DIT 10-Q
Amcon Distributing Co (DIT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended |
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from ___________to _________ |
Commission File Number
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization) | Identification No.) | |
(Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
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.
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)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ◻ | ||
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
Form 10-Q
2nd Quarter
INDEX
2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
AMCON Distributing Company and Subsidiaries
Condensed Consolidated Balance Sheets
March 31, 2026 and September 30, 2025
March | September | |||||
| 2026 | | 2025 | |||
(Unaudited) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash | $ | | $ | | ||
Accounts receivable, less allowance for credit losses of $ |
| |
| | ||
Inventories, net |
| |
| | ||
Income taxes receivable | | | ||||
Prepaid expenses and other current assets |
| |
| | ||
Assets held for sale | | — | ||||
Total current assets |
| |
| | ||
Property and equipment, net |
| |
| | ||
Operating lease right-of-use assets, net | | | ||||
Goodwill |
| |
| | ||
Other intangible assets, net |
| |
| | ||
Other assets |
| |
| | ||
Total assets | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued expenses |
| |
| | ||
Accrued wages, salaries and bonuses |
| |
| | ||
Current operating lease liabilities | | | ||||
Current maturities of long-term debt |
| |
| | ||
Current mandatorily redeemable non-controlling interest | | | ||||
Total current liabilities |
| |
| | ||
Credit facilities |
| |
| | ||
Deferred income tax liability, net |
| |
| | ||
Long-term operating lease liabilities | | | ||||
Long-term debt, less current maturities |
| |
| | ||
Other long-term liabilities |
| |
| | ||
Shareholders’ equity: | ||||||
Preferred stock, $ |
|
| ||||
Common stock, $ |
| |
| | ||
Additional paid-in capital |
| |
| | ||
Retained earnings |
| |
| | ||
Treasury stock at cost |
| ( |
| ( | ||
Total shareholders’ equity | | | ||||
Total liabilities and shareholders’ equity | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
3
AMCON Distributing Company and Subsidiaries
Condensed Consolidated Unaudited Statements of Operations
for the three and six months ended March 31, 2026 and 2025
For the three months ended March | For the six months ended March | |||||||||||
| 2026 | | 2025 | | 2026 | | 2025 | |||||
Sales (including excise taxes of $ | $ | | $ | | $ | | $ | | ||||
Cost of sales |
| |
| |
| |
| | ||||
Gross profit |
| |
| |
| |
| | ||||
Selling, general and administrative expenses |
| |
| |
| |
| | ||||
Depreciation and amortization |
| |
| |
| |
| | ||||
| |
| |
| |
| | |||||
Operating income (loss) |
| ( |
| |
| |
| | ||||
Other expense (income): | ||||||||||||
Interest expense |
| |
| |
| |
| | ||||
Change in fair value of mandatorily redeemable non-controlling interest | | | | | ||||||||
Other (income), net |
| ( |
| ( |
| ( |
| ( | ||||
| |
| |
| |
| | |||||
Income (loss) from operations before income taxes |
| ( |
| ( |
| ( |
| ( | ||||
Income tax expense (benefit) |
| ( |
| ( |
| ( |
| ( | ||||
Net income (loss) available to common shareholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Basic earnings (loss) per share available to common shareholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Diluted earnings (loss) per share available to common shareholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Basic weighted average shares outstanding |
| |
| |
| |
| | ||||
Diluted weighted average shares outstanding |
| |
| |
| |
| | ||||
| ||||||||||||
Dividends paid per common share | $ | | $ | | $ | | $ | | ||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
4
AMCON Distributing Company and Subsidiaries
Condensed Consolidated Unaudited Statements of Shareholders’ Equity
for the three and six months ended March 31, 2026 and 2025
Additional | |||||||||||||||||||
Common Stock | Treasury Stock | Paid-in | Retained | ||||||||||||||||
| Shares | | Amount | | Shares | | Amount | | Capital | | Earnings | | Total | ||||||
THREE MONTHS ENDED MARCH 2025 | |||||||||||||||||||
Balance, January 1, 2025 | | $ | | ( | $ | ( | $ | | $ | | $ | | |||||||
Dividends on common stock, $ | — | — | — | — | — | ( | ( | ||||||||||||
Compensation expense related to equity-based awards | — | — | — | — | | — | | ||||||||||||
Net loss available to common shareholders | — |
| — | — | — | — | ( | ( | |||||||||||
Balance, March 31, 2025 | | $ | | ( | $ | ( | $ | | $ | | $ | | |||||||
THREE MONTHS ENDED MARCH 2026 | |||||||||||||||||||
Balance, January 1, 2026 | | $ | | ( | $ | ( | $ | | $ | | $ | | |||||||
Dividends on common stock, $ | — | — | — | — | — | ( | ( | ||||||||||||
Compensation expense related to equity-based awards | — | — | — | — | | — | | ||||||||||||
Issuance of shares for stock split | — | | — | — | ( | — | |||||||||||||
Net loss available to common shareholders | — |
| — | — | — | — | ( | ( | |||||||||||
Balance, March 31, 2026 | | $ | | ( | $ | ( | $ | | $ | | $ | | |||||||
Additional | |||||||||||||||||||
Common Stock | Treasury Stock | Paid-in | Retained | ||||||||||||||||
| Shares | | Amount | | Shares | | Amount | | Capital | | Earnings | | Total | ||||||
SIX MONTHS ENDED MARCH 2025 | |||||||||||||||||||
Balance, October 1, 2024 | | $ | | ( | $ | ( | $ | | $ | | $ | | |||||||
Dividends on common stock, $ | — | — | — | — | — | ( | ( | ||||||||||||
Compensation expense and issuance of stock in connection with equity-based awards | | | — | — | | — | | ||||||||||||
Net loss available to common shareholders | — |
| — | — | — | — | ( | ( | |||||||||||
Balance, March 31, 2025 | | $ | | ( | $ | ( | $ | | $ | | $ | | |||||||
SIX MONTHS ENDED MARCH 2026 | |||||||||||||||||||
Balance, October 1, 2025 | | $ | | ( | $ | ( | $ | | $ | | $ | | |||||||
Dividends on common stock, $ | — | — | — | — | — | ( | ( | ||||||||||||
