Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Sep. 30, 2020 | Nov. 06, 2020 | Mar. 31, 2020 | |
Document and Entity Information | |||
Document Type | 10-K | ||
Document Period End Date | Sep. 30, 2020 | ||
Entity Registrant Name | AMCON DISTRIBUTING CO | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 11,353,860 | ||
Entity Common Stock, Shares Outstanding | 551,437 | ||
Entity Central Index Key | 0000928465 | ||
Current Fiscal Year End Date | --09-30 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Current assets: | ||
Cash | $ 661,195 | $ 337,704 |
Accounts receivable, less allowance for doubtful accounts of $0.9 million at September 2020 and September 2019 | 34,278,429 | 24,665,620 |
Inventories, net | 98,971,773 | 102,343,517 |
Income taxes receivable | 350,378 | |
Prepaid and other current assets | 2,091,645 | 7,148,459 |
Total current assets | 136,003,042 | 134,845,678 |
Property and equipment, net | 17,497,274 | 17,655,415 |
Operating lease right-of-use assets, net | 18,936,126 | |
Note receivable | 3,500,000 | |
Goodwill | 4,436,950 | 4,436,950 |
Other intangible assets, net | 500,000 | 500,000 |
Equity method investment | 6,744,095 | |
Other assets | 383,786 | 273,579 |
Total assets | 188,001,273 | 157,711,622 |
Current liabilities: | ||
Accounts payable | 22,108,299 | 18,647,572 |
Accrued expenses | 8,306,160 | 8,577,972 |
Accrued wages, salaries and bonuses | 4,761,020 | 3,828,847 |
Income taxes payable | 567,408 | |
Current operating lease liabilities | 5,607,098 | |
Current maturities of long-term debt | 516,850 | 532,747 |
Total current liabilities | 41,866,835 | 31,587,138 |
Credit facility | 61,971,682 | 60,376,714 |
Deferred income tax liability, net | 1,806,575 | 1,823,373 |
Long-term operating lease liabilities | 14,028,606 | |
Long-term debt, less current maturities | 2,608,794 | 3,125,644 |
Other long-term liabilities | 927,241 | 42,011 |
Shareholders' equity: | ||
Preferred stock, $.01 par value, 1,000,000 shares authorized | ||
Common stock, $.01 par value, 3,000,000 shares authorized, 537,715 shares outstanding at September 2020 and 552,614 shares outstanding at September 2019 | 8,697 | 8,561 |
Additional paid-in capital | 24,282,058 | 23,165,639 |
Retained earnings | 71,362,334 | 66,414,397 |
Treasury stock at cost | (30,861,549) | (28,831,855) |
Total shareholders' equity | 64,791,540 | 60,756,742 |
Total liabilities and shareholders' equity | $ 188,001,273 | $ 157,711,622 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2020 | Sep. 30, 2019 |
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance for doubtful accounts | $ 0.9 | $ 0.9 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 3,000,000 | 3,000,000 |
Common stock, shares outstanding (in shares) | 537,715 | 552,614 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Sales (including excise taxes of $393.3 million and $370.2 million, respectively) | $ 1,521,278,763 | $ 1,392,388,157 |
Cost of sales | 1,433,544,831 | 1,308,364,726 |
Gross profit | 87,733,932 | 84,023,431 |
Selling, general and administrative expenses | 75,051,227 | 72,182,883 |
Depreciation and amortization | 3,116,449 | 2,617,591 |
Impairment charges | 485,270 | 2,873,269 |
Total operating expenses | 78,652,946 | 77,673,743 |
Operating income | 9,080,986 | 6,349,688 |
Other expense (income): | ||
Interest expense | 1,693,251 | 1,598,864 |
Other (income), net | (114,276) | (61,119) |
Total other expenses (income) | 1,578,975 | 1,537,745 |
Income from operations before income taxes | 7,502,011 | 4,811,943 |
Income tax expense | 2,143,000 | 1,609,000 |
Net income (loss) attributable to AMCON, net of tax (1) | 183,579 | |
Net income available to common shareholders | $ 5,542,590 | $ 3,202,943 |
Basic earnings per share available to common shareholders (in dollars per share) | $ 9.88 | $ 5.36 |
Diluted earnings per share available to common shareholders (in dollars per share) | $ 9.76 | $ 5.25 |
Basic weighted average shares outstanding (in shares) | 561,166 | 597,961 |
Diluted weighted average shares outstanding (in shares) | 567,961 | 609,836 |
Dividends declared and paid per common share (in dollars per share) | $ 1 | $ 1 |
CONSOLIDATED STATEMENTS OF OP_2
CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Millions | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Sales, excise taxes | $ 393.3 | $ 370.2 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - USD ($) | Common Stock | Treasury Stock | Additional Paid in Capital | Retained Earnings | Total |
Balance at Sep. 30, 2018 | $ 8,441 | $ (21,324,752) | $ 22,069,098 | $ 63,848,030 | $ 64,600,817 |
Balance (in shares) at Sep. 30, 2018 | 844,089 | (228,312) | |||
Increase (Decrease) in Stockholders' Equity | |||||
Dividends on common stock | (636,576) | (636,576) | |||
Compensation expense and issuance of stock in connection with equity-based awards | $ 120 | 1,096,541 | 1,096,661 | ||
Compensation expense and issuance of stock in connection with equity-based awards (in shares) | 11,950 | ||||
Repurchase of common stock | $ (7,507,103) | (7,507,103) | |||
Repurchase of common stock (in shares) | (75,113) | ||||
Net income | 3,202,943 | 3,202,943 | |||
Balance at Sep. 30, 2019 | $ 8,561 | $ (28,831,855) | 23,165,639 | 66,414,397 | $ 60,756,742 |
Balance (in shares) at Sep. 30, 2019 | 856,039 | (303,425) | 552,614 | ||
Increase (Decrease) in Stockholders' Equity | |||||
Dividends on common stock | (594,653) | $ (594,653) | |||
Compensation expense and issuance of stock in connection with equity-based awards | $ 136 | 1,116,419 | 1,116,555 | ||
Compensation expense and issuance of stock in connection with equity-based awards (in shares) | 13,828 | ||||
Repurchase of common stock | $ (2,029,694) | (2,029,694) | |||
Repurchase of common stock (in shares) | (28,727) | ||||
Net income | 5,542,590 | 5,542,590 | |||
Balance at Sep. 30, 2020 | $ 8,697 | $ (30,861,549) | $ 24,282,058 | $ 71,362,334 | $ 64,791,540 |
Balance (in shares) at Sep. 30, 2020 | 869,867 | (332,152) | 537,715 |
CONSOLIDATED STATEMENTS OF SH_2
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Parenthetical) - $ / shares | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY | ||
Dividends on common stock | $ 1 | $ 1 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 5,542,590 | $ 3,202,943 |
Adjustments to reconcile net income from operations to net cash flows from (used in) operating activities: | ||
Depreciation | 3,116,449 | 2,575,924 |
Amortization | 41,667 | |
Equity method investment earnings, net of tax | (183,579) | |
Impairment charges | 485,270 | 2,873,269 |
Loss (gain) on sales of property and equipment | 105,039 | (13,775) |
Equity-based compensation | 1,085,287 | 1,299,792 |
Deferred income taxes | (16,798) | 40,572 |
Provision for losses on doubtful accounts | (21,000) | 21,000 |
Inventory allowance | (322,240) | 560,610 |
Changes in assets and liabilities: | ||
Accounts receivable | (9,591,809) | 6,742,225 |
Inventories | 3,693,984 | (24,034,512) |
Prepaid and other current assets | 4,794,469 | (2,207,684) |
Other assets | (110,207) | 28,214 |
Accounts payable | 3,529,980 | (2,247,262) |
Accrued expenses and accrued wages, salaries and bonuses | 1,353,113 | (262,330) |
Other long-term liabilities | 885,230 | 3,956 |
Income taxes payable and receivable | 857,270 | (78,266) |
Net cash flows from (used in) operating activities | 15,203,048 | (11,453,657) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (3,356,573) | (4,438,280) |
Proceeds from sales of property and equipment | 43,600 | 57,200 |
Investment in equity method investee | (6,500,000) | |
Issuance of note receivable | (3,500,000) | |
Net cash flows from (used in) investing activities | (13,312,973) | (4,381,080) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Borrowings under revolving credit facility | 1,515,476,055 | 1,427,544,804 |
Repayments under revolving credit facility | (1,513,881,087) | (1,402,596,687) |
Principal payments on long-term debt | (532,747) | (1,096,306) |
Proceeds from exercise of stock options | 25,750 | |
Repurchase of common stock | (2,029,694) | (7,507,103) |
Dividends on common stock | (594,653) | (636,576) |
Settlement and withholdings of equity-based awards | (30,208) | (56,335) |
Net cash flows from (used in) financing activities | (1,566,584) | 15,651,797 |
Net change in cash | 323,491 | (182,940) |
Cash, beginning of period | 337,704 | 520,644 |
Cash, end of period | 661,195 | 337,704 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest | 1,743,098 | 1,561,531 |
Cash paid during the period for income taxes | 1,302,528 | 1,646,694 |
Supplemental disclosure of non-cash information: | ||
Equipment acquisitions classified in accounts payable | 69,253 | |
Issuance of common stock in connection with the vesting and exercise of equity-based awards | $ 990,653 | $ 1,005,792 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (a) Company Operations: AMCON Distributing Company and Subsidiaries (“AMCON” and “the Company”) serves customers in 26 states and is primarily engaged in the wholesale distribution of consumer products in the Central, Rocky Mountain, and Mid-South regions of the United States. AMCON’s wholesale distribution business includes six distribution centers that sell approximately 17,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery, 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, 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 twenty-one retail health food stores as Chamberlin’s Natural Foods (“Chamberlin’s”), Akin’s Natural Foods (“Akin’s”), and Earth Origins Market (“EOM”). 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 69% of the Company’s consolidated revenue during both fiscal 2020 and fiscal 2019, and 17% of the Company’s consolidated gross profit during both fiscal 2020 and fiscal 2019. (b) Accounting Period: The Company’s fiscal year ends on September 30 and the fiscal years ended September 30, 2020 and September 30, 2019 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. 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 fiscal 2020 and fiscal 2019 totaled approximately $1.3 million and $1.1 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 facility (see Note 8). 