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 29, 1997
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, 1998
COMMON STOCK - $.10 PAR VALUE 920,780
NON VOTING COMMON STOCK - $.00 PAR VALUE 0
NON VOTING PREFERRED STOCK - $.00 PAR VALUE 0
Exhibit Index on Page 10
(1) PAGE 1 OF 17 PAGES
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
--------------------------------- ---------------------------------
November 29, November 30, November 29, November 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 6,729,757 $ 6,710,275 $ 13,607,628 $ 13,959,820
COST OF GOODS SOLD 5,313,520 5,283,602 10,702,733 10,961,859
------------ ------------ ------------ ------------
Gross Margin 1,416,237 1,426,673 2,904,895 2,997,961
OPERATING EXPENSES 1,457,509 1,439,866 2,912,632 2,904,675
------------ ------------ ------------ ------------
Operating Income (Loss) (41,272) (13,193) (7,737) 93,286
OTHER INCOME (EXPENSE)
Interest income 6,092 9,884 12,943 21,043
Other income 13,138 14,064 26,541 27,628
Gain (Loss) on sale of assets 0 1,714 0 (31,095)
Interest expense (14,892) (19,059) (30,237) (37,027)
------------ ------------ ------------ ------------
Income (Loss) Before Income Tax (36,934) (6,590) 1,510 73,835
PROVISION (BENEFIT) FOR
INCOME TAXES (10,738) (2,198) 357 24,626
------------ ------------ ------------ ------------
NET INCOME (LOSS) (26,196) (4,392) 1,153 49,209
RETAINED EARNINGS:
Beginning 1,746,901 1,719,925 1,719,552 1,666,324
Cash dividends 0 (55,479) 0 (55,479)
Redemption of common stock (48) (161) (48) (161)
------------ ------------ ------------ ------------
Ending 1,720,657 1,659,893 1,720,657 1,659,893
============ ============ ============ ============
PER SHARE:
Net income (loss) ($ 0.028) ($ 0.005) $ 0.001 $ 0.053
============ ============ ============ ============
Cash dividends $ 0.000 ($ 0.060) $ 0.000 ($ 0.060)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 921,437 924,274 921,366 923,895
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
(2) PAGE 2 OF 17 PAGES
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED BALANCE SHEETS
November 29, May 31,
1997 1997
---------- ----------
--A S S E T S--
CURRENT ASSETS:
Cash $ 711,593 $ 669,594
Securities purchased under agreement
to resell -- 190,878
Certificate of deposit 384,514 374,396
Accounts receivable 215,957 146,751
Refundable income taxes 1,827 80,953
Inventories 1,887,109 1,737,809
Prepaid expenses 20,247 21,286
---------- ----------
Total current assets 3,221,247 3,221,667
---------- ----------
PROPERTY - At cost:
Property 2,908,859 2,873,014
Less accumulated depreciation 1,923,783 1,803,230
---------- ----------
Property - Net 985,076 1,069,784
---------- ----------
OTHER ASSETS 10,000 10,000
---------- ----------
TOTAL ASSETS $4,216,323 $4,301,451
========== ==========
- -LIABILITIES AND STOCKHOLDERS' EQUITY- -
CURRENT LIABILITIES:
Accounts payable $ 637,262 $ 718,216
Short-term borrowings 212,439 129,000
Obligations under capital leases, current portion 150,542 144,926
Accrued sales tax 113,784 113,308
Other accrued liabilities 105,993 115,793
---------- ----------
Total Current Liabilities 1,220,020 1,221,243
---------- ----------
DEFERRED INCOME TAX LIABILITY 49,870 48,270
---------- ----------
DEFERRED INCOME 114,805 125,403
---------- ----------
OBLIGATIONS UNDER CAPITALIZED LEASE AGREEMENTS 251,035 326,369
---------- ----------
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 920,780 and 921,507 92,078 92,150
Additional paid-in capital 767,858 768,464
Retained earnings 1,720,657 1,719,552
---------- ----------
Total Stockholders' Equity 2,580,593 2,580,166
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $4,216,323 $4,301,451
========== ==========
See Notes to Financial Statements
(3) PAGE 3 OF 17 PAGES
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMER, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
---------------------------
November 29, November 30,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,153 $ 49,209
Adjustments to reconcile net income to net cash
