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AMCON Overstates Net Income, Blames Complicated Accounting
Distributor restates financials after mistaking a liability for equity.
November 24, 2022
In May 2022 AMCON Distributing Company (DIT), wholesale distributor to convenience, grocery, and drug stores, became the majority owner of Team Sledd, a convenience store distributor. Though it didn’t pay any additional money, AMCON’s stake in Sledd increased from 49% to 56% as certain membership interests in Team Sledd may be redeemed over a period of years, with such redemptions being funded from the operations of Team Sledd.
Rather than accounting for the membership interests Sledd can redeem as liabilities, AMCON had improperly accounted for them as equity. In the nine months ended June 22, 2022 the error, among other adjustments, resulted in AMCON:
—Understating current liabilities by $1.7 million, or 2.4%
—Overstating total shareholder equity by $10.9 million, or 12.3%
—Overstating net income attributable to non-controlling interest by $500,000, or 3.9%
In its latest annual report, AMCON company restated its financials, correcting its classification of the non-controlling interest from equity to a liability, and acknowledged a material weakness in its internal controls over financials reporting (ICFR):
“...solely related to the accounting for a certain complex financial instrument relating to a non-controlling interest…”
The remaining future membership interest redemptions and other amounts due Team Sledd will occur through April 2026.
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