UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED September 24, 2004
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM to
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Commission File Number 0-24708
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AMCON Distributing Company
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(Exact name of Registrant as specified in its charter)
Delaware 47-0702918
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
7405 Irvington Road, Omaha NE 68122
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(Address of principal executive offices)
Registrant's telephone number, including area code: (402) 331-3727
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Annual Report on
Form 10-K or any other amendment to this Form 10-K. /X/
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
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The aggregate market value of equity securities held by non-affiliates of the
Registrant on March 25, 2004 was approximately $6.9 million.
As of December 31, 2004 there were 527,062 shares of common stock
outstanding.
- Documents Incorporated by Reference -
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Portions of the Company's 2004 Annual Report to Shareholders are incorporated
herein by reference into Parts I, II and IV. Portions of the Company's Proxy
Statement pertaining to the 2005 Annual Shareholders' Meeting are
incorporated herein by reference into Part III.
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AMCON DISTRIBUTING COMPANY
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2004 FORM 10-K ANNUAL REPORT
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Table of Contents
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Page
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PART I
Item 1. Business...................................................... 3
Item 2. Properties.................................................... 13
Item 3. Legal Proceedings............................................. 14
Item 4. Submission of Matters to a Vote of Security Holders........... 15
Item 4A. Executive Officers of the Company............................. 15
PART II
Item 5. Market for the Registrant's Common Stock, Related
Stockholder Matters and Issuer Purchases of Securities........ 16
Item 6. Selected Financial Data....................................... 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 16
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.... 16
Item 8. Financial Statements and Supplementary Data................... 16
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................... 17
Item 9A. Controls and Procedures....................................... 17
PART III
Item 10. Directors and Executive Officers of the Registrant............ 17
Item 11. Executive Compensation........................................ 18
Item 12. Security Ownership of Certain Beneficial Owners
and Management................................................ 18
Item 13. Certain Relationships and Related Transactions................ 18
Item 14. Principal Accountant Fees and Services........................ 18
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports
on Form 8-K .................................................. 18
2
PART I
ITEM 1. BUSINESS
GENERAL
AMCON Distributing Company ("AMCON" or the "Company") was incorporated in
Delaware in 1986. The Company's principal executive offices are located at
7405 Irvington Road, Omaha, Nebraska 68122. The telephone number at that
address is 402-331-3727 and the website address is www.amcon.com. The
Company makes available free of charge on its website, its reports on Forms
10-K and 10-Q as soon as reasonably practical after filing with the SEC.
AMCON is primarily engaged in the wholesale distribution of consumer products
including cigarettes and tobacco products, candy and other confectionery,
beverages, groceries, paper products and health and beauty care products. In
addition, the Company operates thirteen retail health food stores in Florida
and the Midwest and a non-alcoholic beverage business that includes a natural
spring and a geothermal water bottling operations in the States of Hawaii and
Idaho and a marketing and distribution operation which is focused on selling
the Company's proprietary water and other specialty beverages. As used
herein, unless the context indicates otherwise, the term "ADC" means the
wholesale distribution business and "AMCON" or the "Company" means AMCON
Distributing Company and its subsidiaries.
WHOLESALE DISTRIBUTION BUSINESS
ADC serves approximately 6,500 retail outlets in the Great Plains and Rocky
Mountain regions, the largest of which accounted for less than 7.0% of
AMCON's total revenues during fiscal 2004. Convenience Store News, a trade
periodical, ranked ADC as the ninth (9th) largest distributor in its industry
out of approximately 1,000 distributors in the United States based upon
fiscal 2003 sales volume. From its inception, ADC has pursued a strategy of
growth through increased sales and acquisitions. Since 1993, ADC has focused
on increasing operating efficiency in its distribution business by merging
smaller branch distribution facilities into larger ones. In addition, ADC
has grown through expansion of its market area into contiguous regions and by
introduction of new product lines to customers.
ADC distributes approximately 13,000 different consumer products, including
cigarettes and tobacco products, candy and other confectionery, beverages,
groceries, paper products, health and beauty care products, frozen and
chilled products and institutional food service products. While cigarettes
accounted for approximately 73% of the Company's sales volume during fiscal
2004, ADC continues to diversify its businesses and product lines in an
attempt to lessen its dependence upon cigarette sales. ADC's principal
suppliers include Philip Morris USA, RJ Reynolds Tobacco, Proctor & Gamble,
Hershey, Mars, William Wrigley and Nabisco. ADC also markets private label
lines of cigarettes, tobacco, snuff, water, candy products, batteries and
film.
ADC has sought to increase sales to convenience stores and petroleum
marketers by adopting a number of operating strategies which it believes
gives it a competitive advantage with these types of retailers. One key
operating strategy is a commitment to customer service. In a continuing
effort to provide better service than its competitors, ADC offers a complete
point-of-sale (POS) program to assist with customer image building and
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product promotions, health and beauty programs, profit building private label
programs and custom food service programs, all of which have proven to be
advantageous to convenience store customers. ADC has a policy of next-day
delivery and employs a concept of selling products in cut-case quantities or
"by the each" (i.e. individual units). ADC also offers planograms to
convenience store customers to assist in the design of their store and
display of products within the store. In addition, customers are able to use
ADC's web site to manage their inventory and retail prices, as well as obtain
periodic velocity management reports.
ADC has worked to improve its operating efficiency by investing in the latest
in systems technology, including computerization of buying and financial
control functions. Due to the significant price of cigarettes, inventory
management has become even more critical. ADC has also sought to reduce
inventory expenses by improving the number of times its inventory is renewed
during a period ("inventory turns") for the same level of sales. Inventory
turned 27.8 times in fiscal year 2004. Inventory turns for the past five
years are as follows:
Fiscal Times
Year Inventory Turned
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2004 27.8
2003 27.5
2002 28.5
2001 26.8
2000 25.4
By managing its operating costs, ADC is better able to price its products in
such a manner to achieve an advantage over less efficient distributors in its
market areas.
ADC's main office is in Omaha, Nebraska. ADC has six distribution centers
located in Illinois, Missouri, Nebraska, North Dakota, South Dakota, and
Wyoming. These distribution centers contain a total of approximately 495,000
square feet of floor space and employ modern equipment for the efficient
distribution of the large and diverse product mix. ADC also operates a fleet
of approximately 227 delivery vehicles, including straight trucks and
over-the-road vehicles with refrigerated trailers.
RETAIL HEALTH FOOD BUSINESS
AMCON's retail health food stores, which are operated as Chamberlin's Market
& Cafe ("Chamberlin's" or "CNF") and Akin's Natural Foods Market ("Akin's" or
"ANF"), offer over 35,000 different product selections for their customers.
