ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements under Item 8 and other information in this report, including Critical Accounting Estimates and Cautionary Information included at the end of this Item 7. The following discussion and analysis includes the results of operations for the twelve month periods ended September 2025 and September 2024. For more information regarding our business segments, see Item 1 “Business” of this Annual Report.
Business Update
Similar to other retail formats, the convenience retailing sector we service continues to operate in a challenging operating environment, impacted in part by weaker consumer spending. At the same time, the cost structures for wholesale distributors such as our Company have been impacted by the cumulative impact of inflation over a multi-year period. These inflationary pressures have increased operating costs in all areas of our business such as product costs, labor and employee benefits, equipment, and insurance.
We continue to monitor the impact that changes in tariff rates may have on our operations. Additionally, we remain focused on proposals from regulatory bodies, including the United States Food and Drug Administration (“FDA”), which is evaluating potential limitations and/or prohibitions on the sale of certain products sold by our Company such as cigarettes (including menthol cigarettes), e-cigarettes, tobacco, and vaping products.
In response to this operating environment, the Company has undertaken a number of strategic initiatives including efforts to optimize its organizational structure, continued investments in higher margin growth categories such as foodservice, and the ongoing development of proprietary technology solutions which help differentiate the Company from its competitors. Additionally, the Company has expanded to targeted geographic regions to accommodate customer growth in those areas. This expanded footprint has also created new business development opportunities for the Company as it is now viewed as a viable alternative to other national distributors.
In this regard, during fiscal 2025, the Company acquired Davis-Jones, Inc. d/b/a Arrowrock Supply (“Arrowrock”), a wholesale distributor based in Boise, Idaho, and also opened a new distribution center in Colorado City, Colorado. AMCON now ranks as the third largest Convenience Distributor in the United States as measured by territory covered. We believe this new, expanded geographic footprint will provide an attractive platform for growth in the coming years.
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Results of Operations
The following table sets forth an analysis of various components of the Company’s Statement of Operations as a percentage of sales for fiscal years 2025 and 2024:
Fiscal Years
Gross profit 6.7 6.7
Selling, general and administrative expenses 5.9 5.7
Depreciation and amortization 0.3 0.3
Operating income 0.5 0.7
Interest expense 0.4 0.4
Other (income), net 0.0 0.0
Income from operations before income taxes 0.1 0.3
Income tax expense 0.1 0.1
Net income available to common shareholders 0.0 % 0.2 %
The following table presents selected statement of operations data for fiscal years 2025 and 2024:
CONSOLIDATED:
Gross profit percentage 6.7 % 6.7 %
Operating income 12.6 18.0 (5.4)
Interest expense 10.4 10.4 —
Income tax expense 1.0 3.1 (2.1)
Net income available to common shareholders 0.6 4.3 (3.7)
BUSINESS SEGMENTS:
Wholesale
Gross profit percentage 6.2 % 6.3 %
Retail
Gross profit percentage 36.9 % 36.7 %
(2) Calculated based on rounded numbers as presented in the table.
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SALES
Changes in sales are primarily driven by:
(iii) acquisitions
SALES—Fiscal 2025 vs. Fiscal 2024
Sales in our Wholesale Segment increased $103.7 million during fiscal 2025 as compared to fiscal 2024. Significant items impacting sales during fiscal 2025 included a $120.8 million increase in comparative sales related to the combined acquisitions of Burklund and Richmond Master during Q3 2024, a $23.2 million increase in sales related to the Arrowrock acquisition during fiscal 2025, a $115.2 million increase in sales related to price increases implemented by cigarette manufacturers, and a $20.8 million increase in sales related to the volume and mix of products in our tobacco, confectionary, foodservice, and other categories (“Other Products”), partially offset by a $176.3 million decrease in sales related to the volume and mix of cigarette cartons sold.
Sales in our Retail Segment increased approximately $2.0 million in fiscal 2025 as compared to fiscal 2024. Of this change, approximately $3.1 million related to the combined impact of higher sales volumes in our existing stores and the opening of one new retail store. These increases were partially offset by a $1.1 million decrease related to the closure of three stores between the comparative periods.
GROSS PROFIT—Fiscal 2025 vs. Fiscal 2024
Our gross profit does not include fulfillment costs and costs related to the distribution network which are included in selling, general and administrative costs, and may not be comparable to those of other entities. Some entities may classify such costs as a component of cost of sales. Cost of sales, a component used in determining gross profit, for the Wholesale and Retail Segments includes the cost of products purchased from manufacturers, less incentives we receive which are netted against such costs.
Gross profit in our Wholesale Segment increased $5.0 million during fiscal 2025 as compared to fiscal 2024. Significant items impacting gross profit during fiscal 2025 included an $6.8 million increase in comparative gross profit related to the combined acquisitions of Burklund and Richmond Master in Q3 2024, a $1.2 million increase in gross profit related to the Arrowrock acquisition during fiscal 2025, and a $1.6 million increase in gross profit related to the mix of volumes and promotions in our Other Products category, partially offset by a $3.6 million decrease in gross profit related to the volume and mix of cigarette cartons sold between the comparative periods, and a $1.0 million decrease in gross profit due to the timing and related benefits of cigarette manufacturer price increases. Gross profit in our Retail Segment increased approximately $0.8 million in fiscal 2025 as compared to fiscal 2024. This change was primarily related to a $1.2 million increase in gross profit related to the combined impact of higher sales in our existing stores and the opening of one new retail store, partially offset by a $0.4 million decrease in gross profit related to the closure of three stores between the comparative periods.
