SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2001
OR
/ / Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
------------------------------
COMMISSION FILE 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 2,738,524 shares of its $.01 par value common stock
outstanding as of July 31, 2001.
Form 10-Q
3rd Quarter
INDEX
-------
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
---------------------
Condensed consolidated balance sheets at
June 30, 2001 and at September 30, 2000 3
Condensed consolidated statements of operations
for the three and nine-month periods ended
June 30, 2001 and June 30, 2000 4
Condensed consolidated statements of cash flows
for the nine-month periods ended June 30, 2001
and June 30, 2000 5
Notes to unaudited condensed consolidated
financial statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 24
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMCON Distributing Company
Condensed Consolidated Balance Sheets
June 30, 2001 and September 30, 2000
---------------------------------------------------------------------------------------
(Unaudited)
June 30, September 30,
2001 2000
------------- -------------
ASSETS
Current assets:
Cash $ 1,051,626 $ 613,158
Accounts receivable, less allowance for
doubtful accounts of $684,049 and $329,069 35,873,042 16,703,983
Inventories 29,684,879 22,122,674
Deferred income taxes 1,122,058 332,959
Current assets of discontinued operations - 10,709,284
Other 654,642 447,754
------------- ------------
Total current assets 68,386,247 50,929,812
Fixed assets, net 15,136,561 4,870,093
Notes receivable 1,250,000 350,000
Investments 1,068,168 509,162
Deferred income taxes 266,728 -
Non-current assets of discontinued operations - 3,902,433
Other assets 16,597,133 12,434,011
------------- ------------
$ 102,704,837 $ 72,995,511
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,458,882 $ 6,610,358
Accrued expenses 4,898,500 2,600,258
Income taxes payable - -
Current liabilities of discontinued operations - 10,923,756
Current portion of long-term debt 1,289,178 2,860,030
Current portion of subordinated debt 868,721 912,694
------------- ------------
Total current liabilities 29,515,281 23,907,096
------------- ------------
Other liabilities 1,139,412 338,290
Non-current liabilities of discontinued operations - 1,145,868
Long-term debt, less current portion 50,234,612 22,004,116
Subordinated debt, less current portion 6,472,792 8,745,236
Commitments
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000
shares authorized, none outstanding - -
Common stock, $.01 par value, 15,000,000
shares authorized, 2,738,304 and 2,737,551
issued, respectively 27,383 27,376
Additional paid-in capital 4,123,086 4,121,981
Unrealized gain on investments available-for-sale,
net of $191,194 and $139,482 tax 315,111 228,924
Retained earnings 10,877,160 12,476,624
------------- ------------
Total shareholders' equity 15,342,740 16,854,905
------------- ------------
$ 102,704,837 $ 72,995,511
============= ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
AMCON Distributing Company
Condensed Consolidated Statements of Operations
for the three and nine months ended June 30, 2001 and 2000
(Unaudited)
------------------------------------------------------------------------------------
For the three months For the nine months
ended June 30 ended June 30
--------------------------- ---------------------------
2001 2000 2001 2000
------------ ------------ ------------- -----------
Sales (including excise taxes
of $26.3 million and $18.8
million, and $59.2 million
and $52.1 million, respectively) $153,662,344 $105,950,999 $355,924,403 $306,123,069
Cost of sales 141,441,141 95,444,465 323,577,307 273,225,403
------------ ------------ ------------ ------------
Gross profit 12,221,203 10,506,534 32,347,096 32,897,666
Selling, general and
administrative expenses 10,800,560 9,055,589 28,235,894 25,902,037
Depreciation and amortization 644,967 457,800 1,760,820 1,634,249
------------ ------------ ------------ ------------
11,445,527 9,513,389 29,996,714 27,536,286
------------ ------------ ------------ ------------
Income from operations 775,676 993,145 2,350,382 5,361,380
Other expense (income):
Interest expense 765,620 581,539 2,112,936 1,808,111
Other income, net (125,000) (1,940,187) (173,224) (2,091,473)
Equity in loss of
unconsolidated affiliate 38,042 - 38,042 -
------------ ------------ ------------ ------------
678,662 (1,358,648) 1,977,754 (283,362)
------------ ------------ ------------ ------------
Income from continuing
operations before income taxes 97,014 2,351,793 372,628 5,644,742
Income tax expense 52,396 820,292 155,752 2,037,032
------------ ------------ ------------ ------------
Income from continuing
operations 44,618 1,531,501 216,876 3,607,710
Loss from discontinued
operations, net of income
tax benefit of $88,630,
$551,298 and $5,357 - (150,910) (894,435) (9,122)
Loss on disposal of discontinued
operations, net of income tax
benefit of $411,350 - - (675,416) -
------------ ------------ ------------ ------------
Net income (loss) $ 44,618 $ 1,380,591 $ (1,352,975) $ 3,598,588
============ ============ ============ ============
Earnings (loss) per share
from continuing operations:
Basic $ 0.02 $ 0.56 $ 0.08 $ 1.32
Diluted $ 0.02 $ 0.54 $ 0.08 $ 1.26
Earnings (loss) per share
from discontinued operations:
Basic $ - $ (0.06) $ (0.57) $ (0.00)
Diluted $ - $ (0.05) $ (0.56) $ (0.00)
Net earnings (loss) per share:
Basic $ 0.02 $ 0.50 $ (0.49) $ 1.32
Diluted $ 0.02 $ 0.49 $ (0.48) $ 1.26
Weighted average shares
outstanding:
Basic 2,738,231 2,737,333 2,737,983 2,733,954
Diluted 2,831,433 2,845,101 2,826,207 2,858,725
The accompanying notes are an integral part of these condensed consolidated
financial statements.
AMCON Distributing Company
Condensed Consolidated Statements of Cash Flows
for the nine months ended June 30, 2001 and 2000
(Unaudited)
---------------------------------------------------------------------------------
2001 2000
------------ ------------
Net cash provided by operating activities $ 13,983,622 $ 3,605,592
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (1,220,207) (607,247)
Proceeds from sales of fixed assets 1,350 1,945,413
Advances under notes receivable (900,000) -
Purchase of common stock in HNWC (300,000) -
Proceeds from sales of available-for-sale
securities - 92,260
Proceeds from disposal of discontinued
operations, net of cash expenditures 8,200,641 -
Acquisitions, net of cash acquired (36,344,144) -
------------ ------------
Net cash (used in) investing activities (30,562,360) 1,430,426
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 720,000 -
Proceeds from bank credit agreement
for acquisition 36,344,144 -
Net (payments) on bank credit agreement (16,141,430) (5,153,192)
Payments on long-term debt and
subordinated debt (3,354,289) (626,619)
Payment of debt issue costs (305,846) -
Dividends paid (246,429) (208,042)
Proceeds from exercise of stock options 1,141 20,262
Purchase of treasury stock (85) -
------------ ------------
Net cash (used in) financing activities 17,017,206 (5,967,591)
------------ ------------
Net increase (decrease) in cash 438,468 (931,573)
Cash, beginning of period 613,158 1,646,133
------------ ------------
Cash, end of period $ 1,051,626 $ 714,560
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
AMCON Distributing Company
Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2001 and 2000
-----------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements include
the accounts of AMCON Distributing Company and its subsidiaries ("AMCON" or
the "Company"). All significant intercompany transactions and balances have
been eliminated in consolidation. In the opinion of management, the
accompanying unaudited condensed consolidated financial statements contain all
adjustments necessary to fairly present the financial information included
therein, such adjustments consisting 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, 2000, 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.
Additionally, the Company completed its purchase of the distribution business
and net assets of Merchants Wholesale, Inc. on June 1, 2001. As more fully
described in Note 2 to the unaudited condensed consolidated financial
statements, the Company completed the sale of its health food distribution
business effective March 23, 2001. As a result, the Company's September 30,
2000 balance sheet and fiscal 2000 results have been restated to reflect the
health food distribution business as discontinued operations.
AMCON's fiscal third quarters ended on June 29, 2001 and June 23, 2000,
respectively. For convenience, the fiscal quarters have been indicated as
June 30. Each three and nine-month period ended comprised 13 weeks and 39
weeks, respectively.
2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES:
Health Food Distribution Business
---------------------------------
Effective March 23, 2001, the Company's subsidiary, Food For Health Co., Inc.,
completed the sale of the assets of its health food distribution business for
$10.3 million, subject to certain adjustments. The purchase price was paid in
cash and the assumption by the purchaser of approximately $2.1 million in
indebtedness. The sale resulted in a pre-tax loss of approximately $1.1
million ($675,000 after taxes). This loss includes an accrual for estimated
costs, including rent and related expenses associated with the remaining lease
commitments on the two distribution facilities that were retained by the
Company of $2.5 million and contractual consulting agreements of $445,000,
which will provide no future economic benefit to the Company. The Company is
actively seeking tenants to sublease the facilities for the remainder of the
lease terms. Any differences between these expense estimates and their actual
settlement will change the loss accordingly. In connection with the sale of
the health food distribution business, the Company also entered into a 5 year
supply agreement with the purchaser under which the purchaser will supply
products to the Company's retail health food stores at market prices.
