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 27, 1999
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 7, 2000
COMMON STOCK - $.10 PAR VALUE 836,938
NON VOTING COMMON STOCK - $.00 PAR VALUE 0
NON VOTING PREFERRED STOCK - $.00 PAR VALUE 0
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------------------------------------------
November 27, November 28, November 27, November 28,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 6,328,416 $ 6,299,480 $ 12,286,578 $ 12,939,024
COST OF GOODS SOLD 4,883,198 4,867,532 9,451,112 10,117,832
------------ ------------ ------------ ------------
Gross Margin 1,445,218 1,431,948 2,835,466 2,821,192
OPERATING EXPENSES 1,479,875 1,424,102 2,921,554 2,879,352
------------ ------------ ------------ ------------
Operating Income (Loss) (34,657) 7,846 (86,088) (58,160)
OTHER INCOME (EXPENSE)
Interest income 5,864 5,834 10,484 13,505
Other income 22,624 18,218 40,006 32,155
Interest expense (19,164) (11,727) (26,962) (24,486)
------------ ------------ ------------ ------------
Income (Loss) Before Income Tax (25,333) 20,171 (62,560) (36,986)
PROVISION (BENEFIT) FOR
INCOME TAXES (9,871) 8,593 (24,758) (15,913)
------------ ------------ ------------ ------------
NET INCOME (LOSS) (15,462) 11,578 (37,802) (21,073)
RETAINED EARNINGS:
Beginning 1,720,561 1,770,447 1,744,798 1,803,098
Redemption of common stock (311) (269) (2,208) (269)
------------ ------------ ------------ ------------
Ending 1,704,788 1,781,756 1,704,788 1,781,756
============ ============ ============ ============
PER SHARE:
Net income (loss) ($ 0.018) $ 0.013 ($ 0.045) ($ 0.024)
============ ============ ============ ============
Cash dividends $ 0.000 $ 0.000 $ 0.000 $ 0.000
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 842,467 890,067 840,892 889,537
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
(2)
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED BALANCE SHEETS
November 27, May 29,
1999 1999
------------ -------
--A S S E T S--
CURRENT ASSETS:
Cash and short-term investments $1,098,022 $ 917,438
Certificate of deposit 423,736 414,520
Accounts receivable 197,250 149,521
Inventories 1,915,656 1,860,037
Prepaid expenses 25,402 13,078
Refundable income taxes 26,614 28,119
---------- ----------
Total current assets 3,686,680 3,382,713
---------- ----------
PROPERTY - At cost:
Property 2,950,347 2,938,099
Less accumulated depreciation 2,374,058 2,287,484
---------- ----------
Property - Net 576,289 650,615
---------- ----------
OTHER ASSETS
TOTAL ASSETS $4,262,969 $4,033,328
========== ==========
-LIABILITIES AND STOCKHOLDERS' EQUITY-
CURRENT LIABILITIES:
Accounts payable $ 661,723 $ 653,117
Short-term borrowings 666,142 306,955
Obligations under capital leases, current portion 107,883 117,414
Accrued sales tax 64,830 96,852
Other accrued liabilities 144,895 106,219
---------- ----------
Total Current Liabilities 1,645,473 1,280,557
---------- ----------
DEFERRED INCOME TAX LIABILITY 38,335 40,335
---------- ----------
DEFERRED INCOME 71,916 86,897
---------- ----------
OBLIGATIONS UNDER CAPITALIZED LEASE AGREEMENTS 20,823 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 836,938 and 870,355 83,694 87,036
Additional paid-in capital 697,940 725,807
Retained earnings 1,704,788 1,744,798
---------- ----------
Total Stockholders' Equity 2,486,422 2,557,641
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $4,262,969 $4,033,328
========== ==========
See Notes to Financial Statements
(3)
<PAGE>
FINANCIAL INFORMATION
AMERICAN CONSUMER, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
----------------------
November 27, November 28,
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
----------- -----------
<S> <C> <C>
Net income (loss) $ (37,802) $ (21,073)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 111,438 135,462
Deferred income taxes (2,000) (2,000)
Deferred income (14,981) (10,597)
Change in operating assets and liabilities:
Certificate of deposit (9,216) (10,410)
Accounts receivable (47,729) (19,776)
Inventories (55,619) (110,915)
Prepaid expenses (12,324) (1,801)
Refundable income taxes 1,505 (26,376)
Accounts payable 8,606 (27,253)
Accrued sales tax (32,022) (43,666)
Accrued income taxes -- (24,634)
