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 June 30, 1998
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 NUMBER 0-24708
------------------------------
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
------- -------
The Registrant had 2,479,903 shares of its $.01 par value common stock
outstanding as of July 31, 1998.
Form 10-Q
3rd Quarter
INDEX
-------
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
---------------------
Consolidated balance sheets at June 30, 1998
and at September 30, 1997 3
Consolidated statements of income for the three and
nine-month periods ended June 30, 1998 and June 30, 1997 4
Consolidated statements of cash flows for the
nine-month periods ended June 30, 1998 and June 30, 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 6. Exhibits and Reports on Form 8-K 13
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMCON Distributing Company
Consolidated Balance Sheets
June 30, 1998 and September 30, 1997
- --------------------------------------------------------------------------------
(Unaudited)
June 30, September 30,
1998 1997
----------- -------------
ASSETS
Current assets:
Cash $ 35,572 $ 26,973
Marketable securities - 127,786
Accounts receivable, less allowance
for doubtful accounts of $462,340
and $206,249 15,052,414 10,788,979
Note and interest receivable from officer - 130,795
Inventories 19,923,952 7,183,245
Deferred income taxes 119,017 119,017
Other 224,303 84,616
------------ ------------
Total current assets 35,355,258 18,461,411
Fixed assets, net 4,702,994 3,608,891
Investments 508,375 560,250
Other assets 2,815,151 866,749
------------ ------------
$ 43,381,778 $ 23,497,301
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 9,834,937 $ 4,764,816
Accrued expenses 1,343,977 906,282
Accrued wages, salaries and bonuses 532,256 719,962
Income taxes payable 976,257 579,802
Current portion of long-term debt 1,665,972 332,338
------------ ------------
Total current liabilities 14,353,399 7,303,200
------------ ------------
Deferred income taxes 173,671 195,458
Other 428,148 -
Long-term debt, less current portion 19,497,139 8,790,524
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000
shares authorized, none outstanding - -
Common stock, $.01 par value, 15,000,000
shares authorized and 2,480,000 shares
issued and outstanding at June 30, 1998;
5,000,000 shares authorized and 2,450,000
issued and outstanding at September 30, 1997 24,800 24,500
Additional paid-in capital 2,271,278 2,213,828
Unrealized gain on investments available-
for-sale, net of $150,197 and $171,985 tax 207,416 237,503
Retained earnings 6,426,242 4,732,603
------------ ------------
8,929,736 7,208,434
Less treasury stock, 97 shares, at cost (315) (315)
------------ ------------
Total shareholders' equity 8,929,421 7,208,119
------------ ------------
$ 43,381,778 $ 23,497,301
============ ============
The accompanying notes are an integral part of these financial statements.
AMCON Distributing Company
Consolidated Statements of Income
for the three and nine months ended June 30, 1998 and 1997
(Unaudited)
- ---------------------------------------------------------------------------
For the three months For the nine months
ended June 30 ended June 30
------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ------------ ------------
Sales (including excise taxes
of $13.9 million and $10.4 million,
and $37.7 million and $30.1
million, respectively) $77,650,819 $47,374,291 $211,545,387 $128,769,820
Cost of sales 69,312,856 42,488,887 188,629,189 114,822,001
----------- ----------- ------------ ------------
Gross profit 8,337,963 4,885,404 22,916,198 13,947,819
Selling, general and
administrative expenses 6,463,812 3,852,715 18,133,338 11,453,601
Depreciation and amortization 265,327 225,818 797,039 636,527
----------- ----------- ------------ ------------
6,729,139 4,078,533 18,930,377 12,090,128
----------- ----------- ------------ ------------
Income from operations 1,608,824 806,871 3,985,821 1,857,691
Other expense (income):
Interest expense 454,595 218,289 1,410,052 610,155
Other expense (income), net (81,796) (88,415) (221,078) (1,308,342)
----------- ----------- ------------ ------------
372,799 129,874 1,188,974 (698,187)
----------- ----------- ------------ ------------
Income before income taxes 1,236,025 676,997 2,796,847 2,555,878
Income tax expense 482,405 277,569 1,103,207 1,047,910
----------- ----------- ------------ ------------
Net income $ 753,620 $ 399,428 $ 1,693,640 $ 1,507,968
=========== =========== ============ ============
Earnings share
Basic $ 0.31 $ 0.16 $ 0.69 $ 0.62
=========== =========== ============ ============
Diluted $ 0.29 $ 0.16 $ 0.67 $ 0.62
=========== =========== ============ ============
Weighted average shares
outstanding:
Basic 2,452,540 2,445,903 2,450,782 2,445,903
=========== =========== ============ ===========
Diluted 2,571,660 2,449,728 2,532,464 2,449,930
=========== =========== ============ ===========
The accompanying notes are an integral part of these financial statements.
