SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1998
OR
/ / Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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COMMISSION FILE NUMBER 0-24708
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AMCON DISTRIBUTING COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of Incorporation)
10228 "L" Street
Omaha, NE 68127
(Address of principal executive offices)
(Zip Code)
47-0702918
(I.R.S. Employer Identification No.)
(402) 331-3727
(Registrant's telephone number, including area code)
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
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The Registrant had 2,449,903 shares of its $.01 par value common stock
outstanding as of April 30, 1998.
Form 10-Q
2nd Quarter
INDEX
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PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
---------------------
Balance sheets at March 31, 1998
and at September 30, 1997 3
Statements of income for the three and six-month
periods ended March 31, 1998 and March 31, 1997 4
Statements of cash flows for the three and six-month
periods ended March 31, 1998 and March 31, 1997 5
Notes to unaudited financial statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II - OTHER INFORMATION
Item 2. Changes in Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMCON Distributing Company
Balance Sheets
March 31, 1998 and September 30, 1997
- --------------------------------------------------------------------------------
(Unaudited)
March 31, September 30,
1998 1997
----------- -------------
ASSETS
Current assets:
Cash $ 19,452 $ 26,973
Marketable securities - 127,786
Accounts receivable, less allowance
for doubtful accounts of $504,733
and $206,249 14,188,647 10,788,979
Note and interest receivable from officer - 130,795
Inventories 15,769,869 7,183,245
Deferred income taxes 119,017 119,017
Other 179,837 84,616
------------ ------------
Total current assets 30,276,822 18,461,411
Fixed assets, net 4,844,194 3,608,891
Investments 487,625 560,250
Other assets 2,844,207 866,749
------------ ------------
$ 38,452,848 $ 23,497,301
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,127,070 $ 4,764,816
Accrued expenses 1,282,318 906,282
Accrued wages, salaries and bonuses 634,053 719,962
Income taxes payable 872,682 579,802
Current portion of long-term debt 1,032,427 332,338
------------ ------------
Total current liabilities 10,948,550 7,303,200
------------ ------------
Deferred income taxes 164,956 195,458
Long-term debt, less current portion 19,178,575 8,790,524
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000
shares authorized
Common stock, $.01 par value, 15,000,000
shares authorized, 2,450,000 shares
issued and outstanding 24,500 24,500
Additional paid-in capital 2,268,578 2,213,828
Unrealized gain on investments available-
for-sale, net of $141,483 and $171,985 tax 195,381 237,503
Retained earnings 5,672,623 4,732,603
------------ ------------
8,161,082 7,208,434
Less treasury stock, 97 shares, at cost (315) (315)
------------ ------------
Total shareholders' equity 8,160,767 7,208,119
------------ ------------
$ 38,452,848 $ 23,497,301
============ ============
The accompanying notes are an integral part of these financial statements.
AMCON Distributing Company
Statements of Income
for the three and six months ended March 31, 1998 and 1997
(Unaudited)
- ----------------------------------------------------------------------------
For the three months For the six months
ended March 31 ended March 31
------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ------------- -----------
Sales (including excise taxes
of $10.9 million and $9.9 million,
and $23.8 million and $19.7
million, respectively) $68,946,009 $40,020,268 $133,894,568 $81,395,529
Cost of sales 61,533,784 35,648,916 119,316,333 72,333,114
----------- ----------- ------------ -----------
Gross profit 7,412,225 4,371,352 14,578,235 9,062,415
Selling, general and
administrative expenses 6,231,594 3,803,024 11,669,525 7,600,886
Depreciation and amortization 254,970 213,745 531,712 410,709
----------- ----------- ------------ -----------
6,486,564 4,016,769 12,201,237 8,011,595
----------- ----------- ------------ -----------
Income from operations 925,661 354,583 2,376,998 1,050,820
Other expense (income):
Interest expense 552,947 199,061 955,457 391,866
Other expense (income), net (33,032) (67,482) (139,280) (1,219,927)
----------- ----------- ------------ -----------
519,915 131,579 816,177 (828,061)
----------- ----------- ------------ -----------
Income before income taxes 405,746 223,004 1,560,821 1,878,881
Income tax expense 137,502 91,431 620,801 770,341
----------- ----------- ------------ -----------
Net income $ 268,244 $ 131,573 $ 940,020 $ 1,108,540
=========== =========== ============ ===========
Earnings share
Basic $ 0.11 $ 0.05 $ 0.38 $ 0.45
=========== =========== ============ ===========
Diluted $ 0.11 $ 0.05 $ 0.38 $ 0.45
=========== =========== ============ ===========
Weighted average shares
outstanding:
Basic 2,449,903 2,445,903 2,449,903 2,445,903
=========== =========== ============ ===========
Diluted 2,526,365 2,451,529 2,504,195 2,450,080
=========== =========== ============ ===========
The accompanying notes are an integral part of these financial statements.
