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 February 28, 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 April 6, 1998
COMMON STOCK - $.10 PAR VALUE 892,587
NON VOTING COMMON STOCK - $.00 PAR VALUE 0
NON VOTING PREFERRED STOCK - $.00 PAR VALUE 0
Exhibit Index on Page ____
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
---------------------------------- ----------------------------------
February 28, March 1, February 28, March 1,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 6,717,154 $ 7,048,867 $ 20,324,782 $ 21,008,687
COST OF GOODS SOLD 5,201,650 5,517,995 15,904,383 16,479,854
------------ ------------ ------------ ------------
Gross Margin 1,515,504 1,530,872 4,420,399 4,528,833
OPERATING EXPENSES 1,453,584 1,477,627 4,366,217 4,382,302
------------ ------------ ------------ ------------
Operating Income 61,920 53,245 54,182 146,531
OTHER INCOME (EXPENSE)
Interest income 3,428 10,086 16,371 31,129
Other income 13,376 14,076 39,917 41,704
Loss on sale of assets -- -- -- (31,095)
Interest expense (14,765) (18,235) (45,002) (55,262)
------------ ------------ ------------ ------------
Income Before Income Taxes 63,959 59,172 65,469 133,007
PROVISION (BENEFIT) FOR
INCOME TAXES 17,220 25,383 17,577 50,009
------------ ------------ ------------ ------------
NET INCOME 46,739 33,789 47,892 82,998
RETAINED EARNINGS:
Beginning 1,720,657 1,659,893 1,719,552 1,666,324
Cash dividends -- -- -- (55,479)
Redemption of common stock (1,863) -- (1,911) (161)
------------ ------------ ------------ ------------
Ending 1,765,533 1,693,682 1,765,533 1,693,682
============ ============ ============ ============
PER SHARE:
Net income $ 0.051 $ 0.038 $ 0.053 $ 0.090
============ ============ ============ ============
Cash dividends $ 0.000 $ 0.000 $ 0.000 $ 0.060
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 916,450 922,222 911,633 923,352
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
(2)
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, May 31,
1998 1997
---------- ----------
--A S S E T S--
<S> <C> <C>
CURRENT ASSETS:
Cash $ 880,527 $ 669,594
Securities purchased under agreement
to resell -- 190,878
Certificate of deposit 384,514 374,396
Accounts receivable 173,508 146,751
Refundable income taxes -- 80,953
Inventories 1,784,834 1,737,809
Prepaid expenses 23,014 21,286
---------- ----------
Total current assets 3,246,397 3,221,667
---------- ----------
PROPERTY - At cost:
Property 2,942,762 2,873,014
Less accumulated depreciation 1,998,664 1,803,230
---------- ----------
Property - Net 944,098 1,069,784
---------- ----------
OTHER ASSETS 4,000 10,000
---------- ----------
TOTAL ASSETS $4,194,495 $4,301,451
========== ==========
--LIABILITIES AND STOCKHOLDERS' EQUITY--
CURRENT LIABILITIES:
Accounts payable $ 631,639 $ 718,216
Short-term borrowings 203,694 129,000
Obligations under capital leases, current portion 148,752 144,926
Accrued sales tax 109,597 113,308
Accrued income taxes 19,993 --
Other accrued liabilities 106,065 115,793
---------- ----------
Total Current Liabilities 1,219,740 1,221,243
---------- ----------
DEFERRED INCOME TAX LIABILITY 46,270 48,270
---------- ----------
DEFERRED INCOME 112,845 125,403
---------- ----------
OBLIGATIONS UNDER CAPITALIZED LEASE AGREEMENTS 216,501 326,369
---------- ----------
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 892,587 at 2/28/98
and 921,507 at 5/31/97 89,259 92,150
Additional paid-in capital 744,347 768,464
Retained earnings 1,765,533 1,719,552
---------- ----------
Total Stockholders' Equity 2,599,139 2,580,166
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $4,194,495 $4,301,451
========== ==========
</TABLE>
See Notes to Financial Statements
(3)
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMER, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
-----------------------
February 28, March 1,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 47,892 $ 82,998
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 217,070 232,425
Deferred income taxes (2,000) 11,185
(Gain) loss on sale of property -- 31,095
Deferred income (12,558) (15,896)
Change in operating assets and liabilities:
Certificate of deposit (10,118) (9,101)
Accounts receivable (26,757) 52,133
Refundable income taxes 80,953 (27,568)
Inventories (47,025) (32,429)
Prepaid expenses (1,728) 31,906
Accounts payable (86,577) 31,110
Accrued sales tax (3,711) (96,551)
