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 August 29, 1998
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 October 8, 1998
COMMON STOCK - $.10 PAR VALUE 888,863
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.
CONSDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
THIRTEEN WEEKS ENDED
August 29, August 30,
1998 1997
----------- -----------
NET SALES $ 6,639,544 $ 6,877,871
COST OF GOODS SOLD 5,250,300 5,389,213
----------- -----------
Gross Margin 1,389,244 1,488,658
OPERATING EXPENSES 1,455,250 1,455,123
----------- -----------
Operating Income (Loss) (66,006) 33,535
OTHER INCOME (EXPENSE)
Interest income 7,671 6,851
Other income 13,937 13,403
Interest expense (12,759) (15,345)
----------- -----------
Income (Loss) Before Income Taxes (57,157) 38,444
PROVISION (BENEFIT) FOR INCOME TAXES (24,506) 11,095
----------- -----------
NET INCOME (LOSS) (32,651) 27,349
RETAINED EARNINGS:
Beginning 1,803,098 1,719,552
----------- -----------
Ending 1,770,447 1,746,901
=========== ===========
PER SHARE:
Net income (loss) ($ 0.037) $ 0.030
=========== ===========
Cash dividends $ 0.000 $ 0.000
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 890,597 921,507
=========== ===========
See Notes to Financial Statements
(2)
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
August 29, May 30,
1998 1998
---------- ----------
--A S S E T S--
<S> <C> <C>
CURRENT ASSETS:
Cash and short-term investments $ 936,033 $ 945,222
Certificate of deposit 394,792 394,792
Accounts receivable 182,608 175,135
Inventories 1,789,361 1,830,003
Prepaid expenses 18,732 14,613
Refundable income tax 22,500 0
---------- ----------
Total current assets 3,344,026 3,359,765
========== ==========
PROPERTY - At cost:
Property 2,942,742 2,939,838
Less accumulated depreciation 2,113,412 2,046,381
---------- ----------
Property - Net 829,330 893,457
---------- ----------
OTHER ASSETS 4,000 4,000
---------- ----------
TOTAL ASSETS $4,177,356 $4,257,222
========== ==========
-- LIABILITIES AND STOCKHOLDERS' EQUITY --
CURRENT LIABILITIES:
Accounts payable $ 701,830 $ 655,937
Short-term borrowings 198,169 208,945
Obligations under capital leases, current portion 133,833 144,077
Accrued sales tax 71,560 106,239
Accrued income taxes 5,122 24,634
Other accrued liabilities 144,618 128,652
---------- ----------
Total Current Liabilities 1,255,132 1,268,484
---------- ----------
DEFERRED INCOME TAX LIABILITY 61,504 62,504
---------- ----------
DEFERRED INCOME 102,248 107,546
---------- ----------
OBLIGATIONS UNDER CAPITALIZED LEASE AGREEMENTS 156,277 183,842
---------- ----------
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 $.10 par value; issued 890,597 89,060 89,060
Additional paid-in capital 742,688 742,688
Retained earnings 1,770,447 1,803,098
---------- ----------
Total Stockholders' Equity 2,602,195 2,634,846
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 4,177,356 4,257,222
========== ==========
</TABLE>
See Notes to Financial Statements
(3)
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMER, INC.
CONSENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
August 29, August 30,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ($ 32,651) $ 27,349
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 67,032 70,172
Deferred income taxes (1,000) (2,000)
Deferred income (5,299) (5,299)
Change in operating assets and liabilities:
Accounts receivable (7,473) (147,150)
Inventories 40,642 5,006
Prepaid expenses (4,119) 2,324
Refundable income taxes (22,500) 13,100
Accounts payable 45,893 148,379
Accrued sales tax (34,679) 12,421
Accrued income taxes (19,512) --
Other accrued liabilities 15,966 4,127
--------- ---------
Net Cash provided by (used in) operating activities 42,300 128,429
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property (2,904) (3,836)
Net cash used in investing activities (2,904) (3,836)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings (10,776) 2,000
Principal payments on obligations under capital leases (37,809) (34,380)
--------- ---------
Net cash used in financing activities (48,585) (32,380)
--------- ---------
Net increase (decrease) in cash (9,189) 92,213
Cash and cash equivalents at beginning of period 945,222 860,472
--------- ---------
Cash and cash equivalents at end of period 936,033 952,685
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 19,512 $ 994
========= =========
Interest $ 12,759 $ 15,344
========= =========
</TABLE>
See Notes to Financial Statements
(4)
<PAGE>
AMERICAN CONSUMERS, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Basis of Presentation.
