<PAGE>
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 November 30, 1996
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, 1997
COMMON STOCK - $.10 PAR VALUE 922,222
NON VOTING COMMON STOCK - $.00 PAR VALUE 0
NON VOTING PREFERRED STOCK - $.00 PAR VALUE 0
Exhibit Index on Page 10
(1)
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------------------- --------------------------------
November 30, December 2, November 30, December 2,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $6,710,275 $7,217,438 $13,959,820 $14,502,059
COST OF GOODS SOLD 5,283,602 5,739,345 $10,961,859 11,497,333
------------ ------------ ------------ ------------
Gross Margin 1,426,673 1,478,093 2,997,961 3,004,726
OPERATING EXPENSES 1,439,866 1,455,486 2,904,675 2,928,874
------------ ------------ ------------ ------------
Operating Income (13,193) 22,607 93,286 75,852
OTHER INCOME (EXPENSE)
Interest income 9,884 7,115 21,043 12,163
Other income (expense) 14,064 13,157 27,628 25,096
Gain (Loss) on sale of assets 1,714 (5,792) (31,095) (5,792)
Interest expense (19,059) (4,686) (37,027) (9,633)
------------ ------------ ------------ ------------
Income Before Income Taxes (6,590) 32,401 73,835 97,686
PROVISION (BENEFIT) FOR
INCOME TAXES (2,198) 6,890 24,626 29,133
------------ ------------ ------------ ------------
NET INCOME (4,392) 25,511 49,209 68,553
RETAINED EARNINGS:
Beginning 1,719,925 1,492,129 1,666,324 1,467,651
Cash dividends (55,479) (18,544) (55,479) (37,093)
Redemption of common stock (161) (73) (161) (88)
------------ ------------ ------------ ------------
Ending 1,659,893 1,499,023 1,659,893 1,499,023
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
PER SHARE:
Net income ($0.005) $0.028 $0.053 $0.074
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Cash dividends ($0.060) ($0.020) ($0.060) ($0.040)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 924,274 927,330 923,895 927,263
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See Notes to Financial Statements
(2)
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED BALANCE SHEETS
November 30, June 1,
1996 1996
------------ -----------
--A S S E T S--
CURRENT ASSETS:
Cash $679,114 $606,399
Securities purchased under agreement
to resell 160,194 371,150
Certificate of deposit 365,033 355,932
Accounts receivable 153,239 190,225
Refundable income taxes 27,091 - - -
Inventories 1,747,415 1,663,304
Prepaid expenses 23,887 55,264
------------ -----------
Total current assets 3,155,973 3,242,274
------------ -----------
PROPERTY - At cost:
Property 2,859,641 2,856,592
Less accumulated depreciation 1,688,782 1,614,687
------------ -----------
Property - Net 1,170,859 1,241,905
------------ -----------
OTHER ASSETS 17,593 18,491
------------ -----------
TOTAL ASSETS $4,344,425 $4,502,670
------------ -----------
------------ -----------
- -LIABILITIES AND STOCKHOLDERS' EQUITY- -
CURRENT LIABILITIES:
Accounts payable $678,543 $731,029
Short-term borrowings 195,000 201,000
Obligations under capital leases, current portion 137,178 109,102
Accrued sales tax 69,715 170,433
Accrued income taxes - - - 24,067
Other accrued liabilities 154,687 161,585
------------ -----------
Total Current Liabilities 1,235,123 1,397,216
------------ -----------
DEFERRED INCOME TAX LIABILITY 52,018 40,333
------------ -----------
DEFERRED INCOME 136,000 146,598
------------ -----------
OBLIGATIONS UNDER CAPITALIZED LEASE AGREEMENTS 400,109 388,646
------------ -----------
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 922,222, and 924,650 92,222 92,465
Additional paid-in capital 769,060 771,088
Retained earnings 1,659,893 1,666,324
------------ -----------
Total Stockholders' Equity 2,521,175 2,529,877
------------ -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 4,344,425 4,502,670
------------ -----------
------------ -----------
See Notes to Financial Statements
(3) PAGE 3 OF 16 PAGES
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMER, INC.
