Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
⌧
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2026
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 1-15589
(Exact name of registrant as specified in its charter)
Delaware
47-0702918
(State or other jurisdiction
(I.R.S. Employer
of incorporation or organization)
Identification No.)
7405 Irvington Road, Omaha NE
68122
(Address of principal executive offices)
(Zip code)
Registrant’s telephone number, including area code: (402) 331-3727
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 Par Value
DIT
NYSE American
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 ◻
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 ◻
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 ◻
Non-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 976,028 shares of its $.01 par value common stock outstanding as of April 17, 2026.
Form 10-Q
2nd Quarter
INDEX
March 31, 2026
PAGE
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets at March 31, 2026 (unaudited) and September 30, 2025
3
Condensed consolidated unaudited statements of operations for the three and six months ended March 31, 2026 and 2025
4
Condensed consolidated unaudited statements of shareholders’ equity for the three and six months ended March 31, 2026 and 2025
5
Condensed consolidated unaudited statements of cash flows for the six months ended March 31, 2026 and 2025
6
Notes to condensed consolidated unaudited financial statements
7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
15
Item 3. Quantitative and Qualitative Disclosures About Market Risk
23
Item 4. Controls and Procedures
24
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
25
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
26
2
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
$
643,064
744,613
Accounts receivable, less allowance for credit losses of $2.4 million at March 2026 and $2.4 million at September 2025
72,803,828
73,192,069
Inventories, net
150,695,783
153,276,545
Income taxes receivable
30,156
140,986
Prepaid expenses and other current assets
16,060,448
12,150,645
Assets held for sale
943,638
—
Total current assets
241,176,917
239,504,858
Property and equipment, net
111,781,351
107,844,655
Operating lease right-of-use assets, net
28,527,753
30,488,841
Goodwill
5,778,325
Other intangible assets, net
4,008,507
4,240,359
Other assets
3,194,416
3,231,488
Total assets
394,467,269
391,088,526
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
69,904,304
69,532,355
Accrued expenses
15,552,569
15,459,406
Accrued wages, salaries and bonuses
5,155,787
6,745,698
Current operating lease liabilities
7,361,830
7,862,117
Current maturities of long-term debt
5,513,687
5,471,310
Current mandatorily redeemable non-controlling interest
7,459,135
7,020,895
Total current liabilities
110,947,312
112,091,781
Credit facilities
137,063,059
126,804,775
Deferred income tax liability, net
3,251,034
4,048,070
Long-term operating lease liabilities
21,340,946
22,845,456
Long-term debt, less current maturities
8,199,693
11,033,949
Other long-term liabilities
1,297,832
1,193,081
Shareholders’ equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized
Common stock, $.01 par value, 3,000,000 shares authorized, 976,028 shares outstanding at March 2026 and 953,378 shares outstanding at September 2025
13,203
9,799
Additional paid-in capital
38,085,548
36,991,031
Retained earnings
106,673,900
108,475,842
Treasury stock at cost
(32,405,258)
Total shareholders’ equity
112,367,393
113,071,414
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
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
Sales (including excise taxes of $138.0 million and $126.1 million, and $281.1 and $269.5 million, respectively)
715,652,441
619,503,087
1,445,707,771
1,330,776,344
Cost of sales
672,163,242
576,475,202
1,354,170,245
1,240,854,907
Gross profit
43,489,199
43,027,885
91,537,526
89,921,437
Selling, general and administrative expenses
41,383,448
40,107,953
82,975,108
80,695,584
Depreciation and amortization
2,490,471
2,458,027
5,004,243
5,093,628
43,873,919
42,565,980
87,979,351
85,789,212
Operating income (loss)
(384,720)
461,905
3,558,175
4,132,225
Other expense (income):
Interest expense
2,228,039
2,266,407
4,889,675
5,113,028
Change in fair value of mandatorily redeemable non-controlling interest
115,599
272,856
438,240
467,668
Other (income), net
(126,877)
(56,398)
(206,223)
(167,930)
2,216,761
2,482,865
5,121,692
5,412,766
Income (loss) from operations before income taxes
(2,601,481)
(2,020,960)
(1,563,517)
(1,280,541)
Income tax expense (benefit)
(427,000)
(431,000)
(182,000)
(39,000)
Net income (loss) available to common shareholders
(2,174,481)
(1,589,960)
(1,381,517)
(1,241,541)
Basic earnings (loss) per share available to common shareholders
(2.34)
(1.72)
(1.49)
(1.35)
Diluted earnings (loss) per share available to common shareholders
Basic weighted average shares outstanding
930,727
922,857
927,906
919,870
Diluted weighted average shares outstanding
Dividends paid per common share
0.31
0.43
Condensed Consolidated Unaudited Statements of Shareholders’ Equity
Additional
Common Stock
Treasury Stock
Paid-in
Retained
Shares
Amount
Capital
Earnings
Total
THREE MONTHS ENDED MARCH 2025
Balance, January 1, 2025
1,297,814
(329,656)
(31,272,163)
35,077,446
108,604,071
112,419,153
Dividends on common stock, $0.12 per share
(116,183)
Compensation expense related to equity-based awards
637,862
Net loss available to common shareholders
Balance, March 31, 2025
35,715,308
106,897,928
111,350,872
THREE MONTHS ENDED MARCH 2026
Balance, January 1, 2026
1,320,464
9,950
(344,436)
37,539,841
108,969,480
114,114,013
(121,099)
548,960
Issuance of shares for stock split
3,253
(3,253)
Balance, March 31, 2026
SIX MONTHS ENDED MARCH 2025
