Amcon (DIT) 10-Q for FY2020 Q1, filed Jan 21, 2020

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended December 31, 2019

☐	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 1-15589

amcon_4c_logo.eps

(Exact name of registrant as specified in its charter)

Delaware		47-0702918
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

7405 Irvington Road, Omaha NE		68122
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (402) 331-3727

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	DIT	NYSE American

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐		Non-accelerated filer ☒

Smaller reporting company ☒Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

The Registrant had 565,833 shares of its $.01 par value common stock outstanding as of January 15, 2020.

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Form 10-Q

1st Quarter

INDEX


December 31, 2019	PAGE

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed consolidated balance sheets at December 31, 2019 (unaudited) and September 30, 2019	3

Condensed consolidated unaudited statements of operations for the three months ended December 31, 2019 and 2018	4

Condensed consolidated unaudited statements of shareholders’ equity for the three months ended December 31, 2019 and 2018	5

Condensed consolidated unaudited statements of cash flows for the three months ended December 31, 2019 and 2018	6

Notes to condensed consolidated unaudited financial statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3. Quantitative and Qualitative Disclosures About Market Risk	23

Item 4. Controls and Procedures	24

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	25

Item 1A. Risk Factors	25

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3. Defaults Upon Senior Securities	25

Item 4. Mine Safety Disclosures	25

Item 5. Other Information	25

Item 6. Exhibits	26

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

AMCON Distributing Company and Subsidiaries

Condensed Consolidated Balance Sheets

December 31, 2019 and September 30, 2019


	December	September
	2019	2019
	(Unaudited)
ASSETS
Current assets:
Cash	439,991	337,704
Accounts receivable, less allowance for doubtful accounts of 1.2 million at December 2019 and 0.9 million at September 2019	31,466,281	24,665,620
Inventories, net	62,958,790	102,343,517
Income taxes receivable	254,606	350,378
Prepaid and other current assets	8,464,551	7,148,459
Total current assets	103,584,219	134,845,678

Property and equipment, net	18,323,979	17,655,415
Operating lease right-of-use assets, net	20,523,782	—
Goodwill	4,436,950	4,436,950
Other intangible assets, net	500,000	500,000
Other assets	231,527	273,579
Total assets	147,600,457	157,711,622

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	17,189,294	18,647,572
Accrued expenses	6,608,838	8,577,972
Accrued wages, salaries and bonuses	1,960,785	3,828,847
Current operating lease liabilities	5,460,582	—
Current maturities of long-term debt	537,285	532,747
Total current liabilities	31,756,784	31,587,138

Credit facility	33,524,029	60,376,714
Deferred income tax liability, net	1,978,165	1,823,373
Long-term operating lease liabilities	15,397,681	—
Long-term debt, less current maturities	2,989,526	3,125,644
Other long-term liabilities	—	42,011

Shareholders’ equity:
Preferred stock, .01 par value, 1,000,000 shares authorized	—	—
Common stock, .01 par value, 3,000,000 shares authorized, 565,833 shares outstanding at December 2019 and 552,614 shares outstanding at September 2019	8,692	8,561
Additional paid-in capital	24,192,954	23,165,639
Retained earnings	66,592,637	66,414,397
Treasury stock at cost	(28,840,011)	(28,831,855)
Total shareholders’ equity	61,954,272	60,756,742
Total liabilities and shareholders’ equity	147,600,457	157,711,622

All values are in US Dollars.

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

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AMCON Distributing Company and Subsidiaries

Condensed Consolidated Unaudited Statements of Operations

for the three months ended December 31, 2019 and 2018


	For the three months ended December
	2019	2018
Sales (including excise taxes of 94.0 million and 93.0 million, respectively)	360,101,103	344,733,920
Cost of sales	339,256,392	324,101,782
Gross profit	20,844,711	20,632,138
Selling, general and administrative expenses	18,952,735	17,957,214
Depreciation and amortization	725,461	608,008
	19,678,196	18,565,222
Operating income	1,166,515	2,066,916

Other expense (income):
Interest expense	472,423	322,950
Other (income), net	(6,778)	(3,355)
	465,645	319,595
Income from operations before income taxes	700,870	1,747,321
Income tax expense	249,000	502,000
Net income available to common shareholders	451,870	1,245,321

Basic earnings per share available to common shareholders	0.80	2.02
Diluted earnings per share available to common shareholders	0.80	1.99

Basic weighted average shares outstanding	562,578	617,858
Diluted weighted average shares outstanding	567,794	624,525

Dividends declared and paid per common share	0.18	0.18

All values are in US Dollars.

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

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AMCON Distributing Company and Subsidiaries

Condensed Consolidated Unaudited Statements of Shareholders’ Equity

for the three months ended December 31, 2019 and 2018


					Additional
	Common Stock		Treasury Stock		Paid in	Retained
	Shares	Amount	Shares	Amount	Capital	Earnings	Total
THREE MONTHS ENDED DECEMBER 2018
Balance, October 1, 2018	844,089	8,441	(228,312)	(21,324,752)	22,069,098	63,848,030	64,600,817
Dividends on common stock, 0.46 per share	—	—	—	—	—	(296,936)	(296,936)
Compensation expense and issuance of stock in connection with equity-based awards	11,950	120	—	—	1,041,615	—	1,041,735
Repurchase of common stock	—	—	(10,432)	(918,085)	—	—	(918,085)
Net income	—	—	—	—	—	1,245,321	1,245,321
Balance, December 31, 2018	856,039	8,561	(238,744)	(22,242,837)	23,110,713	64,796,415	65,672,852

THREE MONTHS ENDED DECEMBER 2019
Balance, October 1, 2019	856,039	8,561	(303,425)	(28,831,855)	23,165,639	66,414,397	60,756,742
Dividends on common stock, 0.46 per share	—	—	—	—	—	(273,630)	(273,630)
Compensation expense and issuance of stock in connection with equity-based awards	13,328	131	—	—	1,027,315	—	1,027,446
Repurchase of common stock	—	—	(109)	(8,156)	—	—	(8,156)
Net income	—	—	—	—	—	451,870	451,870
Balance, December 31, 2019	869,367	8,692	(303,534)	(28,840,011)	24,192,954	66,592,637	61,954,272

All values are in US Dollars.