AMCON Distributing Company
Statements of Cash Flows
for the six months ended March 31, 1998 and 1997
(Unaudited)
- --------------------------------------------------------------------------------
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 940,020 $ 1,108,540
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 531,712 410,709
Gain on sales of fixed assets and securities (39,844) (52,950)
Gain on sale of Denver beer distributorship - (1,102,205)
Proceeds from sale of trading securities 157,206 24,600
Deferred income taxes 69,430 -
Changes in assets and liabilities, net of
effects from acquisitions:
Accounts receivable (174,634) 33,380
Inventories (1,935,676) (695,919)
Other current assets 23,746 57,709
Other assets (199,452) (22,497)
Accounts payable 322,931 1,395,310
Accrued expenses and accrued wages,
salaries, and bonuses (119,053) (127,107)
Income taxes payable 292,879 151,741
----------- -----------
Net cash provided by (used in) operating activities (130,735) 1,181,311
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (591,751) (516,508)
Purchases of water bottling company assets - (456,705)
Purchase of assets of Marcus Distributors, Inc. (2,664,916) -
Purchase of Food For Health Co., Inc. net
of cash acquired (4,454,338) -
Proceeds from sales of fixed assets 41,708 71,662
Proceeds from sales of available-for-sale securities - 33,967
Proceeds from sale of Denver beer distributorship - 2,371,994
----------- -----------
Net cash provided by (used in) investing activities (7,669,297) 1,504,410
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 4,500,000 363,961
Net (payments) proceeds on bank credit agreement 3,666,595 (1,662,244)
Payments on long-term and subordinated debt (374,084) (184,263)
Redemption of preferred stock - (1,200,000)
----------- -----------
Net cash provided by (used in) financing activities 7,792,511 (2,682,546)
----------- -----------
Net increase (decrease)in cash (7,521) 3,175
Cash, beginning of period 26,973 21,497
----------- -----------
Cash, end of period $ 19,452 $ 24,672
=========== ===========
The accompanying notes are an integral part of these financial statements.
AMCON Distributing Company
Notes to Financial Statements
March 31, 1998 and 1997
- ----------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying unaudited financial statements of AMCON Distributing Company
and subsidiary (the "Company") have been prepared on the same basis as the
audited financial statements for the year ended September 30, 1997, and, in
the opinion of management, contain all adjustments necessary to fairly present
the financial information included therein, such adjustments consist of normal
recurring items. It is suggested that these financial statements be read in
conjunction with the audited financial statements and notes thereto, for the
fiscal year ended September 30, 1997, which are included in the Company's
Annual Report to Stockholders filed with Form 10-K. Results for the interim
period are not necessarily indicative of results to be expected for the entire
year.
2. EARNINGS PER SHARE:
Earnings per share was computed as presented below in accordance with
Statement of Accounting Standards No. 128, Earnings Per Share. Prior year
amounts have been restated to conform to the new standard. Basic earnings per
share is calculated by dividing net income by the weighted average common
shares outstanding for each period. Diluted earnings per share is calculated
by dividing net income by the sum of the weighted average common shares
outstanding and the weighted average dilutive options, using the treasury
stock method.