The financial statements have been prepared in conformity with generally
accepted accounting principles and general practices within the industry.
The interim financial statements should be read in conjunction with the
notes to the financial statements presented in the Corporation's 1998
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. This figure could increase if Y2K problems arise.
The Company adopted a retirement plan effective January 1, 1995. The plan
is a 401(k) plan administered by BISYS Qualified Plan Services.
Participation in the plan is available to all full-time employees after one
year of service and age 19. Any contribution by the Company will be at the
discretion of the Board of Directors. The Board voted to contribute $10,000
to the plan in 1998 and $15,000 in 1997.
None of the Company's employees are represented by a union.
Subsequent to August 29, 1998, the Company exercised existing options to
extend the leases for its administrative office (extended through November
30, 1999) and for its retail store in Chickamauga, Georgia (extended
through December 31, 2004).
(3) The Company invests excess funds in the U.S. Government for U.S. Government
Agency securities which are purchased under an agreement to resell (reverse
re- purchase agreement). The securities are purchased from a bank but do
not constitute deposits at the bank and 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 $97,520 at August 29, 1998, and $161,256 at May 30,
1998.
(5)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED
----------------------------
August 29, August 30,
1998 1997
----------- -----------
Sales $ 6,639,544 $ 6,877,871
% Sales Increase (Decrease) -3.47 -5.13
Gross Margin % 20.92 21.64
Operating and Administrative Expense:
Amount $ 1,455,251 $ 1,455,123
% of Sales 21.92 21.16
Net Income (Loss) ($ 32,651) $ 27,349
The decrease in sales of 3.47% includes losses at four of the Company's
locations. Competition has increased pressure on the Company's market share,
sales and profits, the effects of which are threatening the profitability of the
Company. The Company's competitors are constantly conducting sales promotions
which are expensive for an operation the size of the Company to match.
Management believes that competitive pressures on the Company will continue to
increase over time as a result of its competitors opening more new stores in the
Company's trade area. Management is continuously seeking to improve the gross
margin and increase profitability by obtaining the lowest cost for the Company's
inventory. Subsequent to the end of the most recent quarter, the retail price of
soft drinks has been adjusted in an effort to improve the gross margin.
Operating expenses increased from 20.16% of sales to 21.92% of sales due
primarily to the reduction in sales. The dollar value of the increase was only
$128.
Interest expense decreased because of the reduction in the capitalized
lease obligation of the Company.
Accounts payable increased from $655,937 to $701,830 or $45,893. This
increase is normal at the end of August. Last year accounts payable increased
$148,379 between year end and August 30, 1997.
The benefit for income taxes for the quarter ended August 29, 1998 was
$24,506 as compared to a provision for income taxes in the amount of $11,095 at
August 30, 1997. The provision (benefit) 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 are reflected in increased
selling prices for the goods sold by the Company.
(6)
<PAGE>
FINANCIAL CONDITION
Liquidity and Capital Resources:
The Company finances its working capital requirements principally through
its cash flow from operations and short-term borrowing. Short-term borrowing to
finance inventory purchases is provided by the Company's $800,000 line of credit
with a regional bank. An additional line of credit in the amount of $300,000 is
also available from its principal inventory supplier. Long-term borrowing
generally finances capital expansion.
Short-term borrowings as of August 29, 1998 and August 30, 1997 consist of
unsecured notes payable to a trust for the benefit of a son of Michael and Diana
Richardson, principal shareholders of the Company, and to the estate of a former
principal stockholder. The notes, in the amount of $198,169 and $208,945
respectively, are payable on demand and bear interest at .25% below the base
rate charged by the regional bank which provides the Company with its line of
credit to finance inventory purchases.