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OPERATING EXPENSE—Fiscal 2025 vs. Fiscal 2024
Operating expense includes selling, general and administrative expenses and depreciation and amortization. Selling, general, and administrative expenses primarily consist of costs related to our sales, warehouse, delivery and administrative departments, including purchasing and receiving costs, warehousing costs and costs of picking and loading customer orders. Our most significant expenses relate to costs associated with employees, facility and equipment leases, transportation, fuel, and insurance.
Our fiscal 2025 consolidated operating expenses increased $11.3 million as compared to fiscal 2024. Significant items impacting operating expenses during fiscal 2025 included a $6.5 million increase in operating expenses related to the combined acquisitions of Burklund and Richmond Master during Q3 2024, a $1.4 million increase related to the Arrowrock acquisition during fiscal 2025, a $2.3 million increase in health and other insurance costs, a $2.3 million increase in other Wholesale Segment operating costs, and a $0.8 million increase in operating expense costs in our Retail Segment. These increases were partially offset by a $1.5 million reduction in the Company’s contingent consideration liability and a $0.5 million reduction in employee compensation and benefit costs. The change in our Retail Segment’s operating costs was primarily related to the opening of one new retail store and higher costs in our existing stores, partially offset by the closure of three stores between the comparative periods.
INTEREST EXPENSE — Fiscal 2025 vs. Fiscal 2024
During fiscal 2025, interest expense was impacted by higher outstanding debt balances related to the acquisitions of Arrowrock in fiscal 2025 and Burklund and Richmond Master in fiscal 2024, substantially offset by lower interest rates in the current period.
INCOME TAX EXPENSE — Fiscal 2025 vs. Fiscal 2024
The change in the Company’s effective tax rate during fiscal 2025 as compared to fiscal 2024 was primarily related to non-deductible compensation expense in relation to the amount of income from operations before income tax expense and variances in the average effective state income tax rates between the comparative periods.
Liquidity and Capital Resources
The Company’s variability in cash flows from operating activities is dependent on the timing of inventory purchases and seasonal fluctuations. For example, periodically we have inventory “buy-in” opportunities which offer more favorable pricing terms. As a result, we may have to hold inventory for a period longer than the payment terms. This generates a cash outflow from operating activities that we expect to reverse in later periods. Additionally, during our peak time of operations in the warm weather months, we generally carry higher amounts of inventory to ensure high fill rates and customer satisfaction.
The Company primarily finances its operations through three credit facility agreements (a) a facility that is an obligation of AMCON Distributing Company (the “AMCON Facility”), (b) a facility that is an obligation of Team Sledd (“Team Sledd” and, the “Team Sledd Facility”) and (c) a facility that is the obligation of Henry’s (the “Henry’s Facility”) (collectively, the “Facilities”) and long-term debt agreements with banks. The Team Sledd Facility and the Henry’s Facility are non- recourse to AMCON Distributing Company, are not guaranteed by AMCON Distributing Company and have no cross default provisions applicable to AMCON Distributing Company.
At September 2025, the Facilities have a total combined borrowing capacity of $305.0 million, which includes provisions for up to $30.0 million in credit advances for certain inventory purchases, which are limited by accounts receivable and inventory qualifications, and the value of certain real estate collateral. The AMCON Facility matures in June 2027, the Henry’s Facility matures in February 2028, and the Team Sledd Facility matures in March 2028, each without a penalty for prepayment. Obligations under the Facilities are collateralized by substantially all of the Company’s respective equipment, intangibles, inventories, accounts receivable, and certain real estate. The Facilities each feature an unused commitment fee and springing financial covenants. Borrowings under the Facilities bear interest at the Secured Overnight Financing Rate (“SOFR”), plus any applicable spreads.
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The amount available for use from the Facilities at any given time is subject to a number of factors, including eligible accounts receivable and inventory balances that fluctuate day-to-day, as well as the value of certain real estate collateral. Based on the collateral and loan limits as defined in the Facility agreements, the credit limit of the combined Facilities at September 2025 was $230.3 million, of which $126.8 million was outstanding, leaving $103.5 million available.
The average interest rate of the Facilities was 5.73% at September 2025. During fiscal 2025, the peak borrowings under the Facilities was $197.1 million, and the average borrowings and average availability under the Facilities was $159.4 million and $77.4 million, respectively.
Cross Default and Co-Terminus Provisions
The Team Sledd Facility and Team Sledd’s two notes payable contain cross default provisions. The Henry’s Facility and the Henry’s note payable also contain cross default provisions. There were no such cross defaults for either Team Sledd or Henry’s at September 2025. Additionally, the Team Sledd Facility and the Henry’s Facility are non-recourse to AMCON Distributing Company, are not guaranteed by AMCON Distributing Company and have no cross default provisions applicable to AMCON Distributing Company. The Company and its subsidiaries, including Team Sledd and Henry’s, were in compliance with all of the financial covenants under the Facilities at September 2025.
Dividend Payments
The Company paid cash dividends of $0.6 million, or $1.00 per common share, in each of fiscal 2025 and fiscal 2024.