For the three months For the three months
ended March 31, 1998 ended March 31, 1997
----------------------- -----------------------
Basic Diluted Basic Diluted
--------- --------- --------- ---------
1. Weighted average common
shares outstanding 2,450,000 2,450,000 2,450,000 2,450,000
2. Weighted average treasury
shares (97) (97) (4,097) (4,097)
3. Weighted average of net
additional shares outstanding
assuming dilutive options and
warrants exercised and proceeds
used to purchase treasury stock - 76,462 - 5,626
--------- --------- --------- ---------
4. Weighted average number of
shares outstanding 2,449,903 2,526,365 2,445,903 2,451,529
========= ========= ========= =========
5. Net income $ 268,244 $ 268,244 $ 131,573 $ 131,573
========= ========= ========= =========
6. Earnings per share $ 0.11 $ 0.11 $ 0.05 $ 0.05
========= ========= ========= =========
For the six months For the six months
ended March 31, 1998 ended March 31, 1997
----------------------- -----------------------
Basic Diluted Basic Diluted
---------- ---------- ---------- ----------
1. Weighted average common
shares outstanding 2,450,000 2,450,000 2,450,000 2,450,000
2. Weighted average treasury
shares (97) (97) (4,097) (4,097)
3. Weighted average of net
additional shares outstanding
assuming dilutive options and
warrants exercised and proceeds
used to purchase treasury stock - 54,292 - 4,987
---------- --------- ---------- ----------
4. Weighted average number of
shares outstanding 2,449,903 2,504,195 2,445,903 2,450,080
========== ========== ========== ==========
5. Net income $ 940,020 $ 940,020 $1,108,540 $1,108,540
========== ========== ========== ==========
6. Earnings per share $ 0.38 $ 0.38 $ 0.45 $ 0.45
========== ========== ========== ==========
3. PURCHASE OF DISTRIBUTORSHIP ASSETS:
On October 10, 1997, the Company purchased certain inventory and fixed assets
from Marcus Distributors, Inc. ("Marcus") of St. Louis, Missouri for $2.7
million in cash and warrants to acquire 30,000 shares of the Company's common
stock at an exercise price of $0.10 per share. In addition, the Company
entered into a five year lease agreement with Marcus to lease a distribution
facility in St. Louis, Missouri. The acquisition was funded through
borrowings on the Facility, which was increased in October 1997 to accommodate
the purchase.
4. PURCHASE OF STOCK OF FOOD FOR HEALTH COMPANY, INC.:
On November 10, 1997, the Company purchased all of the outstanding stock of
Food For Health Company, Inc. ("FFH"), a distributor of health and natural
foods based in Phoenix, AZ, for $4.4 million in cash. The acquisition was
funded by a $4.5 million five year term loan from a bank. The loan bears
interest at LIBOR plus 1.75% and requires monthly payments of accrued interest
with monthly principal payments of $85,096 plus accrued interest beginning in
August 1998. The loan is collateralized by the common stock of FFH and a
personal guarantee from the Chairman of the Company. The assets and
liabilities assumed as a result of the acquisition are as follows:
Fair value of assets............... $10,189,108
Cash paid.......................... (4,400,000)
-----------
Liabilities assumed................ $ 5,789,108
===========
Based on a preliminary allocation of the purchase price, goodwill is estimated
to be $1.9 million and will be amortized over 25 years.
5. LONG-TERM DEBT:
In March 1998, the Company refinanced its Revolving Credit Facility with a new
bank (the "Facility") in order to obtain more favorable lending terms to
support operations and to finance any future acquisitions. The Facility
increased the Company's borrowing limit to $20 million and decreased the
interest rate on the New Facility to LIBOR plus 1.75%. The Facility also
provided for an additional $10 million facility to be collateralized by
specific inventory and a $1.5 million facility to be used for transportation
equipment purchases. As of March 31, 1998, the Company had borrowed
approximately $11.8 million under the Facility.
