accounting Officer) and
Director
s/Virgil E. Bishop Vice-President and August 21, 1996
- ----------------------- Director
Virgil E. Biship
s/John P. Price Director August 22, 1996
- -----------------------
John P. Price
s/Thomas L. Richardson Director August 22, 1996
- -----------------------
Thomas L. Richardson
s/Jerome P. Sims Director August 23, 1996
- -----------------------
Jerome P. Sims, Sr.
- ----------------------- Director August __, 1996
Herbert S. Willbanks
EQUIPMENT LEASE
THIS LICENSE AGREEMENT is made and entered into this 31st day of March,
1995, by and between Fleming Companies,Inc., an Oklahoma corporation
("Fleming'), and American Consumers, Inc. ("Retailer").
In consideration of the mutual terms and provisions
contained herein, Fleming and Retailer agree as follows:
1. Lease of Equipment. Fleming hereby leases to Retailer
the equipment ("Equipment") described in any Lease Schedule now
or hereafter attached to this Lease in accordance with the terms,
conditions and provisions of this lease and all Lease Schedules
now or in the future attached hereto. A Lease Schedule shall
become a part of this lease only when signed by both Retailer and
Fleming. The rent payable by Retailer to Fleming (the "Rent")
shall be the amount specified in each Lease Schedule for the
Equipment described therein. The term of this lease (the "Term")
shall also be as specified in each Lease Schedule with respect to
the Equipment described therein.
2. Other Terms. The terms, conditions and provisions
attached hereto are incorporated by references and are a part of
this lease.
Mike Richardson
FLEMING COMPANIES, INC. ---------------------------
(RETAILER'S NAME)
s/ Tina Baker s/ Michael A. Richardson
By ----------------------- By ------------------------
(Signature) (Signature)
Lead Accountant President
----------------------- ------------------------
(Title) (Title)
Address: Address:
American Consumers, Inc.
6301 Waterford Blvd. 418 Battlefield Drive
Oklahoma City, Oklahoma 73118 Fort Oglethorpe, Ga. 30742
PERSONAL GUARANTY
The undersigned hereby jointly and severally,
unconditionally and absolutely guarantee the due and punctual
performance by Retailer of all of its obligations under the above
and foregoing Equipment Lease. This Guaranty may be enforced
without first having recourse to the undersigned. The liability
under this Guaranty shall not be released, diminished, impaired,
reduced or affected by: (i) the taking or accepting of any other
security or guaranty; (ii) any release, surrender, exchange,
subordination or loss of any security at any time existing in
connection with the performance of the Equipment Lease; or (iii)
any partial release of the liability of the undersigned
hereunder. The undersigned agree that this Guaranty may be
enforced directly against the undersigned without the joinder of
any other party or parties and without first having sought relief
against any other party or parties. This Guaranty shall be
governed by, and construed in accordance with the laws of the
State of Oklahoma.
IN WITNESS WHEREOF, the undersigned have executed this
Guaranty contemporaneously with the Equipment Lease.
- ------------------------------
(Signature of Guarantor)
- ------------------------------
(Signature of Guarantor)
1
<PAGE>
TERMS AND CONDITIONS
1. TERM
The Term of this lease shown on the Lease Schedule shall
begin on the date Retailer is notified that the Equipment is
installed and ready to use. Acceptance of the Equipment by
Retailer shall be deemed to have been given ten (10) days after
delivery of the Equipment. This lease shall automatically be
extended at the end of the initial Term at Lessor's weekly
rentals then in effect (subject to annual adjustment as provided
herein) unless, at least sixty (60) days prior to the expiration
of the original term or any renewal term, Retailer or Fleming
gives written notice to the other party to terminate this lease
at the expiration of the then-current term. Each extension shall
be for a period of (1) year.
2. PRICES
The Rent and prices shown on the Lease Schedule and all
shipments made hereunder are F.O.B. Retailer's store designated
on the Lease Schedule. All transporation, rigging, installation,
insurance and other costs of delivery of the Equipment to and
from Retailer's store shall be paid by Fleming. Rent and prices
do not include applicable federal, state or local taxes, which
shall be paid by Retailer.
Rent also includes installation and initial training
charges, cost of maintenance provided under this lease (subject
to adjustment as provided hereafter), Fleming support described
herein, and, if the Equipment includes scanning equipment, host
support as provided herein. To the extent Rent includes cost of
maintenance, such costs may be adjusted annually by Fleming upon
at least thirty (30) days prior written notice to Retailer. At
the time of adjustment, if any, Fleming shall recalculate the
weekly rentals payable and notify Retailer of the adjustment
amount. The weekly Rental will be included in the statement sent
to Retailer by Fleming division servicing Retailer.
3. DELIVERY AND INSTALLATION
Fleming will arrange for delivery of the Equipment on or
about the date given to Retailer by Fleming after receipt and
acceptance by Fleming of a Lease Schedule from Retailer. Fleming
shall not be responsible for delays in delivery which are beyond
Fleming's reasonable control. Retailer shall undertake, at it's
own expense, to prepare and make available the installation site
for each unit of the Equipment. Retailer shall designate one
qualified employee and one alternate as Retailer's main point of
contact regarding delivery, installation, training and
maintenance. After delivery, Fleming shall install or cause to
be installed the Equipment.
4. LOCATION OF EQUIPMENT
All Equipment shall be kept and used only at the location
specified in the Lease Schedule. Fleming may, subject to its sole
discretion and approval upon at least thirty (30) days prior
written request from Retailer, submitted to Fleming's corporate
headquarters in Oklahoma City, Oklahoma, arrange for the
Equipment to be installed at another location owned and operated
by Retailer and serviced by Fleming, provided that there shall be
no interruption of the weekly Rent hereunder. Any relocation of
the equipment may result in a change in maintenance charges, as
determined by Fleming. The effective date of such change shall
be the date of installation and re-installation in such amounts
as are determined by Fleming shall be paid by Retailer.
5. RISK OF LOSS AND INSURANCE
During the Term, Retailer shall take good care of the
Equipment. Retailer shall be solely responsible for any loss of
or damage to the Equipment, except loss or damage caused solely by
the negligence of Fleming, its agents or representatives.
Retailer, at its own expense, shall insure the Equipment against
all risks with nationally recognized financially responsible
insurers in amounts not less than the fair market replacement
value of the Equipment. Retailer shall maintain public liability
and property damage insurance satisfactory to Fleming. Retailer
shall provide to Fleming satisfactory evidence of any insurance
so maintained, upon request. All such insurance so maintained
shall provide for thirty (30) days' prior written notice to
Fleming of any cancellation or reduction of coverage, shall insure
the interest of Fleming and Retailer in the Equipment, and shall
provide for payment of all Insurance proceeds to Fleming and
Retailer as their respective interests may appear.
6. TITLE
All equipment is owned by Fleming or is being leased by
Fleming from another company that owns such equipment. Retailer
will not pledge, mortgage, grant a security interest in, encumber
or attempt in any other manner to dispose of the Equipment or to
permit any liens or legal process to be incurred or levied on the
Equipment. Fleming may inspect the Equipment at Retailer's
premises during regular business hours. Retailer will not permit
the Equipment or any part thereof to become fixtures or a part of
Retailer's store premises (other than as leased personal
property).
7. DEFAULT AND REPOSSESSION
If Retailer defaults in making any payment hereunder or in
performing any other obligation required to be performed by
Retailer hereunder or in any other agreement between Retailer and
Fleming, then Fleming may terminate this lease and repossess the
Equipment. Fleming may in such event, in addition to any other
remedies available to Fleming hereunder or at law or in equity,
enter Retailer's premises for purposes of repossession; Retailer
hereby consents to such entry.
