ITEM 1. BUSINESS
GENERAL
AMCON Distributing Company (together with its wholly-owned subsidiary, Food For Health Co., Inc. and its wholly-owned subsidiaries U.S. Health Distributors, Inc., Chamberlin's Natural Foods, Inc. and Health Food Associates, Inc.) operates 9 distribution centers and 13 retail health food stores in the Great Plains, Rocky Mountain and Southern regions of the United States. As used herein, unless the context indicates otherwise, the term "ADC" means the separate company operations or "traditional distribution business" of AMCON Distributing Company, the term "FFH" means the "natural food distribution business" of Food For Health Co., Inc. and its wholly-owned subsidiary U.S. Health Distributors, Inc. ("USHD"), the terms "CNF" and "HFA" represent the "retail health food stores" operated by Chamberlin's Natural Foods, Inc. and Health Food Associates, Inc., respectively, both wholly-owned subsidiaries of FFH, and the term "AMCON" or the "Company" means AMCON Distributing Company and its subsidiaries.
AMCON sells approximately 24,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery, beverages, groceries, paper products, health and beauty care products, natural food and related products, frozen and chilled products and institutional food service products.
AMCON has over 8,500 retail customers, the largest of which accounted for less than 6.5% of AMCON's total revenues during fiscal 1999. The Company distributes products primarily to retailers such as convenience stores, discount and general merchandise stores, grocery stores and supermarkets, health food stores, natural food stores, drug stores and gas stations. In addition, the Company services institutional customers, including restaurants and bars, schools, sports complexes and vendors, as well as other wholesalers.
AMCON operates seven (7) retail health food stores in Florida and six (6) in the Midwest. These stores carry natural supplements, groceries, health and beauty care products and other food items.
While cigarettes accounted for approximately 65% of the Company's sales volume during its most recent fiscal year, AMCON continues to diversify its businesses and product lines in an attempt to lessen its dependence upon cigarette sales.
TRADITIONAL DISTRIBUTION BUSINESS
ADC serves approximately 7,500 retail outlets in the Great Plains and Rocky Mountain regions and was ranked by the U.S. Distribution Journal as the seventeenth (17th) largest tobacco, candy and convenience store distributor of approximately 1,000 distributors of such products in the United States based upon 1998 sales volume. From its inception, ADC has pursued a strategy of growth through increased sales and through acquisitions. From 1993 to 1998, ADC focused on increasing operating efficiency in its traditional distribution business by merging smaller branch distribution facilities into larger ones. In addition, ADC grew through expansion of its market area into contiguous regions and by introduction of new product lines to customers.
ADC distributes approximately 9,000 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. ADC's principal suppliers include Philip Morris, RJR Nabisco, Brown & Williamson, Proctor & Gamble, Hershey, Mars, William Wrigley and Planters-Lifesavers. 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 carries a broad and diverse product line which allows ADC to offer "one-stop shopping" to its customers. ADC offers self-service health and beauty programs, grocery products and custom food service programs which have proven to be profitable to convenience store customers. In addition, 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.
ADC has worked to improve its operating efficiency by investing in the latest in systems technology, including computerization of buying and financial control functions and introduction in 1999 of internet-based customer maintenance and reporting options. Inventory management has become even more critical due to significant increases in the price of cigarettes over the past two years. 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 turns improved to 24.5 times in 1999. Inventory turns for the past five years are as follows:
Year Times Inventory Turned ---- ---------------------- 1999 24.5 1998 19.6* 1997 21.8 1996 21.2 1995 17.5
* Inventory turns declined slightly in fiscal 1998 as ADC managed its inventory levels to take advantage of anticipated manufacturers' price increases.
By keeping its operating costs down, 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 seven distribution centers located in Kansas, Missouri (2), Nebraska, North Dakota, South Dakota, and Wyoming. These distribution centers contain a total of approximately 311,100 square feet of floor space and employ state-of-the-art equipment for the efficient distribution of the large and diverse product mix sold by ADC. ADC also operates a fleet of approximately 110 delivery vehicles, ranging from over-the-road vehicles with refrigerated trailers to half-ton vans.