Other accrued liabilities 38,676 22,377
----------- -----------
Net Cash used in operating activities (51,468) (140,662)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property (37,113) (37,436)
Net cash used in investing activities (37,113) (37,436)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in short-term borrowings 359,187 143,577
Principal payments on obligations under capital leases (56,605) (74,767)
Redemption of common stock (33,417) (4,077)
----------- -----------
Net cash provided by financing activities 269,165 64,733
----------- -----------
Net increase (decrease) in cash 180,584 (113,365)
Cash and cash equivalents at beginning of period 917,438 945,222
----------- -----------
Cash and cash equivalents at end of period 1,098,022 831,857
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 0 $ 39,108
=========== ===========
Interest $ 26,962 $ 24,486
=========== ===========
</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 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. 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 $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. The Board voted to contribute $7,500
to the plan in 1999 and $10,000 in 1998.
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. No funds were invested at
November 27, 1999, at November 28, 1998 or at May 29, 1999.
(5)
<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 27, November 28, November 27, November 28,
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales $ 6,328,416 $ 6,299,480 $ 12,286,578 $ 12,939,024
% Sales Increase (Decrease) .46 (6.39) (5.04) (4.91)
Gross Margin % 22.84 22.73 23.08 21.80
Operating and Administrative
Expense:
Amount 1,479,875 1,424,102 2,921,554 2,879,352
% of Sales 23.38 22.61 23.78 22.25
Net Income (Loss) (15,462) 11,578 (37,802) (21,073)
</TABLE>
Overall sales increased .46% from sales for the same quarter last year.
This increase is attributable to the Company extending its hours of operation in
response to increasing competitive pressure on the Company's market share, sales
and profits, which is threatening the profitability of the Company. The retail
outlets are now open on Sunday from 9:00 AM to 8:00 PM. This change was
considered necessary to combat competitive pressures placed on the Company by
other chains opening stores in the Company's trade area. 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 gross margin and increase
profitability by obtaining the lowest cost for the Company's inventory.
Competitive pressures make it difficult to maintain gross margin and increase
sales. The decision of management to open on Sunday to stop the downward trend
in sales was a tough decision but is responsible for the small increase this
quarter.
Operating and administrative expense increased from 22.61% to 23.38% of
sales for the quarters presented, but were lower from the percentage of 24.20
for the quarter ended August 28, 1999.
Interest expense increased due to the increase in short-term borrowings.
Inventories, up $55,619 from May 29, 1999, is consistent for this time of
year. Inventories were $1,915,656 at November 27, 1999 and $1,940,918 at
November 28, 1998.
Refundable income taxes at November 27, 1999 are a result of operating
losses for the quarter and year to date. The amount at May 29, 1999 was a result
of estimated taxes paid exceeding the Company's tax liability at year end.
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. When the Company
is forced to raise overall prices of its goods, the Company attempts to protect
its market share through competitive pricing strategies which emphasize weekly
advertised specials.
(6)
<PAGE>
FINANCIAL CONDITION
Liquidity and Capital Resources:
The Company finances its working capital requirements principally through
its cash flow from operations and short-term borrowing. Short-term borrowing to
finance inventory purchases is provided by the Company's $800,000 line of credit
with a regional bank. Additional funds are expected to be available to the
Company, if needed, through the establishment of an additional line of credit
with the Company's principal inventory supplier. Long-term borrowing generally
finances capital expansion.