AMCON Distributing Company
Consolidated Statements of Cash Flows
for the nine months ended June 30, 1998 and 1997
(Unaudited)
- --------------------------------------------------------------------------------
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,693,640 $ 1,507,968
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 797,039 636,527
Gain on sales of fixed assets and securities (45,076) (100,166)
Gain on sale of Denver beer distributorship - (1,102,205)
Proceeds from sale of trading securities 157,206 92,548
Deferred income taxes 87,411 -
Changes in assets and liabilities, net of
effects from acquisitions:
Accounts receivable (1,034,574) (840,207)
Inventories (6,096,911) (2,106,073)
Other current assets (23,956) 132,263
Other assets (203,696) (32,497)
Accounts payable 3,065,383 1,920,959
Accrued expenses and accrued wages,
salaries, and bonuses (190,864) (285,751)
Income taxes payable 396,455 8,324
----------- -----------
Net cash used in operating activities (1,397,943) (168,310)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (711,044) (635,910)
Purchases of water bottling company assets - (499,109)
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 60,341 160,789
Proceeds from sales of available-for-sale securities - 33,967
Proceeds from sale of Denver beer distributorship - 2,371,994
----------- -----------
Net cash (used in) provided by investing activities (7,769,957) 1,431,731
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 4,500,000 363,961
Net (payments) proceeds on bank credit agreement 5,010,364 (154,310)
Payments on long-term and subordinated debt (336,865) (268,823)
Proceeds from issuance of common stock 3,000 -
Redemption of preferred stock - (1,200,000)
----------- -----------
Net cash provided by (used in) financing activities 9,176,499 (1,259,172)
----------- -----------
Net increase in cash 8,599 4,249
Cash, beginning of period 26,973 21,497
----------- -----------
Cash, end of period $ 35,572 $ 25,746
=========== ===========
The accompanying notes are an integral part of these financial statements.
AMCON Distributing Company
Notes to Financial Statements
June 30, 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 June 30, 1998 ended June 30, 1997
----------------------- -----------------------
Basic Diluted Basic Diluted
--------- --------- --------- ---------
1. Weighted average common
shares outstanding 2,452,637 2,452,637 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 - 119,120 - 3,825
--------- --------- --------- ---------
4. Weighted average number of
shares outstanding 2,452,540 2,571,660 2,445,903 2,449,728
========= ========= ========= =========
5. Net income $ 753,620 $ 753,620 $ 399,428 $ 399,428
========= ========= ========= =========
6. Earnings per share $ 0.31 $ 0.29 $ 0.16 $ 0.16
========= ========= ========= =========
For the nine months For the nine months
ended June 30, 1998 ended June 30, 1997
----------------------- -----------------------
Basic Diluted Basic Diluted
---------- ---------- ---------- ----------
1. Weighted average common
shares outstanding 2,450,879 2,450,879 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 - 81,682 - 4,027
---------- --------- ---------- ----------
4. Weighted average number of
shares outstanding 2,450,782 2,532,464 2,445,903 2,449,930
========== ========== ========== ==========
5. Net income $1,693,640 $1,693,640 $1,507,968 $1,507,968
========== ========== ========== ==========
6. Earnings per share $ 0.69 $ 0.67 $ 0.62 $ 0.62
========== ========== ========== ==========
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 Company's then existing revolving credit 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, Arizona, 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 $1.5 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 June 30, 1998, the Company had borrowed
approximately $13.1 million under the Facility.
In March 1998, 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 June 30, 1998, FFH had borrowed
approximately $2.9 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.
6. NEW ACCOUNTING PRONOUNCEMENTS:
Comprehensive income: Effective in the year ending September 1999, the
Company will adopt SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income will differ from net income due to unrealized gains or
losses on marketable securities, which are disclosed in the Consolidated
Statement of Changes in Stockholders' Equity.
Business segments: Effective at September 30, 1999, the Company will adopt
SFAS No. 131 "Disclosure about Segments of an Enterprise and Related
Information." The Company is currently reviewing the requirements of this
statement, but believes that is will change the extent of its current business
segment disclosure. SFAS No. 131 affects only the presentation of segment
information in the Notes to Consolidated Financial Statements and will not
affect the Company's Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Comparison of the three-month and nine-month periods ended June 30, 1998 and
June 30, 1997
Sales for the three months ended June 30, 1998 increased 63.9% to $77.7
million, compared to $47.4 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 $19.7 million, of which $9.0 million related to cigarette
sales. Sales from the core distribution business increased by $10.6 million
during the third quarter as compared to the prior year as follows: Cigarette
sales increased approximately $4.1 million over the prior year due to price
increases and approximately $4.8 million due to increased volume to current
and new customers. Tobacco sales increased $645,000, food service sales
increased $297,000, candy and snacks sales increased $401,000, beverage sales
increased $135,000, sales from health and beauty care products increased
$99,000 and all other product sales increased by $224,000 due to increase in
the demand for such products from the customer base.