NATURAL FOOD DISTRIBUTION BUSINESS
FFH is a distributor of natural foods and related products serving approximately 1,000 health and natural food retailers in the Southern and Western United States. FFH distributes approximately 15,000 different products consisting of national brands, regional brands, private label and master distribution products including vitamin and mineral supplements, herbal preparations, skin and hair care, dairy and dairy substitutes, frozen foods, general grocery and organic produce. FFH's suppliers number approximately 600 and include well known national brands such as Twin Labs, Schiff Bio Foods, Weider, Hain Pure Foods, Arrowhead Mills, Knudsen, Nature's Way and Health Valley. FFH also markets proprietary brand products under the trade names Healthy Edge and Nutri-Value . The products offered are consumer packages of nuts, seeds, grains, pastas, sweeteners, cereals and snack items.
The Company believes that FFH is positioned to provide unequaled service to independent health and natural food retail stores of all sizes and types. FFH pays particular attention to the ongoing needs of its customers and is forward looking in developing progressive marketing programs such as the Nutri-Value Retailers Association which provides co-operative and preferential buying advantages beyond those generally available through other types of programs offered in the market.
FFH's primary distribution location and main office is located in a 132,000 square foot facility located in Phoenix, Arizona. FFH's distribution subsidiary, U.S. Health Distributors, Inc., operates out of a facility in Melbourne, Florida. In addition, FFH also utilized a cross-dock facility located near Dallas, Texas. FFH operates its own fleet of approximately 20 over-the-road and straight trucks equipped to provide full refrigerated, dry and frozen food service.
RETAIL HEALTH FOOD STORES
FFH's retail health food stores are operated by CNF and HFA as Chamberlin's Market & Cafe ("Chamberlin's") and Akin's Natural Food Market ("Akin's"), respectively. Chamberlin's, which was acquired in March 1999, was first established in 1935, and is an award-winning and highly-acclaimed chain of seven 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 was selected the best health food chain in the United States by the trade publication Health Foods Business. Chamberlin's is headquartered in Winter Park, Florida and operates all of its stores in and around Orlando, Florida.
Akin's Natural Foods Market, also established in 1935 and headquartered in Tulsa, Oklahoma, is a well-recognized chain of six 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, Oklahoma; Lincoln, Nebraska; Springfield, Missouri; and Topeka, Kansas.
FFH's new retail health food store segment is being organized to utilize the name recognition of the established health food retail chains that are acquired. Both retail chains are unique in their market areas. The Company plans to maintain the local identity of each chain while providing a means to achieve operating synergies leading to cost savings.
ACQUISITIONS
ADC was incorporated in Delaware in 1986 to carry on the business of General Tobacco and Candy Company ("General Tobacco"), a Nebraska corporation which was the predecessor to ADC. Since 1981, the Company has acquired 23 consumer product distributors in the Great Plains, Rocky Mountain and Southern regions of the United States. In June 1993, ADC acquired Sheya Brothers Specialty Beverages, Inc., a beer and "New Age" beverage distribution company. In September 1995, ADC sold the "New Age" beverage business and in October 1996, ADC sold the beer and malt beverage business. In October 1997, ADC purchased the assets of a traditional candy and tobacco distribution company in St. Louis, Missouri, thereby expanding ADC's market area to include eastern Missouri, Illinois and Indiana. In November 1997, ADC purchased all of the outstanding stock of FFH. In November 1998, FFH purchased all of the outstanding stock of U.S. Health Distributors, Inc. In March 1999, FFH purchased all of the outstanding stock of CNF. In September 1999, FFH purchased all of the outstanding stock of HFA.
PRINCIPAL PRODUCTS
CIGARETTES. Sales of cigarettes and the gross margin derived therefrom for the fiscal years ending September 30, 1999, 1998, and 1997 are set forth below:
(Dollars in Millions)
Fiscal Year Ended September 30, ------------------------------------ 1999 1998 1997 ------ ------ ------ Sales $251.1 $185.5 $117.6 Sales as a % of Total Sales 65.1% 63.0% 65.7% Gross Margin $ 17.0 $ 13.3 $ 10.8 Gross Margin as a % of Total Gross Margin 40.1% 42.0% 55.2% Gross Margin Percentage 6.8% 7.2% 9.2%
Revenues from the sale of cigarettes during fiscal 1999 increased by 35.3% as compared to fiscal 1998, while gross profit from the sale of cigarettes increased by 28.1% during the same period (see "MANAGEMENT'S DISCUSSION AND ANALYSIS-Results of Operations-Year Ended September 30, 1999 Versus Year Ended September 30, 1998" in the Annual Report to Stockholders for the Fiscal Year Ended September 30, 1999). Sales of cigarettes represented approximately 65% of the Company's sales volume during fiscal 1999. This represents a 2% increase from the prior year and related primarily to a significant increase in the price of cigarettes during the first quarter of the year.