Compensation expense and issuance of stock in connection with equity-based awards | | | — | — | | — | | ||||||||||||
Issuance of shares for stock split | — | | — | — | ( | — | — | ||||||||||||
Net loss available to common shareholders | — |
| — | — | — | — | ( | ( | |||||||||||
Balance, March 31, 2026 | | $ | | ( | $ | ( | $ | | $ | | $ | | |||||||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
5
AMCON Distributing Company and Subsidiaries
Condensed Consolidated Unaudited Statements of Cash Flows
for the six months ended March 31, 2026 and 2025
March | March | |||||
| 2026 | | 2025 | |||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income (loss) available to common shareholders | $ | ( | $ | ( | ||
Adjustments to reconcile net income (loss) available to common shareholders to net cash flows from (used in) operating activities: | ||||||
Depreciation | | | ||||
Amortization | | | ||||
(Gain) loss on sales of property and equipment | ( | ( | ||||
Equity-based compensation | | | ||||
Deferred income taxes | ( | ( | ||||
Provision for credit losses | | ( | ||||
Inventory allowance | ( | | ||||
Change in fair value of contingent consideration | — | ( | ||||
Change in fair value of mandatorily redeemable non-controlling interest | | | ||||
Changes in assets and liabilities, net of effects of business combinations: | ||||||
Accounts receivable | | | ||||
Inventories | | ( | ||||
Prepaid and other current assets | ( | ( | ||||
Other assets | | ( | ||||
Accounts payable | ( | | ||||
Accrued expenses and accrued wages, salaries and bonuses | ( | ( | ||||
Other long-term liabilities | | | ||||
Income taxes payable and receivable | | | ||||
Net cash flows from (used in) operating activities | | ( | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Purchase of property and equipment | ( | ( | ||||
Proceeds from sales of property and equipment | | | ||||
Acquisition of Arrowrock Supply | — | ( | ||||
Net cash flows from (used in) investing activities | ( | ( | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Borrowings under revolving credit facilities | | | ||||
Repayments under revolving credit facilities | ( | ( | ||||
Principal payments on long-term debt | ( | ( | ||||
Dividends on common stock | ( | ( | ||||
Net cash flows from (used in) financing activities | | | ||||
Net change in cash | ( | | ||||
Cash, beginning of period | | | ||||
Cash, end of period | $ | | $ | | ||
Supplemental disclosure of cash flow information: | ||||||
Cash paid during the period for interest, net of amounts capitalized | $ | | $ | | ||
Cash paid during the period for income taxes, net of refunds |
| |
| | ||
Supplemental disclosure of non-cash information: | ||||||
Equipment acquisitions classified in accounts payable | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
6
AMCON Distributing Company and Subsidiaries
Notes to Condensed Consolidated Unaudited Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
AMCON Distributing Company and Subsidiaries (“AMCON” or the “Company”) serves customers in
| ● | Our wholesale distribution segment (the “Wholesale Segment”), which includes our Team Sledd, LLC (“Team Sledd”) and Henry’s Foods, Inc. (“Henry’s”) subsidiaries, 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 customers primarily in the Central, Rocky Mountain, Great Lakes, Mid-South and Mid-Atlantic regions of the United States. |
| ● | Our retail health food segment (the “Retail Segment”) operates |
WHOLESALE SEGMENT
Our Wholesale Segment is one of the largest wholesale distributors in the United States, serving approximately
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 distribution 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, inventory optimization and merchandising expertise, information systems, and accessing trade credit.
During Q2 2026, we purchased a distribution facility in Ohio for $
RETAIL SEGMENT
Our Retail Segment, through our Healthy Edge Retail Group subsidiary, is a specialty retailer of natural/organic groceries and operates
Market banners. We operate within the natural products retail industry, which is a subset of the United States 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. These stores carry over
7
FINANCIAL STATEMENTS
The Company’s fiscal year ends on September 30th. 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, 2025, 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 consolidated subsidiaries. Additionally, the three-month fiscal periods ended March 31, 2026 and March 31, 2025 have been referred to throughout this Quarterly Report as Q2 2026 and Q2 2025, respectively. The fiscal balance sheet dates as of March 31, 2026 and September 30, 2025 have been referred to as March 2026 and September 2025, respectively. Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on previously reported net income or shareholders' equity.
ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures”, which enhances the transparency, effectiveness and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. This guidance is effective for annual periods beginning after December 15, 2024 (fiscal 2026 for the Company), with early adoption permitted. The Company is currently reviewing this ASU and its potential impact on our consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures”, which improves disclosure requirements and provides more detailed information about an entity’s expenses, specifically amounts related to purchases of inventory, employee compensation, depreciation, intangible asset amortization, and selling expenses, along with qualitative descriptions of certain other types of expenses. This guidance is effective for fiscal years beginning after December 15, 2026 (fiscal 2028 for the Company), and interim periods within fiscal years beginning after December 15, 2027 (fiscal 2029 for the Company), with early adoption permitted. The Company is currently reviewing this ASU and its potential impact on our consolidated financial statements.