Also on default by Retailer, all Rent and other amounts
which would be payable for the remainder of the Term shall
immediately become due and payable. If it becomes necessary for
Fleming to employ the services of a collection agency or an
attorney by reason of Retailer's delinquency in paying Rent or
any other default under this lease, Retailer shall pay
reasonable charges, fees and expenses of such collection agency
or attorney to Fleming on demand. A default by Retailer under
this lease may be deemed by Fleming to be a default under any and
all other agreements, contracts and leases between Fleming or any
other of its affiliated companies and Retailer.
2
<PAGE>
8. SUPPORT
During the Term, Fleming shall provide support to Retailer,
which will include initial training and a help desk.
9. CONDITION OF EQUIPMENT
Equipment and parts may, at Fleming's option, be either new
or refurbished. All parts that are replaced by parts provided by
Fleming or manufacturer shall be the property of Fleming.
10. MAINTENANCE
Maintenance shall be provided by Fleming at charges and on
terms established by Fleming. Maintenance provided as a result
of any of the following conditions shall be subject to additional
charges for labor, travel expense and parts: alterations to the
Equipment which are not authorized in writing by Fleming; damage
resulting from accident, neglect, power surge or failure, or
operating environment not in conformance with the specifications
of Fleming or the manufacturer for electric power, air quality,
humidity or temperature; or events other than normal wear and
tear or defects in design, material or workmanship. Maintenance
services shall commence on the date of acceptance.
11. WARRANTY
Fleming warrants that the Equipment when installed, will be
in good working order. THIS CONSTITUTES THE SOLE WARRANTY MADE
BY FLEMING, EITHER EXPRESS OR IMPLIED, SUCH WARRANTY BEING
EXTENDED ONLY TO RETAILER AS ORIGINAL LEASEE. THERE ARE NO OTHER
WARRANTIES, EXPRESSED OR IMPLIED, WHICH EXTEND BEYOND THE FACE
HEREOF, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. FLEMING ALSO DISCLAIMS ANY
WARRANTIES AGAINST INFRINGEMENT, IT BEING UNDERSTOOD THAT THE
EQUIPMENT IS NOT MANUFACTURED OR MADE BY FLEMING. IN NO EVENT
SHALL FLEMING OR ITS ASSIGNS BE LIABLE FOR ANY INCIDENTAL,
CONSEQUENTIAL OR SPECIAL DAMAGES INCLUDING, WITHOUT LIMITATION,
RETAILER'S LOST PROFITS. RETAILER'S REMEDIES SHALL BE LIMITED TO
RETURN OF EQUIPMENT AND REFUND BY FLEMING OF RENTALS PAID DURING
THE TIME THE EQUIPMENT IS INOPERABLE OR TO REPAIR OR REPLACEMENT
OF ANY DEFECTIVE OR NONCONFORMING UNITS OR PARTS.
12. PROPRIETARY INFORMATION
Retailer agrees that any information, whether or not
protected by patent, which is identified as being proprietary to
Fleming or manufacturer and which is given to Retailer pursuant
to Fleming's performance under this lease, shall be treated by
Retailer as being proprietary to Fleming or manufacturer and
shall not be disclosed to any third party without the prior
written consent of Fleming. Any maintenance manuals which may be
supplied by Retailer are and contain proprietary information.
Retailer agrees not to reproduce, provide or otherwise make
available any of Fleming's or manufacturer's proprietary
information in any form to any person other than those employees
of Retailer at the location of the Equipment who have a need to
know consistent with Retailer's authorized use of such
information. Retailer will take appropriate action by
instruction, agreement or otherwise with its employees and other
persons permitted access to such proprietary information to
satisfy its obligations under this provision with respect to the
use, copying, security and protection of any proprietary
information.
13. SOFTWARE
Any software in any form supplied to Retailer by Fleming is
proprietary information and shall be treated as such. Any such
software is supplied by way of license under a separate agreement
and not by sale and shall remain the property of Fleming. Unless
Retailer obtains prior written consent from Fleming, Retailer
shall not use any such software on any equipment that is not
provided by Fleming.
14. INDEMNITY
Except for the gross negligence of Fleming, Retailer
indemnifies Fleming against, and holds Fleming harmless from any
and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities at law or in equity, including reasonable
attorney fees, arising out of, connected with or resulting from
this lease or the Equipment including, without limitation, the
manufacture (including strict liability), selection, purchase,
delivery, possession, condition, use operation or return thereof.
Retailer's obligations hereunder will survive the termination of
this lease with respect to acts or events occurring or alleged to
have occurred prior to the return of the Equipment to Fleming.
15. DESIGNATION OF OWNERSHIP
If at any time during the Term Fleming supplies Retailer
with labels, plates or other markings stating that the Equipment
is owned by Fleming or another company, Retailer shall affix and
keep them prominently displayed on the Equipment.
16. GOVERNING LAW
This lease and any Lease Schedule shall be governed by, and
construed in accordance with, the laws of the State of Oklahoma,
including the Oklahoma Uniform Commercial Code. All rights of
Fleming hereunder are cumulative and in addition to any rights
Fleming may have at law or in equity.
17. WAIVERS
Each shipment made pursuant to any Lease Schedule shall be
treated as a separate transaction. In the event of default by
Retailer, Fleming may decline to make any further shipments
without in any way affecting its rights under this lease. If,
despite any default by Retailer, Fleming elects to continue to
make shipments, its actions shall not constitute a waiver of any
default by Retailer or in any other way affect Fleming's legal
remedies for any such default.
18. SEVERABILITY
If any provision of this lease is held to be invalid,
illegal or unenforceable, the validity, legality and
enforceability of the remaining provision shall in no way be
affected or impaired thereby.
3
<PAGE>
19. NOTICES; AMENDMENTS
All notices, requests, demands or other communications
required or permitted to be given hereunder shall be in writing
and shall be directed to Fleming or Retailer at their respective
addresses set forth herein unless otherwise specified in writing.
No amendment, waiver or other modification of this lease may be
made in any manner other than in writing. No notice, amendment,
waiver or other modification shall be effective against Fleming
unless it is signed by Fleming.
20. ACCEPTANCE AND AGREEMENT
This lease and any Lease Schedule are accepted by Fleming at
its corporate offices in Oklahoma City, Oklahoma.
21. FORCE MAJEURE
Fleming shall not be liable for any failure or delay in
delivery, installation, furnishing of materials or labor by
reason of an act of God, war, civil disturbance, strike, labor
disturbance, storm, fire, flood, transportation contingencies,
material or labor shortage, law, regulation, act or order of any
government or any agency or official thereof, or any other causes
not within its control.
22. ASSIGNMENT
RETAILER MAY NOT ASSIGN THIS LEASE OR ANY LEASE SCHEDULE, OR
ENCUMBER THE EQUIPMENT, WITHOUT THE PRIOR WRITTEN CONSENT OF
FLEMING. Any attempt by Retailer to assign its rights, duties or
obligations which arise under this lease or any Lease Schedule
without Fleming's prior written consent shall be void. Fleming
may assign or otherwise transfer any of its interests under this
lease or any Lease Schedule without notice to, or the consent of,
Retailer. If any Lease Schedule is so assigned or transferred,
Retailer agrees to (a) pay all amounts under the applicable Lease
Schedule to the assignee or transferee, notwithstanding any
defense, setoff or counterclaim Retailer may have against Fleming
or such assignee or transferee, (b) not require such assignee or
transferee to perform any of Fleming's obligations under the
applicable Lease Schedule unless expressly assumed in writing by
such assignee or transferee, and (c) execute such acknowledgments
concerning such assignments or transfers as may be requested by
Fleming. Retailer further agrees that such assignee or
transferee shall be entitled to all of Fleming's rights under the
applicable Lease Schedule. RETAILER ACKNOWLEDGES THAT ANY
ASSIGNMENT OR TRANSFER BY FLEMING SHALL NOT MATERIALLY CHANGE
RETAILER'S OBLIGATIONS UNDER THE ASSIGNED LEASE SCHEDULE.