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 consist primarily of amounts due to the Company from its normal business activities, including trade receivables from customers and other receivables primarily related to various rebate and promotional incentives with the Company’s suppliers. An allowance for doubtful accounts is maintained to reflect the expected uncollectibility of accounts receivable based on past collection history, evaluation of economic conditions as they may impact our customers, and specific risks identified in the portfolio. The Company determines the past due status of trade receivables based on our terms with each customer. Account balances are charged off against the allowance for doubtful accounts 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 2020 and September 2019, receivables from transactions with customers, less allowance for doubtful accounts were $33.3 million and $23.7 million, respectively. (f) Inventories: At September 2020 and September 2019, inventories in our wholesale segment consisted of finished goods and are stated at the lower of cost or net realizable value determined on a FIFO basis. 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 $0.7 million and $1.0 million at September 2020 and September 2019, 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): September 2020 September 2019 Prepaid expenses $ 1.6 $ 1.8 Prepaid inventory 0.5 5.3 $ 2.1 $ 7.1 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 Buildings and improvements - 40 Warehouse equipment - 15 Furniture, fixtures and leasehold improvements - 12 Vehicles - 5 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 determined based on the amount by which the carrying value of the asset group exceeds the fair value of the asset group. The Company recorded impairment charges of approximately $0.5 million during fiscal 2020 related to a non-performing store in our retail reporting unit, of which $0.2 million was related to fixed assets. There was no impairment of any property and equipment during fiscal 2019. (i) Goodwill and Intangible Assets: Goodwill consists of the excess purchase price paid in business combinations over the fair value of assets acquired. Intangible assets consist of trademarks, tradenames, and customer relationships acquired as part of acquisitions. Goodwill, trademarks, and tradenames 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 ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” 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 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. The Company’s retail reporting unit recorded intangible asset impairment charges of approximately $2.9 million during fiscal 2019 (See Note 6). These impairment charges arose from a range of considerations including, but not limited to, heightened competition in the industry, retail sector market conditions, and earning shortfalls which impacted the Company’s projections of future cash flows to be generated from these assets. (j) 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. See Note 7 (Equity Method Investment) for further information relating to the Company’s equity method investment. (k) 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 Footnote 13 “Business Segments” for the disaggregation of net sales for each of our business segments. (l) Insurance: The Company’s workers’ compensation, general liability, and employee‑related health care benefits are provided through high‑deductible or self‑insurance programs. As a result, the Company accrues for its workers’ compensation and general liability based upon a claim reserve analysis. The Company has issued a letter of credit in the amount of $0.5 million to its workers’ compensation insurance carrier as part of its loss control program. The reserve for incurred, but not reported, employee health care benefits is calculated using 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. (m) 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. (n) 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 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.” (o) 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. (p) 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. (q) 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. (r) 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 and conversion features of the Company’s preferred stock issuances. (s) 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. (t) 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, trade accounts payable, 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. During fiscal 2019, intangible assets with indefinite useful lives were adjusted to fair value, resulting in a pretax, non-cash impairment charge of $2.9 million (see Note 6). (u) Accounting Pronouncements: Accounting Pronouncements Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02 “Leases (Topic 842)”. Accounting Standards Codification Topic (“ASC”) 842 superseded the lease accounting requirements in “ASC 840 - Leases”. The most significant among the changes in ASU 2016-02 is the recognition of right-of-use (“ROU”) assets and corresponding lease liabilities for leases classified as operating leases. The accounting for finance leases, which were classified as capital leases under historical GAAP, remains substantially unchanged. The lease liabilities are equal to the present value of the remaining lease payments while the ROU asset is determined based on the amount of the lease liability, plus initial direct costs incurred less lease incentives. The Company elected the optional transition method to apply ASU 2016-02 prospectively at adoption during the Company’s first quarter of fiscal 2020, which resulted in recognition of ROU assets of approximately $21.9 million, lease liabilities of $22.2 million, and a decrease of deferred rent recorded under ASC 840 of $0.3 million. The adoption of ASC 842 did not have a material effect on the Company’s consolidated statements of operations or cash flows. The fiscal 2019 comparative period presented in the financial statements continues to be presented under ASC 840. The adoption of ASC 842 did not have a material impact on the Company’s debt-covenant compliance under its revolving credit facility. In accordance with an accounting policy election under ASC 842, the Company does not recognize assets or liabilities for leases with an initial term of twelve months or less as 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 package of practical expedients within ASC 842 that allows an entity to not reassess, prior to the effective date, (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, or (iii) initial direct costs for any existing leases. The Company also elected the practical expedient to account for non-lease components as part of the lease for all asset classes. New Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This guidance is effective for fiscal years beginning after December 15, 2022 (fiscal 2024 for the Company) with early adoption permitted. The Company is currently reviewing this ASU and its potential impact on our consolidated financial statements. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as the market transitions from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The amendments in this update were effective upon issuance for all entities through December 31, 2022. The Company is currently reviewing this ASU and its potential impact on our consolidated financial statements. |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Sep. 30, 2020 | |
ACQUISITION | |
ACQUISITION | 2. ACQUISITIONS AND INVESTMENTS: During fiscal 2020, the Company made a $10.0 million investment in Team Sledd LLC (“Team Sledd”) as discussed further in Note 7. During fiscal 2019, the Company acquired the assets (primarily inventory) from a wholesale distributor for approximately $1.1 million. No material intangible assets or liabilities were assumed in connection with this transaction and the Company does not consider this transaction material to the Company’s consolidated financial statements. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 12 Months Ended |
Sep. 30, 2020 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 3. EARNINGS PER SHARE: Basic earnings per share available to common shareholders is calculated by dividing net income by the weighted average 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 common shares outstanding and the weighted average dilutive equity awards. For Fiscal Years 2020 2019 Basic Basic Weighted average common shares outstanding 561,166 597,961 Net income available to common shareholders $ 5,542,590 $ 3,202,943 Net earnings per share available to common shareholders $ 9.88 $ 5.36 For Fiscal Years 2020 2019 Diluted Diluted Weighted average common shares outstanding 561,166 597,961 Weighted average of net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock and conversion of preferred stock(1) 6,795 11,875 Weighted average number of shares outstanding 567,961 609,836 Net income available to common shareholders $ 5,542,590 $ 3,202,943 Net earnings per share available to common shareholders $ 9.76 $ 5.25 (1) Diluted earnings per share calculation includes all stock options and restricted stock units deemed to be dilutive. |
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET | 12 Months Ended |
Sep. 30, 2020 | |
PROPERTY AND EQUIPMENT, NET | |
PROPERTY AND EQUIPMENT, NET | 4. PROPERTY AND EQUIPMENT, NET: Property and equipment at September 2020 and September 2019 consisted of the following: 2020 2019 Land $ 773,068 $ 773,068 Buildings and improvements 12,605,512 12,574,893 Warehouse equipment 15,409,944 15,011,605 Furniture, fixtures and leasehold improvements 13,539,336 13,155,606 Vehicles 3,846,227 3,687,901 Construction in progress 33,149 617,881 46,207,236 45,820,954 Less accumulated depreciation and amortization: (28,709,962) (28,165,539) Owned property and equipment $ 17,497,274 $ 17,655,415 |
LEASES
LEASES | 12 Months Ended |
Sep. 30, 2020 | |
Leases | |
