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 March 1, 2003
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.
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(Exact name of registrant as specified in its charter)
GEORGIA 58-1033765
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
55 Hannah Way, Rossville, GA 30741
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (706) 861-3347
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(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 ( )
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES ( ) NO (X)
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 10, 2003
COMMON STOCK $.10 PAR VALUE 817,327
NON VOTING COMMON STOCK $.10 PAR VALUE -
NON VOTING PREFERRED STOCK NO PAR VALUE -
ITEM 1. FINANCIAL STATEMENTS.
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------ --------------------------
March 1, March 2, March 1, March 2,
2003 2002 2003 2002
----------- ----------- ------------ ------------
NET SALES $7,496,786 $7,312,978 $22,050,757 $21,699,095
COST OF GOODS SOLD 5,681,465 5,630,547 16,761,814 16,767,917
----------- ----------- ------------ ------------
Gross Margin 1,815,321 1,682,431 5,288,943 4,931,178
OPERATING EXPENSES 1,813,083 1,761,051 5,327,250 5,225,926
----------- ----------- ------------ ------------
Operating Income (Loss) 2,238 (78,620) (38,307) (294,748)
OTHER INCOME (EXPENSE)
Interest income 4,324 5,023 12,982 15,431
Other income 24,394 16,731 77,052 83,098
Gain (loss) on sale of assets (1,217) - (1,217) -
Interest expense (13,535) (17,578) (44,071) (57,674)
----------- ----------- ------------ ------------
Income (Loss) Before
Income Tax (Benefit) 16,204 (74,444) 6,439 (253,893)
INCOME TAXES - - - -
----------- ----------- ------------ ------------
NET INCOME (LOSS) 16,204 (74,444) 6,439 (253,893)
RETAINED EARNINGS:
Beginning 1,461,898 1,519,574 1,471,997 1,699,105
Redemption of common stock (44) (20) (378) (102)
----------- ----------- ------------ ------------
Ending $1,478,058 $1,445,110 $ 1,478,058 $ 1,445,110
=========== =========== ============ ============
PER SHARE:
Net income (loss) $ 0.020 $ (0.090) $ 0.008 $ (0.307)
=========== =========== ============ ============
Cash Dividends $ - $ - $ - $ -
=========== =========== ============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 818,290 826,403 818,655 826,247
=========== =========== ============ ============
See Notes to Financial Statements
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED BALANCE SHEETS
March 1, June 1,
2003 2002
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-- A S S E T S --
CURRENT ASSETS
Cash and short-term investments $ 536,107 $ 743,370
Certificate of deposit 462,416 450,000
Accounts receivable 95,575 108,756
Inventories 2,087,213 2,001,339
Prepaid expenses 107,575 40,657
Refundable income taxes 1,684 43,891
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Total current assets 3,290,570 3,388,013
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PROPERTY AND EQUIPMENT - at cost
Leasehold improvements 258,122 258,122
Furniture, fixtures and equipment 2,974,848 2,959,273
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3,232,970 3,217,395
Less accumulated depreciation (2,349,726) (2,136,594)
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883,244 1,080,801
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TOTAL ASSETS $ 4,173,814 $ 4,468,814
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- - LIABILITIES AND STOCKHOLDERS' EQUITY - -
CURRENT LIABILITIES
Accounts payable $ 735,321 $ 801,407
Short-term borrowings 355,793 410,323
Current maturities of long-term debt 170,775 131,451
Accrued sales tax 96,656 138,948
Federal and state income taxes - 4,000
Other 183,880 169,743
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Total current liabilities 1,542,425 1,655,872
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LONG-TERM DEBT 386,479 549,703
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DEFERRED INCOME 3,532 22,580
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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-$.10 par value; no shares issued - -
Common stock-$.10 par value; authorized 5,000,000
shares; shares issued of 817,327 and 823,047, respectively 81,733 82,305
Additional paid-in capital 681,587 686,357
Retained earnings 1,478,058 1,471,997
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Total Stockholders' Equity 2,241,378 2,240,659
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 4,173,814 $ 4,468,814
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See Notes to Financial Statements
FINANCIAL INFORMATION
AMERICAN CONSUMERS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
THIRTY-NINE WEEKS ENDED
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March 1, March 2,