In March 1998, the FFH refinanced its Revolving Credit Facility with a new
bank (the "FFH Facility") in order to obtain more favorable lending terms to
support operations. The borrowings under the FFH Facility are secured by the
assets of FFH and are guaranteed by the Company. The FFH Facility established
a borrowing limit of $5 million and decreased the interest rate on the FFH
Facility to LIBOR plus 1.75%. As of March 31, 1998, FFH had borrowed
approximately $2.8 million under the FFH Facility.
In November 1997, the Company borrowed $4.5 million from a bank to finance the
purchase of the common stock of FFH. The loan bears interest at LIBOR plus
1.75% and requires monthly payments of accrued interest with monthly principal
payments of $85,096 plus accrued interest beginning in August 1998.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Comparison of the three-month and six-month periods ended March 31, 1998 and
March 31, 1997
Sales for the three months ended March 31, 1998 increased 72.3% to $68.9
million, compared to $40.0 million for the same period in prior fiscal year.
Sales attributable to the new St. Louis distribution center and Food For
Health Company, Inc. ("FFH"), a distributor of health foods and related
products, were $21.1 million, of which $8.6 million related to cigarette
sales. Sales from the core distribution business increased by $7.8 million
during the second quarter as compared to the prior year as follows: Cigarette
sales increased approximately $2.9 million over the prior year due to price
increases and approximately $3.5 million due to increased volume to current
and new customers. Tobacco sales increased $594,000, food service sales
increased $294,000, candy sales increased $188,000, sales from health and
beauty care products increased $131,000 and all other product sales increased
by $173,000 due to increase in the demand for such products from the customer
base.
Sales for the six months ended March 31, 1998 increased 64.5% to $133.9
million compared to $81.4 million for the six months ended March 31, 1997.
Sales attributable to the new St. Louis distribution center and to FFH were
$37.3 million, of which $18.1 million related to cigarette sales. Sales from
the core distribution business increased by $15.2 million during the six
months ended March 31, 1998 as compared to the prior year as follows:
Cigarette sales increased approximately $5.4 million over the prior year due
to price increases and approximately $6.8 million due to increased volume to
current and new customers. Tobacco sales increased $1.2 million, food service
sales increased $589,000, candy sales increased $574,000, sales from health
and beauty care products increased $557,000 and all other product sales
increased by $659,000 due to increase in the demand for such products from the
customer base. There were no sales of beer products during the six months
ended March 31, 1998 due to the sale of the Denver beer distributorship in
October 1996. This accounted for a $538,000 decrease in sales of beer
products as compared to the prior year.
Gross profit increased 69.6% to $7.4 million for the three months ended March
31, 1998 from $4.4 million over the same period during the prior year. Gross
profit as a percent of sales declined to 10.7% for the quarter ended March 31,
1998 compared to 10.9% for the quarter ended March 31, 1997. The increase in
gross profit was primarily attributable to the new St. Louis distribution
center and FFH, which accounted for $3.0 of the increase in gross profit for
the quarter. The decrease in gross profit margin percentage was primarily
attributable to a decline in per-carton purchase discounts paid by cigarette
manufacturers for the quarter combined with a large increase in cigarette
sales, principally in the St. Louis market. Purchase discount programs vary
by manufacturer. Although all of the purchase discount programs offered by
manufacturers are computed on a cents-per-carton-sold basis, the programs vary
on the criteria necessary for meeting the higher purchase discount brackets,
such as, market share by cigarette category. Therefore, it is possible to
have increased sales in certain product categories, but receive less purchase
discounts.
Gross profit increased 60.9% to $14.6 million for the six months ended March
31, 1998 from $9.1 million over the same period during the prior year. Gross
profit as a percent of sales declined to 10.9% for the six months ended March
31, 1998 compared to 11.1% to the six months ended March 31, 1997. The
increase in gross profit was primarily attributable to the new St. Louis
distribution center and FFH, which accounted for $4.7 million of the increase
in gross profit for the six months. The decrease in gross profit margin
percentage was primarily attributable to the large increase in cigarette
sales, principally in the St. Louis market. Cigarettes have historically, and
continue to have, a lower profit margin percentage than the Company's other
products.
