-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FOCOEDzmToaQaq1dVV4FFHqzenqWYXF5YcpWcEcaiXmhOGJ/OMGCWbyPDzGcmLfM rOYVe8saZHDKaFQPCfgd7A== /in/edgar/work/20000804/0000928465-00-000027/0000928465-00-000027.txt : 20000921 0000928465-00-000027.hdr.sgml : 20000921 ACCESSION NUMBER: 0000928465-00-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMCON DISTRIBUTING CO CENTRAL INDEX KEY: 0000928465 STANDARD INDUSTRIAL CLASSIFICATION: [5141 ] IRS NUMBER: 470702918 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-15589 FILM NUMBER: 686015 BUSINESS ADDRESS: STREET 1: 10228 L ST STREET 2: POST OFFICE BOX 241230 CITY: OMAHA STATE: NE ZIP: 68127 BUSINESS PHONE: 4023313727 MAIL ADDRESS: STREET 1: 10228 L STREET STREET 2: POST OFFICE 241230 CITY: OMAHA STATE: NE ZIP: 68127 10-Q 1 0001.txt AMCON DISTRIBUTING COMPANY FORM 10-Q, 06/30/2000 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2000 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 2,737,331 shares of its $.01 par value common stock outstanding as of July 31, 2000. Form 10-Q 3rd Quarter INDEX ------- PAGE ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements: --------------------- Balance sheets at June 30, 2000 and at September 30, 1999 3 Statements of income for the three and nine-month periods ended June 30, 2000 and June 30, 1999 4 Statements of cash flows for the nine-month periods ended June 30, 2000 and June 30, 1999 5 Notes to unaudited financial statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 16 PART I - FINANCIAL INFORMATION Item 1. Financial Statements
AMCON Distributing Company Consolidated Balance Sheets June 30, 2000 and September 30, 1999 - --------------------------------------------------------------------------------------- (Unaudited) June 30, September 30, 2000 1999 ------------ ------------- ASSETS Current assets: Cash $ 805,047 $ 1,728,042 Accounts receivable, less allowance for doubtful accounts of $774,458 and $676,801 18,814,136 18,345,816 Inventories 26,277,365 23,979,639 Deferred income taxes 852,210 717,022 Other 550,984 1,000,189 ------------ ------------ Total current assets 47,299,742 45,770,708 Fixed assets, net 6,155,449 7,502,927 Investments 490,000 550,691 Other assets 14,881,630 14,764,890 ------------ ------------ $ 68,826,821 $ 68,589,216 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 12,842,988 $ 11,953,546 Accrued expenses 3,315,867 3,173,231 Accrued wages, salaries and bonuses 1,009,294 640,933 Income taxes payable 578,653 283,111 Dividends payable 82,120 51,297 Current portion of long-term debt 8,776,158 10,133,393 Current portion of subordinated debt 800,000 800,000 ------------ ------------ Total current liabilities 27,405,080 27,035,511 ------------ ------------ Deferred income taxes 768,639 678,455 Other liabilities 504,677 423,574 Long-term debt, less current portion 14,322,127 17,995,432 Subordinated debt, less current portion 9,200,000 9,200,000 Shareholders' equity (as restated): Preferred stock, $.01 par value, 1,000,000 shares authorized, none outstanding - - Common stock, $.01 par value, 15,000,000 shares authorized, 2,737,337 and 2,727,656 issued, respectively 27,373 27,276 Additional paid-in capital 4,121,667 4,101,629 Unrealized gain on investments available-for-sale, net of $136,069 and $149,664 tax 224,366 234,299 Retained earnings 12,252,931 8,893,400 ------------ ------------ 16,626,337 13,256,604 Less treasury stock, 6 and 102 shares at cost ( 39) (360) ------------ ------------ Total shareholders' equity 16,626,298 13,256,244 ------------ ------------ $ 68,826,821 $ 68,589,216 ============ ============ The accompanying notes are an integral part of these financial statements
AMCON Distributing Company Consolidated Statements of Income for the three and nine-months ended June 30, 2000 and 1999 (Unaudited) - ------------------------------------------------------------------------------------ For the three months For the nine months ended June 30, ended June 30 -------------------------- --------------------------- 2000 1999 2000 1999 ------------ ----------- ------------- ----------- Sales (including excise taxes of $18.8 million and $14.7 million, and $52.1 million and $41.7 million, respectively) $115,884,327 $103,650,576 $339,664,202 $275,998,896 Cost of sales 102,876,013 92,985,488 297,982,288 245,334,725 ------------ ----------- ------------ ------------ Gross profit 13,008,314 10,665,088 41,681,914 30,664,171 Selling, general and administrative expenses 11,295,876 8,449,417 33,694,970 23,347,446 Depreciation and amortization 733,598 452,401 2,042,777 1,053,122 ------------ ----------- ------------ ------------ 12,029,474 8,901,818 35,737,747 24,400,568 ------------ ----------- ------------ ------------ Income from operations 978,840 1,763,270 5,944,167 6,263,603 Other expense (income): Interest expense 679,939 409,504 2,243,610 1,234,745 Other expense (income), net (1,876,193) (6,404) (1,992,546) (151,666) ------------ ----------- ------------ ------------ (1,196,254) 403,100 251,064 1,083,079 ------------ ----------- ------------ ------------ Income before income taxes 2,175,094 1,360,170 5,693,103 5,180,524 Income tax expense 794,503 510,127 2,094,515 2,025,633 ------------ ----------- ------------ ------------ Net income $ 1,380,591 $ 850,043 $ 3,598,588 $ 3,154,891 ============ =========== ============ ============ Earnings share Basic $ 0.50 $ 0.31 $ 1.32 $ 1.16 ============ =========== ============ ============ Diluted $ 0.49 $ 0.30 $ 1.26 $ 1.12 ============ =========== ============ ============ Weighted average shares outstanding: Basic 2,737,333 2,727,662 2,733,954 2,727,662 ============ =========== ============ ============ Diluted 2,845,101 2,837,968 2,858,725 2,829,081 ============ =========== ============ ============ The accompanying notes are an integral part of these financial statements.
AMCON Distributing Company Consolidated Statements of Cash Flows for the nine months ended June 30, 2000 and 1999 (Unaudited) - ------------------------------------------------------------------------------------ 2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,598,588 $ 3,154,891 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,042,777 1,082,970 Gain on sales of fixed assets and securities (1,263,417) (40,772) Provision for losses on doubtful accounts 62,659 197,554 Changes in assets and liabilities, net of effects from acquisitions: Accounts receivable (599,867) (2,371,556) Inventories (2,297,726) (818,906) Other current assets (95,830) (23,510) Other assets (196,791) 13,705 Accounts payable 1,227,324 2,532,527 Accrued expenses and accrued wages, salaries, and bonuses 41,928 159,999 Income taxes payable and deferred taxes 266,491 (165,303) ----------- ----------- Net cash provided by operating activities 2,786,136 3,721,599 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of fixed assets (754,695) (491,837) Acquisitions, net of cash acquired - (3,411,450) Proceeds from sales of fixed assets 1,945,413 46,830 Proceeds from sale of available for sale securities 92,260 - ----------- ----------- Net cash provided by (used in) investing activities 1,282,978 (3,856,457) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt - 1,080,000 Net (payments) proceeds on bank credit agreement (4,015,709) 2,997,695 Payments on long-term debt (788,620) (3,533,799) Dividends paid (208,042) (99,200) Proceeds from exercise of stock options 19,941 - Purchase of treasury stock 321 - ----------- ----------- Net cash provided by (used in) financing activities (4,992,109) 444,696 ----------- ----------- Net increase (decrease)in cash (922,995) 309,838 Cash, beginning of period 1,728,042 38,369 ----------- ----------- Cash, end of period $ 805,047 $ 348,207 =========== =========== The accompanying notes are an integral part of these financial statements.