Short-term borrowings consist of notes payable to the following:
11/27/99 5/29/99 11/28/98
-------- -------- --------
Michael and Diana Richardson $100,983 $ 97,972 $128,867
Matthew Richardson 54,326 52,194 52,961
Line of Credit-Wachovia Bank 510,833 156,790 170,693
-------- -------- --------
Total $666,142 $306,956 $352,521
======== ======== ========
Notes to the Richardson family members 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 2.24 to 1 at the end
of the latest quarter, November 27, 1999 as compared to 2.59 to 1 on November
28, 1998 and 2.64 to 1 at the end of the fiscal year ended May 29,1999. Cash and
cash equivalents constituted 41.28% of the total current assets at November 27,
1999 as compared to 24.35% at November 28, 1998 and 39.38% at May 29, 1999. The
activity is detailed in the Condensed Statements of Cash Flows on page four.
During the quarter ended November 29, 1999 retained earnings decreased as a
result of the Company's net loss for the quarter.
Year 2000
The Year 2000 issue results from computer programs being written using two
digits rather than four to define the applicable year. As the year 2000
approached, there were concerns that systems using such programs might be unable
to accurately process certain date-based information. To the extent that the
Company's software applications had contained source code that was unable to
interpret appropriately calendar year 2000 and beyond, some level of
modification or replacement of such applications was necessary to avoid system
failures and the temporary inability to process transactions or engage in other
normal business activities.
During fiscal 1998, the Company began evaluating both its information
technology systems and other systems and equipment in order to identify and
adjust date sensitive systems for Year 2000 compliance. The Company's
assessments in both its information technology ("IT") area and in its
non-information technology ("Non-IT") area were completed prior to the end of
calendar year 1999. The Company also completed its primary remediation efforts
(including acquisition and installation of any necessary new equipment and
software) during the quarter ended November 27, 1999, and does not anticipate
that any further remediation will be required.
(7)
<PAGE>
The operating expenditures to address the Company's Year 2000 issues
totaled approximately $6,000 for upgrades to checkout systems in each of the
Company's six store locations. The Company made additional capital expenditures
of approximately $11,700 for the purchase of new computer equipment during the
second quarter of fiscal 2000, the majority which involved planned information
technology replacements which would have occurred even in the absence of the
Year 2000 issue.
The Company's IT issues fall into two principal areas: compliance of the
Company's corporate accounting and other record-keeping hardware and software
and compliance of the electronic scanning equipment and related software
utilized for inventory control and the processing of retail customer
transactions in each of the Company's six grocery stores. The Company has
received documentation from the provider of the software utilized in the
Company's corporate accounting and record-keeping functions, certifying the Year
2000 compliant status of all of such software. The Company replaced all of the
hardware employed in such functions with new hardware that is certified as Year
2000 compliant during the quarter ended November 27, 1999, at a cost of $11,734.
Under the terms of the Company's lease of its electronic scanning equipment form
Fleming Companies, Inc., Fleming was responsible for testing such equipment for
Year 2000 compliance and making any necessary modifications or replacements,
which were completed during the quarter ended November 27, 1999.
The risks of Year 2000 issues from a Non-IT standpoint were principally as
follows: electrical outages resulting in breakdown of point of sales systems,
lighting and refrigeration equipment and the loss of utility service. In
addition, certain store equipment might have had imbedded chips or
microprocessors that were not Year 2000 compliant. The Company believes that
there are no such problems with any of its current equipment. The events noted
above could have severely affected Company operations; however, as of the filing
date of this Report, the Company had not experienced any equipment failures or
other operational difficulties related to the Year 2000 problem.