Other
The Company has issued letters of credit to its workers’ compensation insurance carriers as part of its self-insured loss control program totaling $3.1 million and $2.4 million as of September 2025 and September 2024, respectively.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Liquidity Risk
The Company’s liquidity position is significantly influenced by its ability to maintain sufficient levels of working capital. For our Company and our industry in general, customer credit risk and ongoing access to bank credit heavily influence liquidity positions.
The Company does not currently hedge its exposure to interest rate risk or fuel costs. Accordingly, significant price movements in these areas can and do impact the Company’s profitability.
While the Company believes its liquidity position going forward will be adequate to sustain operations in both the short- and long-term, a precipitous change in the operating environment could materially impact the Company’s future revenue streams as well as its ability to collect on customer accounts receivable or secure bank credit.
OTHER MATTERS—Critical Accounting Estimates
GENERAL
The Consolidated Financial Statements of the Company are prepared in accordance with U.S. generally accepted accounting principles, which require the Company to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company believes that the accounting estimates employed
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and the resulting balances are reasonable; however, actual results may differ from these estimates under different assumptions or conditions.
The Company utilizes numerous critical accounting policies, estimates and assumptions in the preparation of the Consolidated Financial Statements, the most significant of which is set forth below.
ALLOWANCE FOR EXPECTED CREDIT LOSSES
NATURE OF ESTIMATES REQUIRED. The allowance for expected credit losses represents our estimate of uncollectible accounts receivable at the balance sheet date. We monitor our credit exposure on a daily basis and regularly assess the adequacy of our allowance for expected credit losses. Because credit losses can vary significantly over time, estimating the required allowance requires a number of assumptions that are uncertain.
ASSUMPTIONS AND APPROACH USED. We estimate our required allowance for expected credit losses using the following key assumptions:
ACCOUNTING PRONOUNCEMENTS
Accounting Pronouncements Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures”, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU also expands disclosure requirements to enable users of financial statements to better understand the entity’s measurement and assessment of segment performance and resource allocation. The Company adopted ASU 2023-07 on September 30, 2025. The adoption of ASU 2023-07 did not have a material effect on the Company’s consolidated financial statements.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures”, which enhances the transparency, effectiveness and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. This guidance is effective for annual periods beginning after December 15, 2024 (fiscal 2026 for the Company), with early adoption permitted. The Company is currently reviewing this ASU and its potential impact on our consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures”, which improves disclosure requirements and provides more detailed information about an entity’s expenses, specifically amounts related to purchases of inventory, employee compensation, depreciation, intangible asset amortization, and selling expenses, along with qualitative descriptions of certain other types of expenses. This guidance is effective for fiscal years beginning after December 15, 2026 (fiscal 2028 for the Company), and interim periods within fiscal years beginning after December 15, 2027 (fiscal 2029 for the Company), with early adoption permitted. The Company is currently reviewing this ASU and its potential impact on our consolidated financial statements.
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections, contains forward-looking statements that are subject to risks and uncertainties and which reflect management’s current beliefs and estimates of future economic circumstances, industry conditions, Company performance and financial results. Forward-looking statements include information concerning the possible or assumed future results of operations of the Company and those statements preceded by, followed by or that include the words “future,” “position,” “anticipate(s),” “expect(s),” “believe(s),” “see,” “plan,” “further improve,” “outlook,” “should” or similar expressions. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions.
It should be understood that the following important factors, in addition to those discussed elsewhere in this document, could affect the future results of the Company and could cause those results to differ materially from those expressed in our forward-looking statements:
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● risks associated with opening new, or closing unprofitable, retail stores,
● increases in inventory carrying costs and customer credit risks,
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● domestic regulatory and legislative risks,
Changes in these factors could result in significantly different results. Consequently, future results may differ from management’s expectations. Moreover, past financial performance should not be considered a reliable indicator of future performance. Any forward-looking statement contained herein is made as of the date of this document. Except as required by law, the Company undertakes no obligation to publicly update or correct any of these forward-looking statements in the future to reflect changed assumptions, the occurrence of material events or changes in future operating results, financial conditions or business over time.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to 2025 and 2024 Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID# 49) 32
Consolidated Balance Sheets as of September 2025 and September 2024 34
Notes to Consolidated Financial Statements 38
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of AMCON Distributing Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AMCON Distributing Company and its subsidiaries (the Company) as of September 30, 2025 and 2024, the related consolidated statements of operations, shareholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition
As reported on the consolidated statements of operations, the Company reported sales of approximately $2.8 billion for the year ended September 30, 2025. Also as disclosed in Note 1 to the consolidated financial statements, the Company recognizes revenues when the performance obligation is satisfied, which is the point where control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services.
We identified the occurrence and cutoff of revenue transactions as a critical audit matter due to the significant audit effort required in performing procedures related to testing these assertions given the significance of net sales and the large volume of transactions.
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Our audit procedures related to evaluating the occurrence and cutoff of revenue transactions included the following, among others:
/s/ RSM US LLP
We have served as the Company’s auditor since 2006.
Omaha, Nebraska
November 7, 2025
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AMCON Distributing Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September September
ASSETS
Current assets:
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Shareholders’ equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized — —
The accompanying notes are an integral part of these consolidated financial statements.
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AMCON Distributing Company and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Years Ended September
Other expense (income):
Net income available to common shareholders $ 568,739 $ 4,336,489
Basic earnings per share available to common shareholders $ 0.93 $ 7.24
Diluted earnings per share available to common shareholders $ 0.92 $ 7.15
Basic weighted average shares outstanding 613,188 599,020
Diluted weighted average shares outstanding 616,486 606,782
Dividends paid per common share $ 1.00 $ 1.00
The accompanying notes are an integral part of these consolidated financial statements.
