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 26, 2000
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, 2000
----- ----------------------------
COMMON STOCK - $.10 PAR VALUE 835,838
NON VOTING COMMON STOCK - $.00 PAR VALUE 0
NON VOTING PREFERRED STOCK - $.00 PAR VALUE 0
(1)
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
----------------------------------- -----------------------------------
February 26, February 27, February 26, February 27,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 6,533,794 $ 6,383,791 $ 18,820,372 $ 19,322,815
COST OF GOODS SOLD 5,070,333 4,914,116 14,521,445 15,031,948
------------ ------------ ------------ ------------
Gross Margin 1,463,461 1,469,675 4,298,927 4,290,867
OPERATING EXPENSES 1,534,988 1,463,653 4,456,542 4,343,005
------------ ------------ ------------ ------------
Operating Income (Loss) (71,527) 6,022 (157,615) (52,138)
OTHER INCOME (EXPENSE)
Interest income 5,563 4,698 16,047 18,203
Other income 16,172 16,687 56,178 48,842
Interest expense (14,746) (14,263) (41,708) (38,749)
------------ ------------ ------------ ------------
Income Before Income Taxes (64,538) 13,144 (127,098) (23,842)
PROVISION (BENEFIT) FOR
INCOME TAXES (24,600) 5,484 (49,358) (10,429)
------------ ------------ ------------ ------------
NET INCOME (LOSS) (39,938) 7,660 (77,740) (13,413)
RETAINED EARNINGS:
Beginning 1,704,788 1,781,756 1,744,798 1,803,098
Redemption of common stock (73) (925) (2,281) (1,194)
------------ ------------ ------------ ------------
Ending 1,664,777 1,788,491 1,664,777 1,788,491
============ ============ ============ ============
PER SHARE:
Net income ($ 0.047) $ 0.009 ($ 0.093) ($ 0.015)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 840,962 888,316 839,457 887,094
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
(2)
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
February 26, May 29,
2000 1999
---------- ----------
<S> <C> <C>
--A S S E T S--
CURRENT ASSETS:
Cash and short-term investments $1,094,193 $ 917,438
Certificate of deposit 423,736 414,520
Accounts receivable 180,997 149,521
Inventories 1,694,503 1,860,037
Prepaid expenses 18,088 13,078
Refundable income taxes 49,236 28,119
---------- ----------
Total current assets 3,460,753 3,382,713
---------- ----------
PROPERTY - At cost:
Property 2,994,940 2,938,099
Less accumulated depreciation 2,418,962 2,287,484
---------- ----------
Property - Net 575,978 650,615
---------- ----------
TOTAL ASSETS $4,036,731 $4,033,328
========== ==========
--LIABILITIES AND STOCKHOLDERS' EQUITY--
CURRENT LIABILITIES:
Accounts payable $ 650,561 $ 653,117
Short-term borrowings 544,762 306,955
Obligations under capital leases, current portion 90,779 117,414
Accrued sales tax 57,277 96,852
Other accrued liabilities 135,253 106,219
---------- ----------
Total Current Liabilities 1,478,632 1,280,557
---------- ----------
DEFERRED INCOME TAX LIABILITY 37,335 40,335
---------- ----------
DEFERRED INCOME 66,617 86,897
---------- ----------
OBLIGATIONS UNDER CAPITALIZED LEASE AGREEMENTS 8,763 67,898
---------- ----------
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 835,838 and 870,355 83,584 87,036
Additional paid-in capital 697,023 725,807
Retained earnings 1,664,777 1,744,798
---------- ----------
Total Stockholders' Equity 2,445,384 2,557,641
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $4,036,731 $4,033,328
========== ==========
</TABLE>
See Notes to Financial Statements
(3)
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMER, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
-----------------------------
February 26, February 27,
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ($ 77,740) ($ 13,413)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 172,522 206,392
Deferred income taxes (3,000) (3,000)
Deferred income (20,280) (15,896)
Change in operating assets and liabilities:
Certificate of deposit (9,216) (10,410)
Accounts receivable (31,476) (23,197)
Refundable income taxes (21,117) (26,597)
Inventories 165,534 4,597
Prepaid expenses (5,010) (560)
Accounts payable (2,556) 6,591
Accrued sales tax (39,575) (49,228)
Accrued income taxes -- (24,634)
Other accrued liabilities 29,034 25,075
----------- -----------
Net Cash provided by operating activities 157,120 75,720
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property (97,885) (29,727)
Net cash used in investing activities (97,885) (29,727)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in short-term borrowings 237,807 176,752
Principal payments on obligations under capital leases (85,770) (110,282)
Redemption of common stock (34,517) (18,080)
----------- -----------
Net cash provided by financing activities 117,520 48,390
----------- -----------
Net increase in cash 176,755 94,382
Cash and cash equivalents at beginning of period 917,438 945,222
----------- -----------
Cash and cash equivalents at end of period 1,094,193 1,039,604
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 0 $ 46,818
=========== ===========
Interest $ 41,708 $ 38,749
=========== ===========
</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 1999
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 $150,000 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 its decision annually
at the quarterly meeting in January. The Board voted to contribute $7,500
to the plan for both calendar year 1999 and 1998. The expense for these
contributions are 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 the balance sheet dates presented.