CONDENSED STATEMENTS OF CASH FLOWS
TWENTY-SIX WEEKS ENDED
----------------------
November 30 December 2,
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995
----------- -----------
Net income $49,209 $68,553
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 155,874 77,997
Deferred income taxes 11,685 (4,340)
(Gain) loss on sale of property 31,095 5,792
Deferred income (10,598) (10,598)
Change in operating assets and liabilities:
Certificate of Deposit (9,101) (9,612)
Accounts receivable 36,986 33,090
Refundable income taxes (27,091) - - - -
Inventories (84,111) (164,221)
Prepaid expenses 31,377 (17,278)
Accounts payable (52,486) 84,732
Accrued sales tax (100,718) 5,579
Accrued income taxes (24,067) - - - -
Other accrued liabilities (6,898) 60,092
----------- -----------
Net Cash provided by (used in) operating activities 1,156 129,786
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property (25,207) (35,590)
Proceeds from disposal of property 9,000 2,500
Other 897 913
----------- -----------
Net cash used in investing activities (15,310) (32,177)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings (6,000) 178,528
Principal payments on obligations under capital leases (60,177) - - - -
Cash dividends (55,479) (37,093)
Redemption of common stock (2,431) (1,320)
----------- -----------
Net cash provided by (used in) financing activities (124,087) 140,115
----------- -----------
Net increase (decrease) in cash (138,241) 237,724
Cash and cash equivalents at beginning of period 977,549 604,156
----------- -----------
Cash and cash equivalents at end of period 839,308 841,880
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes 66,242 42,819
----------- -----------
----------- -----------
Interest 37,027 9,633
----------- -----------
----------- -----------
NONCASH FINANCING ACTIVITIES
Capital lease obligations incurred for use
of equipment $99,716 $ ----
----------- -----------
----------- -----------
See Notes to Financial Statements
(4) PAGE 4 OF 16 PAGES
<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.
Capital expenditures are not expected to exceed $100,000 during the current
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
decided at the Board of Directors meeting in January. The Board voted to
contribute $20,000 to the plan in January 1996.
None of the Company's employees are represented by a union.
(3) 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 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 $160,194 at November 30, 1996, and $371,150 at
June 1, 1996.
(5)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------ ------------------------
November 30, December 2, November 30, December 2,
1996 1995 1996 1995
------------ ----------- ------------ -----------
Sales $6,710,275 $7,217,438 $13,959,820 $14,502,059
% Sales Increase (Decrease) (7.03) 4.85 (3.74) 3.73
Gross Margin % 21.26 20.48 21.48 20.72
Operating and Administrative
Expense:
Amount 1,439,866 1,455,486 2,904,675 2,928,874
% of Sales 21.46 20.17 20.81 20.20
Net Income (Loss) (4,392) 25,511 49,209 68,553
Overall sales decreased 7.03% from sales for the same quarter last year.
This decrease is attributable to decreased sales at all of the Company's six
stores. Management believes that this decrease is primarily due to (1) the
opening of a new competitor at one location and (2) increased competition
experienced by two of the Company's other locations due to the presence of a
Wal-Mart Super Center in their area. The decreases at the other three locations
are less than three percent for the quarter. Management believes that the store
location which was impacted by the opening of a new competitor (which
represented the most significant component of the overall sales decrease) may
regain a portion of its lost volume once the competitor has completed the
initial phase of heavy sales promotions typically associated with the opening of
a new location in the grocery store industry. In addition to the installation
of scanning equipment, which has improved the Company's pricing efficiency and
its control of inventory costs, the Company continuously seeks to improve its
profitability by obtaining the lowest cost available for its goods and by
containing the expansion of its labor costs. The Company will also continue to
explore other means of improving results, including consideration of the
possible acquisition of additional store locations in areas where some of the
Company's larger competitors have not yet established a significant presence.
At present, the Company has no definite plans for any such acquisition.
Operating and administrative expense increased as a percent of sales
between the quarter and year to date periods presented. Increases in operating
expenses such as depreciation, due to the capital leases pertaining to the
Company's scanning equipment, and group insurance, due to the Company's having
absorbed the last premium increase rather than passing it on to employees, are
the reasons for the increased expense. Interest expense also increased as a
result of the recording of the capital leases.
Refundable income taxes at November 30, 1996 are a result of estimated
taxes paid exceeding the liability due. At June 1, 1996 a liability of $24,067
was recorded.
Inventories, up $84,111 from June 1, is consistent for this time of year.
At December 2, 1995 inventories were $1,763,656.
Accrued sales taxes have decreased due to the State of Georgia reducing the
sales tax rate on food by two percent, resulting in a smaller monthly liability
for the Company.
(6)
<PAGE>
Income Taxes:
The benefit for income taxes for the quarter ended November 30, 1996 was
$2,198 while the provision was $6,890 for December 2, 1995. 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.
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. Notes to stockholder, in the sum of $195,000 and $210,000 as of
November 30, 1996 and June 1, 1996 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.