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AMCON Distributing Company and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Additional
Common Stock Treasury Stock Paid-in Retained
Shares Amount Shares Amount Capital Earnings Total
Net income available to common shareholders — — — — — 568,739 568,739
The accompanying notes are an integral part of these consolidated financial statements.
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AMCON Distributing Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
September September
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income available to common shareholders $ 568,739 $ 4,336,489
(Gain) loss on sales of property and equipment (90,237) (177,467)
Provision for credit losses 53,549 (64,705)
Change in fair value of contingent consideration (1,453,452) (124,992)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and equipment 113,214 416,546
Acquisition of Arrowrock Supply (See Note 2) (6,131,527) —
Acquisition of Burklund (See Note 2) — (15,464,397)
Acquisition of Richmond Master (See Note 2) — (6,631,039)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock (1,133,095) —
Supplemental disclosure of cash flow information:
Supplemental disclosure of non-cash information:
Equipment acquisitions classified in accounts payable $ 41,384 $ 1,016,948
Purchase of property financed with promissory note — 8,000,000
The accompanying notes are an integral part of these consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Company Operations:
AMCON Distributing Company and Subsidiaries (“AMCON” or “the Company”) serves customers in 34 states and is primarily engaged in the wholesale distribution of consumer products in the Central, Rocky Mountain, Great Lakes, Mid-South and Mid-Atlantic regions of the United States.
AMCON’s wholesale distribution business which includes our Team Sledd, LLC (“Team Sledd”) and Henry’s Foods, Inc. (“Henry’s) subsidiaries (“Wholesale Segment”), operates 14 distribution centers that sell over 20,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery products, beverages, groceries, paper products, health and beauty care products, frozen and refrigerated products and institutional foodservice products. The Company distributes products primarily to retailers such as convenience stores, discount and general merchandise stores, grocery stores, drug stores, tobacco shops and gas stations. In addition, the Company services institutional customers, including restaurants and bars, schools, sports complexes, as well as other wholesalers.
AMCON, through its Healthy Edge Inc. subsidiary, operates 15 retail health food stores as Chamberlin’s Natural Foods, Akin’s Natural Foods, and Earth Origins Market (“Retail Segment”). These stores carry natural supplements, organic and natural groceries, health and beauty care products, and other food items.
The Company’s operations are subject to a number of factors which are beyond the control of management, such as changes in manufacturers’ cigarette pricing, state excise tax increases, or the opening of competing retail stores in close proximity to the Company’s retail stores. While the Company sells a diversified product line, it remains dependent upon the sale of cigarettes which accounted for approximately 61% and 62% of the Company’s consolidated revenue during fiscal 2025 and fiscal 2024, respectively, and 17% and 18% of the Company’s consolidated gross profit during fiscal 2025 and fiscal 2024, respectively.
(b) Accounting Period:
The Company’s fiscal year ends on September 30th, and the fiscal years ended September 30, 2025 and September 30, 2024 have been included herein.
(c) Principles of Consolidation and Basis of Presentation:
The Consolidated Financial Statements include the accounts of AMCON and its wholly-owned subsidiaries and its non-wholly-owned equity investment in Team Sledd. All significant intercompany accounts and transactions have been eliminated.
(d) Cash and Accounts Payable:
AMCON utilizes a cash management system under which an overdraft is the normal book balance in the primary disbursing accounts. Overdrafts included in accounts payable at September 2025 and September 2024 totaled approximately $2.5 million and $3.9 million, respectively, and reflect checks drawn on the disbursing accounts that have been issued but have not yet cleared through the banking system. The Company’s policy has been to fund these outstanding checks as they clear with borrowings under its revolving credit facilities (see Note 7). These outstanding checks (book overdrafts) are classified as cash flows from operating activities in the Consolidated Statements of Cash Flows.
(e) Accounts Receivable:
Accounts receivable primarily consists of customer trade receivables arising in the ordinary course of business and other receivables primarily related to various rebate and promotional incentives with the Company’s suppliers. These receivables are recorded net of an allowance for expected credit losses. The Company evaluates the expected uncollectibility of
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accounts receivable based on a combination of factors, including but not limited to, past collection history, customer credit terms, industry, regulatory and economic conditions, and any customer specific risks, including credit concentration risks. The Company determines the past due status of trade receivables based on our payment terms with each customer. If the Company becomes aware of a specific customer’s inability to meet its financial obligations, such as bankruptcy filings or deterioration in the customer’s operating results or financial position, the Company may record a specific reserve for expected credit losses to reduce the related receivable to the amount it reasonably believes is collectible. Account balances are charged off against the allowance for credit losses when collection efforts have been exhausted and the account receivable is deemed worthless. Any subsequent recoveries of charged off account balances are recorded as income in the period received. As of September 2025 and September 2024, receivables from transactions with customers, less allowance for expected credit losses were $70.4 million and $68.1 million, respectively.