ADC has sought to position itself to capitalize on consumer demand for discount or value-priced cigarettes by marketing its own private label cigarette. Substantial price increases implemented by manufacturers of premium cigarettes during the late 1980's and early 1990's resulted in a demand for private label cigarettes, which are sold at lower prices than premium brands. The Company began marketing private label cigarettes in 1983 as a high-quality, value-priced alternative to premium cigarettes. Since 1988, ADC's private label cigarettes have been manufactured under an exclusive agreement with Philip Morris Incorporated. This agreement was renewed in October 1998 for a term of three years.
NATURAL FOODS AND RELATED PRODUCTS. Natural foods and related products, which are primarily sold by FFH, CNF and HFA, constitute the Company's second largest-selling product line, representing approximately 12.9% of the Company's total sales volume during fiscal 1999. Sales of natural foods and related products and the gross margin derived therefrom for the fiscal years ending September 30, 1999 and 1998 are set forth below (the Company did not sell natural foods and related products in 1997):
(Dollars in Millions)
Fiscal Year Ended September 30, ------------------------------- 1999 1998 ------ ------ Sales $ 49.6 $ 31.2 Gross Margin 13.5 7.7 Gross Margin Percentage 27.2% 24.8%
CONFECTIONERY. Candy and related confectionery items, which are primarily sold by ADC, constitute the Company's third largest-selling product line, representing approximately 6.2% of the Company's total sales volume during fiscal 1999. Sales of confectionery items and the gross margin derived therefrom for the fiscal years ending September 30, 1999, 1998 and 1997 are set forth below:
(Dollars in Millions)
Fiscal Year Ended September 30, ------------------------------------ 1999 1998 1997 ------ ------ ------ Sales $ 30.2 $ 29.3 $ 21.8 Gross Margin 3.8 3.6 3.0 Gross Margin Percentage 12.6% 12.3% 13.8%
ADC 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 Planters-Lifesavers. The Company also markets its own private label candy under a manufacturing agreement with Palmer Candy Company.
OTHER PRODUCT LINES. Over the past eight years, ADC's strategy has been to expand its portfolio of consumer products in order to better serve its customer base. ADC's other product lines include cigars and other tobacco products, water and other beverages, groceries, paper products, health and beauty care products, frozen and chilled products and institutional food products. During fiscal 1999, ADC's sales of other products increased $6.4 million or 13.2%. During fiscal 1999 the gross profit margin on these types of products was 14.9%.
COMPETITION
Both the traditional and natural food distribution businesses are highly competitive. There are many similar distribution companies operating in the same geographical regions as ADC and FFH. Management believes that ADC is one of the largest distribution companies of its type operating in its market
area. ADC's principal competitors are national wholesalers such as McLane Co., Inc. (Temple, TX) and regional wholesalers such as Farner-Bocken (Carroll, IA), Merchants Wholesale (Quincy, IL) and Minter-Weisman Co. (Minneapolis, MN) along with a host of smaller grocery and tobacco wholesalers. FFH's principal competitors are national distributors such as Tree of Life and United Natural Foods and regional distributors such as Nature's Best along with numerous smaller specialty distributors of natural products. Most of these competitors generally offer a wide range of products at prices comparable to the Company's. Therefore, the Company seeks to distinguish itself from its competitors by offering a higher level of customer service.
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 and acquire smaller independent competitors. In addition, conventional supermarkets and mass market outlets have also begun to increase their emphasis on the sale of natural products. Management believes the Company's retail stores separate themselves from other competitors by offering smaller, friendly, community-oriented settings run by people who share a passion for healthy living and natural foods.
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 $1.20 to $5.80 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.
The Company is also subject to regulation by state and local health departments, the U.S. Department of Agriculture, the Food and Drug Administration and the Drug Enforcement Administration. These agencies generally impose standards for product quality and sanitation, as well as for setting security and distribution policies.