Chamberlin's, which was first established in 1935, is an award-winning and
highly-acclaimed chain of six health and natural product retail stores, all
offering an extensive selection of natural supplements and herbs, baked
goods, dairy products, delicatessen items and organic produce. Chamberlin's
operates all of its stores in and around Orlando, Florida.
Akin's, also established in 1935, is also an award winning chain of seven
health and natural product retail stores, each offering an extensive line of
natural supplements and herbs, dairy products, delicatessen items and organic
produce. Akin's has locations in Tulsa (2 stores) and Oklahoma City (2
stores), Oklahoma; Lincoln, Nebraska; Springfield, Missouri; and Topeka,
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Kansas. Management is currently evaluating the possibility of adding at
least one new store in fiscal 2005.
AMCON's retail health food stores are managed collectively through a main
office in Tulsa, OK, but utilize the name recognition of the established
health food retail chains that were acquired. The Company endeavors to
maintain the local identity of each chain while providing a means to achieve
operating synergies leading to cost savings through centralized management of
operations.
BEVERAGE BUSINESS
AMCON's beverage business consists of Hawaiian Natural Water Company, Inc.
("HNWC"), Trinity Springs, Inc. ("TSI") and The Beverage Group, Inc.
("TBG"). HNWC which is headquartered in Pearl City, HI, was formed in 1994
for the purpose of bottling, marketing and distributing Hawaiian natural
spring water in Hawaii, the mainland and foreign markets. HNWC's Hawaiian
Springs/R/ brand is the only bottled "natural" spring water available from
Hawaii. All other bottled waters produced in Hawaii contain "purified"
water, from which chemicals and minerals have been removed by means of
reverse osmosis filtration. HNWC draws its Hawaiian Springs water from an
artesian well located at the base of the Mauna Loa mountain in Kea'au (near
Hilo) on the big island of Hawaii. The water is "bottled at the source" in
polyethylene terepthalate ("PET") plastic bottles, which are produced from
pre-forms at HNWC's bottling facility. All of HNWC's retail PET products are
bottled at its facility in Kea'au, HI. These products consist of the
Hawaiian Springs natural spring water line and various limited production co-
packaged products.
In July 2004, HNWC acquired the business and operating assets of Nesco
Hawaii, a small established purified water bottler on the island of Oahu.
This acquisition enables HNWC to more effectively differentiate the premium
natural spring water from purified bottled water products in the market place
and provides a more competitive price point in which to provide private label
water to the island of Oahu.
TSI, purchased in June 2004, produces and sells a bottled natural mineral
supplement and geothermal bottled water under the Trinity/R/ label. The
Trinity brands are bottled at the source from one of the world's deepest and
purest sources at the base of the Trinity Mountains in Idaho at a place
called Paradise. The Trinity source flows to the surface of the earth
through crystal-lined granite faults by means of geothermal pressure, and
reaches the surface at 138 degrees Fahrenheit. TSI is headquartered in
Boise, ID and markets and distributes the Trinity products on a national
level primarily to the retail health food market. TSI plans to develop its
market to include mainstream grocery stores and mass merchandise stores.
TBG was formed in January 2003 for the purpose of marketing and distributing
the Company's proprietary water and other specialty beverages. TBG has
exclusive marketing and distribution rights in the United States, Canada and
Mexico for its beverage portfolio which includes Royal Kona Coffee/R/ and
energy drinks under the Lightnin/TM/ label, as well as, other private label
energy drinks. TBG's main office is in Pasadena, CA. TBG incurred
significant losses during 2004 as significant expenditures were made for
product development, distribution network development and market efforts to
promote our portfolio of specialty beverages. TBG has taken steps to reduce
the on-going expenses by reducing the work force and plans to consolidate
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certain activities of TBG with other companies in the affiliated group. In
addition, management is evaluating the line of product offerings and plans to
discontinue non-contributing brands and focus on the brands with the greatest
potential for market penetration.
ACQUISITIONS
Since 1981, the Company has acquired 24 consumer product distributors in the
Great Plains, Rocky Mountain and Southern regions of the United States. In
addition, the Company has acquired two retail health food store chains and
two water bottling operations.
HAWAIIAN NATURAL WATER COMPANY. On December 17, 2001 the Company completed a
merger with HNWC, pursuant to which HNWC merged with and into, and thereby
became, a wholly-owned subsidiary of AMCON Distributing Company. The merger
consideration valued the entire common equity interest in HNWC at
approximately $2.9 million, which was paid in cash of $0.8 million during
fiscal 2001 and in common stock of the Company valued at $2.1 million. As a
result, the Company issued 62,260 shares of its common stock to outside HNWC
shareholders, representing 12.0% of the Company's outstanding shares after
giving effect to the merger. HNWC option holders and warrant holders also
received comparable options and warrants of the Company, but with the
exercise price and number of shares covered thereby being adjusted to reflect
the exchange ratio.
TRINITY SPRINGS, INC. On June 17, 2004, a newly formed subsidiary of AMCON,
TSL Acquisition Corp. (which subsequently changed its name to Trinity
Springs, Inc.) acquired the tradename, water source, customer list and
substantially all of the operating assets of Trinity Springs, Ltd. (which
subsequently changed its name to Crystal Paradise Holdings, Inc.). The
Seller was headquartered in Sun Valley/Ketchum, Idaho, and once bottled and
sold a geothermal bottled water and a natural mineral supplement.
The total purchase price of $8.8 million was paid through a combination of
$2.3 million in cash, $3.3 million in notes which were issued by Trinity
Springs, Inc. (TSI) and guaranteed by AMCON; the assumption of approximately
$0.2 million of liabilities and the issuance of TSI common stock representing
15% ownership of TSI which had an estimated fair value of $0.2 million. The
TSI common stock is convertible into 16,666 shares of AMCON common stock at
the option of the Seller. Additionally, the conversion option had an
estimated fair value of $0.2 million. Included in the $2.3 million paid in
cash are transaction costs totaling approximately $0.8 million that were
incurred to complete the acquisition and consists primarily of fees and
expenses for attorneys and investment bankers. In addition, TSI will pay an
annual water royalty to the Seller, in perpetuity, in an amount equal to the
greater of $0.03 per liter of water extracted from the source or 4% of water
revenues (as defined by the purchase agreement) which is guaranteed by AMCON
up to a maximum of $5 million, subject to a floor of $206,400 for the first
year and $288,000 annually thereafter. The Company has recorded a $2.8
million liability for the present value of future minimum water royalty
payments and related brokers fees to be paid in perpetuity. The discount
rate utilized by the Company to determine the present value of the future
minimum water royalty was based on a weighted average cost of capital which
incorporated the Company's equity discount rate, dividend rate on the Series
A Convertible Preferred Stock and the Company's average borrowing rate for
all outstanding debt.