In August 2025, the FASB issued ASU No. 2025-05, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets”, which amended the guidance in Topic 326 to allow entities to elect a practical expedient to assume the current conditions as of the balance sheet date remain unchanged over the remaining life of an asset in developing reasonable and supportable forecasts as part of estimating expected credit losses. This amended guidance is effective for annual periods beginning after December 15, 2025 (fiscal 2027 for the Company), and interim periods within those annual periods, with early adoption permitted. The Company is currently reviewing this ASU and its potential impact on our consolidated financial statements.
2. INVENTORIES
Inventories in our Wholesale Segment consisted of finished goods and are stated at the lower of cost or net realizable value, utilizing FIFO and average cost methods. Inventories in our Retail Segment consisted of finished goods and are stated at the lower of cost or market using the retail method. 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 $
8
3. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill at March 2026 and September 2025 was as follows:
| March | | September | |||
2026 | 2025 | |||||
Wholesale Segment | $ | | $ | | ||
Other intangible assets at March 2026 and September 2025 consisted of the following:
| March | | September | |||
2026 | 2025 | |||||
Customer lists (Wholesale Segment) (less accumulated amortization of $ | $ | | $ | | ||
Non-competition agreements (Wholesale Segment) (less accumulated amortization of $ | | | ||||
Tradename (Wholesale Segment) (less accumulated amortization of $ | | | ||||
Trademarks and tradenames (Retail Segment) | | | ||||
$ | | $ | | |||
Goodwill and Retail Segment 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 sheets represent amounts allocated to its Wholesale Segment, which totaled approximately $
At March 2026, identifiable intangible assets considered to have finite lives were represented by customer lists which are being amortized over
Estimated future amortization expense related to identifiable intangible assets with finite lives was as follows at March 2026:
March | |||
| 2026 | ||
Fiscal 2026 (1) | $ | | |
Fiscal 2027 | | ||
Fiscal 2028 | | ||
Fiscal 2029 | | ||
Fiscal 2030 | | ||
Fiscal 2031 and thereafter | | ||
$ | | ||
| (1) | Represents amortization for the remaining six months of Fiscal 2026. |
9
4. DIVIDENDS
The Company paid cash dividends on its common stock totaling $
On March 20, 2026, the Company effected a stock split of its common stock, $
5. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share available to common shareholders is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for each period. Diluted earnings (loss) per share available to common shareholders is calculated by dividing net income (loss) available to common shareholders by the sum of the weighted average number of common shares outstanding and the weighted average dilutive equity awards.
For the three months ended March | ||||||||||||
2026 | 2025 | |||||||||||
| Basic | | Diluted | | Basic | | Diluted | |||||
Weighted average number of common shares outstanding | | | | | ||||||||
Weighted average net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock (1) | — | — | — | — | ||||||||
Weighted average number of shares outstanding | | | | | ||||||||
Net income (loss) available to common shareholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Net earnings (loss) per share available to common shareholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
| (1) | Diluted earnings (loss) per share calculation includes all equity-based awards deemed to be dilutive. |
For the six months ended March | ||||||||||||
2026 | 2025 | |||||||||||
| Basic | | Diluted | | Basic | | Diluted | |||||
Weighted average number of common shares outstanding | | | | | ||||||||
Weighted average net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock (1) | — | — | — | — | ||||||||
Weighted average number of shares outstanding | | | | | ||||||||
Net income (loss) available to common shareholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Net earnings (loss) per share available to common shareholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
| (1) | Diluted earnings (loss) per share calculation includes all equity-based awards deemed to be dilutive. |
10
6. DEBT
The Company primarily finances its operations through
At March 2026, the Facilities had a total combined borrowing capacity of $
The amount available for use from the Facilities at any given time is subject to a number of factors, including eligible accounts receivable and inventory balances that fluctuate day-to-day, as well as the value of certain real estate collateral. Based on the collateral and loan limits as defined in the Facility agreements, the credit limit of the combined Facilities at March 2026 was $
The average interest rate of the Facilities was
Cross Default and Co-Terminus Provisions
The Team Sledd Facility and Team Sledd’s two notes payable contain cross default provisions. The Henry’s Facility and the Henry’s note payable also contain cross default provisions. There were no such cross defaults for either Team Sledd or Henry’s at March 2026. Additionally, the Team Sledd Facility and the Henry’s Facility are non-recourse to AMCON Distributing Company, are not guaranteed by AMCON Distributing Company and have no cross default provisions applicable to AMCON Distributing Company. The Company and its subsidiaries, including Team Sledd and Henry’s, were in compliance with all of the financial covenants under the respective Facilities at March 2026.
Other
The Company has issued letters of credit totaling $
7. INCOME TAXES
The change in the Company’s effective income tax rate for the three- and six-month periods ended March 2026 as compared to the respective prior year periods was primarily related to non-deductible expenses in relation to the amount of income (loss) from operations before income tax expense (benefit) and variances in the average effective state income tax rates between the comparative periods.