AMCON Distributing Company Notes to Consolidated Financial Statements June 30, 2000 and 1999 - ------------------------------------------------------------------------------ 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The accompanying unaudited financial statements of AMCON Distributing Company and subsidiaries ("AMCON" or the "Company") have been prepared on the same basis as the audited financial statements for the year ended September 30, 1999, and, in the opinion of management, contain all adjustments necessary to fairly present the financial information included therein, such adjustments consisting of normal recurring items. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended September 30, 1999, 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. AMCON's fiscal third quarters ended on June 23, 2000 and June 25, 1999, respectively. For convenience, the fiscal quarters have been indicated as June 30 and each of AMCON's fiscal first, second and third quarters were comprised of 13 weeks. 2. INVENTORIES: Inventories consist of finished products purchased in bulk quantities by the wholesale distribution business to be redistributed to the Company's retail customers and finished products purchased by the retail health food stores to be sold to consumers. Effective in fiscal 1999, the Company changed the method of accounting for inventory from the first-in, first-out ("FIFO") method to the last-in, first-out ("LIFO") method. LIFO inventories at June 30, 2000 were approximately $2.2 million less than the amount of such inventories valued on a FIFO basis. 3. STOCK DIVIDEND: In December 1999, the Board of Directors of the Company declared a special 10% stock dividend paid on February 8, 2000 to shareholders of record on January 25, 2000. The effect of the special 10% stock dividend has been reflected retroactively in the earnings per share calculation for the quarter ended June 30, 1999 and the capital accounts at September 30, 1999. 4. EARNINGS PER SHARE: Basic earnings per share is calculated by dividing net income by the weighted average common shares outstanding for each period. Diluted earnings per share is calculated by dividing net income by the sum of the weighted average common shares outstanding and the weighted average dilutive options, using the treasury stock method.
For the three-month period ended June 30, ------------------------------------------------ 2000 1999 ------------------------- ------------------------- Basic Diluted Basic Diluted ----------- ----------- ----------- ----------- 1. Weighted average common shares outstanding 2,737,337 2,737,337 2,727,759 2,727,759 2. Weighted average treasury shares outstanding (4) (4) (97) (97) 3. Weighted average of net additional shares outstanding assuming dilutive options and warrants exercised and proceeds used to purchase treasury stock - 107,768 - 110,306 ----------- ----------- ----------- ----------- 4. Weighted average number of shares outstanding 2,737,333 2,845,101 2,727,662 2,837,968 =========== =========== =========== =========== 5. Net income $ 1,380,591 $ 1,380,591 $ 850,043 $ 850,043 =========== =========== =========== =========== 6. Earnings per share $ 0.50 $ 0.49 $ 0.31 $ 0.30 =========== =========== =========== ===========
For the nine-month period ended June 30, ------------------------------------------------ 2000 1999 ------------------------- ------------------------- Basic Diluted Basic Diluted ----------- ----------- ----------- ----------- 1. Weighted average common shares outstanding 2,733,955 2,733,955 2,727,759 2,727,759 2. Weighted average treasury shares outstanding (1) (1) (97) (97) 3. Weighted average of net additional shares outstanding assuming dilutive options and warrants exercised and proceeds used to purchase treasury stock - 124,771 - 101,419 ----------- ----------- ----------- ----------- 4. Weighted average number of shares outstanding 2,733,954 2,858,725 2,727,662 2,829,081 =========== =========== =========== =========== 5. Net income $ 3,598,588 $ 3,598,588 $ 3,154,890 $ 3,154,890 =========== =========== =========== =========== 6. Earnings per share $ 1.32 $ 1.26 $ 1.16 $ 1.12 =========== =========== =========== ===========
In December 1999 the Board of Directors increased the quarterly cash dividend from $0.02 to $0.03 per share and declared a special 10% stock dividend. 5. COMPREHENSIVE INCOME: The following is a reconciliation of net income per the accompanying consolidated statements of income to comprehensive income for the periods indicated:
For the three months For the nine months ended June 30 ended June 30 ------------------------- ------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net income $ 1,380,591 $ 850,043 $ 3,598,588 $ 3,154,891 Other comprehensive income: Unrealized holding gain (losses) from investments arising during the period, net of income taxes of $17,956, $24,277, $19,783 and $44,509, respectively 29,926 37,973 32,971 69,616 Less reclassification adjustments for gains included in net income (25,533) - (42,904) - ----------- ----------- ----------- ----------- Comprehensive income $ 1,384,984 $ 888,016 $ 3,588,655 $ 3,224,507 =========== =========== =========== ===========
6. BUSINESS SEGMENTS: AMCON operates within two business segments:the wholesale distribution of consumer products by AMCON Distributing Company and Food For Health Co., Inc. and the retail sale of health and natural food products by Chamberlin's Natural Food Products, Inc. (d/b/a Chamberlin's Market and Cafe) and Health Food Associates, Inc. (d/b/a Akin's Natural Foods Market). The business units within each segment are evaluated on revenues, operating income and income before taxes and extraordinary items.
Wholesale Distribution Retail Consolidated ------------- ------------ ------------- Quarter ended June 30, 2000: External revenues $ 107,508,493 $ 8,375,834 $ 115,884,327 Intersegment sales 2,168,946 - 2,168,946 Income (loss) before taxes 2,399,651 (224,557) 2,175,094 Total assets 48,861,047 19,965,774 68,826,821 Quarter ended June 30, 1999: External revenues $ 100,483,841 $ 3,166,735 $ 103,650,576 Intersegment sales - - - Income before taxes 1,327,375 32,795 1,360,170 Total assets 44,751,185 5,659,995 50,411,180 Nine months ended June 30, 2000: External revenues $ 314,473,929 $ 25,190,273 $ 339,664,202 Intersegment sales 5,735,791 - 5,735,791 Income before taxes 5,204,438 488,665 5,693,103 Total assets 48,861,047 19,965,774 68,826,821 Nine months ended June 30, 1999: External revenues $ 272,832,161 $ 3,166,735 $ 275,998,896 Intersegment sales - - - Income before taxes 5,147,729 32,795 5,180,524 Total assets 44,751,185 5,659,995 50,411,180
Intersegment sales are at cost plus a nominal markup and are eliminated in the consolidated statements of income. The retail segment was acquired in the third and fourth quarters of fiscal 1999; therefore no segment information is presented for the retail segment in first six months of fiscal 1999. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Comparison of the three-month and nine-month periods ended June 30, 2000 and June 30, 1999 Sales for the three months ended June 30, 2000 increased 11.8% to$115.9 million, compared to $103.7 million for the third quarter in prior fiscal year. Sales increase by business segment is as follows: Wholesale distribution $ 7.0 million Retail health food stores 5.2 million ------ $ 12.2 million ====== Sales from the traditional distribution business increased by $8.0 million during the third quarter over the third quarter in the prior year as follows: Cigarette sales increased approximately $6.5 million over the third quarter in the prior year (approximately $3.0 million was due to price increases and approximately $3.5 million was due to increased volume). Sales of tobacco, confectionery and other products increased by $1.5 million primarily due to increased volume. Sales from the natural foods distribution business, Food For Health, Co. Inc. ("FFH"), decreased by $1.0 million primarily due to the loss of several significant customers who either were acquired or implemented an internal distribution system. The increase in sales from the retail health food stores, Chamberlin's Market & Cafe and Akin's Natural Foods Market, is related primarily to Akin's Natural Foods Market, which was acquired in the fourth quarter of fiscal 1999 and whose sales represent new sales for the quarter. Sales for the nine months ended June 30, 2000 increased 23.1% to $339.7 million, compared to $276.0 million for the same period in prior fiscal year. Sales increase by business segment is as follows: Wholesale distribution $ 41.7 million Retail health food stores 22.0 million ------ $ 63.7 million ====== Sales from the traditional distribution business increased by $40.1 million for the nine months ended June 30, 2000 as compared to the same period in the prior year as follows: Cigarette sales increased approximately $33.5 million over the prior year (approximately $24.6 million was due to price increases and the balance was due to increased volume). Sales of non-cigarette products increased by $6.6 million primarily due to increased volume. Sales from the health and natural foods distribution business increased by $1.6 million. This increase was primarily due to the acquisition of a Florida natural foods distributor in the middle of the first quarter of fiscal 1999. The increase in sales of $22.0 million from the retail health food stores, Chamberlin's Market & Cafe and Akin's Natural Foods Market, is primarily due to new sales generated since the retail segment was purchased in the third and fourth quarters of fiscal 1999. Gross profit increased 22.0% to $13.0 million for the three months ended June 30, 2000 from $10.7 million over the same period during