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The promissory notes referred to above and the water royalty are secured by a
first priority security and mortgage on the acquired assets, other than
inventory and accounts receivable. The Seller retains the right to receive
any water royalty payment for the first five years in shares of AMCON common
stock up to a maximum of 41,666 shares. The water royalty can be cancelled
after ten years have elapsed following the closing of the sale of assets of
TSI, or if the business of TSI is sold to an unaffiliated third party, in
which case the Seller would be entitled to receive the appraised fair market
value of the water royalty but not less than $5 million. The Company's
Chairman has in turn guaranteed AMCON for these payments as well as the
promissory notes referred to above.
The acquisition has been recorded on the Company's books using the purchase
method of accounting. 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 estimated fair value of the
net assets acquired to be allocated to identifiable intangible assets is
approximately $5.5 million.
The initial purchase price allocation performed in the third quarter of
fiscal 2004 was based on management's internal preliminary allocation and
resulted in an estimated purchase price of approximately $11.1 million, with
approximately $7.8 million of the purchase price being allocated to
intangible assets including, customer list, the Trinity tradename and the
water source. Subsequently, the Company engaged an independent valuation
firm to further analyze the transaction and based on preliminary input from
the independent valuation firm, the amount of purchase price was reduced from
$11.1 million to $8.8 million based on reassessment of the future water
royalty obligation and related brokers fees and the weighted average cost of
capital rate applied to the payment stream in perpetuity. Accordingly, the
amount allocated to intangible assets was also reduced from $7.8 million to
$5.5 million. At this stage, the purchase price allocation remains
preliminary and is subject to completion of an independent appraisal. The
Company has engaged an independent valuation firm to value the intangible
assets and it is expected that a final report will be completed by the end of
the second quarter, at which time any differences between the preliminary
purchase price allocation will be recorded.
The Company has determined that it has acquired a unique water source as part
of the transaction which represents an intangible asset and the Company has
assigned a preliminary value of $2.8 million to this intangible asset.
Additionally, the Company has acquired the Trinity tradename and has assigned
a preliminary value of $2.3 million to this intangible asset. Upon
completion of the independent valuation, the amount assigned to the water
source and/or the Trinity tradename could be different and any residual
amount would then be assigned to goodwill. Since both the water source and
the Trinity tradename have indefinite lives, as does any goodwill, the assets
are not amortized. Therefore, any change resulting from completion of the
independent valuation in the allocation of purchase price from water source
or tradename to goodwill would not have any impact on operating income.
Additionally, the Company has assigned a preliminary value of $0.4 million to
a customer list which will be amortized over a five year period.
NESCO HAWAII. On July 1, 2004, the Company's water bottling subsidiary in
Hawaii entered into an agreement to acquire certain water bottling assets and
liabilities from a water bottling company in Hawaii (Nesco Hawaii) for $0.5
million in cash, and $0.7 million in notes and the assumption of $0.1 million
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of liabilities. The acquisition has been recorded on the Company's books
using the purchase method of accounting. 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 estimated fair value of
the net assets acquired to be allocated to identifiable intangible assets is
approximately $0.7 million. The identifiable intangible assets consists of
tradenames and a customer list. The tradenames have indefinite lives and
therefore are not amortized. The customer list of $0.2 million is amortized
over a five year period. The remaining portion of the excess purchase price
allocated to goodwill was $0.4 million.
BUSINESS SEGMENTS
AMCON has three reportable business segments: the wholesale distribution of
consumer products; the retail sale of health and natural food products; and
the bottling, marketing and distribution of bottled water and other beverage
products. The results of the retail health food stores are included in the
retail segment due to similar economic characteristics, as well as similar
characteristics with respect to the nature of products sold, the type and
class of customers for the health food products and the methods used to sell
the products. The results of HNWC, TBG and TSI, which was acquired in June
2004, comprise the beverage segment due to their unique economic
characteristics and the nature of the products, as well as the methods used
to sell and distribute the products. The segments are evaluated on revenues,
gross margins, operating income (loss) and income (loss) before taxes.
PRINCIPAL PRODUCTS
CIGARETTES. Sales of cigarettes and the gross margin derived therefrom for
the fiscal years ending 2004, 2003 and, 2002 are set forth below (dollars in
millions):
Fiscal Year Ended
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2004 2003 2002
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Sales $597.3 $564.8 $640.4
Sales as a % of Total Sales 72.5% 73.1% 75.6%
Gross Margin $ 19.4 $ 22.5 $ 24.4
Gross Margin as a % of Total
Gross Margin 33.3% 37.5% 39.5%
Gross Margin Percentage 3.3% 4.0% 3.8%
Revenues from the sale of cigarettes during fiscal 2004 increased by 5.6% as
compared to fiscal 2003, while gross profit from the sale of cigarettes
decreased by 3.2% during the same period (see "MANAGEMENT'S DISCUSSION AND
ANALYSIS-Results of Operations-Fiscal Year Ended 2004 Versus Year Ended 2003"
in the Annual Report to Shareholders for the Fiscal Year Ended September 24,
2004 which is incorporated herein by reference). Sales of cigarettes
represented approximately 72.5% of the Company's sales volume during fiscal
2004. This represents a 0.6% decrease but is primarily because the Company
continues to diversify its product offerings and sales. Cigarette carton
volumes increased 7.5% and the Company had benefits from price increases
implemented in response to the elimination of vendor program incentives
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during the year. These increases were offset by a decrease in cigarette
prices on Philip Morris and a permanent decrease on RJ Reynolds (successor in
merger to Brown & Williamson) brands beginning in the second quarter of 2003.
Although the Philip Morris price reduction program was communicated as a
temporary reduction, Philip Morris has extended the program through January
2005 and could extend it further. Both companies, however, did increase
prices of certain cigarette brands in December 2004 by as much as $1.00 per
carton.
ADC markets its own private label cigarettes as an alternative to premium
cigarettes. However, significant manufacturers' price decreases in premium
brand cigarettes, aimed at recapturing market share, occurred in 1993 and
caused a steady decline in the sales of private label cigarettes since that
time. Sales of ADC's private label cigarettes have declined an average of
34% annually since 1993. Philip Morris USA manufactures ADC's private label
cigarettes under an exclusive agreement that ends on December 31, 2004, with
two one-year renewal options. The terms of the agreement are such that sales
of the Company's private label cigarettes no longer represent a significant
source of gross profit for the Company.