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

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AMCON Distributing Company and Subsidiaries

Condensed Consolidated Unaudited Statements of Cash Flows

for the three months ended December 31, 2019 and 2018


	December	December
	2019	2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	451,870	1,245,321
Adjustments to reconcile net income from operations to net cash flows from (used in)<br>operating activities:
Depreciation	725,461	592,383
Amortization	—	15,625
Equity-based compensation	129,931	316,056
Deferred income taxes	154,792	276,942
Provision for losses on doubtful accounts	371,000	11,000
Inventory allowance	51,587	117,531
Other	(42,011)	989

Changes in assets and liabilities:
Accounts receivable	(7,171,661)	689,059
Inventories	39,333,140	22,199,828
Prepaid and other current assets	(1,578,437)	(4,321,455)
Other assets	42,052	50,265
Accounts payable	(1,623,841)	(4,261,996)
Accrued expenses and accrued wages, salaries and bonuses	(2,509,401)	(2,515,963)
Income taxes receivable	95,772	225,058
Net cash flows from (used in) operating activities	28,430,254	14,640,643

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(1,228,462)	(956,976)
Net cash flows from (used in) investing activities	(1,228,462)	(956,976)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility	330,596,076	336,212,413
Repayments under revolving credit facility	(357,448,761)	(348,325,547)
Principal payments on long-term debt	(131,580)	(235,188)
Repurchase of common stock	(8,156)	(918,085)
Dividends on common stock	(107,084)	(116,196)
Net cash flows from (used in) financing activities	(27,099,505)	(13,382,603)
Net change in cash	102,287	301,064
Cash, beginning of period	337,704	520,644
Cash, end of period	439,991	821,708

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	519,459	306,243
Cash paid (refunded) during the period for income taxes	(1,563)	—

Supplemental disclosure of non-cash information:
Equipment acquisitions classified in accounts payable	234,816	200,782
Dividends declared, not paid	166,546	180,740
Issuance of common stock in connection with the vesting and exercise of<br>equity-based awards	990,653	1,005,792

All values are in US Dollars.

The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.

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AMCON Distributing Company and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

AMCON Distributing Company and Subsidiaries (“AMCON” or the “Company”) operate two business segments:

	·		Our wholesale distribution segment (“Wholesale Segment”) distributes consumer products and provides a full range of programs and services to our customers that are focused on helping them manage their business and increase their profitability. We serve 26 states and primarily operate in the Central, Rocky Mountain, and Mid-South regions of the United States.
	·		Our retail health food segment (“Retail Segment”) operates twenty-two health food retail stores located throughout the Midwest and Florida.
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WHOLESALE SEGMENT

Our Wholesale Segment is one of the largest wholesale distributors in the United States serving approximately 4,100 retail outlets including convenience stores, grocery stores, liquor stores, drug stores, and tobacco shops. We currently distribute over 17,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery, beverages, groceries, paper products, health and beauty care products, frozen and refrigerated products and institutional foodservice products. Convenience stores represent our largest customer category. In November 2019, Convenience Store News ranked us as the eighth (8th) largest convenience store distributor in the United States based on annual sales.

Our Wholesale Segment offers retailers the ability to take advantage of manufacturer and Company sponsored sales and marketing programs, merchandising and product category management services, and the use of information systems and data services that are focused on minimizing retailers’ investment in inventory, while seeking to maximize their sales and profits. In addition, our wholesale distributing capabilities provide valuable services to both manufacturers of consumer products and convenience retailers. Manufacturers benefit from our broad retail coverage, inventory management, efficiency in processing small orders, and frequency of deliveries. Convenience retailers benefit from our distribution capabilities by gaining access to a broad product line, optimizing inventory, merchandising expertise, information systems, and accessing trade credit.

Our Wholesale Segment operates six distribution centers located in Illinois, Missouri, Nebraska, North Dakota, South Dakota, and Tennessee. These distribution centers, combined with cross-dock facilities, include approximately 685,000 square feet of permanent floor space. Our principal suppliers include Altria, RJ Reynolds, ITG Brands, Hershey, Kelloggs, Kraft, and Mars. We also market private label lines of water, candy products, batteries, and other products. We do not maintain any long-term purchase contracts with our suppliers.

RETAIL SEGMENT

Our Retail Segment, through our Healthy Edge, Inc. subsidiary, is a specialty retailer of natural/organic groceries and dietary supplements which focuses on providing high quality products at affordable prices, with an exceptional level of customer service and nutritional consultation. All of the products carried in our stores must meet strict quality and ingredient guidelines, and include offerings such as gluten-free and antibiotic-free groceries and meat products, as well as products containing no artificial colors, flavors, preservatives, or partially hydrogenated oils. We design our retail sites in an efficient and flexible small-store format, which emphasizes a high energy and shopper-friendly environment.

We operate within the natural products retail industry, which is a subset of the U.S. grocery industry. This industry includes conventional, natural, gourmet and specialty food markets, mass and discount retailers, warehouse clubs, health food stores, dietary supplement retailers, drug stores, farmers markets, mail order and online retailers, and multi-level marketers.