the prior year. Gross profit as a percent of sales increased to 11.2% for the quarter ended June 30, 2000 compared to 10.3% for the quarter ended June 30, 1999. Gross profit by business segment for the third quarter is as follows (dollars in millions): Quarter ended June 30, ---------------- Incr/ 2000 1999 (Decr) ------ ------ ------ Wholesale distribution $ 9.7 $ 9.4 $ .3 Retail health food stores 3.3 1.3 2.0 ------ ------ ------ $ 13.0 $ 10.7 $ 2.3 ====== ====== ====== The increases in gross profit and gross profit percentage were primarily the result of $3.3 million in gross profit generated by the retail health food stores, which were acquired in the third and fourth quarters of fiscal 1999. Profit margins generated by the retail food stores are typically 40-45% compared to profit margins of 9-11% generated by the distribution segment. Gross profit increased 35.9% to $41.7 million for the nine months ended June 30, 2000 from $30.7 million over the same period during the prior year. Gross profit as a percent of sales increased to 12.3% for the period compared to 11.1 % for the nine months ended June 30, 1999. Gross profit by business segment for the nine months ended June 30, 2000 is as follows (dollars in millions): Nine months ended June 30, ----------------- Incr/ 2000 1999 (Decr) ------ ------ ------ Wholesale distribution (recurring) $ 30.3 $ 25.7 $ 4.6 Wholesale distribution (nonrecurring) 0.7 3.7 (3.0) Retail health food stores 10.7 1.3 9.4 ------ ------ ------ $ 41.7 $ 30.7 $ 11.0 ====== ====== ====== The increases in gross profit and gross profit percentage were primarily attributable to $10.7 million in gross profit generated by the retail health food stores, which were acquired in the third and fourth quarters of fiscal 1999. Profit margins generated by the retail food stores are typically 40-45% compared to profit margins of 9-11% generated by the distribution segment. Gross profit generated by the recurring traditional and natural foods distribution businesses increased by $4.6 million due to additional sales generated by the segment. However, for the first nine months of fiscal 2000, the traditional distribution business experienced a decrease of $3.0 million in gross profit, as compared to the same period of the prior year, due to the absence of cigarette price increases of the magnitude of which occurred in the prior year. A significant cigarette price increase was implemented by cigarette manufacturers in the first quarter of fiscal 1999 as the result of a settlement that was reached between the major tobacco manufacturers and the various states that had filed liability suits against the industry. Price increases of the magnitude experienced in November 1998 are rare and the profits generated by this event are not expected to recur on a regular basis. Although manufacturers increased the price of cigarettes again in the second quarter and early fourth quarter of fiscal 2000, management considers gross profits derived from such increases as nonrecurring since they occur on an irregular and unpredictable basis. Sales of the Company's private label cigarettes declined steadily from 1993 through 1999 primarily due to the price differential between premium and major generic brands. The rate of decline in private label cigarette sales has slowed in fiscal 2000 and gross profit derived from such sales increased slightly in both the three and nine-months ended June 30, 2000 as compared to the prior year. Management expects the gross profit derived from the sale of its private label cigarettes to remain at current levels for the remainder of fiscal 2000. Total operating expense, which includes selling, general and administrative expenses and depreciation and amortization, increased 35.1% or $3.1 million to $12.0 million for the third quarter ended June 30, 2000 compared to the same period in the prior fiscal year. The increase was primarily due to expenses associated with the retail health food stores which accounted for $2.0 million of the increase in operating expenses. The retail health food stores were acquired in the third and fourth quarters of fiscal 1999 and incurred $1.1 million in operating costs in the third quarter of the prior year. Operating expenses incurred by the distribution segment increased by $1.1 primarily due to increased labor costs in the distribution centers resulting from tight labor markets, an increase in fuel and other delivery expenses and additional administrative costs associated with development of new retail business opportunities. As a percentage of sales, total operating expense increased to 10.4% from 8.6% during the same period in the prior year. This increase is primarily due to operating costs incurred by the retail health food business during the period. Operating expenses incurred by this business segment were approximately 38.0% of sales compared to 8.2% incurred by the wholesale distribution business. For the nine-month period ended June 30, 2000, total operating expense increased 46.5% or $11.3 million to $35.7 million compared to the same period in fiscal 1999. The increase was primarily due to expenses associated with the retail health food stores which accounted for $8.0 million of the increase in operating expenses. The retail health food stores were acquired in the third and fourth quarters of fiscal 1999; therefore, there were no operating expenses associated with this business segment in the first six months of the prior fiscal year. Operating expenses incurred by the distribution segment increased by $3.3 primarily due to increased labor costs in the distribution centers resulting from tight labor markets, an increase in fuel and other delivery expenses, and additional administrative costs associated with development of new retail business opportunities. As a percentage of sales, total operating expense increased to 10.5% from 8.8% during the same period in the prior year. This increase is primarily due to operating costs incurred by the retail health food business during the period. Operating expenses incurred by this business segment were approximately 36.1% of sales compared to 8.5% incurred by the wholesale distribution business. As a result of the above, income from operations for the third quarter ended June 30, 2000 decreased by $784,000 or 44.5% to $978,000. Income from operations for the nine-month period ended June 30, 2000 decreased $319,000 or 5.1% to $5,944,000. Interest expense for the three months ended June 30, 2000 increased 66.0% to $680,000 compared to $410,000 during the same period in the prior year. Interest expense for the nine-month period ended June 30, 2000 increased 81.7% to $2.2 million compared to $1.2 million during the prior year. The increase was primarily due to interest expense attributable to the debt incurred to purchase the retail health food stores in fiscal 1999. Interest expense associated with this acquisition debt was approximately $395,000 and $1,150,000 for the three and nine-months periods ended June 30, 2000, respectively, compared to $94,000 in both periods of the prior year. Interest expense associated with the Company's operating lines of credit decreased approximately $30,000 and $47,000, for the three and nine-month periods ended June 30, 2000, as compared to the same periods in the prior year. The decrease was primarily attributable to reductions to the revolving credit balances from the proceeds of the sale of the Company's interest in a condominium. Other income for the three and nine-month periods ended June 30, 2000 of $1.9 and $2.0 million, respectively, was generated primarily by $1.9 million in gains associated with the sale of the Company's interest in a condominium and resolution of an intellectual property matter involving a trademark. Sale of fixed assets and marketable securities, royalty payments and dividends received on investment securities were also included in other income. Other income for the three months ended June 30, 1999 of $6,400 was generated from royalty payments and gains on sales of fixed assets. Other income for the nine months ended June 30, 1999 of $152,000 was generated from similar activities and dividends received on investment securities. As a result of the above factors, net income during the three months ended June 30, 2000 was $1,381,000 compared to $850,000 for the three months ended June 30, 1999. Net income during the nine months ended June 30, 2000 was $3,599,000 compared to $3,155,000 for the first nine months of the prior year. As described in Management's Discussion and Analysis in the Company's Annual Report to Shareholders for the Fiscal Year Ended September 30, 1999, the Company's distribution and retail businesses operate in very competitive markets. Pressure on profit margins continues to affect both large and small distributors and expansion by large natural food retail chains intensifies competition in the Company's natural food retail markets. This business climate subjects operating income to a number of factors which are beyond the control of management, such as competing retail stores opening in close proximity to the Company's retail stores, acquisition of the Company's retail customers by other retail chains who are not customers and changes in manufacturers' cigarette pricing which affects the market for generic and private label cigarettes. While the Company sells a diversified product line, it remains dependent upon cigarette sales which represented approximately 63% of its revenue and 35% of its gross margin in the first nine months of fiscal 2000. The Company continuously evaluates steps it may take to improve net income in future periods, including further acquisitions of other distributing companies and retail stores in similar business lines and further sales of assets that are no longer essential to its primary business activities such as investments in equity securities. Investments in equity securities at June 30, 2000 and September 30, 1999, respectively, consisted of 70,000 and 83,000 shares of Consolidated Water Company Limited ("CWC"), a public company which is listed on NASDAQ,. During the third quarter ended June 30, 2000, the Company sold 7,000 shares of CWC and realized a gain of $40,800. The Company's basis in the remaining securities is $127,000 and the fair market value of the securities was $490,000 and $540,000 on June 30, 2000 and September 30, 1999, respectively. The unrealized gain on CWC shares was approximately $363,000 and $389,000 on June 30, 2000 and September 30, 1999, respectively. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended June 30, 2000, the Company utilized cash flow in operating activities to build inventory, pay bonuses and satisfy other accrued expenses. Cash was provided by operating activities through increases in accounts payable to finance inventory. During the nine-month period ended June 30, 2000, cash was provided by investing activities primarily through the sale of real estate and was utilized in investing activities primarily to fund purchases of fixed assets. Cash was utilized in financing activities to reduce borrowings on the Company's revolving lines of credit and to satisfy current long-term debt obligations. The Company had working capital of approximately $19.9 million as of June 30, 2000 compared to $18.7 million as of September 30, 1999. The Company's debt to equity ratio was 3.14 to 1 at June 30, 2000 compared to 4.17 at September 30, 1999. The decrease was due to a reduction in the amount borrowed under the Company's revolving credit facilities. The Company maintains two revolving credit facilities, the AMCON Distributing Company revolving credit facility (the "Facility") and the FFH revolving credit facility (the "FFH Facility"). The Facility was amended in September 1999 to increase the primary borrowing limit from $20 million to $25 million and remove the additional $10 million facility which was collateralized by specific inventory. The Facility allows the Company to borrow up to $25 million at any time, subject to eligible accounts receivable and inventory requirements, and provides for an additional $1.5 million facility to be used for transportation equipment purchases. The Facility bears interest at the bank's base rate ("Prime") less 0.5% or LIBOR plus 1.75%, as selected by the Company. As of June 30, 2000, the Company had borrowed approximately $13.2 million under the Facility. The Facility is collateralized by all equipment, general intangibles, inventories and accounts receivable, and with a first mortgage on the owned distribution center. The Facility expires on February 25, 2002. The FFH Facility was amended in November 1999 to increase the amount provided for maximum borrowings from $6 million to $8 million. Borrowings under the FFH Facility are collateralized by the assets of FFH and are guaranteed by the Company. Amounts under the FFH Facility bear interest at Prime less 0.5% or LIBOR plus 2.0%, as selected by FFH. A commitment fee of .25% of the annual average unutilized amount of the commitment is required. As of June 30, 2000, FFH had borrowed approximately $6.4 million under the FFH Facility. The FFH Facility expires on February 25, 2002. The FFH Facility contains covenants which, among other things, set forth certain financial ratios and net worth requirements which adjust semiannually or annually as specified in the FFH Facility. As of June 30, 2000, FFH was not in compliance with several of its financial ratios due to the acquisition of Health Food Associates, Inc. ("HFA") in September 1999. The bank has provided FFH with an amendment to the Facility that, when executed, would bring FFH into compliance with the revised covenants. The Company has an outstanding term loan from a bank which was used to finance the purchase of the common stock of FFH (the "Acquisition Loan"). The Acquisition Loan has a term of five years, bears interest at Prime less 0.5% or LIBOR plus 1.75%, as selected by the Company and requires monthly payments equal to accrued interest plus principal payments of $85,096, which began in August 1998. As of June 30, 2000, the outstanding balance of the Acquisition Loan was $2.5 million. FFH has an outstanding term loan from a bank which was used to finance the purchase of a Florida natural foods distributor in November 1998 (the "Term Loan"). The Term Loan bears interest at Prime less 0.5%, required payments of interest only for the first six months and monthly principal payments for the term of the loan. The Term Loan is collateralized by the assets of FFH. As of June 30, 2000, the outstanding balance of the Term Loan was $846,000. In September, 1999, FFH utilized borrowings under an 8% Convertible Subordinated Note (the "Convertible Note") and under a Collateralized Subordinated Promissory Note (the "Collateralized Note"), in addition to borrowing under the Facility, to purchase all of the common stock of HFA. Funding for the acquisition was provided as follows: $4.0 million through borrowings under the Facility; $2.0 million through borrowings under the Convertible Note; and $8.0 million through borrowings under the Collateralized Note. Both the Convertible Note and the Collateralized Note have five-year terms and bear interest at 8% per annum. Principal on the Convertible Note is due in a single payment at maturity. Principal on the Collateralized Note is payable in installments of $800,000 per year with the balance due at maturity. The Collateralized Note is collateralized by a pledge of the stock of HFA. The principal balance of the Convertible Note may be converted into stock of FFH under circumstances set forth in the Convertible Note. As of June 30, 2000, the outstanding balances of the Convertible Note and the Collateralized Note were $2.0 million and $8.0 million, respectively. The Company believes that funds generated from operations, supplemented as necessary with funds available under the Facility and the FFH Facility, 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 Company does not utilize financial instruments for trading purposes and holds no derivative financial instruments which could expose the Company to significant market risk. The Company's exposure to market risk relates primarily to its investment in the common stock of Consolidated Water Company (formerly Cayman Water Company), a public company traded on the Nasdaq National Market system, and to changes in interest rates to its long-term obligations. At June 30, 2000, the Company held 70,000 shares of common stock of Consolidated Water Company valued at $490,000. The Company values this investment at market and records price fluctuations in equity as unrealized gain or loss on investments. At June 30, 2000, the Company had $23.1 million of variable rate debt outstanding, with maturities through May 2004. The interest rates on this debt ranged from 8.38% to 9.00% at June 30, 2000. The Company has the ability to select the base on which its variable interest rates are calculated and may select an interest rate based on its lender's prime interest rate or based on LIBOR. This provides management with some control of the Company's variable interest rate risk. The Company estimates that its annual cash flow exposure relating to interest rate risk based on its current borrowings is approximately $144,000 for each 1% change in its lender's prime interest rate or LIBOR, as applicable. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) EXHIBITS 2.1 Stock Purchase Agreement dated November 3, 1997, between the Company and FFH Holdings, Inc. (incorporated by reference to Exhibit 2.1 of AMCON's Current Report on Form 8-K filed on November 25, 1997) 2.2 Stock Purchase Agreement dated February 24, 1999, between Food For Health Company, Inc. ("FFH"), an Arizona corporation and a wholly-owned subsidiary of AMCON, Chamberlin Natural Foods, Inc.("Chamberlin"), a Florida corporation, Dale C. Bennett, Dale C. Bennett as Trustee of the Alice M. Bennett Irrevocable Trust Dated August 8, 1991, Dale C. Bennett as Trustee of the Dale C. Bennett Revocable Trust dated August 8, 1991, Kirk D. Bennett and Chad W. Bennett as Trustees of the Dale C. Bennett Irrevocable Trust No. 1, Chad W. Bennett and Kirk D. Bennett (incorporated by reference to Exhibit 2.2 of AMCON's Quarterly Report on Form 10-Q filed on May 10, 1999) 2.3 Stock Purchase Agreement dated August 30, 1999, by and among Food For Health Company, Inc., a wholly-owned subsidiary of AMCON Distributing and Health Food Associates, Inc. (incorporated by reference to Exhibit 2.1 of AMCON's Current Report of Form 8-K filed on September 30, 1999) 3.1 Restated Certificate of Incorporation of the Company, as amended March 19, 1998 (incorporated by reference to Exhibit 3.1 of AMCON's Quarterly Report on Form 10-Q filed on May 11, 1998) 3.3 Bylaws of the Company (incorporated by reference to Exhibit 3.2 of AMCON's Registration Statement on Form S-1 (Registration No. 33-82848) filed on August 15, 1994) 4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of AMCON's Registration Statement on Form S-1 (Registration No. 33-82848) filed on August 15, 1994) 10.1 Grant of Exclusive Manufacturing Rights, dated October 1, 1993, between the Company and Famous Value Brands, a division of Philip Morris Incorporated, including Private Label Manufacturing Agreement and Amended and Restated Trademark License Agreement (incorporated by reference to Exhibit 10.1 of Amendment No. 1 to AMCON's Registration Statement on Form S-1 (Registration No. 33-82848) filed on