CONFECTIONERY. Candy, related confectionery items and snacks constitute the
Company's second largest-selling product line, representing approximately
6.8% of the Company's total sales volume during fiscal 2004. Sales of
confectionery items and the gross margin derived therefrom for the fiscal
years ending 2004, 2003, and 2002 are set forth below (dollars in millions):
Fiscal Year Ended
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2004 2003 2002
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Sales $ 55.6 $ 51.4 $ 52.6
Gross Margin 7.3 6.4 6.1
Gross Margin Percentage 13.1% 12.5% 11.5%
AMCON supplies customers with over 1,900 different types of candy and related
products, including chocolate bars, cookies, chewing gum, nuts and other
snack items. Major brand names include products manufactured by Hershey
(Reese's, Kit Kat, and Hershey), Mars (Snickers, M&M's, and Milky Way),
William Wrigley and Nabisco. The Company also markets its own private label
candy under a manufacturing agreement with Palmer Candy Company.
OTHER TOBACCO PRODUCTS. Sales of other tobacco products (cigars, snuff,
chewing tobacco, etc.) represents AMCON's third largest-selling product line,
representing approximately 6.6% of the Company's total sales volume during
fiscal 2004. Sales of other tobacco products and the gross margin derived
therefrom for the fiscal years ending 2004, 2003 and 2002 are set forth below
(dollars in millions):
Fiscal Year Ended
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2004 2003 2002
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Sales $ 54.2 $ 48.3 $ 46.7
Gross Margin 4.7 4.0 3.7
Gross Margin Percentage 8.6% 8.3% 7.9%
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NATURAL FOODS AND RELATED PRODUCTS. Natural foods and related products,
which are primarily sold by the retail segment, constitute the Company's
fourth largest-selling product line, representing approximately 3.9% of the
Company's total sales volume during fiscal 2004. Sales of natural foods and
related products and the gross margin derived therefrom for the fiscal years
ending 2004, 2003 and 2002 are set forth below (dollars in millions):
Fiscal Year Ended
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2004 2003 2002
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Sales $ 32.4 $ 33.1 $ 31.6
Gross Margin 13.0 13.2 13.2
Gross Margin Percentage 40.0% 39.8% 41.7%
OTHER PRODUCT LINES. Over the past decade, AMCON's strategy has been to
expand its portfolio of consumer products in order to better serve its
customer base. AMCON's other product lines include bottled water and other
beverages, groceries, paper products, health and beauty care products, frozen
and chilled products and institutional food products. During fiscal 2004,
AMCON's sales of other products increased $9.7 million or 12.8% due primarily
to new customers in the wholesale distribution segment and an increase in the
beverage segment's sales of its bottled water and other proprietary
beverages. During fiscal 2004, the gross profit margin on these types of
products was 16.4% compared to 18.8% for fiscal 2003.
COMPETITION
The distribution industry is highly competitive. There are many similar
distribution companies operating in the same geographical regions as ADC.
ADC is one of the largest distribution companies of its kind operating in its
market area. ADC's principal competitors are national wholesalers such as
McLane Co., Inc. (Temple, TX) and Core-Mark International (San Francisco, CA)
and regional wholesalers such as Eby-Brown LLP (Chicago, IL) and
Farner-Bocken (Carroll, IA), along with a host of smaller grocery and tobacco
wholesalers. Most of these competitors generally offer a wide range of
products at prices comparable to ADC's. ADC seeks to distinguish itself from
its competitors by offering a higher level of technology than its smaller
competitors and a higher level of customer service than its larger
competitors.
The natural food retail industry is highly fragmented, with more than 9,000
stores operating independently or as part of small chains. The two leading
natural food chains, Whole Foods Market and Wild Oats, continue to expand
their geographic markets by opening stores in new markets. In addition,
conventional supermarkets and mass market outlets are also increasing their
emphasis on the sale of natural products. These strategies have contributed
to the saturation of health food retail stores in some markets. This has
increased competition in the health food sector and has had a restraining
impact on same store sales increases in some markets and a slight reduction
in same store sales in other markets.
The bottled water and specialty beverage market is highly competitive, with
numerous participants selling products often perceived as generic by
consumers. The principal bases of competition in the industry are brand
recognition, price, water source for bottled water products, and packaging.
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Price competition has become more pronounced as the industry has matured.
The Company seeks to develop recognition for its brands by differentiating
its products from more recognized products in the brand category. The
Hawaiian Springs and Trinity brands of water are unique because of their
water source. HNWC is the only producer of natural spring water from Hawaii.
Most other popular brands, such as Aquafina/R/, Dasani/R/, Crystal Geyser/R/,
and Arrowhead/R/ are all bottled on the mainland and sell "purified"
municipal water, not "natural" or "spring" water. HNWC generally prices this
product at or slightly below the price for other premium brands. HNWC's
purchase of Nesco Hawaii has allowed HNWC to more effectively differentiate
the premium natural spring water from the purified bottled water products and
services at a more competitive price points in which to provide private label
water to the island of Oahu. The Trinity geothermal water and natural mineral
supplement are sold primarily in health food stores and the Company plans to
extend distribution channels outside the health food market. TBG's line of
Royal Kona Coffee is a line of "iced" coffee designed to compete against a
similar line offered by Starbucks/R/. Lightnin'/TM/ is a value priced
energy drink developed as a better tasting alternative to Red Bull/R/.
Management believes that by offering a portfolio of high quality specialty
beverages, retailers have the ability to choose products that meet their
niche market and offer consumers natural alternatives to more popular brands.
SEASONALITY
Sales in the wholesale distribution and beverage segments are somewhat
seasonal by nature and tend to be higher in warm weather months, which
generally fall within the Company's third and fourth quarters.
GOVERNMENT REGULATION
Various state government agencies regulate the distribution of cigarettes and
tobacco products in several ways, including the imposition of excise taxes,
licensing and bonding requirements. Complying with these regulations is a
very time-consuming, expensive and labor-intensive undertaking. For example,
each state (as well as certain cities and counties) requires the Company to
collect excise taxes ranging from $1.70 to $9.80 ($17.00 beginning January 1,
2005) per carton on all cigarettes sold by it in the state. Such excise
taxes must be paid in advance and, in most states, is evidenced by a stamp
which must be affixed to each package of cigarettes. A number of states
increased their excise tax on cigarettes in recent years, and more are
expected to do so in the future. For example, Colorado, Montana and Oklahoma
all have excise tax increases scheduled to go into effect on January 1, 2005.
The increases range from $4.40 to $10.00 per carton.
The Company is also subject to regulation by state and local health
departments, the U.S. Department of Agriculture, the Food and Drug
Administration, U.S. Department of Transportation and the Drug Enforcement
Agency. These agencies generally impose standards for product quality and
sanitation, as well as, for security and distribution policies.
The bottled water industry is regulated both in the United States and abroad.
Various state and Federal regulations, designed to ensure (but not guarantee)
the quality of the product and the truthfulness of its marketing claims,
require HNWC and TSI to monitor each aspect of its production process,
including its water source, bottling operations and packaging and labeling
practices. The Environmental Protection Agency requires a yearly analysis of
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the water sources by a certified laboratory with respect to a comprehensive
list of contaminants (including herbicides, pesticides, volatile chemicals
and trace metals). In addition, the State Department of Health for Hawaii
and Idaho require weekly microbiological testing of the source water.