(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 26, February 27, February 26, February 27,
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales $ 6,533,794 $ 6,383,791 $ 18,820,372 $ 19,322,815
% Sales Increase (Decrease) 2.35 (4.96) (2.60) (4.93)
Gross Margin % 22.40 23.02 22.84 22.21
Operating and Administrative
Expense:
Amount $ 1,463,461 $ 1,463,653 $ 4,456,542 $ 4,343,005
% of Sales 22.40 22.93 23.68 22.48
Net Income $ (39,938) $ 7,660 $ (77,740) $ (13,413)
</TABLE>
Overall sales increased 2.35% from sales for the same quarter last year.
This increase is attributable to the Company extending its hours of operation.
The retail outlets are now open on Sunday from 9:00 AM to 8:00 PM. This change
was considered necessary to compete with competitors and to combat increased
pressures placed on the Company's market share and sales by other chains opening
stores in the Company's trade area, the effect of which is threatening the
profitability of the Company. Management believes that competitive pressures on
the Company will continue to increase over time as a result of 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. The Company changed suppliers on March
6, 2000 in an effort to obtain a lower cost of inventory, and thereby improve
margins. The decisions to open on Sunday to stop the downward trend in sales and
to switch suppliers were tough decisions but were felt to be necessary and is a
result in the increase in sales for the quarter.
Operating and administrative expense decreased as a percent of sales in the
quarter and the year to date periods presented. The dollar amount remained
constant for the two quarterly periods presented, but the percentage of sales
decreased because of the increase in sales.
Income Taxes:
The benefit for income taxes for the quarter ended February 26, 2000 was
$24,006 while the provision was $5,484 for the quarter ended February 27, 1999.
The provision for income taxes does not vary significantly from the statutory
rate of 34% and State rates of 5% - 6%.
Refundable income taxes at February 26, 2000 are a result of the operating
loss reported for the thirty-nine weeks then ended. A refund was also recorded
at year end May 29, 1999.
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.
(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 $600,000 line of credit
with a regional bank. This line was reduced by the bank on february 10, 2000
from $800,000 to $600,000 to reduce the unsecured exposure to the bank based on
the operating losses incurred by the Company. This revised line of credit is
believed to be sufficient to finance the Company's operations in the near term,
and management believes that the Company could obtain additional financing, if
required, on commercially reasonable terms. Long-term borrowing generally
finances capital expansion.
Short-term borrowings consist of notes payable to the following:
2/26/00 5/29/99 2/27/99 2/28/98
-------- -------- -------- --------
Michael and Diana Richardson $ 86,936 $ 97,972 $111,072 $ 92,117
Matthew Richardson 55,501 52,194 51,216 5,092
Line of Credit-Wachovia Bank 402,325 156,790 223,410 106,484
-------- -------- -------- --------
Total $544,762 $306,956 $385,697 $203,693
======== ======== ======== ========
Notes to the Richardsons 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 2.34 to 1 at the end
of the latest quarter, February 26, 2000, as compared to 2.55 to 1 on February
27, 1999 and 2.64 to 1 at the end of the fiscal year ended May 29, 1999. Cash
and cash equivalents constituted 43.86% of the total current assets at February
26, 2000 as compared to 41.16% at February 27, 1999 and 39.38% at May 29, 1999.
Cash activity is detailed in the Condensed Statements of Cash Flows on page
four.
During the quarter ended February 26, 2000 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.