11
8. FAIR VALUE DISCLOSURES
Mandatorily Redeemable Non-Controlling Interest
Mandatorily redeemable non-controlling interest (“MRNCI”) recorded on the Company’s condensed consolidated balance sheets represents the fair value of the non-controlling interest in the Company’s strategic investment in Team Sledd. The Company owned approximately
A summary of the MRNCI activity is as follows:
For the Three Months Ended March 31, | ||||||
2026 | 2025 | |||||
Fair value, beginning of period | $ | | $ | | ||
Change in fair value | | | ||||
Fair value, end of period | $ | | $ | | ||
For the Six Months Ended March 31, | ||||||
2026 | 2025 | |||||
Fair value, beginning of period | $ | | $ | | ||
Change in fair value | | | ||||
Fair value, end of period | $ | | $ | | ||
Contingent Consideration
In April 2024, the Company acquired substantially all of the net operating assets of Burklund Distributors, Inc. (“Burklund”). A portion of the consideration exchanged in the acquisition of Burklund was in the form of contingent consideration, which the Company recorded at fair value as of the acquisition date. At each reporting date, the Company reevaluates whether the achievement of the targets to trigger the minimum payout of any contingent consideration is probable. In Q1 2025, the Company determined that the achievement of the targets to trigger the minimum payout of any contingent consideration was not probable, and adjusted the fair value of its contingent consideration liability and recognized operating income of approximately $
12
9. BUSINESS SEGMENTS
The Company has
Wholesale | Retail | |||||||||||
| Segment | | Segment | | Other | | Consolidated | |||||
THREE MONTHS ENDED MARCH 2026 | ||||||||||||
External revenue: | ||||||||||||
Cigarettes | $ | | $ | — | $ | — | $ | | ||||
Tobacco | | — | — | | ||||||||
Confectionery | | — | — | | ||||||||
Health food | — | | — | | ||||||||
Foodservice & other | | — | — | | ||||||||
Total external revenue | | | — | | ||||||||
Cost of sales | | | — | | ||||||||
Selling, general and administrative expenses | | | | | ||||||||
Depreciation | | | — | | ||||||||
Amortization | | — | — | | ||||||||
Operating income (loss) | | | ( | ( | ||||||||
Interest expense | — | — | | | ||||||||
Income (loss) from operations before taxes | | | ( | ( | ||||||||
Total assets | | | | | ||||||||
Capital expenditures (1) | | | — | | ||||||||
(1) Includes $
Wholesale | Retail | |||||||||||
| Segment | | Segment | | Other | | Consolidated | |||||
THREE MONTHS ENDED MARCH 2025 | ||||||||||||
External revenue: | ||||||||||||
Cigarettes | $ | | $ | — | $ | — | $ | | ||||
Tobacco | | — | — | | ||||||||
Confectionery | | — | — | | ||||||||
Health food | — | | — | | ||||||||
Foodservice & other | | — | — | | ||||||||
Total external revenue | | | — | | ||||||||
Cost of sales | | | — | | ||||||||
Selling, general and administrative expenses | | | | | ||||||||
Depreciation | | | — | | ||||||||
Amortization | | — | — | | ||||||||
Operating income (loss) | | | ( | | ||||||||
Interest expense | — | — | | | ||||||||
Income (loss) from operations before taxes | | | ( | ( | ||||||||
Total assets | | | | | ||||||||
Capital expenditures | | | — | | ||||||||
13
Wholesale | Retail | |||||||||||
| Segment | | Segment | | Other | | Consolidated | |||||
SIX MONTHS ENDED MARCH 2026 | ||||||||||||
External revenue: | ||||||||||||
Cigarettes | $ | | $ | — | $ | — | $ | | ||||
Tobacco | | — | — | | ||||||||
Confectionery | | — | — | | ||||||||
Health food | — | | — | | ||||||||
Foodservice & other | | — | — | | ||||||||
Total external revenue | | | — | | ||||||||
Cost of sales | | | — | | ||||||||
Selling, general and administrative expenses | | | | | ||||||||
Depreciation | | | — | | ||||||||
Amortization | | — | — | | ||||||||
Operating income (loss) | | ( | ( | | ||||||||
Interest expense | — | — | | | ||||||||
Income (loss) from operations before taxes | | ( | ( | ( | ||||||||
Total assets | | | | | ||||||||
Capital expenditures (1) | | | — | | ||||||||
(1) Includes $
Wholesale | Retail | |||||||||||
| Segment | | Segment | | Other | | Consolidated | |||||
SIX MONTHS ENDED MARCH 2025 | ||||||||||||
External revenue: | ||||||||||||
Cigarettes | $ | | $ | — | $ | — | $ | | ||||
Tobacco | | — | — | | ||||||||
Confectionery | | — | — | | ||||||||
Health food | — | | — | | ||||||||
Foodservice & other | | — | — | | ||||||||
Total external revenue | | | — | | ||||||||
Cost of sales | | | — | | ||||||||
Selling, general and administrative expenses | | | | | ||||||||
Depreciation | | | — | | ||||||||
Amortization | | — | — | | ||||||||
Operating income (loss) | | | ( | | ||||||||
Interest expense | — | — | | | ||||||||
Income (loss) from operations before taxes | | | ( | ( | ||||||||
Total assets | | | | | ||||||||
Capital expenditures | | | — | | ||||||||
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
BUSINESS UPDATE
Similar to other retail formats, the convenience retailing sector we service continues to operate in a challenging operating environment, impacted in part by weaker consumer spending. At the same time, the cost structures for wholesale distributors such as our Company have been impacted by the cumulative impact of inflation over a multi-year period. These inflationary pressures have increased operating costs in all areas of our business such as product costs, fuel, labor and employee benefits, equipment, and insurance.
We continue to closely monitor economic conditions, including the impact of recent geopolitical events, tariffs and constraints on global shipping routes and supply chains. Additionally, we remain focused on proposals from regulatory bodies, including the United States Food and Drug Administration (“FDA”), which is evaluating potential limitations and/or prohibitions on the sale of certain products sold by our Company such as cigarettes (including menthol cigarettes), e-cigarettes, tobacco, and vaping products.