Significant risk also could have arisen out of the possible failure of
vendors to respond to Year 2000 issues. The Company's only significant vendor is
its primary inventory supplier, Fleming Companies, Inc. The Company had
discussions with representatives of Fleming to determine the state of its
readiness and to review its Year 2000 contigency plans. Based upon those
discussions, the Company concluded that Fleming was making adequate progress
toward Year 2000 compliance for all of its systems that could impact on
Fleming's relationship with the Company, and did not expect the Company's
business to suffer any material adverse effects as a result of non-compliance by
any of Fleming's systems. As of the date of this Report, the Company had not
experienced any such problems in its relationship with Fleming.
With respect to contigencies, the Company developed a program to identify
the additional resources that would be necessary to fully run the Company when
and if it is affected by the foregoing risk factors. During the first six months
of fiscal 2000, the Company will continue to expand its contigency plans and
detailed procedures in order to mitigate any delayed effects of the Year 2000
issues that might affect the Company.
The Company believes that the steps it has taken were sufficient to resolve
all significant Year 2000 issues in a timely manner and, as discussed above, it
has not experienced any operational difficulties due to the Year 2000 problem
through the first week of January 2000.
(8)
<PAGE>
Forward-Looking Statements
Information provided by the Company, including written or oral statements
made by its representatives, may contain "forward-looking information" as
defined in Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts, which addresses
activities, events or developments that the Company expects or anticipates will
or may occur in the future, including such things as expansion and growth of the
Company's business, the effects of future competition, future capital
expenditures and the Company's business strategy, are forward-looking
statements. In reviewing such information it should be kept in mind that actual
results may differ materially from those projected or suggested in such
forward-looking statements. This forward-looking information is based on various
factors and was derived utilizing numerous assumptions. Many of these factors
have previously been identified in filings of statements made by or on behalf of
the Company, including filings with the Securities and Exchange Commission of
Forms 10-Q, 10-K and 8-K. Important assumptions and other important factors that
could cause actual results to differ materially from those set forth in the
forward-looking statements include: changes in the general economy or in the
Company's primary markets, changes in consumer spending, competitive factors,
the nature and extent of continued consolidation in the grocery store industry,
changes in the rate of inflation, changes in state or federal legislation or
regulation, adverse determinations with respect to any litigation or other
claims, inability to develop new stores or complete remodels as rapidly as
planned, stability of product costs, supply or quality control problems with the
Company's vendors, issues and uncertainties related to Year 2000, and other
issues detailed from time-to-time in the Company's filings with the Securities
and Exchange Commission.
[This space intentionally left blank]
(9)
<PAGE>
AMERICAN CONSUMERS, INC.
PART II OTHER INFORMATION
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as a part of the report.
10(a) Collateral Assignment of Deposit between the Company and
Wachovia Bank of Georgia, N.A., dated November 15, 1999
10(b) Commitment letter dated November 15, 1999 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.
(10)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN CONSUMERS, INC.
(Registrant)
/s/ MICHAEL A. RICHARDSON
Date: 1/7/2000
-------- -----------------------------------------------
Michael A. Richardson
CHAIRMAN
(Principal Executive Officer)
/s/ PAUL R. COOK
Date: 1/7/2000
-------- -----------------------------------------------
Paul R. Cook
EXECUTIVE VICE PRESIDENT - TREASURER
(Principal Financial Officer & Chief Accounting
Officer)
(11)
Collateral Assignment of Deposit [WACHOVIA LOGO]
Primary Borrower: American Consumers, Inc. Acct. No.: 002 050 000 150 3
The undersigned, American Consumers, Inc. (hereinafter collectively and/or
individually referred to as "Pledgor") for value received and in consideration
of extensions of credit as may from time to time be made by Wachovia Bank, N.A.,
a national banking association (hereinafter referred to as "Lender"), to
Pledgor, either directly or indirectly, and/or American Consumers, Inc.
