AMCON Distributing Company (NYSE American: DIT) — FY2023 Form 10-K
Reporting period: Fiscal year ended September 30, 2023; comparisons are with fiscal 2022. This is an annual report, not a standalone fourth-quarter filing.
Business context
AMCON distributes consumer products through its wholesale segment, serving approximately 7,000 retail outlets across 31 states, and operates 17 natural-food and health-product stores. Cigarettes remained a major product, representing approximately 62% of consolidated revenue and 19% of gross profit. The company acquired substantially all operating assets of Henry’s Foods on February 3, 2023, for approximately $54.9 million in cash, expanding its wholesale footprint and foodservice offering.
Financial performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $2,540.0 million | $2,010.8 million |
| Gross profit / margin | $170.8 million / 6.7% | $127.7 million / 6.4% |
| Operating income / margin | $26.0 million / 1.0% | $22.6 million / 1.1% |
| Interest expense | $8.6 million | $2.2 million |
| Net income available to common shareholders | $11.6 million | $16.7 million |
| Diluted earnings per share | $19.46 | $28.59 |
| Net cash from operating activities | $19.7 million | $22.9 million |
Wholesale revenue rose $532.3 million, reflecting acquisitions, cigarette manufacturer price increases, and growth in other product categories; cigarette carton volume and mix reduced sales. Henry’s contributed $220.6 million of revenue and $2.4 million of net income from acquisition through year-end. Retail revenue fell $3.1 million to $43.1 million, and the segment recorded an operating loss of $0.7 million, versus operating income of $0.5 million in FY2022.
At September 30, 2023, cash was $0.8 million and total assets were $363.4 million. Credit facilities had $140.4 million outstanding against a collateral-based credit limit of $239.1 million, leaving $98.7 million available; the stated average facility rate was 7.03%. Long-term debt was $13.6 million, including current maturities. Facility borrowings are variable-rate and secured by substantial assets. The company reported compliance with facility financial covenants. Cash dividends were $5.72 per share, or approximately $3.5 million in total.
Changes, outlook, risks and unusual items
- Revenue growth was acquisition-led and price-driven, while lower cigarette carton volume and mix partially offset those gains. Cigarette sales declined as a share of revenue from 66% to 62%.
- Net income decreased despite higher sales and gross profit. Higher interest expense—attributed to increased rates and debt balances following acquisitions—was a significant factor. FY2022 also included $1.7 million of equity-method earnings and an approximately $2.4 million non-cash gain related to the Team Sledd control transaction.
- Management cited persistent inflation and supply-chain disruptions, with higher product, labor, fuel and financing costs and pressure on consumer demand. The company does not provide specific financial guidance in the filing; its stated priorities include liquidity and operating cash generation, technology and foodservice investment, and longer-term organic and acquisition growth.
- Management is repositioning the retail business amid intense competition and says new store prototypes may be part of the strategy. Results depend on execution and the economics of existing and future stores.
- Key risks include dependence on cigarette distribution amid category decline; possible tobacco, menthol or vaping restrictions and excise-tax increases; variable-rate borrowing costs; customer credit and liquidity exposure; supplier concentration and lack of significant long-term wholesale supply contracts; acquisition integration; and retail competition and possible asset impairment.
- Henry’s acquisition accounting involved significant fair-value estimates and was identified as a critical audit matter. The auditor gave an unqualified opinion on the financial statements; the auditor did not attest to internal control effectiveness. Management reported effective controls, while excluding Henry’s from the year-end internal-control assessment as permitted during the acquisition year.
- As of September 30, 2023, the company reported fewer than 300 shareholders of record and disclosed that continued low record-holder numbers could allow it to suspend Exchange Act reporting and lead to NYSE American delisting. The filing also disclosed a new executive change-in-control severance plan adopted after year-end.
Investor verification priorities
- Separate the effects of Henry’s and Team Sledd from comparable underlying sales, gross profit and cash generation.
- Track cigarette volume, pricing and gross-profit contribution, as well as the pace of growth in foodservice and other products.
- Assess whether operating cash flow and facility availability can support working capital, capital spending, dividends and debt service as borrowing costs change.
- Review Henry’s integration, acquisition-related estimates and goodwill/intangible-asset impairment assumptions, and monitor the retail repositioning plan and store performance.
- Confirm the shareholder-of-record count and any implications for ongoing reporting obligations and the stock’s listing.