Both HNWC's and TSI's bottling facilities have on-site laboratories, where
samples of finished product are visually and chemically tested daily. Both
facilities utilize independent state certified laboratories to test samples
from each production run. In addition, the production lines are subject to
constant visual inspection. The Company believes that it meets or exceeds
all applicable regulatory standards concerning the quality of its bottled
water.
In addition to U.S. regulations, HNWC must meet the requirements of foreign
regulatory agencies in order to export and sell its product into other
countries. These requirements are generally similar to, and in certain
respects more stringent than, U.S. regulations. HNWC believes that it is in
compliance with applicable regulations in all foreign territories where it
currently markets its product.
Failure to meet applicable regulations in the U.S. or foreign markets could
lead to costly recalls or loss of certification to market products. Even in
the absence of governmental action, loss of revenue could result from adverse
market reaction to negative publicity.
ENVIRONMENTAL MATTERS
The Company believes that all of its real property is in compliance with all
regulations regarding the discharge of toxic substances into the environment
and is not aware of any condition at its properties that could have a
material adverse effect on its financial condition or results of operations.
In that regard, the Company has not been notified by any governmental
authority of any potential liability or other claim in connection with any of
its properties.
EMPLOYEES
At fiscal year end 2004, the Company had 987 full-time and part-time
employees in the following areas:
Managerial 54
Administrative 96
Delivery 114
Sales & Marketing 387
Warehouse 336
-----
Total Employees 987
=====
All of ADC's delivery employees in the Quincy distribution center,
representing 36% of ADC's delivery employees company-wide, are represented by
the International Association of Machinists and Aerospace Workers. Management
believes its relations with its employees are generally good.
12
ITEM 2. PROPERTIES
The location and approximate square footage of the six distribution centers,
thirteen retail stores, water bottling and packaging plants and sales and
marketing offices operated by AMCON as of fiscal year end 2004 are set forth
below:
Location Square Feet
-------- -----------
Distribution - IL, MO, ND, NE, SD & WY 494,600
Retail - FL, KS, MO, NE & OK 134,600
Beverage - HI, CA, & ID 71,700
-------
Total Square Footage 700,900
=======
AMCON owns its distribution facilities in Quincy, Illinois and Bismarck,
North Dakota. These facilities are subject to a first mortgage securing
borrowings under the Company's mortgage loan and a second mortgage securing
future payments owed in connection with the Merchants Wholesale acquisition
that occurred in fiscal 2001 (see "MANAGEMENT'S DISCUSSION AND ANALYSIS-
Liquidity and Capital Resources" in the Annual Report to Shareholders for the
Fiscal Year Ended 2004 which is incorporated herein by reference). In
addition, AMCON owns a water bottling plant, real estate and a lodge in
Paradise, Idaho that are subject to the mortgage between AMCON and Trinity
Springs, Ltd. which is shared on an equal basis with one of the Company's
directors who extended loans to Trinity Springs, Inc. in December 2004.
AMCON leases its remaining distribution and warehouse facilities, retail
stores, water bottling plant, offices, and certain equipment under
noncancellable operating and capital leases. Leases for the four
distribution facilities, thirteen retail stores, warehouse in Idaho and water
bottling and packaging plant in Hawaii leased by the Company have base terms
expiring from 2004 to 2052. Minimum future lease commitments for these
properties and equipment total approximately $22.0 million as of fiscal year
end 2004.
In December 2004, the Company purchased and began construction of an addition
to a distribution facility in Rapid City, SD to replace its current facility
when the lease expires. The new facility will increase square footage by
14,000 square feet and provides space for a more efficient distribution
operation.
AMCON also has future lease obligations for a facility and equipment related
to the discontinued operations of its former health food distribution
business. The Company estimated its ultimate liabilities related to these
leases and recorded a charge to earnings during the second quarter of fiscal
2001. The Company negotiated a termination settlement during fiscal 2002 on
its former Arizona facility and entered into a sublease agreement on the
remaining facility in Florida. The sub-tenant of the Florida facility was in
default as of fiscal year end 2003 and the Company evicted the sub-tenant.
The Company incurred approximately $0.1 million of expenses associated with
the facility during fiscal 2004. The Company entered into a sublease
agreement with a new sub-tenant prior to the end of fiscal 2004 and
therefore, expects there will be no further expenditures incurred on the
Florida facility. Accordingly, no amount related to the lease obligation has
been recorded in the reserve for discontinued operations. Any differences
13
between these expense estimates and their actual settlement will change the
loss accordingly.
Management believes that its existing and contracted new facilities are
adequate for the Company's present level of operations; however, larger
facilities and additional cross-dock facilities and retail stores may be
required to accommodate the Company's anticipated growth in certain market
areas.
ITEM 3. LEGAL PROCEEDINGS
AMCON announced in May 2004 that it was filing suit against Trinity Springs,
Ltd. in order to obtain an order from the United States District Court for
the District of Idaho declaring that a majority of the votes entitled to be
cast by the shareholders of Trinity Springs, Ltd. were cast in favor of the
sale of substantially all of its assets to AMCON's subsidiary, TSL
Acquisition Corp. and thereby satisfied the shareholder approval condition of
the asset purchase transaction. Subsequent to AMCON's filing of its lawsuit,
the Inspectors of Election and the Board of Directors of Trinity Springs,
Ltd. certified the shareholder voting results in favor of the asset purchase
transaction.
After the certification of the voting results, certain minority shareholders
filed a complaint and motion seeking injunctive relief in the District Court
of the Fifth Judicial District of the State of Idaho. The Court granted a
temporary restraining order on June 11, 2004, which prevented the closing of
the asset purchase transaction until the Court had an opportunity to receive
additional briefing on the issues presented and the parties could be heard by
the Court. On June 16, 2004, the Court heard arguments on whether to extend
the temporary restraining order and grant the minority shareholders' motion
for preliminary injunction. As a result of the parties' briefing and the
arguments presented, the Court dissolved the temporary restraining order and
thereby enabled the asset sale transaction to be consummated.
On July 19, 2004, several of the same minority shareholders, along with some
additional shareholders filed an amended complaint in the same Idaho state
court action. The minority shareholders' amended complaint seeks (i) a
declaration that the asset sale transaction is void and injunctive relief
rescinding that transaction or, alternatively, that a new shareholder vote on
the asset sale transaction be ordered, (ii) damages for the alleged breaches
of fiduciary duty which are claimed to have arisen out of the disclosure made
in connection with the solicitation of proxies, how the votes were counted,
and 29 conducting the closing without the requisite shareholder vote, and
(iii) imposition of a constructive trust on the sale proceeds and requiring
separate books to be maintained. AMCON continues to believe that the
shareholders of Trinity Springs, Ltd. approved the sale of assets to the
Company in accordance with applicable law and that the asset sale transaction
was properly completed.
