AMCON Distributing pany(DIT) - 2022 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents AMCON Distributing Company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, shareholders' equity, cash flows, and accompanying notes for the periods ended March 31, 2022 Condensed Consolidated Balance Sheets As of March 31, 2022, total assets were $181.2 million, a decrease from $188.4 million at September 30, 2021, primarily due to lower inventories and accounts receivable Condensed Consolidated Balance Sheets (in thousands) | Account | March 2022 (Unaudited) | September 2021 | | :--- | :--- | :--- | | Total current assets | $130,479 | $136,575 | | Total assets | $181,170 | $188,411 | | Total current liabilities | $45,390 | $47,136 | | Total liabilities | $99,137 | $110,800 | | Total shareholders' equity | $82,033 | $77,613 | | Total liabilities and shareholders' equity | $181,170 | $188,411 | Condensed Consolidated Unaudited Statements of Operations For Q2 2022, sales rose 3.5% to $391.9 million and net income increased 23.8% to $3.0 million, with diluted EPS at $5.19 Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Sales | $391,888 | $378,513 | $814,459 | $783,258 | | Gross Profit | $26,677 | $22,973 | $53,610 | $46,435 | | Operating Income | $3,943 | $3,171 | $7,701 | $7,259 | | Net Income | $3,006 | $2,429 | $6,007 | $5,507 | | Diluted EPS | $5.19 | $4.33 | $10.33 | $9.87 | Condensed Consolidated Unaudited Statements of Shareholders' Equity Shareholders' equity increased from $77.6 million to $82.0 million by March 31, 2022, driven by net income and partially offset by dividends - For the six months ended March 31, 2022, total shareholders' equity increased by approximately $4.4 million. Key changes include a $6.0 million increase from net income and a $3.2 million decrease due to dividend payments[18][19] Condensed Consolidated Unaudited Statements of Cash Flows Net cash from operating activities decreased to $13.8 million for the six months ended March 31, 2022, primarily due to working capital changes Cash Flow Summary for Six Months Ended March 31 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $13,796 | $21,280 | | Net cash used in investing activities | ($720) | ($710) | | Net cash used in financing activities | ($13,067) | ($20,615) | | Net change in cash | $8 | ($45) | Notes to Condensed Consolidated Unaudited Financial Statements The notes detail business segments, accounting policies, the Team Sledd equity investment, credit facility terms, and segment-level financial performance - The company operates two business segments: a Wholesale Segment serving approximately 4,100 retail outlets, and a Retail Segment operating twenty health food stores[24][25] - The company holds a 49% equity interest in Team Sledd, LLC, with a carrying value of $10.5 million as of March 2022. This investment generated $1.4 million in earnings for the six months ended March 2022[39] Segment Operating Income (in thousands) | Period | Wholesale Segment | Retail Segment | | :--- | :--- | :--- | | Q2 2022 | $6,303 | $746 | | Q2 2021 | $4,431 | $661 | | Six Months 2022 | $13,742 | $1,208 | | Six Months 2021 | $10,219 | $546 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses macroeconomic impacts, operational results for three and six-month periods, and the company's strong liquidity position Business Update and Impact of COVID-19 The company faces macroeconomic headwinds including supply chain disruptions, higher fuel costs, and potential FDA regulations on tobacco products - The business is facing cost pressures from global supply chain challenges, higher fuel costs, and a competitive labor market, creating an inflationary environment[74] - The company is closely monitoring potential FDA regulations to ban or limit menthol and flavored tobacco products, which would have a negative impact on financial results if implemented[76] Results of Operations – Three Months Ended March 2022 Consolidated sales increased 3.5% to $391.9 million, driven by wholesale segment growth, while operating expenses rose due to higher compensation and fuel costs - Wholesale segment sales increased by $13.3 million, reflecting a $16.8 million increase from cigarette price hikes and a $12.3 million increase from other product sales, partially offset by a $15.8 million decrease from lower cigarette carton volume[96] - Operating expenses increased by $2.9 million, largely due to a $1.8 million rise in employee compensation and benefits from a competitive labor market and a $0.5 million increase in fuel costs[99] Results of Operations – Six Months Ended March 2022 Consolidated sales grew 4.0% to $814.5 million, with wholesale segment gross profit increasing, though operating expenses rose due to higher employee, insurance, and fuel costs - Wholesale segment sales increased by $30.3 million, reflecting a $35.7 million increase from cigarette price hikes and a $26.5 million increase from other product sales, partially offset by a $31.9 million decrease from lower cigarette carton volume[103] - Operating expenses increased by $6.7 million, primarily due to a $4.8 million rise in employee compensation, a $1.0 million increase in insurance costs, and a $0.9 million increase in fuel costs[107] Liquidity and Capital Resources The company primarily finances operations through a $110.0 million revolving credit facility, with $70.8 million available as of March 2022 - The main source of liquidity is a credit facility with a $110.0 million revolving limit and a $25.0 million accordion feature[107] - As of March 2022, the company had $70.8 million available under its credit facility, with $35.2 million outstanding[111] - The company paid cash dividends totaling $3.2 million for the six-month period ended March 31, 2022[114] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is noted as not applicable for this reporting period - Not applicable[120] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal controls - Based on an evaluation as of March 31, 2022, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[122] - There were no changes in internal control over financial reporting during the fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[128] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings during the period - None[130] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the Company's risk factors as previously disclosed in the Form 10-K for the fiscal year ended September 30, 2021[131] Other Items (2, 3, 4, 5) Items 2, 3, 4, and 5 were all reported as not applicable for this reporting period - Items 2, 3, 4, and 5 are not applicable for this reporting period[132][133][134][135] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and the Interactive Data File - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and the Interactive Data File (XBRL)[137] Signatures - The report was duly signed and authorized on April 18, 2022, by Christopher H. Atayan (CEO and Chairman) and Charles J. Schmaderer (VP, CFO, and Secretary)[139][140]