(f) Inventories:
At September 2025 and September 2024, inventories in our Wholesale Segment consisted of finished goods and are stated at the lower of cost or net realizable value, utilizing FIFO and average cost methods. Inventories in our Retail Segment consisted of finished goods and are stated at the lower of cost or market using the retail method. The wholesale distribution and retail health food segment inventories consist of finished products purchased in bulk quantities to be redistributed to the Company’s customers or sold at retail. Finished goods included total reserves of approximately $0.9 million and $1.2 million at September 2025 and September 2024, respectively. These reserves include the Company’s obsolescence allowance, which reflects estimated unsaleable or non-refundable inventory based upon an evaluation of slow moving and discontinued products.
(g) Prepaid Expenses and Other Current Assets:
A summary of prepaid expenses and other current assets is as follows (in millions):
Prepaid expenses $ 5.8 $ 5.5
Prepaid inventory 6.4 7.3
Prepaid inventory represents inventory in-transit that has been paid for but not received.
(h) Property and Equipment:
Property and equipment are stated at cost less accumulated depreciation or amortization. Major renewals and improvements are capitalized and charged to expense over their useful lives through depreciation or amortization charges. Repairs and maintenance are charged to expense in the period incurred. The straight-line method of depreciation is used to depreciate assets over the estimated useful lives as follows:
Years
Land improvements 9 - 15
Buildings and improvements 5 - 40
Warehouse equipment 2 - 20
Furniture, fixtures and leasehold improvements 1 - 12
Vehicles 1 - 10
Costs and accumulated depreciation applicable to assets retired or sold are eliminated from the accounts, and the resulting gains or losses are reported as a component of operating income.
The Company reviews property and equipment for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash flows expected to be generated by the asset group are estimated over the asset’s useful life of the primary asset and based on updated projections on an undiscounted basis. If the evaluation indicates that the carrying value of the asset group may not be recoverable, the potential impairment is
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determined based on the amount by which the carrying value of the asset group exceeds the fair value of the asset group. There was no impairment of any property and equipment during either fiscal 2025 or fiscal 2024.
(i) Leases:
Lease liabilities are equal to the present value of the remaining fixed lease payments. Right-of-use (“ROU”) assets are determined based on the amount of the lease liability, plus initial direct costs incurred less lease incentives. The Company determines its incremental borrowing rates based on information available at the lease commencement date in calculating the present value of its lease payments. The Company does not recognize assets or liabilities for leases with an initial term of twelve months or less and these short-term lease payments are recognized in the consolidated statements of operations on a straight-line basis over the lease term. The Company elected the practical expedient to account for non-lease components as part of the lease for all asset classes. The Company reviews its ROU lease assets for indicators of impairment in the same manner as its other property and equipment as described above in (h) Property and Equipment.
(j) Goodwill and Intangible Assets:
Goodwill consists of the excess purchase price paid in certain business combinations over the fair value of assets acquired and generally represents synergies and economies of scale generated through reductions in selling, general, and administrative expenses. Intangible assets consist of trademarks, tradenames, and customer relationships acquired as part of acquisitions in addition to certain non-competition agreements. Goodwill and the trademarks and tradenames for our Retail Segment are considered to have indefinite lives.
Goodwill and intangible assets having indefinite useful lives are not amortized into the results of operations, but instead are reviewed annually or more frequently if events or changes in circumstances indicate that the assets might be impaired, to assess whether their fair value exceeds their carrying value. The Company performs its annual goodwill and intangible asset impairment assessment during the fourth fiscal quarter of each year.
When evaluating the potential impairment of non-amortizable indefinite lived assets and goodwill, the Company first assesses a range of qualitative factors, including but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for the Company’s products and services, market prices, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and the overall financial performance for each of the Company’s reporting units. If after completing this assessment, the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative evaluation is performed using the income approach (discounted cash flow method).
A discounted cash flow methodology requires the estimation of a wide range of factors including but not limited to: (i) forecasting future earnings and cash flows, (ii) determining the discount rate applicable to the earnings stream being discounted, and (iii) computing a terminal value at some point in the future. These estimations require significant judgment and include making assumptions such as sales growth rates including the addition of new retail stores, future store profitability, planned capital expenditures, our ability to control costs, the successful implementation of initiatives designed to enhance sales and improve inventory management, gross profit estimates, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for the Company’s products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, working capital requirements, weighted average cost of capital, and current and anticipated operating conditions. The use of different assumptions or estimates for future cash flows could produce different results.
For goodwill impairment testing, the Company utilizes the guidance in Accounting Standards Codification (“ASC”) 350 - Intangibles - Goodwill and Other whereby a reporting unit’s carrying value is compared to its fair value and impairment charges are recognized for an amount by which a reporting unit’s carrying amount exceeds its fair value.
The Company’s identifiable intangible assets with finite lives are amortized over their estimated useful lives and are assessed for impairment whenever events or circumstances change which may indicate that the carrying amount of the assets may not be recoverable. Identifiable intangible assets which are subject to amortization are evaluated for impairment
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using a process similar to that used in evaluating the elements of property and equipment. If impaired, the related assets are written down to their estimated fair value.
(k) Equity Method Investment:
The Company uses the equity method to account for its investment in an investee if the investment provides the ability to exercise significant influence, but not control, over operating and financial policies of the investee. The Company’s proportionate share of the net income or loss (net of income taxes) of the investee is included in consolidated net earnings.
Judgment regarding the level of influence over its equity method investment includes considering key factors such as the Company’s ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The Company evaluates its equity method investment for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. Factors considered by the Company when reviewing its equity method investment for impairment include the length of time (duration) and the extent (severity) to which the fair value of the equity method investment has been less than cost, the investee’s financial condition and future prospects, and the intent and ability to hold the investment for a period of time sufficient to allow for anticipated recovery. An impairment that is other-than-temporary is recognized in the period identified.