In recent years, the Company has completed a number of forward-looking strategic investments to enhance its overall competitive position. These investments include acquisitions, opening new distribution facilities, facility upgrades, and new investments in our foodservice and technology platforms. Our Company now ranks as the third (3rd) largest Convenience Distributor in the United States as measured by territory. We believe these targeted investments will be a competitive differentiator over time and will set the stage for future growth as major manufacturers and leading convenience store chains are increasingly relying on large distributors who can both cover wide geographic footprints and deploy unique merchandising and technology solutions.
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 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:
| ● | risks to our business, customers, or employees associated with social unrest, labor disputes (strikes), natural disasters, domestic/political unrest and/or acts of violence, or any restrictions, regulations, or security measures implemented by governmental bodies in response to these items, |
| ● | the potential impact that ongoing or proposed increases or fluctuations in trade tariffs and/or changes to trade policies may have on raw materials or finished goods sourced from abroad which could result in higher prices for the products we sell while also decreasing consumer disposable income and demand, |
| ● | risks associated with tariffs, disruptions to global shipping channels and supply chains, including those incident to wars and blockades, or other macroeconomic factors which may impact our cost structure and overall business risk, particularly related to oil/fuel/energy costs, product and equipment costs, wages, interest, food ingredient and commodity prices, consumer demand and disposable income, customer credit risk and our ability to pass on higher operating costs, |
| ● | risks associated with weakness in retail level demand within the convenience store industry including declining demand for cigarette products, |
15
| ● | risks associated with the emergence of artificial intelligence (AI) and how it may impact our industry, business, and/or ability to compete in the future, |
| ● | risks associated with workforce availability and/or wage pressures which may be impacted by economic conditions, changes in governmental policies, or other changes in the operating environment which may impact our labor force, |
| ● | risks associated with all forms of insurance renewals and the risk that the Company may not be able to renew various insurance with adequate levels of coverage, at favorable rates, or obtain insurance at all based upon market conditions within the insurance industry and/or because of the industry in which the Company operates, |
| ● | risks associated with unrest in certain global regions which could further disrupt world supply chains, manufacturing centers, and shipping routes, impacting commodity/product availability and/or cost, as well as consumer demand trends, |
| ● | risks associated with higher interest rates or prolonged periods of higher interest rates and the related impact on demand, customer credit risk, profitability and cash flows for both the Company and its customer base, particularly as it relates to variable interest rate borrowings, as well as the risk that such borrowings may not be renewed in the future on favorable terms or at all, |
| ● | risks associated with any systemic pressures in the banking system, particularly as they relate to customer credit risk and any resulting impact on our cash flow and our ability to collect on our receivables, |
| ● | regulations, potential bans, limitations and/or litigation related to the manufacturing, distribution, and sale of certain cigarette, e-cigarette, tobacco, and vaping products imposed by the FDA, state or local governmental agencies, or other parties, including proposed and pending regulations and/or product approvals/authorizations related to the manufacturing, distribution, and sale of certain menthol, vaping, and flavored tobacco products, including proposed rules which would limit nicotine levels in certain cigarette and tobacco products, |
| ● | risks associated with the threat or occurrence of epidemics or pandemics (such as COVID-19 or its variants) or other public health issues, including the continued health of our employees and management, the reduced demand for our goods and services or increased credit risk from customer credit defaults resulting from an economic downturn, |
| ● | risks associated with the imposition of governmental orders restricting our operations and the operations of our suppliers and customers, in particular, disruptions to our supply chain or our ability to procure products or fulfill orders due to labor shortages in our warehouse operations, |
| ● | risks associated with macroeconomic, black swan, or other similar events (e.g., stock market crashes, global unrest, supply chain disruptions, pandemics, etc.) that may impact the Company’s sales volumes and/or cost structure and for which the Company has limited ability within its business model to offset the related financial impact, |
| ● | risks associated with the acquisition of businesses or assets, capital asset expenditure projects by either of our business segments such as the development of new facilities/locations or upgrades to distribution centers or retail stores, including, but not limited to, risks associated with consummating such transactions on expected terms or timing, purchase price and business valuation and recording risks, customer turnover and retention risks, and risks related to the assumption of certain liabilities or obligations, |
| ● | risks associated with the integration of new businesses or equity investments by either of our business segments including, but not limited to, risks associated with vendor and customer retention, technology integration, and the potential loss of any key management personnel or employees, |
| ● | 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, |
| ● | risk that our repositioning strategy for our retail business will not be successful, |
16
| ● | risks associated with opening new, or closing unprofitable, retail stores, |
| ● | risks to our brick and mortar retail business and potentially to our wholesale distribution business if online shopping formats such as Amazon™ continue to grow in popularity and further disrupt traditional sales channels, |
| ● | increasing product and operational costs resulting from ongoing supply chain disruptions, an intensely competitive labor market with a limited pool of qualified workers, and higher incremental costs associated with the handling and transportation of certain product categories such as foodservice, |
| ● | increases in state and federal excise taxes on cigarette and tobacco products and the potential impact on demand, particularly as it relates to current legislation under consideration which could significantly increase such taxes, |
| ● | risks associated with disruptions to our technology systems or those of third parties upon which we rely, including human or artificial intelligence-generated security breaches, cyber and ransomware attacks, malware, or other methods by which such information systems could or may have been compromised or impacted, |
| ● | increases in inventory carrying costs and customer credit risks, |
| ● | changes in pricing strategies and/or promotional/incentive programs offered by cigarette and tobacco manufacturers, |
| ● | changing demand for the Company’s products, particularly cigarette, tobacco and vaping products, |
| ● | risks that product manufacturers may begin selling directly to convenience stores and bypass wholesale distributors, |
| ● | changes in laws and regulations and ongoing compliance related to health care and associated insurance, |
| ● | increasing health care costs for both the Company and consumers and its potential impact on discretionary consumer spending, |
| ● | decreased availability of capital resources and/or our access to credit to adequately fund our operations, |
| ● | domestic regulatory and legislative risks, |
| ● | adverse weather including the impact of climate change and/or other sudden and unanticipated changes in weather conditions that may materially impact our operations temporarily (e.g., wildfires, floods, wind storms, tornadoes, extreme temperature changes, ice storms, blizzards, or other violent storms), |
| ● | consolidation trends within the convenience store, wholesale distribution, and retail health food industries, and |
| ● | other risks over which the Company has little or no control, and any other factors not identified herein. |
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.
