Amcon Distributing Co 10-Q for FY2023 Q3

Amcon Distributing Co (DIT)

10-Q 2023-07-18 For: 2023-06-30

Added on April 06, 2026

About this 10-Q

Amcon Distributing Co filed this 10-Q on July 18, 2023, covering the quarter ended June 30, 2023 (FY2023 Q3).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $696.49M; up 26.5% from $550.58M a year earlier
Net income: $3.94M; down 34.7% from net income of $6.04M a year earlier
Diluted EPS: $6.59; down 36.5% from $10.38 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

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

Smaller reporting company ⌧	Emerging growth company ◻


June 30, 2023	PAGE

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements:

Condensed consolidated balance sheets at June 30, 2023 (unaudited) and September 30, 2022	3

Condensed consolidated unaudited statements of operations for the three and nine months ended June 30, 2023 and 2022	4

Condensed consolidated unaudited statements of shareholders’ equity for the three and nine months ended June 30, 2023 and 2022	5

Condensed consolidated unaudited statements of cash flows for the nine months ended June 30, 2023 and 2022	6

Notes to condensed consolidated unaudited financial statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3. Quantitative and Qualitative Disclosures About Market Risk	24

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


	June		September
	2023		2022
	(Unaudited)
ASSETS
Current assets:
Cash	$	739,013	$	431,576
Accounts receivable, less allowance for doubtful accounts of $2.5 million at both June 2023 and September 2022		78,640,187		62,367,888
Inventories, net		162,567,117		134,654,637
Income taxes receivable		—		819,595
Prepaid expenses and other current assets		13,630,317		12,702,084
Total current assets		255,576,634		210,975,780

Property and equipment, net		78,872,876		48,085,520
Operating lease right-of-use assets, net		19,739,321		19,941,009
Goodwill		5,778,325		5,277,950
Other intangible assets, net		5,419,361		2,093,113
Other assets		3,320,838		2,751,155
Total assets	$	368,707,355	$	289,124,527

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	51,853,159	$	39,962,363
Accrued expenses		15,960,945		14,446,210
Accrued wages, salaries and bonuses		7,799,903		7,811,207
Income taxes payable		752,658		—
Current operating lease liabilities		6,300,102		6,454,473
Current maturities of long-term debt		2,738,524		1,595,309
Current mandatorily redeemable non-controlling interest		1,641,612		1,712,095
Total current liabilities		87,046,903		71,981,657

Credit facilities		143,375,961		91,262,438
Deferred income tax liability, net		3,138,204		2,328,588
Long-term operating lease liabilities		13,737,167		13,787,721
Long-term debt, less current maturities		12,229,486		7,384,260
Mandatorily redeemable non-controlling interest, less current portion		7,976,499		9,446,460
Other long-term liabilities		289,672		103,968

Shareholders’ equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized		—		—
Common stock, $.01 par value, 3,000,000 shares authorized, 608,689 shares outstanding at June 2023 and 584,789 shares outstanding at September 2022		9,431		9,168
Additional paid-in capital		30,175,977		26,903,201
Retained earnings		102,000,218		96,784,353
Treasury stock at cost		(31,272,163)		(30,867,287)
Total shareholders’ equity		100,913,463		92,829,435
Total liabilities and shareholders’ equity	$	368,707,355	$	289,124,527


⌧	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2023


◻	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ___________to _________


	For the three months ended June				For the nine months ended June
	2023		2022		2023		2022
Sales (including excise taxes of $153.7 million and $129.2 million, and $414.9 million and $315.5 million, respectively)	$	696,489,427	$	550,584,152	$	1,847,472,782	$	1,365,043,621
Cost of sales		649,623,651		516,907,540		1,724,504,862		1,277,757,425
Gross profit		46,865,776		33,676,612		122,967,920		87,286,196
Selling, general and administrative expenses		36,851,520		25,862,325		99,227,695		70,168,415
Depreciation and amortization		2,103,429		912,501		4,982,068		2,514,968
		38,954,949		26,774,826		104,209,763		72,683,383
Operating income		7,910,827		6,901,786		18,758,157		14,602,813