November 8, 1994) 10.2 Amendment No. 1 to Grant of Exclusive Manufacturing Rights, dated October 1, 1998, between the Company and Famous Value Brands, a division of Philip Morris Incorporated, including Amendment No. 1 To Private Label Manufacturing Agreement and Amendment No. 1 to Amended and Restated Trademark License Agreement (incorporated by reference to Exhibit 10.2 of AMCON's Annual Report on Form 10-K filed on December 24, 1998) 10.3 Loan Agreement, dated November 10, 1997, between the Company and LaSalle National Bank (incorporated by reference to Exhibit 10.1 of AMCON's Current Report on Form 8-K filed on November 25, 1997) 10.4 Amended Loan Agreement, dated February 25, 1998, between the Company and LaSalle National Bank (incorporated by reference to Exhibit 10.5 of AMCON's Quarterly Report on Form 10-Q filed on May 11, 1998) 10.5 Note, dated November 10, 1997, between the Company and LaSalle National Bank (incorporated by reference to Exhibit 10.2 of AMCON's Current Report on Form 8-K filed on November 25, 1997) 10.6 First Allonge to Note, dated February 25, 1998, between the Company and LaSalle National Bank (incorporated by reference to Exhibit 10.7 of AMCON's Quarterly Report on Form 10-Q filed on May 11, 1998) 10.7 Loan and Security Agreement, dated February 25, 1998, between the Company and LaSalle National Bank (incorporated by reference to Exhibit 10.8 of AMCON's Quarterly Report on Form 10-Q filed on May 11, 1998) 10.8 Promissory Note, dated February 25, 1998, between the Company and LaSalle National Bank (incorporated by reference to Exhibit 10.9 of AMCON's Quarterly Report on Form 10-Q filed on May 11, 1998) 10.9 Loan and Security Agreement, dated February 25, 1998, between Food For Health Co., Inc. and LaSalle National Bank (incorporated by reference to Exhibit 10.10 of AMCON's Quarterly Report on Form 10-Q filed on May 11, 1998) 10.10 Promissory Note, dated February 25, 1998, between Food For Health Co., Inc. and LaSalle National Bank (incorporated by reference to Exhibit 10.11 of AMCON's Quarterly Report on Form 10-Q filed on May 11, 1998) 10.11 First Amendment to Loan and Security Agreement, dated November 18, 1998, between Food For Health Co., Inc. and LaSalle National Bank (incorporated by reference to Exhibit 10.11 of AMCON's Quarterly Report on Form 10-Q/A filed on August 5, 1999) 10.12 First Amendment and Allonge to Promissory Note, dated November 18, 1998, between Food For Health Co., Inc. and LaSalle National Bank (incorporated by reference to Exhibit 10.12 of AMCON's Quarterly Report on Form 10-Q/A filed on August 5, 1999) 10.13 Unconditional Guarantee, dated February 25, 1998, between the Company and LaSalle National Bank (incorporated by reference to Exhibit 10.12 of AMCON's Quarterly Report on Form 10-Q filed on May 11, 1998) 10.14 8% Convertible Subordinated Note, dated September 15, 1999 by and between Food For Health Company Inc. and Eric Hinkefent, Mary Ann O'Dell, Sally Sobol, and Amy Laminsky (incorporated by reference to Exhibit 10.1 of AMCON's Current Report on Form 8-K filed on September 30, 1999) 10.15 Secured Promissory Note, dated September 15, 1999, by and between Food For Health Company, Inc. and James C. Hinkefent and Marilyn M. Hinkefent, as trustees of the James C. Hinkefent Trust dated July 11, 1994, as amended, Eric Hinkefent, Mary Ann O'Dell, Sally Sobol, and Amy Laminsky (incorporated by reference to Exhibit 10.2 of AMCON's Current Report on Form 8-K filed on September 30, 1999) 10.16 Pledge Agreement, dated September 15, 1999, by and between Food For Health Company, Inc. and James C. Hinkefent and Marilyn M. Hinkefent, as trustees of the James C. Hinkefent Trust dated July 11, 1994, as amended, Eric Hinkefent, Mary Ann O'Dell, Sally Sobol, and Amy Laminsky (incorporated by reference to Exhibit 10.3 of AMCON's Current Report on Form 8-K filed on September 30, 1999) 10.17 First Amended and Restated AMCON Distributing Company 1994 Stock Option Plan 10.18 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) 10.19 Employment Agreement, dated May 22, 1998, between the Company and William F. Wright (incorporated by reference to Exhibit 10.14 of the Company's Quarterly Report on Form 10-Q filed on August 6, 1998) 10.20 Employment Agreement, dated May 22, 1998, between the Company and Kathleen M. Evans (incorporated by reference to Exhibit 10.15 of the Company's Quarterly Report on Form 10-Q filed on August 6, 1998) 10.21 Employment Agreement, dated May 22, 1998, between the Food For Health Co., Inc. and Jerry Fleming (incorporated by reference to Exhibit 10.16 of the Company's Quarterly Report on Form 10-Q filed on August 6, 1998) 11.1 Statement re: computation of per share earnings (incorporated by reference to footnote 4 to the financial statements included in Item 1 of Part I herein) 27.0 Financial Data Schedules (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed by the Company during the quarter ended June 30, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. AMCON DISTRIBUTING COMPANY (registrant) Date: August 4, 2000 Kathleen M. Evans ----------------- ------------------------- Kathleen M. Evans President & Principal Executive Officer Date: August 4, 2000 Michael D. James ----------------- ------------------------- Michael D. James Treasurer & CFO and Principal Financial and Accounting Officer EX-10.17 2 0002.txt FIRST AMENDED AND RESTATED STOCK OPTION PLAN AMCON DISTRIBUTING COMPANY FIRST AMENDED AND RESTATED 1994 STOCK OPTION PLAN ARTICLE I PURPOSE; DEFINITIONS Section 1.1. STATEMENT OF POLICY. The Board of Directors of AMCON DISTRIBUTING COMPANY, a Delaware corporation (the "Company"), believes that it is in the best interest of the Company and its shareholders to retain the services of the directors, officers and key employees of the Company, to attract and induce new executives and other key employees to become associated with the Company and to establish a close identity between the interests of the Company and its shareholders with those of the directors, officers and key employees of the Company and, accordingly, has caused the Company to adopt this First Amended and Restated 1994 Stock Option Plan (the "Plan") which provides for both Incentive Stock Options (as defined in Section 1.2 of the Plan) and Nonqualified Stock Options (as defined in Section 1.2 of the Plan) and which amends and restates in its entirety the 1994 Stock Option Plan which become effective on June 2, 1994. Section 1.2. Definitions. When used in this Plan, unless the context otherwise requires: "AFFILIATE" shall mean any entity, other than its Subsidiaries, in which the Company has a direct or indirect equity interest, as determined by the Board of Directors. "AWARD" shall mean the award of Incentive Stock Options or Nonqualified Stock Options under the Plan. "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company as constituted from time to time. "CODE" shall mean the United States Internal Revenue Code of 1986, as amended from time to time, or any statutes succeeding thereto. "COMMITTEE" shall mean the Compensation Committee designated by the Board of Directors to administer the Plan under Section 3.1 hereof; provided, however, that all members of the Committee must qualify as "outside directors" within the meaning of Treasury Regulation 1.162-27(e)(3). "COMMON STOCK" and "STOCK" shall each mean the Common Stock of the Company. "COMPANY" shall mean AMCON Distributing Company, a Delaware corporation. "DISINTERESTED PERSON" shall mean a person defined in Rule 16b-3(d)(3) promulgated by the Securities and Exchange Commission under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission. "EMPLOYEE" shall mean an officer or other key employee of the Company or any of its Subsidiaries or Affiliates, including a director who is such an employee. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated pursuant thereto. "FAIR MARKET VALUE" shall mean, on the date of determination: (i) if the Company's Common Stock is listed on a national securities exchange or is quoted on the NASDAQ National Market System, the average of the high and low quotations at which the Common Stock was traded on the date of determination or, if the Common Stock was not traded on the date of determination or such national securities exchange or the NASDAQ National Market System was not open for business on such date, the average of the high and low quotations at which the Common Stock was traded on the closest preceding date on which such Common Stock was traded on such national securities exchange or the NASDAQ National Market System; (ii) if the Company's Common Stock is not listed on a national securities exchange or quoted on the NASDAQ National Market System but is otherwise traded in the over-the-counter market, the average of the closing bid and asked quotations on the date of determination or, if there are no bid and asked quotations for the Company's Common Stock on the date of determination, the average of the closing bid and asked quotations for such Common Stock on the closest preceding date on which such Common Stock was traded; or (iii) if no public market exists for the Company's Common Stock on the date of determination, the Committee shall, in its sole discretion and best judgment, determine the fair market value of the Company's Common Stock. For all purposes of this Plan, the determination by the Committee of Fair Market Value shall be conclusive. "HOLDER" shall mean an Employee to whom an Award has been made. "INCENTIVE STOCK OPTIONS" shall mean options which meet the requirements for Incentive Stock Options in Section 422 of the Code. "NONQUALIFIED STOCK OPTIONS" shall mean stock options which do not meet the requirements for Incentive Stock Options, as defined above in this Section 1.2, and stock options which do meet such requirements but which the Committee designates as Nonqualified Stock options. "OPTION AGREEMENT" shall mean each Agreement referred to in Section 12 of this Plan between the Company and any person to whom an Option is granted. "OPTIONS" shall mean the Incentive Stock Options and Nonqualified Stock Options granted under this Plan. "Option Shares" shall have the meaning set forth in Section 8.4(a). "PLAN" shall mean this First Amended and Restated 1994 Stock Option Plan adopted by the Board of Directors, as such Plan from time to time may be amended as herein provided. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated pursuant thereto. "SUBSIDIARY" shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. "TEN PERCENT SHAREHOLDER" shall mean a person who on any given date owns, either directly or within the meaning of the attribution rules contained in Section 425(d) of the Code, capital stock possessing more than 10% of the total combined voting powers of all capital stock of the Company or a Subsidiary. ARTICLE II ELIGIBILITY Persons eligible to receive Awards under this Plan shall be any Employee as the Committee, in its sole discretion, may select. However, in no event may Incentive Stock Options be granted to Employees of Affiliates. ARTICLE III ADMINISTRATION OF PLAN Section 3.1. COMMITTEE. This Plan shall be administered by the Committee, which shall consist of two or more members of the Board of Directors selected by the Board of Directors, each of which shall be a Disinterested Person. The Committee shall have absolute authority, subject only to the express provisions of this Plan, (a) to determine in its sole discretion the Employees to whom, and the time or times at which, Awards shall be made, the number of shares to be covered by each Award and whether an Award shall consist of Incentive Stock Options or Nonqualified Stock Options or both; provided, however, that Incentive Stock Options may be granted only to persons who are Employees of the Company and its Subsidiaries; (b) to interpret this Plan and to prescribe, amend and rescind the rules and regulations relating to it; (c) to determine the terms and provisions of the Awards and the respective Option Agreements (which need not be identical), including without limitation such terms and provisions as may be requisite in the judgment of the Committee (i) to cause this Plan and the Options and Common Stock issued pursuant to the Plan to be registered on Form S-8 promulgated pursuant to the Securities Act, and the applicable rules and regulations thereunder, or any other appropriate form, (ii) to provide for the reimbursement of the Company for taxes paid or advanced in respect of the issuance to Employees of Options or Common Stock under the Plan and (iii) to set forth the form of restrictive legends to be placed on certificates representing shares of Common Stock to be issued pursuant to Options relating to obligations of the Holders under the federal and state securities laws and under the Code; (d) unilaterally and without approval of a Holder to amend an existing Award in order to carry out the purposes of this Plan (so long as such an amendment does not take away any benefit granted to a Holder by the Award and so long as the amended Award would comport with the terms of this Plan); and (e) to make all other determinations deemed necessary or advisable for the granting of Awards and the administration of this Plan. Any interpretation by the Committee of the terms and provisions of this Plan and the administration hereof, and all action taken by the Committee, shall be final and binding upon Plan participants. Section 3.2. VACANCIES. If a member of the Committee for any reason shall cease to serve, the vacancy may be filled by the Board of Directors in accordance with the bylaws of the Company and this Plan. Section 3.3. REMOVAL. Any member of the Committee may be removed at any time, with or without cause, by the Board of Directors. Section 3.4. CHAIRMAN AND SECRETARY. (a) The Board of Directors or the Committee shall select one of the members of the Committee as the Committee's Chairman who shall preside at all meetings of the Committee and shall have such other duties and responsibilities as may be assigned to him or her by the Committee. (b) The Committee may appoint a secretary, who shall keep minutes of its meetings and make such rules and regulations for the conduct of its business as the Committee may deemed advisable. Section 3.5. MEETINGS AND ACTIONS BY CONSENT. The Committee shall hold its meetings at such times and places as it shall deem advisable. A majority of its members shall constitute a quorum. All determinations of the Committee shall be made by at least a majority of the members attending a meeting at which a quorum is present. Any decision or determination which could be made or any action taken by the Committee at a duly called meeting at which a quorum is present may also be made or taken by written consent of all of the members of the Committee. ARTICLE IV SHARES OF COMMON STOCK SUBJECT TO PLAN (a) The Committee may, but shall not be required to, grant in accordance with this Plan both Incentive Stock Options and Nonqualified Stock Options to purchase not more than, in the aggregate, 550,000 shares of the Common Stock. The Company shall reserve and keep available the number of shares of Common Stock that are necessary to satisfy the requirements of the Plan during the term hereof. Such shares of Common Stock may be authorized and unissued shares or issued shares held in the Company's treasury. Said number of shares shall be computed prior to any adjustment resulting from stock dividends, stock splits, reorganizations or other substitutions of securities for the present Common Stock of the Company. (b) Any shares of Common Stock issued by the Company as a result of the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares of Common Stock available for Awards under this Plan. If any shares of Common Stock subject to any Award granted hereunder are forfeited or such Award otherwise terminates without the issuance of such shares or the payment of other consideration in lieu of such shares, the shares of Common Stock subject to such Award, to the extent of any such forfeiture or termination, shall again be available for Awards under the Plan. (c) Notwithstanding any other provision of this Plan to the contrary, the Committee shall not award Options to any employee included in the group consisting of "covered employees" within the meaning of Treasury Regulation 1.162-27(c)(2) that would cause the compensation for such employee to exceed the limitations imposed by Treasury Regulation 1.162-27(b), as it shall be amended from time to time. Furthermore, during a year with respect to which the individual is a covered employee, an Option granted in such year or any previous year may not be repriced or, if cancelled, may not be reissued to such individual unless the number of shares covered by such Option are again counted against the limitation contained in the preceding sentence for the year in which such Option is reissued or repriced. ARTICLE V OPTIONS Section 5.1. OPTION GRANTS. Options shall be evidenced by Option Agreements. An Option Agreement signed by the Chairman, the President or any other officer of the Company designated by the Chairman or the Board of Directors, and attested by the Treasurer or Assistant Treasurer or Secretary or Assistant Secretary of the Company, shall be issued to each Holder to whom an Award is granted. The form and provisions of each Option Agreement shall be determined by the Committee in accordance with the terms of this Plan. If a Holder does not execute an Option Agreement in the form prescribed by the Committee within 30 days from the grant thereof, the grant of such Award shall be deemed to be void ab initio and of no further force or effect. Section 5.2. TIME FOR GRANT OF AWARDS. Awards may be granted by the Committee pursuant to this Plan from time to time for a period beginning June 1, 1994 and ending June 1, 2004. Nothing herein shall be construed to prohibit the issuance of Awards at different times to the same Employee. Section 5.3. NUMBER OF SHARES TO BE OPTIONED AND NATURE OF OPTION. Subject to Article IV of this Plan, the total number of shares to be optioned to any Employee and whether the Option shall be an Incentive Stock Option or a Non-Qualified Stock Option shall be determined by the Committee in its sole discretion; provided, however, that, in the case of Incentive Stock options, the aggregate Fair Market Value, determined as of the time the Option is granted, of the Stock with respect to which Incentive Stock Options may be exercisable for the first time by any individual during any calendar year shall not exceed $100,000. Section 5.4. INCENTIVE STOCK OPTION. Each provision of this Plan and each Option Agreement relating to an Incentive Stock Option shall be construed so that each Incentive Stock Option shall be an incentive stock option as defined in Section 422A of the Code, and any provisions thereof that cannot be so construed shall be disregarded. In no event may a Holder be granted Incentive Stock Options which do not comply with such grant and vesting limitations as may be prescribed by Section 422A(b)(7) of the Code. Incentive Stock Options may not be granted to Employees of Affiliates. Section 5.5. TERM OF OPTIONS. The Option Agreements shall specify when an Option may be exercisable and the terms and conditions applicable thereto, including any vesting requirements. In no event may an Option become exercisable until the expiration of six months from the date of grant. The term of an Option, whether an Incentive Stock Option or