Amcon Distributing Co 10-Q for FY2022 Q2

Amcon Distributing Co (DIT)

10-Q 2022-04-18 For: 2022-03-31

Added on April 06, 2026

About this 10-Q

Amcon Distributing Co filed this 10-Q on April 18, 2022, covering the quarter ended March 31, 2022 (FY2022 Q2).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $391.89M; up 3.5% from $378.51M a year earlier
Net income: $3.01M; up 23.8% from net income of $2.43M a year earlier
Diluted EPS: $5.19; up 19.9% from $4.33 a year earlier

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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)


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


March 31, 2022	PAGE

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements:

Condensed consolidated balance sheets at March 31, 2022 (unaudited) and September 30, 2021	3

Condensed consolidated unaudited statements of operations for the three and six months ended March 31, 2022 and 2021	4

Condensed consolidated unaudited statements of shareholders’ equity for the three and six months ended March 31, 2022 and 2021	5

Condensed consolidated unaudited statements of cash flows for the six months ended March 31, 2022 and 2021	6

Notes to condensed consolidated unaudited financial statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3. Quantitative and Qualitative Disclosures About Market Risk	23

Item 4. Controls and Procedures	23

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


	March		September
	2022		2021
	(Unaudited)
ASSETS
Current assets:
Cash	$	527,555	$	519,591
Accounts receivable, less allowance for doubtful accounts of $0.9 million at March 2022 and September 2021		33,556,601		35,844,163
Inventories, net		90,248,795		95,212,085
Income taxes receivable		670,234		—
Prepaid expenses and other current assets		5,476,104		4,999,125
Total current assets		130,479,289		136,574,964

Property and equipment, net		15,282,499		16,012,524
Operating lease right-of-use assets, net		16,280,827		17,846,529
Note receivable, net of current portion		3,325,000		3,325,000
Goodwill		4,436,950		4,436,950
Other intangible assets, net		500,000		500,000
Equity method investment		10,451,386		9,380,343
Other assets		414,120		334,819
Total assets	$	181,170,071	$	188,411,129

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	25,601,210	$	24,235,042
Accrued expenses		9,747,031		11,468,955
Accrued wages, salaries and bonuses		4,011,309		4,489,852
Income taxes payable		—		867,160
Current operating lease liabilities		5,458,358		5,513,390
Current maturities of long-term debt		572,100		561,202
Total current liabilities		45,390,008		47,135,601

Credit facility		35,191,547		43,650,865
Deferred income tax liability, net		2,630,427		1,531,228
Long-term operating lease liabilities		11,123,103		12,669,157
Long-term debt, less current maturities		4,765,465		5,054,265
Other long-term liabilities		36,069		757,387

Shareholders’ equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized		—		—
Common stock, $.01 par value, 3,000,000 shares authorized, 584,789 shares outstanding at March 2022 and 551,369 shares outstanding at September 2021		9,168		8,834
Additional paid-in capital		26,555,046		24,918,781
Retained earnings		86,336,525		83,552,298
Treasury stock at cost		(30,867,287)		(30,867,287)
Total shareholders’ equity		82,033,452		77,612,626
Total liabilities and shareholders’ equity	$	181,170,071	$	188,411,129


	For the three months ended March				For the six months ended March
	2022		2021		2022		2021
Sales (including excise taxes of $89.1 million and $92.0 million, and $186.2 million and $192.5 million, respectively)	$	391,888,192	$	378,513,490	$	814,459,469	$	783,258,263
Cost of sales		365,211,270		355,540,704		760,849,885		736,823,498
Gross profit		26,676,922		22,972,786		53,609,584		46,434,765
Selling, general and administrative expenses		21,915,351		19,022,167		44,306,090		37,621,983
Depreciation		818,222		779,925		1,602,467		1,554,210
		22,733,573		19,802,092		45,908,557		39,176,193
Operating income		3,943,349		3,170,694		7,701,027		7,258,572

Other expense (income):
Interest expense		244,920		310,543		567,018		686,973
Other (income), net		(60,958)		(84,265)		(101,068)		(126,088)
		183,962		226,278		465,950		560,885
Income from operations before income taxes		3,759,387		2,944,416		7,235,077		6,697,687
Income tax expense		1,345,000		829,000		2,590,000		1,840,000
Equity method investment earnings, net of tax		591,795		313,492		1,362,161		648,831
Net income available to common shareholders	$	3,006,182	$	2,428,908	$	6,007,238	$	5,506,518