The Company is also party to other lawsuits and claims arising out of the
operation of its businesses. Management believes the ultimate resolution of
such matters should not have a material adverse effect on the Company's
financial condition, results of operations or liquidity.
14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal year 2004.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
The Company's day-to-day affairs are managed by its executive officers, who
are appointed by the Board of Directors for terms of one year. The Company
has entered into employment agreements with Mr. Wright and Ms. Evans each
with a term expiring on December 31, 2005. These executive officers are as
follows:
Name Age Position
---- --- --------
William F. Wright 62 Chairman of the Board, Director
Kathleen M. Evans 57 President, Director
William R. Hoppner 54 Senior Vice President, Director
Eric J. Hinkefent 43 President of CNF and HFA
Michael D. James 43 Secretary, Treasurer and
Chief Financial Officer
WILLIAM F. WRIGHT has served as the Chairman and Chief Executive Officer of
AMCON Corporation (the former parent of AMCON) since 1976 and as Chairman of
the Company since 1981. From 1968 to 1984, Mr. Wright practiced corporate
and securities law in Lincoln, Nebraska. Mr. Wright is a graduate of the
University of Nebraska and Duke University School of Law and is a certified
public accountant.
KATHLEEN M. EVANS became President of the Company in February 1991. Prior to
that time she served as Vice President of AMCON Corporation from 1985 to
1991. From 1978 until 1985, Ms. Evans acted in various capacities with AMCON
Corporation and its operating subsidiaries.
WILLIAM R. HOPPNER became Senior Vice President of the Company in February
2004. Prior to that time he was engaged in the private practice of law and
served as a consultant to the Company. Most recently, from 1999-2004, he
served in an Of Counsel position with the law firm of Rehm and Bennett, P.C.
From 1997 through 1998, Mr. Hoppner pursued a political career. Prior to
that time he served as Executive Vice President of International
Transportation Specialists, Inc. and Chief of Staff to former Nebraska
Governors and U.S. Senators, J.J. Exon and Robert Kerry. Mr. Hoppner is a
graduate of the University of Nebraska and Nebraska School of Law.
ERIC J. HINKEFENT has served as President of both Chamberlin Natural Foods,
Inc. and Health Food Associates, Inc. since October 2001. Prior to that time
he served as President of Health Food Associates, Inc. beginning in 1993. He
has also served on the board of The Healthy Edge, Inc. from 1999 through
2003. Mr. Hinkefent is a graduate of Oklahoma State University.
MICHAEL D. JAMES became Treasurer and Chief Financial Officer of the Company
in June 1994. In November 1997, he assumed the responsibilities of Secretary
of the Company. He is a certified public accountant and is responsible for
all financial and reporting functions within the Company. Prior to joining
AMCON, Mr. James practiced accounting for ten years with the firm of
15
PricewaterhouseCoopers LLP, serving as the senior tax manager of the Omaha,
Nebraska office from 1992 until 1994. Mr. James is a graduate of Kansas
State University.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The information required by this item is incorporated by reference from the
Company's Annual Report to Shareholders for the fiscal year ended September
24, 2004 under the heading "Market for Common Stock", except for the issuer
purchases of equity securities described below.
The Company made no repurchases of its common stock during fiscal 2004 or
2003. However, in May 2004, the shareholders approved and the Company
effected a one-for-six reverse stock split of the outstanding shares of its
common stock. Shareholders who held fewer than six shares of AMCON's common
stock immediately prior to the reverse stock split received a cash payment in
exchange for their remaining fractional shares after the reverse stock split.
As a result, the Company paid $26,328 for approximately 960 post reverse
split common shares.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference from the
Company's Annual Report to Shareholders for the fiscal year ended September
24, 2004 under the heading "Selected Financial Data."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this item is incorporated by reference from the
Company's Annual Report to Shareholders for the fiscal year ended September
24, 2004 under the heading "Management's Discussion and Analysis."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is incorporated by reference from the
Company's Annual Report to Shareholders for the fiscal year ended September
24, 2004 under the heading "Management's Discussion and Analysis -
Quantitative and Qualitative Disclosures About Market Risk."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and accompanying notes, together with the report of
independent registered public accounting firm, are incorporated by reference
from the Company's Annual Report to Shareholders for the fiscal year ended
September 24, 2004 under the heading "Consolidated Financial Statements."
Supplemental financial information is incorporated by reference from the
Annual Report to Shareholders for the fiscal year ended September 24, 2004
under the heading "Selected Quarterly Financial Data."
16
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
The Company's management, including the Company's Principal Executive Officer
and Chief Financial Officer, reviewed and evaluated the effectiveness of the
design and operation of the Company's disclosure controls and procedures.
Based on that review and evaluation, the Principal Executive Officer and
Chief Financial Officer have concluded that the Company's current disclosure
controls and procedures, as designed and implemented, were effective as of
the end of the period covered by this report. There have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect the Company's internal controls subsequent to the date
of their evaluation. There were no significant material weaknesses
identified in the course of such review and evaluation and, therefore, no
corrective measures were taken by the Company.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant's Proxy Statement to be used in connection with the 2005
Annual Meeting of Shareholders (the "Proxy Statement") will contain under the
caption "Election of Directors" certain information required by Item 10 of
Form 10-K and such information is incorporated herein by this reference. The
information required by Item 10 of Form 10-K as to executive officers is set
forth in Item 4A of Part I hereof.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and certain persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and
Exchange Commission (the "SEC") reports of their ownership of Company Common
Stock. Officers, directors and greater-than-ten-percent shareowners are
required by SEC regulation to furnish the Company with copies of such Section
16(a) reports they file. Based solely upon review of the copies of such
reports received by the Company and written representations from each such
person who did not file an annual report with the SEC (Form 5) that no other
reports were required, the Company believes that there was compliance for the
fiscal year ended 2004 with all Section 16(a) filing requirements applicable
to the Company officers, directors and greater-than-ten-percent beneficial
owners.
CODE OF ETHICS
The Company has adopted a Code of Ethics that applies to the Chairman,
President, Chief Financial Officer, Controller and directors of the Company.
In addition, the Company has adopted a Code of Business Conduct and Ethics
which includes more extensive requirements than those required by Section 406
of the Sarbanes Oxley Act of 2002. The Company's Code of Business Conduct
and Ethics applies to all of its directors, officer and employees of the
Company while section 406 of the Sarbanes Oxley Act of 2002 applies its more
limited ethical requirements only to the Company's principal executive
17
officers and controller or senior accounting officer (or persons performing
similar functions). A copy of the Code of Ethics is incorporated by
reference in this Form 10-K as Exhibit 14.1.