The ratio of current assets to current liabilities was 2.56 to 1 at the end
of the latest quarter, November 30, 1996, as compared to 2.12 to 1 on December
2, 1995 and 2.32 to 1 at the end of the fiscal year ended June 1, 1996. Cash
and cash equivalents constituted 26.59% of the total current assets at November
30, 1996 as compared to 25.86% at December 2, 1995 and 30.15% at June 1, 1996.
During the quarter ended November 30, 1996 retained earnings decreased as a
result of the Company's net loss for the quarter.
(7)
<PAGE>
AMERICAN CONSUMERS, INC.
PART II OTHER INFORMATION
Item 6 EXHIBITS AND REPORTS OF FORM 8-K
(a) The following exhibits are filed as a part of the
report.
10(c) Note and Security Agreement between the
Company and Wachovia Bank of Georgia, N.A.,
dated October 21, 1996
10(d) Commitment letter dated October 22, 1996
between the Company and Wachovia Bank of
Georgia, N.A.
(11) Statement re: computation of per share
earnings.
(b) During the most recent quarter, the Company has
notfiled 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: 1/10/97 /s/ Michael A. Richardson
-------------- ------------------------------------
Michael A. Richardson
CHAIRMAN
(Principal Executive Officer)
Date: 1/10/97 /s/ Paul R. Cook
-------------- ------------------------------------
Paul R. Cook
EXECUTIVE VICE PRESIDENT - TREASURER
(Principal Financial Officer & Chief
Accounting Officer)
(9)
<PAGE>
EXHIBIT INDEX
Exhibit Sequential Page Number
- ------- ----------------------
10(c) Note and Security Agreement between the 11
Company and Wachovia Bank of Georgia,
N.A., dated October 21, 1996
10(d) Commitment letter dated October 22, 1996 13
between the Company and Wachovia Bank
of Georgia, N.A.
11 Statement re: computation of per share 16
earnings
<PAGE>
THIS NOTE IS A RENEWAL OF AN EXISTING NOTE BETWEEN THE BANK AND THE BORROWER.
NOTE AND SECURITY AGREEMENT [WACHOVIA LOGO]
Date October 21, 1996 $800,000.00
---------------- -----------
FOR VALUE RECEIVED, the undersigned (individually and collectively hereinafter
called the "Borrower") hereby promises to pay to the order of WACHOVIA BANK OF
GEORGIA, N.A. (hereinafter called the "Lender") at its office where borrowed, in
immediately available funds, the sum of EIGHT HUNDRED THOUSAND AND 00/100
dollars together with any unpaid interest hereon from date of advance, in
accordance with the terms contained in this Note and Security Agreement
(hereinafter referred to as the "Note"). The optional provisions applicable to
this Note are checked below.
REPAYMENT:
___ One payment in full of principal and unpaid interest due
___ On Demand
___ Payments of $ beginning and thereafter
until
when the entire principal amount then outstanding and all accrued but
unpaid interest shall be paid in full.
X On Demand * the principal amount set forth above or the unpaid principal
amount of all advances which the Lender actually makes hereunder to the
Borrower, whichever amount is less. Each advance and each payment made on
account of the principal thereof, shall be evidenced on an attachment
hereto; provided, however, any such notation or the failure of the Lender
or other holder to make any such notation shall not limit or otherwise
affect the obligation of the Borrower with respect to repayment of all
advances actually made hereunder. This Note and any attachment hereto
shall be used to record the outstanding principal balance advanced
hereunder until it is surrendered to the Borrower by the Lender, and it
shall continue to be used even though there may be periods prior to such
surrender when no amount of principal or interest is owing hereunder. If
advances of the principal amount hereof are to be made by Lender to the
Borrower after the date of this Note, Lender, at its sole discretion, is
hereby authorized to make such advances under this Note upon telephonic or
written communication of a borrowing request from any person representing
himself or herself to be the Borrower or, in the event the Borrower is a
partnership or corporation, a duly authorized officer or representative of
Borrower.
* Notwithstanding the above terms and conditions, principal shall be due
and payable on demand, but not later than October 1, 1997.**
INTEREST:
Payable: X in arrears; ___ in advance.
X in addition to the payments described above;
___ included in the payments described above.
Payable at the rate per annum of: X Prime Rate plus -0- %;
___ % of Prime Rate;
___ % Fixed;
___ Those rates which may be offered from time to time by the Lender and agreed
to by the Borrower and so noted by the Lender on an attachment hereto. In
the event of a good faith dispute among the parties to this Note as to rate
under this rate option, the rate shall be the Prime Rate, adjusted for any
changes in the Prime Rate as of the day such Prime Rate changes;
___ The rate(s) set forth in Schedule 1 attached to this Note and incorporated
herein by reference;
___ Those rates which have been offered by the Lender to the Borrower in the
Loan Agreement or Commitment Letter checked below, the provisions of which
shall determine such rates, the procedure for the selection of such rates
and the time periods for which such rates shall apply.