LEASES | 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. 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 right-of-use (ROU) lease assets and liabilities recorded on the Company’s consolidated balance sheet consist of fixed lease payments. Leases with an initial term of twelve months or less are not recorded on the consolidated balance sheet 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. The Company recorded impairment charges of approximately $0.5 million during fiscal 2020 related to a non-performing store in our retail reporting unit, of which $0.3 million was related to a ROU asset. Leases consist of the following: Assets Classification September 2020 Operating Operating lease right-of-use assets $ 18,936,126 Liabilities Current: Operating Operating lease liabilities $ 5,607,098 Non-current: Operating Long-term operating lease liabilities 14,028,606 Total lease liabilities $ 19,635,704 The components of lease costs were as follows: Fiscal Year 2020 Operating lease cost $ 6,757,206 Short-term lease cost 261,708 Variable lease cost 350,313 Net lease cost $ 7,369,227 Maturities of lease liabilities as of September 2020 were as follows: Operating Leases 2021 $ 6,279,478 2022 5,309,736 2023 4,032,833 2024 2,841,950 2025 1,795,480 2026 and thereafter 1,050,961 Total lease payments 21,310,438 Less: interest (1,674,734) Present value of lease liabilities $ 19,635,704 Weighted-average remaining lease term and weighted-average discount rate information regarding the Company’s leases were as follows: Lease Term September 2020 Weighted-average remaining lease term (years): Operating Discount Rate Weighted-average discount rate: Operating % Other information regarding the Company’s leases were as follows: For the year ended September 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used by operating leases $ 6,661,365 Lease liabilities arising from obtaining new ROU assets: Operating leases $ 3,116,737 Future minimum operating lease payments as of September 2019, as reported in the 2019 Form 10-K under ASC 840, were as follows: Operating Fiscal Year Ending Leases 2020 $ 6,468,837 2021 5,418,617 2022 4,299,261 2023 3,216,671 2024 2,456,810 Thereafter 2,387,618 Total minimum lease payments $ 24,247,814 |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended |
Sep. 30, 2020 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 6. GOODWILL AND OTHER INTANGIBLE ASSETS: Goodwill at September 2020 and September 2019 was as follows: September September 2020 2019 Wholesale Segment $ 4,436,950 $ 4,436,950 Other intangible assets at September 2020 and September 2019 consisted of the following: September September 2020 2019 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. The Company’s retail reporting unit recorded intangible asset (trademarks and tradenames) impairment charges of approximately $2.9 million during fiscal 2019 when it was determined that the carrying values of these assets exceeded their fair values. These impairment charges arose from a range of considerations including, but not limited to, heightened competition in the industry, retail sector market conditions, and earning shortfalls which impacted the Company’s projections of future cash flows to be generated. These impairment charges were recorded in the Company’s consolidated statement of operations as a component of operating income. Goodwill recorded on the Company’s consolidated balance sheet represents amounts allocated to its wholesale reporting unit which totaled $4.4 million at both September 2020 and September 2019. The Company determined that the estimated fair value of its wholesale reporting unit exceeded its carrying value at both September 2020 and September 2019. |
EQUITY METHOD INVESTMENT
EQUITY METHOD INVESTMENT | 12 Months Ended |
Sep. 30, 2020 | |
EQUITY METHOD INVESTMENT | |
EQUITY METHOD INVESTMENT | 7. 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 Team Sledd, a limited liability company formed for the purpose of owning and operating Sledd’s wholesale distribution business. In conjunction with the transaction, Sledd contributed substantially all of its operating 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. The transaction was primarily funded from the Company’s revolving line of credit and profits from operations. At September 2020, AMCON owned approximately 44% of Team Sledd’s outstanding equity, with a carrying value of $6.7 million. During fiscal 2020, the Company recognized $0.2 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 September 2020. Team Sledd’s summarized financial data for the six months ended September 2020 was as follows: For the six months ended September 2020 Sales $ 350,685,407 Gross profit $ 14,218,204 Net income (loss) before income taxes $ 551,280 Net income (loss) attributable to AMCON, net of tax $ 183,579 |
DEBT
DEBT | 12 Months Ended |
Sep. 30, 2020 | |
DEBT | |
DEBT | 8. DEBT: The Company primarily finances its operations through a credit facility agreement (the “Facility”) and long-term debt agreements with banks. The Facility is provided through Bank of America acting as the senior agent and with BMO Harris Bank (“BMO”) participating in a loan syndication. CREDIT FACILITY 2020 2019 Revolving portion of the Facility, interest payable at 2.41% at September 2020 $ 61,971,682 $ 60,376,714 The Facility included the following significant terms at September 2020: · A March 2025 maturity date without a penalty for prepayment. · $110.0 million revolving credit limit. · Loan accordion allowing the Company to increase the size of the credit facility agreement by $25.0 million. · A provision providing an additional $10.0 million of credit advances for certain inventory purchases. · Evergreen renewal clause automatically renewing the agreement for one year unless either the borrower or lender provides written notice terminating the agreement at least 90 days prior to the end of any original or renewal term of the agreement. · The Facility bears interest at either the bank’s prime rate, or at LIBOR (or equivalent successor rate index) plus 125 ‑ 150 basis points depending on certain credit facility utilization measures, at the election of the Company. For these purposes, in no event shall LIBOR be less than 100 basis points. · Lending limits subject to accounts receivable and inventory limitations. · An unused commitment fee equal to one‑quarter of one percent ( 1 / 4 %) per annum on the difference between the maximum loan limit and average monthly borrowings. · Secured by collateral including all of the Company’s equipment, intangibles, inventories, and accounts receivable. · A financial covenant requiring a fixed charge coverage ratio of at least 1.0 as measured by the previous twelve month period then ended only if excess availability falls below 10% of the maximum loan limit as defined in the credit agreement. The Company’s fixed charge coverage ratio was over 1.0 for the trailing twelve months. · Provides that the Company may use up to $3.5 million annually, on a collective basis, for the payment of dividends on its common stock, or other distributions or investments, provided the Company is not in default before or after such dividends, distributions or investments. Additionally, the Company may pay dividends on its common stock, or make other distributions or investments in excess of $3.5 million annually provided the Company meets certain excess availability and proforma fixed charge coverage ratios and is not in default before or after such dividends, distributions or investments. During fiscal 2020, total borrowings and payments on the Facility were approximately $1.5 billion and $1.5 billion, respectively, resulting in net advances of $1.6 million. Total borrowings and repayment on the Facility during fiscal 2019 were approximately $1.4 billion and $1.4 billion, respectively, resulting in net advances of $24.9 million. The amount available for use on the Facility at any given time is subject to a number of factors including eligible accounts receivable and inventory balances that fluctuate day‑to‑day. Based on our collateral and loan limits as defined in the Facility agreement, the credit limit of the Facility at September 2020 was $109.6 million, of which $62.0 million was outstanding, leaving $47.6 million available. LONG-TERM DEBT In addition to the Facility, the Company also had the following long‑term obligations at fiscal 2020 and fiscal 2019. 2020 2019 Note payable to a bank (“Real Estate Loan”), interest payable at a fixed rate of 2.99% with monthly installments of principal and interest of $38,344 through August 2021 with remaining principal due October 2021, collateralized by three distribution facilities $ 1,866,231 $ 2,263,040 Note payable, interest payable at a fixed rate of 4.50% with quarterly installments of principal and interest of $49,114 through June 2023 with remaining principal due September 2023 1,259,413 1,395,351 3,125,644 3,658,391 Less current maturities (516,850) (532,747) $ 2,608,794 $ 3,125,644 The aggregate minimum principal maturities of the long‑term debt for each of the next five fiscal years are as follows: Fiscal Year Ending 2021 $ 516,850 2022 1,640,205 2023 968,589 2024 — 2025 — $ 3,125,644 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 2020. Cross Default and Co‑Terminus Provisions The Company owns real estate in Bismarck, ND, Quincy, IL, and Rapid City, SD, which is financed through a single term Real Estate Loan with BMO which is also a participant lender on the Company’s revolving line of credit. The Real Estate Loan contains cross default provisions which cause the loan to be considered in default if the loans where BMO is a lender, including the revolving credit facility, is in default. There were no such cross defaults at September 2020. In addition, the Real Estate Loan contains co‑terminus provisions which require all loans with BMO to be paid in full if any of the loans are paid in full prior to the end of their specified terms. Other The Company has issued a letter of credit for $0.5 million to its workers’ compensation insurance carrier as part of its self‑insured loss control program . |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Sep. 30, 2020 | |
INCOME TAXES | |