The sale of the Company's health food distribution business has been reflected
as discontinued operations in the unaudited condensed consolidated financial
statements in accordance with APB No. 30. Revenues from the discontinued
operations, which have been excluded from income from continuing operations in
the accompanying unaudited condensed consolidated statements of operations for
the three and nine-month periods ended June 30, 2001 and 2000, are presented
below. The effects of the discontinued operations on net income (loss) and
per share data are reflected within the accompanying unaudited condensed
consolidated statements of operations.
Three months ended Nine months ended
June 30, June 30,
-------------------------- ---------------------------
2001 2000 2001 2000
----------- ------------ ------------ ------------
Revenue $ - $ 9,933,329 $ 13,704,844 $ 33,541,133
Merchants Wholesale, Inc.
-------------------------
On June 1, 2001, the Company completed the acquisition of substantially all of
the distribution business and net assets of Merchants Wholesale, Inc.
("Merchants") located in Quincy, IL. In addition, the Company purchased a
206,000 square foot building occupied by Merchants and owned by Merchants'
sole shareholder. The net purchase price of $36.7 million, net of assumed
liabilities of $6.0 million, was based on assets held at the closing date,
including the real estate. Funding for the acquisition was provided as
follows: $27.0 million through borrowings under a revolving loan agreement
with LaSalle National Bank (the "Revolving Loan"); $6.3 million through a real
estate loan with Gold Bank (the "Real Estate Loan"); and $3.4 million of
deferred payment to the sole stockholder of MWI. Costs and expenses
associated with the acquisition were paid from AMCON's Revolving Loan
proceeds. The Revolving Loan is secured by all of AMCON's assets, excluding
real estate. The Real Estate Loan is secured by AMCON's two owned
distribution facilities.
The transaction was accounted for using the purchase method of accounting
under which the purchase price was allocated to the assets acquired and
liabilities assumed based on their estimated fair values. The portion of the
purchase price in excess of the fair value of the net assets acquired to be
allocated to goodwill and other identifiable assets is currently estimated to
be approximately $4.1 million and $0.3 million, respectively. The goodwill is
currently being amortized over 25 years, while the identifiable intangible
asset, represented by a noncompete agreement with the sole shareholder of
Merchants, is being amortized over the period covered by the agreement of four
years. On October 1, 2001, the Company intends to early adopt the guidance
under the newly issued Statement of Financial Accounting Standards No. 142 and
the remaining unamortized goodwill asset will no longer be amortized. The
carrying value of the goodwill will then be reviewed for impairment and
written down and charged to the results of operations if and when the
impairment recognition criteria is met and the recorded value of the asset
exceeds its measured fair value. It is the Company's intention to more fully
evaluate the fair value, classification and useful lives of the acquired net
assets, including the intangible assets, and, as a result, the final
allocation of the purchase price to the intangible assets acquired may
ultimately differ from that recorded as of June 30, 2001. The Company intends
to have the evaluation of fair value, and therefrom, the purchase price
allocation completed by September 30, 2001.
Operating results for the Merchants acquisition are included in the
accompanying condensed consolidated statement of operations from the
acquisition date. The following presents pro forma unaudited condensed
consolidated revenues, net income from continuing operations and net income
per share for the nine months ended June 30, 2001 and 2000 as if the
acquisition of the distribution business and the net assets of Merchants
occurred on October 1, 2000 and 1999, respectively.
Nine months ended
-----------------------------
June 30, June 30,
2001 2000
------------- -------------
Sales $ 664,268,399 $ 628,276,249
Net income from continuing
operations $ (202,414) $ 3,767,199
Net income $ (1,772,264) $ 3,758,077
Earnings per share:
Basic $ (0.65) $ 1.38
Diluted $ (0.65) $ 1.32
The pro forma information provided above is based on assumptions that
management deems appropriate, but does not purport to be indicative of the
results that would have actually occurred had the acquisition taken place on
October 1, 2000 and 1999, respectively.
Hawaiian Natural Water Company, Inc.
------------------------------------
In November 2000, the Company entered into a merger agreement with Hawaiian
Natural Water Company, Inc. (OTC: HNWC), pursuant to which HNWC would be
merged with and into, and thereby become, a wholly-owned subsidiary of the
Company. As a result, the Company will issue between 358,168 and 477,558
shares of its common stock to HNWC shareholders, representing between 11.6%
and 14.9% of the Company's outstanding shares after giving effect to the
merger. The ultimate purchase price will be determined based on the Company's
stock price at the closing of the transaction. Based on the Company's closing
stock price on July 31, 2001, the maximum purchase price would be $2.7 million
(excluding the $750,000, but including the $500,000, advanced to HNWC through
June 30, 2001 and recorded as notes receivable and the $300,000 recorded as an
investment in the accompanying unaudited condensed consolidated balance sheet
at June 30, 2001).
The Company has provided HNWC with certain interim debt financing pending the
consummation of the merger. HNWC is currently experiencing recurring
operating losses and negative cash flows from operations; therefore, the
Company loaned HNWC $350,000 in September 2000 and $400,000 in October 2000
for a total of $750,000 (the "$750,000 Notes") to be used for working capital
and other general corporate purposes, including redemption of outstanding
preferred stock. The loan is evidenced by promissory notes, bearing interest
at the rate of 10% per annum, due on September 30, 2001 (the original due date
was March 31, 2001), which are secured by substantially all of HNWC's assets.
In February 2001, the Company invested an additional $300,000 in HNWC in
exchange for 750,000 shares of common stock at substantially the same exchange
ratio as provided for in the merger agreement. The investment represents an
ownership interest of approximately 9.5% in HNWC and, accordingly, was
accounted for under the cost method through the end of Company's quarter ended
March 31, 2001.
In February 2001, the Company agreed to obtain, and placed orders for, certain
water bottling equipment to be utilized by HNWC in order to increase
production capacity to achieve its growth targets. The estimated commitment
under this operating lease is approximately $2.6 million over 8 years. The
Company will sublease this equipment to HNWC under similar terms.
In June 2001, the Company loaned HNWC an additional $500,000, which loan is
evidenced by a promissory note bearing interest at the rate of 10% per annum,
due on September 30, 2001, and which is also secured by substantially all of
HNWC's assets (the "$500,000 Note"). In the event that the merger agreement
is terminated for any reason or HNWC defaults on its obligations under the
$750,000 Notes or the $500,000 Note, the Company will be entitled to convert
all of those notes into Series C Convertible Preferred Stock which, among
other things, would entitle AMCON to elect a majority of HNWC's Board of
Directors. The $750,000 notes are also convertible upon 61 days' advance
notice into HNWC's common stock at the same exchange ratio as in the merger.
The $500,000 Note is convertible at any time at AMCON's election into HNWC's
common stock at a conversion ratio of $0.40 per share and gives the Company a
beneficial ownership interest of approximately 22% in HNWC.
While there is no commitment to do so, the Company may consider negotiating
future financing needs as they arise. However, given the continued funding of
HNWC in the Company's quarter ended June 30, 2001 through the issuance of the
$500,000 Note, AMCON management believes that it has the ability to exercise
significant influence over the operating and financial policies of HNWC.
Accordingly, the Company has adopted the equity method of accounting for its
investment in HNWC in the 3rd quarter ended June 30, 2001. The effect of
adopting equity accounting on the carrying value of the common stock in HNWC
and the results of operations as of, and for, the Company's second quarter
ended March 31, 2001, the quarter in which the HNWC common stock investment
was made, is immaterial. The charge to the Company's third quarter results to
record its equity in the losses of HNWC from the initial common stock
investment date is $38,042.
The 750,000 shares purchased in February 2001 and the 1,250,000 shares
receivable by AMCON upon conversion of the $500,000 Note will participate in
the consideration to be received by HNWC stockholders in the merger (the
"Merger Consideration"). Any shares receivable by AMCON upon conversion of
the $750,000 Notes will not participate in the merger consideration. Due to
the anticipated acquisition of HNWC and management's belief that the notes
will not be paid within the next 12 months, the notes have been classified as
noncurrent as of June 30, 2001.
The merger is expected to qualify as a tax-free reorganization and to be
recorded on the Company's books using the purchase method of accounting. The
merger is subject to various conditions, including the effectiveness of a
registration statement covering the AMCON shares to be issued in the merger,
the listing of such shares on AMEX and the approval of the HNWC stockholders.
It is expected that the merger will be consummated in the fourth quarter of
fiscal 2001.
3. INVENTORIES:
Inventories consist of finished products purchased in bulk quantities to be
redistributed to the Company's customers. Effective in fiscal 1999, the
Company changed the method of accounting for inventory from the first-in,
first-out ("FIFO") method to the last-in, first-out ("LIFO") method. LIFO
inventories at June 30, 2001 were approximately $3.9 million less than the
amount of such inventories valued on a FIFO basis.
4. DIVIDENDS:
The Company paid cash dividends totaling $0.03 per share during the quarter
ended June 30, 2001.