In no case shall interest exceed the maximum rate permitted by applicable law.
To the extent not prohibited by law, a late charge not to exceed 5% of the
payment amount shall be assessed on any payment remaining unpaid on the
fifteenth day after the payment due date.
ON THE DATE HEREOF, THE RATE OF INTEREST ON THIS NOTE, EXPRESSED IN SIMPLE
INTEREST TERMS, IS 8.25% PER ANNUM.
If the interest is based upon the Prime Rate, such interest rate will be
adjusted on:
X The day the Prime Rate changes; ___ Other .
Due: ___ On principal payment dates; X Other: THE FIRST DAY OF THE MONTH
BEGINNING NOVEMBER 1, 1996.
<PAGE>
Interest will be calculated on the basis of: X A year of 360 days and paid
for the actual number of days elapsed; ___ Other .
After demand or maturity (whether by acceleration or otherwise), as applicable,
interest on any unpaid balance hereof shall be payable on demand at a rate per
annum equal to 150% of the Prime Rate, or if greater, 2% above the rate
applicable prior to demand or maturity, adjusted for any changes in the Prime
Rate as of the day such Prime Rate changes, not to exceed the maximum rate
permitted by applicable law.
As used herein, "Prime Rate" refers to that interest rate so denominated and set
by the Lender from time to time as an interest rate basis for borrowings. The
Prime Rate is one of several interest rate bases used by the Lender. The Lender
lends at interest rates above and below the Prime Rate.
All payments on this Note shall be applied first to accrued interest, then to
principal, and then to late charges.
___ The terms and conditions in a Loan Agreement dated between the
parties hereto as the same shall be amended from time to time shall be
considered a part hereof to the same extent as if written herein.
X The terms and conditions in a Commitment Letter dated OCTOBER 21, 1996
from the Lender to the Borrower, as the same may be amended, extended or
replaced from time to time, shall be considered a part hereof to the same
extent as if written herein.
___
To secure the indebtedness evidenced by this Note, together with any extensions,
modifications, or renewals thereof, in whole or in part, as well as all other
indebtedness, obligations and liabilities of the Borrower to the Lender or to
any of Lender's Affiliates (as hereinafter defined), now existing or hereafter
incurred or arising (hereinafter sometimes referred to collectively as the
"Obligations"), except for other indebtedness, obligations and liabilities owing
to any of Lender's Affiliates that constitute open-end credit under, or are
subject to, the disclosure requirements of the Truth-in-Lending Act and Federal
Reserve Board Regulation Z or any applicable state consumer protection laws
(hereinafter collectively referred to as "Consumer Debt"), the Borrower does
hereby grant to the Lender and to such Lender's Affiliate (as the case may be) a
security interest in and security title to, and does hereby assign, pledge,
transfer and convey to Lender and such Lender's Affiliate (as the case may be),
the following described property:
WACHOVIA BANK OF GEORGIA, N.A. CERTIFICATE OF DEPOSIT # 6139531 .
whether now owned or hereafter acquired, together with any and all additions and
accessions thereto or replacements thereof, returned or unearned premiums from
any insurance written in connection with this Note and any products and/or
proceeds of any of the foregoing. As used herein, "Lender's Affiliates" means
any entity or entities now or hereafter directly or indirectly controlled by
Wachovia Corporation or any successor thereto. In no event, however, shall the
Lender or the Lender's Affiliates (as the case may be) have a security interest
in any goods acquired by the Borrower for personal, family or household purposes
more than 10 days after the date of this Note, unless such goods are added to or
attached to the Collateral (as hereinafter defined). In addition, to the extent
not prohibited by law, the Borrower hereby grants to the Lender and to such
Lender's Affiliate (as the case my be) a security interest in and security title
to, and does hereby assign, pledge, transfer and convey to Lender and such
Lender's Affiliate (as the case may be), (i) all other property of the Borrower
of every kind or description now or hereafter in the possession or control of
the Lender or of any of Lender's Affiliates, exclusive of any such property in
the possession or control of the Lender or any of Lender's Affiliates as a
fiduciary other than as agent, for any reason including, without limitation, all
cash, stock or other dividends and all proceeds thereof, and all rights to
subscribe for securities incident thereto and any substitutions or replacements
for, or other rights in connection with, any of the Collateral and (ii) any
balance or deposit accounts of the Borrower, whether such accounts be general or
special, or individual or multiple party, and upon all drafts, notes, or other
items deposited for collection or presented for payment by the Borrower with the
Lender or the Lender's Affiliates (as the case may be), exclusive of any such
property in the possession or control of the Lender or any Lender's Affiliates
as a fiduciary other than as agent, and the Lender and the Lender's Affiliates
(as the case may be) may at any time, without demand or notice, appropriate and
apply any of such to the payment of any of the Obligations, whether or not due,
with the exception of Consumer Debt. All property described in this paragraph,
in which the Borrower has granted to the Lender and the Lender's Affiliates a
security interest or security title hereunder, is herein collectively referred
to as the "Collateral." If, with respect to any Collateral in the form of
investment securities, a stock dividend is declared or any stock split-up made
or right to subscribe issued, all the certificates for the shares representing
such stock dividend or split-up or right to subscribe will be immediately
delivered, duly endorsed, to the Lender as additional Collateral. The Lender
and the Lender's Affiliates (as the case may be) shall be deemed
<PAGE>
to have possession, control and custody of any Collateral actually in transit to
it or to any of its offices or agents.