(hereinafter collectively and/or individually referred to as "Borrower"), and to
secure any existing or future indebtedness, liability or obligation whatsoever
of Pledgor and/or Borrower to Lender, whether absolute or contingent, and
whether incurred as principal, maker, endorser, surety, account party or
otherwise (hereinafter collectively referred to as the "Obligations"), Pledgor
hereby pledges, transfers, sets over, assigns and conveys to Lender, and grants
Lender a security interest in and on Certificate of Deposit account number
6390610 standing in the Pledgor's name on the books of Wachovia Bank, N.A.
(hereinafter referred to as "Financial Institution") and all Pledgor's right,
title, equity and interest therein, including, without limitation, all interest
now or hereafter accruing thereon, together with any renewals, replacements
and/or substitutions thereof, or any portion thereof and any deposits hereafter
made therein or in any renewals, replacements and/or substitutions thereof and
any and all proceeds of the foregoing (hereinafter collectively referred to as
the "Collateral"). Notwithstanding anything to the contrary contained herein,
the Collateral shall not secure such Obligations of Pledgor and Borrower to
Lender that are (i) subject to, the disclosure requirements of the Truth in
Lending Act and Federal Reserve Board Regulation Z or (ii) that are extended for
personal, family or household purposes and are subject to any state consumer
protection laws, or (iii) that are subject to the limitations specified in North
Carolina General Statutes Section 24-11, as amended from time to time, unless
specified to the contrary on the appropriate evidence of the Obligations.
Pledgor hereby irrevocably constitutes and appoints Lender its attorney in fact
to transfer said Collateral on the books of the Financial Institution, with full
power of substitution and transfer, including full power and authority to demand
and receive such Collateral, or to transfer it into Lender's name. As used
herein, the term "Obligor" shall mean any endorser, surety or guarantor of the
Obligations.
Pledgor agrees that all or any part of the Collateral, including any
interest accrued thereon, may be redeemed, appropriated and applied to the
payment of the Obligations (even if such application and redemption shall result
in a penalty for early withdrawal), whether or not the Obligations or any part
thereof is due or payable.
In the event a Borrower is named in the first paragraph, Pledgor consents
that, at any time, and from time to time, either with or without consideration,
the whole or any part of any security now or hereafter held for any Obligations
may be exchanged, compromised, or surrendered; the time or place of payment of
any Obligations or of any security thereof may be changed or extended, in whole
or in part, to a time certain or otherwise, and may be renewed or accelerated,
in whole or in part; Borrower may be granted indulgences generally; any of the
provisions of any note or other instrument evidencing any Obligations or any
security therefor may be modified or waived; any party liable for the payment
thereof may be granted indulgences or released; the death, termination of
existence, bankruptcy, insolvency, incapacity, lack of authority or disability
of Borrower or any Obligor shall not affect the obligations of Pledgor hereunder
and no claim need be asserted against the personal representative, guardian,
custodian, trustee or debtor in bankruptcy or receiver of any deceased,
incompetent, bankrupt or insolvent Borrower or Obligor; any deposit balance to
the credit of Borrower, Obligor or any party liable upon any security therefor
may be released, in whole or in part, at, before and/or after the stated,
extended or accelerated maturity of any Obligations; and Lender may release,
discharge, compromise or enter into any accord and satisfaction with respect to
any collateral for the Obligations, or the liability of Borrower or Obligor, all
without notice to or further assent by Pledgor, who shall remain bound hereon,
notwithstanding any such exchange, compromise, surrender, extension, renewal,
acceleration, modification, indulgence, release, discharge or accord and
satisfaction. Further, Pledgor expressly waives: (i) notice of acceptance of
this Agreement and all extensions or renewals of credit or other financial
accommodations to Borrower; (ii) presentment and demand for payment of any of
the Obligations; (iii) protest and notice of dishonor or of default to Borrower,
Obligor or to any other party with respect to any of the Obligations or with
respect to any security therefor; (iv) any invalidity or disability in whole or
in part at the time of the acceptance of, or at any time with respect to, any
security for the Obligations or with respect to any party primarily or
secondarily liable for the payment of the Obligations to Lender; (v) the fact
that any security for the Obligations may at any time or from time to time be in
default or be inaccurately estimated or may deteriorate in value for any cause
whatsoever; (vi) any diligence in the creation or perfection of a security
interest or collection or protection of or realization upon the Obligations or
any security therefor, any liability hereunder, or any party primarily or
