ACQUISITIONS

12 Months Ended

Sep. 30, 2024

ACQUISITIONS

ACQUISITIONS

2. ACQUISITIONS

Burklund Distributors, Inc.

On April 5, 2024, the Company acquired substantially all of the net operating assets of Burklund, a wholesale distributor to convenience stores operating in Illinois, Missouri, Indiana and Iowa, for approximately $20.9 million, consisting of $15.4 million in cash, a $3.9 million promissory note payable in quarterly installments over five years at an annual rate of 5.75%, and additional contingent consideration with an acquisition date fair value of $1.6 million. Pursuant to the transaction, contingent consideration of up to $3.0 million in cash could be payable in two installments on the one-year and two-year anniversaries of the acquisition date based on certain sales thresholds. The short-term and long-term portions of the contingent consideration are recorded in accrued expenses and other long-term liabilities, respectively, on the condensed consolidated balance sheets and are re-measured to fair value at each reporting period. The periodic change in fair value is recorded in selling, general and administrative expenses on the condensed consolidated statements of operations. In addition, the Company also assumed certain operating liabilities totaling approximately $0.3 million. The cash portion of 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. The acquisition of Burklund aligns with the Company’s long-term growth strategy by expanding its regional footprint and will provide customers with an enhanced range of products and services over time.

Richmond Master Distributors, Inc.

On June 21, 2024, the Company acquired substantially all of the net operating assets of Richmond Master, a wholesale distributor to convenience stores operating in Illinois, Indiana and Michigan, for approximately $6.6 million in cash. In connection with the transaction, the Company assumed certain operating liabilities totaling approximately $0.6 million, including approximately $0.5 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. The acquisition of Richmond Master provides access to new markets and improved service capability for accounts in our existing service area.

For the two transactions described above, the Company paid consideration in the forms of cash, debt and contingent consideration for the net acquired assets and their related values as of the respective acquisition dates, measured in accordance with ASC 805. In valuing any potential identifiable intangible assets, the Company estimated the fair value using a 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 dates included, but were not limited to, sales growth, gross profit estimates, economic and industry conditions, working capital requirements and various other operational considerations. As a result of the valuation process, no value was assigned to any identifiable intangible assets and no value was assigned to goodwill in either transaction. Burklund and Richmond Master will both be reported as part of the Company’s Wholesale Segment.

The consideration paid for each transaction is as follows:

				Richmond
		Burklund		Master		Total
Cash	$	15,464,397	$	6,631,039	$	22,095,436
Note payable		3,900,000		—		3,900,000
Contingent consideration at fair value		1,578,444		—		1,578,444
Total consideration	$	20,942,841	$	6,631,039	$	27,573,880

The following purchase price allocations reflect the amounts of identifiable assets and liabilities assumed for each transaction:

				Richmond
		Burklund		Master		Total
Accounts receivable	$	3,338,217	$	2,272,945	$	5,611,162
Inventories		10,987,058		3,750,603		14,737,661
Prepaid and other assets		955,965		472,111		1,428,076
Property and equipment		5,956,948		250,000		6,206,948
Operating lease right-of use assets		—		506,356		506,356
Liabilities assumed		(295,347)		(620,976)		(916,323)
Total identifiable net assets	$	20,942,841	$	6,631,039	$	27,573,880
Total identifiable net assets	$	20,942,841	$	6,631,039	$	27,573,880
Goodwill		—		—		—
Total consideration	$	20,942,841	$	6,631,039	$	27,573,880

Accounts receivable were recorded at their fair values representing the amounts we expect to collect, which also approximated the gross contractual values of such receivables at the respective acquisition dates. The transactions did not result in the acquisition of any identifiable intangible assets, nor did they result in any goodwill.

The following table sets forth the unaudited supplemental financial data for Burklund and Richmond Master from the respective acquisition dates through September 2024, which are included in the Company’s consolidated results for fiscal 2024.

				Richmond
		Burklund		Master		Total
Revenue	$	73,396,615	$	25,194,245	$	98,590,860
Net income (loss) available to common shareholders	$	(496)	$	61,544	$	61,048

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

The following table presents unaudited supplemental pro forma financial information assuming the Company acquired Burklund, Richmond Master and Henry’s on October 1, 2022, in addition to holding a 76% interest in Team Sledd on October 1, 2022. 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 2024		For the year ended September 2023
Revenue	$	2,854,752,348	$	2,892,363,498
Net income available to common shareholders	$	3,823,775	$	12,435,254