INCOME TAXES | 9. INCOME TAXES: The components of income tax expense from operations for fiscal 2020 and fiscal 2019 consisted of the following: 2020 2019 Current: Federal $ 1,690,956 $ 1,139,927 Current: State 468,842 428,501 2,159,798 1,568,428 Deferred: Federal (14,270) 34,466 Deferred: State (2,528) 6,106 (16,798) 40,572 Income tax expense $ 2,143,000 $ 1,609,000 The difference between the Company’s income tax expense in the accompanying consolidated financial statements and that which would be calculated using the statutory income tax rate of 21% for both fiscal 2020 and fiscal 2019 on income before income taxes is as follows: 2020 2019 Tax at statutory rate $ 1,575,422 $ 1,010,517 Nondeductible business expenses 230,571 226,670 State income taxes, net of federal tax benefit 376,262 332,931 Other (39,255) 38,882 $ 2,143,000 $ 1,609,000 Temporary differences between the financial statement carrying balances and tax basis of assets and liabilities giving rise to net deferred tax assets (liabilities) at September 2020 and September 2019 relates to the following: 2020 2019 Deferred tax assets: Allowance for doubtful accounts $ 210,734 $ 215,925 Accrued expenses 1,243,132 796,542 Inventory 365,417 452,192 Intangible assets 15,803 71,849 Other — 23,237 Net operating loss carry forwards - federal 35,545 63,983 Net operating loss carry forwards - state 716,241 723,306 Total gross deferred tax assets 2,586,872 2,347,034 Less: Valuation allowance (716,241) (723,306) Total net deferred tax assets 1,870,631 1,623,728 Deferred tax liabilities: Trade discounts 318,070 375,172 Property and equipment 2,437,337 2,150,130 Goodwill 921,799 921,799 Total deferred tax liabilities 3,677,206 3,447,101 Total net deferred income tax liability $ 1,806,575 $ 1,823,373 At September 2020, the Company had noncurrent deferred tax assets related to federal net operating loss carryforwards in an amount less than $0.1 million. These federal net operating loss carryforwards totaled approximately $0.2 million and were primarily attributable to the Company’s fiscal 2002 purchase of Hawaiian Natural Water Company, Inc. (“HNWC”), a wholly owned subsidiary of the Company. The utilization of HNWC’s net operating losses is limited by Internal Revenue Code Section 382 to approximately $0.1 million per year through 2022. The Company had a valuation allowance of approximately $0.7 million at both September 2020 and September 2019, against certain state net operating losses, which more likely than not will not be utilized. The Company had no material unrecognized tax benefits, interest, or penalties during fiscal 2020 or fiscal 2019, and the Company does not anticipate any such items during the next twelve months. The Company’s policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations. The Company files income tax returns in the U.S. and various states and the tax years 2017 and forward remain open under U.S. and state statutes. During fiscal 2020, the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act is an emergency economic stimulus package in response to the coronavirus outbreak which, among other things, contains numerous income tax provisions. The Company evaluated the impact of the legislation and determined that while there was an impact on the timing of certain future tax payments, there is no material impact on the Company’s consolidated financial statements or related disclosures. |
PROFIT SHARING PLAN
PROFIT SHARING PLAN | 12 Months Ended |
Sep. 30, 2020 | |
PROFIT SHARING PLAN | |
PROFIT SHARING PLAN | 10 . PROFIT SHARING PLAN: The Company sponsors a profit sharing plan (i.e. a section 401(k) plan) covering substantially all employees. The plan allows employees to make voluntary contributions up to 100% of their compensation, subject to Internal Revenue Service limits. The Company matches 100% of the first 2% contributed and 50% of the next 4% contributed for a maximum match of 4% of employee compensation. The Company made matching contributions to the profit sharing plan of approximately $0.9 million and $0.8 million (net of employee forfeitures) in fiscal 2020 and fiscal 2019, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Sep. 30, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 11. COMMITMENTS AND CONTINGENCIES: Liability Insurance The Company carries property, general liability, vehicle liability, directors’ and officers’ liability and workers’ compensation insurance. Additionally, the Company carries an umbrella liability policy to provide excess coverage over the underlying limits of the aforementioned primary policies. The Company’s insurance programs for workers’ compensation, general liability, and employee related health care benefits are provided through high deductible or self‑insured programs. Claims in excess of self‑insurance levels are fully insured subject to policy limits. Accruals are based on historical claims experience, actual claims filed, and estimates of claims incurred but not reported. The Company’s liabilities for unpaid and incurred, but not reported claims, for workers’ compensation, general liability, and health insurance was $1.5 million at both September 2020 and September 2019. These amounts are included in accrued expenses in the accompanying Consolidated Balance Sheets. While the ultimate amount of claims incurred is dependent on future developments, in the Company’s opinion, recorded reserves are adequate to cover the future payment of claims previously incurred. However, it is possible that recorded reserves may not be adequate to cover the future payment of claims. Adjustments, if any, to claims estimates previously recorded, resulting from actual claim payments, are reflected in operations in the periods in which such adjustments are known. A summary of the activity in the Company’s self‑insured liabilities reserve is set forth below (in millions): 2020 2019 Beginning balance $ 1.5 $ 1.6 Charged to expense 6.6 5.4 Payments (6.6) (5.5) Ending balance $ 1.5 $ 1.5 |
EQUITY-BASED INCENTIVE AWARDS
EQUITY-BASED INCENTIVE AWARDS | 12 Months Ended |
Sep. 30, 2020 | |
EQUITY-BASED INCENTIVE AWARDS | |
EQUITY-BASED INCENTIVE AWARDS | 12. EQUITY-BASED INCENTIVE AWARDS: Omnibus Plans The Company has two equity-based incentive plans, the 2014 Omnibus Incentive Plan and 2018 Omnibus Incentive Plan (collectively “the Omnibus Plans”), which provide for equity incentives to employees. Each Omnibus Plan was designed with the intent of encouraging employees to acquire a vested interest in the growth and performance of the Company. The Omnibus Plans together permit the issuance of up to 135,000 shares of the Company’s common stock in the form of stock options, restricted stock awards, restricted stock units, performance share awards as well as awards such as stock appreciation rights, performance units, performance shares, bonus shares, and dividend share awards payable in the form of common stock or cash. The number of shares issuable under the Omnibus Plans is subject to customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Company’s common stock. At September 2020, awards with respect to a total of 101,280 shares, net of forfeitures, had been awarded pursuant to the Omnibus Plans and awards with respect to another 33,720 shares may be awarded under the Omnibus Plans. Stock Options No incentive stock options awards were issued during fiscal 2020. The Company issued 5,450 incentive stock option awards to employees during fiscal 2019 pursuant to the provisions of the Company’s 2014 Omnibus Plan. These awards vest in equal installments over a five year service period. The fiscal 2019 incentive stock option awards had an estimated grant date fair value of approximately $0.2 million using the Black‑Scholes option pricing model. The following assumptions were used in connection with the Black‑Scholes option pricing calculation as it relates to the fiscal 2019 incentive stock option awards: Stock Option Pricing Assumptions 2019 Risk-free interest rate 2.55 % Dividend yield 0.8 % Expected volatility % Expected life in years The stock options issued by the Company expire ten years from the grant date and include a five year graded vesting schedule. At September 2020, the Company had 34,350 stock options outstanding with a weighted average exercise price of $80.33 per share and 22,890 stock options which were exercisable with a weighted average exercise price of $72.67 per share. The following is a summary of stock option activity during fiscal 2020: Weighted Number Average of Exercise Shares Price Outstanding at September 2019 36,450 $ 78.67 Granted — — Exercised (2,100) 51.50 Forfeited/Expired — — Outstanding at September 2020 34,350 $ 80.33 Net income before income taxes included compensation expense related to the amortization of the Company’s stock option awards of $0.1 million during both fiscal 2020 and fiscal 2019. At September 2020, total unamortized compensation expense related to stock options was approximately $0.2 million. This unamortized compensation expense is expected to be amortized over approximately the next 29 months. The aggregate intrinsic value of stock options outstanding was less than $0.1 million at September 2020 and $0.2 million at September 2019. The aggregate intrinsic value of stock options exercisable was less than $0.1 million and $0.2 million at September 2020 and September 2019, respectively. The total intrinsic value of stock options exercised was less than $0.1 million in both fiscal 2020 and fiscal 2019. The total fair value of stock options vested was $0.4 million during both fiscal 2020 and fiscal 2019. Restricted Stock Units At September 2020, the Compensation Committee of the Board of Directors had authorized and approved the following restricted stock unit awards to members of the Company’s management team pursuant to the provisions of the Company’s Omnibus Plans: Restricted Restricted Restricted Restricted Date of award: October 2015 October 2017 October 2018 October 2019 Original number of awards issued: Service period: 36 - 60 months 36 months 36 months 36 months Estimated fair value of award at grant date: $ $ $ $ Non-vested awards outstanding at September 30, 2020: Fair value of non-vested awards at September 30, 2020 of approximately: $ $ $ $ (1) (2) (3) (4) There is no direct cost to the recipients of the restricted stock units, except for any applicable taxes. The recipients of the restricted stock units are entitled to the customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Company’s common stock. All cash dividends and/or distributions payable to restricted stock recipients will be held in escrow until all the conditions of vesting have been met. The restricted stock units provide that the recipients can elect, at their option, to receive either common stock in the Company, or a cash settlement based upon the closing price of the Company’s shares, at the time of vesting. Based on these award provisions, the compensation expense recorded in the Company’s Statement of Operations reflects the straight‑line amortized fair value based on the liability method under “ASC 718 – Compensation – Stock Compensation”. Net income before income taxes included compensation expense related to the amortization of the Company’s restricted stock unit awards of approximately $1.0 million and $1.2 million during fiscal 2020 and fiscal 2019, respectively. These amounts were recorded as accrued expenses in the Company’s Consolidated Balance Sheets at both September 2020 and September 2019. The tax benefit related to this compensation expense was approximately $0.2 million and $0.3 million in fiscal 2020 and fiscal 2019, respectively. The total intrinsic value of restricted stock units vested during fiscal 2020 and fiscal 2019 was approximately $0.9 million and $1.1 million, respectively. Total unamortized compensation expense for these awards based on the grant date fair value price was approximately $1.1 million. This unamortized compensation expense, plus any changes in the fair value of the awards through the settlement date, are expected to be amortized over approximately the next 16 months (the weighted‑average period). The following summarizes restricted stock unit activity under the Omnibus Plans during fiscal 2020: Number Weighted of Average Shares Fair Value Nonvested restricted stocks units at September 2019 28,151 $ 76.25 Granted 14,550 69.20 Vested (13,730) 74.02 Expired — — Nonvested restricted stocks units at September 2020 28,971 $ 64.59 |