23. HEADINGS
The headings used in this lease are used for convenience
only and are not to be used to interpret this lease.
24. MASTER LEASE
This is a master lease. The terms of any Lease Schedule
entered into pursuant to this lease are and will be subject to
all terms, conditions and provisions of this lease. Each Lease
Schedule shall be considered a separate and enforceable lease,
incorporating all of the terms, conditions and provisions of this
lease. In the event of a conflict between this lease and any
Lease Schedule, the Lease Schedule shall control, but only with
respect to the Equipment identified therein.
25. BUSINESS USE
Retailer acknowledges that Retailer is leasing the Equipment
primarily for business use, and not for personal, household or
family purposes.
26. TRUE LEASE
Fleming and Retailer intend this lease and any Lease
Schedules to be true leases and Retailer hereby authorizes
Fleming to file financial statements to give public notice of
this lease and any Lease Schedule. If this lease or any Lease
Schedule is deemed by a court of competent jurisdiction to be a
lease intended for security, Retailer grants Fleming a purchase
money security interest in the Equipment and all attachments,
accessories, additions, substitutions, products, replacements and
proceeds therefrom (collectively "Collateral"). Retailer agrees
to execute such financing statements or other documents as
Fleming deems necessary to perfect or protect Fleming's security
interests in the Collateral.
27. ENTIRE AGREEMENT
This lease and all applicable Lease Schedules constitute the
entire understanding and agreement between the parties with
respect to the subject matter hereof, superseding all prior
agreements, negotiations, materials, correspondence or contracts
relating to the subject matter hereof.
28. COUNTERPARTS
Fleming and Retailer agree that only one counterpart of a
Lease Schedule shall be marked "Original," and all other
counterparts shall be marked as, and shall be, duplicates. To the
extent that any Lease Schedule constitutes chattel paper (as
defined by the Uniform Commercial Code in effect in theapplicable
jurisdiction), no security interest in such Lease Schedule may be
created through the transfer or possession of any counterpart other
than the original.
4
<PAGE>
NOTE TO SEC: Due to the voluminous nature of the documents, the
Lease Schedules associated with this agreement have been
omitted. The registrant hereby undertakes to provide copies of such
schedules separately upon request of the Commission's staff.
<PAGE>
LICENSE NO. B1634-00
--------
MASTER LICENSE AGREEMENT
THIS LICENSE AGREEMENT is made and entered into this 31st day
of March 1995, by and between Fleming Companies, Inc., an
Oklahoma corporation ("Fleming"), and American Consumers, Inc.
("Retailer").
In consideration of the mutual terms and provisions
contained herein, Fleming and Retailer agree as follows:
1. GRANT OF LICENSE. Fleming hereby grants to Retailer a
nonexclusive and nontransferable right and license to use the
programs, materials and documentation (the "Licensed Programs and
Materials") described in any License Schedule now or hereafter
attached to this License Agreement in accordance with the terms,
conditions and provisions of this License Agreement and all License
Schedules now or in the future attached hereto. A License Schedule
shall become a part of this License Agreement only when signed by both
Retailer and Fleming. This license fees payable by Retailer to Fleming
(the "License Fees") shall be the amount specified in each License
Schedule for the Licensed Programs and Materials described
therein.
2. OTHER TERMS. The terms, conditions and provisions
attach hereto are incorporated by reference and are a part of
this License Agreement.
Mike Richardson
-------------------------------
FLEMING COMPANIES, INC. (RETAILER'S NAME)
s/Tina Baker s/Michael A. Richardson
By ________________________ By _________________________
(Signature) (Signature)
Lead Accountant President
_________________________ ________________________
(Title) (Title)
Address: Address:
American Consumers, Inc.
6301 Waterford Blvd. 418 Battlefield Drive
Oklahoma City, Oklahoma 23118 Fort Oglethorpe, GA 30742
PERSONAL GUARANTY
The undersigned hereby jointly and severally,
unconditionally and absolutely guarantee the due and punctual
performance by Retailer of all of its obligations under the above
and foregoing Equipment Lease. This Guaranty may be enforced
without first having recourse to the undersigned. The liability
under this Guaranty shall not be released, diminished, impaired,
reduced of affected by: (i) the taking or accepting of any other
security of guaranty; (ii) any release, surrender, exchange,
subordination or loss of any security at any time existing in
connection with the performance of the Equipment Lease; or (iii)
any partial release of the liability of the undersigned
hereunder. The undersigned agree that this Guaranty may be
enforced directly against the undersigned without the joinder of
any other party or parties and without first having sought relief
against any other party or parties. This Guaranty shall be
governed by, and construed in accordance with, the laws of the
State of Oklahoma.
IN WITNESS WHEREOF, the undersigned have executed this
Guaranty contemporaneously with the Equipment Lease.
_________________________________
(Signature of Guarantor)
_________________________________
(Signature of Guarantor)
5
<PAGE>
TERMS AND CONDITIONS
1. TERM.
The term of the license shown on the License Schedule shall
commence on the date Retailer is notified that the Licensed
Programs and Materials are installed and ready for use. Acceptance
of the Licenses Programs and Materials by Retailer shall be deemed
to have been given ten (10) days' after delivery of the Licensed
Programs and Materials.
2. LICENSE FEES
Retailer shall pay Fleming the License Fees in the amounts
set forth in the License Schedule. The License Fees include
installation, initial training and support desk. Retailer will
be responsible for any taxes applicable to the Licensed Programs
and Materials, including any applicable sales, use, or personal
property taxes, excluding only taxes on Fleming's net income. To
the extent the License Fees include costs of maintenance, such
costs may be adjusted annually by Fleming upon at least thirty
(30) days prior written notice to Retailer. At the time of
adjustment, if any, Fleming shall recalculate the License Fees
payable and notify Retailer of the adjusted amount. The License
Fees will be included in the statement sent to Retailer by the
Fleming division servicing Retailer.
3. DELIVERY AND INSTALLATION
Fleming will arrange for delivery of the Licensed Programs
and Materials on or about the date set forth in the License
Schedule. Delivery dates are approximate. Fleming shall not be
liable for delays in delivery which are beyond Fleming's
reasonable control. Upon delivery, Retailer shall assume all
risk of loss and damage to the Licensed Programs and Materials.
If the Licensed Programs and Materials or any portion are lost or
damaged while in Retailer's possession, replacement copies may be
obtained from Fleming at its rates then in effect. Retailer
shall designate one qualified employee and one alternate as
Retailer's main point of contact regarding delivery,
installation, training, and maintenance. After delivery, Fleming
shall install the Licensed Programs and Materials.
4. RESTRICTIONS ON USE
(a) Retailer's use of the Licensed Programs and Materials is
limited to installation and use on the equipment at the location
specified in the License Schedule. Retailer may not transfer the
Licensed Programs and Materials to other equipment or to another
location without Fleming's prior written consent. Any relocation
may result in a change in maintenance charges, as determined by
Fleming. The effective date of such charge shall be the date of
installation at the new location. In addition, the cost of de-
installation and re-installation in such amounts as are determined
by Fleming shall be paid by Retailer.
(b) Retailer shall not copy or reproduce any part of the
Licensed Programs and Materials. Additional copies of documentation
may be obtained at Fleming's rates then in effect. This license
includes only binary and/or object versions of the Licensed Programs
and Materials; the source code is not included.
(c) Retailer may not assign, sublicense, or otherwise
transfer its rights under this Agreement. Any attempted
assignment, sublicense, or transfer shall be void. Use of the
Licensed Programs and Materials is restricted to Retailer.
Retailer shall use the Licensed Programs and Materials only to
process its own data and only for its internal operations.