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Our Retail Segment operates twenty-two retail health food stores as Chamberlin’s Natural Foods (“Chamberlin’s”), Akin’s Natural Foods (“Akins”), and Earth Origins Market (“EOM”). These stores carry over 33,000 different national and regionally branded and private label products including high-quality natural, organic, and specialty foods consisting of produce, baked goods, frozen foods, nutritional supplements, personal care items, and general merchandise. Chamberlin’s, which was established in 1935, has a total of seven locations in and around Orlando, Florida. Akin’s, which was also established in 1935, has a total of seven locations in Arkansas, Missouri, and Oklahoma. Earth Origins Market has a total of eight locations in Florida.

FINANCIAL STATEMENTS

The Company’s fiscal year ends on September 30. The results for the interim period included with this Quarterly Report may not be indicative of the results which could be expected for the entire fiscal year. All significant intercompany transactions and balances have been eliminated in consolidation. Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been condensed or omitted. In the opinion of management, the accompanying condensed consolidated unaudited financial statements (“financial statements”) contain all adjustments necessary to fairly present the financial information included herein. The Company believes that although the disclosures contained herein are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with the Company’s annual audited consolidated financial statements for the fiscal year ended September 30, 2019, as filed with the Securities and Exchange Commission on Form 10-K. For purposes of this report, unless the context indicates otherwise, all references to “we”, “us”, “our”, the “Company”, and “AMCON” shall mean AMCON Distributing Company and its subsidiaries. Additionally, the three month fiscal periods ended December 31, 2019 and December 31, 2018 have been referred to throughout this quarterly report as Q1 2020 and Q1 2019, respectively. The fiscal balance sheet dates as of December 31, 2019 and September 30, 2019 have been referred to as December 2019 and September 2019, respectively.

ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncement Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02 “Leases (Topic 842)”. Accounting Standards Codification Topic (“ASC”) 842 supersedes the lease accounting requirements in “ASC 840 - Leases”. The most significant among the changes in ASU 2016-02 is the recognition of right-of-use (“ROU”) assets and corresponding lease liabilities for leases classified as operating leases. The accounting for finance leases, which were classified as capital leases under historical GAAP, remains substantially unchanged. The lease liabilities are equal to the present value of the remaining lease payments while the ROU asset is determined based on the amount of the lease liability, plus initial direct costs incurred less lease incentives. The Company elected the optional transition method to apply ASU 2016-02 prospectively at adoption during Q1 2020, which resulted in recognition of ROU assets of approximately $21.9 million, lease liabilities of $22.2 million, and a decrease of deferred rent recorded under ASC 840 of $0.3 million. The adoption of ASC 842 did not have a material effect on the Company’s consolidated statements of operations or cash flows. Comparative periods presented in the financial statements prior to Q1 2020 continue to be presented under ASC 840. The adoption of ASC 842 did not have a material impact on the Company’s debt-covenant compliance under its current revolving credit facility.

In accordance with an accounting policy election under ASC 842, the Company does not recognize assets or liabilities for leases with an initial term of twelve months or less; these short-term lease payments are recognized in the consolidated statements of operations on a straight-line basis over the lease term. The Company elected the package of practical expedients within ASC 842 that allows an entity to not reassess, prior to the effective date, (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, or (iii) initial direct costs for any existing leases. The Company also elected the practical expedient to account for non-lease components as part of the lease for all asset classes.

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New Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information, and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models, and methods for estimating expected credit losses. This guidance is effective for fiscal years beginning after December 15, 2022 (fiscal 2024 for the Company) with early adoption permitted. The Company is currently reviewing this ASU and its potential impact on our consolidated financial statements.

INVENTORIES

Inventories consisted of finished goods and are stated at the lower of cost (determined on a FIFO basis for our wholesale segment and using the retail method for our retail segment) or net realizable value. The wholesale distribution and retail health food segment inventories consist of finished products purchased in bulk quantities to be redistributed to the Company’s customers or sold at retail. Finished goods included total reserves of approximately $1.1 million at December 2019 and $1.0 million at September 2019. These reserves include the Company’s obsolescence allowance, which reflects estimated unsalable or non-refundable inventory based upon an evaluation of slow moving and discontinued products.

LEASES

The Company’s wholesale segment leases certain warehouse facilities, office space, vehicles and office equipment. The Company’s retail segment leases store space in various shopping center complexes. Certain of the warehouse and retail store leases include one or more options to renew or terminate the applicable lease agreement, with the exercise of such options at the Company’s discretion. The Company’s leases do not contain any significant residual value guarantees nor do they impose any significant restrictions or covenants other than those customarily found in similar types of leases.

The operating right-of-use (ROU) lease assets and liabilities recorded on the Company’s balance sheet consist of fixed lease payments. Leases with an initial term of twelve months or less are not recorded on the balance sheet and are expensed on a straight-line basis over the lease term. Additionally, certain leases contain variable payments such as vehicle leases with per-mile charges or retail leases with an additional rent payment based on store performance. These variable payments are expensed as incurred. The Company combines lease components and non-lease components for all asset classes for purposes of recognizing lease assets and liabilities. The Company determines its incremental borrowing rates based on information available at the lease commencement date in calculating the present value of lease payments.

Leases consist of the following:


Assets	Classification	December 2019
Operating	Operating lease right-of-use assets	20,523,782


Liabilities
Current:
Operating	Operating lease liabilities	5,460,582
Non-current:
Operating	Long-term operating lease liabilities	15,397,681
Total lease liabilities		20,858,263

All values are in US Dollars.

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The components of lease costs were as follows:



		Total
THREE MONTHS ENDED DECEMBER 2019
Operating lease cost		1,670,774
Short-term lease cost		83,505
Variable lease cost		89,273
Net lease cost		1,843,552

All values are in US Dollars.