17
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, 2025, as filed with the Securities and Exchange Commission. There have been no significant changes with respect to these estimates and related policies during the six months ended March 2026.
SECOND FISCAL QUARTER 2026 (Q2 2026)
The following discussion and analysis includes the Company’s results of operations for the three and six months ended March 2026 and March 2025:
Wholesale Segment
Our Wholesale Segment is one of the largest wholesale distributors in the United States, serving approximately 8,500 retail outlets including convenience stores, grocery stores, liquor stores, drug stores, and tobacco shops. We currently distribute over 20,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery products, beverages, groceries, paper products, health and beauty care products, frozen and refrigerated products and institutional foodservice products. We have licenses, and operate, in 34 states, and are the third (3rd) largest convenience store distributor by geographic territory served.
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 distribution 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, inventory optimization and merchandising expertise, information systems, and accessing trade credit.
During Q2 2026, we purchased a distribution facility in Ohio for $8.0 million using borrowings from the Company’s revolving credit facilities. Our Wholesale Segment now operates 15 distribution centers located in Colorado, Idaho, Illinois, Indiana, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee and West Virginia. These distribution centers, combined with cross-dock facilities, include approximately 1.8 million square feet of permanent floor space. Our principal suppliers include Altria, RJ Reynolds, ITG Brands, Hershey, Kellanova, Kraft Heinz, Mars Wrigley, General Mills, Procter and Gamble, Ferrero and other major Consumer Packaged Goods and Foodservice suppliers. We also work closely with our customer base to source private label products on their behalf in a wide variety of categories. In addition, we market our own private label lines of water, candy products, batteries, and other products. We do not maintain any long-term purchase contracts with our suppliers. However, we do participate in a number of programs with our major vendors to support in-stock positions of our key products.
Retail Segment
Our Retail Segment, through our Healthy Edge Retail Group subsidiary, is a specialty retailer of natural/organic groceries and operates 15 retail health food stores under the Chamberlin’s Natural Foods, Akin’s Natural Foods, and Earth Origins Market banners. We operate within the natural products retail industry, which is a subset of the United States 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. These stores carry over 32,000 different nationally 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.
18
RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH:
| 2026 | | 2025 | | Incr (Decr) | | % Change | ||||
CONSOLIDATED: | |||||||||||
Sales (1) | $ | 715,652,441 | $ | 619,503,087 | $ | 96,149,354 |
| 15.5 | |||
Cost of sales |
| 672,163,242 |
| 576,475,202 |
| 95,688,040 |
| 16.6 | |||
Gross profit |
| 43,489,199 |
| 43,027,885 |
| 461,314 |
| 1.1 | |||
Gross profit percentage |
| 6.1 | % |
| 6.9 | % |
| ||||
Operating expense | $ | 43,873,919 | $ | 42,565,980 | $ | 1,307,939 |
| 3.1 | |||
Operating income (loss) |
| (384,720) |
| 461,905 |
| (846,625) |
| (183.3) | |||
Interest expense |
| 2,228,039 |
| 2,266,407 |
| (38,368) |
| (1.7) | |||
Change in fair value of mandatorily redeemable non-controlling interest | 115,599 | 272,856 | (157,257) | (57.6) | |||||||
Income tax expense (benefit) |
| (427,000) |
| (431,000) |
| 4,000 |
| (0.9) | |||
Net income (loss) available to common shareholders |
| (2,174,481) |
| (1,589,960) |
| (584,521) |
| 36.8 | |||
BUSINESS SEGMENTS: | |||||||||||
Wholesale | |||||||||||
Sales | $ | 703,898,978 | $ | 607,600,563 | $ | 96,298,415 |
| 15.8 | |||
Gross profit |
| 39,338,206 |
| 38,556,562 |
| 781,644 |
| 2.0 | |||
Gross profit percentage |
| 5.6 | % |
| 6.3 | % |
| ||||
Retail | |||||||||||
Sales | $ | 11,753,463 | $ | 11,902,524 | $ | (149,061) |
| (1.3) | |||
Gross profit |
| 4,150,993 |
| 4,471,323 |
| (320,330) |
| (7.2) | |||
Gross profit percentage |
| 35.3 | % |
| 37.6 | % |
| ||||
| (1) | Sales are reported net of costs associated with incentives provided to retailers. These incentives totaled $12.5 million in Q2 2026 and $9.2 million in Q2 2025. |
SALES
Changes in sales are primarily driven by:
| (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 and mix of products sold to our customers, either due to a change in purchasing patterns resulting from shifting consumer preferences or the fluctuation in the comparable number of business days in our reporting period. |
19
SALES – Q2 2026 vs. Q2 2025
Sales in our Wholesale Segment increased $96.3 million during Q2 2026 as compared to Q2 2025. Significant items impacting sales during Q2 2026 included a $53.9 million increase in sales related to the volume and mix of cigarette cartons sold, a $31.6 million increase in sales related to price increases implemented by cigarette manufacturers, and a $10.8 million increase in sales related to the volume and mix of products in our tobacco, confectionery, foodservice, and other categories (“Other Products”). Sales in our Retail Segment decreased approximately $0.1 million during Q2 2026 as compared to Q2 2025, primarily due to lower sales volumes in our existing stores.