a Nonqualified Stock Option, shall in no event be exercisable more than 10 years (five years in the case of an Incentive Stock Option granted to a Ten Percent Shareholder), or such shorter period, if any, as may be necessary to comply with the requirements of state securities laws, from the date such Option is granted, except to the extent provided in Section 6.1(c) of this Plan. Section 5.6. ASSIGNABILITY OF OPTIONS. Options and all rights thereunder shall by their terms be nonassignable and nontransferable by the Holder (otherwise than by will or the laws of descent and distribution), and any attempt to do so shall be null and void. Options shall be exercisable during the lifetime of the Holder only by the Holder. Nothing contained herein shall be deemed inconsistent with the provisions hereinafter set forth pertaining to the exercise of an Option by the estate of a deceased Holder pursuant to Section 6.1 of this Plan. Section 5.7. OPTION PRICE. The price at which Common Stock may be purchased upon exercise of an Option shall be determined by the Committee but shall be not less than the Fair Market Value of the Common Stock on the date such Option is granted. In the case of an Incentive Stock Option granted to a Ten Percent Shareholder, the exercise price shall not be less than 110% of the Fair Market Value of the Common Stock on the date such Incentive Stock Option is granted. ARTICLE VI EXERCISE OF OPTIONS Section 6.1. DEATH, DISABILITY, RETIREMENT OR TERMINATION OF EMPLOYMENT WITH CONSENT. Notwithstanding the provisions of Section 6.2 of this Plan, Options granted to a Holder may be exercised as follows: (a) In the event of such Holder's retirement (including, without limitation, any early retirement permitted by the Company) or other termination of the Holder's employment with consent, such Holder's Option may be exercised, regardless of tax consequences, to the extent vested and exercisable on the date of retirement or termination as provided in the Option Agreement applicable to such Option (or, if so determined by the Committee in its sole discretion, up to the full extent thereof, whether or not vested) at any time within 90 days following the date of such retirement or termination. As used herein, a Holder's employment with the Company shall be deemed to have been terminated "with consent" if the Company has provided its express written consent to the exercise of the Holder's Options following such termination. (b) In the event of the death or the permanent physical or mental disability (as such disability shall be determined by a physician selected by the Company) of the Holder either (i) while employed by the Company or a Subsidiary or an Affiliate or (ii) (with respect to a Nonqualified Stock Option only) while eligible to exercise his Option pursuant to Section 6.1(a) of this Plan following the termination of his employment, such Holder's Options may be exercised, to the extent vested on the date of death or determination of disability (or, if so determined by the Committee in its sole discretion, up to the full extent thereof, whether or not vested), at any time within one year following the Holder's death or such determination of disability, by the Holder, the executors or administrators of the Holder or any person who shall have acquired the Option from the Holder by bequest or inheritance. In the event of termination of employment by reason of disability or retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422A of the Code, such Incentive Stock Option will thereafter be treated as a Nonqualified Stock Option. (c) Notwithstanding the foregoing provisions, in no event may an Option be exercised (i) prior to shareholder approval of this Plan, (ii) prior to vesting requirements (other than as provided in this Plan), if any, contained in any Option Agreement or (iii) subsequent to the expiration of its term, except that a Nonqualified Stock Option shall be exercisable, to the extent provided in Section 6.1(b) of this Plan, for a maximum of one year following the death of a Holder, or the date on which such Holder is determined to have a permanent physical or mental disability, regardless of its original term. Section 6.2. TERMINATION OF EMPLOYMENT UNDER OTHER CIRCUMSTANCES. In the event of the termination of the employment of a Holder for any reason other than by reason of the Holder's death, disability or retirement or with the written consent of the Company, all Options granted to such Holder which have not been exercised by such Holder prior to the time of such termination, whether or not vested, shall be then terminated and thereafter may not be exercised by the Holder. Options granted under this Plan, however, shall not be affected by any change of employment so long as the Holder of the Option continues to be an Employee of the Company or a Subsidiary or an Affiliate. Section 6.3. HOW EXERCISABLE. (a) An Option shall be exercisable by delivery of a duly signed notice in writing to such effect (an "Exercise Notice") and the full purchase price of the Common Stock purchased pursuant to the exercise of the Option to the Treasurer of the Company or to any other officer of the Company appointed by the Committee for the purpose of receiving the same; provided, however, that no Option issued pursuant to this Plan may be exercised at any time when the Option or the granting or the exercise thereof violates any law or governmental order or regulation. (b) Delivery of the full purchase price shall be satisfied either: (a) by payment in cash of the full purchase price, (b) by tender of such number of shares of the Company's Common Stock owned either (i) by the Holder prior to exercise of the Option or (ii) with the consent of the Committee, by the Holder as a result of the exercise of the Option, as is equal in value (as determined by its Fair Market Value at the close of business on the last business day before the date of delivery) to the full purchase price or (c) by delivery of any combination of cash and such shares of the Company's Common Stock (valued as set forth above) which, in the aggregate, is equal in value to the full purchase price, subject to compliance with applicable securities laws. Whenever all or any portion of the purchase price payable upon exercise of an Option is paid by the delivery of shares of the Company's Common Stock, tender of such shares shall be accompanied by a duly executed stock power and by payment of the requisite stock transfer tax, if any. The Committee may also require the Holder to make such representations as to his title, authority to transfer such title and any other facts as it may deem appropriate. In connection with the exercise of a Nonqualified Stock Option, the Committee may require the Holder to remit an amount in cash or in Common Stock sufficient to satisfy all federal, state and local requirements to withhold taxes. Section 6.4. ISSUANCE OF SHARES. Within a reasonable time after the exercise of an Option, the Company shall cause to be delivered to the purchaser a certificate representing the shares of Common Stock purchased pursuant to the exercise of the Option. Section 6.5. SHAREHOLDER RIGHTS OF HOLDER. No Holder entitled to exercise an Option awarded under this Plan shall have any rights or privileges as a shareholder of the Company in respect of any Common Stock issuable upon exercise of such Option until such Option has been duly exercised in accordance with the terms hereof and the applicable Option Agreement and the full purchase price is tendered therefor. Section 6.6. TERMINATION OF OPTIONS. Any Option not exercised within the period fixed for its exercise in an Option Agreement and this Article VI shall terminate and become null and void. Section 6.7. UNEXERCISED OPTIONS. Common Stock covered by Options which have terminated in accordance with the provision of this Plan, to the extent to which such Options have not been exercised, may be treated by the Committee as Common Stock which is eligible for other and further granting of Options in accordance with the terms of this Plan. Section 6.8. CASH-OUT OF VESTED OPTIONS. The Committee may in its sole discretion cancel the vested portion of any Options held by a Holder who is at such time no longer an Employee of the Company or any of its Subsidiaries or Affiliates in exchange for a cash payment equal to the difference between (a) the Fair Market Value of the shares subject to such vested Options and (b) the Option Price for such shares. ARTICLE VII NOT AN EMPLOYMENT CONTRACT Anything contained herein or in any Option Agreement notwithstanding, neither this Plan, any Option Agreement nor any Option granted pursuant to this Plan shall confer on an individual any right to continue in the employ or service of the Company or any Subsidiary or Affiliate or interfere in any way with the right of the Company or such Subsidiary or Affiliate at any time to terminate or modify the terms or conditions of the employment or service of the Holder of the Option. ARTICLE VIII RECAPITALIZATION, MERGER, CONSOLIDATION AND REORGANIZATION Section 8.1. CHANGE IN COMMON STOCK. (a) Appropriate and equitable adjustment shall be made in the number of shares of Common Stock subject to each outstanding Option or the exercise prices of such Options or both, in the event of any changes in the outstanding Common Stock by reason of a stock dividend, stock split, recapitalization, reorganization, merger, consolidation, sale or exchange of assets, combination or exchange of shares or offering of subscription rights, it being the purpose of this provision to ensure that an Option shall be adjusted to give the Holder, upon exercise of his Option, rights equivalent to the rights of a person who had held shares of Common Stock in the