AMCON Distributing pany(DIT) - 2024 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for the three months ended December 31, 2023, including balance sheets, statements of operations, shareholders' equity, cash flows, and detailed accounting notes Condensed Consolidated Balance Sheets Total assets slightly decreased to $362.4 million by December 31, 2023, while shareholders' equity increased to $106.9 million, primarily due to retained earnings Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Dec 31, 2023 | Sep 30, 2023 | | :--- | :--- | :--- | | Total Current Assets | $243.4 | $245.7 | | Total Assets | $362.4 | $363.4 | | Total Current Liabilities | $72.8 | $76.6 | | Total Liabilities | $255.5 | $259.3 | | Total Shareholders' Equity | $106.9 | $104.2 | Condensed Consolidated Statements of Operations Q1 2024 sales increased 14.0% year-over-year, but operating income declined 30.7% to $3.8 million, and net income fell 59.3% to $1.1 million, resulting in diluted EPS of $1.78 Q1 2024 vs Q1 2023 Statement of Operations (in millions, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Sales | $645.0 | $566.0 | | Gross Profit | $43.3 | $35.0 | | Operating Income | $3.8 | $5.5 | | Net Income | $1.1 | $2.6 | | Diluted EPS | $1.78 | $4.46 | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $106.9 million by December 31, 2023, driven by net income and equity-based compensation, partially offset by dividends - Shareholders' equity grew to $106.9 million at the end of Q1 2024, supported by net income and stock compensation, despite dividend payments[16] Condensed Consolidated Statements of Cash Flows Q1 2024 operating cash flow improved to $5.0 million, while investing activities used $3.8 million and financing activities used $1.0 million, a shift from prior year's financing inflow Q1 2024 vs Q1 2023 Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Operating Activities | $5.0 | $(48.5) | | Investing Activities | $(3.8) | $(1.4) | | Financing Activities | $(1.0) | $49.9 | | Net Change in Cash | $0.2 | $0.02 | Notes to Financial Statements Notes detail the company's Wholesale and Retail segments, accounting policies, debt structure, and segment performance, including the adoption of ASU 2016-13 with no material impact - The company operates two segments: a Wholesale Segment, ranked as the 6th largest convenience store distributor in the U.S., and a Retail Segment with 15 health food stores[21][26][27] - On October 1, 2023, the company adopted ASU 2016-13 regarding credit losses, which did not have a material effect on the consolidated financial statements[30] Q1 2024 Segment Performance (in millions) | Segment | External Revenue | Operating Income (Loss) | | :--- | :--- | :--- | | Wholesale | $634.3 | $7.0 | | Retail | $10.7 | $(0.02) | - The company has a combined borrowing capacity of $300.0 million under its credit facilities. As of December 2023, $140.1 million was outstanding, with $88.5 million available[45][47] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A discusses Q1 2024 financial results, noting a 14.0% sales increase driven by the Henry's acquisition, but significant declines in operating and net income due to increased expenses and interest costs - The business is impacted by macroeconomic factors like inflation and supply chain disruptions, which have decreased consumer discretionary spending and increased operating costs[62] - The company is monitoring potential FDA regulations that could prohibit or limit the sale of certain tobacco products, such as menthol cigarettes, which may negatively impact future revenues[63] Consolidated Results Summary: Q1 2024 vs Q1 2023 | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Sales | $645.0M | $566.0M | 14.0% | | Gross Profit | $43.3M | $35.0M | 23.8% | | Operating Income | $3.8M | $5.5M | (30.7)% | | Net Income | $1.1M | $2.6M | (59.3)% | Results of Operations Q1 2024 Wholesale sales grew 14.1% to $634.3 million, driven by acquisition and price increases, while retail sales rose 4.2%; gross profit margin improved, but operating expenses increased, leading to lower net income - Wholesale segment sales increased by $78.5 million, driven by the Henry's acquisition ($78.7 million) and cigarette manufacturer price increases ($26.3 million), partially offset by a $31.5 million decrease from lower cigarette carton volume[84] - Retail segment sales increased by $0.4 million due to a reopened store and higher sales at existing locations, which was partially offset by the closure of four stores[84] - Operating expenses increased by $10.0 million, with the acquisition of Henry's accounting for $7.8 million of the increase[87] - Interest expense rose by $0.6 million due to higher interest rates and increased debt balances related to the Henry's acquisition[90] Liquidity and Capital Resources The company's liquidity is primarily from $300 million in credit facilities, with $88.5 million available as of December 2023 at an average interest rate of 7.17%, sensitive to working capital and interest rate risks - The company finances operations through three main credit facilities with a total borrowing capacity of $300.0 million[94][95] - At December 2023, available liquidity under the facilities was $88.5 million, with an average interest rate of 7.17%[96][97] - During Q1 2024, the company declared a special dividend of $0.28 per share, totaling approximately $0.2 million, which was paid in Q2 2024[101] Quantitative and Qualitative Disclosures About Market Risk This section is not applicable for the current reporting period - Not applicable[106] Controls and Procedures Management concluded disclosure controls and procedures were effective as of December 31, 2023, with no material changes to internal controls over financial reporting, aside from Henry's acquisition integration - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[108] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting, other than the ongoing implementation of controls for the acquired Henry's business[112] PART II — OTHER INFORMATION Legal Proceedings No legal proceedings were reported during the period - None[114] Risk Factors No material changes to the company's risk factors were reported since the last annual report on Form 10-K - No material changes to the Company's risk factors were reported since the last annual report on Form 10-K[115] Unregistered Sales of Equity Securities and Use of Proceeds Unregistered equity securities were issued to management for awards, exempt under Section 4(a)(2) of the Securities Act of 1933 - Unregistered securities were issued to management during the quarter related to equity awards, exempt from registration under the Securities Act of 1933[116] Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended December 31, 2023[119] Exhibits This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and the Interactive Data File - The report includes CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act as exhibits[120]