5. EARNINGS (LOSS) PER SHARE:
Basic earnings (loss) per share is calculated by dividing income from
continuing operations, loss from discontinued operations and net income (loss)
by the weighted average common shares outstanding for each period. Diluted
earnings (loss) per share is calculated by dividing income from continuing
operations, loss from discontinued operations and net income (loss) by the sum
of the weighted average common shares outstanding and the weighted average
dilutive options, using the treasury stock method. Stock options outstanding
at June 30, 2001 and 2000, respectively, which were not included in the
computations of diluted earnings per share because the option's exercise price
was greater than the average market price of the common shares totaled 172,380
with an average exercise price of $7.25 for the three and nine months ended
June 30, 2001, 168,200 shares with an average exercise price of $7.39 for the
three months ended June 2000 and 129,700 shares with an average exercise price
of $7.76 for the nine months ended June 30, 2000.
For the three-month period ended June 30,
-------------------------------------------------------
2001 2000
------------------------- -------------------------
Basic Diluted Basic Diluted
----------- ----------- ----------- -----------
1. Weighted average common
shares outstanding 2,738,242 2,738,242 2,737,337 2,737,337
2. Weighted average treasury
shares outstanding (11) (11) (4) (4)
3. Weighted average of net
additional shares outstanding
assuming dilutive options and
warrants exercised and proceeds
used to purchase treasury stock - 93,202 - 107,768
----------- ----------- ----------- -----------
4. Weighted average number of
shares outstanding 2,738,231 2,831,433 2,737,333 2,845,101
=========== =========== =========== ===========
5. Income from continuing
operations $ 44,618 $ 44,618 $ 1,531,501 $ 1,531,501
=========== =========== =========== ===========
6. Loss from discontinued
operations $ - $ - $ (150,910) $ (150,910)
=========== =========== =========== ===========
7. Net income $ 44,618 $ 44,618 $ 1,380,591 $ 1,380,591
=========== =========== =========== ===========
8. Earnings per share from
continuing operations $ 0.02 $ 0.02 $ 0.56 $ 0.54
=========== =========== =========== ===========
9. Loss per share from
discontinued operations $ - $ - $ (0.06) $ (0.05)
=========== =========== =========== ===========
10. Net earnings per share $ 0.02 $ 0.02 $ 0.50 $ 0.49
=========== =========== =========== ===========
For the nine-month period ended June 30,
-------------------------------------------------------
2001 2000
------------------------- -------------------------
Basic Diluted Basic Diluted
----------- ----------- ----------- -----------
1. Weighted average common
shares outstanding 2,737,988 2,737,988 2,733,955 2,733,955
2. Weighted average treasury
shares outstanding (5) (5) (1) (1)
3. Weighted average of net
additional shares outstanding
assuming dilutive options and
warrants exercised and proceeds
used to purchase treasury stock - 88,224 - 124,771
----------- ----------- ----------- -----------
4. Weighted average number of
shares outstanding 2,737,983 2,826,207 2,733,954 2,858,725
=========== =========== =========== ===========
5. Income from continuing
operations $ 216,876 $ 216,876 $ 3,607,710 $ 3,607,710
=========== =========== =========== ===========
6. Loss from discontinued
operations $ (894,435) $ (894,435) $ (9,122) $ (9,122)
=========== =========== =========== ===========
7. Loss on disposal of
discontinued operations $ (675,416) $ (675,416) $ - $ -
=========== =========== =========== ===========
8. Net income (loss) $(1,352,975) $(1,352,975) $ 3,598,588 $ 3,598,588
=========== =========== =========== ===========
9. Earnings per share from
continuing operations $ 0.08 $ 0.08 $ 1.32 $ 1.26
=========== =========== =========== ===========
10. Loss per share from
discontinued operations $ (0.57) $ (0.56) $ - $ -
=========== =========== =========== ===========
11. Net earnings (loss) per share $ (0.49) $ (0.48) $ 1.32 $ 1.26
=========== =========== =========== ===========
6. COMPREHENSIVE INCOME (LOSS):
The following is a reconciliation of net income (loss) per the accompanying
consolidated statements of operations to comprehensive income (loss) for the
periods indicated:
For the three months For the nine months
ended June 30 ended June 30
------------------------- -------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Net income (loss) $ 44,618 $ 1,380,591 $(1,352,975) $ 3,598,588
Other comprehensive income:
Unrealized holding gain (losses)
arising from investments during
the period, net of income taxes
of $(10,499), $17,956, $51,712
and $19,783, respectively (17,501) 29,926 86,188 32,971
Less reclassification adjustments
included in net income - (25,533) - (42,904)
----------- ----------- ----------- -----------
Comprehensive income (loss) $ 27,117 $ 1,384,984 $(1,266,787) $ 3,588,655
=========== =========== =========== ===========
7. DEBT:
In connection with the acquisition of the distribution business and net assets
of Merchants on June 1, 2001, the Company incurred additional debt as follows:
Revolving Credit Facility
-------------------------
The Company amended its revolving credit facility (the "Facility") with a bank
to increase the Facility from $25.0 million to $55.0 million. Borrowings
under the Facility are based on eligible accounts receivable and inventory
requirements. The new Facility bears interest at the bank's base rate
("Prime") or LIBOR plus 1.75%, as selected by the Company. In addition, the
Company is required to pay an unused fee equal to .25% per annum on the
difference between the maximum loan limit and the average borrowing for the
month. The Facility is collateralized by all equipment, all intangibles,
inventories, and accounts receivable. The Facility contains covenants which,
among other things, set certain financial ratios and net worth requirements,
including covenants that (i) restrict the permitted investments, (ii) restrict
intercompany advances to HNWC, (iii) restrict incurrence of additional debt,
(iv) restrict mergers and acquisitions and changes in business or conduct of
business and (v) require the maintenance of certain financial ratios and net
worth levels including an average annual fixed charge ratio of 1.1 to 1.0,
average annual debt service coverage ratio of 1.5 to 1.0, average annual
Senior debt to EBITDA ratio of 6.0 to 1.0, and a minimum tangible net worth of
$7,000,000. In addition, the Company must maintain a fill rate percentage of
not less than 93% calculated on a weekly basis. The fill rate percentage is
determined by dividing the total dollar amount of inventory delivered to the
Company's customers each week into the total amount of orders which correspond
to such deliveries. The Facility also provides that the Company may not pay
dividends in excess of $.12 per share on an annual basis.
Real Estate Term Loan
---------------------
The Company borrowed $6.9 million from a bank to purchase the distribution
facility utilized by Merchants, which was owned by Merchants' sole stockholder
(the "Real Estate Loan"). Proceeds from the Real Estate Loan were also used
to retire term debt. The Real Estate Loan bears interest at a fixed rate of
7.5% with monthly installments of principal and interest in the amount of
$56,531 per month. The loan has a term of 5 years, at which time the
remaining balance will be due and payable, and is collateralized by the
Company's two owned distribution facilities.
Subordinated Obligations Due Seller
----------------------------------
The asset purchase agreement with Merchants provides for deferred payments to
be made to the seller totaling $4,550,000. The obligations are subordinate to
the Facility and the Real Estate Loan. The company paid $1,000,000 on the
closing date of the transaction, while the remaining $3,550,000 is required to
be paid on the first, second, third and fourth anniversaries of the closing
date of the transaction in installments of $900,000 on each of the first
three anniversary dates with a final payment of $850,000 on the fourth
anniversary of the closing date. In addition, the Company entered into a
noncompetition agreement with the seller that requires the Company to make
payments of $100,000 annually on the first through fourth anniversary dates of
the closing of the transaction. The Company has recorded the seller
obligations at their fair values utilizing a 6% effective interest rate which
was determined based on the Company's approximate average borrowing rate.
8. ADOPTION OF SFAS NO. 133 AND THE INTEREST RATE SWAP AGREEMENT
The Company adopted Statement of Financial Standards No. 133 (SFAS No. 133),
"Accounting for Derivative Instruments and Hedging Activities," on September
30, 2000. Under SFAS No. 133, all derivatives are recognized on the balance
sheet at their fair value, with the impact of the change in the fair value
recorded in current earnings or in other comprehensive income depending on the
type of derivative, the designation of the instrument as a hedge, and the
effectiveness of the hedge. At September 30, 2000, the Company did not have
any derivative financial instruments.
In connection with the purchase of the distribution business and net assets of
Merchants, the Company assumed Merchants's interest rate swap agreement with a
bank. Under the agreement, the Company agrees to exchange, at specified
intervals, fixed interest amounts for variable interest amounts calculated by
reference to an agreed-upon notional principal amount of $25,000,000. The
interest rate swap effectively converts $25,000,000 of the Company's variable-
rate senior debt to fixed-rate debt (before accounting for the impact of the
change in market value of the interest rate swap derivative financial
instrument) at a rate of 8.33%, through the maturity of the swap agreement on
May 27, 2003.