**This is a revolving Line of Credit whereby the borrower can borrow, repay and
borrow.
<PAGE>
If at any time the Collateral pledged as security for any of the Obligations
shall be or become unsatisfactory to the Lender or should the Lender deem itself
insecure, the Borrower will immediately furnish such further property to be held
by the Lender as if originally pledged as Collateral hereunder or make such
payment on account as will be satisfactory to the Lender.
The Lender shall have, but shall not be limited to, the following rights, each
of which may be exercised at any time: (i) to transfer this Note and the
Collateral, and any transferee shall have all the rights of the Lender hereunder
and the Lender shall be thereafter relieved from any liability with respect to
any Collateral so transferred; (ii) to transfer the whole or any part of the
Collateral in the name of itself or its nominees; (iii) to vote any investment
securities forming a part of the Collateral; (iv) to notify the obligors on any
Collateral to make payment to the Lender of any amounts due thereon; (v) to
execute at any time in the name of any party hereto and to file financing
statements covering any of the Collateral; (vi) to receive or take control of
any income or other proceeds of any of the Collateral; and (vii) to request and
receive current financial information from any party liable for all or any part
of the Obligations.
Furthermore, the Lender shall have the right to require Borrower to maintain
insurance on such of the Collateral, with such companies, in such amounts and
against such risks as Lender may request. All policies of insurance will
specify that Lender is an additional insured as its interest may appear and
shall provide that such insurance shall not be cancellable by the Borrower or
the insurer without at least 10 days advance written notice to Lender. In the
event any or all insurance hereinbefore provided is cancelled, any returned
premium thereon shall be payable to Lender and may be applied by Lender to any
part of the Obligations, whether matured or unmatured. Lender is authorized to
receive the proceeds of any insurance loss and at the option of Lender shall
apply such proceeds toward either the repair or replacement of the Collateral or
the payment of the Obligations secured hereby. If the Borrower fails to
maintain such insurance, Lender may, at its option, but without obligation,
purchase such insurance or pay any premium owing and any such sum paid by Lender
shall be payable by Borrower on demand by Lender or at Lender's option may be
added to any of the Obligations.