ITEM 11. EXECUTIVE COMPENSATION
The Registrant's Proxy Statement will contain under the captions
"Compensation of Directors", "Compensation of Executive Officers" and
"Compensation Committee Interlocks and Insider Participation", the
information required by Item 11 of Form 10-K, and such information is
incorporated herein by this reference. The information set forth under the
captions "Report of Compensation Committee on Executive Compensation" and
"Company Performance" is expressly excluded from such incorporation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Registrant's Proxy Statement will contain under the captions "Voting
Securities and Beneficial Ownership Thereof by Principal Stockholders,
Directors and Officers" and "Equity Compensation Plan Information" the
information required by Item 12 of Form 10-K and such information is
incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Registrant's Proxy Statement will contain under the caption "Certain
Relationships and Related Transactions" the information required by Item 13
of Form 10-K and such information is incorporated herein by this reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Registrant's Proxy Statement will contain under the caption "Ratification
of Appointment of Independent Auditor" the information required by Item 14 of
Form 10-K and such information is incorporated herein by this reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements of AMCON Distributing Company are
incorporated by reference under Item 8. The Annual Report to Shareholders
for the Fiscal Year Ended September 24, 2004 is attached as Exhibit 13.1.
Reference Page
--------------
Report of Independent Registered Public Accounting Firm F-1
Consolidated Balance Sheets as of Fiscal Years
Ended September 2004 and 2003 F-2
Consolidated Statements of Operations for the
Fiscal Years Ended September 2004, 2003 and 2002 F-3
Consolidated Statements of Shareholders' Equity
and Comprehensive Income (Loss) for the Fiscal
Years Ended September 2004, 2003 and 2002 F-4
Consolidated Statements of Cash Flows for the Fiscal
Years Ended September 2004, 2003 and 2002 F-5
Notes to Consolidated Financial Statements F-6
18
(2) Financial Statement Schedules
Report of Independent Registered Public Accounting Firm
Schedule II - Valuation and Qualifying Accounts
(3) Exhibits
2.1 Fifth Amended and Restated Agreement and Plan of Merger dated September
27, 2001 by and between AMCON Distributing Company, AMCON Merger Sub,
Inc. and Hawaiian Natural Water Company Inc. (incorporated by reference
to Exhibit 2.1 of AMCON's Registration Statement on Form S-4
(Registration No. 333-71300) filed on November 13, 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 Asset Purchase Agreement, dated April 24, 2004, between TSL Acquisition
Corp., AMCON Distributing Company and Trinity Springs, Ltd.
(incorporated by reference to Exhibit 2.8 of AMCON's Quarterly Report on
Form 10-Q filed on August 9, 2004)
2.9 First Amendment to Asset Purchase Agreement dated June 17, 2004 between
TSL Acquisition Corp., AMCON Distributing Company and Trinity Springs,
Ltd. (incorporated by reference to Exhibit 2.9 of AMCON's Quarterly
Report on Form 10-Q filed on August 9, 2004)
3.1 Restated Certificate of Incorporation of the Company, as amended May
11, 2004 (incorporated by reference to Exhibit 3.1 of AMCON's Quarterly
Report on Form 10-Q filed on August 9, 2004)
19
3.2 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)
3.3 Second Corrected Certificate of Designations, Preferences and Rights of
Series A Convertible Preferred Securities of AMCON Distributing Company
dated August 5, 2004 (incorporated by reference to Exhibit 3.3 of
AMCON's Quarterly Report on Form 10-Q filed on August 9, 2004)
3.4 Certificate of Designations, Preferences and Rights of Series B
Convertible Preferred Securities of AMCON Distributing Company dated
October 8, 2004
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)
4.2 Specimen Series A Convertible Preferred Stock Certificate (incorporated
by reference to Exhibit 4.2 of AMCON's Quarterly Report on Form 10-Q
filed on August 9, 2004)
4.3 Specimen Series B Convertible Preferred Stock Certificate
4.4 Securities Purchase Agreement dated June 17, 2004 between AMCON
Distributing Company, William F. Wright and Draupnir, LLC (incorporated
by reference to Exhibit 4.3 of AMCON's Quarterly Report on Form 10-Q
filed on August 9, 2004)
4.5 Securities Purchase Agreement dated October 8, 2004 between AMCON
Distributing Company and Spencer Street Investments, Inc.
10.1 Amended and Restated Loan and Security Agreement, dated September 30,
2004, between the Company and LaSalle National Bank, as agent
10.2 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)
10.3 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)
10.4 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)
10.5 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)
10.6 Agreement, dated December 10, 2004 between AMCON Distributing Company
and William F. Wright with respect to split dollar life insurance
10.7 Agreement, dated December 15, 2004 between AMCON Distributing Company
and Kathleen M. Evans with respect to split dollar life insurance
20
10.8 ISDA Master Agreement, dated as of May 12, 2003 between the Company and
LaSalle Bank National Association (incorporated by reference to Exhibit
10.13 of AMCON's Quarterly Report on Form 10-Q filed on August 11,
2003)
10.9 Swap Transaction Confirmation ($10,000,000) dated as of May 23, 2003
between the Company and LaSalle Bank National Association (incorporated
by reference to Exhibit 10.14 of AMCON's Quarterly Report on Form 10-Q
filed on August 11, 2003)
10.10 Swap Transaction Confirmation ($5,000,000) dated as of May 23, 2003
between the Company and LaSalle Bank National Association (incorporated
by reference to Exhibit 10.15 of AMCON's Quarterly Report on Form 10-Q
filed on August 11, 2003)
10.11 Promissory Note ($2,828,440), dated as of June 17, 2004 between the
Company and Trinity Springs, Ltd. (incorporated by reference to Exhibit
10.15 of AMCON's Quarterly Report on Form 10-Q filed on August 9, 2004)
10.12 Promissory Note ($500,000), dated as of June 17, 2004 between the
Company and Trinity Springs, Ltd. (incorporated by reference to Exhibit
10.16 of AMCON's Quarterly Report on Form 10-Q filed on August 9, 2004)
10.13 Security Agreement, dated June 17, 2004 by and between TSL Acquisition
Corp., AMCON Distributing Company and Trinity Springs,Ltd.(incorporated
by reference to Exhibit 10.17 of AMCON's Quarterly Report on Form 10-Q
filed on August 9, 2004)
10.14 Shareholders Agreement, dated June 17,2004, by and between TSL
Acquisition Corp, AMCON Distributing Company and Trinity Springs, Ltd.