Sales of the Company's private label cigarette have continued to decline since
1993 when cigarette manufacturers substantially reduced the price of premium
brand cigarettes. Management anticipates that the volume of private label
cigarettes could continue to decline by as much as 20% to 30%. If such a
decline is realized, gross profit from private label cigarette sales could
decrease annually by $200,000 to $300,000 in fiscal 1998 and 1999.
Total operating expense, which includes selling, general and administrative
expenses and depreciation and amortization, increased 61.5% or $2.5 million to
$6.5 million for the quarter ended March 31, 1998 compared to the same period
in fiscal 1997. The increase was primarily due to expenses associated with the
new St. Louis distribution center and FFH which accounted for $2.5 million in
operating expenses. As a percentage of sales, total operating expense
decreased to 9.4% from 10.0% during the same period in the prior year.
For the six month period ended March 31, 1998, total operating expense
increased 52.3% or $4.2 million to $12.2 million, compared to the same period
in the prior year. The increase was primarily due to expenses associated with
the new St. Louis distribution center and FFH which accounted for $4.2 million
in operating expenses. As a percentage of sales, total operating expense
decreased to 9.1% from 9.8% during the same period in the prior year. The
decrease in operating expenses as a percentage of sales is due to efficiencies
gained through increased volume.
As a result of the above, income from operations for the quarter ended March
31, 1998 increased $571,000 to $926,000. Income from operations for the six
month period ended March 31, 1998 increased $1.3 million to $2.4 million.
Interest expense for the three months ended March 31, 1998 increased 177.8%,
or $354,000, over the same period in the prior year. Interest expense for the
six month period ended March 31, 1998 increased 143.8%, or $564,000, compared
to the six month period ended March 31, 1997. The increase was primarily due
to interest expense associated with FFH's revolving credit facility, which
accounted for $196,000 and $240,000 of interest expense during the three and
six month periods ended March 31, 1998, respectively and a $7.7 million and
$7.0 million increase in the average amount borrowed under the Company's
revolving credit facility with a bank (the "Facility") during the three and
six month periods ended March 31, 1998, respectively. The Facility was
utilized to finance the acquisition of the new St. Louis distribution center,
the expansion of the Bismarck, ND distribution center and to finance an
increase in inventory during the period. In addition, the Company borrowed
$4.5 million in November 1997 to finance the acquisition of FFH.
Other income of $33,000 for the three months ended March 31, 1998 consisted
primarily of royalty payments associated with the sale of the Denver non-
alcoholic beverage business, rent income and gains on sales of fixed assets.
Other income of $139,000 for the six months ended March 31, 1998 was generated
primarily by a gain of $29,000 from the sale of marketable securities, royalty
payments associated with the sale of the Denver non-alcoholic beverage
business of $17,000, and rent income and gains on sales of fixed assets.
Other income of $1.2 million for the six months ended March 31, 1997 was
generated primarily by the gain associated with the sale of the Denver beer
distributorship of $1.1 million.
As a result of the above factors, net income during the three months ended
March 31, 1998 was $337,675 compared to $131,573 for the three months ended
March 31, 1997. Net income during the six months ended March 31, 1998 was
$1,009,452 compared to $1,108,540 for the six months ended March 31, 1997.