Due to the significant decline in variable interest rates from the date
Merchants initially entered into the swap agreement, the negative fair value
of the swap instrument recorded as a liability on Merchant's balance sheet at
the closing date was $931,824. Upon assuming the swap liability, the Company
did not designate the swap transaction as a hedge and, therefore, recognized
changes in the market value of the instrument in current earnings (interest
expense). At June 30, 2001, the swap instrument had a market value of
$893,834. The change in fair value of the swap instrument from a negative
market value of $931,824 as of the acquisition date to a negative market value
of $893,834 at June 30, 2001 was recorded as a reduction to interest expense
in the Company's three and nine months ended June 20, 2001.
9. BUSINESS SEGMENTS:
AMCON has two reportable business segments; the wholesale distribution of
consumer products and the retail sale of health and natural food products.
The Company disposed of its health food distribution segment during the second
quarter of fiscal 2001. Prior period segment data has been restated to conform
to the current presentation. The results of the acquired Merchants
distribution business are included in the wholesale distribution of consumer
products segment due to similar economic characteristics shared by AMCON's
existing distribution business and Merchants distribution business and due to
similar characteristics with respect to the nature of the products
distributed, the type and class of customers for the distribution products,
and the methods used to distribute the products. The segments are evaluated
on revenues, operating income and income before taxes.
Wholesale
Distribution Retail Other Consolidated
------------- ------------ -------- -------------
Quarter ended June 30, 2001:
Revenues $ 145,391,249 $ 8,271,095 - $ 153,662,344
Operating income (loss) 1,093,712 (318,036) - 775,676
Income (loss) before taxes 771,918 (636,862) $(38,042) 97,014
Total assets 82,181,582 20,523,255 - 102,704,507
Quarter ended June 30, 2000:
Revenues $ 97,575,165 $ 8,375,834 - $ 105,950,999
Operating income (loss) 1,305,203 (312,058) - 993,145
Income before taxes 3,051,244 (699,451) - 2,351,793
Total assets, excluding
discontinued operations 33,051,902 19,965,774 - 53,017,676
Nine months ended June 30, 2001:
Revenues $ 331,610,778 $ 24,313,625 - $ 355,924,403
Operating income (loss) 3,102,488 (752,106) - 2,350,382
Income (loss) before taxes 2,321,040 (1,910,370) $(38,042) 372,628
Total assets 82,181,582 20,523,255 - 102,704,507
Nine months ended June 30, 2000:
Revenues $ 280,932,796 $ 25,190,273 - $ 306,123,069
Operating income 4,772,631 588,749 - 5,361,380
Income before taxes 6,179,270 (534,528) - 5,644,742
Total assets, excluding
discontinued operations 33,051,902 19,965,774 - 53,017,676
There are no intersegment sales between the two operating segments. Operating
income (loss) and income (loss) before taxes from the retail segment include
general corporate overhead expenses, which were previously allocated to the
discontinued health food distribution operations but were not eliminated as a
result of the sale. Income (loss) before taxes in the "Other" column
represent equity in the loss of unconsolidated affiliates.
10. RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Standards No. 141 (SFAS No. 141), "Business
Combinations" and SFAS No. 142,"Goodwill and Other Intangible Assets." SFAS
No. 141 requires business combinations initiated after June 30, 2001 to be
accounted for using the purchase method of accounting, and broadens the
criteria for recording intangible assets separate from goodwill. Recorded
goodwill and intangibles being classified as goodwill, or alternatively,
amounts initially recorded as goodwill may be separately identified and
recognized apart from goodwill. SFAS No. 142 requires the use of a
nonamortization approach to account for purchased goodwill and certain
intangibles. Under a nonamortization approach, goodwill and certain
intangibles will not be amortized into results of operations, but instead
would be reviewed for impairment and written down and charged to results of
operations only in the periods in which the impairment recognition criteria
had been met and the recorded value of goodwill and certain intangibles is
more than its measured fair value. The provisions of each statement which
apply to goodwill and intangible assets acquired prior to June 30, 2001 must
be adopted by the Company on October 1, 2002. Early application of SFAS 142
is permitted for the Company's fiscal year beginning October 1, 2001. Given
that the Company is still evaluating the fair value classification and useful
lives of the acquired Merchants' net assets, including goodwill and the
identifiable intangible assets, management is still addressing what the impact
on future periods will be resulting from the adoption of SFAS No. 141 and SFAS
No. 142.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
As more fully described in the section "Acquisitions and Dispositions"
hereunder, the Company completed the sale of its health food distribution
business effective March 23, 2001. As a result, the Company's September 30,
2000 balance sheet and fiscal 2000 results have been restated to reflect the
health food distribution business as discontinued operations. The discussions
and figures below are based on the restated presentation. Additionally, as
more fully described in the section "Acquisitions and Dispositions" hereunder,
the Company completed its acquisition of substantially all of the distribution
business and net assets of Merchants on June 1, 2001. Accordingly, the
results of operations for the Merchants distribution business are included in
the accompanying condensed consolidated statement of operations from the
acquisition date.
Comparison of the three month and nine month periods ended June 30, 2001 and
June 30, 2000
Sales for the three months ended June 30, 2001 increased 45.0% to $153.7
million, compared to $106.0 million for the third quarter in the prior fiscal
year. The sales increase by business segment is as follows:
Wholesale distribution $ 47.8 million
Retail health food stores (0.1) million
------
$ 47.7 million
======
Sales from the wholesale distribution business increased by $47.8 million
during Q3 2001 over Q3 2000. Sales from the new Quincy distribution business
(formerly the Merchants distribution business) accounted for $33.8 million of
the increase. The remaining increase of $14.0 million was attributable
primarily to an increase in cigarette sales of approximately $10.9 million
over Q3 2000 as a result of three price increases. Cigarette carton volume
increased by approximately 2.2% as compared to Q3 2000. In addition, sales of
tobacco, confectionery and other products were higher in Q3 2001 relative to
Q3 2000 by $3.1 million or 9.3%. Sales growth during Q3 2001 improved over Q3
2000 as weather conditions improved in the Midwest, which promoted more
outdoor activities and more business for the Company's customers.
Sales from the retail health food segment in Q3 2001 decreased by $105,000
when compared to Q3 2000 primarily due to an overall softening of the natural
food retail market over the past year as few new products have been developed
to promote traffic in the retail stores. Additionally, increased competition
by national chains, who have opened stores in the same markets as the
Company's stores, have negatively impacted sales. The Company plans to close
one retail store in the Florida market before the end of the fiscal year due
to poor financial performance.
Sales for the nine months ended June 30, 2001 increased 16.3% to $355.9
million, compared to $306.1 million for the same period in the prior fiscal
year. The sales increase by business segment is as follows:
Wholesale distribution $ 50.7 million
Retail health food stores (0.9) million
------
$ 49.8 million
======
Sales from the wholesale distribution business increased by $50.7 million for
the nine months ended June 30, 2001 as compared to the same period in the
prior year. Sales from the new Quincy distribution business accounted for
$33.8 million of the increase. The remaining increase of $16.9 million was
attributable primarily to an increase in cigarette sales of approximately
$13.1 million over the same period of the prior year as a result of three
price increases, despite a 4.5% decline in carton volume. Sales of tobacco,
confectionery and other products accounted for the remainder of the increase
as sales of these products were higher than the prior year by approximately
$3.8 million or 5.3%. Sales growth for the first six months of the year was
negatively impacted by the severe winter in the Midwest, which inhibited
traffic in customers' retail stores; however, sales improved in Q3 2001 as
weather conditions improved. In addition, pricing strategies implemented by
several competitors since the prior year has also had a negative impact on
sales.
Sales from the retail health food segment decreased by $0.9 million when
compared to the prior year due to increased competition by national chains who
have opened stores in the same markets as the Company's stores. Additionally,
an overall softening of the natural food retail market over the past year due
to few new products being developed has negatively impacted sales growth in
the retail health food segment.
Gross profit increased 16.3% to $12.2 million for Q3 2001 from $10.5 million
for Q3 2000. Gross profit as a percentage of sales declined to 8.0% for Q3
2001 compared to 9.9% for Q3 2000. Gross profit by business segment is as
follows (dollars in millions):
Quarter ended
June 30,
---------------- Incr/
2001 2000 (Decr)
------ ------ -----
Wholesale distribution $ 9.0 $ 7.2 $ 1.8
Retail health food stores 3.2 3.3 (0.1)
------ ------ -----
$ 12.2 $ 10.5 $ 1.7
====== ====== =====
The new Quincy distribution business accounted for $1.4 million of the
increase in gross profit dollars in the wholesale distribution segment. The
remaining increase in gross profit dollars in the wholesale distribution
segment was primarily due to the net impact of (1) a marginal increase in
cigarette carton volume accompanied by three price increases subsequent to Q3
2000 and (2) a favorable margin impact of approximately $0.5 million in Q3
2001 resulting from inventory levels at the time of the Q3 2000 price increase
turning at a lower cost relative to the new sales price; and (3) a charge to
cost of sales of $0.7 million to account for the increase in the inventory
LIFO reserve due to a significant increase in the Producer Price index
utilized by the Company to compute its inventory LIFO reserve. The decline in
gross profit percentage is directly attributable to the new Quincy
distribution business and increases in the cost and selling price of
cigarettes. As the Company's overall percentage of cigarette sales increases
in relation to total sales, the overall gross margin percentage continues to
decline.