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 6,439 $ (253,893)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 217,364 218,120
Deferred income (19,048) (18,924)
(Gain) loss on sale of property and equipment 1,217 (3,433)
Change in operating assets and liabilities:
Accounts receivable 13,181 (23,987)
Inventories (85,874) (69,273)
Prepaid expenses (66,918) 46,858
Refundable income taxes 42,207 -
Accounts payable (66,086) (25,805)
Accrued sale tax (42,292) 35,776
Accrued income taxes (4,000) (1,500)
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Other 14,137 (24,624)
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Net cash provided by (used in) operating activities 10,327 (120,685)
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CASH FLOWS FROM INVESTING ACTIVITIES
Increase in certificate of deposit (12,416) (14,285)
Purchase of property and equipment (27,374) (541,099)
Proceeds from disposal of equipment 6,350 3,433
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Net cash used in investing activities (33,440) (551,951)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings (54,530) (365,037)
Proceeds from long-term borrowings - 627,013
Principal payments on long-term debt (123,900) (74,907)
Principal payments on obligations under capital leases - (3,195)
Redemption of common stock (5,720) (1,545)
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Net cash provided by (used in) financing activities (184,329) 182,329
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Net increase (decrease) in cash (207,263) (490,307)
Cash and cash equivalents at beginning of period 743,370 1,245,135
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Cash and cash equivalents at end of period $ 536,107 $ 754,828
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See Notes to Financial Statements
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 2002
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 $200,000 for the 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 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 2002 and 2001.
None of the Company's employees are represented by a union.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
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March 1, March 2, March 1, March 2,
2003 2002 2003 2002
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Sales $7,496,786 $7,312,978 $22,050,757 $21,699,095
% Sales Increase 2.51% 15.46% 1.62% 13.62%
Same stores % sales increase 1.56% 4.67% 0.76% 2.71%
Gross Margin % 24.21% 23.01% 23.99% 22.73%
Operating and Administrative
Expense:
Amount $1,813,083 $1,761,051 $ 5,327,250 $ 5,225,926
% of Sales 24.18% 24.08% 24.16% 24.08%
Net Income (Loss) pre-tax $ 16,204 $ (74,444) $ 6,439 $ (253,893)
The Company realized pre-tax income of $16,204 during the quarter ended March 1,
2003 compared to a pre-tax net loss of $74,444 for the quarter ended March 2,
2002. For the six months ended March 1, 2003, the Company realized pre-tax
income of $6,439, compared to a pre-tax net loss of $253,893 for the six months
ended March 2, 2002. The improvement, amounting to $90,648 for the quarter and
$260,332 for the nine months, is attributable to an improvement in gross margins
for the quarterly and nine month periods presented. Management began working on
the gross margin percentage in the middle of the first quarter, resulting in the
first quarter gross margin of 23.45%. The gross margin for the second quarter
of fiscal 2003 was 24.19% and remained stable at 24.21% for the current quarter.
Management is actively monitoring the Company's mix of retail prices and is
attempting to achieve further improvements in gross margin, to the extent
permitted by competition. Due to competitive conditions, however, further
improvements in the gross margin may not be achievable at this time. Management
believes that competitive pressures on the Company, which have been threatening
the profitability of 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 developments, management will continue seeking to improve the
gross margin and increase profitability by obtaining the lowest cost for the
Company's inventory and, as competition permits, by periodically implementing
strategic adjustments in the Company's overall mix of retail prices.
A significant portion of the 15.46% and 13.62% increase in sales for the quarter
and nine month periods ended March 2, 2002 (respectively) was due to sales
generated by the addition of the Company's seventh retail store in Jasper,
Tennessee, which was purchased in April 2001.
Operating and administrative expense, as a percent of sales for the periods
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%.
No taxes were reflected for the thirteen or thirty-nine week periods presented
due to the impact of net operating loss carry forward provisions 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.