Sales for the nine months ended June 30, 1998 increased 64.3% to $211.5
million compared to $128.8 million for the nine months ended June 30, 1997.
Sales attributable to the new St. Louis distribution center and to FFH were
$56.9 million, of which $27.1 million related to cigarette sales. Sales from
the core distribution business increased by $25.9 million during the nine
months ended June 30, 1998 as compared to the prior year as follows:
Cigarette sales increased approximately $9.5 million over the prior year due
to price increases and approximately $11.6 million due to increased volume to
current and new customers. Tobacco sales increased $1.8 million, food service
sales increased $886,000, candy and snacks sales increased $1.3 million, sales
from health and beauty care products increased $656,000 and all other product
sales increased by $678,000 due to increase in the demand for such products
from the customer base. There were no sales of beer products during the nine
months ended June 30, 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 70.7% to $8.3 million for the three months ended June
30, 1998 from $4.9 million over the same period during the prior year. Gross
profit as a percent of sales increased to 10.7% for the quarter ended June 30,
1998 compared to 10.3% for the quarter ended June 30, 1997. The increase in
gross profit was primarily attributable to the new St. Louis distribution
center and FFH, which accounted for $2.6 million of the increase in gross
profit for the quarter. Price increases from tobacco manufacturers contributed
an additional $570,000 to gross profit during the quarter as compared to the
prior year. These increases offset a reduction in purchase discounts from
tobacco manufacturers of $133,000 for the quarter. The increase in profit
margin percentage for the third quarter was primarily attributable to the
addition of FFH. The average profit margin percentage for health food products
is considerably higher than the products sold by the core distribution business.
Gross profit increased 64.3% to $22.9 million for the nine months ended March
31, 1998 from $13.9 million over the same period during the prior year. Gross
profit as a percent of sales remained level at 10.8% for the nine months ended
June 30, 1998 compared to 10.8% to the nine months ended June 30, 1997. The
increase in gross profit was primarily attributable to the new St. Louis
distribution center and FFH, which accounted for $7.3 million of the increase
in gross profit for the nine months. Tobacco price increases during the
nine months ended June 30, 1998 accounted for an additional $930,000 in gross
profit as compared to the prior year and offset a decrease of $502,000 in
purchase discounts received from tobacco manufacturers, as compared to the
prior year. Gross margin percentage remained constant year over year, but was
impacted primarily by two factors. FFH's profit margin added approximately
1.6% to the Company's profit margin percentage. A corresponding decrease in
gross profit margin percentage was attributable to the large increase in
cigarette sales, principally in the St.Louis market and a reduction in
purchase discounts received from manufacturers. Cigarettes have historically,
and continue to have, a lower profit margin percentage than the Company's
other products. Therefore, a large increase in cigarette sales adversely
affects the profit margin percentage. 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.
Sales of the Company's private label cigarettes 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 30% to 35%. 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 65.0% or $2.7 million to
$6.7 million for the quarter ended June 30, 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 $2.4 million in
operating expenses. As a percentage of sales, total operating expense
increased to 8.7% from 8.6% during the same period in the prior year. The
slight increase was due to operating costs at FFH being higher as a percentage
of sales than the core distribution business. This increase offset
efficiencies gained through increased volume in the core distribution
business.
For the nine month period ended June 30, 1998, total operating expense
increased 56.5% or $6.8 million to $18.9 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 $6.6 million
in operating expenses. As a percentage of sales, total operating expense
decreased to 8.9% from 9.4% 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 in the core distribution business which were
partially offset by the proportionately higher operating costs incurred by FFH
during the period.
As a result of the above, income from operations for the quarter ended June
30, 1998 increased $802,000 to $1,609,000. Income from operations for the
nine month period ended June 30, 1998 increased $2.1 million to $4.0 million.