Maturities of lease liabilities as of December 2019 were as follows:


		Operating Leases
2020		6,185,910
2021		5,278,523
2022		4,081,106
2023		3,229,468
2024		2,117,859
2025 and thereafter		1,934,262
Total lease payments		22,827,128
Less: interest		(1,968,865)
Present value of lease liabilities		20,858,263

All values are in US Dollars.

Weighted-average remaining lease term and weighted-average discount rate information regarding the Company’s leases were as follows:


Lease Term	December 2019
Weighted-average remaining lease term (years):
Operating	4.6
Discount Rate
Weighted-average discount rate:
Operating	4.04	%

Other information regarding the Company’s leases were as follows:


		For the three months ended December 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases		1,655,241
Lease liabilities arising from obtaining new ROU assets:
Operating leases		119,112

All values are in US Dollars.

Future minimum operating lease payments as of September 2019, as reported in the 2019 Form 10-K under ASC 840, were as follows:


		Operating
Fiscal Year Ending		Leases
2020		6,468,837
2021		5,418,617
2022		4,299,261
2023		3,216,671
2024		2,456,810
Thereafter		2,387,618
Total minimum lease payments		24,247,814

All values are in US Dollars.

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GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill by reporting segment of the Company consisted of the following:


	December	September
	2019	2019
Wholesale Segment	4,436,950	4,436,950

All values are in US Dollars.

Other intangible assets of the Company consisted of the following:


	December	September
	2019	2019
Trademarks and tradenames (Retail Segment)	500,000	500,000

All values are in US Dollars.

Goodwill, trademarks and tradenames are considered to have indefinite useful lives and therefore no amortization has been taken on these assets. Goodwill recorded on the Company’s consolidated balance sheet represents amounts allocated to its wholesale reporting unit which totaled $4.4 million at both December 2019 and September 2019. The Company performs its annual impairment testing during the fourth fiscal quarter of each year or as circumstances change or necessitate. There have been no material changes to the Company’s impairment assessments since its fiscal year ended September 2019.

DIVIDENDS

The Company paid cash dividends on its common stock totaling $0.1 million in each of the three month periods ended December 2019 and December 2018.

EARNINGS PER SHARE

Basic earnings per share available to common shareholders is calculated by dividing net income less preferred stock dividend requirements by the weighted average common shares outstanding for each period. Diluted earnings per share available to common shareholders is calculated by dividing income from operations less preferred stock dividend requirements (when anti-dilutive) by the sum of the weighted average common shares outstanding and the weighted average dilutive equity awards.


	For the three months ended December
	2019		2018
	Basic	Diluted	Basic	Diluted
Weighted average common shares outstanding	562,578	562,578	617,858	617,858
Weighted average net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock and conversion of preferred stock (1)	—	5,216	—	6,667
Weighted average number of shares outstanding	562,578	567,794	617,858	624,525
Net income available to common shareholders	451,870	451,870	1,245,321	1,245,321

Net earnings per share available to common shareholders	0.80	0.80	2.02	1.99

All values are in US Dollars.

	(1)		Diluted earnings per share calculation includes all stock options and restricted stock units deemed to be dilutive.

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DEBT

The Company primarily finances its operations through a credit facility agreement (the “Facility”) and long-term debt agreements with banks. The Facility is provided through Bank of America acting as the senior agent and with BMO Harris Bank participating in a loan syndication.

The Facility included the following significant terms at December 2019:

	·		A November 2022 maturity date without a penalty for prepayment.
	·		$70.0 million revolving credit limit.
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	·		Loan accordion allowing the Company to increase the size of the credit facility agreement by $25.0 million.
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	·		A provision providing an additional $10.0 million of credit advances for certain inventory purchases.
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	·		Evergreen renewal clause automatically renewing the agreement for one year unless either the borrower or lender provides written notice terminating the agreement at least 90 days prior to the end of any original or renewal term of the agreement.
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	·		The Facility bears interest at either the bank’s prime rate, or at LIBOR plus 125 - 150 basis points depending on certain credit facility utilization measures, at the election of the Company.
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	·		Lending limits subject to accounts receivable and inventory limitations.
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	·		An unused commitment fee equal to one-quarter of one percent (1/4%) per annum on the difference between the maximum loan limit and average monthly borrowings.
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	·		Secured by collateral including all of the Company’s equipment, intangibles, inventories, and accounts receivable.
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	·		A financial covenant requiring a fixed charge coverage ratio of at least 1.0 as measured by the previous twelve month period then ended only if excess availability falls below 10% of the maximum loan limit as defined in the credit agreement. The Company’s fixed charge coverage ratio is over 1.0 for the trailing twelve months.
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	·		Provides that the Company may pay up to $2.0 million of dividends on its common stock annually provided the Company is not in default before or after the dividend. Additionally, the Company may pay dividends on its common stock in excess of $2.0 million annually provided the Company meets certain excess availability and proforma fixed charge coverage ratios and is not in default before or after the dividend.
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The amount available for use on the Facility at any given time is subject to a number of factors including eligible accounts receivable and inventory balances that fluctuate day-to-day. Based on our collateral and loan limits as defined in the Facility agreement, the credit limit of the Facility at December 2019 was $69.5 million, of which $33.5 million was outstanding, leaving $36.0 million available.

At December 2019, the revolving portion of the Company’s Facility balance bore interest based on the bank’s prime rate and various short-term LIBOR rate elections made by the Company. The average interest rate was 3.46% at December 2019. For the three months ended December 2019, our peak borrowings under the Facility were $71.6 million, and our average borrowings and average availability under the Facility were $45.8 million and $26.1 million, respectively.

Cross Default and Co-Terminus Provisions

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loans where BMO is a lender, including the revolving credit facility, are in default. There were no such cross defaults at December 2019. In addition, the Real Estate Loan contains co-terminus provisions which require all loans with BMO to be paid in full if any of the loans are paid in full prior to the end of their specified terms.