Basic earnings per share available to common shareholders	$	5.29	$	4.41	$	10.62	$	10.02
Diluted earnings per share available to common shareholders	$	5.19	$	4.33	$	10.33	$	9.87

Basic weighted average shares outstanding		567,889		551,369		565,694		549,729
Diluted weighted average shares outstanding		578,751		560,941		581,328		557,741

Dividends paid per common share	$	0.18	$	5.18	$	5.36	$	5.36


⌧	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2022


◻	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________to _________

Large accelerated filer ◻		Accelerated filer ◻		Non-accelerated filer ⌧


							Additional
	Common Stock			Treasury Stock			Paid-in		Retained
	Shares	Amount		Shares	Amount		Capital		Earnings		Total
THREE MONTHS ENDED MARCH 2021
Balance, January 1, 2021	883,589	$	8,834	(332,220)	$	(30,867,287)	$	25,007,239	$	71,401,400	$	65,550,186
Dividends on common stock, $0.18 per share	—		—	—		—		—		(105,586)		(105,586)
Compensation expense and settlement of equity-based awards	—		—	—		—		(89,474)		—		(89,474)
Repurchase of common stock	—		—	—		—		—		—		—
Net income	—		—	—		—		—		2,428,908		2,428,908
Balance, March 31, 2021	883,589	$	8,834	(332,220)	$	(30,867,287)	$	24,917,765	$	73,724,722	$	67,784,034

THREE MONTHS ENDED MARCH 2022
Balance, January 1, 2022	915,009	$	9,148	(332,220)	$	(30,867,287)	$	26,999,735	$	83,438,578	$	79,580,174
Dividends on common stock, $0.18 per share	—		—	—		—		—		(108,235)		(108,235)
Compensation expense and settlement of equity-based awards	2,000		20	—		—		(444,689)		—		(444,669)
Repurchase of common stock	—		—	—		—		—		—		—
Net income	—		—	—		—		—		3,006,182		3,006,182
Balance, March 31, 2022	917,009	$	9,168	(332,220)	$	(30,867,287)	$	26,555,046	$	86,336,525	$	82,033,452


	For the three months ended March 2022		For the three months ended March 2021		For the six months ended March 2022		For the six months ended March 2021
Sales	$	148,066,173	$	158,459,384	$	329,483,268	$	323,027,468
Gross profit		8,219,808		7,719,918		18,037,786		15,567,308
Net income before income taxes		1,594,579		941,027		3,669,415		1,944,820
Net income attributable to AMCON, net of tax		591,795		313,492		1,362,161		648,831


		Weighted
	Number	Average
	of	Exercise
	Shares	Price
Outstanding at September 2021	22,250	$	86.76
Granted	—		—
Exercised	(22,250)		86.76
Forfeited/Expired	—		—
Outstanding at March 2022	—	$	—


	Wholesale		Retail
	Segment		Segment		Other		Consolidated
THREE MONTHS ENDED MARCH 2022
External revenues:
Cigarettes	$	256,539,579	$	—	$	—	$	256,539,579
Tobacco		66,739,280		—		—		66,739,280
Confectionery		22,671,755		—		—		22,671,755
Health food		—		12,419,296		—		12,419,296
Foodservice & other		33,518,282		—		—		33,518,282
Total external revenue		379,468,896		12,419,296		—		391,888,192
Depreciation		499,567		318,655		—		818,222
Operating income (loss)		6,303,312		746,068		(3,106,031)		3,943,349
Interest expense		53,067		—		191,853		244,920
Income (loss) from operations before taxes		6,281,362		748,572		(3,270,547)		3,759,387
Equity method investment earnings, net of tax		—		—		591,795		591,795
Total assets		149,384,369		17,563,452		14,222,250		181,170,071
Capital expenditures		466,703		187,093		—		653,796


	2022			2021			Incr (Decr)		% Change
CONSOLIDATED:
Sales(1)	$	391,888,192		$	378,513,490		$	13,374,702	3.5
Cost of sales		365,211,270			355,540,704			9,670,566	2.7
Gross profit		26,676,922			22,972,786			3,704,136	16.1
Gross profit percentage		6.8	%		6.1	%