As described in Management's Discussion and Analysis in the Company's Annual
Report to Shareholders for the Fiscal Year Ended September 30, 1997, the
Company's operating income is subject to a number of factors which are beyond
the control of management, such as changes in manufacturers' cigarette pricing
which affects the market for generic and private label cigarettes. The
Company continues to remain dependent on cigarette sales which now represent
approximately 63% of its revenue (66% in fiscal 1997). Net income remains
heavily dependent on sales of the Company's private label cigarettes and
volume discounts received in connection with such sales. The Company continues
to evaluate various steps it may take to improve net income in future periods,
including acquisitions of distributing companies such as the new St. Louis
distribution center and FFH which were purchased in the first quarter and
continued sales of assets that are no longer essential to its primary business
activities, such as, investments and certain real estate. An analysis of such
assets held at March 31, 1998 is as follows:
ESTIMATE OF GAIN
-------------------------------
March 31, September 30,
DESCRIPTION OF ASSET 1998 1997
-------------------- ------------ -------------
Investments (available-for-sale) $337,000 $409,000
Condominium & furnishings 480,000 480,000
Investments consist of 83,000 shares of Cayman Water Company Limited (CWC), a
public company which is listed on NASDAQ, at March 31, 1998 and September 30,
1997, respectively. The Company's basis in the securities was $151,000 and
the fair market value of the securities was $488,000 and $560,000 on March 31,
1998 and September 30, 1997, respectively. The fair market value of the
securities on April 30, 1998 was $571,000.
The condominium and furnishings consist of a condominium in the Cayman Islands
which is used in furtherance of the Company's business marketing strategies.
The costs and benefits associated with retaining the condominium are being
evaluated in relation to the current business strategies of the Company.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended March 31, 1998, the Company utilized cash flow in
operating activities to finance increases in inventory in all branches in
anticipation of calendar year-end price increases. Cash was utilized in
investing activities during the six month period ended March 31, 1998
primarily to purchase the assets of Marcus Distributors, Inc. in St. Louis, MO
in October 1997 and the stock of FFH in November 1997 for $2.7 million and
$4.5 million respectively. Cash was provided in financing activities through
increases in the Facility and from a term note to finance the purchase of FFH.
The Company had working capital of approximately $19.3 million as of March 31,
1998 compared to $11.2 million as of September 30, 1997. The Company's debt
to equity ratio was 3.68 at March 31, 1998 compared to 2.26 at September 30,
1997.
In March 1998, the Company refinanced its Revolving Credit Facility with a new
bank (the "Facility") in order to obtain more favorable lending terms to
support operations and to finance any future acquisitions. The Facility
increased the Company's borrowing limit to $20 million and decreased the
interest rate on the new Facility to LIBOR plus 1.75%. The Facility also
provided for an additional $10 million facility collateralized by specific
inventory and a $1.5 million facility to be used for transportation equipment
purchases. As of March 31, 1998, the Company had borrowed approximately $11.8
million under the Facility.
In March 1998, the FFH refinanced its Revolving Credit Facility with a new
bank (the "FFH Facility") in order to obtain more favorable lending terms to
support operations. The borrowings under the FFH Facility are secured by the
assets of FFH and are guaranteed by the Company. The FFH Facility established
a borrowing limit of $5 million and decreased the interest rate on the FFH
Facility to LIBOR plus 1.75%. As of March 31, 1998, FFH had borrowed
approximately $2.8 million under the FFH Facility.
In November 1997, the Company borrowed $4.5 million from a bank to finance the
purchase of the common stock of FFH. The loan bears interest at LIBOR plus
1.75% and requires monthly payments of accrued interest with monthly principal
payments of $85,096 plus accrued interest beginning in August 1998.
The Company also maintains a $1,250,000 non-revolving line of credit used to
finance the purchase of trucks and delivery equipment. Advances against the
non-revolving line of credit were $680,000 through March 31, 1998. The amount
available on the non-revolving line of credit was $570,000 at March 31, 1998.
The line of credit is secured by a first lien on the delivery vehicles
purchased with the loan proceeds.
The Company believes that funds generated from operations, supplemented as
necessary with funds available under the Facility, the FFH Facility and the
non-revolving line of credit, will provide sufficient liquidity to cover its
debt service and any reasonably foreseeable future working capital and capital
expenditure requirements.