BUSINESS SEGMENTS
BUSINESS SEGMENTS | 12 Months Ended |
Sep. 30, 2020 | |
BUSINESS SEGMENTS | |
BUSINESS SEGMENTS | 13. BUSINESS SEGMENTS: The Company has two reportable business segments: the wholesale distribution of consumer products and the retail sale of health and natural food products. The retail health food stores’ operations are aggregated to comprise the Retail Segment because such operations have similar economic characteristics, as well as similar characteristics with respect to the nature of products sold, the type and class of customers for the health food products and the methods used to sell the products. Included in the “Other” column are intercompany eliminations, and assets held and charges incurred by our holding company. The segments are evaluated on revenues, gross margins, operating income (loss), and income before taxes. Wholesale Retail Segment Segment Other Consolidated FISCAL YEAR ENDED 2020: External revenues: Cigarettes $ 1,045,661,081 $ — $ — $ 1,045,661,081 Tobacco 227,807,266 — — 227,807,266 Confectionery 82,910,260 — — 82,910,260 Health food — 46,010,692 — 46,010,692 Foodservice & other 118,889,464 — — 118,889,464 Total external revenue 1,475,268,071 46,010,692 — 1,521,278,763 Depreciation 1,791,414 1,325,035 — 3,116,449 Amortization — — — — Operating income (loss) 17,291,306 (1,824,416) (6,385,904) 9,080,986 Interest expense 128,672 — 1,564,579 1,693,251 Income (loss) from operations before taxes 17,207,935 (1,814,850) (7,891,074) 7,502,011 Equity method investment earnings, net of tax — — 183,579 183,579 Total assets 158,292,477 19,124,233 10,584,563 188,001,273 Capital expenditures 2,071,956 1,215,364 — 3,287,320 FISCAL YEAR ENDED 2019: External revenue: Cigarettes $ 955,667,916 $ — $ — $ 955,667,916 Tobacco 197,678,519 — — 197,678,519 Confectionery 83,130,063 — — 83,130,063 Health food — 44,210,688 — 44,210,688 Foodservice & other 111,700,971 — — 111,700,971 Total external revenue 1,348,177,469 44,210,688 — 1,392,388,157 Depreciation 1,569,178 1,006,746 — 2,575,924 Amortization 41,667 — — 41,667 Operating income (loss) 17,280,500 (4,731,717) (6,199,095) 6,349,688 Interest expense 145,980 — 1,452,884 1,598,864 Income (loss) from operations before taxes 17,186,295 (4,722,375) (7,651,977) 4,811,943 Total assets 143,541,723 14,028,232 141,667 157,711,622 Capital expenditures 2,982,273 1,524,007 — 4,506,280 |
TREASURY STOCK
TREASURY STOCK | 12 Months Ended |
Sep. 30, 2020 | |
TREASURY STOCK | |
TREASURY STOCK | 14. TREASURY STOCK: The Company repurchased a total of 28,727 and 75,113 shares of its common stock during fiscal 2020 and fiscal 2019, respectively, for cash totaling approximately $2.0 million and $7.5 million, respectively. All repurchased shares were recorded in treasury stock at cost. |
IMPACT OF COVID-19
IMPACT OF COVID-19 | 12 Months Ended |
Sep. 30, 2020 | |
IMPACT OF COVID-19 | |
IMPACT OF COVID-19 | 15. IMPACT OF COVID-19: In March 2020, the World Health Organization (WHO) declared the novel strain of coronavirus (COVID-19) a global pandemic. The Company has been designated as a critical infrastructure supplier to the Convenience Store Industry. Both of the Company’s business segments have continued to operate during the pandemic as essential suppliers of goods and services and the Company has taken certain proactive and precautionary steps to ensure the safety of its employees, customers, and suppliers, including frequent cleaning and disinfection of workspaces, property and equipment, instituting social distancing measures, and mandating remote working environments for certain employees. The Company continues to monitor medical, regulatory and consumer developments, and community-based regulations, however, we cannot predict the long-term effects on our business, including our financial position or results of operations, if governmental restrictions such as Stay-At-Home orders or other such directives continue or are reinstated for a prolonged period of time and materially disrupt consumer demand, our supply chain or our ability to procure products or fulfill orders due to disruptions in our warehouse operations. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 12 Months Ended |
Sep. 30, 2020 | |
SUBSEQUENT EVENT | |
SUBSEQUENT EVENTS | 16. SUBSEQUENT EVENTS: On October 27, 2020 the Compensation Committee of the Company’s Board of Directors awarded 20,500 restricted stock units to members of the Company’s executive management team. These awards include a three year graded vesting schedule and can be settled in either cash or stock. At the same time, the Company’s Board of Directors replenished the number of shares authorized for repurchase under AMCON’s existing Common Stock repurchase program. The program provides for periodic repurchases of up to 75,000 shares of AMCON’s common stock in open market or privately negotiated transactions. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION | |
Company Operations | (a) Company Operations: AMCON Distributing Company and Subsidiaries (“AMCON” and “the Company”) serves customers in 26 states and is primarily engaged in the wholesale distribution of consumer products in the Central, Rocky Mountain, and Mid-South regions of the United States. AMCON’s wholesale distribution business includes six distribution centers that sell approximately 17,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery, 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, 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 twenty-one retail health food stores as Chamberlin’s Natural Foods (“Chamberlin’s”), Akin’s Natural Foods (“Akin’s”), and Earth Origins Market (“EOM”). 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 69% of the Company’s consolidated revenue during both fiscal 2020 and fiscal 2019, and 17% of the Company’s consolidated gross profit during both fiscal 2020 and fiscal 2019. |
Accounting Period | (b) Accounting Period: The Company’s fiscal year ends on September 30 and the fiscal years ended September 30, 2020 and September 30, 2019 have been included herein. |
Principles of Consolidation and Basis of Presentation | (c) Principles of Consolidation and Basis of Presentation: The Consolidated Financial Statements include the accounts of AMCON and its wholly‑owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. |
Cash and Accounts Payable | (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 fiscal 2020 and fiscal 2019 totaled approximately $1.3 million and $1.1 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 facility (see Note 8). These outstanding checks (book overdrafts) are classified as cash flows from operating activities in the Consolidated Statements of Cash Flows. |
Accounts Receivable | (e) Accounts Receivable: Accounts receivable consist primarily of amounts due to the Company from its normal business activities, including trade receivables from customers and other receivables primarily related to various rebate and promotional incentives with the Company’s suppliers. An allowance for doubtful accounts is maintained to reflect the expected uncollectibility of accounts receivable based on past collection history, evaluation of economic conditions as they may impact our customers, and specific risks identified in the portfolio. The Company determines the past due status of trade receivables based on our terms with each customer. Account balances are charged off against the allowance for doubtful accounts 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 2020 and September 2019, receivables from transactions with customers, less allowance for doubtful accounts were $33.3 million and $23.7 million, respectively. |
Inventories | (f) Inventories: At September 2020 and September 2019, inventories in our wholesale segment consisted of finished goods and are stated at the lower of cost or net realizable value determined on a FIFO basis. 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 $0.7 million and $1.0 million at September 2020 and September 2019, 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. |
Prepaid Expenses and Other Current Assets | (g) Prepaid Expenses and Other Current Assets: A summary of prepaid expenses and other current assets is as follows (in millions): September 2020 September 2019 Prepaid expenses $ 1.6 $ 1.8 Prepaid inventory 0.5 5.3 $ 2.1 $ 7.1 Prepaid inventory represents inventory in-transit that has been paid for but not received. |
Property and Equipment | (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 Buildings and improvements - 40 Warehouse equipment - 15 Furniture, fixtures and leasehold improvements - 12 Vehicles - 5 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 determined based on the amount by which the carrying value of the asset group exceeds the fair value of the asset group. The Company recorded impairment charges of approximately $0.5 million during fiscal 2020 related to a non-performing store in our retail reporting unit, of which $0.2 million was related to fixed assets. There was no impairment of any property and equipment during fiscal 2019. |
Goodwill and Intangible Assets | (i) Goodwill and Intangible Assets: Goodwill consists of the excess purchase price paid in business combinations over the fair value of assets acquired. Intangible assets consist of trademarks, tradenames, and customer relationships acquired as part of acquisitions. Goodwill, trademarks, and tradenames 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 ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” 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 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. The Company’s retail reporting unit recorded intangible asset impairment charges of approximately $2.9 million during fiscal 2019 (See Note 6). These impairment charges arose from a range of considerations including, but not limited to, heightened competition in the industry, retail sector market conditions, and earning shortfalls which impacted the Company’s projections of future cash flows to be generated from these assets. |
Equity Method Investment | (j) 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. See Note 7 (Equity Method Investment) for further information relating to the Company’s equity method investment. |
