SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported) May 24, 2006
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AMCON DISTRIBUTING COMPANY
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(Exact name of registrant as specified in its charter)
DELAWARE 1-15589 47-0702918
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
7405 Irvington Road, Omaha, NE 68122
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(Address of principal executive offices) (Zip Code)
(402) 331-3727
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
ITEM 4.02. NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED
AUDIT REPORT OR COMPLETED INTERIM REVIEW
In performing year end audit procedures as of and for the period ended September
30, 2005 on the Company's wholly-owned subsidiary, Hawaiian Natural Water
Company ("HNWC"), the auditors noted discrepancies in their physical test counts
and the final perpetual inventory records. These discrepancies led the Company
to initiate an internal investigation which resulted in the identification of
several areas where journal entries were recorded incorrectly including
inventory production accounting errors; the overstatement of inventory when
integrating in fiscal 2005 the production systems and records of an operation
acquired in fiscal 2004; capitalization of certain fixed overhead costs as
inventory which should have been expensed; failure to reserve an appropriate
amount for inventory that became obsolete; and capitalization of certain product
development costs that should have been expensed as incurred. The above led to
an overstatement of inventory, other assets and net income by an aggregate of
approximately $685,000, after tax over the first nine months of fiscal 2005.
Based on the results of the investigation, (a) these errors were generally
caused by deficiencies in internal control over financial reporting, including
deficiencies in disclosure controls and procedures, discussed below in this Form
8-K/A; (b) the scope of the errors were contained in fiscal 2005, and (c) the
errors were concentrated in the areas discussed above.
When AMCON corporate management became aware of the issues referenced above, it
reported these problems to the Audit Committee and Deloitte and Touche, the
Company's independent registered public accountants. AMCON corporate management
has discussed the investigation, the resolution of the problems and
strengthening of internal controls with the Audit Committee and its independent
registered public accountants.
On January 16, 2006, the Company issued a press release disclosing management's
investigation into the above.
As a result of the accounting errors, management and the Company's Audit
Committee determined on May 24, 2006 that the Company's first, second and third
quarter financial statements for fiscal 2005 filed on Form 10-Qs with the
Securities and Exchange Commission on February 14, 2005, May 27, 2005 and August
22, 2005, respectively, should no longer be relied upon because of these errors
and that these financial statements should be restated to correct these errors.
Management and the Audit Committee have discussed with the Company's independent
registered public accountants that these financial statements can no longer be
relied upon.
The foregoing incorrect accounting entries resulted from the following material
weaknesses in internal control over financial reporting:
a) The Company did not maintain sufficient levels of appropriately
qualified and trained personnel in the accounting office of HNWC, specifically
as they related to the integration of new business operations and the
application of certain complex aspects of inventory and manufacturing
accounting; and
b) The Company did not maintain sufficient oversight and review of the
disclosure controls and procedures of its subsidiaries during fiscal year 2005
to identify the significant deficiencies in the internal controls over financial
reporting at HNWC in a timely manner.
2
The following changes in our internal control over financial reporting were made
to correct the deficiencies noted above. These changes occurred during the first
and second quarters of fiscal year 2006 and have significantly strengthened our
internal control over financial reporting:
1) AMCON corporate management terminated HNWC's then current President and
Chief Financial Officer.
2) AMCON corporate management hired a new acting president and a highly
qualified accounting consultant at HNWC to investigate the irregularities and to
guide internal accounting personnel in the application of generally accepted
accounting principles related to inventory and production cost accounting.
3) HNWC hired accounting staff with more experience.
4) HNWC management is reviewing all product cost summaries and all posting
of inventory cost changes.
5) AMCON corporate management implemented procedures to ensure proper
review and approval of all adjusting journal entries posted at HNWC, as well as,
increasing monthly review of subsidiary financial statements.
The table set forth below gives effect to these restatements. Management expects
to restate the quarterly financials prospectively as each quarter is filed in
fiscal 2006.
A summary of the significant effects of this restatement by quarter is as
follows:
FIRST FISCAL QUARTER ENDED DECEMBER 31, 2004
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As previously
reported Corrections As restated
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Condensed Consolidated Unaudited Balance Sheet
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Inventory $ 35,454,419 $ (574,165) $ 34,880,254
Deferred income taxes 2,618,391 232,000 2,850,391
Other assets 1,485,457 (108,759) 1,376,698
Retained earnings 6,397,550 (450,924) 5,946,626
Condensed Consolidated Unaudited Statement of Operations
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Cost of sales $ 198,459,240 $ 574,165 $199,033,405
Selling, general and administrative expenses 13,824,366 108,759 13,933,125
Income tax (benefit) expense 224,000 (232,000) (8,000)
Net (loss) income (85,599) (450,924) (536,523)
Basic (loss) earnings per share (0.16) (0.86) (1.02)
Diluted (loss) earnings per share (0.02) (0.86) (1.02) /1/
/1/ Before this restatement, the impact of the conversion of the stock options
and preferred stock was dilutive to earnings per share because there was income
from continuing operations. After making the corrections for the restatement,
there will now be a loss from continuing operations which makes the impact of
the conversion of the stock options and preferred stock was antidilutive. This
antidilutive impact results in a loss of ($1.02) per dilutive share.
