10-Q 1 d27699_form10-q.txt QUARTERLY REPORT 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 December 1, 2001 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) 55 Hannah Way, Rossville, GA 30741 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, including Area Code: (706) 861-3347 (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 10, 2002 COMMON STOCK - $.10 PAR VALUE 825,987 NON VOTING COMMON STOCK - $.00 PAR VALUE -- NON VOTING PREFERRED STOCK - $.00 PAR VALUE -- ITEM 1. FINANCIAL STATEMENTS. FINANCIAL INFORMATION AMERICAN CONSUMERS, INC. CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
THIRTEEN WEEKS ENDED TWENTY-SIX WEEK ENDED -------------------------- --------------------------- December 1, December 2, December 1, December 2, 2001 2000 2001 2000 ----------- ----------- ----------- ----------- NET SALES $ 7,250,881 $ 6,364,584 $ 14,386,117 $ 12,764,680 COST OF GOODS SOLD 5,655,411 4,850,768 11,137,370 9,743,508 ----------- ----------- ------------ ------------ Gross Margin 1,595,450 1,513,816 3,248,747 3,021,172 OPERATING EXPENSES 1,738,191 1,510,532 3,464,875 3,031,544 ----------- ----------- ------------ ------------ Operating Income (Loss) (142,741) 3,284 (216,128) (10,372) OTHER INCOME (EXPENSE) Interest income 5,000 7,150 10,408 13,861 Other income 35,480 19,088 62,934 37,658 Gain (loss) on sale of assets (1,567) -- 3,433 -- Interest expense (20,999) (6,872) (40,096) (12,648) ----------- ----------- ------------ ------------ Income (Loss) Before Income Tax (Benefit) (124,827) 22,650 (179,449) 28,499 INCOME TAXES 11,573 6,843 -- 9,492 ----------- ----------- ------------ ------------ NET INCOME (LOSS) (136,400) 15,807 (179,449) 19,007 RETAINED EARNINGS: Beginning 1,656,003 1,695,165 1,699,105 1,691,965 Redemption of common stock (29) (192) (82) (192) ----------- ----------- ------------ ------------ Ending $ 1,519,574 $ 1,710,780 $ 1,519,574 $ 1,710,780 =========== =========== ============ ============ PER SHARE: Net income (loss) $ (0.165) $ 0.019 $ (0.217) $ 0.023 =========== =========== ============ ============ Cash dividends $ -- $ -- $ -- $ -- =========== =========== ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 826,559 831,530 826,562 834,841 =========== =========== ============ ============
See Notes to Financial Statements 2 FINANCIAL INFORMATION AMERICAN CONSUMERS, INC. CONDENSED BALANCE SHEETS
December 1, June 2, 2001 2001 ----------- ----------- --ASSETS-- CURRENT ASSETS Cash and short-term investments $ 785,911 $ 1,245,135 Certificate of deposit 459,526 450,000 Accounts receivable 139,556 104,917 Inventories 2,010,096 1,894,146 Prepaid expenses 36,855 80,003 Refundable income taxes 685 -- ----------- ----------- Total current assets 3,432,629 3,774,201 ----------- ----------- PROPERTY AND EQUIPMENT - at cost Leasehold improvements 256,043 218,332 Furniture, fixtures and equipment 2,867,884 2,843,230 ----------- ----------- 3,123,927 3,061,562 Less accumulated depreciation (2,034,829) (2,270,177) ----------- ----------- 1,089,098 791,385 ----------- ----------- TOTAL ASSETS $ 4,521,727 $ 4,565,586 =========== =========== --LIABILITIES AND STOCKHOLDERS' EQUITY-- CURRENT LIABILITIES Accounts payable $ 722,260 $ 788,639 Short-term borrowings 452,726 797,194 Current maturities of long-term debt 131,958 28,688 Current obligations under capital leases -- 3,195 Accrued sales tax 127,113 132,536 Federal and state income taxes -- 9,422 Other 157,384 146,026 ----------- ----------- Total current liabilities 1,591,441 1,905,700 ----------- ----------- DEFERRED INCOME TAXES 2,827 3,827 ----------- ----------- OBLIGATIONS UNDER CAPITAL LEASE AGREEMENTS 606,452 140,733 ----------- ----------- DEFERRED INCOME 30,026 43,651 ----------- ----------- STOCKHOLDERS' EQUITY Nonvoting preferred stock - authorized 5,000,000 shares of no par value; no shares issued -- -- Nonvoting common stock - authorized 5,000,000 shares of no par value; no shares issued -- -- Common stock - $.10 par value; authorized 5,000,000 shares; shares issued of 825,987 and 827,233 respectively 82,599 82,723 Additional paid-in capital 688,808 689,847 Retained earnings 1,519,574 1,699,105 ----------- ----------- Total Stockholders' Equity 2,290,981 2,471,675 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,521,727 $ 4,565,586 =========== ===========
See Notes to Financial Statements 3 FINANCIAL INFORMATION AMERICAN CONSUMERS, INC. CONDENSED STATEMENTS OF CASH FLOWS