secondarily liable for the Obligations or any lack of commercial reasonableness
in dealing with any security for the Obligations; (vii) any duty or obligation
on the part of Lender to ascertain the extent or nature of any security for the
Obligations, or any insurance or other rights respecting such security, or the
liability of any party primarily or secondarily liable for the Obligations, or
to take any steps or action to safeguard, protect, handle, obtain or convey
information respecting, or otherwise follow in any manner, any such security,
insurance or other rights; (viii) any duty or obligation of Lender to proceed to
collect the Obligations from, or to commence an action against, Borrower,
Obligor, or any other person, or to resort to any security or to any balance of
any deposit account or credit on the books of Lender in favor of Borrower,
Obligor, or any other person, despite any notice or request of Pledgor to do so;
(ix) any rights of Pledgor, if any, pursuant to Official Code of Georgia Section
10-7-24 if Georgia law is applicable to this Agreement or North Carolina General
Statutes Section 26-7 if North Carolina law is applicable to this Agreement or
any similar or subsequent law or Sections 49-25 and 49-26 of the Code of
Virginia (1950) if Virginia law is applicable to this Agreement or any similar
or subsequent law; (x) to the extent not prohibited by law, all rights of
redemption, stay, appraisal, or rights which would deny Lender a deficiency
judgment which Pledgor now has or may at any time in the future have under any
rule of law or statute now existing or hereafter enacted; (xi) except as
otherwise expressly provided herein, all other notices to which Pledgor might
otherwise be entitled; (xii) any defense as to invalidity or unenforceability of
any Obligation; (xiii) all rights of subrogation, indemnity, reimbursement or
other claims against Borrower and all rights of recourse against any property of
Borrower arising out of or related to any application of the proceeds of the
Collateral to reduce the amount owing by Borrower under the Obligations; and
(xiv) any other legal or equitable defenses whatsoever to which Pledgor might
otherwise be entitled. In addition, Pledgor hereby agrees and acknowledges that
Lender, Borrower and Obligor have not made any representations or warranties
with respect to: (i) Borrower or Obligor or the financial condition or solvency
of Borrower or Obligor, or (ii) the value or nature of any collateral in which
the Lender may have been granted a security interest.
<PAGE>
This Collateral Assignment shall be in full force and effect until all of
the Obligations to Lender 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 Pledgor, Borrower or Obligor, and Lender shall not be obligated to
extend any further Obligations and has terminated this Assignment in writing.
This Collateral Assignment shall be governed by and construed and interpreted in
accordance with the laws of the State of Georgia and any applicable federal law.
IN WITNESS WHEREOF, the Pledgor has caused this Collateral Assignment to be
executed under seal this 15th day of November, 1999.
If Pledgor is a corporation: American Consumers, Inc.
----------------------------------
Name of Corporation
(Corporate Seal to be affixed here)
Attest: /s/ Reba S. Southern By: /s/ Michael A. Richardson
----------------------------- -----------------------------
Secretary/Assistant Secretary Michael A. Richardson
Title: President
---------------------------
If Pledgor is a partnership: ____________________________(SEAL)
Name of Partnership
By:
------------------------------
General Partner
By:
------------------------------
General Partner
If Pledgor is an individual/sole proprietor:
(SEAL)
- ----------------------------------------- ----------------------------------
PLEDGOR'S Social Security Number Signature
(SEAL)
- ----------------------------------------- ----------------------------------
PLEDGOR'S Social Security Number Signature
ACKNOWLEDGEMENT OF ASSIGNMENT
The Undersigned consents to, acknowledges and accepts service of the above
and foregoing assignment, and agrees to make payments to Wachovia Bank, N.A., in
accordance with the terms of said assignment, and the undersigned recognizes and
accepts the above assignment as valid and binding upon the undersigned
notwithstanding any term or language to the contrary specified on or governing
the Collateral including, but not limited to, any statement of
non-transferability. In addition, the undersigned (if other than Wachovia Bank,
N.A.) waives all claims, charges and or rights it has or may hereafter have
against the Collateral, including, but not limited to, any statutory or
contractual right or claim of offset or lien resulting from any transaction
which involves the Collateral or which arises out of any relationship that the
undersigned has or may hereafter have with any owner of the Collateral. The
value of said account on the undersigned's books as of _______________________,
is $__________________________ and there have been no withdrawals since that
date. The undersigned's records do not disclose any liens or claims of any kind
against said account except __________________________________. This __________
day of ______________________, ____________.