Revenue Recognition | (k) 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 Footnote 13 “Business Segments” for the disaggregation of net sales for each of our business segments. |
Insurance | (l) Insurance: The Company’s workers’ compensation, general liability, and employee‑related health care benefits are provided through high‑deductible or self‑insurance programs. As a result, the Company accrues for its workers’ compensation and general liability based upon a claim reserve analysis. The Company has issued a letter of credit in the amount of $0.5 million to its workers’ compensation insurance carrier as part of its loss control program. The reserve for incurred, but not reported, employee health care benefits is calculated using 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. |
Income Taxes | (m) 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. |
Share-Based Compensation | (n) 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 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.” |
Customer Sales Incentives | (o) 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. |
Excise Taxes | (p) 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. |
Contract Costs | (q) 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. |
Per-share Results | (r) 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 and conversion features of the Company’s preferred stock issuances. |
Use of Estimates | (s) 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. |
Fair Value Measurements | (t) 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, trade accounts payable, 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. During fiscal 2019, intangible assets with indefinite useful lives were adjusted to fair value, resulting in a pretax, non-cash impairment charge of $2.9 million (see Note 6). |
Accounting Pronouncements | (u) Accounting Pronouncements: Accounting Pronouncements Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02 “Leases (Topic 842)”. Accounting Standards Codification Topic (“ASC”) 842 superseded the lease accounting requirements in “ASC 840 - Leases”. The most significant among the changes in ASU 2016-02 is the recognition of right-of-use (“ROU”) assets and corresponding lease liabilities for leases classified as operating leases. The accounting for finance leases, which were classified as capital leases under historical GAAP, remains substantially unchanged. The lease liabilities are equal to the present value of the remaining lease payments while the ROU asset is determined based on the amount of the lease liability, plus initial direct costs incurred less lease incentives. The Company elected the optional transition method to apply ASU 2016-02 prospectively at adoption during the Company’s first quarter of fiscal 2020, which resulted in recognition of ROU assets of approximately $21.9 million, lease liabilities of $22.2 million, and a decrease of deferred rent recorded under ASC 840 of $0.3 million. The adoption of ASC 842 did not have a material effect on the Company’s consolidated statements of operations or cash flows. The fiscal 2019 comparative period presented in the financial statements continues to be presented under ASC 840. The adoption of ASC 842 did not have a material impact on the Company’s debt-covenant compliance under its revolving credit facility. In accordance with an accounting policy election under ASC 842, the Company does not recognize assets or liabilities for leases with an initial term of twelve months or less as 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 package of practical expedients within ASC 842 that allows an entity to not reassess, prior to the effective date, (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, or (iii) initial direct costs for any existing leases. The Company also elected the practical expedient to account for non-lease components as part of the lease for all asset classes. New Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This guidance is effective for fiscal years beginning after December 15, 2022 (fiscal 2024 for the Company) with early adoption permitted. The Company is currently reviewing this ASU and its potential impact on our consolidated financial statements. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as the market transitions from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The amendments in this update were effective upon issuance for all entities through December 31, 2022. The Company is currently reviewing this ASU and its potential impact on our consolidated financial statements |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION | |
Summary of prepaid expenses and other current assets | September 2020 September 2019 Prepaid expenses $ 1.6 $ 1.8 Prepaid inventory 0.5 5.3 $ 2.1 $ 7.1 |
Schedule of estimated useful lives of property and equipment | Years Buildings and improvements - 40 Warehouse equipment - 15 Furniture, fixtures and leasehold improvements - 12 Vehicles - 5 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
EARNINGS PER SHARE | |
Schedule of net earnings per share available to common shareholders | For Fiscal Years 2020 2019 Basic Basic Weighted average common shares outstanding 561,166 597,961 Net income available to common shareholders $ 5,542,590 $ 3,202,943 Net earnings per share available to common shareholders $ 9.88 $ 5.36 For Fiscal Years 2020 2019 Diluted Diluted Weighted average common shares outstanding 561,166 597,961 Weighted average of net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock and conversion of preferred stock(1) 6,795 11,875 Weighted average number of shares outstanding 567,961 609,836 Net income available to common shareholders $ 5,542,590 $ 3,202,943 Net earnings per share available to common shareholders $ 9.76 $ 5.25 (1) Diluted earnings per share calculation includes all stock options and restricted stock units deemed to be dilutive. |
PROPERTY AND EQUIPMENT, NET (Ta
PROPERTY AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
PROPERTY AND EQUIPMENT, NET | |
Schedule of property and equipment | 2020 2019 Land $ 773,068 $ 773,068 Buildings and improvements 12,605,512 12,574,893 Warehouse equipment 15,409,944 15,011,605 Furniture, fixtures and leasehold improvements 13,539,336 13,155,606 Vehicles 3,846,227 3,687,901 Construction in progress 33,149 617,881 46,207,236 45,820,954 Less accumulated depreciation and amortization: (28,709,962) (28,165,539) Owned property and equipment $ 17,497,274 $ 17,655,415 |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
Leases | |
Schedule of leases | Assets Classification September 2020 Operating Operating lease right-of-use assets $ 18,936,126 Liabilities Current: Operating Operating lease liabilities $ 5,607,098 Non-current: Operating Long-term operating lease liabilities 14,028,606 Total lease liabilities $ 19,635,704 |
Schedule of components of lease costs | Fiscal Year 2020 Operating lease cost $ 6,757,206 Short-term lease cost 261,708 Variable lease cost 350,313 Net lease cost $ 7,369,227 |
Schedule of maturities of lease liabilities | Operating Leases 2021 $ 6,279,478 2022 5,309,736 2023 4,032,833 2024 2,841,950 2025 1,795,480 2026 and thereafter 1,050,961 Total lease payments 21,310,438 Less: interest (1,674,734) Present value of lease liabilities $ 19,635,704 |
Schedule of weighted-average remaining lease term and weighted-average discount rate | Lease Term September 2020 Weighted-average remaining lease term (years): Operating Discount Rate Weighted-average discount rate: Operating % |
Schedule of other information regarding the Company’s leases | For the year ended September 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used by operating leases $ 6,661,365 Lease liabilities arising from obtaining new ROU assets: Operating leases $ 3,116,737 |
Schedule of future minimum operating lease payments | Operating Fiscal Year Ending Leases 2020 $ 6,468,837 2021 5,418,617 2022 4,299,261 2023 3,216,671 2024 2,456,810 Thereafter 2,387,618 Total minimum lease payments $ 24,247,814 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Schedule of goodwill | September September 2020 2019 Wholesale Segment $ 4,436,950 $ 4,436,950 |
Schedule of other intangible assets | September September 2020 2019 Trademarks and tradenames (Retail Segment) $ 500,000 $ 500,000 |
EQUITY METHOD INVESTMENT (Table
EQUITY METHOD INVESTMENT (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
EQUITY METHOD INVESTMENT | |
Summarized financial data of equity investee | For the six months ended September 2020 Sales $ 350,685,407 Gross profit $ 14,218,204 Net income (loss) before income taxes $ 551,280 Net income (loss) attributable to AMCON, net of tax $ 183,579 |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
DEBT | |
Schedule of revolving portion of the Facility | 2020 2019 Revolving portion of the Facility, interest payable at 2.41% at September 2020 $ 61,971,682 $ 60,376,714 |
Schedule of long-term obligations | 2020 2019 Note payable to a bank (“Real Estate Loan”), interest payable at a fixed rate of 2.99% with monthly installments of principal and interest of $38,344 through August 2021 with remaining principal due October 2021, collateralized by three distribution facilities $ 1,866,231 $ 2,263,040 Note payable, interest payable at a fixed rate of 4.50% with quarterly installments of principal and interest of $49,114 through June 2023 with remaining principal due September 2023 1,259,413 1,395,351 3,125,644 3,658,391 Less current maturities (516,850) (532,747) $ 2,608,794 $ 3,125,644 |
Schedule of minimum principal maturities of the long-term debt | Fiscal Year Ending 2021 $ 516,850 2022 1,640,205 2023 968,589 2024 — 2025 — $ 3,125,644 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
INCOME TAXES | |
Schedule of components of income tax expense from operations | 2020 2019 Current: Federal $ 1,690,956 $ 1,139,927 Current: State 468,842 428,501 2,159,798 1,568,428 Deferred: Federal (14,270) 34,466 Deferred: State (2,528) 6,106 (16,798) 40,572 Income tax expense $ 2,143,000 $ 1,609,000 |
Schedule of difference between the income tax expense and that which would be calculated using the statutory income tax rate | 2020 2019 Tax at statutory rate $ 1,575,422 $ 1,010,517 Nondeductible business expenses 230,571 226,670 State income taxes, net of federal tax benefit 376,262 332,931 Other (39,255) 38,882 $ 2,143,000 $ 1,609,000 |