Accrued income taxes 19,993 (24,067)
Other accrued liabilities (9,728) (1,684)
----------- -----------
Net Cash provided by operating activities 165,705 265,556
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property (91,383) (37,550)
Proceeds from disposal of property -- 9,000
Other 6,000 1,385
----------- -----------
Net cash used in investing activities (85,383) (27,165)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings 74,694 (8,000)
Principal payments on obligations under capital leases (106,041) (92,721)
----------- -----------
Cash dividends -- (55,479)
Redemption of common stock (28,920) (2,431)
----------- -----------
Net cash used in financing activities (60,267) (158,631)
----------- -----------
Net increase in cash 20,055 79,760
Cash and cash equivalents at beginning of period 860,472 977,549
----------- -----------
Cash and cash equivalents at end of period 880,527 1,057,309
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 0 $ 93,672
=========== ===========
Interest $ 45,002 $ 55,262
=========== ===========
NONCASH FINANCING ACTIVITIES
Capital lease obligations incurred for use of equipment $ 0 $ 99,716
=========== ===========
</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 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. All such adjustments
are of a normal recurring nature. The results for the 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, which will make such decisions
annually at its quarterly meeting in January. At the Board Meeting in
January 1998, the Board voted to contribute $10,000 to the plan on behalf
of plan participants. The Board voted to contribute $15,000 to the plan in
1997. The expense for these contributions is included in the accompanying
financial statements.
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 February 28, 1998, while $457,434 was invested at March 1,
1997, and $190,878 was invested at May 31, 1997.
(5)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
----------------------------- -----------------------------
February 28, March 1, February 28, March 1,
1998 1997 1998 1997
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Sales $6,717,154 $7,048,867 $20,324,782 $21,008,687
% Sales Increase (Decrease) (4.71) (7.04) (3.26) (4.87)
Gross Margin % 22.56 21.72 21.75 21.56
Operating and Administrative
Expense:
Amount $1,453,584 $1,477,627 4,366,216 4,382,302
% of Sales 21.64 20.96 21.48 20.86
Net Income 46,739 33,789 47,892 82,998
</TABLE>
Overall, sales decreased 4.71% from sales for the same quarter last year.
This decrease although smaller than the decrease a year ago, is threatening the
profitability of the Company. The increase in profitability for the most recent
quarter compared to the same quarter last year is due to the increase in gross
margin, which may be difficult to continue unless sales increase. A promotional
program is scheduled to start in May, in an effort to increase sales without an
adverse affect on gross margin. The Company's competitors are constantly
conducting sales promotions which are expensive for an operation the size of the
Company to match over long periods of time. 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. A continuous
effort is made to improve the gross margin and increase profitability by
obtaining the lowest cost for the Company's inventory.
Operating and administrative expense increased as a percent of sales in the
quarter and the year to date periods presented. The decline in sales also has
resulted in both an increase in the fixed charge components of the Company's
operating expenses relative to sales and an increase in the Company's overall
proportion of fixed expenses relative to total expenses, as reflected in the
results for both the quarter and year to date periods presented.
Interest income is down because of the decrease in cash flow, while
interest expense has decreased because of the reduction in the Company's capital
lease obligations through the ongoing amortization of such obligations.
Refundable income taxes at May 31, 1997 are a result of estimated taxes
paid exceeding the liability due. At February 28, 1998 a liability of $19,993
was recorded.
Income Taxes:
The provision for income taxes for the quarter ended February 28, 1998 was
$17,220 while the l iability was $25,383 for the quarter ended March 1, 1997.
The provision for income taxes does not vary significantly from the statutory
rate of 34%.