Retailer shall not resell or transfer any results obtained from
the Licensed Programs and Materials to any other person or
entity.
(d) With respect to Licensed Programs and Materials
utilized with equipment leased to Retailer by Fleming, the license
granted herein will terminate simultaneously with the termination
of the lease for such equipment.
5. OWNERSHIP AND CONFIDENTIALITY
Retailer's rights in the Licensed Programs and Materials are
only those of a licensee. Retailer agrees to use the Licensed
Programs and Materials only in accordance with this Agreement.
Retailer shall protect and maintain the confidentiality of the
Licensed Programs and Materials. Retailer shall maintain records
of the location of all copies of any part of the Licensed
Programs and Materials and shall take appropriate action, whether
by instruction, agreement, or otherwise, with its employees to
ensure the confidentiality and security of the Licensed Programs
and Materials. Retailer will promptly notify Fleming of any
unauthorized access to the Licensed Programs and Materials.
Retailer shall not modify or attempt to recreate any source code
from the Licensed Programs and Materials. If any of the
provisions of this paragraph are violated, Fleming may, in
addition to any other right or remedy available to Fleming,
terminate this Agreement immediately and without notice. In such
event, Fleming shall have no obligation to return or otherwise
account to Retailer for Licenses Fees or other amounts paid by
Retailer before termination. Fleming may also seek injunctive
relief to enforce this paragraph.
6. DEFAULT AND TERMINATION
If Retailer defaults in making any payment hereunder or in
performing any other obligation required to be performed by
Retailer hereunder or in any other agreement between Retailer and
Fleming or any of its affiliated companies, then Fleming may
terminate this Agreement and the license granted hereunder. On
termination of the license for any reason, Fleming may, in
addition to any other remedies available to Fleming under this
Agreement or at law or in equity, enter Retailer's premises for
purposes of repossession; Retailer hereby consents to such entry.
A default by Retailer under this Agreement may be deemed by
Fleming to be a default under any
6
<PAGE>
and all other agreements, contracts and leases between Fleming and
Retailer. Upon termination for any reason, Retailer shall make no
further use of the Licensed Programs and Materials and shall return
to Fleming everything supplied to Retailer hereunder. Additionally,
Retailer shall provide a written certification to Fleming that
this provision has been satisfied.
7. PROGRAM MAINTENANCE SERVICES AND TRAINING
During the term, Fleming shall obtain required maintenance
services for Retailer from third parties at additional expense to
Retailer. Also, Fleming will provide help desk services to
Retailer. Maintenance and help desk services shall terminate with
respect to any unit of the Licensed Programs and Materials
simultaneously with termination of this Agreement with respect to
such unit. Maintenance services provided as a result of any of
the following conditions shall be subject to additional charges
for labor or travel expense: alterations to the Licensed
Programs and Materials which are not authorized in writing by
Fleming; damage resulting from accident, neglect, power surge or
failure, or operating environment not in conformance with the
specifications of Fleming or the manufacturer for electric power,
air quality, humidity or temperature; or events other than normal
wear and tear or defects in design, material or workmanship.
Fleming shall make a reasonable effort to correct material
defects confirmed by it, but does not guarantee service results
or represent or warrant that all software defects will be
corrected. Maintenance and help desk services shall commence
on the date of acceptance.
8. WARRANTY
Fleming warrants that it has the right to grant this license
to the Licensed Programs and Materials. THIS CONSTITUTES THE
SOLE WARRANTY MADE BY FLEMING, EITHER EXPRESS OR IMPLIED, SUCH
WARRANTY BEING EXTENDED ONLY TO RETAILER AS ORIGINAL LICENSEE.
THERE ARE NO OTHER WARRANTIES, EXPRESSED OR IMPLIED, WHICH EXTEND
BEYOND THE FACE HEREOF, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO
EVENT SHALL FLEMING OR ITS ASSIGNS BE LIABLE FOR ANY INCIDENTAL,
CONSEQUENTIAL OR SPECIAL DAMAGES INCLUDING, WITHOUT LIMITATION,
RETAILER'S LOST PROFITS. RETAILER'S REMEDIES SHALL BE LIMITED TO
REPAIR OR REPLACEMENT OF ANY DEFECTIVE OR NONCONFORMING
COMPONENTS OF THE LICENSED PROGRAMS AND MATERIALS.
9. RETAILER RESPONSIBILITY
Retailer shall be exclusively responsible for (i)
establishing adequate backup plans based on alternate procedures
to protect against the possibility of loss due to a Licensed
Programs and Materials malfunction, and (ii) implementing
sufficient procedures and checkpoints to satisfy its requirements
for accuracy of input and output, as well as restart and recovery
in the event of a malfunction.
10. INDEMNITY
Except for the gross negligence of Fleming, Retailer
indemnifies Fleming against and holds Fleming harmless from any
and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities at law or in equity, including reasonable
attorney fees, arising out of, connected with or resulting from
this license or the Licensed Programs and Materials including,
without limitation, the manufacture (including strict liability),
selection, purchase, delivery, possession, condition, use,
operation or return thereof. Retailer's obligations hereunder
will survive the termination of this Agreement with respect to
acts or events occurring or alleged to have occurred prior to the
return of the Licensed Programs and Materials to Fleming.
11. GOVERNING LAW
This Agreement and any License Schedule shall be governed
by, and construed in accordance with, the laws of the State of Oklahoma.
All rights of Fleming hereunder are cumulative and in addition to any
rights Fleming may have at law or in equity.
12. WAIVERS
Each shipment made pursuant to any License Schedule shall be
treated as a separate transaction. In the event of default by
Retailer, Fleming may decline to make any further shipments
without in any way affecting its rights under this Agreement.
13. SEVERABILITY
If any provision of this Agreement is held to be invalid,
illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be
affected or impaired thereby.
14. NOTICES; AMENDMENTS
All notices, requests, demands or other communications
required or permitted to be given hereunder shall be in writing
and shall be directed to Fleming or Retailer at their respective
addresses set forth herein unless otherwise specified in writing.
No amendment, waiver or other modification of this Agreement may
be made in any manner other than in writing. No notice,
amendment, waiver or other modification shall be effective
against Fleming unless it is signed by Fleming.
15. ACCEPTANCE AND AGREEMENT
This Agreement and any License Schedule are accepted by
Fleming at is corporate offices in Oklahoma City, Oklahoma.
7
<PAGE>
16. FORCE MAJEURE
Fleming shall not be liable for any failure or delay in
delivery, installation, furnishing or materials or labor by
reason of an act of God, war, civil disturbance, strike, labor
disturbance, storm, fire, flood, transportation contingencies,
material or labor shortage, law, regulation, act or order of any
government or any agency or official thereof, or any other causes
not within its control.
17. ASSIGNMENT
Retailer may not assign this license or encumber the Licensed
Programs and Materials without the prior written consent of
Fleming. Any attempt to assign any rights, duties or obligations
which arise under this Agreement without such written consent
shall be void.
18. HEADINGS
The headings used in this Agreement are for convenience only
and not to be used to interpret this Agreement.
19. MASTER LICENSE
This is a master license. The terms of any License Schedule
entered into pursuant to this Agreement are and will be subject
to all terms, conditions and provisions of this Agreement. Each
License Schedule shall be considered a separate and enforceable
license, incorporating all of the terms, conditions and
provisions of this Agreement. In the event of a conflict between
this Agreement and any License Schedule, the License Schedule
shall control, but only with respect to the Licensed Programs and
Materials identified therein.
20. LICENSE AS SUBLICENSE
Retailer understands that certain of the Licensed Programs
and Materials are licensed to Fleming by third parties and are
being sublicensed to Retailer by Fleming. In such cases, this
agreement establishes a sublicense, and the rights and license
granted to Retailer are subject in all respects to the terms of
the license granted to Fleming.