provided by (used in) operating
activities:
Depreciation and amortization 142,188 155,874
Deferred income taxes 1,600 11,685
(Gain) loss on sale of property -- 31,095
Deferred income (10,598) (10,598)
Change in operating assets and liabilities:
Certificate of deposit (10,118) (9,101)
Accounts receivable (69,206) 36,986
Refundable income taxes 79,126 (27,091)
Inventories (149,300) (84,111)
Prepaid expenses 1,039 31,377
Accounts payable (80,954) (52,486)
Accrued sales tax 476 (100,718)
Accrued income taxes -- (24,067)
Other accrued liabilities (9,800) (6,898)
--------- ---------
Net Cash provided by (used in) operating activities (104,394) 1,156
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property (57,481) (25,207)
Proceeds from disposal of property -- 9,000
Other -- 897
--------- ---------
Net cash used in investing activities (57,481) (15,310)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings 83,439 (6,000)
Principal payments on obligations under capital leases (69,716) (60,177)
--------- ---------
Cash dividends -- (55,479)
Redemption of common stock (727) (2,431)
--------- ---------
Net cash provided by (used in) financing activities 12,996 (124,087)
--------- ---------
Net decrease in cash (148,879) (138,241)
Cash and cash equivalents at beginning of period 860,472 977,549
--------- ---------
Cash and cash equivalents at end of period 711,593 839,308
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 994 $ 66,242
========= =========
Interest $ 30,237 $ 37,027
========= =========
NONCASH FINANCING ACTIVITIES
Capital lease obligations incurred for use of equipment $ -- $ 99,716
========= =========
</TABLE>
See Notes to Financial Statements
(4) PAGE 4 OF 17 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 1997
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 at the
discretion of the Board of Directors. The Board voted to contribute $15,000
to the plan in 1997 and $20,000 in 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. There were no funds
invested at November 29, 1997, while $160,194 was invested at November 30,
1996, and $190,878 was invested at May 31, 1997.
(5) PAGE 5 OF 17 PAGES
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------------- --------------------------------
November 29, November 30, November 29, November 30,
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales $ 6,729,757 $ 6,710,275 $ 13,607,628 $ 13,959,820
% Sales Increase (Decrease) 0.29 (7.03) (2.52) (3.74)
Gross Margin % 21.04 21.26 21.35 21.48
Operating and Administrative
Expense:
Amount $ 1,457,509 $ 1,439,866 2,912,632 2,904,675
% of Sales 21.66 21.46 21.40 20.81
Net Income (Loss) (26,196) (4,392) 1,153 49,209
</TABLE>
Overall, sales increased 0.29% from sales for the same quarter last year.
This increase is attributable to increased sales at three of the Company's six
stores. Sales were down 7.03% during this same quarter last year due primarily
to the opening of a competitor at one location in which the Company operates.
The slight increase this quarter is attributable, in large part, to the
regaining of market share in that location and increased sales in three other
locations. Management is currently increasing retail prices, to the extent
permitted by competition, in order to increase gross margin. The Company
continuously seeks to improve its gross margin and profitability by obtaining
the lowest cost available for its goods.
Operating and administrative expense increased slightly as a percent of
sales between the quarter and year to date periods presented. Management is
currently making reductions in advertising expense and reviewing other expenses
in an effort to reduce its operating expenses and increase profitability.
Interest income is down from $9,884 to $6,092 because of the reduction in
the Company's cash flow, and subsequent reduction in the utilization of the
Company's cash management system. Interest expense decrease due to the reduction
in debt relating to the capital leases. Short-term borrowings increased as a
result of the reduced cash flow.