CONCERNING FORWARD LOOKING STATEMENTS
This Quarterly Report, including the Management's Discussion and Analysis and
other sections, contains forward looking statements that are subject to risks
and uncertainties and which reflect management's current beliefs and estimates
of future economic circumstances, industry conditions, company performance and
financial results. Forward looking statements include information concerning
the possible or assumed future results of operations of the Company and those
statements preceded by, followed by or include the words "future," "position,"
"anticipate(s)," "expect," "believe(s)," "see," "plan," "further improve,"
"outlook," "should" or similar expressions. For these statements, we claim
the protection of the safe harbor for forward looking statements contained in
the Private Securities Litigation Reform Act of 1995. You should understand
that the following important factors, in addition to those discussed elsewhere
in this document, could affect the future results of the Company and could
cause those results to differ materially from those expressed in our forward
looking statements: changing market conditions with regard to cigarettes and
the demand for the Company's products, domestic regulatory risks, competitive
and other risks over which the Company has little or no control. Any changes
in such factors could result in significantly different results.
Consequently, future results may differ from management's expectations.
Moreover, past financial performance should not be considered a reliable
indicator of future performance.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The information required by this item will not be applicable to the Company
before its Annual Report on Form 10-K for the year ending September 30, 1998.
PART II - OTHER INFORMATION
Item 2. Changes in Securities.
The Loan and Security Agreement, dated February 25, 1998, between the Company
and LaSalle National Bank restricts the Company from declaring or paying
dividends on any class of its stock or on account of any equity interest in
the Company. This restriction is consistent with restrictions contained in
the Company's previous Credit and Security Agreement, dated July 25, 1994,
between the Company and Norwest Bank Minnesota.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its Annual Meeting of Stockholders on March 19, 1998 for
the purpose of electing two directors, ratifying the appointment of its
auditors, amending its restated certificate of incorporation to increase the
number of authorized shares of Common Stock and amending the Company's 1994
Stock Option Plan so that awards under the Plan will comply with Section
162(m) of the Internal Revenue Code of 1986, as amended.
The following sets forth the results of the election of directors:
NAME OF NOMINEE FOR WITHHELD
William Wright 1,646,578 67.21% 723 0.03%
Jerry Fleming 1,646,587 67.21% 714 0.03%
There was no solicitation in opposition to the nominees proposed to be
elected by the Stockholders in the Proxy Statement.
The ratification of the appointment of Coopers & Lybrand as independent
auditors for the Company for the fiscal year ending September 26, 1998 was
approved by the Stockholders with 1,645,832 votes FOR (approximately 67%),
1,016 votes AGAINST, and 453 votes ABSTAINED OR BROKER NON-VOTES.
The Board of Directors had proposed that the Company's Restated
Certificate of Incorporation be amended to increase the total number of
authorized Common Stock from 5,000,000 to 15,000,000. The amendment to the
Restated Certificate of Incorporation was approved by the Stockholders with
1,564,418 votes FOR (approximately 64%), 82,250 votes AGAINST, and 633 votes
ABSTAINED OR BROKER NON-VOTES.
The proposal to approve the amendment to the Company's 1994 Stock Option
Plan so that awards under the Plan will comply with the requirements of
Section 162(m) of the Internal Revenue Code of 1986, as amended was approved
by the Stockholders with 1,639,843 votes FOR (approximately 67%), 6,779 votes
AGAINST, and 679 votes ABSTAINED OR BROKER NON-VOTES.