EMPLOYEES
As of September 30, 1999, the Company had 1,017 full-time and part-time employees in the following areas:
Managerial 20 Administrative 146 Sales & Marketing 485 Warehouse 265 Delivery 101 ----- Total Employees 1,017 =====
None of AMCON's employees are subject to any collective bargaining agreements with the Company and management believes its relations with its employees are good.
ITEM 2.
ITEM 2. PROPERTIES
The location and approximate square footage of the nine principal distribution centers and 13 retail stores operated by AMCON as of September 30, 1999 are set forth below:
LOCATION SQUARE FEET -------- ----------- DISTRIBUTION ------------ ADC ----- Bismarck, North Dakota 28,100 Casper, Wyoming 19,100 Olathe, Kansas 5,000 Omaha, Nebraska 70,300 Rapid City, South Dakota 21,600 Springfield, Missouri 97,000 St. Louis, Missouri 70,000
FFH ----- Phoenix, Arizona 132,000 Melbourne, Florida 35,000 ------- Total Distribution 478,100 -------
RETAIL ------ CNF - Florida 43,900 HFA - Kansas, Missouri, Nebraska & Oklahoma 50,800 ------- Total Retail 94,700 ------- Total Square Footage 572,800 =======
AMCON owns its distribution facility in Bismarck, North Dakota. The Company owned one other building that was subsequent to year end. Each of these facilities is subject to a first mortgage securing borrowings under the Company's revolving credit facility (see "MANAGEMENT'S DISCUSSION AND ANALYSIS-Liquidity and Capital Resources" in the Annual Report to Stockholders for the Fiscal Year Ended September 30, 1999).
AMCON leases its remaining distribution facilities, retail stores, offices and certain equipment under noncancellable operating leases. Leases for the nine distribution facilities and 13 retail stores leased by the Company have terms expiring from 2000 to 2006. Minimum future lease commitments for these properties and equipment total approximately $14.7 million as of September 30, 1999.
Management believes that its existing facilities are adequate for the Company's present level of operations; however, additional cross-dock facilities and retail stores will be required to accommodate the Company's anticipated growth in certain market areas.
AMCON owns a condominium in the Cayman Islands that is uses in furtherance of its business marketing strategies. AMCON acquired a portion of its interest in the condominium from its former parent in 1992 under an agreement that provides that the greater of the first $400,000 of the net gain or one-half of the net gain from the ultimate sale of this property will be allocated to the former parent. See Item 13 - "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
The Company is subject to claims and litigation in the ordinary course of its business. However, in the opinion of management, no currently pending legal proceedings or claims against the Company will, individually or in the aggregate, have a material adverse effect on the Company's financial condition or results of operations. 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 affect 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.
ITEM 4.
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 ended September 30, 1999.
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, Ms. Evans and Mr. Fleming, each with a term expiring on December 31, 2001. The executive officers of AMCON are as follows:
Name Age Position ---- --- -------- William F. Wright 57 Chairman of the Board, Director
Kathleen M. Evans 52 President of ADC, Director
Jerry Fleming 61 President of FFH, Director
Michael D. James 38 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 ADC) 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. Mr. Wright is also a director of Gold Banc Corporation, Inc., a NASDAQ company.
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.
JERRY FLEMING became President of FFH in 1992. Mr. Fleming is a 36 year veteran of the health and natural foods industry and prior to joining FFH, served as President of Nature's Way (Murdock Health Care),a leading manufacturer of herbal remedies; Vice President of the Natural Foods Group for Tree of Life, Inc.; President of the South East division of Tree of Life; President of Collegedale Distributors; President of Healthway Specialty Foods, Inc.; Vice President of Landstrom Specialty Foods, Inc. and served eight years on the board of directors of the National Nutritional Foods Association.
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 PricewaterhouseCoopers LLP, serving as the senior tax manager of the Omaha, Nebraska office from 1992 until 1994. Mr. James graduated from Kansas State University in 1983.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The information required by this item is incorporated by reference from the Annual Report to Stockholders for the fiscal year ended September 30, 1999 under the heading "Market for Common Stock" on pages 4 and 5.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is incorporated by reference from the Annual Report to Stockholders for the fiscal year ended September 30, 1999 under the heading "Selected Financial Data" on pages 2 through 4.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
With the exception of the Year 2000 Readiness discussion below, the information required by this item is incorporated by reference from the Annual Report to Stockholders for the fiscal year ended September 30, 1999 under the heading "Managements Discussion and Analysis" on pages 5 through 14.