Other

The Company has issued a letter of credit for $0.5 million to its workers’ compensation insurance carrier as part of its self‑insured loss control program.

EQUITY-BASED INCENTIVE AWARDS

Omnibus Plans

The Company has two equity-based incentive plans, the 2014 Omnibus Incentive Plan and 2018 Omnibus Incentive Plan (collectively “the Omnibus Plans”), which provide for equity incentives to employees. Each Omnibus Plan was designed with the intent of encouraging employees to acquire a vested interest in the growth and performance of the Company. The Omnibus Plans together permit the issuance of up to 135,000 shares of the Company’s common stock in the form of stock options, restricted stock awards, restricted stock units, performance share awards as well as awards such as stock appreciation rights, performance units, performance shares, bonus shares, and dividend share awards payable in the form of common stock or cash. The number of shares issuable under the Omnibus Plans is subject to customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Company’s common stock. At December 2019, awards with respect to a total of 101,146 shares, net of forfeitures, had been awarded pursuant to the Omnibus Plans and awards with respect to another 33,854 shares may be awarded under the Omnibus Plans.

Restricted Stock Units

At December 2019, the Compensation Committee of the Board of Directors had authorized and approved the following restricted stock unit awards to members of the Company’s management team pursuant to the provisions of the Company’s Omnibus Plans:


	Restricted Stock Units(1)	Restricted Stock Units(2)	Restricted Stock Units(3)	Restricted Stock Units(4)
Date of award:	October 2015	October 2017	October 2018	October 2019
Original number of awards issued:	13,250	13,000	15,050	14,550
Service period:	36 - 60 months	36 months	36 months	36 months
Estimated fair value of award at grant date:	1,112,000	1,177,000	1,264,000	1,007,000
Non-vested awards outstanding at<br>December 31, 2019:	50	4,334	10,037	14,550
Fair value of non-vested awards at<br>December 31, 2019 of approximately:	4,000	312,000	723,000	1,048,000

All values are in US Dollars.

(1)13,200 of the restricted stock units were vested as of December 2019. The remaining 50 restricted stock units will vest in October 2020.

(2)8,666 of the restricted stock units were vested as of December 2019. The remaining 4,334 restricted stock units will vest in October 2020.

(3)5,013 of the restricted stock units were vested as of December 2019. 5,018 restricted stock units will vest in October 2020 and 5,019 will vest in October 2021.

(4)The 14,550 restricted stock units will vest in equal amounts in October 2020, October 2021, and October 2022.

There is no direct cost to the recipients of the restricted stock units, except for any applicable taxes. The restricted stock units are subject to the customary adjustments in the event of stock splits, stock dividends, and certain other distributions

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of the Company’s common stock. All cash dividends and/or distributions payable to restricted stock recipients will be held in escrow until all the conditions of vesting have been met.

The restricted stock units provide that the recipients can elect, at their option, to receive either common stock in the Company, or a cash settlement based upon the closing price of the Company’s shares, at the time of vesting. Based on these award provisions, the compensation expense recorded in the Company’s Statement of Operations reflects the straight‑line amortized fair value based on the period end closing price under the liability method.

The following summarizes restricted stock unit activity under the Omnibus Plans during Q1 2020:


	Number	Weighted
	of	Average
	Shares	Fair Value
Nonvested restricted stocks units at September 2019	28,151	76.25
Granted	14,550	69.20
Vested	(13,730)	74.02
Expired	—	—
Nonvested restricted stocks units at December 2019	28,971	72.01

All values are in US Dollars.

All Equity-Based Awards (stock options and restricted stock units)

Net income before income taxes included compensation expense of approximately $0.1 million and $0.3 million during Q1 2020 and Q1 2019 respectively, related to the amortization of all equity-based compensation awards. Total unamortized compensation expense related to these awards at December 2019 and September 2019 was approximately $2.3 million and $1.6 million, respectively.

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BUSINESS SEGMENTS

The Company has two reportable business segments: the wholesale distribution of consumer products and the retail sale of health and natural food products. The retail health food stores’ operations are aggregated to comprise the Retail Segment because such operations have similar economic characteristics, as well as similar characteristics with respect to the nature of products sold, the type and class of customers for the health food products and the methods used to sell the products. Included in the “Other” column are intercompany eliminations, and assets held and charges incurred by our holding company. The segments are evaluated on revenues, gross margins, operating income (loss), and income (loss) before taxes.


	Wholesale	Retail
	Segment	Segment		Other	Consolidated
THREE MONTHS ENDED DECEMBER 2019
External revenues:
Cigarettes	245,050,054		—	—	245,050,054
Tobacco	54,317,548		—	—	54,317,548
Confectionery	20,836,862		—	—	20,836,862
Health food	—		10,096,495	—	10,096,495
Foodservice & other	29,800,144		—	—	29,800,144
Total external revenue	350,004,608		10,096,495	—	360,101,103
Depreciation	432,263		293,198	—	725,461
Amortization	—		—	—	—
Operating income (loss)	3,649,014		(1,142,306)	(1,340,193)	1,166,515
Interest expense	33,974		—	438,449	472,423
Income (loss) from operations before taxes	3,619,664		(1,140,152)	(1,778,642)	700,870
Total assets	125,529,755		21,947,811	122,891	147,600,457
Capital expenditures	793,681		600,344	—	1,394,025

THREE MONTHS ENDED DECEMBER 2018
External revenue:
Cigarettes	238,361,582		—	—	238,361,582
Tobacco	48,195,046		—	—	48,195,046
Confectionery	19,717,666		—	—	19,717,666
Health food	—		10,990,623	—	10,990,623
Foodservice & other	27,469,003		—	—	27,469,003
Total external revenue	333,743,297		10,990,623	—	344,733,920
Depreciation	364,132		228,251	—	592,383
Amortization	15,625		—	—	15,625
Operating income (loss)	3,703,884		(45,443)	(1,591,525)	2,066,916
Interest expense	37,774		—	285,176	322,950
Income (loss) from operations before taxes	3,667,924		(43,901)	(1,876,702)	1,747,321
Total assets	105,897,386		15,838,092	96,951	121,832,429
Capital expenditures	784,116		372,389	—	1,156,505

All values are in US Dollars.