TWENTY-SIX WEEKS ENDED -------------------------- December 1, December 2, 2001 2000 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (179,449) $ 19,007 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 136,974 99,329 Deferred income taxes (1,000) (2,000) Deferred income (13,625) (10,597) Change in operating assets and liabilities: Accounts receivable (34,639) 14,746 Inventories (115,950) 29,206 Prepaid expenses 43,148 33,282 Refundable income taxes (685) -- Accounts payable (66,379) (89,010) Accrued sales tax (5,423) (10,731) Accrued income taxes (9,422) 9,683 Other accrued liabilities 11,358 40,720 ----------- --------- Net cash provided by (used in) operating activities (235,092) 133,635 ----------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Increase in Certificate of Deposit (9,526) (13,385) Purchase of property and equipment (434,687) (2,140) ----------- --------- Net cash used in investing activities (444,213) (15,525) ----------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in short-term borrowings (344,468) (8,663) Increase in long-term borrowing 568,989 -- Principal payments on obligations under capital leases (3,195) (43,340) Redemption of common stock (1,245) (2,902) ----------- --------- Net cash provided by (used in) financing activities 220,081 (54,905) ----------- --------- Net increase (decrease) in cash (459,224) 63,205 Cash and cash equivalents at beginning of period 1,245,135 852,652 ----------- --------- Cash and cash equivalents at end of period $ 785,911 $ 915,857 =========== =========
See Notes to Financial Statements 4 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 Company's 2001 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 the results to be expected for the complete fiscal year. (2) Commitments and Contingencies. Capital expenditures are not expected to exceed $575,000 for the year, including all expenditures needed to complete the purchase of new, updated replacements for cash registers and other equipment which were previously leased. This amount was not expected to exceed $475,000 but new cases for the Jasper location, which was purchased April, 2000, have been ordered and the company took advantage of the zero percent financing available and purchased a new vehicle to replace an older van. 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 is at the discretion of the Board of Directors, which makes its decision annually at the quarterly meeting in January. The Board voted to contribute $7,500 to the plan for both calendar years 2001 and 2000. None of the Company's employees are represented by a union. 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS
THIRTEEN WEEK ENDED TWENTY-SIX WEEKS ENDED December 1, December 2, December 1, December 2, 2001 2000 2001 2000 ------------- ------------- ------------- ------------- Sales $ 7,250,861 $ 6,364,584 $ 14,386,117 $ 12,764,680 % Sales Increase 13.93% 0.57% 12.70% 3.89% Same stores % sales increase 2.95% -- 1.74% -- Gross Margin % 22.00% 23.78% 22.58% 23.67% Operating and Administrative Expense: Amount 1,735,191 1,510,532 3,464,875 3,031,544 % of Sales 23.97% 23.73% 24.08% 23.75% Net Income (Loss) before tax (124,827) 22,650 (179,449) 28,499
The Company operated seven stores during the quarter ended December 1, 2001 and only operated six stores during the quarter ended December 2, 2000. Same store sales were up 2.95% for the quarter and 1.74% for the year to date. The opening of a Wal-Mart Supercenter in the trade area of two of the Company's stores continues to impact Company sales. The reduction in the gross margin for the periods presented is the result of the Company's maintaining low prices in an effort to fight competition. Still, the access to improved lines of generic grocery items which we are able to price more competitively versus national brands appears to have increased overall traffic in the Company's grocery stores and may have helped offset some of the impact of the Wal-Mart expansion. This access was gained as a result of the Company's switch to a different wholesaler during the last quarter of fiscal 2000. Subsequent to the end of the quarter, management is attempting to adjust the Company's mix of retail prices to increase gross margin and reduce its operating losses. 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. In response to these pressures, management is seeking to improve the gross margin and increase profitability by obtaining the lowest cost for the Company's inventory. Operating and administrative expense, as a percent of sales for the quarters presented, has remained fairly consistent. Income Taxes: The provision (benefit) for income taxes for the quarters ended above do not vary significantly from the statutory rate of 34% and state rates of 5% - 6%. Taxes are recorded as a current liability in each of the periods presented. No tax benefit is reflected for the twenty-six week period because the net operating loss incurred by the Company cannot be carried back under current tax laws. Inflation: Although currently not a 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 FINANCIAL CONDITION Liquidity and Capital