Upon (i) any failure of any Obligor (which term shall include the Borrower and
each endorser, surety or guarantor of this Note) to pay any of the Obligations
when due or to observe or perform any agreement, covenant or promise hereunder
or in any other agreement, note, instrument or certificate of any Obligor to the
Lender, or to any of Lender's Affiliates, now existing or hereafter executed in
connection with any of the Obligations, including, but not limited to, a loan
agreement, if applicable, and any agreement guaranteeing payment of any of the
Obligations; (ii) any default of any Obligor in the payment or performance of
any other liabilities, indebtedness or obligations to any other creditor or to
allow or permit any other liabilities, indebtedness or obligations to any other
creditor to be accelerated (iii) any failure of any Obligor to furnish Lender
current financial information upon request; (iv) any failure of any Obligor or
any pledgor of any security interest in the Collateral (the "Pledgor") to
observe or perform any agreement, covenant or promise contained in any
agreement, instrument or certificate executed in connection with the granting of
a security interest in property to secure the Obligations; (v) any warranty,
representation or statement made or furnished to the Lender by or on behalf of
any Obligor or Pledgor in connection with the extension of credit evidenced by
this Note proving to have been false in any material respect when made or
furnished; (vi) any loss, theft, substantial damage, destruction, sale,
foreclosure of or encumbrance to any of the Collateral, or the making of any
levy, seizure or attachment thereof or thereon or the rendering of any judgment
or lien or garnishment or attachment against any Obligor or his property,
whether actual or threatened; (vii) the death, dissolution, change in control,
termination of existence, insolvency, business failure, or appointment of a
receiver of any part of the property of, assignment for the benefit of creditors
by, or the commencement of any proceeding under any bankruptcy or insolvency
laws, state or federal, by or against the Borrower or any other Obligor; (viii)
any discontinuance or termination of any guaranty of any of the Obligations by a
guarantor; or (ix) the Lender deeming itself insecure; thereupon, or at any time
thereafter, the Lender at its option may terminate any obligation to extend any
additional credit or make any other financial accommodation to the Borrower
and/or may declare all of the Obligations to be immediately due and payable, all
without notice or demand, and shall have in addition to and independent of the
right to declare the Obligations to be due and payable and any other rights of
the Lender under this Note or any other agreement with any Obligor or any
Pledgor, the remedies of a secured party under the Uniform Commercial Code of
Georgia, as amended from time to time (the "Code") including, without limitation
thereto, the right to take possession of the Collateral, or the proceeds thereof
and to sell or otherwise dispose thereof, and for this purpose, to sign in the
name of any Obligor or Pledgor, any transfer, conveyance or instrument necessary
or appropriate in order for the Lender to
<PAGE>
sell or dispose of any of the Collateral, and the Lender may, so far as the
Borrower can give authority therefor, enter upon the premises on which the
Collateral or any part thereof may be situated and remove the same therefrom,
without being liable in any way to any Obligor on account of entering any
premises. The Lender may require the Borrower to assemble the Collateral and
make the Collateral available to the Lender at any place to be designated by the
Lender which is reasonably convenient to both parties. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the Lender shall give the Borrower written notice
of the time and place of any public sale thereof or of the time after which any
private sale or other intended disposition thereof is to be made. The
requirement of sending reasonable notice shall be met if such notice is mailed,
postage prepaid, or otherwise given, to the Borrower or Pledgor at the last
address shown on the Lender's records at least five days before such
disposition. If any Obligation (including but not limited to the Note) is a
demand instrument, the statement of a maturity date, the requirement for the
payment of periodic interest or the recitation of defaults and the right of
Lender to declare any Obligation due and payable shall not constitute an
election by Lender to waive its right to demand payment under a demand at any
time and in any event as Lender in its sole discretion may deem appropriate.
The rights of the Lender specified herein shall be in addition to, and not in
limitation of the Lender's rights under the Code, or any other statute or rules
of law conferring rights similar to those conferred by the Code, and under the
provisions of any other instrument or agreement executed by the Borrower, any
other Obligor or any Pledgor to the Lender. Any rights or remedies of the Lender
may be exercised or taken in any order or sequence whatsoever, at the sole
option of the Lender.
The security agreement set forth herein and the security interest in the
Collateral created hereby shall terminate only when all of the Obligations have
been indefeasibly paid in full and such payments are no longer subject to
rescission, recovery or repayment upon the bankruptcy, insolvency,
reorganization, moratorium, receivership or similar proceeding affecting the
Borrower or any other person. No waiver by the Lender of any default shall be
effective unless in writing nor operate as a waiver of any other default or of
the same default on a future occasion. All rights of the Lender hereunder shall
inure to the benefit of its successors and assigns, and all obligations of the
Borrower shall bind the heirs, legal representatives, successors and assigns of
the Borrower. The Borrower and each endorser, surety or guarantor of this Note,
whether bound by this or by separate instrument or agreement, shall be jointly
and severally liable for the indebtedness evidenced by this Note and hereby
severally (1) waive presentment for payment, demand, protest, notice of
nonpayment or dishonor and of protest and any and all other notices and demands
whatsoever; (2) consent that at any time, or from time to time, payment of any
sum payable under this Note may be extended without notice whether for a
definite or indefinite time; and (3) agree to remain liable until all of the
Obligations are paid in full notwithstanding any impairment, substitution,
release or transfer of Collateral or any one or more Borrower or Obligor by the
Lender or any of Lender's Affiliates, with or without consideration, or of any
extension, modification or renewal. No conduct of the holder shall be deemed a
waiver or release of such liability, unless the holder expressly releases such
party in writing. In the event the indebtedness evidenced hereby is collected by
or through an attorney, the holder shall be entitled to recover reasonable
attorneys' fees (15% of the then outstanding principal and interest of the
indebtedness, to the extent not prohibited by law) and all other costs and
expenses of collection. Time is of the essence.