The retail health food segment experienced a reduction in gross margin due to
an overall decline in same store sales as compared to Q3 2000. Management is
actively reviewing strategies to improve sales and gross profit in the retail
segment, including evaluation of retail locations and promotional activities.
The Company plans to close one retail store in the Florida market before the
end of the fiscal year due to poor financial performance.
For the nine months ended June 30, 2001, gross profit decreased 1.7% to $32.3
million from $32.9 million for the same period during the prior fiscal year.
Gross profit as a percentage of sales declined to 9.1% for the nine month
period ended June 30, 2001 compared to 10.7% for the nine month period ended
June 30, 2000. Gross profit by business segment is as follows (dollars in
millions):
Nine months ended
June 30,
---------------- Incr/
2001 2000 (Decr)
------ ------ -----
Wholesale distribution $ 22.6 $ 22.2 $ 0.4
Retail health food stores 9.7 10.7 (1.0)
------ ------ -----
$ 32.3 $ 32.9 $(0.6)
====== ====== =====
For the nine months ended June 30, 2001, the new Quincy distribution business
contributed $1.4 million of gross profit. This increase in gross profit was
offset by a decrease in gross profit in the wholesale distribution segment
resulting from (1) a favorable margin impact of approximately $0.3 million
resulting from inventory levels at the time of price increases turning at a
lower cost relative to the new sales price, (2) a Q2 and Q3 2001 charge to
cost of sales of $1.4 million to account for the increase in the LIFO reserve,
which reduced margin by approximately $1.4 million relative to the nine months
ended June 30, 2000 and (3) reductions in incentive allowances from
manufacturers due to a decline in cigarette carton volume over the first nine
months of the fiscal year as compared to the prior fiscal year. The retail
health food segment experienced an overall decline in same store sales as
compared to the same period of the prior fiscal year, which negatively
impacted profits.
The reduction in the gross profit percentage was primarily attributable to the
three price increases in cigarettes since Q3 2000 combined with the
disproportional increase in the selling prices to our customers. In addition,
the Producer Price index utilized by the Company to compute its LIFO reserve
increased substantially during Q2 and Q3 2001 as compared to increases in the
index in prior quarters, thus requiring a charge to cost of sales of $1.4
million to increase the LIFO reserve accordingly.
Since 1993, sales of the Company's private label cigarettes have declined an
average of 30% annually. This trend is primarily due to the decreased price
differential between premium and major generic brands, including the Company's
brands, and to the price of sub-generic brands being substantially less than
the Company's brand. Sales of the Company's private label cigarettes were
down by approximately 40% compared to the first nine months of the prior year
and the volume incentive payment related to those sales was $485,000 less than
the first nine months of the prior year. Management anticipates the volume of
the Company's private label cigarettes will continue to decline over the next
few years. Based on these estimates, gross profit from the sale of private
label cigarettes could decrease as much as an additional $100,000 for the
remainder of fiscal 2001.
Total operating expense, which includes selling, general and administrative
expenses and depreciation and amortization, increased 20.3% or approximately
$1.9 million to $11.4 million for Q3 2001 compared to Q3 2000. The increase
was primarily due to expenses associated with the new Quincy distribution
business which accounted for $1.5 million of the increase. As a percentage of
sales, total operating expense decreased to 7.4% from 9.0% during Q3 2000.
This decrease is primarily due to the acquisition of the Quincy distribution
business which brought the wholesale distribution segment's operating costs as
a percent of sales down to 5.4% for Q3 2001 compared to 6.0% for Q3 2000.
For the nine month period ended June 30, 2001, total operating expense
increased 8.9% or approximately $2.5 million to $30.0 million compared to the
same period in the prior fiscal year. The increase was primarily due to
expenses associated with the new Quincy distribution business which accounted
for $1.5 million of the increase. The rest of the wholesale distribution
segment incurred $0.6 million in operating costs above amounts incurred in the
first nine months of fiscal 2000 due to increases in general labor, delivery
and fuel costs, as compared to the prior fiscal year. The retail health food
business accounted for the remaining $0.4 million of the increase in operating
expenses. Operating expenses incurred by this business segment increased due
to the addition of a new store since the same period in the prior fiscal year
and additional administrative costs associated with the development of new
retail business opportunities. As a percentage of sales, total operating
expense decreased to 8.4% from 9.0% during the same period in the prior fiscal
year. This decrease is primarily due to the acquisition of the Quincy
distribution business which brought the wholesale distribution segment's
operating costs as a percentage of sales down to 5.9% for the nine months
ended June 30, 2001 compared to 6.2% for the same period of the prior year.
As a result of the above, income from operations for Q3 2001 decreased by
$217,000 to $776,000. Income from operations for the nine months ended June
30, 2001 decreased by $3.0 million to $2.4 million.
Interest expense for Q3 2001 increased 31.7% to approximately $766,000
compared to approximately $582,000 during Q3 2000. The increase was primarily
due to interest expense attributable to the debt incurred to acquire the
Merchants distribution business and net assets and the Quincy distribution
facility on June 1, 2001 and to provide advances to Hawaiian Natural Water
Company ("HNWC"). Interest incurred for these purposes was approximately
$259,000. Interest expense for the nine months ended June 30, 2001 increased
16.9% to $2.1 million compared to $1.8 million for the same period in the
prior fiscal year. The increase was primarily due to debt incurred to acquire
the Merchants distribution business and net assets and the Quincy distribution
facility and debt incurred to provide advances to and investments in HNWC.
These items accounted for approximately $271,000, or 89%, of the increase in
interest expense.
Other income for the three and nine-month periods ended June 30, 2001 of
approximately $125,000 and $173,000, respectively, was generated primarily by
interest income and dividends received on investment securities. Other income
for the three and nine-month periods ended June 30, 2000 of $1.9 million and
$2.1 million, respectively, included gains of $1.9 million associated with the
sale of the Company's interest in a condominium and resolution of an
intellectual property matter involving a trademark.
Equity in earnings of unconsolidated affiliates represents the Company's
ownership interest in the loss of HNWC.
As a result of the above factors, income from continuing operations for the
three months ended June 30, 2001 was $44,418 compared to $1,531,501 for the
three months ended June 30, 2000. Income from continuing operations for the
nine months ended June 30, 2001 was $216,876, compared to $3,607,710 for the
first nine months of the prior year.
As described in Management's Discussion and Analysis in the Company's Annual
Report to Shareholders for the Fiscal Year Ended September 30, 2000 and as
evidenced by the Company's acquisition of the distribution business and net
assets of Merchants, the distribution industry is in a state of consolidation.
Competition and pressure on profit margins continue to affect both large and
small distributors demand that distributors consolidate in order to become
more efficient. The new Quincy, IL distribution business (formerly Merchants)
operates out of a state-of-the-art facility that enables customers in
Arkansas, Illinois, Indiana, Iowa, Kansas, Missouri, Ohio and Wisconsin to be
serviced out of one 206,000 square foot facility. As a result of the
acquisition, AMCON's annualized revenues will be approximately $900 million.
The retail natural foods industry is highly fragmented, with more than 9,000
stores operated independently or as part of small chains. The two leading
natural food chains continue to expand their geographic markets and acquire
smaller independent competitors. In addition, conventional supermarkets and
mass market outlets have also begun to increase their emphasis on the sale of
natural products. This business climate subjects operating income to a number
of factors which are beyond the control of management, such as competing
retail stores opening in close proximity to the Company's retail stores and
manufacturers changing prices and promotional programs.
While the Company sells a diversified product line, it remains dependent on
cigarette sales which represented approximately 71% of its revenue and 44% of
its gross margin in the first nine months of the fiscal year. Changes in
manufacturers' cigarette pricing affects the market for generic and private
label cigarettes and net income is heavily dependent upon sales of the
Company's private label cigarettes and volume discounts received from
manufacturers in connection with such sales. The Company continuously
evaluates steps it may take to improve net income in future periods, including
further acquisitions of other distributing companies and retail stores in
similar business lines and further sales of assets that are no longer
essential to its primary business activities such as investments in equity
securities.
Investments at June 30, 2001 included 70,000 shares of Consolidated Water
Company Limited ("CWC"), a public company which is listed on NASDAQ. The
Company's basis in the securities is $127,000 and the fair market value of the
securities was $637,000 and $499,000 on June 30, 2001 and September 30, 2000,
respectively. The unrealized gain on CWC shares was approximately $510,000
and $372,000 on June 30, 2001 and September 30, 2000, respectively. The fair
market value of the CWC shares held on July 31, 2001 was $764,000.
The impact of the recent accounting pronouncements on the Company's financial
statements in future periods is incorporated by reference from footnote 10 of
the notes to unaudited condensed consolidated financial statements for the
three and nine months ended June 30, 2001.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended June 30, 2001, cash of $14.0 million was provided
by operating activities primarily through reductions in inventory (excluding
the impact of inventory that was purchased from Merchants) and due to
increases in accounts payable resulting from the Company taking advantage of
extended payment terms offered by manufacturers. Cash of $7.0 million was
generated from investing activities during the nine-month period ended June
30, 2001 primarily due to proceeds received from the sale of the health food
distribution business. Cash of $36.3 million was used in investing activities
to acquire the distribution business net assets of Merchants Wholesale, Inc.,
including the Quincy, IL distribution facility previously owned by the sole
shareholder of Merchants. In addition, cash was used to make an additional
investment of $900,000 in notes receivable from HNWC, a $300,000 equity
investment in HNWC and for capital expenditures of approximately $1.2 million.
