UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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Commission File Number 1-15589

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(Exact name of registrant as specified in its charter)

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

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

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ⌧  No ◻

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

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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.

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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. ◻

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

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The Registrant had 645,462 shares of its $.01 par value common stock outstanding as of April 17, 2025.

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Form 10-Q

2nd Quarter

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INDEX

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PART I — FINANCIAL INFORMATION

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Item 1.      Financial Statements

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AMCON Distributing Company and Subsidiaries

Condensed Consolidated Balance Sheets

March 31, 2025 and September 30, 2024

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

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AMCON Distributing Company and Subsidiaries

Condensed Consolidated Unaudited Statements of Operations

for the three and six months ended March 31, 2025 and 2024

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

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AMCON Distributing Company and Subsidiaries

Condensed Consolidated Unaudited Statements of Shareholders’ Equity

for the three and six months ended March 31, 2025 and 2024

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

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AMCON Distributing Company and Subsidiaries

Condensed Consolidated Unaudited Statements of Cash Flows

for the six months ended March 31, 2025 and 2024

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

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AMCON Distributing Company and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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AMCON Distributing Company and Subsidiaries (“AMCON” or the “Company”) serves customers in 34 states through two business segments:

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WHOLESALE SEGMENT

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Our Wholesale Segment is one of the largest wholesale distributors in the United States, serving approximately 7,900 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.

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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.

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Our Wholesale Segment operates 14 distribution centers located in Colorado, Idaho, Illinois, Indiana, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, Tennessee and West Virginia. These distribution centers, combined with cross-dock facilities, include approximately 1.7 million square feet of permanent floor space. Our principal suppliers include Altria, RJ Reynolds, ITG Brands, Hershey, Kellanova, Kraft Heinz, and Mars Wrigley. We also market private label lines of water, candy products, batteries, and other products. We do not maintain any long-term purchase contracts with our suppliers.

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RETAIL SEGMENT

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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.

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FINANCIAL STATEMENTS

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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, 2024, 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, 2025 and March 31, 2024 have been referred to throughout this Quarterly Report as Q2 2025 and Q2 2024, respectively. The fiscal balance sheet dates as of March 31, 2025 and September 30, 2024 have been referred to as March 2025 and September 2024, respectively.

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ACCOUNTING PRONOUNCEMENTS

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Recent Accounting Pronouncements

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In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures”, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU also expands disclosure requirements to enable users of financial statements to better understand the entity’s measurement and assessment of segment performance and resource allocation. This guidance is effective for fiscal years beginning after December 15, 2023 (fiscal 2025 for the Company), and interim periods within fiscal years 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.

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In December 2023, the FASB issued 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 ASU 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.

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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.

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2. ACQUISITION

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On January 17, 2025, the Company acquired substantially all of the operating assets of Davis-Jones, Inc. d/b/a Arrowrock Supply (“Arrowrock”), for approximately $6.1 million in cash. Costs to effectuate the acquisition were not significant and were expensed as incurred. The transaction was funded with borrowings from the Company’s existing bank group. The acquisition of Arrowrock provides access to new markets and improved service capability for accounts in our existing service area.

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The Company paid cash consideration for the acquired assets and their related values as of the acquisition date, measured in accordance with FASB Accounting Standards Codification 805 – Business Combinations (“ASC 805”). No value was assigned to any identifiable intangible assets or goodwill in conjunction with the acquisition.

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Arrowrock will be reported as part of the Company’s Wholesale Segment.

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Identifiable assets acquired are as follows:

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Accounts receivable was recorded at its fair value representing the amount we expect to collect, which also approximated the gross contractual value of such receivables at the acquisition date.

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The following table sets forth the unaudited supplemental financial data for Arrowrock from the acquisition date through March 2025, which is included in the Company’s consolidated results for the three and six months ended March 2025.

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The following table presents unaudited supplemental pro forma information assuming the Company acquired Arrowrock, Burklund Distributors, Inc. and Richmond Master Distributors, Inc. on October 1, 2023, in addition to holding a 76% interest in Team Sledd on October 1, 2023. These pro forma amounts do not purport to be indicative of the actual results that would have been obtained had the acquisitions occurred at that time.

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3. INVENTORIES

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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 $1.2 million at both March 2025 and September 2024. These reserves include the Company’s obsolescence allowance, which reflects estimated unsalable or non-refundable inventory based upon an evaluation of slow-moving and discontinued products.

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4. GOODWILL AND OTHER INTANGIBLE ASSETS

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Goodwill at March 2025 and September 2024 was as follows:

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Other intangible assets at March 2025 and September 2024 consisted of the following:

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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 reporting unit which totaled approximately $5.8 million at both March 2025 and September 2024. The Company performs its annual impairment testing during the fourth fiscal quarter of each year or as circumstances change or necessitate. There have been no material changes to the Company’s impairment assessments since its fiscal year ended September 2024.

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At March 2025, identifiable intangible assets considered to have finite lives were represented by customer lists which are being amortized over 15 years, a non-competition agreement which is being amortized over three years, a non-competition agreement which is being amortized over five years, and a tradename in our Wholesale Segment that is being amortized over seven years. These intangible assets are evaluated for accelerated attrition or amortization adjustments if warranted. Amortization expense related to these assets was approximately $0.1 million and $0.3 million for the three- and six-month periods ended March 2025, respectively, and approximately $0.1 million and $0.3 million for the three- and six-month periods ended March 2024, respectively.