Other expense (income):
Interest expense		2,385,842		655,811		6,249,540		1,222,829
Change in fair value of mandatorily redeemable non-controlling interest		698,571		705,392		864,684		705,392
Other (income), net		(931,765)		(2,417,252)		(1,159,021)		(2,518,320)
		2,152,648		(1,056,049)		5,955,203		(590,099)
Income from operations before income taxes		5,758,179		7,957,835		12,802,954		15,192,912
Income tax expense		1,813,800		2,221,000		4,164,000		4,811,000
Equity method investment earnings, net of tax		—		307,973		—		1,670,133
Net income available to common shareholders	$	3,944,379	$	6,044,808	$	8,638,954	$	12,052,045

Basic earnings per share available to common shareholders	$	6.74	$	10.61	$	14.78	$	21.25
Diluted earnings per share available to common shareholders	$	6.59	$	10.38	$	14.56	$	20.72

Basic weighted average shares outstanding		585,625		569,689		584,359		567,026
Diluted weighted average shares outstanding		598,590		582,370		593,480		581,578

Dividends paid per common share	$	0.18	$	0.18	$	5.54	$	5.54


							Additional
	Common Stock			Treasury Stock			Paid-in		Retained
	Shares	Amount		Shares	Amount		Capital		Earnings		Total
THREE MONTHS ENDED JUNE 2022
Balance, April 1, 2022	917,009	$	9,168	(332,220)	$	(30,867,287)	$	26,555,046	$	86,336,525	$	82,033,452
Dividends on common stock, $0.18 per share	—		—	—		—		—		(108,596)		(108,596)
Compensation expense related to equity-based awards	—		—	—		—		174,078		—		174,078
Net income available to common shareholders	—		—	—		—		—		6,044,808		6,044,808
Balance, June 30, 2022	917,009	$	9,168	(332,220)	$	(30,867,287)	$	26,729,124	$	92,272,737	$	88,143,742

THREE MONTHS ENDED JUNE 2023
Balance, April 1, 2023	943,272	$	9,431	(332,220)	$	(30,867,287)	$	29,766,566	$	98,167,058	$	97,075,768
Dividends on common stock, $0.18 per share	—		—	—		—		—		(111,219)		(111,219)
Compensation expense related to equity-based awards	—		—	—		—		409,411		—		409,411
Committed repurchase of treasury stock	—		—	(2,363)		(404,876)		—		—		(404,876)
Net income available to common shareholders	—		—	—		—		—		3,944,379		3,944,379
Balance, June 30, 2023	943,272	$	9,431	(334,583)	$	(31,272,163)	$	30,175,977	$	102,000,218	$	100,913,463


Accounts receivable	$	8,237,652
Inventories		16,060,965
Prepaid and other assets		400,964
Property and equipment		27,216,323
Other intangible assets		3,607,000
Liabilities assumed		(1,157,976)
Total identifiable net assets	$	54,364,928

Total identifiable net assets	$	54,364,928
Goodwill		500,375
Consideration transferred	$	54,865,303


	Acquisition-Date		Useful Life
Other Intangible Asset	Fair Value		(Years)
Customer list	$	2,010,000		15
Non-competition agreement		95,000		5
Trade name		1,502,000		7
	$	3,607,000


Revenue	$	131,563,988
Net income available to common shareholders	$	1,288,462


	For the three months ended June 2023		For the three months ended June 2022		For the nine months ended June 2023		For the nine months ended June 2022
Revenue	$	696,489,427	$	700,311,723	$	1,951,264,477	$	1,988,702,611
Net income available to common shareholders	$	3,944,379	$	6,202,533	$	8,838,866	$	15,484,735


	June
	2023
Fiscal 2023 (1)	$	134,425
Fiscal 2024		537,701
Fiscal 2025		506,869
Fiscal 2026		463,703
Fiscal 2027		463,703
Fiscal 2028 and thereafter		2,812,960
	$	4,919,361


