EQUITY METHOD INVESTMENT

6 Months Ended

Mar. 31, 2021

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 March 2021, AMCON owned approximately 44% of Team Sledd’s outstanding equity, with a carrying value of $7.6 million. For the three and six months ended March 2021, the Company recognized $0.3 million and $0.6 million, respectively, 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 March 2021. 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. During April 2021, subsequent to Q2 2021, certain membership interests in Team Sledd were redeemed, which resulted in AMCON’s ownership of Team Sledd’s outstanding equity increasing to approximately 49%.

Team Sledd’s summarized unaudited financial data for the three and six months ended March 2021 was as follows:


	For the three months ended March 2021		For the six months ended March 2021
Sales	$	158,459,384	$	323,027,468
Gross profit	$	7,719,918	$	15,567,308
Net income before income taxes	$	941,027	$	1,944,820
Net income attributable to AMCON, net of tax	$	313,492	$	648,831