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Estimated future amortization expense related to identifiable intangible assets with finite lives was as follows at March 2025:

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5. DIVIDENDS

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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 2025, respectively, and $0.3 million and $0.4 million for the three- and six-month periods ended March 2024, respectively.

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6. EARNINGS (LOSS) PER SHARE

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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.

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7. DEBT

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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 (the “Team Sledd Facility”) and (c) a facility that is an obligation of Henry’s (the “Henry’s Facility” and, 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.

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At March 2025, the Facilities had a total combined borrowing capacity of $305.0 million, which includes 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.

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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.

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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 2025 was $220.7 million, of which $142.3 million was outstanding, leaving $78.4 million available.

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The average interest rate of the Facilities was 5.76% at March 2025. For the six months ended March 2025, the peak borrowings under the Facilities was $197.1 million, and the average borrowings and average availability under the Facilities was $158.9 million and $73.2 million, respectively.

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Cross Default and Co-Terminus Provisions

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Team Sledd’s two notes payable and the Team Sledd Facility contain cross default provisions. The Henry’s note payable and the Henry’s Facility contain cross default provisions. There were no such cross defaults for either Team Sledd or Henry’s at March 2025. 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 2025.

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Other

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The Company has issued letters of credit totaling $3.1 million to its workers’ compensation insurance carriers as part of its self-insured loss control program.

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8. INCOME TAXES

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The change in the Company’s effective income tax rate for the three- and six-month periods ended March 2025 as compared to the respective prior year periods, was primarily related to non-deductible compensation expense 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.

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9. FAIR VALUE DISCLOSURES

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Mandatorily Redeemable Non-Controlling Interest

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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 76% of Team Sledd at both March 2025 and September 2024. The Company has elected to present the MRNCI liability at fair value under Accounting Standards Codification 825 – Financial Instruments as it believes this best represents the potential future liability and cash flows. As such, the MRNCI balance at March 2025 represents the fair value of the remaining future membership interest redemptions and other amounts due to noncontrolling interest holders through April 2026. The Company calculates the estimated fair value of the MRNCI based on a discounted cash flow valuation technique using the best information available at the reporting date, and records changes in the fair value of the MRNCI as a component of other expense (income) in the condensed consolidated statements of operations. The MRNCI is classified as Level 3 because of the Company’s reliance on unobservable assumptions. The Company estimates the probability and timing of future redemptions and earnings of Team Sledd based on management’s knowledge and assumptions of certain events as of each reporting date, including the timing of any future redemptions and an appropriate discount rate, which was 13.2% at March 2025. At March 2025 and September 2024, the difference between the contractual amount due under the MRNCI and the fair value was approximately $0.6 million and $0.7 million, respectively.

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A summary of the MRNCI activity is as follows:

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During April 2025, subsequent to Q2 2025, certain membership interests in Team Sledd were redeemed, which resulted in AMCON’s ownership of Team Sledd’s outstanding equity increasing to approximately 91%.

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Contingent Consideration

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On April 5, 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 of up to $3.0 million in cash payable in two installments on the one-year and two-year anniversaries of the acquisition date based on the achievement of certain sales thresholds. In accordance with ASC 805, the Company recorded this contingent consideration at fair value as of the acquisition date and re-measures the liability at each reporting period. The Company calculates the estimated fair value of the contingent consideration based on a discounted cash flow valuation technique using the best information available at the reporting date, and records changes in the fair value of the contingent consideration in selling, general and administrative expenses in the condensed consolidated statements of operations. The short-term and long-term portions of any contingent consideration payable are recorded in accrued expenses and other long-term liabilities, respectively, in the Company’s condensed consolidated balance sheets. The contingent consideration liability is classified as Level 3 because of the Company’s reliance on unobservable assumptions.

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At each reporting date, the Company reviews certain inputs, including sales thresholds and an appropriate discount rate, based on management’s knowledge and assumptions of certain events. In Q1 2025, the Company determined that due to current sales trends including customer turnover, the achievement of the sales thresholds required to meet the minimum payout of any contingent consideration was not probable. As such, the Company adjusted the fair value of its contingent consideration liability and recognized operating income of approximately $1.5 million in Q1 2025, which was recorded as a reduction of selling, general and administrative expenses in the condensed consolidated statements of operations. At March 2025, the Company reaffirmed that the achievement of the sales thresholds required to meet the minimum payout of any contingent consideration was not probable.

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At September 2024, the difference between the estimated amount due under the contingent consideration arrangement and the fair value was approximately $0.2 million.

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The following table presents changes in the fair value of the contingent consideration since September 2024:

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10. BUSINESS SEGMENTS

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The Company has two reportable business segments: the wholesale distribution of consumer products (the Wholesale Segment), and the retail sale of health and natural food products (the Retail Segment). The aggregation of the Company’s business operations into these business segments was based on a range of considerations, including but not limited to the characteristics of each business, similarities in the nature and type of products sold, customer classes, methods used to sell the products and economic profiles. Included in the “Other” column are intercompany eliminations and assets held and charges incurred and income earned by our holding company. The segments are evaluated on revenues, gross margins, operating income (loss), and income (loss) from operations before taxes.

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(1) Includes $10.0 million purchase of a distribution facility in Colorado City, Colorado.

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