(l) Revenue Recognition:
The Company recognizes revenues when the performance obligation is satisfied, which is the point where control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. For the majority of the Company’s customer arrangements, control transfers to customers at a point-in-time when goods have been delivered, as that is generally when legal title, physical possession and risks and rewards of goods/services transfers to the customer. The timing of satisfaction of the performance obligation is not subject to significant judgment due to the simultaneous nature of the Company’s customer arrangements (same day creation and fulfillment). After the completion of its performance obligations, the Company has an unconditional right of payment from customers with varying collection and payment terms based on region, credit risk, and other situational factors. Customer receivables are included on the consolidated balance sheets less an allowance for doubtful accounts. The Company has elected the practical expedient permitting it to disregard financing components which may be deemed to be part of its transaction price as its customary payments terms are less than one year. See Note 13 “Business Segments” for the disaggregation of net sales for each of our business segments.
(m) Insurance:
The Company’s insurance for employee-related health care benefits, workers’ compensation, and general liability is provided through high-deductible or self-insured programs. The Company accrues for employee-related health care costs utilizing a claims reserve methodology and prepays insurance carriers for all workers’ compensation and general liability coverage as part of its insurance program. The Company accrues for employee-related health care claims based upon a reserve analysis for claims incurred, but not reported, utilizing the Company’s historical claims experience rate, plus specific reserves for large claims. The reserves associated with the exposure to these liabilities are reviewed by management for adequacy at the end of each reporting period. The Company has issued letters of credit to insurance carriers as part of its loss control program totaling $3.1 million and $2.4 million as of September 2025 and September 2024, respectively.
(n) Income Taxes:
The Company uses the asset and liability method to calculate deferred income taxes. Deferred tax assets and liabilities are recognized on temporary differences between financial statement and tax bases of assets and liabilities using enacted tax rates. The effect of tax rate changes on deferred tax assets and liabilities is recognized in income during the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when we do not consider it more likely than not that some portion or all of the deferred tax assets will be realized. During the fourth quarter of fiscal 2025, the One Big Beautiful Bill Act was signed into law. The Company is evaluating any impacts the legislation may have on its consolidated financial statements.
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(o) Share-Based Compensation:
The Company recognizes expense for its share-based compensation based on the fair value of the awards that are granted. The fair value of stock options are estimated at the date of grant using the Black-Scholes option pricing model. Option pricing methods require the input of highly subjective assumptions, including the expected stock price volatility. The fair value of restricted stock units and restricted stock awards is based on the period ending closing price of the Company’s common stock. Measured compensation cost is recognized ratably over the vesting period of the related share-based compensation award and is reflected in our Consolidated Statement of Operations under “Selling, general and administrative expenses.”
(p) Customer Sales Incentives:
The Company provides consideration to customers, such as sales allowances or discounts on a regular basis. In accordance with ASC 606, the Company estimates customer sales incentives due as sales are made and records them as a reduction of net sales.
(q) Excise Taxes:
Under ASC 606, the Company is primarily responsible for excise taxes levied on cigarette and other tobacco products and presents excise taxes as a component of revenue.
(r) Contract Costs:
Under ASC 606, the Company expenses as incurred any incremental costs to obtain and fulfill customer contracts as the related amortization period would be one year or less.
(s) Per-share Results:
Basic earnings or loss per share data are based on the weighted-average number of common shares outstanding during each period. Diluted earnings or loss per share data are based on the weighted-average number of common shares outstanding and the effect of all dilutive potential common shares including stock options, restricted stock units and restricted stock awards.
(t) Use of Estimates:
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(u) Fair Value Measurements:
The Company’s financial assets and liabilities are recognized or disclosed at fair value in the financial statements on a recurring basis. The carrying amount of trade accounts receivable, other receivables, accounts payable and other accrued liabilities approximates fair value because of the short maturity of these financial instruments. The carrying amount of the Company’s variable and fixed rate debt also approximates fair value.
(v) Mandatorily Redeemable Non-Controlling Interest:
Mandatorily redeemable non-controlling interest (“MRNCI”) recorded on the Company’s consolidated balance sheets represents the fair value of the non-controlling interest in the Company’s strategic investment in Team Sledd. The Company has elected to present the MRNCI liability at fair value under ASC 825 – Financial Instruments (“ASC 825”) as it believes this best represents the potential future liability and cash flows. The Company calculates the estimated fair value of the MRNCI based on a discounted cash flow valuation technique using the best information available at the
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reporting date, and records changes in the fair value of the MRNCI as a component of other expense (income) in the Consolidated Statements of Operations. The Company estimates the probability and timing of future redemptions and earnings of Team Sledd based on management’s knowledge and assumptions of certain events as of each reporting date, including the timing of any future redemptions and an appropriate discount rate. The MRNCI is classified as Level 3 because of the Company’s reliance on unobservable assumptions.