Schedule of temporary differences between the financial statement carrying balances and tax basis of assets and liabilities giving rise to a net deferred tax asset (liabilities) | 2020 2019 Deferred tax assets: Allowance for doubtful accounts $ 210,734 $ 215,925 Accrued expenses 1,243,132 796,542 Inventory 365,417 452,192 Intangible assets 15,803 71,849 Other — 23,237 Net operating loss carry forwards - federal 35,545 63,983 Net operating loss carry forwards - state 716,241 723,306 Total gross deferred tax assets 2,586,872 2,347,034 Less: Valuation allowance (716,241) (723,306) Total net deferred tax assets 1,870,631 1,623,728 Deferred tax liabilities: Trade discounts 318,070 375,172 Property and equipment 2,437,337 2,150,130 Goodwill 921,799 921,799 Total deferred tax liabilities 3,677,206 3,447,101 Total net deferred income tax liability $ 1,806,575 $ 1,823,373 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
Summary of self-insured liabilities reserve | 2020 2019 Beginning balance $ 1.5 $ 1.6 Charged to expense 6.6 5.4 Payments (6.6) (5.5) Ending balance $ 1.5 $ 1.5 |
EQUITY-BASED INCENTIVE AWARDS (
EQUITY-BASED INCENTIVE AWARDS (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
EQUITY-BASED INCENTIVE AWARDS | |
Schedule of assumptions used in connection with the Black-Scholes option pricing calculation | Stock Option Pricing Assumptions 2019 Risk-free interest rate 2.55 % Dividend yield 0.8 % Expected volatility % Expected life in years |
Summary of stock options activity | Weighted Number Average of Exercise Shares Price Outstanding at September 2019 36,450 $ 78.67 Granted — — Exercised (2,100) 51.50 Forfeited/Expired — — Outstanding at September 2020 34,350 $ 80.33 |
Schedule of restricted stock unit awards | Restricted Restricted Restricted Restricted Date of award: October 2015 October 2017 October 2018 October 2019 Original number of awards issued: Service period: 36 - 60 months 36 months 36 months 36 months Estimated fair value of award at grant date: $ $ $ $ Non-vested awards outstanding at September 30, 2020: Fair value of non-vested awards at September 30, 2020 of approximately: $ $ $ $ (1) (2) (3) (4) |
Summary of restricted stock unit activity | Number Weighted of Average Shares Fair Value Nonvested restricted stocks units at September 2019 28,151 $ 76.25 Granted 14,550 69.20 Vested (13,730) 74.02 Expired — — Nonvested restricted stocks units at September 2020 28,971 $ 64.59 |
BUSINESS SEGMENTS (Tables)
BUSINESS SEGMENTS (Tables) | 12 Months Ended |
Sep. 30, 2020 | |
BUSINESS SEGMENTS | |
Schedule of segment information | Wholesale Retail Segment Segment Other Consolidated FISCAL YEAR ENDED 2020: External revenues: Cigarettes $ 1,045,661,081 $ — $ — $ 1,045,661,081 Tobacco 227,807,266 — — 227,807,266 Confectionery 82,910,260 — — 82,910,260 Health food — 46,010,692 — 46,010,692 Foodservice & other 118,889,464 — — 118,889,464 Total external revenue 1,475,268,071 46,010,692 — 1,521,278,763 Depreciation 1,791,414 1,325,035 — 3,116,449 Amortization — — — — Operating income (loss) 17,291,306 (1,824,416) (6,385,904) 9,080,986 Interest expense 128,672 — 1,564,579 1,693,251 Income (loss) from operations before taxes 17,207,935 (1,814,850) (7,891,074) 7,502,011 Equity method investment earnings, net of tax — — 183,579 183,579 Total assets 158,292,477 19,124,233 10,584,563 188,001,273 Capital expenditures 2,071,956 1,215,364 — 3,287,320 FISCAL YEAR ENDED 2019: External revenue: Cigarettes $ 955,667,916 $ — $ — $ 955,667,916 Tobacco 197,678,519 — — 197,678,519 Confectionery 83,130,063 — — 83,130,063 Health food — 44,210,688 — 44,210,688 Foodservice & other 111,700,971 — — 111,700,971 Total external revenue 1,348,177,469 44,210,688 — 1,392,388,157 Depreciation 1,569,178 1,006,746 — 2,575,924 Amortization 41,667 — — 41,667 Operating income (loss) 17,280,500 (4,731,717) (6,199,095) 6,349,688 Interest expense 145,980 — 1,452,884 1,598,864 Income (loss) from operations before taxes 17,186,295 (4,722,375) (7,651,977) 4,811,943 Total assets 143,541,723 14,028,232 141,667 157,711,622 Capital expenditures 2,982,273 1,524,007 — 4,506,280 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended | |
Sep. 30, 2020USD ($)storestateitem | Sep. 30, 2019USD ($) | |
Number of states served | state | 26 | |
Number of operating health food retail stores | store | 21 | |
Cash and Accounts Payable | ||
Overdrafts | $ 1,300,000 | $ 1,100,000 |
Accounts Receivable | ||
Receivables from transactions with customers, less allowance for doubtful accounts | 33,300,000 | 23,700,000 |
Inventories | ||
Total reserves on finished goods | 700,000 | 1,000,000 |
Prepaid Expenses and Other Current Assets | ||
Prepaid expenses | 1,600,000 | 1,800,000 |
Prepaid inventory | 500,000 | 5,300,000 |
Prepaid and other current assets | $ 2,091,645 | $ 7,148,459 |
Cigarettes Product | Percentage of consolidated revenue | ||
Concentration of cigarette sales | 69.00% | 69.00% |
Cigarettes Product | Percentage of consolidated gross profit | ||
Concentration of cigarette sales | 17.00% | 17.00% |
Wholesale Segment | ||
Number of distribution centers | item | 6 | |
Number of products sold or distributed | item | 17,000 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment to Accounting Pronouncements (Details) - USD ($) | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Oct. 01, 2019 | |
Property and Equipment | |||
Impairment charges | $ 485,270 | $ 2,873,269 | |
Impairment of property and equipment | $ 200,000 | 0 | |
Goodwill and Intangible Assets: | |||
Intangible asset impairment charges | 2,900,000 | ||
Revenue Recognition | |||
Practical expedient, financing components | true | ||
Insurance | |||
Letter of credit issued for worker's compensation insurance carrier as part of the entity's self-insured loss control program | $ 500,000 | ||
Contract Costs | |||
Practical expedient to expense as incurred any incremental costs to obtain and fulfill customer contracts | true | ||
Fair Value Measurements | |||
Intangible asset impairment charges | 2,900,000 | ||
Accounting Pronouncements | |||
ROU assets | $ 18,936,126 | ||
Lease liabilities | $ 19,635,704 | ||
Lease, Practical Expedients, Package [true false] | true | ||
ASU 2016-12 | Adjustment | |||
Accounting Pronouncements | |||
ROU assets | $ 21,900,000 | ||
Lease liabilities | 22,200,000 | ||
Decrease of deferred rent | $ 300,000 | ||
Retail Segment | |||
Goodwill and Intangible Assets: | |||
Intangible asset impairment charges | 2,900,000 | ||
Fair Value Measurements | |||
Intangible asset impairment charges | $ 2,900,000 | ||
Buildings and improvements | Minimum | |||
Property and Equipment | |||
Estimated useful lives | 5 years | ||
Buildings and improvements | Maximum | |||
Property and Equipment | |||
Estimated useful lives | 40 years | ||
Warehouse equipment | Minimum | |||
Property and Equipment | |||
Estimated useful lives | 3 years | ||
Warehouse equipment | Maximum | |||
Property and Equipment | |||
Estimated useful lives | 15 years | ||
Furniture, fixtures and leasehold improvements | Minimum | |||
Property and Equipment | |||
Estimated useful lives | 1 year | ||
Furniture, fixtures and leasehold improvements | Maximum | |||
Property and Equipment | |||
Estimated useful lives | 12 years | ||
Vehicles | Minimum | |||
Property and Equipment | |||
Estimated useful lives | 2 years | ||
Vehicles | Maximum | |||
Property and Equipment | |||
Estimated useful lives | 5 years |
ACQUISITION (Details)
ACQUISITION (Details) - USD ($) $ in Millions | 1 Months Ended | 12 Months Ended | |
Apr. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | |
Acquisition | |||
Payment to acquire wholesale distributor | $ 1.1 | ||
Team Sledd | |||
Acquisition | |||
Investment made | $ 10 | $ 10 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
EARNINGS PER SHARE | ||
Weighted average common shares outstanding, Basic | 561,166 | 597,961 |
Net income available to common shareholders | $ 5,542,590 | $ 3,202,943 |
Net earnings per share available to common shareholders, Basic (in dollars per share) | $ 9.88 | $ 5.36 |
Weighted average of net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock | 6,795 | 11,875 |
Weighted average number of shares outstanding, Diluted | 567,961 | 609,836 |
Net income available to common shareholders, diluted | $ 5,542,590 | $ 3,202,943 |
Net earnings per share available to common shareholders, Diluted (in dollars per share) | $ 9.76 | $ 5.25 |
PROPERTY AND EQUIPMENT, NET (De
PROPERTY AND EQUIPMENT, NET (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
PROPERTY AND EQUIPMENT, NET | ||
Property and equipment, gross | $ 46,207,236 | $ 45,820,954 |
Less accumulated depreciation and amortization: Owned property and equipment | (28,709,962) | (28,165,539) |
Property and equipment, net | 17,497,274 | 17,655,415 |
Land | ||
PROPERTY AND EQUIPMENT, NET | ||
Property and equipment, gross | 773,068 | 773,068 |
Buildings and improvements | ||
PROPERTY AND EQUIPMENT, NET | ||
Property and equipment, gross | 12,605,512 | 12,574,893 |
Warehouse equipment | ||
PROPERTY AND EQUIPMENT, NET | ||
Property and equipment, gross | 15,409,944 | 15,011,605 |
Furniture, fixtures and leasehold improvements | ||
PROPERTY AND EQUIPMENT, NET | ||
Property and equipment, gross | 13,539,336 | 13,155,606 |
Vehicles | ||
PROPERTY AND EQUIPMENT, NET | ||
Property and equipment, gross | 3,846,227 | 3,687,901 |
Construction in progress | ||
PROPERTY AND EQUIPMENT, NET | ||
Property and equipment, gross | $ 33,149 | $ 617,881 |
LEASES (Details)
LEASES (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Lessee, Lease, Description [Line Items] | ||
Options to renew | true | |
Options to terminate | true | |
Impairment charges | $ 485,270 | $ 2,873,269 |
Operating lease right-of-use assets, net | 18,936,126 | |
Current operating lease liabilities | 5,607,098 | |
Non-current operating lease liabilities | 14,028,606 | |
Total lease liabilities | 19,635,704 | |
Retail Segment | ||
Lessee, Lease, Description [Line Items] | ||
Impairment charges related to a ROU asset | $ 300,000 |
LEASES - Components of lease co
LEASES - Components of lease costs (Details) | 12 Months Ended |
Sep. 30, 2020USD ($) | |
Leases | |
Operating lease cost | $ 6,757,206 |
Short-term lease cost | 261,708 |
Variable lease cost | 350,313 |
Net lease cost | $ 7,369,227 |
LEASES - Maturities of lease li
LEASES - Maturities of lease liabilities (Details) | Sep. 30, 2020USD ($) |
Operating Leases | |
2021 | $ 6,279,478 |
2022 | 5,309,736 |
2023 | 4,032,833 |
2024 | 2,841,950 |
2025 | 1,795,480 |
2026 and thereafter | 1,050,961 |
Total lease payments | 21,310,438 |
Less: interest | (1,674,734) |
Present value of lease liabilities | $ 19,635,704 |
LEASES - Weighted-average remai
LEASES - Weighted-average remaining lease term and weighted-average discount rate (Details) | Sep. 30, 2020 |
Leases | |
Operating, weighted-average remaining lease term | 4 years 2 months 12 days |
Operating, weighted-average discount rate | 4.04% |