COMMON STOCK REPURCHASE

The Company repurchased 109 shares of its common stock during Q1 2020 for cash in an amount less than $0.1 million and 10,432 shares of its common stock during Q1 2019 for cash totaling approximately $0.9 million. All repurchased shares were recorded in treasury stock at cost.

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SUBSEQUENT EVENT

In January 2020, the Company entered into a definitive agreement with Chas. M. Sledd Company (“Sledd”), a West Virginia wholesale distributor serving the convenience store industry. The agreement provides that the Company and Sledd are to jointly own a limited liability company (“Team Sledd”). Sledd would contribute subatantially all of its assets and stated liabilities to Team Sledd, while the Company would contribute $10.0 million in cash, of which $6.5 million is structured as equity and $3.5 million as a secured line of credit to Team Sledd. The Company will hold a minority interest in Team Sledd and anticipates it will fund its contribution to Team Sledd from the Company’s revolving credit facility. The transaction is expected to close during the Company’s second fiscal quarter, subject to the satisfaction of customary conditions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 that include the words “future,” “position,” “anticipate(s),” “expect(s),” “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. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions.

It should be understood 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:

	·		increasing competition and market conditions in our wholesale and retail health food businesses and any associated impact on the carrying value and any potential impairment of assets (including intangible assets) within those businesses,
	·		that our repositioning strategy for our retail business will not be successful,
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	·		risks associated with opening new retail stores,
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	·		risks associated with the acquisition of assets or new businesses by either of our business segments including, but not limited to, risks associated with purchase price and business valuation risks, vendor and customer retention risks, employee and technology integration risks, and risks related to the assumption of certain liabilities or obligations,
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	·		if online shopping formats such as Amazon continue to grow in popularity and further disrupt traditional sales channels, it may present a significant direct risk to our brick and mortar retail business and potentially to our wholesale distribution business,
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	·		the potential impact of ongoing trade tariffs may have on our product costs or on consumer disposable income and demand,
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	·		increases in fuel costs and expenses associated with operating a refrigerated trucking fleet,
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	·		the risks associated with a highly competitive labor market, particularly for truck drivers and warehouse workers, which may impact our ability to recruit and retain employees and result in higher employee compensation costs,
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	·		increases in state and federal excise taxes on cigarette and tobacco products and the potential impact on demand,
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	·		higher commodity prices and general inflation which could impact food ingredient costs and demand for many of the products we sell,
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	·		regulations, potential bans and/or litigation related to the manufacturing, distribution, and sale of certain cigarette, tobacco, and e-cigarette/vaping products by the United States Food and Drug Administration (“FDA”), state or local governmental agencies, or other parties,
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	·		increases in manufacturer prices,
	·		increases in inventory carrying costs and customer credit risks,
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	·		changes in promotional and incentive programs offered by manufacturers,
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	·		demand for the Company’s products, particularly cigarette, tobacco and e-cigarette/vaping products,
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	·		risks that product manufacturers may begin selling directly to convenience stores and bypass wholesale distributors,
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	·		changes in laws and regulations and ongoing compliance related to health care and associated insurance,
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	·		increasing health care costs for both the Company and consumers and its potential impact on discretionary consumer spending,
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	·		decreased availability of capital resources,
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	·		domestic regulatory and legislative risks,
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	·		poor weather conditions, and the adverse effects of climate change,
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	·		consolidation trends within the convenience store, wholesale distribution, and retail health food industries,
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	·		natural disasters and domestic or political unrest,
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	·		other risks over which the Company has little or no control, and any other factors not identified herein.
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Changes in these 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. Any forward-looking statement contained herein is made as of the date of this document. Except as required by law, the Company undertakes no obligation to publicly update or correct any of these forward-looking statements in the future to reflect changed assumptions, the occurrence of material events or changes in future operating results, financial conditions or business over time.

CRITICAL ACCOUNTING ESTIMATES

Certain accounting estimates used in the preparation of the Company’s condensed consolidated unaudited financial statements (“financial statements”) require us to make judgments and estimates and the financial results we report may vary depending on how we make these judgments and estimates. Our critical accounting estimates are set forth in our annual report on Form 10-K for the fiscal year ended September 30, 2019, as filed with the Securities and Exchange Commission. There have been no significant changes with respect to these policies during the three months ended December 2019 other than the adoption of ASC 842 which did have a material impact on the Company’s consolidated balance sheet.

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FIRST FISCAL QUARTER 2020 (Q1 2020)

The following discussion and analysis includes the Company’s results of operations for the three months ended December 2019 and December 2018:

Wholesale Segment

Retail Segment

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RESULTS OF OPERATIONS – THREE MONTHS ENDED DECEMBER:


	2019		2018		Incr (Decr)	% Change
CONSOLIDATED:
Sales(1)	360,101,103		344,733,920		15,367,183		4.5
Cost of sales	339,256,392		324,101,782		15,154,610		4.7
Gross profit	20,844,711		20,632,138		212,573		1.0
Gross profit percentage	5.8	%	6.0	%

Operating expense	19,678,196		18,565,222		1,112,974		6.0
Operating income	1,166,515		2,066,916		(900,401)		(43.6)
Interest expense	472,423		322,950		149,473		46.3
Income tax expense	249,000		502,000		(253,000)		(50.4)
Net income	451,870		1,245,321		(793,451)		(63.7)

BUSINESS SEGMENTS:
Wholesale
Sales	350,004,608		333,743,297		16,261,311		4.9
Gross profit	17,586,795		16,071,334		1,515,461		9.4
Gross profit percentage	5.0	%	4.8	%
Retail
Sales	10,096,495		10,990,623		(894,128)		(8.1)
Gross profit	3,257,916		4,560,804		(1,302,888)		(28.6)
Gross profit percentage	32.3	%	41.5	%

All values are in US Dollars.