GROSS PROFIT – Q2 2026 vs. Q2 2025
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 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 $0.8 million during Q2 2026 as compared to Q2 2025. Significant items impacting gross profit during Q2 2026 included an increase of $1.1 million related to the volume and mix of cigarette cartons sold between the comparative periods and a $0.1 million increase related to the mix of volumes and promotions in our Other Products category, partially offset by a $0.4 million decrease in gross profit due to the timing and related benefits of cigarette manufacturer price increases. Gross profit in our Retail Segment decreased approximately $0.3 million during Q2 2026 as compared to Q2 2025, primarily due to a decrease in gross profit related to same store sales.
OPERATING EXPENSE – Q2 2026 vs. Q2 2025
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 Q2 2026 operating expenses increased $1.3 million as compared to Q2 2025. Significant items impacting operating expenses during Q2 2026 included a $1.3 million increase in other Wholesale Segment operating costs, a $0.4 million increase in allowance for credit losses, and a $0.1 million increase in health and other insurance costs. These increases in operating expenses were partially offset by a $0.5 million decrease related to employee compensation and benefit costs.
INTEREST EXPENSE – Q2 2026 vs. Q2 2025
Interest expense decreased in Q2 2026 as compared to Q2 2025, primarily due to lower interest rates and lower average debt balances in the current period.
INCOME TAX EXPENSE – Q2 2026 vs. Q2 2025
The change in the Q2 2026 income tax rate as compared to Q2 2025 was primarily related to non-deductible expenses in relation to the amount of income (loss) from operations before income tax expense (benefit) and variances in the average effective state income tax rates between the comparative periods.
20
RESULTS OF OPERATIONS – SIX MONTHS ENDED MARCH:
| 2026 | | 2025 | | Incr (Decr) | | % Change | ||||
CONSOLIDATED: | |||||||||||
Sales (1) | $ | 1,445,707,771 | $ | 1,330,776,344 | $ | 114,931,427 |
| 8.6 | |||
Cost of sales | 1,354,170,245 | 1,240,854,907 | 113,315,338 |
| 9.1 | ||||||
Gross profit | 91,537,526 | 89,921,437 | 1,616,089 |
| 1.8 | ||||||
Gross profit percentage | 6.3 | % | 6.8 | % | |||||||
Operating expense | $ | 87,979,351 | $ | 85,789,212 | $ | 2,190,139 |
| 2.6 | |||
Operating income (loss) | 3,558,175 | 4,132,225 | (574,050) |
| (13.9) | ||||||
Interest expense | 4,889,675 | 5,113,028 | (223,353) |
| (4.4) | ||||||
Change in fair value of mandatorily redeemable non-controlling interest | 438,240 | 467,668 | (29,428) | (6.3) | |||||||
Income tax expense (benefit) | (182,000) | (39,000) | (143,000) |
| 366.7 | ||||||
Net income (loss) available to common shareholders | (1,381,517) | (1,241,541) | (139,976) |
| 11.3 | ||||||
BUSINESS SEGMENTS: | |||||||||||
Wholesale | |||||||||||
Sales | $ | 1,423,165,888 | $ | 1,308,348,485 | $ | 114,817,403 |
| 8.8 | |||
Gross profit | 83,442,400 | 81,660,279 | 1,782,121 |
| 2.2 | ||||||
Gross profit percentage | 5.9 | % | 6.2 | % | |||||||
Retail | |||||||||||
Sales | $ | 22,541,883 | $ | 22,427,859 | $ | 114,024 |
| 0.5 | |||
Gross profit |
| 8,095,126 |
| 8,261,158 |
| (166,032) |
| (2.0) | |||
Gross profit percentage |
| 35.9 | % |
| 36.8 | % | |||||
| (1) | Sales are reported net of costs associated with incentives provided to retailers. These incentives totaled $23.0 million for the six months ended March 2026 and $19.2 million for the six months ended March 2025. |
SALES – Six months ended March 2026
Sales in our Wholesale Segment increased $114.8 million during the six months ended March 2026 as compared to the same prior year period. Significant items impacting sales during the current period included a $60.7 million increase in sales related to price increases implemented by cigarette manufacturers, a $37.5 million increase in sales related to the volume and mix of cigarette cartons sold, and a $16.6 million increase in sales related to the volume and mix of products in our Other Products category. Sales in our Retail Segment increased approximately $0.1 million during the six months ended March 2026 as compared to the same prior year period, primarily due to higher sales volumes in our existing stores.
GROSS PROFIT – Six months ended March 2026
Gross profit in our Wholesale Segment increased $1.8 million during the six months ended March 2026 as compared to the same prior year period. Significant items impacting gross profit during the current period included an increase of $1.4 million related to the mix of volumes and promotions in our Other Products category, and a $1.0 million increase in gross profit related to the volume and mix of cigarette cartons sold between the comparative periods, partially offset by a $0.6 million decrease in gross profit due to the timing and related benefits of cigarette manufacturer price increases. Gross profit in our Retail Segment decreased approximately $0.2 million during the six months ended March 2026 as compared to the same prior year period, primarily due to a decrease in gross profit related to same store sales.