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 $600,000 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:
March 1, June 1, March 2,
2003 2002 2002
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Michael and Diana Richardson $ 22,404 $ 23,626 $ 24,448
Matthew Richardson 33,389 41,697 42,709
Line of Credit 300,000 345,000 365,000
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Total $ 355,793 $410,323 $ 432,157
========= ======== =========
Notes to Michael and Diana Richardson and to Matthew Richardson are unsecured,
payable on demand and bear interest at 0.25% below the base rate charged by
Northwest Georgia Bank which provides the Company with its line of credit.
Long-Term Debt:
At March 1, 2003, long-term debt consisted of a note payable to Northwest
Georgia Bank of $111,511 incurred to finance the addition of the Company's
seventh grocery store and a note payable to Northwest Georgia Bank of $414,014
to finance cash registers and peripheral equipment. Also, two vehicles were
purchased and financed through GMAC with a balance due at March 1, 2003 of
$28,729. Both notes to the Bank are also secured with personal guarantees of
the Company's President and Executive Vice President.
Long-term debt consisted of the following as of the dates indicated:
March 1, June 1, March 2,
2003 2002 2002
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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. $ 111,511 $137,850 $ 146,288
Note payable, Bank, secured by all inventory and
machinery and equipment of the Company, due
$11,381 monthly plus interest at 6.5% to September, 2006 417,014 502,822 530,839
Notes payable, GMAC, secured by vehicles, due
$716 monthly through December, 2004 28,729 40,482 44,400
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557,254 681,154 721,527
Less: Current Portion 170,775 131,451 151,071
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$ 386,479 $549,703 $ 570,456
========= ======== =========
The following is a schedule by years of the amount of maturities of all
long-term debt:
Year Amount
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2003 $ 111,450
2004 127,686
2005 131,387
2006 135,192
2007 51,539
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$ 557,254
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FINANCIAL CONDITION (Continued)
The ratio of current assets to current liabilities was 2.13 to 1 at the end
of the latest quarter, March 1, 2003, as compared to 2.00 to 1 on March 2, 2002
and 2.05 to 1 at the end of the fiscal year ended on June 1, 2002. Cash and
cash equivalents constituted 30.34% of the total current assets at March 1, 2003
as compared to 36.42% at March 2, 2002 and 35.22% at June 1, 2002.
During the quarter ended March 1, 2003 retained earnings increased as a
result of the Company's net income 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 on 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, the effects of ongoing price
competition from competitors with greater financial resources than those of the
Company, changes in consumer spending, 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 derivative transactions, nor does it hold or
issue financial instruments for trading or other speculative purposes. The
Company is exposed to market risk related 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.
ITEM 4. CONTROLS AND PROCEDURES.
Under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Chief
Financial Officer, an evaluation of the effectiveness of the design and
operation of the Company's disclosure controls and procedures was conducted
pursuant to Exchange Act Rules 13a-14(c) and 15d-14(c) within 90 days of the
filing date of this quarterly report. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that these
disclosure controls and procedures are effective. There were no significant
changes in the Company's internal controls or in other factors that could
significantly affect internal controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
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.
(99.1) CEO Certification pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(99.2) CFO Certification pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) During the most recent quarter, the Company has not
filed a report on Form 8-K
SIGNATURES
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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: April 14, 2003 /s/ Michael A. Richardson
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Michael A. Richardson
CHAIRMAN
(Principal Executive Officer)
Date: April 14, 2003 /s/ Paul R. Cook
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Paul R. Cook
EXECUTIVE VICE PRESIDENT AND TREASURER
(Principal Financial Officer & Chief Accounting
Officer)
CERTIFICATIONS
I, Michael A. Richardson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of American Consumers,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: April 14, 2003 /s/ Michael A. Richardson
---------------- --------------------------------------------------
Michael A. Richardson, Principal Executive Officer
I, Paul R. Cook, certify that:
1. I have reviewed this quarterly report on Form 10-Q of American Consumers,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: April 14, 2003 /s/ Paul R. Cook
---------------- --------------------------------------------------
Paul R. Cook, Principal Financial Officer &
Chief Accounting Officer