Resources: The Company finances its working capital requirements principally through its cash flow from operations and short-term borrowings. Short-term borrowing to finance inventory purchases is provided by the Company's $650,000 line of credit from its lead bank, Northwest Georgia Bank, Fort Oglethorpe, Georgia. Short-term borrowings as of the end of specific quarters are presented below: December 1, 2001 June 2, 2001 Decmeber 2, 2000 ---------------- ------------ ---------------- Michael and Diana Richardson $ 33,014 $ 37,411 $ 56,258 Matthew Richardson 44,712 48,330 57,164 Line of Credit- 375,000 711,453 6,320 -------- -------- -------- Total $452,726 $797,194 $120,012 ======== ======== ======== Notes to Michael and Diana Richardson and to Matthew Richardson are unsecured, payable on demand and bear interest at .25% below the base rate charged by Northwest Georgia Bank, which provides the Company with its line of credit. Long-term Debt During the third quarter of fiscal 2001, the Company began a program of purchasing replacements for cash registers and other equipment which the Company previously leased as the existing leases expired. The Company arranged financing for this program with Northwest Georgia Bank in the form of a short-term note which was converted to long-term debt once the replacements were completed. The Company also financed the addition of its seventh grocery store in Jasper, Tennessee through a separate note with Northwest Georgia Bank. Long-term debt at December 1, 2001 and June 2, 2001, consisted of the following:
December 1, June 2, 2001 2001 -------- -------- Note payable, Bank, secured by all inventory and machinery and equipment of the Company, due $3,576 monthly plus interest at 6.5% to April, 2006 (acquisition financing) $154,604 $169,421 Note payable, Bank, secured by all inventory and machinery and equipment of the Company, due $11,381 monthly plus interest at 5% to September, 2006 (equipment financing) 558,015 -- Note payable, GMAC, secured by vehicle, due $716 monthly with interest at 0% to December, 2004 25,791 -- -------- -------- 738,410 169,421 Less: Current Portion 131,958 28,688 -------- -------- $606,452 $140,733 ======== ========
The following is a schedule by years of the amount of maturities of all long-term debt: Year Amount ---- ---------- 2002 131,958 2003 151,442 2004 161,934 2005 175,969 2006 117,107 ---------- $ 738,410 ========== 7 FINANCIAL CONDITION (Continued) The ratio of current assets to current liabilities was 2.16 to 1 at the end of the latest quarter, December 1, 2001, as compared to 3.07 to 1 on December 2, 2000 and 1.98 to 1 at the end of the fiscal year ended on June 2, 2001. Cash and cash equivalents constituted 36.28% of the total current assets at December 1, 2001 as compared to 43.44% at December 2, 2000 and 44.91% at June 2, 2001. During the quarter ended December 1, 2001, retained earnings decreased as a result of the Company's net loss for the quarter. 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 which address 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 previously have been identified in filings or statements made 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 of 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, and other issues and uncertainties detailed from time to time in the Company's filings with the Securities and Exchange Commission. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company does not engage in speculative or derivative transactions, nor does it hold or issue financial instruments for trading purposes. The Company is exposed to changes in interest rates primarily as a result of its borrowing activities. The effective interest rate on the Company's borrowings under its Line of Credit Agreements and under its outstanding notes varies with the prime rate. We believe that our present exposure to market risk relating to interest rate risk is not material. The company does not maintain any interest rate hedging arrangements. All of the Company's business is transacted in U.S. dollars and, accordingly, foreign exchange rate fluctuations have never had a significant impact on the Company and they are not expected to in the foreseeable future. 8 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. (11) Statement re: computation of per share earnings. (b) During the most recent quarter, the Company has not filed a report on Form 8-K 9 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: January 15, 2002 /s/ Michael A. Richardson -------------------------------- Michael A. Richardson CHAIRMAN (Principal Executive Officer) Date: January 15, 2002 /s/ Paul R. Cook -------------------------------- Paul R. Cook EXECUTIVE VICE PRESISENT AND TREASURER (Principal Financial Officer & Chief Accounting Officer) 10