This Note, and the rights and obligations of the parties hereunder, shall be
governed and construed in accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, the Borrower has executed this Note under seal the day and
year set forth above.
Witness:
----------------------------------------
(Individual Borrower)
- -------------------------------- ----------------------------------------
(Individual Borrower)
________________________________ Borrower:
American Consumers, Inc.
-------------------------------
Attest: (Name of Corporation or Partnership)
/s/ Reba Southern By: /s/ Michael A. Richardson
- -------------------------------- ---------------------------------------
Reba Southern Michael A. Richardson
Title: Secretary Title: President
(Corporate Seal)
<PAGE>
Wachovia Bank of Georgia, N.A. [WACHOVIA LOGO]
Northwest Georgia Division
Post Office Box 1088
Dalton, Georgia 30722-1088
October 21,1996
Mr. Michael A. Richardson
President
American Consumers, Inc.
P.O. Box 2328
Ft. Oglethorpe, Ga.
Dear Mike,
Wachovia Bank of Georgia, N.A. ("Bank"), is pleased to make available to
American Consumers, Inc. (the "Borrower") an Eight Hundred Thousand Dollar
($800,000) line of credit. This revolving line of credit will become effective
upon your acceptance of this commitment letter, your return of the executed copy
of same to the Bank along with any required deposit or fees, and, subject to the
conditions set forth herein and the satisfaction and compliance with all terms
and conditions herein and in any other instrument, agreement or document and a
closing of the transaction in a manner satisfactory to the Bank. "Closing",
"close", or "Closed", as used herein shall mean the execution, recordation where
necessary, and delivery to the Bank of all documentation required by this
commitment letter. After closing, this line of credit will expire on October 1,
1997 (or on demand, whichever is earlier). This line of credit commitment is
subject to the maintenance by Borrower of a condition satisfactory to the Bank
and the following terms and conditions. As used herein, the term "loan" shall
include loan, line of credit, advance, drawing, debit, liability, and any other
obligation of Borrower to the Bank arising out of this commitment.
1. INTEREST RATE. The rate of interest is the Bank's Prime Rate,
presently 8.25%, subject to change by the Bank from time to time. The rate of
interest shall be calculated on the basis of a 360 day year for the actual
number of days in each interest period. Interest shall be due and payable
monthly in arrears commencing on November 1,1996. As used herein, the "Prime
Rate" refers to that interest rate so denominated and set by the Bank from time
to time as an interest rate basis for
<PAGE>
borrowings. The Prime Rate is one of several interest rate bases used by the
Bank. The Bank lends at interest rates above and below the Prime Rate.
3. USE OF PROCEEDS. The line of credit will be used by Borrower for
general short term working capital purposes.
4. PRINCIPAL REPAYMENT. The principal of the line of credit will be
payable on demand and if no demand is made then on October 1, 1997 and shall be
paid down to at least S300,000.00 for 30 consecutive days during the term of
this commitment.
5. COLLATERAL. The commitment will be secured by a Wachovia Bank of Ga.
certificate of deposit in a minimum amount of S300,000.
6. LOAN DOCUMENTS. At or prior to closing Borrower shall furnish to Bank
such loan documents as the Bank shall deem necessary for its protection. Such
documents shall be duly executed and delivered by your company and all
applicable other parties. All loan documents as well as all questions relating
to the validity shall be determined by and shall be satisfactory to the Bank and
the Bank's counsel. The loan documents which will be in a form satisfactory to
Bank will include, standard corporation documents, evidence of corporate
authority for execution and delivery of all loan documents, promissory note, and
warranties and other documents which the Bank deems necessary in order to
document the loan and assure compliance with the terms hereof. Loan advances,
payments and investments shall be governed by the Wachovia Financial Management
Account Investment/Line of Credit Agreements previously executed in conjunction
with this commitment.
7. CROSS-DEFAULT. In addition to any other defaults normally specified
in the Bank's loan documents, Borrower agrees that a default under this Loan
will also cause a default under any other loan or obligation of the Borrower and
that a default under any other loan or obligation of the Borrower to the Bank
will cause a default under this Loan.
8. FINANCIAL INFORMATION. So long as the commitment is available or any
obligation is outstanding to Bank, Borrower will furnish to Bank quarterly
(within 60 days after the end of each calendar quarter) a balance sheet and
income statement, certified as to their authenticity by your Company's Chief
Financial Officer, and an annual audit (within 90 days after the end of each
fiscal year) certified without material qualification by a certified public
accounting firm acceptable to the Bank and prepared in accordance with generally
accepted accounting
<PAGE>
principles and practices applied consistently throughout the period and prior
periods.