21. ENTIRE AGREEMENT
This Agreement and all applicable License Schedules
constitute the entire understanding and agreement between the
parties with respect to the subject matter hereof, superseding
all prior agreements, negotiations, materials, correspondence or
contracts relating to the subject matter hereof.
8
<PAGE>
NOTE TO SEC: Due to the voluminous nature of the documents, the
License Schedules associated with this agreement have been
omitted. The registrant hereby undertakes to provide copies of such
schedules separately upon request of the Commission's staff.
[ACI LOGO]
American
Consumers,
Inc.
1996
Annual
Report
<PAGE>
[ACI LOGO] American Consumers, Inc.
P.O.Box 2328
Fort Oglethorpe, Georgia 30742
Phone 861-3347
Fax 861-3364
TO OUR STOCKHOLDERS
Sales for the 52-week fiscal year ended June 1, 1996, were
$29,285,926. The Company operated six stores during the fiscal
years ended June 1, 1996, and June 3, 1995. Net profits for the
fiscal year were $235,951 as compared to net profits of $172,116
for the previous year. Earnings per share were 25 cents for the
current fiscal year as compared to 18 cents per share for the
previous fiscal year. Book value per share at June 1, 1996, and
June 3, 1995, was $2.74 and $2.52, respectively.
The Board of Directors elected to pay dividends during the
year. A dividend of 2 cents per share was paid in the first two
quarters of the current year. The Company repurchased 2,791 shares
of common stock from certain unaffiliated shareholders in response
to several unsolicited requests during the year.
Entry into the Company's trade area by Winn Dixie and Save-A-
Lot, and further expansion of Food Lion, a foreign-owned
competitor, has caused Ingles and Bi-Lo to react negatively by
further reducing prices and increasing advertising and promotional
activity. These developments have resulted in further pressures on
the Company's sales and profits.
Despite intense competition, the Company has managed to
sustain its profitability during the year through carefully
controlling costs and managing prices.
It is difficult to anticipate the effect of current and future
events and actions in the marketplace, but management intends to
continue its efforts to maintain the Company's profitability for
the wellbeing of its shareholders, employees, and customers.
Your support is very much appreciated.
Sincerely,
AMERICAN CONSUMERS, INC.
/s/ Michael A. Richardson
Michael A. Richardson
Chairman & C.E.O.
1
<PAGE>
BOARD OF DIRECTORS CORPORATE OFFICERS CORPORATE INFORMATION
VIRGIL BISHOP (1) MICHAEL A. RICHARDSON EXECUTIVE OFFICES
Vice President Chairman of the Board, P.O. Box 2328
American Consumers, Inc. Chief Exec. Officer Fort Oglethorpe, GA 30742
and President
PAUL R. COOK(1) PAUL R. COOK AUDITORS
Exec. Vice-President Exec. Vice-President Hazlett, Lewis & Bieter,
and Treasurer and Treasurer PLLC
American Consumers, Inc. Tivoli Center, Suite 300
701 Broad Street
Chattanooga, TN 37402
JOHN PRICE(2)(3) JAMES E. FLOYD(1) COUNSEL
Pharmacist (Retired) Vice-President Witt, Gaither & Whitaker,P.C.
1100 SunTrust Bank Building
Chattanooga, TN 37402
MICHAEL A. RICHARDSON(1) VIRGIL BISHOP 10-K REPORT
Chairman of the Board, Vice-President American Consumers, Inc.'s
Chief Exec. Officer annual report on Form 10-K
and President as filed with TheSecurities
American Consumers, Inc. and Exchange Commission is
available to stockholders
free of charge upon written
THOMAS L. RICHARDSON(2)(3) REBA S. SOUTHERN(1) request to:
Chairman of the Board Secretary Corporate Secretary
Learning Labs, Inc. American Consumers, Inc.,
P.O. Box 2328,
JEROME P. SIMS, SR. (2)(3) Ft. Oglethorpe, GA 30742
Physician (Retired)
H. S. WILLBANKS (2)(3)
Former owner of Willbanks
Paint Center (Retired)
(1) Executive Committee (Mr. Floyd and Mrs. Southern are ex officio members of
the committee.)
(2) Audit Committee
(3) Compensation Committee
2
<PAGE>
AMERICAN CONSUMERS, INC.
FIVE-YEAR SUMMARY OF OPERATIONS
(In thousands, except per share amounts)
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------
<S> <C> <C> <C> <C> <C>
JUNE 1 JUNE 3 MAY 28 MAY 29 MAY 30
1996 1995 1994 1993 1992
------ ------- ------- ------ -------
NET SALES $29,286 $28,835 $28,542 $30,153 $31,522
------ ------ ------ ------- ------
COST AND EXPENSES:
Cost of goods sold 22,996 22,896 22,727 24,399 25,537
Operating, general and
administrative expenses 5,895 5,675 5,467 5,706 5,772
Interest expense 46 18 14 23 7
Other income, net ( 27) ( 41) ( 51) ( 12) ( 65)
----- ----- ---- ---- ----
Total.................. 28,910 28,548 28,157 30,116 31,251
Income before income taxes 376 287 385 37 271
------ ------ ----- ------ -------
INCOME TAXES:
Federal 119 99 123 3 79
State 21 16 23 1 15
------ ------ ----- ------ ------
Total 140 115 146 4 94
------ ------ ----- ------ ------
NET INCOME $ 236 $ 172 $ 239 $ 33 $ 177
====== ====== ===== ====== ======
PER SHARE AMOUNTS:
Net income $ .25 $ .18 $ .25 $ .03 $ .19
====== ====== ===== ====== ======
Cash dividends......... $ .04 $ .08 $ .04 $ 0 $ .08
====== ====== ===== ====== ======
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 926 933 944 944 944
====== ====== ===== ====== ======
TOTAL ASSETS $ 4,503 $ 3,737 $ 3,808 $ 3,560 $ 3,768
====== ====== ====== ====== =======
OBLIGATIONS UNDER CAPITAL
LEASE AGREEMENTS $ 498 $ 0 $ 0 $ 0 $ 0
====== ====== ====== ====== =======
</TABLE>
3
<PAGE>
MARKET AND DIVIDEND INFORMATION
The Company's common stock is traded in the over-the-counter
market. The approximate number of record holders of the Company's
common stock at June 1, 1996, was 940. The following table gives
the range of high and low bid quotations and dividends for each
quarterly period for the two most recent fiscal years.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Bid Prices Asked Prices Dividends
- -----------------------------------------------------------------
High Low High Low Per Share
----- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C>
1996
- ----
First Quarter None None None None $0.02
- ---------------------------------------------------------------
Second Quarter None None None None $0.02
- ---------------------------------------------------------------
Third Quarter $0.50 $0.50 None None None
- ---------------------------------------------------------------
Fourth Quarter $0.50 $0.50 None None None
- ---------------------------------------------------------------
1995
- ----
First Quarter None None None None $0.02
- ---------------------------------------------------------------
Second Quarter None None None None $0.02
- ---------------------------------------------------------------
Third Quarter None None None None $0.02
- ---------------------------------------------------------------
Fourth Quarter None None None None $0.02
- ---------------------------------------------------------------
</TABLE>
The information set forth in the above table is supplied
through the National Quotation Bureau, Inc. where available.
There is no established public trading market for the
Company's stock. The market-makers as of June 1, 1996, are:
Carr Securities Corporation New York (800) 221-2243
Hill Thompson Magid & Co. New Jersey (800) 631-3083
Paragon Capital Corporation Boca Raton (800) 521-8877
Chicago Corporation Chicago (800) 621-1674
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company experienced an after-tax profit in its fiscal year
ended June 1, 1996, of $235,951 as compared to a profit of $172,116
for the prior fiscal year. Net sales for the current 52-week
fiscal year increased approximately 1.6% from net sales for the
previous 53-week fiscal year.