Refundable income taxes at November 29, 1997 and May 31, 1997 are a result
of estimated taxes paid exceeding the liability due.
Inventories were up $149,300 from May 31, which is consistent with prior
periods for this time of year. At November 30, 1996 inventories were $1,747,415.
Income Taxes:
The benefit for income taxes for the quarter ended November 29, 1997 was
$10,738 while the benefit was $2,198 for November 30, 1996. The provision for
income taxes does not vary significantly from the statutory rate of 34%.
(6) PAGE 6 OF 17 PAGES
<PAGE>
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 and borrowings under the Company's line of credit. Notes to the
stockholder, in the sum of $93,222 and $129,000 as of November 29, 1997 and May
31, 1997 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 Company borrowed $119,217 on its line of credit as of November
26, 1997 while no amount was outstanding on the line of credit at year end, May
31, 1997.
The ratio of current assets to current liabilities was 2.64 to 1 at the end
of the latest quarter, November 29, 1997, as compared to 2.56 to 1 on November
30, 1996 and 2.64 to 1 at the end of the fiscal year ended May 31, 1997. Cash
and cash equivalents constituted 22.09% of the total current assets at November
29, 1997 as compared to 26.59% at November 30, 1996 and 26.71% at May 31, 1997.
Cash activity is detailed in the Condensed Statements of Cash Flows on page
four.
During the quarter ended November 29, 1997 retained earnings decreased as a
result of the Company's net loss for the quarter.
(7) PAGE 7 OF 17 PAGES
<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 December 5, 1997
10(d) Commitment letter dated December 3, 1997 between the
Company and Wachovia Bank of Georgia, N.A.
11 Statement re: computation of per share earnings.
27 Financial Data Schedule (EDGAR version only)
(b) During the most recent quarter, the Company has not filed a
report on Form 8-K.
(8) PAGE 8 OF 17 PAGES
<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: 1/13/98 /s/ MICHAEL A. RICHARDSON
------- -----------------------------------------------
Michael A. Richardson
CHAIRMAN
(Principal Executive Officer)
Date: 1/13/98 /s/ PAUL R. COOK
------- -----------------------------------------------
Paul R. Cook
EXECUTIVE VICE PRESIDENT - TREASURER
(Principal Financial Officer & Chief Accounting
Officer)
(9) PAGE 9 OF 17 PAGES
[WACHOVIA
NOTE AND SECURITY AGREEMENT
LOGO]
DALTON, GEORGIA
Date DECEMBER 5, 1997
$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.
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
0.00%; __ %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.
ON THE DATE HEREOF, THE RATE OF INTEREST ON THIS NOTE, EXPRESSED IN SIMPLE
TERMS, IS 8.50% PER ANNUM.
X BORROWER AGREES TO PAY LENDER A NON-REFUNDABLE FEE OF $150.00.
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: MONTHLY
BEGINNING JANUARY 2, 1998.
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 the greater of 150% of the Prime Rate, or 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.
To the extent not prohibited by law, a late charge of four percent (4%) or the
applicable statutory maximum, whichever is greater, shall be assessed on any
payment remaining past due for fifteen (15) days or more unless interest on this
Note is payable in advance, in which case such period shall instead be thirty
(30) days or more; provided, however, that if any applicable statute allows a
shorter minimum time period for the imposition of a late charge, such shorter
time period shall prevail.
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, in accordance with the then current
billing statement applicable to this Note, first to accrued interest, then to
fees, then to principal due and then to late charges. Any remaining funds shall
be applied to the further reduction of principal. Notwithstanding the foregoing,
upon the occurrence of a default hereunder, payments shall be applied as
determined by Lender in its sole discretion.
___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.
XThe terms and conditions in a Commitment Letter dated DECEMBER 3, 1997 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.