Balance, October 1, 2024
1,275,164
9,648
34,439,735
108,552,565
111,729,785
Dividends on common stock, $0.43 per share
(413,096)
Compensation expense and issuance of stock in connection with equity-based awards
22,650
151
1,275,573
1,275,724
SIX MONTHS ENDED MARCH 2026
Balance, October 1, 2025
(420,425)
1,097,770
1,097,921
Condensed Consolidated Unaudited Statements of Cash Flows
for the six months ended March 31, 2026 and 2025
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net income (loss) available to common shareholders to net cash flows from (used in) operating activities:
Depreciation
4,772,391
4,824,777
Amortization
231,852
268,851
(Gain) loss on sales of property and equipment
(94,394)
(44,229)
Equity-based compensation
Deferred income taxes
(797,036)
(571,672)
Provision for credit losses
4,000
(164,616)
Inventory allowance
(8,695)
32,688
Change in fair value of contingent consideration
(1,453,452)
Changes in assets and liabilities, net of effects of business combinations:
Accounts receivable
384,241
5,749,877
Inventories
2,589,457
(13,324,448)
Prepaid and other current assets
(3,909,803)
(245,028)
37,072
(50,666)
(32,480)
2,898,936
Accrued expenses and accrued wages, salaries and bonuses
(1,540,457)
(4,490,508)
104,751
237,652
Income taxes payable and receivable
110,830
380,354
Net cash flows from (used in) operating activities
2,006,373
(5,449,633)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
(9,328,436)
(6,451,773)
Proceeds from sales of property and equipment
174,534
67,208
Acquisition of Arrowrock Supply
(6,131,527)
Net cash flows from (used in) investing activities
(9,153,902)
(12,516,092)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities
1,369,524,265
1,262,647,310
Repayments under revolving credit facilities
(1,359,265,981)
(1,241,627,743)
Principal payments on long-term debt
(2,791,879)
(2,627,680)
Dividends on common stock
Net cash flows from (used in) financing activities
7,045,980
17,978,791
Net change in cash
(101,549)
13,066
Cash, beginning of period
672,788
Cash, end of period
685,854
Supplemental disclosure of cash flow information:
Cash paid during the period for interest, net of amounts capitalized
4,962,484
5,215,092
Cash paid during the period for income taxes, net of refunds
499,080
151,318
Supplemental disclosure of non-cash information:
Equipment acquisitions classified in accounts payable
445,813
841,018
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 34 states through two business segments:
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.
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 $0.9 million at both March 2026 and September 2025. 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.
8
3. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill at March 2026 and September 2025 was as follows:
Wholesale Segment
Other intangible assets at March 2026 and September 2025 consisted of the following:
Customer lists (Wholesale Segment) (less accumulated amortization of $0.8 million at March 2026 and $0.7 million at September 2025)
2,651,150
2,766,216
Non-competition agreements (Wholesale Segment) (less accumulated amortization of $0.3 million at March 2026 and $0.3 million at September 2025)
34,833
44,333
Tradename (Wholesale Segment) (less accumulated amortization of $0.7 million at March 2026 and $0.6 million at September 2025)
822,524
929,810
Trademarks and tradenames (Retail Segment)
500,000
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 $5.8 million at both March 2026 and September 2025. 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 2025.
At March 2026, 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 five years, and a tradename in our Wholesale Segment which 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 $0.2 million for the three- and six-month periods ended March 2026, respectively, and approximately $0.1 million and $0.3 million for the three- and six-month periods ended March 2025.
Estimated future amortization expense related to identifiable intangible assets with finite lives was as follows at March 2026:
Fiscal 2026 (1)
231,851
Fiscal 2027
463,703
Fiscal 2028
451,037
Fiscal 2029
444,703
Fiscal 2030
301,656
Fiscal 2031 and thereafter
1,615,557
3,508,507
9
4. DIVIDENDS
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.
On March 20, 2026, the Company effected a three-for-two stock split of its common stock, $.01 par value, in the form of a 50% stock dividend on its issued and outstanding shares as of the record date of March 6, 2026. All share and per share data in the condensed consolidated financial statements and related footnotes contained in this report have been adjusted to give retroactive effect to the stock split for all periods presented.
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.
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 earnings (loss) per share available to common shareholders
10
6. DEBT
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”) (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.
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.
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.
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 92% of Team Sledd as of both March 2026 and September 2025. The Company has elected to present the MRNCI liability at fair value under FASB Accounting Standards Codification (“ASC”) 825 – Financial Instruments as it believes this best represents the potential future liability and cash flows. As such, the MRNCI balance at March 2026 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 2026. At March 2026, the contractual amount due under the MRNCI was equal to its fair value. At September 2025, the difference between the contractual amount due under the MRNCI and its fair value was approximately $0.3 million.