(w) Contingent Consideration:
Contingent consideration recorded on the Company’s consolidated balance sheets represents the fair value of a portion of the consideration paid in the acquisition of Burklund Distributors, Inc. (“Burklund”) (see Note 2). In accordance with Financial Accounting Standards Board (“FASB”) ASC 805 – Business Combinations (“ASC 805”), the Company recorded the contingent consideration at fair value as of the acquisition date and re-measures the liability at each reporting period. The Company calculates the estimated fair value of the contingent consideration based on a discounted cash flow valuation technique using the best information available at the reporting date, and records changes in the fair value of the contingent consideration in selling, general and administrative expenses in the consolidated statements of operations. The short-term and long-term portions of the contingent consideration are recorded in accrued expenses and other long-term liabilities, respectively, on the consolidated balance sheets. At each reporting date, the Company reviews certain inputs, including sales thresholds and an appropriate discount rate, based on management’s knowledge and assumptions of certain events. The contingent consideration liability is classified as Level 3 because of the Company’s reliance on unobservable assumptions.
(x) Business Combinations:
The acquisition method of accounting for business combinations under ASC 805 requires management to use significant estimates and assumptions, including fair value estimates, as of the business combination date and to refine those estimates as necessary during the measurement period (defined as the period, not to exceed one year, in which the Company is allowed to adjust the provisional amounts recognized for a business combination).
(y) Accounting Pronouncements:
Accounting Pronouncements Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU also expands disclosure requirements to enable users of financial statements to better understand the entity’s measurement and assessment of segment performance and resource allocation. The Company adopted ASU 2023-07 in September 2025. The adoption of ASU 2023-07 did not have a material effect on the Company’s consolidated financial statements.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures”, which enhances the transparency, effectiveness and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. This guidance is effective for annual periods beginning after December 15, 2024 (fiscal 2026 for the Company), with early adoption permitted. The Company is currently reviewing this ASU and its potential impact on our consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures”, which improves disclosure requirements and provides more detailed information about an entity’s expenses, specifically amounts related to purchases of inventory, employee compensation, depreciation, intangible asset amortization, and selling expenses, along with qualitative descriptions of certain other types of expenses. This guidance is effective for fiscal years beginning after December 15, 2026 (fiscal 2028 for the Company), and interim
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periods within fiscal years beginning after December 15, 2027 (fiscal 2029 for the Company), with early adoption permitted. The Company is currently reviewing this ASU and its potential impact on our consolidated financial statements.
2. ACQUISITIONS
Arrowrock Supply
On January 17, 2025, the Company acquired substantially all of the operating assets of Davis-Jones, Inc. d/b/a Arrowrock Supply (“Arrowrock”), for approximately $6.1 million in cash. Costs to effectuate the acquisition were not significant and were expensed as incurred. The transaction was funded with borrowings from the Company’s existing bank group. The acquisition of Arrowrock provides access to new markets and improved service capability for accounts in our existing service area.
The Company paid cash consideration for the acquired assets and their related values as of the acquisition date, measured in accordance with ASC 805. No value was assigned to any identifiable intangible assets or goodwill in conjunction with the acquisition. Arrowrock is reported as part of the Company’s Wholesale Segment.
Identifiable assets acquired are as follows:
Accounts receivable $ 12,375
Prepaid and other assets 1,789
Property and equipment - Land 597,700
Property and equipment - Building 2,466,364
Property and equipment - Vehicles 55,000
Total identifiable net assets $ 6,131,527
Accounts receivable was recorded at its fair value representing the amount we expect to collect, which also approximated the gross contractual value of such receivables at the acquisition date.
The following table sets forth the supplemental financial data for Arrowrock from the acquisition date through September 2025, which is included in the Company’s consolidated results for fiscal 2025.
Net loss available to common shareholders $ (119,609)
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.
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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 Burklund and Richmond Master 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
Contingent consideration at fair value 1,578,444 — 1,578,444
The following purchase price allocations reflect the amounts of identifiable assets and liabilities assumed for each transaction:
Richmond
Burklund Master Total
Operating lease right-of use assets — 506,356 506,356
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.
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The following table sets forth the 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
The following table presents unaudited supplemental pro forma financial information assuming the Company acquired Arrowrock, Burklund and Richmond Master on October 1, 2023, in addition to holding a 92% interest in Team Sledd on October 1, 2023. 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 2025 For the year ended September 2024
Net income available to common shareholders $ 880,645 $ 4,567,482
3. EARNINGS PER SHARE:
Basic earnings per share available to common shareholders is calculated by dividing net income by the weighted average number of common shares outstanding for each period. Diluted earnings per share available to common shareholders is calculated by dividing income from operations by the sum of the weighted average number of common shares outstanding and the weighted average dilutive equity awards.
For Fiscal Years
Basic Basic
Weighted average number of common shares outstanding 613,188 599,020
Net income available to common shareholders $ 568,739 $ 4,336,489
Net earnings per share available to common shareholders $ 0.93 $ 7.24
For Fiscal Years
Diluted Diluted
Weighted average number of common shares outstanding 613,188 599,020
Weighted average number of shares outstanding 616,486 606,782
Net income available to common shareholders $ 568,739 $ 4,336,489
Net earnings per share available to common shareholders $ 0.92 $ 7.15
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4. PROPERTY AND EQUIPMENT, NET:
Property and equipment at September 2025 and September 2024 consisted of the following:
During fiscal 2025 and fiscal 2024, respectively, the Company capitalized approximately $0.7 million and $0.9 million of interest on funds borrowed to finance certain capital expenditures. Capitalized interest is recorded as part of an asset’s cost and will be depreciated over the asset’s useful life.