	(1)		Sales are reported net of costs associated with incentives provided to retailers. These incentives totaled $6.1 million in Q1 2020 and $6.0 million in Q1 2019.

SALES

Changes in sales are driven by two primary components:

	(i)		changes to selling prices, which are largely controlled by our product suppliers, and excise taxes imposed on cigarettes and tobacco products by various states; and
	(ii)		changes in the volume of products sold to our customers, either due to a change in purchasing patterns resulting from consumer preferences or the fluctuation in the comparable number of business days in our reporting period.
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SALES – Q1 2020 vs. Q1 2019

Sales in our Wholesale Segment increased $16.3 million during Q1 2020 as compared to Q1 2019. Significant items impacting sales during Q1 2020 included a $9.4 million increase in sales related to price increases implemented by cigarette manufacturers, a $9.6 million increase in sales related to higher sales volumes in our tobacco, confectionery, foodservice, and other categories (“Other Products”) and a $3.8 million increase in sales related to an increase in cigarette state excise taxes. These increases were partially offset by a $6.5 million decrease in sales related to the volume and mix of cigarette cartons sold. Sales in our Retail Segment decreased $0.9 million for Q1 2020 as compared to Q1 2019. This decrease was primarily due to lower sales volumes in our existing stores.

GROSS PROFIT – Q1 2020 vs. Q1 2019

Our gross profit does not include fulfillment costs and costs related to the distribution network which are included in selling, general and administrative costs, and may not be comparable to those of other entities. Some entities may classify such costs as a component of cost of sales. Cost of sales, a component used in determining gross profit, for the wholesale

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and retail segments includes the cost of products purchased from manufacturers, less incentives we receive which are netted against such costs.

Gross profit in our Wholesale Segment increased $1.5 million during Q1 2020 as compared to Q1 2019. Significant items impacting gross profit during Q1 2020 included a $1.0 million increase in gross profit related to higher sales volumes and promotions in our Other Products category, a $0.2 million increase in gross profit related to the volume and mix of cigarette cartons sold and a $0.3 million increase in gross profit due to the timing and related benefits of cigarette manufacturer price increases between the comparative periods. Gross profit in our Retail Segment decreased $1.3 million during Q1 2020 as compared to Q1 2019 primarily related to lower sales and gross margins in our existing stores.

OPERATING EXPENSE – Q1 2020 vs. Q1 2019

Operating expense includes selling, general and administrative expenses and depreciation and amortization. Selling, general, and administrative expenses primarily consist of costs related to our sales, warehouse, delivery and administrative departments, including purchasing and receiving costs, warehousing costs and costs of picking and loading customer orders. Our most significant expenses relate to costs associated with employees, facility and equipment leases, transportation, fuel, and insurance. Our Q1 2020 operating expenses increased $1.1 million as compared to Q1 2019. Significant items impacting operating expenses during Q1 2020 included a $0.8 million increase in employee compensation and benefit costs, a $0.3 million increase in our provision for doubtful accounts, a $0.2 million increase in other operational expenses, offset by a $0.2 million decrease in expenses in our Retail Segment. The change in our Retail Segment operating expenses was primarily related to reduced payroll and compensation costs.

INCOME TAX EXPENSE – Q1 2020 vs. Q1 2019

The change in the Q1 2020 income tax rate as compared to Q1 2019, was primarily related to nondeductible compensation expense in relation to the amount of income from operations before income tax expense between the comparative periods.

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LIQUIDITY AND CAPITAL RESOURCES

Overview

The Company’s variability in cash flows from operating activities is dependent on the timing of inventory purchases and seasonal fluctuations. For example, periodically we have inventory “buy‑in” opportunities which offer more favorable pricing terms. As a result, we may have to hold inventory for a period longer than the payment terms. This generates a cash outflow from operating activities which we expect to reverse in later periods. Additionally, during our peak time of operations in the warm weather months, we generally carry higher amounts of inventory to ensure high fill rates and customer satisfaction.

In general, the Company finances its operations through a credit facility agreement (the “Facility”) with Bank of America acting as the senior agent and with BMO Harris Bank participating in the loan syndication. The Facility included the following significant terms at December 2019:

	·		A November 2022 maturity date without a penalty for prepayment.
	·		$70.0 million revolving credit limit.
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	·		Loan accordion allowing the Company to increase the size of the credit facility agreement by $25.0 million.
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	·		A provision providing an additional $10.0 million of credit advances for certain inventory purchases.
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	·		Evergreen renewal clause automatically renewing the agreement for one year unless either the borrower or lender provides written notice terminating the agreement at least 90 days prior to the end of any original or renewal term of the agreement.
---	:---	---	:---
	·		The Facility bears interest at either the bank’s prime rate, or at LIBOR plus 125 - 150 basis points depending on certain credit facility utilization measures, at the election of the Company.
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	·		Lending limits subject to accounts receivable and inventory limitations.
---	:---	---	:---
	·		An unused commitment fee equal to one-quarter of one percent (1/4%) per annum on the difference between the maximum loan limit and average monthly borrowings.
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	·		Secured by collateral including all of the Company’s equipment, intangibles, inventories, and accounts receivable.
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	·		A financial covenant requiring a fixed charge coverage ratio of at least 1.0 as measured by the previous twelve month period then ended only if excess availability falls below 10% of the maximum loan limit as defined in the credit agreement. The Company’s fixed charge ratio is over 1.0 for the trailing twelve months.
---	:---	---	:---
	·		Provides that the Company may pay up to $2.0 million of dividends on its common stock annually provided the Company is not in default before or after the dividend. Additionally, the Company may pay dividends on its common stock in excess of $2.0 million annually provided the Company meets certain excess availability and proforma fixed charge coverage ratios and is not in default before or after the dividend.
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Cross Default and Co-Terminus Provisions