By: __________________________________(SEAL)
Title:__________________________________
By: __________________________________(SEAL)
Title:__________________________________
RELEASE OF ASSIGNMENT
The foregoing assignment is hereby released as of the ________ day of
___________________, ________.
Wachovia Bank, N.A.
By: ________________________________________
Title:________________________________________
<PAGE>
Collateral Substitution [WACHOVIA LOGO]
Agreement
Date November 15, 1999
-----------------
For the purposes of this Agreement, the term "Pledgor," shall mean the party or
parties who own and have pledged the collateral referenced herein to secure the
indebtedness referenced below. If Pledgor is not the Borrower, then the Borrower
must also evidence this Agreement through his signature below.
This Collateral Substitution Agreement entered into by and between American
Consumers, Inc. (hereinafter the "Pledgor") and Wachovia Bank, N.A. (hereinafter
the "Lender").
WHEREAS, Pledgor and/or Borrower did on the 5th day of December, 1997,
execute and deliver to Lender a promissory note in the original Principal amount
of Eight Hundred Thousand and 00/100 -- dollars, maturing on _________________
(hereinafter the "Note") secured by certain collateral, a portion of which is as
follows:
Certificate of Deposit #6390608
(hereinafter the "Collateral"); and
WHEREAS, Pledgor and Borrower now request that Lender release said
Collateral and that the following property be substituted in its place:
Certificate of Deposit #6390610 (hereinafter the "New Collateral").
NOW THEREFORE, in consideration of $1.00 in hand paid by the Pledgor to the
Lender, receipt of which is hereby acknowledged, and in further consideration of
the mutual covenants and agreements between the parties hereto, it is agreed
that:
1. The Collateral will be released upon delivery by Pledgor to Lender of
the New Collateral, which is substituted in the place and stead of the
originally pledged collateral.
2. The New Collateral is the Pledgor's property and title to it is vested
in Pledgor and Pledgor makes the same representations as to the New Collateral
as if it had been originally pledged as security for payment of the Note and the
New Collateral is and shall be subject to each and every term and condition of
the Note and of any security agreement executed in connection therewith, if
applicable, as if the New Collateral had been pledged had been pledged as
security for the payment of the Note at the time of its execution and delivery.
3. Pledgor will sign such financing statement or statements or other
documents, in form satisfactory to Lender, which Lender may at any time wish to
file in order to perfect or maintain perfection of its security interest in the
New Collateral or any other property at any time hereafter pledged by Pledgor to
Lender and shall reimburse Lender for the costs of filing same. Pledgor will
execute and/or deliver to Lender any instrument, invoice, document, assignment,
receipt or other writing or do such other acts which may be necessary or
appropriate, in the sole judgement of Lender, to carry out the terms of this
Agreement, and to perfect its security interest in and facilitate the collection
of the New Collateral, the proceeds thereof, and any other property constituting
security to Lender.
IN WITNESS WHEREOF, Pledgor, Borrower (if Pledgor and Borrower are not one
and the same) and Lender have caused this Agreement to be signed and sealed, as
of the day and year first above written.