YEAR 2000 READINESS
STATE OF READINESS. The Year 2000 computer issue is real and does impact the way the Company's systems perform. In addition, AMCON has business relationships with a number of third parties whose Year 2000 problems could impact the Company. Accordingly, management has recognized the Year 2000
issue as a major management and technology project. A task force has been assembled to review all systems to ensure that they do not malfunction as a result of the Year 2000 issue. The Year 2000 project includes review of internal operating systems and equipment, other internal systems and equipment (such as telephones, copiers and fax machines) and external services and systems that are depended upon to operate the Company's business. In this process, AMCON has both replaced some systems and upgraded others.
AMCON's internal operating system consists of midrange computers which are used for the sales, accounts receivable and inventory systems. With the exception of the accounts receivable system, the software operating on the midrange computers does not generally operate or depend upon any date structure, but rather the day-of-week and week-of-month. Therefore, software risk to the Year 2000 issue is considered low. The remaining accounting systems and other record keeping functions performed by the Company are conducted on personal computers which are connected by a local area network. AMCON has engaged third party computer consultants to review, test and modify the midrange computer hardware and software to ensure they will function correctly after December 31, 1999. All software conversions affiliated with the Year 2000 issue have been completed and management believes that the Year 2000 problems relating to internal operating systems will be resolved without significant operational difficulties. Baseline testing of all Year 2000 converted software is completed and deployment of the converted software is substantially complete. Verification that the converted software is functioning properly will continue through December 31, 1999. However, there can be no assurance that testing and verification will discover all potential Year 2000 problems or that it will not reveal unanticipated material problems with its systems that will need to be resolved. Management has taken steps to ensure that information technology personnel are on site at each location on January 1, 2000 to monitor the systems and make software modifications, if necessary.
Other internal systems have been evaluated by AMCON's own personnel, along with the providers that service and maintain the systems with emphasis placed on critical systems such as telephone systems. Management believes that all of its internal systems are currently Year 2000 compliant.
AMCON has no control over the efforts of third parties with which we have material business relationships. AMCON has undertaken the process of contacting each major third party to determine their state of readiness for Year 2000. Such parties include, but are not limited to, AMCON's suppliers of inventory, customers, financial institutions and utility companies. AMCON has received initial assurances from its major suppliers and financial institutions that they will not be adversely affected by Year 2000 problems.
COSTS. Through September 30, 1999, cumulative costs relating directly to Year 2000 issues have totaled approximately $163,000. A portion of the estimated total costs include the cost of existing personnel who have been deployed to work on various phases of the Year 2000 project. These costs do not include system upgrades and replacements that were made in the normal course of business. The deployment of internal resources to the Year 2000 project has not resulted in significant delays to other major technology projects which were planned by the Company. Management estimates that Year 2000 costs to be incurred subsequent to September 30, 1999 will total approximately $30,000 for deployment of Year 2000 converted software.
RISKS. Management believes that AMCON will have successfully addressed the Year 2000 problem before December 31, 1999. Therefore, management believes that the most reasonably likely worst-case scenario will be that one or more of the third parties with which AMCON has a material business relationship will not have successfully dealt with its Year 2000 issues. A critical third party failure (such as telecommunication, utilities or financial institutions) could have a material adverse affect on AMCON by eliminating our ability to order and pay for products from suppliers and receive orders and payments from customers. It is also possible that one or more of the internal operating systems will not function properly and make it difficult to complete routine tasks, such as accounting and other record keeping duties. Based on information currently available, management does not believe there will be any long-term operating system failures. However, AMCON will continue to monitor these issues as part of its Year 2000 project and will concentrate its efforts on minimizing their impact.
