Business Overview and History
AMCON Distributing Company (DIT) is a leading player in the convenience and foodservice distribution industry, serving a diverse customer base across the United States. With a rich history spanning over 80 years, AMCON has established itself as a reliable partner for both manufacturers and retailers, offering a comprehensive range of products and value-added services.
AMCON Distributing Company was founded in 1943 in Omaha, Nebraska, initially focusing on the distribution of tobacco products. Over the decades, the company has expanded its product portfolio to include a wide array of consumer goods, such as beverages, candy, groceries, foodservice items, automotive supplies, and health and beauty products.
The company’s journey has been marked by significant milestones and challenges. In the early years, AMCON focused primarily on distributing cigarettes and tobacco products, but it has since diversified its offerings to adapt to changing market conditions. One of the key challenges AMCON faced was the evolving regulatory landscape in the tobacco industry, which required the company to navigate various regulations and restrictions on the sale and distribution of cigarettes and tobacco products.
Today, AMCON operates through two primary business segments: Wholesale Distribution and Retail Health Food. The Wholesale Distribution segment serves approximately 7,900 retail outlets, including convenience stores, grocery stores, liquor stores, drug stores, and tobacco shops, across 33 states. The company’s operations are supported by 13 distribution centers located in Colorado, Illinois, Indiana, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, Tennessee, and West Virginia. These distribution centers, combined with cross-dock facilities, encompass approximately 1.7 million square feet of permanent floor space, enabling efficient service to AMCON’s growing customer base.
The Retail Health Food segment operates 15 health food retail stores under the Chamberlins Natural Foods, Akins Natural Foods, and Earth Origins Market banners.
Financials
Financial Performance and Ratios
For the fiscal year ended September 30, 2024, AMCON reported total revenue of $2.71 billion, a slight increase from the previous year’s $2.54 billion. However, the company’s net income available to common shareholders declined to $4.34 million, or $7.15 per diluted share, compared to $11.60 million, or $19.46 per diluted share, in the prior fiscal year. The company’s operating cash flow for fiscal year 2024 was $67.87 million, with free cash flow of $47.44 million.
In the most recent quarter (Q3 2024), AMCON’s revenue was $717.85 million, representing a year-over-year growth of 3.1%. Net income for the quarter stood at $1.49 million, with operating cash flow of $26.87 million and free cash flow of $22.54 million. The increase in Q3 2024 revenue was primarily driven by strong sales in the company’s wholesale distribution segment, which saw a $21.91 million increase compared to the prior year quarter. This was partially offset by a $0.55 million decrease in the retail health food segment.
The company’s financial ratios paint a mixed picture. AMCON’s current ratio of 2.46 suggests a strong liquidity position, while its debt-to-equity ratio of 1.28 indicates a moderate level of leverage. The company’s return on assets (ROA) and return on equity (ROE) stood at 1.16% and 3.97%, respectively, in the latest fiscal year, highlighting the need for improved operational efficiency.
Liquidity
AMCON’s current ratio of 2.46 indicates a strong liquidity position, suggesting that the company has sufficient short-term assets to cover its short-term liabilities. The quick ratio of 0.91 further supports this assessment. As of June 2024, AMCON had a cash balance of $719,340.
The company has combined credit facilities with a total borrowing capacity of $300 million, of which $82.30 million was available as of June 2024. These facilities are collateralized by the company’s assets and feature springing financial covenants, providing AMCON with additional financial flexibility to manage its operations and pursue growth opportunities.
Operational Challenges and Acquisitions
AMCON has faced numerous operational challenges in recent years, including labor shortages, supply chain disruptions, inflationary pressures, and the impact of rising interest rates. These factors have put pressure on the company’s profitability, as evidenced by the decline in net income.
To strengthen its market position and geographic reach, AMCON has been actively engaged in strategic acquisitions. In April 2024, the company completed the acquisition of Burklund Distributors, Inc., a wholesale distributor serving customers in Illinois, Missouri, Indiana, and Iowa. This was followed by the acquisition of Richmond Master Distributors, Inc., a wholesale distributor serving customers in Illinois, Indiana, and Michigan, in June 2024.