10.1 Note and Security Agreement between the Company and Wachovia
Bank of Georgia, N.A., dated February 14, 2000
10.2 Commitment letter dated February 10, 2000 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>
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: 4/11/00 /s/ Michael A. Richardson
------- -----------------------------
Michael A. Richardson
CHAIRMAN
(Principal Executive Officer)
Date: 4/11/00 /s/ Paul R. Cook
------- -----------------------------
Paul R. Cook
EXECUTIVE VICE PRESIDENT - TREASURER
(Principal Financial Officer & Chief Accounting
Officer)
(9)
[WACHOVIA LOGO]
Note and Security Agreement
This Note and Security Agreement is a renewal of an existing
Note and Security Agreement between Borrower and Lender.
Account No. 002-050-0001503-00001
Dalton, Georgia
February 14, 2000 $600,000.00
FOR VALUE RECEIVED, the undersigned (hereinafter called the "Borrower") hereby
promises to pay to the order of Wachovia Bank, N.A. (hereinafter called the
"Lender") at its office where borrowed, in immediately available funds of lawful
money of the United States, the sum of Six Hundred Thousand and 00/100 Dollars
($600,000.00 ) together with any unpaid interest hereon from date of advance, in
accordance with the terms contained in this 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.
|X| In addition, Borrower agrees to pay to lender a non-refundable loan fee of
$250.00.
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 on March 01,
2000.
Interest will be calculated on the basis of a year of 360 days and paid for the
actual number of days elapsed.
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.
<PAGE>
|_| The terms and conditions in a Loan Agreement dated __________ between the
parties hereto, as the same may be amended from time to time, shall be
considered a part hereof to the same extent as if written herein.
|_| The terms and conditions in a Commitment Letter dated February 10, 2000
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 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 Number 6390610 in the amount of $423,735.74 held 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 of 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 interests may appear and 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 any or all of such insurance is
cancelled, any returned 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
<PAGE>
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 the 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 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 reasonable
attorneys' 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.
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed this Note under seal the day and
year set forth above.
BORROWER(S):
American Consumers, Inc.
/s/ Michael A. Richardson (SEAL)
-------------------------------------
By: Michael A Richardson
Title: President
[WACHOVIA LOGO]
Wachovia Bank, N.A.
Post Office Box 1088
Dalton, Georgia 30722-1088
February 10, 2000
American Consumers, Inc.
Michael A. Richardson, President
P. O. Box 2328
Ft. Oglethorpe, GA 30742
Dear Michael:
Wachovia Bank, N.A. ("Lender") is pleased to offer American Consumers, Inc.
("Borrower") the following credit facilities. This commitment letter amends and
replaces the commitment letter dated November 20, 1998. This Commitment (as
later defined) will become effective upon your acceptance of the terms and
conditions outlined in this letter. This Commitment will expire on September 30,
2000 or on demand, which ever is earlier.
Commitment Type: Revolving Line of Credit, the "Commitment."
Amount: Up to $600,000
Purpose: General working capital purposes
Interest Rate: Lender's Prime Rate, currently 8.75%, subject to change
from time to time. The "Prime Rate" refers to that rate so
denominated and set by Lender as an interest rate basis for
borrowings. The Prime Rate is but one of several interest
rate bases used by Lender. Lender lends at rates above and
below the Prime Rate.
Interest will be calculated on the basis of a 360 day year
based on the actual number of days elapsed.
Repayment Terms: Interest payable monthly beginning February 14, 2000.
Principal due on demand.
Collateral: Certificate of Deposit issued by Wachovia Bank in the amount
of $424,000.
To the extent permitted by law, the collateral specified
above shall secure the Commitment and also secure any and all
other liabilities, obligations and indebtedness of the
Borrower to Lender, now existing or hereafter arising.
Financial Reports: The following information will be required:
Year end audited financial statements of Borrower within 90
days of fiscal year end prepared by a certified public
accounting firm acceptable to Lender.
Quarterly financial statements, including a balance sheet and
income statement, within 60 days of quarter end signed by an
officer or partner of Borrower attesting to their accuracy.
All financial statements shall be prepared in accordance with
generally accepted accounting principles and practices
applied consistently throughout the period and for prior
periods.
Additional financial information on Borrower or Guarantor as
requested by Lender.
Fees: A $250.00 Commitment fee which shall be fully earned and
non-refundable.