3
Condensed Consolidated Unaudited Statement of Cash Flows
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Income (loss) from continuing operations $ 394,063 $ (450,924) $ (56,861)
available to common shareholders
Deferred income taxes (45,224) (232,000) (277,224)
Inventory (464,962) 574,165 109,203
Other assets (28,512) 108,759 80,247
SECOND FISCAL QUARTER ENDED MARCH 31, 2005
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Condensed Consolidated Unaudited Balance Sheet /2/
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As previously
reported Corrections As restated
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Inventory $ 30,304,173 $ (689,993) $ 29,614,180
Deferred income taxes 3,729,391 279,000 4,008,391
Other assets 1,494,754 (129,904) 1,364,850
Retained earnings 4,509,877 (540,897) 3,968,980
Condensed Consolidated Unaudited Statement of Operations /2/
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Three months ended March 31, 2005 Six months ended March 31, 2005
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As previously As previously
reported Corrections As restated reported Corrections As restated
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Cost of sales $180,236,017 $115,828 $180,351,845 $378,695,256 $689,993 $379,385,249
Selling, general
and administrative expenses 13,727,633 21,145 13,748,778 27,551,999 129,904 27,681,903
Income tax (benefit) expense (565,000) (47,000) (612,000) (341,000) (279,000) (620,000)
Net (loss) income (1,887,674) (89,973) (1,977,647) (1,973,273) (540,897) (2,514,170)
Basic (loss) earnings per share (3.58) (0.17) (3.75) (3.74) (1.03) (4.77)
Diluted (loss) earnings per share (3.58) (0.17) (3.75) (3.74) (1.03) (4.77)
Condensed Consolidated Unaudited Statement of Cash Flows /2/
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As previously
reported Corrections As restated
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Net income (loss) from continuing operations $ (603,991) $ (540,897) $ (1,144,888)
available to common shareholders
Deferred income taxes (1,137,076) (279,000) (1,416,076)
Inventory 4,639,543 689,993 5,329,536
Other assets (37,810) 129,904 92,094
THIRD FISCAL QUARTER ENDED JUNE 30, 2005
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Condensed Consolidated Unaudited Balance Sheet /2/
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As previously
reported Corrections As restated
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Inventory $ 28,939,608 $ (889,612) $ 28,049,996
Deferred income taxes 3,780,391 353,000 4,133,391
Other assets 1,570,434 (148,884) 1,421,550
Retained earnings 4,354,000 (685,496) 3,668,504
4
Condensed Consolidated Unaudited Statement of Operations /2/
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Three months ended June 30, 2005 Nine months ended June 30, 2005
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As previously As previously
reported Corrections As restated reported Corrections As restated
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Cost of sales $201,251,586 $199,619 $201,451,205 $579,946,842 $889,612 $580,836,454
Selling, general
and administrative expenses 13,693,711 18,980 13,712,691 41,245,710 148,884 41,394,594
Income tax (benefit) expense 138,000 (74,000) 64,000 (203,000) (353,000) (556,000)
Net (loss) income (155,877) (144,599) (300,476) (2,129,150) (685,496) (2,814,646)
Basic (loss) earnings per share (0.30) (0.27) (0.57) (4.04) (1.30) (5.34)
Diluted (loss) earnings per share (0.28) (0.27) (0.55) (4.04) (1.30) (5.34)
Condensed Consolidated Unaudited Statement of Cash Flows /2/
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As previously
reported Corrections As restated
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Income (loss) from continuing operations $ (441,609) $ (685,496) $ (1,127,105)
available to common shareholders
Deferred income taxes (1,205,608) (353,000) (1,558,608)
Inventory 5,911,793 889,612 6,801,405
Other assets (191,170) 148,884 (42,286)
/2/ In March 2006, the Company discontinued the operations of Trinity Springs,
Inc., its water bottling operation located in Idaho. As a result, the balance
sheets as of March 31, 2005 and June 30, 2005 and the statements of operations
and statements of cash flows for the fiscal periods then ended will be prepared
reflecting TSI's financial results as discontinued operations in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" when filed. As a result, the
information presented above will differ from the actual financial statements to
be filed with the SEC.
SIGNATURE
Pursuant to the requirements of the Securities and 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: June 20, 2006 By : /s/ Andrew C. Plummer
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Name: Andrew C. Plummer
Title: Vice President & Acting
Chief Financial Officer
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