These acquisitions are expected to expand AMCON’s regional footprint and enhance the company’s ability to provide a broader range of products and services to its customers. The impact of these acquisitions was evident in the third quarter of 2024, with Burklund Distributors contributing $35.3 million in sales and Richmond Master Distributors adding $1.7 million to the company’s revenue. However, the successful integration of these new businesses will be crucial in leveraging the potential synergies and driving future growth.
Regulatory Landscape and Sustainability Initiatives
The distribution industry in which AMCON operates is subject to various regulatory requirements, particularly in the areas of tobacco and vaping products. The company closely monitors the actions and proposals from federal and state governmental bodies, including the FDA, which may introduce further restrictions or limitations on the sale of certain tobacco and vaping products.
Alongside its operational initiatives, AMCON is also committed to sustainability and responsible business practices. The company has implemented various measures to reduce its environmental impact, such as investing in energy-efficient equipment and facilities, and exploring opportunities to leverage renewable energy sources.
Business Segments
AMCON’s Wholesale Segment is one of the largest wholesale distributors in the United States, serving approximately 7,900 retail outlets. The segment currently distributes 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. In December 2023, Convenience Store News ranked AMCON as the 6th largest convenience store distributor in the United States based on annual sales.
The Wholesale Segment offers retailers various services, including manufacturer- and Company-sponsored sales and marketing programs, merchandising and product category management services, and information systems focused on inventory optimization. AMCON’s principal suppliers include major tobacco companies like Altria, RJ Reynolds, and ITG Brands, as well as confectionery producers such as Hershey, Kellanova, Kraft Heinz, and Mars Wrigley. The company also markets private label lines of water, candy products, batteries, and other items.
The Retail Segment, operated through AMCON’s Healthy Edge Retail Group subsidiary, is a specialty retailer of natural and organic groceries and dietary supplements. The segment operates 15 retail health food stores under various banners, carrying over 36,000 different nationally and regionally branded and private label products.
Performance by Geographic Markets
AMCON primarily operates in the Central, Rocky Mountain, Great Lakes, Mid-South and Mid-Atlantic regions of the United States through its wholesale distribution segment. The company’s 13 distribution centers are strategically located across these regions. The retail health food segment operates 15 stores in the Midwest and Florida.
Outlook and Conclusion
AMCON’s performance in fiscal 2024 reflects the challenges faced by the company, as increasing costs and expenses outpaced revenue growth. However, the company’s strategic focus on expanding its geographic reach and service capabilities through targeted acquisitions demonstrates its commitment to long-term growth and market leadership.
The recent acquisitions of Burklund Distributors and Richmond Master Distributors have already shown positive impacts on the company’s revenue, contributing significantly to the wholesale segment’s growth in the third quarter of 2024. These acquisitions, along with the company’s strong market position as the 6th largest convenience store distributor in the United States, provide a solid foundation for future growth.
As AMCON navigates the evolving regulatory landscape and macroeconomic headwinds, the company’s ability to effectively integrate its recent acquisitions, optimize its operations, and adapt to changing consumer preferences will be crucial in driving future success. The company’s strong liquidity position, with a current ratio of 2.46 and available credit facilities, provides financial flexibility to support its growth initiatives and weather potential challenges.
Investors will closely monitor the company’s progress in executing its strategic initiatives and managing the operational complexities that have impacted its financial results. Key areas to watch include the performance of the newly acquired businesses, the company’s ability to manage costs in an inflationary environment, and its success in leveraging its expanded product offerings and geographic reach to drive sales growth.
Overall, AMCON Distributing Company remains a diversified player in the convenience and foodservice distribution industry, with a rich history and a focus on delivering value to its customers and shareholders. The company’s ability to navigate the current challenges while capitalizing on its recent acquisitions and market position will be critical in shaping its future performance and shareholder value.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.