ACQUISITIONS

12 Months Ended

Sep. 30, 2023

ACQUISITIONS

ACQUISITIONS

2. ACQUISITIONS

Henry’s Foods, Inc.

On February 3, 2023, the Company, through its wholly owned subsidiary, LOL Foods, Inc., paid approximately $54.9 million in cash to acquire substantially all of the operating assets of Henry’s, a wholesale distributor to convenience stores and other retail formats operating in Minnesota, North Dakota, South Dakota, Iowa, and Wisconsin. In connection with the transaction, the Company also assumed certain operating liabilities totaling approximately $1.2 million, including approximately $0.2 million of operating leases. The transaction was funded with borrowings from the Company’s existing bank group. Costs to effectuate the acquisition were not significant and were expensed as incurred. Strategically, the acquisition expands the Company’s footprint in the North Central portion of the United States and enhances the product and service offerings available to its customer base.

The Company paid cash consideration for the net acquired assets and their related values as of the acquisition date, measured in accordance with FASB ASC 805. In valuing identifiable intangible assets, the Company has estimated the fair value using the discounted cash flows methodology with the assistance of an independent valuation advisor. Inputs and projections used to measure the fair value as of the acquisition date included, but were not limited to, sales growth, gross profit estimates, royalty and customer retention rates, economic and industry conditions, working capital requirements and various other operational considerations. Henry’s is being reported as a component of the Company’s Wholesale Segment.

The following purchase price allocation reflects the amounts of identifiable assets and liabilities assumed:

Accounts receivable	$	8,237,652
Inventories		16,060,965
Prepaid and other assets		400,964
Property and equipment		27,216,323
Other intangible assets		3,607,000
Liabilities assumed		(1,157,976)
Total identifiable net assets	$	54,364,928
Total identifiable net assets	$	54,364,928
Goodwill		500,375
Consideration transferred	$	54,865,303

Accounts receivable were recorded at their fair value representing the amount we expect to collect, which also approximated the gross contractual values of such receivables at the acquisition date. Goodwill totaling approximately $0.5 million arose from the acquisition and primarily represents synergies and economies of scale generated through reductions in selling, general, and administrative expenses. This goodwill has been assigned to the Company’s Wholesale Segment and is expected to be deductible for tax purposes.

Other intangible assets acquired consisted of the following:

	Acquisition-Date		Useful Life
Other Intangible Asset	Fair Value		(Years)
Customer list	$	2,010,000		15
Non-competition agreement		95,000		5
Trade name		1,502,000		7
	$	3,607,000

The following table sets forth the unaudited supplemental financial data for Henry’s from the acquisition date through September 2023, which is included in the Company’s consolidated results for fiscal 2023.

Revenue	$	220,636,797
Net income available to common shareholders	$	2,448,853

Team Sledd, LLC

The Company and Chas. M. Sledd Company (“Sledd”), a West Virginia wholesale distributor serving the convenience store industry, jointly own and operate Team Sledd, a limited liability company which owns and operates Sledd’s wholesale distribution business.

Pursuant to an operating agreement between the Company and Sledd, 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. Any such redemptions would result in a corresponding increase in AMCON’s ownership percentage in Team Sledd. In May 2022 (the “Control Date”), Team Sledd redeemed additional membership interests from certain members. Prior to May 2022, the Company had a minority interest in Team Sledd, which had been accounted for under the equity method. As a result of the May 2022 redemption, the Company became the majority owner of Team Sledd with a controlling interest of approximately 56%. The Company provided no additional consideration to acquire control of Team Sledd. The costs incurred to effectuate the acquisition were not significant and were expensed as incurred. The acquisition expands the Company’s footprint and enhances our ability to service customers in the Mid-Atlantic region of the United States.

The transaction was accounted for in accordance with ASC 805 and the Company measured the fair value of its previously held equity interest and the related noncontrolling interest using the discounted cash flow methodology with the assistance of independent valuation consultants. The total fair value of Team Sledd was approximately $23.3 million, which resulted in a gain of approximately $2.4 million related to the fair value remeasurement of the Company’s ownership interest in Team Sledd. The gain was recorded as a component of other income in the Company’s Consolidated Statement of Operations for fiscal 2022. In connection with the transaction, the Company recorded a deferred tax liability of approximately $0.6 million which will be recognized in future periods when the associated taxes become due. Inputs used to measure the acquisition-date fair value of the Company’s previously held equity interest and the related non-controlling interest in the entity included sales growth, gross profit estimates, economic and industry conditions, working capital requirements and the contractual requirements of the operating agreement. Team Sledd is being reported as a component of the Company’s Wholesale Segment.

The following tables summarize the acquisition-date fair value of Team Sledd, the fair value of Team Sledd’s assets and liabilities at the Control Date, and the resulting goodwill.

Acquisition-date fair value of non-controlling interest	$	10,419,139
Acquisition-date fair value of previously held interest		12,897,443
Fair value of Team Sledd at the Control Date	$	23,316,582

Amounts of identifiable assets and liabilities at fair value:
Cash	$	7,958
Accounts receivable		29,524,181
Inventories		42,896,135
Prepaid and other current assets		2,533,205
Property and equipment		21,002,604
Operating lease right-of use assets		1,501,996
Other intangible assets		1,664,000
Other assets		1,685,945
Liabilities assumed		(78,340,442)
Total identifiable net assets	$	22,475,582
Goodwill		841,000
	$	23,316,582

Accounts receivable were recorded at their fair value representing the amount we expect to collect. Gross contractual amounts receivable were approximately $1.7 million more than their acquisition-date fair value.

Goodwill totaling approximately $0.8 million arose from the acquisition and primarily represents synergies and economies of scale generated through reductions in selling, general, and administrative expenses. This goodwill has been assigned to the Company’s Wholesale Segment and is deductible for tax purposes.

Other intangible assets acquired consisted of the following:

	Acquisition-Date		Useful Life
Other Intangible Asset	Fair Value		(Years)
Customer list	$	1,442,000		15
Non-competition agreement		222,000		3
	$	1,664,000

Team Sledd’s summarized financial data prior to the Control Date for the period ended September 2022 was as follows:

	For the year ended September 2022
Sales	$	393,606,372
Gross profit		21,759,753
Net income before income taxes		4,498,190
Net income attributable to AMCON, net of tax		1,670,133

The following table sets forth the unaudited supplemental financial data for Team Sledd from the Control Date through September 2022, which is included in the Company’s consolidated results for fiscal 2022.

Revenue	$	298,410,724
Net income available to common shareholders	$	3,220,702

The following table presents unaudited supplemental pro forma information assuming the Company acquired Henry’s on October 1, 2021, in addition to holding a 64% interest in Team Sledd on October 1, 2021. These pro forma amounts do not purport to be indicative of the actual results that would have been obtained had the acquisitions occurred at that time.

	For the year ended September 2023		For the year ended September 2022
Revenue	$	2,643,786,694	$	2,733,975,410
Net income available to common shareholders	$	11,764,886	$	22,109,103