Further information regarding these matters is contained in the Company's
Proxy Statement dated February 23, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
2.1 Stock Purchase Agreement dated November 3, 1997, between the
Company and FFH Holdings, Inc. (incorporated by reference to
Exhibit 2.1 of the Company's Current Report on Form 8-K filed on
November 25, 1997)
3.1 Restated Certificate of Incorporation of the Company, as amended
March 19, 1998
3.3 Bylaws of the Company (incorporated by reference to Exhibit 3.2
of the Company's Registration Statement on Form S-1 (Registration
No. 33-82848) filed on August 15, 1994)
4.1 Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.1 of the Company's Registration Statement on Form S-1
(Registration No. 33-82848) filed on August 15, 1994)
10.1 Grant of Exclusive Manufacturing Rights, dated October 1, 1993,
between the Company and Famous Value Brands, a division of Philip
Morris Incorporated, including Private Label Manufacturing
Agreement and Amended and Restated Trademark License Agreement
(incorporated by reference to Exhibit 10.1 of Amendment No. 1 to
the Company's Registration Statement on Form S-1 (Registration
No. 33-82848) filed on November 8, 1994)
10.2 Credit and Security Agreement, dated July 25, 1994, between the
Company and Norwest Bank Minnesota, National Association
(incorporated by reference to Exhibit 10.4 of the Company's
Registration Statement on Form S-1 (Registration No. 33-82848)
filed on August 15, 1994)
10.3 Amendment to Credit and Security Agreement, dated October 10,
1997, between the Company and Norwest Bank Minnesota, National
Association
10.4 Loan Agreement, dated November 10, 1997, between the Company and
LaSalle National Bank (incorporated by reference to Exhibit 10.1
of the Company's Current Report on Form 8-K filed on November 25,
1997)
10.5 Amended Loan Agreement, dated February 25, 1998, between the Company
and LaSalle National Bank
10.6 Note, dated November 10, 1997, between the Company and LaSalle
National Bank (incorporated by reference to Exhibit 10.2 of the
Company's Current Report on Form 8-K filed on November 25, 1997)
10.7 First Allonge to Note, dated February 25, 1998, between the Company
and LaSalle National Bank
10.8 Loan and Security Agreement, dated February 25, 1998, between the
Company and LaSalle National Bank
10.9 Promissory Note, dated February 25, 1998, between the Company and
LaSalle National Bank
10.10 Loan and Security Agreement, dated February 25, 1998, between Food
For Health Co., Inc. and LaSalle National Bank
10.11 Promissory Note, dated February 25, 1998, between Food For Health
Co., Inc. and LaSalle National Bank
10.12 Unconditional Guarantee, dated February 25, 1998, between the
Company and LaSalle National Bank
10.13 AMCON Distributing Company 1994 Stock Option Plan (incorporated
by reference to Exhibit 10.7 of the Company's Registration
Statement on Form S-1 (Registration No. 33-82848) filed on August
15, 1994)
10.14 AMCON Distributing Company Profit Sharing Plan (incorporated by
reference to Exhibit 10.8 of Amendment No. 1 to the Company's
Registration Statement on Form S-1 (Registration No. 33-82848)
filed on November 8, 1994)
10.15 Employment Agreement, dated July 1, 1994, between the Company and
William F. Wright (incorporated by reference to Exhibit 10.9 of
the Company's Registration Statement on Form S-1 (Registration
No. 33-82848) filed on August 15, 1994)
10.16 Employment Agreement, dated July 1, 1994, between the Company and
Kathleen M. Evans (incorporated by reference to Exhibit 10.9 of
the Company's Registration Statement of Form S-1 (Registration
No. 33-82848) filed on August 15, 1994)
10.17 Consulting Agreement, dated July 1, 1994, between the Company
and Nebraska Distributing Company relating to services of J.
Tony Howard (incorporated by reference to Exhibit 10.10 of the
Company's Registration Statement on Form S-1 (Registration No.
33-82848) filed on August 15, 1994)
10.18 Asset Purchase Agreement, dated October 2, 1996, between the
Company and Western Distributing Company (incorporated by
reference to the Company's Current Report on Form 8-K filed on
October 15, 1996)
10.19 Purchase Agreement, dated September 6, 1997, between the Company
and Marcus Distributors, Inc. (incorporated by reference to the
Company's Current Report on Form 8-K filed on October 24, 1997)
11.1 Statement re: computation of per share earnings (incorporated by
reference to footnote 2 to the financial statements included in
Item 1 herein)
27.0 Financial Data Schedules
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended March 31, 1998.
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, hereunto duly authorized.
AMCON DISTRIBUTING COMPANY
(registrant)
Date: May 11, 1998 Kathleen M. Evans
----------------- -------------------------
Kathleen M. Evans
President & CEO and
Principal Executive Officer
Date: May 11, 1998 Michael D. James
----------------- -------------------------
Michael D. James
Treasurer & CFO and
Principal Financial and
Accounting Officer