The ratio of current assets to current liabilities was 2.66 to 1 at the end
of the latest quarter, August 29, 1998, as compared to 2.47 to 1 on August 30,
1997 and 2.65 to 1 at the end of the fiscal year ended May 30, 1998. Cash and
cash equivalents constituted 39.80% of the total current assets at August 29,
1998 as compared to 27.69% at August 30, 1997 and 39.88% at May 30, 1998. The
activity is detailed in the Condensed Statements of Cash Flows on page four.
During the quarter ended August 29, 1998 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 4 Submission of Matters to a Vote of Security Holders.
The Company held its Annual Meeting of Shareholders on September 17, 1998,
at which shareholders were asked to vote on the election of directors for the
fiscal year ending in 1999. Proxies were solicited by management in favor of
seven nominees, with no solicitation in opposition to management's nominees. All
of such nominees were elected, with the number of votes cast for, against, or
withheld as well as the number of broker non votes and abstentions as to each
nominee having been as follows:
<TABLE>
<CAPTION>
TOTAL VOTES VOTES BROKER
SHARES CAST CAST VOTES NON
NOMINEE VOTED FOR AGAINST WITHHELD VOTES
------- --------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Michael A. Richardson 630,703.6 630,389.6 314.0 259,893.4 4,904.0
Paul R. Cook 630,703.6 630,389.6 314.0 259,893.4 4,904.0
Virgil E. Bishop 630,703.6 630,389.6 314.0 259,893.4 4,904.0
John P. Price 630,703.6 629,949.6 754.0 259,893.4 4,904.0
Thomas L. Richardson 630,703.6 630,389.6 314.0 259,893.4 4,904.0
Jerome P. Sims, Sr 630,703.6 629,379.8 1,323.8 259,893.4 4,904.0
Andrew V. Douglas 630,703.6 629,379.8 1,323.8 259,893.4 4,904.0
</TABLE>
Item 6 EXHIBITS AND REPORTS OF FORM 8-K
(a) The following exhibits are filed as a part of the report.
(11) Statement re: computation of per share earnings.
(27) Financial Data Schedule (EDGAR filing only)
(b) During the most recent quarter, the Company has not filed a
report on Form 8-K.
(8)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN CONSUMERS, INC.
(Registrant)
/s/ Michael A. Richardson
Date: 10/8/98 -----------------------------------------------
Michael A. Richardson
CHAIRMAN
(Principal Executive Officer)
/s/ Paul R. Cook
Date: 10/8/98 -----------------------------------------------
Paul R. Cook
EXECUTIVE VICE PRESIDENT - TREASURER
(Principal Financial Officer & Chief Accounting
Officer)
(9)
AMERICAN CONSUMERS, INC.
NET INCOME PER COMMON SHARE
EXHIBIT 11
THIRTEEN WEEKS ENDED
------------------------------
August 29, August 30,
1998 1997
--------- -------
Net income for computing earnings
per common share ($32,651) $27,349
========= =======
Weighted average number of common
shares outstanding during each period 890,597 921,507
======== =======
Net income per common share ($0.037) $0.030
========= ======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICAN CONSUMERS, INC. FOR THE QUARTERLY PERIOD
ENDED AUGUST 29, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-30-1998
<PERIOD-END> AUG-29-1998
<CASH> 1,233,305
<SECURITIES> 97,520
<RECEIVABLES> 182,608
<ALLOWANCES> 0
<INVENTORY> 1,789,361
<CURRENT-ASSETS> 3,344,026
<PP&E> 2,942,742
<DEPRECIATION> 2,113,412
<TOTAL-ASSETS> 4,177,356
<CURRENT-LIABILITIES> 1,255,132
<BONDS> 0
0
0
<COMMON> 89,060
<OTHER-SE> 2,513,135
<TOTAL-LIABILITY-AND-EQUITY> 4,177,356
<SALES> 6,639,544
<TOTAL-REVENUES> 6,639,544
<CGS> 5,250,300
<TOTAL-COSTS> 5,250,300
<OTHER-EXPENSES> 1,455,250
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,759
<INCOME-PRETAX> (57,157)
<INCOME-TAX> (24,506)
<INCOME-CONTINUING> (32,651)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,651)
<EPS-PRIMARY> (0.037)
<EPS-DILUTED> (0.037)
</TABLE>
