EQUITY METHOD INVESTMENT

3 Months Ended

Dec. 31, 2020

4. EQUITY METHOD INVESTMENT

In April 2020, the Company completed a transaction with Chas. M. Sledd Company (“Sledd”), a West Virginia wholesale distributor serving the convenience store industry, to jointly own and operate a limited liability company (“Team Sledd”) formed for the purpose of owning and operating Sledd’s wholesale distribution business. Sledd contributed substantially all of its assets and stated liabilities to Team Sledd, while the Company contributed $10.0 million in cash, of which $6.5 million was structured as equity and $3.5 million was structured as a secured loan to Team Sledd which is subordinate to the liens of Team Sledd's existing secured lenders.

At December 2020, AMCON owned approximately 44% of Team Sledd’s outstanding equity, with a carrying value of $7.2 million. For the three months ended December 2020, the Company recognized $0.3 million in equity in earnings (net of income taxes) from its investment in Team Sledd. The Company’s secured loan to Team Sledd had a carrying value of $3.5 million as of December 2020. Pursuant to an operating agreement between the Company and Sledd, it is anticipated that certain membership interests in Team Sledd will be redeemed over a period of years, with such redemptions to be funded from the operations of Team Sledd. These redemptions would result in corresponding increases in the percentage of the outstanding equity of Team Sledd owned by AMCON.

Team Sledd’s summarized financial data for the three months ended December 2020 was as follows:


	For the three months ended December 2020
	(Unaudited)
Sales	$	164,568,084
Gross profit	$	7,847,390
Net income before income taxes	$	1,003,793
Net income attributable to AMCON, net of tax	$	335,339