21
OPERATING EXPENSE – Six months ended March 2026
Operating expenses increased $2.2 million during the six months ended March 2026 as compared to the same prior year period. Significant items impacting operating expenses during the current period included the impact of a prior year (Q1 2025) reduction in operating expenses related to a $1.5 million contingent liability fair value adjustment, a $1.6 million increase in other Wholesale Segment operating costs, a $0.2 million increase in allowance for credit losses, and a $0.1 million increase in operating expense costs in our Retail Segment. These increases in operating expenses were partially offset by a $0.8 million decrease in health and other insurance costs and a $0.4 million decrease related to employee compensation and benefit costs. The increase in our Retail Segment was primarily due to an increase in costs associated with our existing stores.
INTEREST EXPENSE – Six months ended March 2026
Interest expense decreased $0.2 million during the six months ended March 2026 as compared to the same prior year period, primarily due to lower interest rates and lower average debt balances in the current period.
INCOME TAX EXPENSE – Six months ended March 2026
The change in the Company’s effective income tax rate during the six-month period ended March 2026 as compared to the respective prior year period was primarily related to non-deductible expenses in relation to the amount of income (loss) from operations before income tax expense (benefit) and variances in the average effective state income tax rates between the comparative periods.
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 that 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.
The Company primarily finances its operations through three credit facility agreements (a) a facility that is an obligation of AMCON Distributing Company (the “AMCON Facility”), (b) a facility that is an obligation of Team Sledd, LLC (“Team Sledd” and, the “Team Sledd Facility”) and (c) a facility that is the obligation of Henry’s (the “Henry’s Facility”) (collectively, the “Facilities”) and long-term debt agreements with banks. The Team Sledd Facility and the Henry’s Facility are non-recourse to AMCON Distributing Company, are not guaranteed by AMCON Distributing Company and have no cross default provisions applicable to AMCON Distributing Company.
At March 2026, the Facilities had a total combined borrowing capacity of $305.0 million, including provisions for up to $30.0 million in credit advances for certain inventory purchases, which are limited by accounts receivable and inventory qualifications, and the value of certain real estate collateral. The AMCON Facility matures in June 2027, the Henry’s Facility matures in February 2028, and the Team Sledd Facility matures in March 2028, each without a penalty for prepayment. Obligations under the Facilities are collateralized by substantially all of the Company’s respective equipment, intangibles, inventories, accounts receivable, and certain real estate. The Facilities each feature an unused commitment fee and springing financial covenants. Borrowings under the Facilities bear interest at the Secured Overnight Financing Rate (“SOFR”), plus any applicable spreads.
The amount available for use from the Facilities at any given time is subject to a number of factors, including eligible accounts receivable and inventory balances that fluctuate day-to-day, as well as the value of certain real estate collateral. Based on the collateral and loan limits as defined in the Facility agreements, the credit limit of the combined Facilities at March 2026 was $234.9 million, of which $137.1 million was outstanding, leaving $97.8 million available.
22
The average interest rate of the Facilities was 5.07% at March 2026. For the six months ended March 2026, the peak borrowings under the Facilities was $193.2 million, and the average borrowings and average availability under the Facilities was $154.6 million and $80.7 million, respectively.
Cross Default and Co-Terminus Provisions
The Team Sledd Facility and Team Sledd’s two notes payable contain cross default provisions. The Henry’s Facility and the Henry’s note payable also contain cross default provisions. There were no such cross defaults for either Team Sledd or Henry’s at March 2026. Additionally, the Team Sledd Facility and the Henry’s Facility are non-recourse to AMCON Distributing Company, are not guaranteed by AMCON Distributing Company and have no cross default provisions applicable to AMCON Distributing Company. The Company and its subsidiaries, including Team Sledd and Henry’s, were in compliance with all of the financial covenants under the respective Facilities at March 2026.
Dividend Payments
The Company paid cash dividends on its common stock totaling $0.3 million and $0.4 million for the three- and six-month periods ended March 2026, respectively, and $0.3 million and $0.4 million for the three- and six-month periods ended March 2025, respectively.
See Note 4 of Part I, Item 1 of this quarterly report on Form 10-Q for information regarding the Company’s March 2026 stock split.
Other
The Company has issued letters of credit totaling $2.9 million to its workers’ compensation insurance carriers 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 our 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 in both the short- and long-term, a precipitous change in operating environment could materially impact the Company’s future revenue streams 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.
23
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 (“SEC”) 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 March 31, 2026 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 is also 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 March 2026, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
24
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, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company issued unregistered securities during the quarterly period ended March 31, 2026, in relation to the stock split as described in Note 4 of Part I, Item 1 of this quarterly report on Form 10-Q. These issuances were exempt from registration under Section 3(a)(9) of the Securities Act of 1933 and Rule 236 thereunder.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended March 31, 2026, none of the Company’s directors or officers
25
Item 6. Exhibits
(a) Exhibits
10.1 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101 | Inline XBRL Interactive Data File (filed herewith electronically) | |
104 | Cover Page Interactive Data File – formatted in Inline XBRL and included in Exhibit 101 |
26
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: April 20, 2026 | /s/ Christopher H. Atayan |
Christopher H. Atayan, | |
Chief Executive Officer and Chairman | |
Date: April 20, 2026 | /s/ Charles J. Schmaderer |
Charles J. Schmaderer, | |
Vice President, Chief Financial Officer and Secretary | |
(Principal Financial and Accounting Officer) |
27