Other Conditions: This Commitment is subject to the maintenance by
Borrower of a condition satisfactory to Lender and the
delivery and/or execution of loan, security, and
informational documents satisfactory to Lender. Examples of
an unsatisfactory condition include, but are not limited to,
a material change in management, an adverse change in
financial condition, or any default by Borrower on any
obligation to Lender or to a third party.
During the term of the Commitment, there shall be no change
in control, ownership, or legal structure of Borrower or
Guarantor without the prior written consent of Lender.
<PAGE>
In no event shall either Borrower or Lender be liable to the
other for indirect, special, or consequential damages which
may arise out of or are in any way connected with the
issuance of this Commitment.
All costs, expenses and fees incurred to close the Commitment
and perfect Lender's security interest will be the
responsibility of the Borrower, whether or not the
transaction contemplated herein closes, unless the failure to
close is due solely to Lender's gross negligence or willful
misconduct.
In addition to any other defaults normally specified in
Lender's documents, to the extent permitted by law, Borrower
agrees that a default under this Commitment will also cause a
default under any other loan or obligation of the Borrower to
Lender and that a default under any other loan or obligation
of the Borrower to Lender will cause a default under this
Commitment.
All advances under the revolving line of credit will be paid
down to a minimum amount, of $424,000 for a minimum of thirty
consecutive days during the term of this Commitment.
The Commitment is subject to Lender serving as Borrower's
primary financial institution for short term working capital
needs. While the Borrower is utilizing Lender's short term
working capital line, the Borrower agrees not to
simultaneously utilize short term working capital lines of
credit provided by other financial institutions.
All information and representations made by the Borrower and
any Guarantors to Lender are and will be accurate at closing.
This Commitment shall be governed by the laws of the State of
Georgia.
This Commitment is for the sole and exclusive benefit of the
Borrower and may not be assigned by the Borrower.
This Commitment and all terms and provisions outlined above
shall survive the closing and shall be binding on the
Borrower after such closing.
Commitment
Modifications: No condition or other term of this Commitment may be waived
or modified except in writing signed by Borrower, all
Guarantors, if any, and Lender.
Please call me if you have any questions about the terms of this offer. If this
Commitment is not accepted with an executed copy received by Lender by February
14, 2000 and closed by February 14, 2000, this Commitment shall be null and void
at the option of Lender. To acknowledge your acceptance, please sign below and
return to me. We look forward to working with you.
Very truly yours,
/s/ Pam Garland
Pam Garland
Vice President
Accepted and agreed to this 14 day of February, 2000.
American Consumers, Inc.
By: /s/ Michael A. Richardson
-------------------------
Michael A. Richardson
AMERICAN CONSUMERS, INC.
NET INCOME PER COMMON SHARE
EXHIBIT 11
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
-------------------------------- --------------------------------
February 26, February 27, February 26, February 27,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income for computing
earnings per common share ($ 39,938) $ 7,660 ($ 77,740) ($ 13,413)
========= ========= ========= =========
Weighted average number of
common shares outstanding
during each period 840,962 888,316 839,457 887,094
========= ========= ========= =========
Net income per common share ($ 0.047) $ 0.009 ($ 0.093) ($ 0.015)
========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS OF AMERICAN CONSUMERS, INC. FOR THE FISCAL
QUARTER ENDED FEBRUARY 26, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-29-1999
<PERIOD-END> FEB-26-2000
<CASH> 1,517,929
<SECURITIES> 0
<RECEIVABLES> 180,997
<ALLOWANCES> 0
<INVENTORY> 1,694,503
<CURRENT-ASSETS> 3,460,753
<PP&E> 2,994,940
<DEPRECIATION> 2,418,962
<TOTAL-ASSETS> 4,036,731
<CURRENT-LIABILITIES> 1,478,632
<BONDS> 0
0
0
<COMMON> 83,584
<OTHER-SE> 2,361,800
<TOTAL-LIABILITY-AND-EQUITY> 4,036,731
<SALES> 18,820,372
<TOTAL-REVENUES> 18,820,372
<CGS> 14,521,445
<TOTAL-COSTS> 14,521,445
<OTHER-EXPENSES> 4,456,542
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,708
<INCOME-PRETAX> (127,098)
<INCOME-TAX> (49,358)
<INCOME-CONTINUING> (77,740)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (77,740)
<EPS-BASIC> (0.093)
<EPS-DILUTED> (0.093)
</TABLE>