(incorporated by reference to Exhibit 10.18 of AMCON's Quarterly Report
on Form 10-Q filed on August 9, 2004)
10.15 Guaranty and Suretyship Agreement, dated June 17, 2004, by and between
AMCON Distributing Company and Trinity Springs, Ltd. (incorporated by
reference to Exhibit 10.19 of AMCON's Quarterly Report on Form 10-Q
filed on August 9, 2004)
10.16 Mortgage, dated June 17, 2004, by and between TSL Acquisition Corp.,
AMCON Distributing Company and Trinity Springs, Ltd.(incorporated by
reference to Exhibit 10.20 of AMCON's Quarterly Report on Form 10-Q
filed on August 9, 2004)
10.17 Guaranty Fee, Reimbursement and Indemnification Agreement, dated as of
September 30, 2004, between AMCON Distributing Company and William F.
Wright
10.18 Unconditional Guaranty, dated as of September 30, 2004 between William
F. Wright and LaSalle Bank, N.A.
10.19 Secured Promissory Note ($1,000,000), dated December 14, 2004, issued
by Trinity Springs, Inc. to Allen D. Petersen
10.20 Modification and Extension of Second Lien Commercial Mortgage,
Assignment of Leases and Rents, and Fixture Filing, dated as of
December 14, 2004 between Trinity Springs, Inc. and Allen D. Petersen
21
11.1 Statement re: computation of per share earnings (incorporated by
reference to footnote 3 to the financial statements which are
incorporated herein by reference to Item 8 of Part II herein)
13.1 Annual Report to Shareholders for the Fiscal Year Ended September 24,
2004
14.1 Code of Ethics for Principal Executive and Financial Officers
(incorporated by reference to Exhibit 14.1 of AMCON's Annual Report on
Form 10-K filed on December 24, 2003)
21.1 Subsidiaries of the Company
23.1 Consent of Independent Registered Public Accounting Firm
31.1 Certification by William F. Wright, Chairman and Principal Executive
Officer, furnished pursuant to section 302 of the Sarbanes-Oxley Act
31.2 Certification by Michael D. James, Vice President and Chief Financial
Officer, furnished pursuant to section 302 of the Sarbanes-Oxley Act
32.1 Certification by William F. Wright, Chairman and Principal Executive
Officer, furnished pursuant to section 906 of the Sarbanes-Oxley Act
32.2 Certification by Michael D. James, Vice President and Chief Financial
Officer, furnished pursuant to section 906 of the Sarbanes-Oxley Act
(b) Reports on Form 8-K
On August 10, 2004, the Company furnished a report on Form 8-K announcing its
earnings for the third quarter ended June 25, 2004 under Items 12, Results of
Operations and Financial Condition. Reference was made to a press release
therewith as exhibit 99.1.
On October 14, 2004, the Company filed a report on Form 8-K announcing the
placement of $2.0 million, or 80,000 shares, of Series B Convertible
Preferred Stock, under Item 3.02, Unregistered Sales of Equity Securities.
The Company also announced the election of a director pursuant to the
issuance of the Series B Convertible Preferred Stock, under Item 5.02,
Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
On November 19, 2004, the Company filed a report on Form 8-K announcing the
entry into an Amended and Restated Loan and Security Agreement with LaSalle
Bank, N.A., Gold Bank and any other lenders from time to time party thereto
under Items 1.01 Entry into a Material Definitive Agreement and Items 2.03
Creation of a Direct Financial Obligation or an Obligation under an Off-
Balance Sheet Arrangement of a Registrant. The Company also announced,
under Item 3.03 Material Modification to Rights of Security Holders, the
dividend limits as set forth in the Amended and Restated Loan and Security
Agreement.
On December 17, 2004, the Company filed a report on Form 8-K announcing the
entry into a $1.0 million revolving credit facility by one of its
consolidated subsidiaries, under Item 1.01 Entry Into a Material Definitive
Agreement.
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Act of
1934, the Registrant, AMCON Distributing Company, a Delaware corporation, has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of Nebraska, on the 7th
day of January, 2005.
AMCON DISTRIBUTING COMPANY
By: /s/ William F. Wright
-------------------------
William F. Wright, Chairman
23
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons in the capacities indicated on the
7th day of January, 2005.
Signature Title
--------- -----
/s/ William F. Wright Chairman of the Board, (Principal Executive
- ------------------------ Officer), and Director
William F. Wright
/s/ Kathleen M. Evans President and Director
- ------------------------
Kathleen M. Evans
/s/ William R. Hoppner Senior Vice President, Director
- ------------------------
William R. Hoppner
/s/ Michael D. James Secretary, Treasurer and Chief Financial
- ------------------------ Officer (Principal Financial and
Michael D. James Accounting Officer)
/s/ Raymond F. Bentele Director
- ------------------------
Raymond F. Bentele
/s/ J. Tony Howard Director
- ------------------------
J. Tony Howard
/s/ John R. Loyack Director
- ------------------------
John R. Loyack
/s/ Stanley Mayer Director
- ------------------------
Stanley Mayer
/s/ Allen D. Petersen Director
- ------------------------
Allen D. Petersen
/s/ Timothy R. Pestotnik Director
- ------------------------
Timothy R. Pestotnik
24
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of AMCON Distributing Company:
We have audited the consolidated financial statements of AMCON Distributing
Company and its subsidiaries (the "Company") as of September 24, 2004 and
September 26, 2003, and for each of the three fiscal years in the period
ended September 24, 2004 and have issued our report thereon dated January 7,
2005(which report expresses an unqualified opinion and includes an
explanatory paragraph relating to the change in method of accounting for
goodwill and intangibles assets in 2003); such consolidated financial
statements and report are included in your 2004 Annual Report to Shareholders
and are incorporated herein by reference. Our audits also included the
consolidated financial statement schedule of the Company, listed in Item 15.
This consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly in all material respects the information
set forth therein.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 7, 2005
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AMCON Distributing Company
Consolidated Financial Statement Schedule
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- -----------------------------------------------
Net
Amounts
Balance at Provision (Written Off) Balance at
Description Beginning of Period (Benefit) Recovered End of Period
- ------------------ ---------------------- --------- ------------- -----------------------
Allowance for
doubtful accounts Sep 28, 2001 616,179 390,053 (364,768) Sep 27, 2002 641,474
Sep 27, 2002 641,474 166,417 27,725 Sep 26, 2003 835,616
Sep 26, 2003 835,616 (12,757) (126,256) Sep 24, 2004 696,603
Allowance for
inventory
obsolescence Sep 29, 2001 222,883 20,387 - Sep 27, 2002 243,270
Sep 27, 2002 243,270 71,035 (21,000) Sep 26, 2003 293,305
Sep 26, 2003 293,305 1,008,266/1/ - Sep 24, 2004 1,301,571
1 The increase in the allowance for inventory obsolescence is primarily the
result of additional reserves required in the beverage segment due to
management's decision to discontinue unprofitable product lines.
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