In addition to any other collateral specified herein and in other agreements, 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, now
existing or hereafter incurred or arising (hereinafter sometimes referred to as
the "Obligations"), except for other indebtedness, obligations and liabilities
owing to Lender that constitute (a) consumer credit as defined in Federal
Reserve Board Regulation Z or (b) non-consumer credit if under applicable state
law the maximum interest rate for such credit is reduced when secured (herein
collectively
<PAGE>
referred to as "Restricted Debt"), the Borrower does hereby grant to the Lender
a security interest in and security title to, and does hereby assign, pledge,
transfer and convey to Lender the following described property:
CERTIFICATE OF DEPOSIT ACCOUNT NUMBER 6139566 IN THE AMOUNT OF $384,500.00 IN
WACHOVIA BANK, N.A.
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. In no event, however, shall the Lender 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 a security interest in and security title to, and does hereby assign,
pledge, transfer and convey to Lender, (i) all other property of the Borrower of
every kind or description now or hereafter in the possession or control of the
Lender exclusive of any such property in the possession or control of the Lender
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, and the Lender may at any time, without demand or notice,
appropriate and apply any of such to the payment of any of the
Obligations(except for Restricted Debt), whether or not due. All property
described in this paragraph, in which the Borrower has granted to the Lender 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
shall be deemed to have possession, control and custody of any Collateral
actually in transit to it or to any of its officers or agents.
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 or from time to 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 Obligation 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.
Borrower will at Lender's request maintain insurance on the Collateral in
amounts at least equal to the fair market value of the Collateral and against
casualty, public liability and property damage risks and such other risks as
Lender may request; provided, however, if the Collateral described above is a
vehicle(s), Borrower agrees to obtain and maintain liability insurance as
required by law and collision and comprehensive insurance with a deductible not
exceeding $500.00. All insurance shall be with companies with a BEST INSURANCE
REPORT rating a B+ or better, and Borrower will pay all premiums for insurance
when due. Unless and until requested by Lender, Borrower shall not be required
to name Lender as additional insured in such policy or to provide Lender a copy
of the policy for or certificate evidencing such insurance, but when and if
requested by Lender, the Borrower shall immediately (but no later than five (5)
calendar days) (i) cause all policies of such insurance to specify that Lender
is an additional insured as its interest may appear to provide that such
insurance shall not be cancellable by Borrower or the insurer without at least
30 days advance written notice to Lender and that proceeds are payable to Lender
regardless of any act or omission of Borrower which would otherwise result in a
denial of a claim; and (ii) deliver all policies or certificates thereof (with
copies of such policies) to Lender. In the event that any or all of such
insurance is cancelled, any return premium thereon may be collected by Lender
and applied by Lender to any part of the Obligations, either 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. The undersigned will also pay all taxes and other impositions on the
Collateral as well as the cost of repairs or maintenance to the Collateral. If
the undersigned fails to maintain such insurance or fails to pay any and all
amounts for taxes, repairs, maintenance and other costs, Lender may, at its
option, but shall not be required to, purchase such insurance or pay any premium
owing with respect to such insurance or pay such amounts for taxes, repairs,
maintenance and other costs, and any such sum paid by Lender shall be payable by
the Borrower on demand by Lender or at its option may be added to the
Obligations and secured hereby. The loss, injury or destruction of the
Collateral, with or without the fault of Borrower, shall not release the
Borrower from any liability hereunder or in any way affect Borrower's liability
hereunder. 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, 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 Lender or any other creditor or to
allow or permit any other liabilities, indebtedness or obligations to Lender or
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 or any
guaranty securing 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
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, to the extent permitted by law,
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 State 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 of Pledgor, any transfer, conveyance or
instrument necessary or appropriate in order for the Lender to 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 a 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
<PAGE>
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. All prior agreements to the extent
inconsistent with the terms of this Note shall be construed in accordance with
the provisions hereof. 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, 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. The
Borrower shall pay to the holder on demand all expenses, including attorney's
fees and expenses of legal counsel, incurred by the holder in any way arising
from or relating to the enforcement or attempted enforcement of the Note and any
related guaranty, collateral document or other document and the collection or
attempted collection, whether by litigation or otherwise, of the Note. Time is
of the essence.