Execution continues on reverse side.
<PAGE>
Pledgor: /s/ Michael A. Richardson, President (SEAL)
---------------------------------------
American Consumers, Inc.
Pledgor: (SEAL)
---------------------------------------
Borrower: /s/ Michael A. Richardson, President (SEAL)
---------------------------------------
American Consumers, Inc.
Borrower (SEAL)
---------------------------------------
Wachovia Bank, N.A.
By: (SEAL)
---------------------------------------
Pam Garland
Title: Vice President (SEAL)
---------------------------------------
For Bank Use Only:
Please Print:
Bank Name Pam Garland Banker Phone Number 706-275-8200
----------------------------- ------------------
Banker Number 60199 Banker Fax Number 706-272-7029
------------------------- --------------------
Account Number 002 050 000 150 3 Decisioning Lender Number
------------------------ (VA Only)
Borrower(s) American Consumers, Inc.
------------------------
[WACHOVIA LOGO]
- --------------------------------------------------------------------------------
Wachovia Bank, N.A.
Post Office Box 1088
Dalton, Georgia 30722-1088
November 15, 1999
Mr. Michael A. Richardson
American Consumers, Inc.
P.O. Box 2328
Fort Oglethorpe, GA 30742
RE: Line Account Number: 002 050 000 150 3
Line of Credit Amount: $800,000.00
Dear Mike:
The Line of Credit referenced above matures on November 15, 1999. The Line
will be extended for an additional 30 days from the current expiration date
of November 15, 1999 to allow time for credit analysis on the annual
renewal. The principal balance of your line as of this date is $342,391.53.
The line of credit will now expire on December 15, 1999. All other terms
and conditions of the original Note and Security Agreement dated December
5, 1997 and commitment letter dated November 20, 1998 remain unchanged.
Please acknowledge the acceptance of this extension period by signing this
letter and returning to me as soon as possible.
All of us at Wachovia appreciate your business. If you have any questions,
please call me at (706)275-8200.
Sincerely,
/s/ Pam Garland
Pam Garland
Vice President
Acknowledged this 16 day of Nov., 1999.
-- ---
American Consumers, Inc.
By: /s/ Michael A. Richardson
--------------------------------
Michael A. Richardson, President
AMERICAN CONSUMERS, INC.
NET INCOME PER COMMON SHARE
EXHIBIT 11
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
November 27, November 28, November 27, November 28,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss) for computing
earnings per common share ($15,462) $ 11,578 ($37,802) ($ 21,073)
======== ======== ======== =========
Weighted average number of
common shares outstanding
during each period 842,467 890,067 840,892 889,537
======== ======== ======== =========
Net income (loss) per common share
($ 0.018) $ 0.013 ($ 0.045) ($ 0.024)
======== ======== ======== =========
</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
NOVEMBER 27, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-29-1999
<PERIOD-END> NOV-27-1999
<CASH> 1,521,758
<SECURITIES> 0
<RECEIVABLES> 197,250
<ALLOWANCES> 0
<INVENTORY> 1,915,656
<CURRENT-ASSETS> 3,686,680
<PP&E> 2,950,347
<DEPRECIATION> 2,374,058
<TOTAL-ASSETS> 4,262,969
<CURRENT-LIABILITIES> 1,645,473
<BONDS> 0
0
0
<COMMON> 83,694
<OTHER-SE> 2,402,728
<TOTAL-LIABILITY-AND-EQUITY> 4,262,969
<SALES> 12,286,578
<TOTAL-REVENUES> 12,286,578
<CGS> 9,451,112
<TOTAL-COSTS> 9,451,112
<OTHER-EXPENSES> 2,921,554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,962
<INCOME-PRETAX> (62,560)
<INCOME-TAX> (24,758)
<INCOME-CONTINUING> (37,802)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37,802)
<EPS-BASIC> (0.045)
<EPS-DILUTED> (0.045)
</TABLE>