The Company owns real estate in Bismarck, ND, Quincy, IL, and Rapid City, SD, which is financed through a single term loan with BMO Harris Bank (the “Real Estate Loan”) which is also a participant lender on the Company’s revolving line of credit. The Real Estate Loan contains cross default provisions which cause the loan to be considered in default if the loans where BMO is a lender, including the revolving credit facility, are in default. There were no such cross defaults at December 2019. In addition, the Real Estate Loan contains co-terminus provisions which require all loans with BMO to be paid in full if any of the loans are paid in full prior to the end of their specified terms.

Dividends Payments

The Company paid cash dividends on its common stock totaling $0.1 million in each of the three month periods ended December 2019 and December 2018.

Other

The Company has issued a letter of credit for $0.5 million to its workers’ compensation insurance carrier as part of its self-insured loss control program.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

Liquidity Risk

The Company’s liquidity position is significantly influenced by its ability to maintain sufficient levels of working capital. For our Company and industry in general, customer credit risk and ongoing access to bank credit heavily influence liquidity positions.

The Company does not currently hedge its exposure to interest rate risk or fuel costs. Accordingly, significant price movements in these areas can and do impact the Company’s profitability.

While the Company believes its liquidity position going forward will be adequate to sustain operations, a precipitous change in operating environment could materially impact the Company’s future revenue stream as well as its ability to collect on customer accounts receivable or secure bank credit.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

As required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2019 was made under the supervision and with the participation of our senior management, including our principal executive officer and principal financial officer. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all errors and fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended December 2019, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

There have been no material changes to the Company’s risk factors as previously disclosed in Item 1A “Risk Factors” of the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes the purchases made by or on behalf of our Company or certain affiliated purchasers of shares of our common stock during the quarterly period ended December 2019:


Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs*
October 1 - 31, 2019	—	—	—	75,000
November 1 - 30, 2019	48	70.90	48	74,952
December 1 - 31, 2019	61	72.18	61	75,000
Total	109	71.61	109	75,000

All values are in US Dollars.

* In December 2019, the Company’s Board of Directors replenished the existing share repurchase authority to authorize purchases of up to 75,000 shares of the Company’s common stock in open market or negotiated transactions. Management was given discretion to determine the number and pricing of the shares to be purchased, as well as the timing of any such purchases.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

(a) Exhibits



	31.1	Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, pursuant to section 302 of the Sarbanes-Oxley Act

	31.2	Certification by Andrew C. Plummer, President and Chief Financial Officer, pursuant to section 302 of the Sarbanes-Oxley Act

	32.1	Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 906 of the Sarbanes-Oxley Act

	32.2	Certification by Andrew C. Plummer, President and Chief Financial Officer, furnished pursuant to section 906 of the Sarbanes-Oxley Act

	101	Interactive Data File (filed herewith electronically)

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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 thereunto duly authorized.

	AMCON DISTRIBUTING COMPANY
	(registrant)

Date: January 21, 2020	/s/ Christopher H. Atayan
	Christopher H. Atayan,
	Chief Executive Officer and Chairman

Date: January 21, 2020	/s/ Andrew C. Plummer
	Andrew C. Plummer,
	President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

dit_Ex31_1

Exhibit 31.1

CERTIFICATION

I, Christopher H. Atayan, certify that:

I have reviewed this report on Form 10-Q of AMCON Distributing Company;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

	a.		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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	c.		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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	d.		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrants’ fiscal fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a.		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b.		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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July
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Date: January 21, 2020	/s/ Christopher H. Atayan
	Christopher H. Atayan,
	Chief Executive Officer and Chairman

dit_Ex31_2

Exhibit 31.2

CERTIFICATION

I, Andrew C. Plummer, certify that:

I have reviewed this report on Form 10-Q of AMCON Distributing Company;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

	a.		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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	c.		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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	d.		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrants’ fiscal fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a.		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b.		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: January 21, 2020	/s/ Andrew C. Plummer
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	Andrew C. Plummer,<br><br><br>President and Chief Financial Officer

dit_Ex32_1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q (the “Report”) of AMCON Distributing Company (the “Company”) for the fiscal quarter ended December 31, 2019, I, Christopher H. Atayan, Chief Executive Officer and Principal Executive Officer of the Company, hereby certify that, to the best of my knowledge and belief:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Ju
Date: January 21, 2020	/s/ Christopher H. Atayan
	Christopher H. Atayan
	Title: Chief Executive Officer and Chairman

A signed original of this written statement required by Section 906 has been provided to AMCON Distributing Company and will be retained by AMCON Distributing Company and furnished to the Securities and Exchange Commission or its staff upon request.

dit_Ex32_2

Exhibit 32.2

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q (the “Report”) of AMCON Distributing Company (the “Company”) for the fiscal quarter ended December 31, 2019, I, Andrew C. Plummer, President and Chief Financial Officer of the Company, hereby certify that, to the best of my knowledge and belief:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: January 21, 2020	/s/ Andrew C. Plummer
	Andrew C. Plummer
	Title: President and Chief Financial Officer

Amcon Distributing Co 10-Q for FY2020 Q1

About this 10-Q

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