Borrower acknowledges that Lender may reproduce (by electronic means or
otherwise) any of the documents evidencing and/or securing the Obligations and
thereafter may destroy the original documents. Borrower does hereby agree that
any document so reproduced shall be and remain the binding obligation of
Borrower, enforceable and admissible in evidence against it to the same extent
as if the original documents had not been destroyed.
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.
_________________________________ (Seal)
(Individual Borrower)
_________________________________ (Seal)
(Individual Borrower)
Borrower:
Attest: AMERICAN CONSUMERS, INC.
(Name of Corporation or Partnership)
/s/ REBA SOUTHERN /s/ MICHAEL A. RICHARDSON
By: Michael A. Richardson
(Seal)
Title: SECRETARY Title: PRESIDENT
(Corporate Seal)
Wachovia Bank, N.A. [WACHOVIA LOGO]
Northwest Georgia Division
Post Office Box 1088
Dalton, Georgia 30722-1088
December 3, 1997
Mr. Michael A. Richardson, President
American Consumers, Inc.
P.O. Box 2328
Ft. Oglethorpe, Ga. 30742
Dear Mike,
Wachovia Bank, 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 December 1,
1998 (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
8.50%, 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 January 2, 1998. 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 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 December 1, 1998 the line of credit
shall be paid down to the minimum amount of $384,500.00 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 $384,500
1
<PAGE>
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 principles and practices applied consistently throughout the
period and prior periods.
9. COSTS. Borrower agrees to pay all of the costs, expenses, and fees ($150.00)
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
2
<PAGE>
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.
Upon return by Borrower to the Bank of a fully-executed copy of this commitment
by December 5, 1997, 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 December 10, 1997 or it will be considered null and void.
Very truly yours,
/s/ GARY E. BROWN
Gary E. Brown
Assistant Vice President
Accepted this 5th day of December, 1997
American Consumers, Inc.
By: /s/ MICHAEL A. RICHARDSON
Title: PRESIDENT
By: /s/ REBA SOUTHERN
Title: SECRETARY
3
AMERICAN CONSUMERS, INC.
NET INCOME PER COMMON SHARE
EXHIBIT 11
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
November November November November
29, 1997 30, 1996 29, 1997 30, 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) for ($ 26,196) ($ 4,392) $ 1,153 $ 49,209
computing earnings
per common share
Weighted average number 921,437 924,274 921,366 923,895
of common shares
outstanding during
each period
Net income per common ($ 0.028) ($ 0.005) $ 0.001 $ 0.053
share
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICAN CONSUMERS, INC. FOR THE QUARTERLY PERIOD
ENDED NOVEMBER 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-29-1997
<CASH> 1,096,107
<SECURITIES> 0
<RECEIVABLES> 215,957
<ALLOWANCES> 0
<INVENTORY> 1,887,109
<CURRENT-ASSETS> 3,221,247
<PP&E> 2,908,859
<DEPRECIATION> 1,923,783
<TOTAL-ASSETS> 4,216,323
<CURRENT-LIABILITIES> 1,220,020
<BONDS> 0
0
0
<COMMON> 92,078
<OTHER-SE> 2,488,515
<TOTAL-LIABILITY-AND-EQUITY> 4,216,323
<SALES> 13,607,628
<TOTAL-REVENUES> 13,607,628
<CGS> 10,702,733
<TOTAL-COSTS> 10,702,733
<OTHER-EXPENSES> 2,912,632
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,237
<INCOME-PRETAX> 1,510
<INCOME-TAX> 357
<INCOME-CONTINUING> 1,153
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,153
<EPS-PRIMARY> 0.001
<EPS-DILUTED> 0.001
</TABLE>