A summary of the MRNCI activity is as follows:
For the Three Months Ended March 31,
Fair value, beginning of period
7,343,536
8,406,312
Change in fair value
Fair value, end of period
8,679,168
For the Six Months Ended March 31,
8,211,500
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 $1.5 million, which was recorded as a reduction of selling, general and administrative expenses in the condensed consolidated statements of operations. At March 2026, the Company reaffirmed that the achievement of the targets to trigger the minimum payout of any contingent consideration was not probable.
12
9. BUSINESS SEGMENTS
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 Company’s chief operating decision maker (“CODM”) is the chief executive officer, who utilizes operating income (loss) to evaluate the Company’s business operations and allocate the Company’s resources to these business segments, which are aggregated 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, charges incurred and income earned by our holding company.
Wholesale
Retail
Segment
Consolidated
External revenue:
Cigarettes
459,801,727
Tobacco
131,247,180
Confectionery
42,851,576
Health food
11,753,463
Foodservice & other
69,998,495
Total external revenue
703,898,978
664,560,772
7,602,470
34,887,958
3,841,312
2,654,178
2,158,987
215,558
2,374,545
115,926
2,175,335
94,123
(2,654,178)
Income (loss) from operations before taxes
2,158,609
122,127
(4,882,217)
375,750,974
17,384,403
1,331,892
Capital expenditures (1)
8,936,661
126,772
9,063,433
(1) Includes $8.0 million purchase of a distribution facility in Ohio.
374,341,125
121,839,251
39,765,350
11,902,524
71,654,837
607,600,563
569,044,001
7,431,201
33,319,064
3,773,571
3,015,318
2,056,696
266,906
2,323,602
134,425
2,821,616
430,846
(2,790,557)
2,582,199
453,806
(5,056,965)
373,458,943
17,342,095
1,202,999
392,004,037
Capital expenditures
2,859,192
207,068
3,066,260
13
906,342,083
274,931,852
89,576,141
22,541,883
152,315,812
1,423,165,888
1,339,723,488
14,446,757
69,845,098
7,783,479
5,346,531
4,321,240
451,151
9,044,210
(139,504)
(5,346,531)
8,757,782
(85,093)
(10,236,206)
9,512,260
220,605
9,732,865
812,363,123
257,736,729
83,798,529
22,427,859
154,450,104
1,308,348,485
1,226,688,206
14,166,701
66,882,445
7,629,538
6,183,601
4,293,179
531,598
9,373,148
100,024
(5,340,947)
9,027,534
145,899
(10,453,974)
5,968,999
306,844
6,275,843
14
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:
16
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:
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:
Incr (Decr)
% Change
CONSOLIDATED:
Sales (1)
96,149,354
15.5
95,688,040
16.6
461,314
1.1
Gross profit percentage
6.1
%
6.9
Operating expense
1,307,939
3.1
(846,625)
(183.3)
(38,368)
(1.7)
(157,257)
(57.6)
(0.9)
(584,521)
36.8
BUSINESS SEGMENTS:
Sales
96,298,415
15.8
39,338,206
38,556,562
781,644
2.0
5.6
6.3
(149,061)
(1.3)
4,150,993
4,471,323
(320,330)
(7.2)
35.3
37.6
SALES
Changes in sales are primarily driven by:
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:
114,931,427
8.6
113,315,338
9.1
1,616,089
1.8
6.8
2,190,139
2.6
(574,050)
(13.9)
(223,353)
(4.4)
(29,428)
(6.3)
(143,000)
366.7
(139,976)
11.3
114,817,403
8.8
83,442,400
81,660,279
1,782,121
2.2
5.9
6.2
114,024
0.5
8,095,126
8,261,158
(166,032)
(2.0)
35.9
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.
22
Dividend Payments
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.
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.
Not applicable.
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.
None.
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.
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.
During the three months ended March 31, 2026, none of the Company’s directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement”, as each term is defined in Item 408(a) of Regulation S-K.
(a) Exhibits
10.1
Joinder and Second Amendment to Loan and Security Agreement, dated March 26, 2026, between LOL Foods, Inc., HF Real Estate, LLC, McKinley Logistics, LLC, and BMO BANK N.A.
31.1
Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, pursuant to section 302 of the Sarbanes-Oxley Act
31.2
Certification by Charles J. Schmaderer, Vice President, Chief Financial Officer and Secretary, pursuant to section 302 of the Sarbanes-Oxley Act
32.1
Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 906 of the Sarbanes-Oxley Act
32.2
Certification by Charles J. Schmaderer, Vice President, Chief Financial Officer and Secretary, furnished pursuant to section 906 of the Sarbanes-Oxley Act
101
Inline XBRL Interactive Data File (filed herewith electronically)
104
Cover Page Interactive Data File – formatted in Inline XBRL and included in Exhibit 101
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
/s/ Charles J. Schmaderer
Charles J. Schmaderer,
Vice President, Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
27