Cash provided by financing activities includes $36.3 million in proceeds from
the new credit facility and the new term debt to fund the acquisition of the
distribution business and net assets of Merchants and the Quincy, IL
distribution facility, respectively. Cash was used in financing activities for
payment of dividends to stockholders.
The Company had working capital of approximately $38.9 million as of June 30,
2001 compared to $27.0 million as of September 30, 2000. The Company's debt
to equity ratio was 5.69 at June 30, 2001 compared to 3.33 at September 30,
2000.
The Company amended its revolving credit facility (the "Facility") with a bank
to increase the Facility from $25.0 million to $55.0 million. Borrowings
under the Facility are based on eligible accounts receivable and inventory
requirements. The new Facility bears interest at the bank's base rate
("Prime") or LIBOR plus 1.75%, as selected by the Company. In addition, the
Company is required to pay an unused fee equal to .25% per annum on the
difference between the maximum loan limit and the average borrowing for the
month. The Facility is collateralized by all equipment, all intangibles,
inventories, and accounts receivable. Debt issuance costs relating to the
amendment of the Facility were $300,000.
The Facility contains covenants which, among other things, set certain
financial ratios and net worth requirements. The Facility includes covenants
that (i) restrict the permitted investments, (ii) restrict intercompany
advances to HNWC, (iii) restrict incurrence of additional debt, (iv) restrict
mergers and acquisitions and changes in business or conduct of business and
(v) require the maintenance of certain financial ratios and net worth levels
including an average annual fixed charge ratio of 1.1 to 1.0, and average
annual debt service coverage ratio of 1.5 to 1.0, average annual Senior debt
to EBITDA ratio of 6.0 to 1.0, and a minimum tangible net worth of $7,000,000.
In addition, the Company must maintain a fill rate percentage of not less than
93% calculated on a weekly basis. The fill rate percentage is determined by
dividing the total dollar amount of inventory delivered to the Company's
customers each week into the total amount of orders which correspond to such
deliveries. The Facility also provides that the Company may not pay dividends
in excess of $.12 per share on an annual basis. As of June 30, 2001 the
outstanding balance on the Facility was $39,944,986.
In connection with the purchase of the distribution business and net assets of
Merchants, the Company assumed Merchants' interest rate swap agreement with a
bank. Under the agreement, the Company agrees to exchange, at specified
intervals, fixed interest amounts for variable interest amounts calculated by
reference to an agreed-upon notional principal amount of $25,000,000. The
interest rate swap effectively converts $25,000,000 of the Company's variable-
rate senior debt to fixed-rate debt (before accounting for the impact of the
change in market value of the interest rate swap derivative financial
instrument) at a rate of 8.33%, through the maturity of the swap agreement on
May 27, 2003.
The Company borrowed $6.9 million from a bank to purchase the distribution
facility utilized by Merchants, which was owned by Merchants sole stockholder
(the "Real Estate Loan"). Proceeds from the Real Estate Loan were also used
to retire term debt. The Real Estate Loan bears interest at a fixed rate of
7.5% with monthly installments of principal and interest in the amount of
$56,531 per month. Debt issuance costs related to the Real Estate Loan were
$37,000. The loan has a term of 5 years, at which time the remaining balance
will be due and payable, and is collateralized by the purchased distribution
facility. As of June 30, 2001, the outstanding balance on the Real Estate
Loan was $6,948,417.
The asset purchase agreement with Merchants provides for deferred payments to
be made to the seller totaling $4,550,000. The obligations are subordinate to
the Facility and the Real Estate Loan. The Company paid $1,000,000 on the
closing date of the transaction, while th remaining $3,550,000 is required to
be paid on the first, second, third and fourth anniversaries of the closing
date of the transaction in installments of $900,000 on each of the first
three anniversary dates with a final payment of $850,000 on the fourth
anniversary of the closing date. In addition, the Company entered into a
noncompetition agreement with the seller that requires the Company to make
payments of $100,000 annually on the first through fourth anniversary dates of
the closing of the transaction. The Company has recorded the seller
obligations at their fair values utilizing a 6% effective interest rate which
was determined based on the Company's approximate average borrowing rate. As
of June 30, 2001, the outstanding obligation to the seller was $3,425,495.
The Company maintained a second revolving credit facility used to provide
capital to the health and natural foods distribution business and a term loan
from a bank used to finance the purchase of a Florida health and natural foods
distributor in November 1998. The revolving credit facility and the term loan
were repaid in full during Q3 2001 with proceeds received from the sale of the
assets of the health and natural foods distribution business during the third
quarter.
The Company had an outstanding term loan from a bank that was used to finance
the purchase of the common stock of Food For Health Co., Inc. (the
"Acquisition Loan") in 1997. The Acquisition Loan was repaid in full during
Q3 2001 with proceeds received from the Real Estate Loan and the Facility.
In September 1999, borrowings under an 8% Convertible Subordinated Note (the
"Convertible Note") and a Collateralized Promissory Note (the "Collateralized
Note"), in addition to borrowings under the revolving credit facility were
used to purchase all of the common stock of Health Food Associates, Inc. Both
the Convertible Note and the Collateralized Note have five-year terms and bear
interest at 8% per annum. Principal on the Convertible Note is due in a
single payment at maturity. Principal on the Collateralized Note is payable
in installments of $800,000 per year with the balance due at maturity. The
Collateralized Note is collateralized by a pledge of the stock of HFA. The
principal balance of the Convertible Note may be converted into stock of FFH
under circumstances set forth in the Convertible Note. As of June 30, 2001,
the outstanding balances of the Convertible Note and the Collateralized Note
were $2.0 million and $7.2 million, respectively.
In November 1999, borrowings under a $220,000 subordinated note (the "MDF
Note") were used to purchase the assets of MDF Health, Inc. ("MDF"). The MDF
Note has a term of 3 years and bears interest at 8% per annum. Principal and
interest payments are due monthly. As of June 30, 2001, the outstanding
balance of the MDF Note was $75,236.
In August 2000, borrowings of $600,000 under the revolving credit facility
were utilized, in addition to $300,000 under a subordinated note (the "TINK
Note"), to purchase all of the outstanding common stock of TINK, Inc. The
TINK Note has a term of 5 years and bears interest at 7% per annum. Interest
payments are due monthly with annual principal payments ranging from $40,000
to $80,000. As of June 30, 2001, the outstanding balance of the TINK Note was
$260,000.
In June 2001, the Company negotiated a $2.0 million credit facility with a
bank to be used to fund the expansion and remodeling of its retail health food
stores (the "Retail Facility"). The Retail Facility bears interest at the
bank's base rate ("Prime") plus 1.0%. The Retail Facility is secured by all
of the inventory of the retail stores and is guaranteed by the Company. The
outstanding balance of the Retail Facility on June 30, 2001 was $600,000.
In connection with the purchase of the distribution business and net assets of
Merchants, the Company assumed several capital leases for office equipment,
automobiles and warehouse equipment. The interest rates on the capital leases
vary from 8% to 16.3%. As of June 30, 2001, the outstanding balances on the
capital leases totaled $1,113,657.
The Company believes that funds generated from operations, supplemented as
necessary with funds available under the revolving credit facility, will
provide sufficient liquidity to cover its debt service and any reasonably
foreseeable future working capital and capital expenditure requirements
associated with existing operations.
ACQUISITIONS AND DISPOSITIONS
Health Food Distribution Business
---------------------------------
Effective March 23, 2001, the Company's subsidiary, Food For Health Co., Inc.,
completed the sale of the assets of its health food distribution business for
$10.3 million, subject to certain adjustments. The purchase price was paid in
cash and the assumption by the purchaser of approximately $2.1 million in
indebtedness. The sale resulted in a pre-tax loss of approximately $1.1
million ($675,000 after taxes). This loss includes an accrual for estimated
costs, including rent and related expenses associated with the remaining lease
commitments on the two distribution facilities that were retained by the
Company of $2.5 million and contractual consulting agreements of $445,000,
which will provide no future economic benefit to the Company. The Company is
actively seeking tenants to sublease the facilities for the remainder of the
lease terms. Any differences between these expense estimates and their actual
settlement will change the loss accordingly. In connection with the sale of
the health food distribution business, the Company also entered into a 5 year
supply agreement with the purchaser under which the purchaser will supply
products to the Company's retail health food stores at market prices.
The sale of the Company's health food distribution business has been reflected
as discontinued operations in the unaudited condensed consolidated financial
statements in accordance with APB No. 30. Revenues from the discontinued
operations, which have been excluded from income from continuing operations in
the accompanying unaudited condensed consolidated statements of operations for
the three and nine-month periods ended June 30, 2001 and 2000, are presented
below. The effects of the discontinued operations on net income (loss) and
per share data are reflected within the accompanying unaudited condensed
consolidated statements of operations.