amount subject to the Option at the time the Option is granted. In applying this provision an adjustment shall be made for any changes occurring after the effective date of this Plan. (b) In the event of a change in the Common Stock of the Company as presently constituted, which is limited to a change of the par value status of any or all of its authorized shares, the shares resulting from any such change shall be deemed to be Common Stock within the meaning of this Plan. (c) To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. The Fair Market Value of any fractional shares resulting from adjustments pursuant to this Section 8.1 shall, where appropriate, be paid in cash to the Holder. Section 8.2. DISSOLUTION OR LIQUIDATION. In the event of the complete liquidation or dissolution of the Company other than as an incident to a merger, reorganization or other adjustment referred to in Section 8.1 above, any Options granted pursuant to this Plan and remaining unexercised shall be deemed cancelled without regard to or limitation by any other provision of this Plan. Section 8.3. RIGHTS OF HOLDERS AND THE COMPANY. (a) Except as hereinbefore expressly provided in this Article VIII, a Holder shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger or consolidation or spin-off of assets or stock of another corporation, and any issue by the Company of shares of stock of any class or securities convertible into shares of stock of any class shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to any Option. (b) The grant of an Option pursuant to this Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes in its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell or transfer all or any part of its business or assets. Section 8.4. COMPLIANCE WITH SECURITIES ACT. (a) As soon as is reasonably practicable, the Company will use its best efforts to effect a registration on Form S-8 under the Securities Act with respect to all Options and all shares of Common Stock issuable upon exercise of the Options (the "Option Shares"); provided, however, that the Company shall not be obligated to effect, or to take any action to effect, any registration in any jurisdiction in which the Company would be required to execute a general consent to service of process in effecting registration unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act or "blue sky" laws of such jurisdiction, provided that the filing of a Form U-2 or similar form shall not be deemed to be a general consent to service of process for purposes of this subsection. In connection with any such registration, the Company shall: (i) promptly give written notice of the proposed registration to all Holders; (ii) use its reasonable best efforts to effect the registration of the Options held by the Holders and the Option Shares subject thereto (including, without limitation, filing post-effective amendments, appropriate qualifications under applicable "blue sky" or other state securities laws and appropriate compliance with the Securities Act) as would permit or facilitate the sale and distribution of such Options and Option Shares; (iii) keep the registration effective; (iv) prepare and file with the Securities and Exchange Commission such amendments and supplements to the registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement; (v) use its best efforts to cause all such Options and Option Shares registered pursuant hereto to be listed on each securities exchange on which similar securities issued by the Company are then listed or eligible for listing if the listing of such Options and Option Shares is then permitted under the rules of such exchange; and (vi) provide a transfer agent and registrar for all Options and Option Shares registered pursuant to such registration statement and a CUSIP number for all such Options and Option Shares, in each case not later than the effective date of such registration statement. (b) Prior to the effectiveness of any registration of the Option Shares, as provided in Section 8.4(a), the Company may postpone the issuance and delivery of shares of Common Stock upon any exercise of any Option until (i) the admission of such shares to listing on any stock exchange on which shares of the Company of the same class are then listed and the completion of such registration or other qualification of such shares under any state or federal law, rule or regulation as the Company shall determine to be necessary or advisable, (ii) insofar as any local "blue sky" law might affect the issuance of such shares, either the local Blue Sky Commission shall have ruled or counsel to the Company shall have advised that the issue is not subject to such local law or that such shares shall have been qualified under such law, (iii) counsel to the Holder has delivered an opinion to the Company, satisfactory in form and substance, to the effect that the issuance of such shares does not require registration under any federal or state securities laws or that any such registration as may be required shall be effective as of the time of issuance of such shares, (iv) the individual to whom the Option is granted shall have represented and agreed in writing that any shares purchased pursuant to the Option are being purchased for investment purposes only and not with a view to the distribution or resale thereof; provided, however, that a Holder making such representation and agreement may be released by the Company at its discretion from such representation and agreement upon the shares being registered or qualified in such manner as may be legally required at any time, and (v) the Committee shall have been advised by counsel that all applicable legal requirements pertaining to the issuance of such shares, including any requirements of the Securities Act, have been complied with. Any person exercising an Option shall make such representations and furnish such information as may be appropriate to permit the Company, in the light of the then existence or nonexistence of an effective registration statement under the Securities Act, with respect to such shares, to issue the shares in compliance with the provisions of that or any comparable law. (c) The Company shall not have any liability to any Holder or otherwise (i) in the event a registration does not occur with respect to the Option Shares or (ii) with respect to any Option the exercise of which is prevented by the provisions of Section 8.4(b). ARTICLE IX AMENDMENT, TERMINATION AND INTERPRETATION Section 9.1. TERMINATION. This Plan shall terminate on June 1, 2004. Section 9.2. AMENDMENT. Upon obtaining such approval of the stockholders of the Company as may be required by law (including Rule 16b-3 under the Exchange Act) or the applicable provisions of the securities exchange upon which the Common Stock is listed, the Board of Directors or the Committee may amend this Plan and the terms and conditions thereof as to any shares of Common Stock which have not then become the subject matter of Options awarded pursuant to the terms of this Plan, and the Board of Directors or the Committee, with the written consent of the affected Holders of any Options awarded pursuant to this Plan, may amend this Plan and the terms and conditions of this Plan as it regards any such Options held by such consenting Holders. Section 9.3. INTERPRETATION. A determination of the Committee as to any question which may arise with respect to the interpretation of the provisions of this Plan and of any Option or Option Agreement shall be final. Section 9.4. RULES AND REGULATIONS. The Committee may authorize and establish such rules, regulations and revisions thereof not inconsistent with the provisions of this Plan as it may determine advisable to make this Plan and the Options effective and provide for their administration, and may take such other actions with regard to this Plan and the Options as it shall deem desirable to effectuate their purposes. Section 9.5. EVIDENCE OF EACH OPTION. The Committee may include in each agreement or document it may issue to the Holder of any Option, evidencing the existence of such Option given or granted pursuant to the terms of this Plan, the text of this Plan by reference thereto in such certificate or document, and, in such event, the entire terms of this Plan as it may exist and as it may be amended from time to time shall be deemed included in such certificate or document with the same force and effect as though this Plan were set forth in its entirety in such agreement or document. ARTICLE X EFFECTIVENESS This Plan has been adopted and shall become effective on March 28, 2000. ARTICLE XI MISCELLANEOUS Section 11.1. SUBSTITUTED OPTIONS. Subject to the limitation in Section 4.1 hereof on total shares available for Options, Options to purchase shares of the Company's Common Stock may be issued under this Plan on terms and conditions which differ from or conflict with the terms and conditions set forth herein, provided that such Options are issued in substitution for outstanding Options held by persons who have become directors, officers or key employees of the Company or any of its Subsidiaries or Affiliates by reason of a corporate merger, consolidation, acquisition of property or capital stock, separation, reorganization or liquidation. EX-27 3 0003.txt FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Balance Sheet at June 30, 2000 and the Statement of Income for the Nine Months Ended June 30, 2000 (Unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS SEP-30-2000 OCT-01-1999 JUN-30-2000 805 0 19,589 774 26,277 47,300 13,291 7,136 68,827 27,405 23,522 0 0 27 16,599 68,827 339,664 339,664 297,982 297,982 0 0 2,244 5,693 2,095 3,599 0 0 0 3,599 1.32 1.26
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