Operating expense	$	22,733,573		$	19,802,092		$	2,931,481	14.8
Operating income		3,943,349			3,170,694			772,655	24.4
Interest expense		244,920			310,543			(65,623)	(21.1)
Income tax expense		1,345,000			829,000			516,000	62.2
Equity method investment earnings, net of tax		591,795			313,492			278,303	88.8
Net income available to common shareholders		3,006,182			2,428,908			577,274	23.8

BUSINESS SEGMENTS:
Wholesale
Sales	$	379,468,896		$	366,207,158		$	13,261,738	3.6
Gross profit		21,939,991			18,279,542			3,660,449	20.0
Gross profit percentage		5.8	%		5.0	%
Retail
Sales	$	12,419,296		$	12,306,332		$	112,964	0.9
Gross profit		4,736,931			4,693,244			43,687	0.9
Gross profit percentage		38.1	%		38.1	%



	3.1	Certificate of Amendment of the Restated Certificate of Incorporation of AMCON Distributing Company (incorporated by reference to Exhibit 3.1 of AMCON’s Form 8-K filed on January 20, 2022)

	3.2	Amended and Restated Bylaws of AMCON Distributing Company (incorporated by reference to Exhibit 3.2 of AMCON’s Form 8-K filed on January 20, 2022)

	10.1	AMCON Distributing Company 2022 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 of AMCON’s Form 8-K filed on January 20, 2022)

	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 Charles J. Schmaderer, Vice President, Chief Financial Officer and Secretary, 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 Charles J. Schmaderer, Vice President, Chief Financial Officer and Secretary, furnished pursuant to section 906 of the Sarbanes-Oxley Act

	101	Interactive Data File (filed herewith electronically)

	104	Cover Page Interactive Data File – formatted in Inline XBRL and included as Exhibit 101

	AMCON DISTRIBUTING COMPANY
	(registrant)

Date: April 18, 2022	/s/ Christopher H. Atayan
	Christopher H. Atayan,
	Chief Executive Officer and Chairman

Date: April 18, 2022	/s/ Charles J. Schmaderer
	Charles J. Schmaderer,
	Vice President, Chief Financial Officer and Secretary
	(Principal Financial and Accounting Officer)


	March		March
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6,007,238	$	5,506,518
Adjustments to reconcile net income from operations to net cash flows from (used in) operating activities:
Depreciation		1,602,467		1,554,210
Equity method investment earnings, net of tax		(1,362,161)		(648,831)
(Gain) loss on sales of property and equipment		(76,220)		(1,374)
Equity-based compensation		1,208,655		833,624
Deferred income taxes		1,099,199		48,248
Provision for losses on doubtful accounts		(3,000)		5,000
Inventory allowance		155,534		110,769
Changes in assets and liabilities:
Accounts receivable		2,290,562		1,390,027
Inventories		4,807,756		17,772,604
Prepaid and other current assets		(651,979)		(4,096,452)
Equity method investment distributions		744,118		—
Other assets		(79,301)		23,327
Accounts payable		1,465,370		429,389
Accrued expenses and accrued wages, salaries and bonuses		(700,748)		(610,589)
Other long-term liabilities		(721,318)		(169,854)
Income taxes payable and receivable		(1,990,394)		(867,112)
Net cash flows from (used in) operating activities		13,795,778		21,279,504

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(974,424)		(720,567)
Proceeds from sales of property and equipment		79,000		10,938
Principal payment received on note receivable		175,000		—
Net cash flows from (used in) investing activities		(720,424)		(709,629)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility		819,125,190		771,182,879
Repayments under revolving credit facility		(827,584,508)		(791,045,384)
Proceeds from borrowings on long-term debt		—		3,000,000
Principal payments on long-term debt		(277,902)		(237,566)
Proceeds from exercise of stock options		173,590		—
Repurchase of common stock		—		(5,738)
Dividends on common stock		(3,223,011)		(3,144,130)
Settlement and withholdings of equity-based awards		(1,280,749)		(365,022)

July
Date: April 18, 2022	/s/ Christopher H. Atayan
	Christopher H. Atayan,
	Chief Executive Officer and Chairman

Ju
Date: April 18, 2022	/s/ Christopher H. Atayan
	Christopher H. Atayan
	Title: Chief Executive Officer and Chairman

Date: April 18, 2022	/s/ Charles J. Schmaderer
	Charles J. Schmaderer
	Title: Vice President, Chief Financial Officer and Secretary