Three months ended Nine months ended
June 30, June 30,
-------------------------- ---------------------------
2001 2000 2001 2000
----------- ------------ ------------ ------------
Revenue $ - $ 9,933,329 $ 13,704,844 $ 33,541,133
Merchants Wholesale, Inc.
-------------------------
On June 1, 2001, the Company completed the acquisition of substantially all of
the distribution business and net assets of Merchants Wholesale, Inc.
("Merchants") located in Quincy, IL. In addition, the Company purchased a
206,000 square foot building occupied by Merchants and owned by Merchants'
sole shareholder. The net purchase price of $36.7 million, net of assumed
liabilities of $6.0 million, was based on assets held at the closing date,
including the real estate. Funding for the acquisition was provided as
follows: $27.0 million through borrowings under a revolving loan agreement
with LaSalle National Bank (the "Revolving Loan"); $6.3 million through a real
estate loan with Gold Bank (the "Real Estate Loan"); and $3.4 million of
deferred payment to the sole stockholder of MWI. Costs and expenses
associated with the acquisition were paid from AMCON's Revolving Loan
proceeds. The Revolving Loan is secured by all of AMCON's assets, excluding
real estate. The Real Estate Loan is secured by AMCON's two owned
distribution facilities.
The transaction was accounted for using the purchase method of accounting
under which the purchase price was allocated to the assets acquired and
liabilities assumed based on their estimated fair values. The portion of the
purchase price in excess of the fair value of the net assets acquired to be
allocated to goodwill and other identifiable assets is currently estimated to
be approximately $4.1 million and $0.3 million, respectively. The goodwill is
currently being amortized over 25 years, while the identifiable intangible
asset, represented by a noncompete agreement with the sole shareholder of
Merchants, is being amortized over the period covered by the agreement of four
years. On October 1, 2001, the Company intends to early adopt the guidance
under the newly issued Statement of Financial Accounting Standards No. 142 and
the remaining unamortized goodwill asset will no longer be amortized. The
carrying value of the goodwill will then be reviewed for impairment and
written down and charged to the results of operations if and when the
impairment recognition criteria is met and the recorded value of the asset
exceeds its measured fair value. It is the Company's intention to more fully
evaluate the fair value, classification and useful lives of the acquired net
assets, including the intangible assets, and, as a result, the final
allocation of the purchase price to the intangible assets acquired may
ultimately differ from that recorded as of June 30, 2001. The Company intends
to have the evaluation of fair value, and therefrom, the purchase price
allocation completed by September 30, 2001.
Operating results for the Merchants acquisition are included in the
accompanying condensed consolidated statement of operations from the
acquisition date. The following presents pro forma unaudited condensed
consolidated revenues, net income from continuing operations and net income
per share for the nine months ended June 30, 2001 and 2000 as if the
acquisition of the distribution business and the net assets of Merchants
occurred on October 1, 2000 and 1999, respectively.
Nine months ended
-----------------------------
June 30, June 30,
2001 2000
------------- -------------
Sales $ 664,268,399 $ 628,276,249
Net income from continuing
operations $ (202,414) $ 3,767,199
Net income $ (1,772,264) $ 3,758,077
Earnings per share:
Basic $ (0.65) $ 1.38
Diluted $ (0.65) $ 1.32
The pro forma information provided above is based on assumptions that
management deems appropriate, but does not purport to be indicative of the
results that would have actually occurred had the acquisition taken place on
October 1, 2000 and 1999, respectively.
Hawaiian Natural Water Company, Inc.
------------------------------------
In November 2000, the Company entered into a merger agreement with Hawaiian
Natural Water Company, Inc. (OTC: HNWC), pursuant to which HNWC would be
merged with and into, and thereby become, a wholly-owned subsidiary of the
Company. As a result, the Company will issue between 358,168 and 477,558
shares of its common stock to HNWC shareholders, representing between 11.6%
and 14.9% of the Company's outstanding shares after giving effect to the
merger. The ultimate purchase price will be determined based on the Company's
stock price at the closing of the transaction. Based on the Company's closing
stock price on July 31, 2001, the maximum purchase price would be $2.7 million
(excluding the $750,000, but including the $500,000, advanced to HNWC through
June 30, 2001 and recorded as notes receivable and the $300,000 recorded as an
investment in the accompanying unaudited condensed consolidated balance sheet
at June 30, 2001).
The Company has provided HNWC with certain interim debt financing pending the
consummation of the merger. HNWC is currently experiencing recurring
operating losses and negative cash flows from operations; therefore, the
Company loaned HNWC $350,000 in September 2000 and $400,000 in October 2000
for a total of $750,000 (the "$750,000 Notes") to be used for working capital
and other general corporate purposes, including redemption of outstanding
preferred stock. The loan is evidenced by promissory notes, bearing interest
at the rate of 10% per annum, due on September 30, 2001 (the original due date
was March 31, 2001), which are secured by substantially all of HNWC's assets.
In February 2001, the Company invested an additional $300,000 in HNWC in
exchange for 750,000 shares of common stock at substantially the same exchange
ratio as provided for in the merger agreement. The investment represents an
ownership interest of approximately 9.5% in HNWC and, accordingly, was
accounted for under the cost method through the end of Company's quarter ended
March 31, 2001.
In February 2001, the Company agreed to obtain, and placed orders for, certain
water bottling equipment to be utilized by HNWC in order to increase
production capacity to achieve its growth targets. The estimated commitment
under this operating lease is approximately $2.6 million over 8 years. The
Company will sublease this equipment to HNWC under similar terms.
In June 2001, the Company loaned HNWC an additional $500,000, which loan is
evidenced by a promissory note bearing interest at the rate of 10% per annum,
due on September 30, 2001, and which is also secured by substantially all of
HNWC's assets (the "$500,000 Note"). In the event that the merger agreement
is terminated for any reason or HNWC defaults on its obligations under the
$750,000 Notes or the $500,000 Note, the Company will be entitled to convert
all of those notes into Series C Convertible Preferred Stock which, among
other things, would entitle AMCON to elect a majority of HNWC's Board of
Directors. The $750,000 notes are also convertible upon 61 days' advance
notice into HNWC's common stock at the same exchange ratio as in the merger.
The $500,000 Note is convertible at any time at AMCON's election into HNWC's
common stock at a conversion ratio of $0.40 per share and gives the Company a
beneficial ownership interest of approximately 22% in HNWC.
While there is no commitment to do so, the Company may consider negotiating
future financing needs as they arise. However, given the continued funding of
HNWC in the Company's quarter ended June 30, 2001 through the issuance of the
$500,000 Note, AMCON management believes that it has the ability to exercise
significant influence over the operating and financial policies of HNWC.
Accordingly, the Company has adopted the equity method of accounting for its
investment in HNWC in the 3rd quarter ended June 30, 2001. The effect of
adopting equity accounting on the carrying value of the common stock in HNWC
and the results of operations as of, and for, the Company's second quarter
ended March 31, 2001, the quarter in which the HNWC common stock investment
was made, is immaterial. The charge to the Company's third quarter results to
record its equity in the losses of HNWC from the initial common stock
investment date is $38,042.
The 750,000 shares purchased in February 2001 and the 1,250,000 shares
receivable by AMCON upon conversion of the $500,000 Note will participate in
the consideration to be received by HNWC stockholders in the merger (the
"Merger Consideration"). Any shares receivable by AMCON upon conversion of
the $750,000 Notes will not participate in the merger consideration. Due to
the anticipated acquisition of HNWC and management's belief that the notes
will not be paid within the next 12 months, the notes have been classified as
noncurrent as of June 30, 2001.
The merger is expected to qualify as a tax-free reorganization and to be
recorded on the Company's books using the purchase method of accounting. The
merger is subject to various conditions, including the effectiveness of a
registration statement covering the AMCON shares to be issued in the merger,
the listing of such shares on AMEX and the approval of the HNWC stockholders.
It is expected that the merger will be consummated in the fourth quarter of
fiscal 2001.
CONCERNING FORWARD LOOKING STATEMENTS
This Quarterly Report, including the Management's Discussion and Analysis of
Financial Condition and Results of Operations 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 that 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.
In connection with the purchase of the distribution business and net assets of
Merchants, the Company assumed Merchants' interest rate swap agreement with a
bank. Under the agreement, the Company agrees to exchange, at specified
intervals, fixed interest amounts for variable interest amounts calculated by
reference to an agreed-upon notional principal amount of $25,000,000. The
interest rate swap effectively converts $25,000,000 of the Company's variable-
rate senior debt to fixed-rate debt (before accounting for the impact of the
change in market value of the interest rate swap derivative financial
instrument) at a rate of 8.33%, through the maturity of the swap agreement on
May 27, 2003.