The Company's gross margin increased slightly to 21.48% during
the past year versus 20.60% for fiscal year 1995 and 20.37% for
fiscal year 1994. This increase is attributable to efficiencies
resulting from the installation of scanning registers and check-in
equipment in the receiving department in all stores during the past
fiscal year, as well as, progressively passing price increases
through to the retail level, to the extent permitted by
competition. The Company utilizes a retail inventory system in all
stores which is designed to reduce inventory levels and increase
gross margin.
The Company's Operating, General and Administrative Expenses
for the fiscal year ended June 1, 1996, increased from the previous
fiscal year. Such expenses as a percentage of sales remained
fairly consistent at 20.13% as compared to 19.68% for the past
fiscal year. Increases in certain expenses, particularly store
payroll, advertising, and depreciation and maintenance expense on
capital leases, account for most of the increase. Also, $20,000
was contributed in 1996 to the Company's 401(k) plan. Operating,
General and Administrative Expenses amounted to 19.15% of net sales
for fiscal 1994. Accordingly, the Company has continued to
experience a slight (less than 1%) increase in such expense over
its fiscal year ended in 1994.
The increase in interest expense is attributable to interest
expensed on capitalized leases in the amount of $27,539 during the
1996 year.
Other income for the past three (3) fiscal years consists of
the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Vendors' compensation $16,752 $16,025 $14,683
Gain (loss) on sale of assets (21,621) (12,455) 9,418
Interest income 25,364 27,515 21,193
Other income 7,852 10,389 6,017
------ ------ ------
Totals $28,347 $41,474 $51,311
======= ======= =======
</TABLE>
5
<PAGE>
Price competition remained a significant factor in the
Company's results of operations. The Company's major competitors
advertise a variety of mainline items at prices below the Company's
cost and sell at everyday low prices several entire categories of
items (pet foods, cereals, baby foods, etc.) at or below the
Company's cost. Accordingly, the Company seeks to improve its
profitability by obtaining the lowest cost for its goods and by
carefully managing its pricing. The Company's major supplier of
staple groceries is Fleming Co., Inc. ("Fleming") a supplier with
its principal corporate offices in Oklahoma City, Oklahoma.
INCOME TAXES
The provision for income taxes for the fiscal year ended June
1, 1996, was $140,457 or 37% of income before taxes. The provision
for income taxes for 1995 was 40% of income before taxes. The
provision for income taxes for fiscal 1994 was 38% of income before
taxes. The components of income taxes are detailed in Note 5 of the
Company's financial statements.
Federal and state income taxes are included as a current
liability for the current fiscal year and as a prepaid expense for
fiscal 1995.
INFLATION
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 Company's goods. When the
Company is forced to raise overall prices of its goods, the Company
attempts to preserve its market share by competitive pricing
strategies which emphasize weekly advertised specials.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its working capital requirements
principally through its cash flow from operations and short-term
borrowings. Short-term borrowing to finance inventory purchases is
provided by the Company's $300,000 line of credit with its principal
inventory supplier and an $800,000 line of credit from its lead
bank, Wachovia Bank, Dalton, Georgia. Short-term borrowings at June
1, 1996, and June 3, 1995, are unsecured notes payable totaling
$201,000 and $198,000, respectively, to a principal shareholder.
For detailed information concerning the Company's short-term
borrowings, see Note 3 to the Company's financial statements.
The ratio of current assets to current liabilities was 2.32 to
1 at the end of fiscal 1996, as compared to 2.37 to 1 at the end of
fiscal 1995, and 2.25 to 1 at the end of fiscal 1994. Cash and
temporary investments constituted 41.13% of total current assets at
June 1, 1996, as compared to 32.91% of total current assets at
June 3, 1995, and 42.78% at May 28, 1994. The decrease to 32.91%
was due primarily to cash outflows during the past fiscal year for
equipment, income taxes, dividends and redemption of common stock.
The Company joined an advertising cooperative during the 1995
fiscal year and, due to the cooperative's equipment problems,
collections of rebates were delayed at that year-end. This problem
has been corrected and, along with better collections of coupon
receivables, is the reason for the decrease in accounts receivable.
6
<PAGE>
The decrease in prepaid expenses was caused by a decrease in
prepaid rent and other prepaids for the periods presented.
Other assets decreased due to an investment in a warehouse
cooperative which matured in December 1995 .
Other current liabilities increased due to an increase in
accrued bonuses and other liabilities at June 1, 1996.
During the fiscal year ended June 1, 1996, retained earnings
increased as a result of the Company's profitability.
MATERIAL COMMITMENTS
Capital expenditures 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 Capital Guardian.
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. The
Company's contribution to the plan was $20,000 in 1996.
None of the Company's employees are represented by a union.
7
<PAGE>
[HL&B LOGO]
Hazlett, Lewis & Bieter, PLLC
CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
American Consumers, Inc.
Fort Oglethorpe, Georgia
We have audited the accompanying balance sheets of American
Consumers, Inc. as of June 1, 1996, and June 3, 1995, and the
related statements of income, changes in stockholders' equity, and
cash flows for each of the three years in the period ended June 1,
1996. 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 mentioned above
present fairly, in all material respects, the financial position of
American Consumers, Inc. as of June 1, 1996, and June 3, 1995, and
the results of its operations and its cash flows for each of the
three years in the period ended June 1, 1996, in conformity with
generally accepted accounting principles.
/S/Hazlett, Lewis & Bieter, PLLC
Chattanooga, Tennessee
July 10, 1996
8
<PAGE>
<TABLE>
<CAPTION>
AMERICAN CONSUMERS, INC.
STATEMENTS OF INCOME
For the Fiscal Years Ended June 1, 1996, June 3, 1995, and May 28, 1994
- -------------------------------------------------------------------------
1996 1995 1994
(52 Weeks) (53 Weeks) (52 Weeks)
<S> <C> <C> <C>
NET SALES $29,285,926 $28,834,871 $28,541,595
COST OF GOODS SOLD 22,996,383 22,895,821 22,727,130
---------- ---------- ----------
Gross profit 6,289,543 5,939,050 5,814,465
OPERATING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,895,329 5,675,490 5,467,002
---------- --------- ---------
Operating income 394,214 263,560 347,463
---------- --------- ---------
OTHER INCOME (EXPENSE)
Interest expense ( 46,153) ( 18,068) ( 13,862)
Other income 28,347 41,474 51,311
---------- --------- ---------
( 17,806) 23,406 37,449
---------- --------- ---------
Income before income taxes 376,408 286,966 384,912
FEDERAL AND STATE INCOME
TAXES (Note 5) 140,457 114,850 146,248
---------- --------- ---------
NET INCOME $ 235,951 $ 172,116 $ 238,664
=========== =========== ===========
EARNINGS PER SHARE $ .25 $ .18 $ .25
=========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 925,961 933,370 944,658
=========== =========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
9
<PAGE>
AMERICAN CONSUMERS, INC.
