AMCON DISTRIBUTING COMPANY BUSINESS UPDATE
Our businesses continue to be impacted by a number of macro-economic factors including ongoing disruptions to global supply chains and product availability.
These factors, combined with a highly inflationary operating environment have resulted in cost pressures across our business segments as product, labor, fuel, interest and other costs have all increased markedly, while at the same time pressuring consumer discretionary spending and impacting retail demand trends.
We continue to closely monitor proposals from governmental and regulatory
bodies, including the
As previously disclosed, the Company closed on its acquisition of
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 which 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:
risks associated with higher interest rates and the related impact on
profitability and cash flows for both the Company and its customer base, ? particularly as it relates to variable interest rate borrowings, as well as
risk that such borrowings may not be renewed in the future on favorable terms
or at all,
risks associated with any systemic pressures in the banking system, ? particularly as they relate to customer credit risk and any resulting impact on
our cash flow and our ability to collect on our receivables,
risks associated with an inflationary operating environment, particularly as it ? relates to wages, fuel, interest, and commodity prices, which impact our
operating cost structure and could impact food ingredient costs and demand for
many of the products we sell,
regulations, potential bans and/or litigation related to the manufacturing,
distribution, and sale of certain cigarette, tobacco, and vaping products ? imposed by the FDA, state or local governmental agencies, or other parties,
including proposed forthcoming regulations around the manufacture and
distribution of certain menthol and flavored tobacco products,
risks associated with the threat or occurrence of epidemics or pandemics (such
as COVID-19 or its variants) or other public health issues, including the ? continued health of our employees and management, the reduced demand for our
goods and services or increased credit risk from customer credit defaults
resulting from an economic downturn,
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risks associated with the imposition of governmental orders restricting our ? operations and the operations of our suppliers and customers, in particular,
disruptions to our supply chain or our ability to procure products or fulfill
orders due to labor shortages in our warehouse operations,
risks associated with the Company's business model which experienced both ? higher sales volumes and labor costs during the COVID-19 pandemic, and the risk
of sales returning to pre-pandemic levels without the Company being able to
offset increases in its cost structure,
risks associated with the acquisition of assets or new businesses or
investments in equity investees by either of our business segments including,
but not limited to, risks associated with consummating such transactions on ? expected terms or timing, purchase price and business valuation and recording
risks, vendor and customer retention risks, employee and technology integration
risks, and risks related to the assumption of certain liabilities or
obligations,
increasing competition and market conditions in our wholesale and retail health ? food businesses and any associated impact on the carrying value and any
potential impairment of assets (including intangible assets) within those
businesses,
? risk that our repositioning strategy for our retail business will not be
successful,
? risks associated with opening new retail stores,
if online shopping formats such as Amazon™ continue to grow in popularity and ? further disrupt traditional sales channels, it may present a significant direct
risk to our brick and mortar retail business and potentially to our wholesale
distribution business,
the potential impact that ongoing, decreasing, or changing trade tariff and ? trade policies may have on our product costs or on consumer disposable income
and demand,
increasing product and operational costs resulting from ongoing supply chain ? disruptions, an intensely competitive labor market with a limited pool of
qualified workers, and higher incremental costs associated with the handling
and transportation of certain product categories such as foodservice,
increases in state and federal excise taxes on cigarette and tobacco products ? and the potential impact on demand, particularly as it relates to current
legislation under consideration which could significantly increase such taxes,
risks associated with disruptions to our technology systems or those of third ? parties upon which we rely, including security breaches, cyber-attacks,
malware, or other methods by which such information systems could be
compromised,
? increases in inventory carrying costs and customer credit risks,
? changes in pricing strategies and/or promotional/incentive programs offered by
cigarette and tobacco manufacturers,
? changing demand for the Company's products, particularly cigarette, tobacco and
vaping products,
? risks that product manufacturers may begin selling directly to convenience
stores and bypass wholesale distributors,
? changes in laws and regulations and ongoing compliance related to health care
and associated insurance,
? increasing health care costs for both the Company and consumers and their
potential impact on discretionary consumer spending,
? decreased availability of capital resources,
? domestic regulatory and legislative risks,
? poor weather conditions, and the adverse effects of climate change,
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? consolidation trends within the convenience store, wholesale distribution, and
retail health food industries,
natural disasters, domestic/political unrest and incidents of violence, or any ? restrictions, regulations, or security measures implemented by governmental
bodies in response to these items, and
? other risks over which the Company has little or no control, and any other
factors not identified herein.
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.
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
SECOND FISCAL QUARTER 2023 (Q2 2023)
The following discussion and analysis includes the Company's results of
operations for the three and six months ended
Wholesale Segment
Our Wholesale Segment is one of the largest wholesale distributors in
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 distributing 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.
Our Wholesale Segment operates eight distribution centers located in
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Retail Segment
Our Retail Segment, through our
We operate within the natural products retail industry, which is a subset of the
Our Retail Segment operates eighteen retail health food stores as
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