(6)
<PAGE>
Inflation:
Although not a currently 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 notes payable to the following:
2/28/98 5/31/97
------- -------
Estate of Beatrice Richardson $92,117 $129,000
Richardson Testamentary Trust 5,092 0
Line of Credit-Wachovia Bank 106,484 0
-------- --------
Total $203,694 $129,000
======== ========
Notes to the Estate and to the Richardson Trust are unsecured, 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 2.66 to 1 at the end
of the latest quarter, February 28, 1998, as compared to 2.49 to 1 on March 1,
1997 and 2.64 to 1 at the end of the fiscal year ended May 31, 1997. Cash and
cash equivalents constituted 38.97% of the total current assets at February 28,
1998 as compared to 20.86% at March 1, 1997 and 26.71% at May 31, 1997.
During the quarter ended February 28, 1998 retained earnings increased as a
result of the Company's net income for the quarter.
(7)
<PAGE>
AMERICAN CONSUMERS, INC.
PART II OTHER INFORMATION
Item 5 OTHER INFORMATION
During the quarter ended February 28, 1998, director Herbert S. Willbanks
announced his decision to retire from the Company's Board of Directors,
effective March 1, 1998.
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 version only).
(99) Agreement to Furnish Copies.
(b) During the most recent quarter, the Company has not filed a report on
Form 8-K.
(8)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN CONSUMERS, INC.
(Registrant)
Date: 4/13/98 /s/ Michael A. Richardson
------------------------------------
Michael A. Richardson
CHAIRMAN
(Principal Executive Officer)
Date: 4/13/98 /s/ Paul R. Cook
------------------------------------
Paul R. Cook
EXECUTIVE VICE PRESIDENT - TREASURER
(Principal Financial Officer &
Chief Accounting Officer)
(9)
AMERICAN CONSUMERS, INC.
NET INCOME PER COMMON SHARE
EXHIBIT 11
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
----------------------------- -----------------------------
February 28, March 1, February 28, March 1,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income for computing
earnings per common share $46,739 $33,789 $47,892 $82,998
======== ======= ======= ========
Weighted average number of
common shares outstanding
during each period 916,450 922,222 911,633 923,352
======== ======= ======= ========
Net income per common share $0.051 $0.037 $0.053 $0.090
======== ======= ======= ========
</TABLE>
(10)
<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
FEBRUARY 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> FEB-28-1998
<CASH> 1,265,041
<SECURITIES> 0
<RECEIVABLES> 173,508
<ALLOWANCES> 0
<INVENTORY> 1,784,834
<CURRENT-ASSETS> 3,246,397
<PP&E> 2,942,762
<DEPRECIATION> 1,998,664
<TOTAL-ASSETS> 4,194,495
<CURRENT-LIABILITIES> 1,219,740
<BONDS> 0
0
0
<COMMON> 89,259
<OTHER-SE> 2,509,880
<TOTAL-LIABILITY-AND-EQUITY> 4,194,495
<SALES> 20,324,782
<TOTAL-REVENUES> 20,324,782
<CGS> 15,904,383
<TOTAL-COSTS> 15,904,383
<OTHER-EXPENSES> 4,366,217
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,002
<INCOME-PRETAX> 65,469
<INCOME-TAX> 17,577
<INCOME-CONTINUING> 47,892
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,892
<EPS-PRIMARY> 0.053
<EPS-DILUTED> 0.053
</TABLE>
AMERICAN CONSUMERS, INC.
AGREEMENT TO FURNISH COPIES
EXHIBIT 99
Pursuant to the requirements of Rule 601(b)(4)(v) of S.E.C. Regulation S-K, the
undersigned registrant hereby undertakes to furnish copies of the following
documents to the Staff of the Securities and Exchange Commission upon request:
Demand Note with Variable Interest Rate, dated September 11, 1997, made by
the Company in favor of the Richardson Testamentary Trust.
Demand Note with Variable Interest Rate, dated September 11, 1997, made by
the Company in favor of the Estate of Beatrice H. Richardson.
AMERICAN CONSUMERS, INC.
(Registrant)
Date: 4/13/98 /s/ Michael A. Richardson
-----------------------------
Michael A. Richardson
CHAIRMAN
(Principal Executive Officer)
(11)