	June 2023		September 2022
Unsecured note payable, interest payable at a fixed rate of 4.50% with quarterly installments of principal and interest of $49,114 through June 2023 with remaining principal due September 2023		852,642		968,589
Note payable, interest payable at a fixed rate of 4.10% with monthly installments of principal and interest of $53,361 through June 2033 with remaining principal due July 2033, collateralized by Team Sledd's principal office and warehouse		5,280,076		5,572,766
Note payable, interest payable at a fixed rate of 3.25% with monthly installments of principal and interest of $17,016 through August 2034 with remaining principal due September 2034, collateralized by Team Sledd's principal office and warehouse		1,927,167		2,052,327
Note payable with monthly installments of principal and interest of $7,934 through February 2025 with remaining principal due March 2025, and an effective variable rate of 7.28% at June 2023, collateralized by certain of Team Sledd's equipment		312,040		385,887
Note payable, interest payable at a fixed rate of 6.04% with monthly installments of principal and interest of $135,469 through February 2028, collateralized by certain of Henry's equipment		6,596,085		—
		14,968,010		8,979,569
Less current maturities		(2,738,524)		(1,595,309)
	$	12,229,486	$	7,384,260


	June		June
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income available to common shareholders	$	8,638,954	$	12,052,045
Adjustments to reconcile net income available to common shareholders to net cash flows from (used in) operating activities:
Depreciation		4,701,316		2,486,613
Amortization		280,752		28,355
Equity method investment earnings, net of tax		—		(1,670,133)
Gain on re-valuation of equity method investment to fair value		—		(2,387,411)
(Gain) loss on sales of property and equipment		(133,159)		(133,639)
Equity-based compensation		1,940,631		1,903,884
Deferred income taxes		809,616		1,231,012
Provision for losses on doubtful accounts		(7,697)		83,000
Inventory allowance		442,603		688,902
Change in fair value of mandatorily redeemable non-controlling interest		864,684		705,392
Changes in assets and liabilities, net of effects of business acquisition:
Accounts receivable		(8,026,950)		(1,215,238)
Inventories		(12,294,118)		(4,674,292)
Prepaid and other current assets		(745,490)		(2,986,167)
Equity method investment distributions		—		1,095,467
Other assets		(569,683)		(728,596)
Accounts payable		10,360,228		1,313,711
Accrued expenses and accrued wages, salaries and bonuses		1,487,971		1,926,479
Other long-term liabilities		185,704		(690,693)
Income taxes payable and receivable		1,572,253		(1,890,449)
Net cash flows from (used in) operating activities		9,507,615		7,138,242

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(6,759,929)		(13,940,428)
Proceeds from sales of property and equipment		151,307		145,500
Principal payment received on note receivable		—		175,000
Cash acquired in business combination		—		7,958
Acquisition of Henry's (See Note 2)		(54,865,303)		—
Net cash flows from (used in) investing activities		(61,473,925)		(13,611,970)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities		1,863,027,754		1,393,048,057
Repayments under revolving credit facilities		(1,810,914,231)		(1,381,508,745)
Proceeds from borrowings on long-term debt		7,000,000		—


	June		September
	2023		2022
Customer lists (Wholesale Segment) (less accumulated amortization of $0.2 million at June 2023 and less than $0.1 million at September 2022)	$	3,284,013	$	1,401,945
Non-competition agreements (Wholesale Segment) (less accumulated amortization of $0.1 million at June 2023 and less than $0.1 million at September 2022)		222,753		191,168
Tradename (Wholesale Segment) (less accumulated amortization of $0.1 million at June 2023)		1,412,595		—
Trademarks and tradenames (Retail Segment)		500,000		500,000
	$	5,419,361	$	2,093,113


	Wholesale		Retail
	Segment		Segment		Other		Consolidated
THREE MONTHS ENDED JUNE 2023
External revenue:
Cigarettes	$	429,431,319	$	—	$	—	$	429,431,319
Tobacco		124,894,734		—		—		124,894,734
Confectionery		46,624,371		—		—		46,624,371
Health food		—		10,745,108		—		10,745,108
Foodservice & other		84,793,895		—		—		84,793,895
Total external revenue		685,744,319		10,745,108		—		696,489,427
Depreciation		1,690,452		278,552		—		1,969,004
Amortization		134,425		—		—		134,425
Operating income (loss)		11,772,692		(297,795)		(3,564,070)		7,910,827
Interest expense		—		—		2,385,842		2,385,842
Income (loss) from operations before taxes		11,148,619		559,473		(5,949,913)		5,758,179
Total assets		349,564,773		18,008,597		1,133,985		368,707,355
Capital expenditures		5,082,997		405,694		—		5,488,691


