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