BALANCE SHEETS
June 1, 1996, and June 3, 1995
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ---- ------ ------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 606,399 $ 416,456
Securities purchased under agreement
to resell (Note 2) 371,150 187,700
Certificate of deposit (Note 3) 355,932 337,021
Accounts receivable 190,225 238,523
Inventories (Note 3) 1,663,304 1,599,435
Prepaid expenses 55,264 80,624
--------- ---------
Total current assets 3,242,274 2,859,759
--------- ---------
PROPERTY AND EQUIPMENT - at cost (Notes 3
and 4)
Leasehold improvements 180,945 180,945
Furniture, fixtures and equipment 2,675,647 2,114,642
--------- ---------
2,856,592 2,295,587
Less accumulated depreciation 1,614,687 1,458,153
--------- ---------
1,241,905 837,434
--------- ---------
OTHER ASSETS 18,491 39,442
--------- ---------
$ 4,502,670 $ 3,736,635
============ ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
10
<PAGE>
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 731,029 $ 718,368
Short-term borrowings (Note 3) 201,000 198,000
Obligations under capital leases,
current portion (Note 4) 109,102 0
Accrued sales tax 170,433 168,993
Federal and state income taxes 24,067 0
Other 161,585 122,912
--------- ---------
Total current liabilities 1,397,216 1,208,273
--------- ---------
DEFERRED INCOME TAXES (Note 5) 40,333 26,759
--------- ---------
OBLIGATIONS UNDER CAPITAL LEASE AGREEMENTS
(Note 4) 388,646 0
--------- ---------
DEFERRED INCOME (Note 6) 146,598 167,793
--------- ---------
STOCKHOLDERS' EQUITY (Note 3)
Nonvoting preferred stock - authorized
5,000,000 shares of no par value;
no shares issued 0 0
Nonvoting common stock - $.10 par value;
authorized 5,000,000 shares; no shares
issued 0 0
Common stock - $.10 par value; authorized
5,000,000 shares; shares issued of
924,653 in 1996 and 927,444 in 1995 92,465 92,744
Additional paid-in capital 771,088 773,415
Retained earnings 1,666,324 1,467,651
---------- ---------
2,529,877 2,333,810
---------- ---------
$ 4,502,670 $ 3,736,635
============ ============
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AMERICAN CONSUMERS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Fiscal Years Ended June 1, 1996, June 3, 1995, and May 28, 1994
- --------------------------------------------------------------------------
Additional
Common Paid-in Retained
Stock Capital Earnings Total
------ ----------- -------- -----
<S> <C> <C> <C> <C>
Balance, May 29, 1993 $94,483 $787,918 $1,170,572 $2,052,973
Net income for year 0 0 238,664 238,664
Cash dividends, $.04
per share 0 0 ( 37,793) ( 37,793)
Redemption of common stock ( 271) ( 2,259) ( 179) ( 2,709)
------ ------- -------- -------
Balance, May 28, 1994 94,212 785,659 1,371,264 2,251,135
Net income for year 0 0 172,116 172,116
Cash dividends, $.08
per share 0 0 ( 74,759) ( 74,759)
Redemption of common stock ( 1,468) ( 12,244) ( 970) ( 14,682)
------ ------- ------- --------
Balance, June 3, 1995 92,744 773,415 1,467,651 2,333,810
Net income for year. 0 0 235,951 235,951
Cash dividends, $.04
per share 0 0 ( 37,093) ( 37,093)
Redemption of common stock ( 279) ( 2,327) ( 185) ( 2,791)
----- ------- ------- ------
Balance, June 1, 1996 $92,465 $771,088 $ 1,666,324 $2,529,877
======= ======== =========== ========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
12
<PAGE>
<TABLE>
<CAPTION>
AMERICAN CONSUMERS, INC.
STATEMENTS OF CASH FLOWS
For the Fiscal Years Ended June 1, 1996, June 3, 1995, and May 28, 1994
- --------------------------------------------------------------------------
1996 1995 1994
(52 Weeks) (53 Weeks)(52 Weeks)
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $235,951 $172,116 $238,664
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 183,974 149,696 146,079
Deferred income taxes 13,574 9,117 13,931
(Gain) loss on sale of property and
equipment 21,621 12,175 ( 9,418)
Change in operating assets and
liabilities:
Accounts receivable 48,298 ( 82,971) ( 4,412)
Inventories ( 63,869) ( 58,386) 190,031
Prepaid expenses 25,360 ( 41,269) 680
Refundable income taxes 0 0 41,016
Other assets 20,951 ( 15,880) 12,534
Accounts payable 12,661 ( 31,248) ( 79,442)
Accrued sales tax ( 32,820) 46,841 7,405
Federal and state income taxes 24,067 (121,580) 121,580
Other accrued liabilities 72,933 ( 16,055) 25,454
------- ------- -------
Net cash provided by operating
activities 562,701 22,556 704,102
------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of certificate of deposit (355,932) (337,021) (323,391)
Proceeds from maturity of certificate
of deposit 337,021 323,391 313,075
Purchase of property and equipment ( 88,411) (272,045) ( 91,294)
Proceeds from disposal of property
and equipment 4,648 2,000 10,250
-------- ------- -------
Net cash used in investing
activities (102,674) (283,675) ( 91,360)
-------- ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term
borrowings 3,000 ( 20,000) ( 18,000)
Principal payments on obligations under
capital leases ( 49,750) 0 0
Cash dividends ( 37,093) ( 74,759) ( 37,793)
Redemption of common stock ( 2,791) ( 14,682) ( 2,709)
------- ------ ------
Net cash used in financing
activities ( 86,634) (109,441) ( 58,502)
-------- ------- ------
Net increase (decrease) in cash and
cash equivalents 373,393 (370,560) 554,240
Cash and cash equivalents at
beginning of year 604,156 974,716 420,476
-------- ------- -------
Cash and cash equivalents at end of year $977,549 $604,156 $974,716
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid (received) during the year for:
Income taxes $ 92,496 $232,203 ($27,384)
Interest 46,361 17,525 13,898
======== ======= ========
NONCASH FINANCING ACTIVITIES
Capital lease obligations incurred for
use of equipment $547,498 $ 0 $ 0
======== ======= ========
</TABLE>
The Notes to Financial Statements are an integral part of these
statements.
13
<PAGE>
AMERICAN CONSUMERS, INC.
NOTES TO FINANCIAL STATEMENTS
==========================================================================
Note 1. Nature of Business and Summary of Significant Accounting Policies
Nature of business:
The Company is engaged in a single line of business, the operation
of a chain of retail grocery stores. The stores are located in
Georgia, Tennessee, and Alabama and operate under the name of
Shop-Rite Supermarket.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash and cash equivalents:
For purposes of reporting cash flows, the Company considers all
highly-liquid debt instruments with an original maturity of three
months or less to be cash equivalents.
Inventories:
Inventories are stated at the lower of average cost or market.
Depreciation of property and equipment:
Depreciation is provided on the straight-line and declining-balance
methods at rates based upon the estimated useful lives of the various
classes of depreciable property.
Advertising costs:
Advertising costs are charged to operations when incurred.
Advertising costs charged to operations were $485,156, $465,683, and
$429,824 in 1996, 1995, and 1994, respectively.
Deferred income taxes:
Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax
assets or liabilities are expected to be realized or settled. As
changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Note 2. Securities Purchased Under Agreement to Resell
The Company invests excess funds in U.S. Government or U.S. Government
Agency securities which are purchased under an agreement to resell
(reverse repurchase agreement). The securities are purchased from a
bank but do not constitute deposits at the bank and are not insured by
the Federal Deposit Insurance Corporation. The bank maintains
possession of
14
<PAGE>
AMERICAN CONSUMERS, INC.
NOTES TO FINANCIAL STATEMENTS
=========================================================================
Note 2. Securities Purchased Under Agreement to Resell (continued)
the securities, but title of ownership passes to the Company according
to the terms of the agreement. The bank repurchases the securities
the business day immediately following the Company's purchase date.
The carrying amount of securities purchased under agreement to resell
approximates fair value. Risk of market value deterioration is
mitigated by the short-term nature of the transaction and the type of
securities purchased. Amounts outstanding under the agreement were
$371,150 at June 1, 1996, and $187,700 at June 3, 1995.
Note 3. Short-Term Borrowings
The Company had line-of-credit agreements with bank and a major
supplier totaling $1,100,000 at June 1, 1996, and June 3, 1995.
During 1996 and 1995, only the bank line of credit was used.