	Wholesale		Retail
	Segment		Segment		Other		Consolidated
THREE MONTHS ENDED JUNE 2022
External revenue:
Cigarettes	$	364,771,496	$	—	$	—	$	364,771,496
Tobacco		93,957,495		—		—		93,957,495
Confectionery		32,541,090		—		—		32,541,090
Health food		—		11,350,797		—		11,350,797
Foodservice & other		47,963,274		—		—		47,963,274
Total external revenue		539,233,355		11,350,797		—		550,584,152
Depreciation		602,770		281,376		—		884,146
Amortization		28,355		—		—		28,355
Operating income (loss)		9,432,660		241,225		(2,772,099)		6,901,786
Interest expense		—		—		655,811		655,811
Income (loss) from operations before taxes		8,732,244		256,392		(1,030,801)		7,957,835
Equity method investment earnings, net of tax		—		—		307,973		307,973
Total assets		278,824,259		18,656,853		814,291		298,295,403
Capital expenditures		12,074,922		985,835		—		13,060,757


Fiscal Year Ending
2023 (1)	$	1,295,972
2024		1,957,369
2025		2,166,686
2026		2,073,198
2027		2,187,857
2028 and thereafter		5,286,928
	$	14,968,010


Fair value of MRNCI as of September 2022	$	11,158,555
Redemption of non-controlling interests		(1,812,558)
Distributions to non-controlling interest		(592,570)
Change in fair value		864,684
Fair value of MRNCI as of June 2023	$	9,618,111
Less current portion at fair value		(1,641,612)
	$	7,976,499


	2023			2022			Incr (Decr)		% Change
CONSOLIDATED:
Sales (1)	$	696,489,427		$	550,584,152		$	145,905,275	26.5
Cost of sales		649,623,651			516,907,540			132,716,111	25.7
Gross profit		46,865,776			33,676,612			13,189,164	39.2
Gross profit percentage		6.7	%		6.1	%

Operating expense	$	38,954,949		$	26,774,826		$	12,180,123	45.5
Operating income		7,910,827			6,901,786			1,009,041	14.6
Interest expense		2,385,842			655,811			1,730,031	263.8
Change in fair value of mandatorily redeemable non-controlling interest		698,571			705,392			(6,821)	(1.0)
Income tax expense		1,813,800			2,221,000			(407,200)	(18.3)
Equity method investment earnings, net of tax		—			307,973			(307,973)	(100.0)
Net income available to common shareholders		3,944,379			6,044,808			(2,100,429)	(34.7)

BUSINESS SEGMENTS:
Wholesale
Sales	$	685,744,319		$	539,233,355		$	146,510,964	27.2
Gross profit		43,093,210			29,442,578			13,650,632	46.4
Gross profit percentage		6.3	%		5.5	%
Retail
Sales	$	10,745,108		$	11,350,797		$	(605,689)	(5.3)
Gross profit		3,772,566			4,234,034			(461,468)	(10.9)
Gross profit percentage		35.1	%		37.3	%



	10.1	Fourth Amendment to Credit Agreement dated April 27, 2023 between Team Sledd, LLC and First National Bank of Pennsylvania

	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: July 18, 2023	/s/ Christopher H. Atayan
	Christopher H. Atayan,
	Chief Executive Officer and Chairman

Date: July 18, 2023	/s/ Charles J. Schmaderer
	Charles J. Schmaderer,
	Vice President, Chief Financial Officer and Secretary
	(Principal Financial and Accounting Officer)

July
Date: July 18, 2023	/s/ Christopher H. Atayan
	Christopher H. Atayan,
	Chief Executive Officer and Chairman

Ju
Date: July 18, 2023	/s/ Christopher H. Atayan
	Christopher H. Atayan
	Title: Chief Executive Officer and Chairman

Date: July 18, 2023	/s/ Charles J. Schmaderer
	Charles J. Schmaderer
	Title: Vice President, Chief Financial Officer and Secretary