CONTINGENCY PLANS. AMCON has not modified any specific contingency plans with respect to internal operating systems. Basic contingency plans are maintained which address short term operating system failure. Management believes these contingency plans will be sufficient to cover possible operating system disruption caused by Year 2000 problems. As AMCON completes deployment of the Year 2000 converted software, these contingency plans will be addressed and modified if necessary. Contingency planning includes, remote dial-up connectivity from remote branches in the event that certain telecommunication services fail to operate, direct faxing of orders to the distribution centers and manual routing. Management currently does not foresee contingency planning in the product receiving, selling, order filling and delivery phases of our business as these areas are very labor intensive. AMCON may be required to perform certain accounting and other record keeping functions manually should a Year 2000 problem become apparent in one or more of those areas. The Company has terminated relationships with third party service providers that were not able to demonstrate that they had successfully resolved their Year 2000 problems in a timely manner. There will inevitably be some third parties who will not have made proper Year 2000 modifications. AMCON's contingency plan only addresses those third parties that are considered critical to its operations.
The foregoing Year 2000 discussion contains certain forward-looking statements, including without limitation anticipated costs and the dates by which AMCON expects to substantially complete the modifications and testing of systems and are based upon management's best current estimates, which were derived utilizing numerous assumptions about future events, including the continued availability of certain resources, representations received from third parties and other factors. However, there can be no guarantee that these estimates will be achieved, and actual results could differ materially from those anticipated. Specific matters that might cause such material differences include, but are not limited to, the availability and cost of trained personnel, the ability to identify and convert all relevant computer systems, results of Year 2000 testing, adequate identification and resolution of Year 2000 issues by third party service providers, suppliers or customers of AMCON, unanticipated system costs, the need to replace additional hardware, the adequacy of and ability to implement contingency plans and similar uncertainties.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this item is incorporated by reference from the Annual Report to Stockholders for the fiscal year ended September 30, 1999 under the heading "Managements Discussion and Analysis" on pages 5 through 14.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and accompanying notes, together with the report of independent accountants are incorporated by reference from the Annual Report to Stockholders for the fiscal year ended September 30, 1999 on pages through. Supplemental financial information is incorporated by reference from the Annual Report to Stockholders for the fiscal year ended September 30, 1999 under the heading "Selected Quarterly Financial Data" on pages 3 and 4.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Registrant's Proxy Statement to be used in connection with the 2000 Annual Meeting of Stockholders (the "Proxy Statement") contains 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) 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 reports received by the 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, except as set forth below, there was compliance for the fiscal year ended September 30, 1999 with all Section 16(a) filing requirements applicable to the Company officers, directors and greater-than-ten-percent beneficial owners.
During the fiscal year ended September 30, 1999, the Statement of Changes of Beneficial Ownership (Form 4) was filed late for Susan C. Wright, Wendy M. Wright and Mark A. Wright, all greater-than-ten-percent owners of the Company's outstanding Common Stock. However, all transactions with respect to the Common Stock of the Company were reported by these shareholders.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The Proxy Statement contains 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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Proxy Statement contains under the caption "Voting Securities and Beneficial Ownership Thereof by Principal Stockholders, Directors and Officers" the information required by Item 12 of Form 10-K and such information is incorporated herein by this reference.
ITEM 13.
Item 13 herein)
13.1 Annual Report to Stockholders for the Fiscal Year Ended September 30, 1999
21.0 Subsidiaries of the Company
23.1 Consent of PricewaterhouseCoopers LLP
27.0 Financial Data Schedules
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the fourth quarter ended September 30, 1999.
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 23rd day of December, 1999.
AMCON DISTRIBUTING COMPANY
By: /s/ Kathleen M. Evans ---------------------- Kathleen M. Evans, President
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 23rd day of December, 1999.
Signature Title --------- -----
/s/ William F. Wright Chairman of the Board, Director - ------------------------ William F. Wright
/s/ Kathleen M. Evans President (Principal Executive - ------------------------ Officer) and Director Kathleen M. Evans
/s/ Michael D. James Treasurer, Chief Financial Officer - ------------------------ and Secretary (Principal Financial Michael D. James and Accounting Officer)
/s/ J. Tony Howard Director - ------------------------ J. Tony Howard
/s/ Allen D. Petersen Director - ------------------------ Allen D. Petersen
/s/ Jerry Fleming Director - ------------------------ Jerry Fleming
/s/ Timothy R. Pestotnik Director - ------------------------ Timothy R. Pestotnik
/s/ William R. Hoppner Director - ------------------------ William R. Hoppner
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of AMCON Distributing Company:
Our report on the consolidated financial statements of AMCON Distributing Company is included in this Form 10-K. In connection with our audit of such financial statements, we have also audited the related financial statement schedule listed in Item 14