Interest expense for the three months ended June 30, 1998 increased 108.3%, or
$236,000, over the same period in the prior year. Interest expense for the
nine month period ended June 30, 1998 increased 131.1%, or $800,000, compared
to the nine month period ended June 30, 1997. The increase was primarily due
to interest expense associated with FFH's revolving credit facility, which
accounted for $73,000 and $179,000 of interest expense during the three and
nine month periods ended June 30, 1998, respectively and a $3.9 million and
$6.0 million increase in the average amount borrowed under the Company's
revolving credit facility with a bank (the "Facility") during the three and
nine month periods ended June 30, 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 $82,000 for the three months ended June 30, 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 $221,000 for the nine months ended June 30, 1998 was generated
from gains on the sale of marketable securities and fixed assets, royalty
payments associated with the sale of the Denver non-alcoholic beverage
business, and rent and interest income. Other income of $1.3 million for the
nine months ended June 30, 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
June 30, 1998 was $753,620 compared to $399,428 for the three months ended
June 30, 1997. Net income during the nine months ended June 30, 1998 was
$1,693,640 compared to $1,507,968 for the nine months ended June 30, 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 June 30, 1998 is as follows:
ESTIMATE OF GAIN
-------------------------------
June 30, September 30,
DESCRIPTION OF ASSET 1998 1997
-------------------- ------------ -------------
Investments (available-for-sale) $357,000 $409,000
Condominium & furnishings 500,000 480,000
Investments at June 30, 1998 and September 30, 1997 consisted of 83,000 shares
of Cayman Water Company Limited (CWC), a public company which is listed on
NASDAQ. The Company's basis in the securities is $151,000 and the fair market
value of the securities was $508,000 and $560,000 on June 30, 1998 and
September 30, 1997, respectively. The fair market value of the securities on
July 31, 1998 was $540,000.
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 nine months ended June 30, 1998, the Company utilized cash flow in
operating activities to finance increases in inventory in all branches to
support an increase in business, primarily during the summer months. Cash was
utilized in investing activities during the nine month period ended June 30,
1998 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 $21.0 million as of June 30,
1998 compared to $11.2 million as of September 30, 1997. The Company's debt
to equity ratio was 3.86 at June 30, 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 June 30, 1998, the Company had borrowed approximately $13.1
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 June 30, 1998, FFH had borrowed
approximately $2.9 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 $584,000 through June 30, 1998. The amount
available on the non-revolving line of credit was $666,000 at June 30, 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 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 (incorporated by reference to Exhibit 3.1 of the
Company's Quarterly Report on Form 10-Q filed on May 11, 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)
10.3 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)
10.4 Amended Loan Agreement, dated February 25, 1998, between the Company
and LaSalle National Bank (incorporated by reference to Exhibit 10.5
of the Company's Quarterly Report on Form 10-Q filed on May 11, 1998)
10.5 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)
10.6 First Allonge to Note, dated February 25, 1998, between the Company
and LaSalle National Bank (incorporated by reference to Exhibit 10.7
of the Company's Quarterly Report on Form 10-Q filed on May 11, 1998)
10.7 Loan and Security Agreement, dated February 25, 1998, between the
Company and LaSalle National Bank (incorporated by reference to
Exhibit 10.8 of the Company's Quarterly Report on Form 10-Q filed on
May 11, 1998)
10.8 Promissory Note, dated February 25, 1998, between the Company and
LaSalle National Bank (incorporated by reference to Exhibit 10.9 of
the Company's Quarterly Report on Form 10-Q filed on May 11, 1998)
10.9 Loan and Security Agreement, dated February 25, 1998, between Food
For Health Co., Inc. and LaSalle National Bank (incorporated by
reference to Exhibit 10.10 of the Company's Quarterly Report on
Form 10-Q filed on May 11, 1998)
10.10 Promissory Note, dated February 25, 1998, between Food For Health
Co., Inc. and LaSalle National Bank (incorporated by reference to
Exhibit 10.11 of the Company's Quarterly Report on Form 10-Q filed
on May 11, 1998)
10.11 Unconditional Guarantee, dated February 25, 1998, between the
Company and LaSalle National Bank (incorporated by reference to
Exhibit 10.12 of the Company's Quarterly Report on Form 10-Q filed
on May 11, 1998)
10.12 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)
10.13 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)
10.14 Employment Agreement, dated May 22, 1998, between the Company and
William F. Wright
10.15 Employment Agreement, dated May 22, 1998, between the Company and
Kathleen M. Evans
10.16 Employment Agreement, dated May 22, 1998, between the Food For
Health Co., Inc. and Jerry Fleming
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 June 30, 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: August 6, 1998 Kathleen M. Evans
----------------- -------------------------
Kathleen M. Evans
President and
Principal Executive Officer
Date: August 6, 1998 Michael D. James
----------------- -------------------------
Michael D. James
Treasurer & CFO and
Principal Financial and
Accounting Officer