Amounts outstanding under the bank agreement bear interest at the
bank's base rate, and the maximum amount available is $800,000. The
line of credit is collateralized by a $355,932 certificate of deposit
owned by the Company. There were no amounts outstanding on this line
of credit at June 1, 1996, or June 3, 1995.
Amounts outstanding under the agreement with the major supplier bear
interest at the prime rate plus 3%, and the maximum amount available
is $300,000. Any outstanding debt under this agreement is
collateralized by inventory, equipment, and trade fixtures. The credit
agreement contains restrictions regarding the maintenance of minimum
minimum inventory and net worth levels.
Short-term borrowings at June 1, 1996, and June 3, 1995, consisted of
unsecured notes payable totaling $201,000 and $198,000, respectively,
to a principal stockholder. These notes provide for interest at .25%
below the bank's base rate and are payable on demand. The carrying
amount of short-term borrowings approximates fair value.
The weighted average interest rate on amounts outstanding under short-
term borrowings was 8.00% and 8.75% at June 1, 1996, and June 3, 1995,
respectively.
Note 4. Lease Commitments
Capital leases:
The Company leases cash registers and scanning equipment under
agreements which are classified as capital leases. The leased capital
assets included in property and equipment at June 1, 1996, totaled
$497,748 net of accumulated depreciation of $49,750. Depreciation
expense for leased capital assets is included in total depreciation
expense as a part of operating, general and administrative expenses in
the statements of income.
15
<PAGE>
AMERICAN CONSUMERS, INC.
NOTES TO FINANCIAL STATEMENTS
==========================================================================
Note 4. Lease Commitments (continued)
Capital leases: (continued)
Future minimum lease payments, by year and in the
aggregate, under noncancelable capital leases are as follows:
<TABLE>
<CAPTION>
Fiscal
Year Ending
<S> <C> <C>
1997 $158,079
1998 159,912
1999 141,083
2000 111,079
2001 48,166
--------
618,319
Less amount representing interest (120,571)
-------
Total obligation under capital
leases 497,748
Less current maturities of
obligation under capital leases (109,102)
-------
$388,646
========
</TABLE>
Operating leases:
The Company leases the facilities in which its retail grocery
operations are located under noncancelable operating leases which
expire at various dates through April 2003. Substantially all of
the leases include renewal options. The following is a schedule by
years of future minimum rental payments required under operating
leases that have initial or remaining noncancelable lease terms in
excess of one year as of June 1, 1996:
<TABLE>
<CAPTION>
Fiscal
Year Ending
<S> <C>
1997 $ 430,000
1998 404,800
1999 362,500
2000 244,900
2001 244,900
After 2001 343,900
----------
Total $ 2,031,000
</TABLE>
16
<PAGE>
AMERICAN CONSUMERS, INC.
NOTES TO FINANCIAL STATEMENTS
==============================================================================
Note 4. Lease Commitments (continued)
Operating leases: (continued)
Rental expense for the fiscal years ended June 1, 1996, June 3, 1995,
and May 28, 1994, is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ----- -----
<S> <C> <C> <C>
Minimum rentals $433,050 $465,396 $427,820
Contingent rentals based on sales 48,529 33,512 40,618
Less sublease rentals 0 0 ( 9,420)
Total $481,579 $498,908 $459,018
</TABLE>
Note 5. Federal and State Income Taxes
The components of income tax expense for the fiscal years ended June
1, 1996, June 3, 1995, and May 28, 1994, are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- -------
<S> <C> <C> <C>
Current tax expense:
Federal $107,697 $ 89,133 $111,917
State 19,186 16,600 20,400
------- ------- ------
126,883 105,733 132,317
------- ------- -------
Deferred tax expense:
Federal 11,284 9,103 11,116
State 2,290 14 2,815
------ ----- ------
13,574 9,117 13,931
------ ------- ------
Total income tax expense $140,457 $ 114,850 $146,248
======== ======== ========
</TABLE>
17
<PAGE>
AMERICAN CONSUMERS, INC.
NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------
Note 5. Federal and State Income Taxes (continued)
A reconciliation of income tax expense computed by applying the
U.S. Federal statutory rate to income before income taxes and
actual income tax expense is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Federal income tax expense
computed at the statutory rate $128,000 $ 94,600 $130,900
State income tax, net of federal
income tax benefit 14,000 11,300 14,800
Other ( 1,543) 8,950 548
-------- -------- -------
Total income tax expense $140,457 $114,850 $146,248
======== ======== =======
</TABLE>
The tax effects of significant temporary differences which comprise
the deferred tax assets and liabilities at June 1, 1996, and June 3,
1995, are as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Assets:
Deferred income ($ 55,649) ($65,954)
Other ( 4,673) ( 1,895)
Liabilities:
Depreciable basis of property and
equipment 100,655 94,608
-------- ------
$ 40,333 $26,759
========= =======
</TABLE>
Deferred taxes for 1996 result principally from amortization of
deferred income and depreciation of assets.
Note 6. Sale of Assets and Deferred Income
On April 29, 1988, the Company sold its strip shopping center
located in Chatsworth, Georgia. The strip shopping center
consisted of two separate buildings with a total of 42,900 square
feet. Approximately 18,540 square feet of the shopping center was
leased to others and approximately 24,360 square feet was used by
the Company for its retail grocery store.
Effective as of the date of sale, the Company leased back its
store location in the center for a period of 15 years. The
minimum annual rental payments of $91,350 are included in the
minimum annual rental payments of operating leases described in
Note 4. The gain resulting from the sale of these assets has been
deferred for financial reporting purposes and is being amortized
over the 15-year lease term.
18
<PAGE>
AMERICAN CONSUMERS, INC.
NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------
Note 7. Employee Benefit Plan
Effective January 1, 1995, the Company adopted a 401(k) employee
benefit plan covering substantially all employees who have met
minimum service and age requirements. The service and age
requirements were waived for the initial plan participants to
encourage participation. The Company's annual contribution is
discretionary. The Company's contribution to the plan was
$20,000 in 1996.
Note 8. Concentration of Credit Risk
The Company maintains a certificate of deposit and other deposit
accounts at financial institutions in amounts which exceed the
Federal Deposit Insurance Corporation (FDIC) insurance limit.
The total of deposits which exceeded the FDIC insurance limit was
$432,691 at June 1, 1996. The Company believes that maintaining
deposits in these financial institutions does not represent a
significant credit risk and that the Company benefits from
favorable banking relationships as a result of maintaining
deposits with these institutions.
19
EXHIBIT 24
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Annual Report (Form
10-K) for the year ended June 1,1996 of our report dated July 10, 1996,
with respect to the financial statements of American Consumers, Inc.
HAZLETT, LEWIS & BIETER, PLLC
Chattanooga, Tennessee
August 1, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICAN CONSUMERS, INC. FOR THE YEAR ENDED
JUNE 1, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-01-1996
<PERIOD-END> JUN-01-1996
<CASH> 962,331
<SECURITIES> 371,150
<RECEIVABLES> 190,225
<ALLOWANCES> 0
<INVENTORY> 1,663,304
<CURRENT-ASSETS> 3,242,274
<PP&E> 2,856,592
<DEPRECIATION> 1,614,687
<TOTAL-ASSETS> 4,502,670
<CURRENT-LIABILITIES> 1,397,216
<BONDS> 0
0
0
<COMMON> 92,465
<OTHER-SE> 2,437,412
<TOTAL-LIABILITY-AND-EQUITY> 4,502,670
<SALES> 29,285,926
<TOTAL-REVENUES> 29,285,926
<CGS> 22,996,383
<TOTAL-COSTS> 22,996,383
<OTHER-EXPENSES> 5,895,329
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,153
<INCOME-PRETAX> 376,408
<INCOME-TAX> 140,457
<INCOME-CONTINUING> 235,951
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 235,951
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