9. COSTS. Borrower agrees to pay all of the costs, expenses, and fees
incurred in connection with the negotiation, preparation for, and closing of the
loan herein committed, whether or not the committed loan is closed.
10. SURVIVAL. This commitment and all terms and provisions hereof shall
survive the closing and shall not be merged into any of the loan documents.
13. NON-ASSIGNABILITY. This commitment is not assignable and no party
other than Borrower is entitled to rely on this commitment
14. CONSEQUENTIAL DAMAGES. In no event shall either Borrower or the Bank
be liable to the other for indirect special, or consequential damages, including
the loss of anticipated profits which may arise out of or are in any way
connected with the issuance of this commitment.
15. MODIFICATIONS. No condition or other term of this commitment may be
waived or modified except by a writing signed by Borrower and the Bank. This
requirement of a writing to waive or modify provisions of this commitment cannot
itself be waived or otherwise negated by any agreement or other conduct of the
parties, express or implied, other than by a writing to that effect signed by
both parties.
16. TERMINATION OF COMMITMENT. Bank may terminate this commitment prior
to the closing of the transactions contemplated hereby by notice in writing to
Borrower, in the event that: (a) Borrower shall fail or refuse to comply in a
timely manner with any of the terms, provisions or conditions of this
commitment; (b) Bank determines in its sole discretion that a material adverse
change has occurred in the financial condition of Borrower or any Guarantor, (c)
any of the information, data, representations, exhibits and other materials
submitted to Bank by Borrower or any Guarantor shall contain any inaccuracy or
misrepresentation or shall omit to set forth any information that is material to
the completeness and accuracy of such information, data, representations,
exhibits and other materials or to the Bank's decision to issue this commitment;
(d) any default by Borrower or any Guarantor under any obligation to Bank or any
third party shall occur or exist. Upon giving of such notice by Bank, the
obligations and liabilities of the Bank under this commitment shall cease and
terminate.
17. APPLICABLE LAW. This commitment shall be interpreted, construed,
enforced, and governed by the laws of the State of Georgia.
<PAGE>
Upon return by Borrower to the Bank of a fully-executed copy of this commitment
by November 1, 1996, this commitment will be considered accepted and will
constitute an agreement obligating the Bank to make and Borrower to accept the
loan subject to compliance with and satisfaction of the terms and conditions set
forth above and in the other loan documents. If the executed copy is not
received by the Bank by the date noted above, this commitment shall be
considered null and void. If this commitment is accepted by Borrower, it must
be closed by November 1,1996 or it will be considered null and void.
Very truly yours,
/s/ J. Michael Young
J. Michael Young
Vice President
Accepted this 22nd day
of October, 1996
American Consumers, Inc.
By: /s/ Michael A. Richardson Attest: /s/ Reba Southern
--------------------------- --------------------
Title:President Title:Secretary
<PAGE>
AMERICAN CONSUMERS, INC.
NET INCOME PER COMMON SHARE
EXHIBIT 11
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
November 30, December 2, November 30, December 2,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income for computing earnings
per common share ($4,392) $25,511 $49,209 $68,553
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of
common shares outstanding
during each period 924,274 927,330 923,895 927,263
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per common share ($0.005) $0.028 $0.053 $0.074
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICAN CONSUMERS, INC. FOR THE QUARTERLY PERIOD
ENDED NOVEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 1,044,147
<SECURITIES> 160,194
<RECEIVABLES> 153,239
<ALLOWANCES> 0
<INVENTORY> 1,747,415
<CURRENT-ASSETS> 3,155,973
<PP&E> 2,859,641
<DEPRECIATION> 1,688,782
<TOTAL-ASSETS> 4,344,425
<CURRENT-LIABILITIES> 1,235,123
<BONDS> 400,109
<COMMON> 92,222
0
0
<OTHER-SE> 2,428,953
<TOTAL-LIABILITY-AND-EQUITY> 4,344,425
<SALES> 6,710,275
<TOTAL-REVENUES> 6,710,275
<CGS> 5,283,602
<TOTAL-COSTS> 5,283,602
<OTHER-EXPENSES> 1,439,866
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,059
<INCOME-PRETAX> (6,590)
<INCOME-TAX> (2,198)
<INCOME-CONTINUING> (4,392)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,392)
<EPS-PRIMARY> (0.005)
<EPS-DILUTED> (0.005)
</TABLE>