5. LEASES:
The Company’s Wholesale Segment leases certain warehouse facilities, office space, vehicles and office equipment. The Company’s Retail Segment leases store space in various shopping center complexes and certain office space. Certain of the warehouse and retail store leases include one or more options to renew or terminate the applicable lease agreement, with the exercise of such options at the Company’s discretion. The Company’s leases do not contain any significant residual value guarantees nor do they impose any significant restrictions or covenants other than those customarily found in similar types of leases.
The operating ROU lease assets and liabilities recorded on the Company’s consolidated balance sheets consist of fixed lease payments. Leases with an initial term of twelve months or less are not recorded on the consolidated balance sheets and are expensed on a straight-line basis over the lease term. Additionally, certain leases contain variable payments such as vehicle leases with per-mile charges or retail leases with an additional rent payment based on store performance. These variable payments are expensed as incurred. The Company combines lease components and non-lease components for all asset classes for purposes of recognizing lease assets and liabilities. The Company determines its incremental borrowing rates based on information available at the lease commencement date in calculating the present value of lease payments. The Company reviews its ROU lease assets for indicators of impairment in the same manner as its other property and equipment as described in Note 1.
Leases consist of the following:
Assets Classification September 2025 September 2024
Liabilities
Current:
Non-current:
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The components of lease costs were as follows:
Maturities of lease liabilities as of September 2025 were as follows:
Operating Leases
Total lease payments 35,994,045
Less: interest (5,286,472)
Present value of lease liabilities $ 30,707,573
Weighted-average remaining lease term and weighted-average discount rate information regarding the Company’s leases were as follows:
Weighted-average remaining lease term (years):
Operating 5.1 5.0
Discount Rate
Weighted-average discount rate:
Other information regarding the Company’s leases were as follows:
Operating cash flows used by operating leases $ 9,532,953 $ 7,997,795
Lease liabilities arising from obtaining new ROU assets:
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6. GOODWILL AND OTHER INTANGIBLE ASSETS:
Goodwill at September 2025 and September 2024 was as follows:
September September
Other intangible assets at September 2025 and September 2024 consisted of the following:
September September
Trademarks and tradenames (Retail Segment) 500,000 500,000
Goodwill, trademarks and tradenames are considered to have indefinite useful lives and therefore no amortization has been taken on these assets. Goodwill recorded on the Company’s consolidated balance sheets represents amounts allocated to its wholesale reporting unit which totaled approximately $5.8 million at both September 2025 and September 2024. The Company determined that the estimated fair value of its wholesale reporting unit exceeded its carrying value at both September 2025 and September 2024.
At September 2025, identifiable intangible assets considered to have finite lives were represented by customer lists which are being amortized over 15 years, a non-competition agreement which is being amortized over five years, and a tradename in our Wholesale Segment that is being amortized over seven years. These intangible assets are evaluated for accelerated attrition or amortization adjustments if warranted. Amortization expense related to these assets was $0.5 million during both fiscal 2025 and fiscal 2024, respectively.
Estimated future amortization expense related to identifiable intangible assets with finite lives was as follows at September 2025:
September
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7. DEBT:
The Company primarily finances its operations through three credit facility agreements (a) a facility that is an obligation of AMCON Distributing Company (the “AMCON Facility”), (b) a facility that is an obligation of Team Sledd (the “Team Sledd Facility”) and (c) a facility that is an obligation of Henry’s (the “Henry’s Facility” and, collectively, the “Facilities”) and long-term debt agreements with banks. The Team Sledd Facility and the Henry’s Facility are non- recourse to AMCON Distributing Company, are not guaranteed by AMCON Distributing Company and have no cross default provisions applicable to AMCON Distributing Company.
At September 2025, the Facilities had a total combined borrowing capacity of $305.0 million, including provisions for up to $30.0 million in credit advances for certain inventory purchases, which are limited by accounts receivable and inventory qualifications, and the value of certain real estate collateral. The AMCON Facility matures in June 2027, the Henry’s Facility matures in February 2028, and the Team Sledd Facility matures in March 2028, each without a penalty for prepayment. Obligations under the Facilities are collateralized by substantially all of the Company’s respective equipment, intangibles, inventories, accounts receivable, and certain real estate. The Facilities each feature an unused commitment fee and springing financial covenants. Borrowings under the Facilities bear interest at the Secured Overnight Financing Rate (“SOFR”), plus any applicable spreads.
The amount available for use from the Facilities at any given time is subject to a number of factors, including eligible accounts receivable and inventory balances that fluctuate day-to-day, as well as the value of certain real estate collateral. Based on the collateral and loan limits as defined in the Facility agreements, the credit limit of the combined Facilities at September 2025 was $230.3 million, of which $126.8 million was outstanding, leaving $103.5 million available.
The average interest rate of the Facilities was 5.73% at September 2025. During fiscal 2025, the peak borrowings under the Facilities was $197.1 million, and the average borrowings and average availability under the Facilities was $159.4 million and $77.4 million, respectively.
LONG-TERM DEBT
In addition to the Facilities, the Company also had the following long-term obligations at September 2025 and September 2024.
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The aggregate minimum principal maturities of the long-term debt for each of the next five fiscal years are as follows:
Fiscal Year Ending
Market rate risk for fixed rate debt is estimated as the potential increase in fair value of debt obligations resulting from decreases in interest rates. Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of the Company’s long-term debt approximated its carrying value at September 2025.