Due to the significant decline in variable interest rates from the date
Merchants initially entered into the swap agreement, the negative fair value
of the swap instrument recorded as a liability on Merchant's balance sheet at
the closing date was $931,824. Upon assuming the swap liability, the Company
did not designate the swap transaction as a hedge and, therefore, recognized
changes in the market value of the instrument in current earnings (interest
expense). At June 30, 2001, the swap instrument had a market value of
$893,834. The change in fair value of the swap instrument from a negative
market value of $931,824 as of the acquisition date to a negative market value
of $893,834 at June 30, 2001 was recorded as a reduction to interest expense
in the Company's three and nine months ended June 20, 2001.
The Company does not utilize financial instruments for trading purposes and
holds no derivative financial instruments other than the interest rate swap
which could expose the Company to significant market risk. The Company's
exposure to market risk relates primarily to its investment in the common
stock of Consolidated Water Company, a public company traded on the NASDAQ
National Market system, the equity investment in the common stock of HNWC, a
public company traded over-the-counter, and for changes in interest rates on
the portion of its long-term obligations in excess of the notional amount of
the $25 million swap transaction. At June 30, 2001, the Company held 70,000
shares of common stock of Consolidated Water Company valued at $637,000. The
Company values this investment at market and records price fluctuations in
equity as unrealized gain or loss on investments. The Company also holds
750,000 shares of HNWC which is recorded using the equity method of accounting
carried at $262,000 at June 30, 2001. At June 30, 2001, the Company had $15.5
million of variable rate debt outstanding, with maturities through May 2004.
The interest rates on this debt ranged from 5.75% to 7.75% at June 30, 2001.
The Company has the ability to select the bases on which its variable interest
rates are calculated and may select an interest rate based on its lender's
base interest rate or based on LIBOR. This provides management with some
control of the Company's variable interest rate risk. The Company estimates
that its annual cash flow exposure relating to interest rate risk based on its
current borrowings is approximately $97,000 for each 1% change in its lender's
prime interest rate or LIBOR, as applicable.
The Company is also exposed to market risk through its investment in
$1,250,000 of convertible notes receivable from HNWC. The notes are recorded
at amortized cost, accrue interest at 10% per annum and mature on September
30, 2001. The original due date of March 31, 2001 was extended to May 31, 2001
and then to September 30, 2001. The notes are convertible into HNWC common
stock. Increases in market interest rates and in HNWC's stock price could
increase the likelihood that such notes would be converted. Alternatively,
decreases in market interest rates and HNWC's stock price could decrease the
likelihood of conversion. Likewise, market changes in HNWC's stock price and
interest rates impact the fair value of the convertible note receivable.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
2.1 Second Amended and Restated Agreement and Plan of Merger dated
January 30, 2001 by and between AMCON Distributing Company,
AMCON Merger Sub, Inc. and Hawaiian Natural Water Company Inc.
(incorporated by reference to Exhibit 2.4 of AMCON's Quarterly
Report on Form 10-Q filed on February 12, 2001)
2.2 Assets Purchase and Sale Agreement by and between Food For
Health Company, Inc., AMCON Distributing Company and Tree of
Life, Inc. dated March 8, 2001 (incorporated by reference to
Exhibit 2.1 of AMCON's Current Report on Form 8-K filed on April
10, 2001)
2.3 Amendment to Assets Purchase and Sale Agreement by and between
Food For Health Company, Inc., AMCON Distributing Company and
Tree of Life, Inc. effective March 23, 2001 (incorporated by
reference to Exhibit 2.2 of AMCON's Current Report on Form 8-K
filed on April 10, 2001)
2.4 Asset Purchase Agreement, dated February 8, 2001, between AMCON
Distributing Company, Merchants Wholesale Inc. and Robert and
Marcia Lansing (incorporated by reference to Exhibit 2.1 of
AMCON's Current Report on Form 8-K filed on June 18, 2001)
2.5 Addendum to Asset Purchase Agreement, dated May 30, 2001,
between AMCON Distributing Company, Merchants Wholesale Inc.
and Robert and Marcia Lansing (incorporated by reference to
Exhibit 2.2 of AMCON's Current Report on Form 8-K filed on June
18, 2001)
2.6 Real Estate Purchase Agreement, dated February 8, 2001, between
AMCON Distributing Company and Robert and Marcia Lansing
(incorporated by reference to Exhibit 2.3 of AMCON's Current
Report on Form 8-K filed on June 18, 2001)
2.7 Addendum to Real Estate Purchase Agreement, dated May 30, 2001,
between AMCON Distributing Company and Robert and Marcia
Lansing (incorporated by reference to Exhibit 2.4 of AMCON's
Current Report on Form 8-K filed on June 18, 2001)
2.8 Noncompete, Nonsolicitation and Nondisclosure Agreement, dated
February 8, 2001, between AMCON Distributing Company, Merchants
Wholesale Inc. and Robert and Marcia Lansing (incorporated by
reference to Exhibit 2.5 of AMCON's Current Report on Form 8-K
filed on June 18, 2001)
2.9 Addendum to Noncompete, Nonsolicitation and Nondisclosure
Agreement, dated May 30, 2001, between AMCON Distributing
Company, Merchants Wholesale Inc. and Robert and Marcia Lansing
(incorporated by reference to Exhibit 2.6 of AMCON's Current
Report on Form 8-K filed on June 18, 2001)
3.1 Restated Certificate of Incorporation of the Company, as amended
March 19, 1998 (incorporated by reference to Exhibit 3.1 of
AMCON'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 AMCON'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 AMCON'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 AMCON's Registration Statement on Form S-1
(Registration No. 33-82848) filed on November 8, 1994)
10.2 Amendment No. 1 to Grant of Exclusive Manufacturing Rights,
dated October 1, 1998, between the Company and Famous Value
Brands, a division of Philip Morris Incorporated, including
Amendment No. 1 To Private Label Manufacturing Agreement and
Amendment No. 1 to Amended and Restated Trademark License
Agreement (incorporated by reference to Exhibit 10.2 of AMCON's
Annual Report on Form 10-K filed on December 24, 1998)
10.3 Loan and Security Agreement, dated June 1, 2001, between the
Company and LaSalle National Bank (incorporated by reference
to Exhibit 10.3 on Form 10-Q filed on August 13, 2001)
10.4 ISDA Master Agreement, dated as of December 22, 2000 between
LaSalle Bank National Association and Merchants Wholesale Inc.,
as assumed by the Company on June 1, 2001
10.5 Secured Promissory Note, dated as of May 30, 2001 between the
Company and Gold Bank
10.6 8% Convertible Subordinated Note, dated September 15, 1999 by
and between Food For Health Company Inc. and Eric Hinkefent,
Mary Ann O'Dell, Sally Sobol, and Amy Laminsky (incorporated by
reference to Exhibit 10.1 of AMCON's Current Report on Form 8-K
filed on September 30, 1999)
10.7 Secured Promissory Note, dated September 15, 1999, by and
between Food For Health Company, Inc. and James C. Hinkefent
and Marilyn M. Hinkefent, as trustees of the James C. Hinkefent
Trust dated July 11, 1994, as amended, Eric Hinkefent, Mary Ann
O'Dell, Sally Sobol, and Amy Laminsky (incorporated by
reference to Exhibit 10.2 of AMCON's Current Report on Form 8-K
filed on September 30, 1999)
10.8 Pledge Agreement, dated September 15, 1999, by and between Food
For Health Company, Inc. and James C. Hinkefent and Marilyn M.
Hinkefent, as trustees of the James C. Hinkefent Trust dated
July 11, 1994, as amended, Eric Hinkefent, Mary Ann O'Dell,
Sally Sobol, and Amy Laminsky (incorporated by reference to
Exhibit 10.3 of AMCON's Current Report on Form 8-K filed on
September 30, 1999)
10.9 First Amended and Restated AMCON Distributing Company 1994
Stock Option Plan (incorporated by reference to Exhibit 10.17
of AMCON's Current Report on Form 10-Q filed on August 4, 2000)
10.10 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)
10.11 Employment Agreement, dated May 22, 1998, between the Company
and William F. Wright (incorporated by reference to Exhibit
10.14 of AMCON's Quarterly Report on Form 10-Q filed on
August 6, 1998)
10.12 Employment Agreement, dated May 22, 1998, between the Company
and Kathleen M. Evans (incorporated by reference to Exhibit
10.15 of AMCON's Quarterly Report on Form 10-Q filed on
August 6, 1998)
10.13 Employment Agreement, dated May 22, 1998, between the Food For
Health Co., Inc. and Jerry Fleming (incorporated by reference
to Exhibit 10.16 of AMCON's Quarterly Report on Form 10-Q
filed on August 6, 1998)
11.1 Statement re: computation of per share earnings (incorporated by
reference to footnote 5 to the financial statements included in
Item 1 of Part I herein)
(b) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K under Items 2 and 7 on
June 18, 2001 announcing the completion of the acquisition of substantially
all of the distribution business and net assets of Merchants Wholesale, Inc.
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: October 4, 2001 Kathleen M. Evans
----------------- -------------------------
Kathleen M. Evans
President & Principal
Executive Officer
Date: October 4, 2001 Michael D. James
----------------- -------------------------
Michael D. James
Treasurer & CFO and
Principal Financial and
Accounting Officer