LEASES - Other information (Det
LEASES - Other information (Details) | 12 Months Ended |
Sep. 30, 2020USD ($) | |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows used by operating leases | $ 6,661,365 |
Lease liabilities arising from obtaining new ROU assets: | |
Operating leases | $ 3,116,737 |
LEASES - Future minimum operati
LEASES - Future minimum operating lease payments (Details) | Sep. 30, 2019USD ($) |
Future minimum operating lease payments | |
2020 | $ 6,468,837 |
2021 | 5,418,617 |
2022 | 4,299,261 |
2023 | 3,216,671 |
2024 | 2,456,810 |
Thereafter | 2,387,618 |
Total minimum lease payments | $ 24,247,814 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2019 |
Goodwill by reporting segment | ||
Goodwill | $ 4,436,950 | $ 4,436,950 |
Wholesale Segment | ||
Goodwill by reporting segment | ||
Goodwill | $ 4,436,950 | $ 4,436,950 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Other Intangible Assets (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2020 | |
Other intangible assets, net | $ 500,000 | $ 500,000 |
Intangible asset impairment charges | 2,900,000 | |
Retail Segment | ||
Intangible asset impairment charges | 2,900,000 | |
Trademarks and tradenames | Retail Segment | ||
Other intangible assets, net | $ 500,000 | $ 500,000 |
EQUITY METHOD INVESTMENT (Detai
EQUITY METHOD INVESTMENT (Details) - USD ($) | 1 Months Ended | 6 Months Ended | 12 Months Ended |
Apr. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2020 | |
EQUITY METHOD INVESTMENT | |||
Contribution structured as equity | $ 6,500,000 | ||
Contribution structured as a secured loan | 3,500,000 | ||
Carrying value of investment | $ 6,744,095 | 6,744,095 | |
Net income (loss) attributable to AMCON, net of tax (1) | 183,579 | ||
Carrying value of secured loan | $ 3,500,000 | 3,500,000 | |
Team Sledd | |||
EQUITY METHOD INVESTMENT | |||
Contribution in cash | $ 10,000,000 | $ 10,000,000 | |
Contribution structured as equity | 6,500,000 | ||
Contribution structured as a secured loan | $ 3,500,000 | ||
Ownership (as a percent) | 44.00% | 44.00% | |
Carrying value of investment | $ 6,700,000 | $ 6,700,000 | |
Net income (loss) attributable to AMCON, net of tax (1) | 183,579 | 200,000 | |
Carrying value of secured loan | $ 3,500,000 | $ 3,500,000 |
EQUITY METHOD INVESTMENT - Equi
EQUITY METHOD INVESTMENT - Equity investee's summarized financial data (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Sep. 30, 2020 | |
EQUITY METHOD INVESTMENT | ||
Net income (loss) attributable to AMCON, net of tax (1) | $ 183,579 | |
Team Sledd | ||
EQUITY METHOD INVESTMENT | ||
Sales | $ 350,685,407 | |
Gross profit | 14,218,204 | |
Net income (loss) before income taxes (1) | 551,280 | |
Net income (loss) attributable to AMCON, net of tax (1) | $ 183,579 | $ 200,000 |
DEBT - Credit Facility (Details
DEBT - Credit Facility (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Revolving credit facility | ||
Revolving portion of the facility | $ 61,971,682 | $ 60,376,714 |
Facility | ||
Revolving credit facility | ||
Revolving portion of the facility | $ 61,971,682 | 60,376,714 |
Interest rate (as a percent) | 2.41% | |
Revolving credit limit | $ 109,600,000 | |
Increase in borrowing capacity available under loan accordion | 25,000,000 | |
Additional credit advances for certain inventory purchases | $ 10,000,000 | |
Automatic renewal period of agreement unless terminated | 1 year | |
Unused commitment fee (as a percent) | 0.25% | |
Period considered for computing fixed charge coverage ratio | 12 months | |
Threshold of excess availability of credit as a percentage of maximum loan limit, required for financial covenant compliance | 10.00% | |
Restricted amount of dividends on common stock, or other distributions or investments | $ 3,500,000 | |
Borrowings on the facility | 1,500,000,000 | 1,400,000,000 |
Payments on the facility | 1,500,000,000 | 1,400,000,000 |
Net advances (payments) on the Facility | 1,600,000 | $ 24,900,000 |
Credit available under the Facility | $ 47,600,000 | |
Facility | LIBOR | ||
Revolving credit facility | ||
Variable rate basis | LIBOR | |
Floor variable rate (as a percent) | 1.00% | |
Facility | Prime rate | ||
Revolving credit facility | ||
Variable rate basis | Prime rate | |
Facility | Minimum | ||
Revolving credit facility | ||
Notice period prior to the end of any original or renewal term of the agreement required for terminating the agreement either by the borrower or lender | 90 days | |
Fixed charge coverage ratio | 1 | |
Facility | Minimum | LIBOR | ||
Revolving credit facility | ||
Basis points added to reference rate (as a percent) | 1.25% | |
Facility | Maximum | ||
Revolving credit facility | ||
Revolving credit limit | $ 110,000,000 | |
Facility | Maximum | LIBOR | ||
Revolving credit facility | ||
Basis points added to reference rate (as a percent) | 1.50% |
DEBT - Long-Term Debt (Details)
DEBT - Long-Term Debt (Details) | 12 Months Ended | |
Sep. 30, 2020USD ($)item | Sep. 30, 2019USD ($)item | |
Long-term obligations | ||
Long-term debt | $ 3,125,644 | $ 3,658,391 |
Less current maturities | (516,850) | (532,747) |
Long-term debt less current maturities | 2,608,794 | 3,125,644 |
2.99% Real Estate Loan | ||
Long-term obligations | ||
Long-term debt | $ 1,866,231 | $ 2,263,040 |
Fixed interest rate (as a percent) | 2.99% | 2.99% |
Periodic installments of principal and interest | $ 38,344 | $ 38,344 |
Number of owned distribution facilities which collateralize debt instrument | item | 3 | 3 |
4.50% Note Payable | ||
Long-term obligations | ||
Long-term debt | $ 1,259,413 | $ 1,395,351 |
Fixed interest rate (as a percent) | 4.50% | 4.50% |
Periodic installments of principal and interest | $ 49,114 | $ 49,114 |
DEBT - Aggregate Minimum Princi
DEBT - Aggregate Minimum Principal Maturities of Long-Term Debt and Other (Details) | 12 Months Ended | |
Sep. 30, 2020USD ($)item | Sep. 30, 2019USD ($) | |
Minimum principal maturities | ||
2021 | $ 516,850 | |
2022 | 1,640,205 | |
2023 | 968,589 | |
Long-term debt | 3,125,644 | $ 3,658,391 |
Letter of credit issued for worker's compensation insurance carrier as part of the entity's self-insured loss control program | 500,000 | |
2.99% Real Estate Loan | ||
Minimum principal maturities | ||
Long-term debt | $ 1,866,231 | $ 2,263,040 |
Number of cross defaults | item | 0 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Components of income tax expense from operations | ||
Current: Federal | $ 1,690,956 | $ 1,139,927 |
Current: State | 468,842 | 428,501 |
Current income tax expense | 2,159,798 | 1,568,428 |
Deferred: Federal | (14,270) | 34,466 |
Deferred: State | (2,528) | 6,106 |
Deferred income tax expense | (16,798) | 40,572 |
Income tax expense | $ 2,143,000 | $ 1,609,000 |
Income tax rate (as a percent) | ||
Blended federal rate (as a percent) | 21.00% | 21.00% |
Summary of difference between the Company's income tax expense in the accompanying consolidated financial statements and that which would be calculated using the statutory income tax rate | ||
Tax at statutory rate | $ 1,575,422 | $ 1,010,517 |
Nondeductible business expenses | 230,571 | 226,670 |
State income taxes, net of federal tax benefit | 376,262 | 332,931 |
Other | (39,255) | 38,882 |
Income tax expense | 2,143,000 | 1,609,000 |
Deferred tax assets: | ||
Allowance for doubtful accounts | 210,734 | 215,925 |
Accrued expenses | 1,243,132 | 796,542 |
Inventory | 365,417 | 452,192 |
Intangible assets | 15,803 | 71,849 |
Other | 23,237 | |
Net operating loss carry forwards-federal | 35,545 | 63,983 |
Net operating loss carry forwards-state | 716,241 | 723,306 |
Total gross deferred tax assets | 2,586,872 | 2,347,034 |
Less: Valuation allowance | (716,241) | (723,306) |
Total net deferred tax assets | 1,870,631 | 1,623,728 |
Deferred tax liabilities: | ||
Trade discounts | 318,070 | 375,172 |
Property and equipment | 2,437,337 | 2,150,130 |
Goodwill | 921,799 | 921,799 |
Total deferred tax liabilities | 3,677,206 | 3,447,101 |
Total net deferred income tax liability | 1,806,575 | 1,823,373 |
Limitation on utilization of HNWC's net operating losses per year through 2022 | 100,000 | |
Valuation allowance against net operating losses | 700,000 | $ 700,000 |
Federal | ||
Deferred tax liabilities: | ||
Noncurrent deferred tax asset related to federal net operating loss carryforwards | 100,000 | |
Net operating loss carryforwards | $ 200,000 |
PROFIT SHARING PLAN (Details)
PROFIT SHARING PLAN (Details) - USD ($) $ in Millions | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
PROFIT SHARING PLAN | ||
Employee's maximum voluntary contribution as percentage of their compensation | 100.00% | |
Percentage of employer's contribution matching first 4 percent of employee's compensation | 100.00% | |
Percentage of first portion of employee's compensation eligible for employer's matching contribution | 2.00% | |
Percentage of employer's contribution matching next 2 percent of employee's compensation | 50.00% | |
Percentage of second portion of employee's compensation eligible for employer's matching contribution | 4.00% | |
Maximum matching percentage of employee compensation | 4.00% | |
Company's matching contributions to the profit sharing plan (net of employee forfeitures) | $ 0.9 | $ 0.8 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Liability Insurance | ||
Liabilities for workers' compensation, general liability and health insurance | $ 1.5 | $ 1.5 |
Self-insured liabilities reserve | ||
Beginning balance | 1.5 | 1.6 |
Charged to expense | 6.6 | 5.4 |
Payments | (6.6) | (5.5) |
Ending balance | $ 1.5 | $ 1.5 |
EQUITY-BASED INCENTIVE AWARDS -
EQUITY-BASED INCENTIVE AWARDS - Omnibus Plans and Stock Options (Details) $ / shares in Units, $ in Millions | 12 Months Ended | |
Sep. 30, 2020USD ($)item$ / sharesshares | Sep. 30, 2019USD ($)$ / sharesshares | |
EQUITY-BASED INCENTIVE AWARD | ||
Number of incentive plans | item | 2 | |
Stock options issued and outstanding | ||
Number Outstanding (in shares) | shares | 34,350 | |
Weighted-Average Exercise Price (in dollars per share) | $ / shares | $ 80.33 | |
Omnibus Plans | ||
EQUITY-BASED INCENTIVE AWARD | ||
Number of shares of the company's common stock permitted for issuance under the plan | shares | 135,000 | |
Number of shares awarded pursuant to the plan | shares | 101,280 | |
Number of additional shares that may be awarded under the plan | shares | 33,720 | |
Stock Options | ||
EQUITY-BASED INCENTIVE AWARD | ||
Awards issued (in shares) | shares | 0 | 5,450 |
Vesting period | 5 years | 5 years |
Estimated fair value of the stock option awards using the Black-Scholes option pricing model | $ | $ 0.2 | |
Stock Option Pricing Assumptions | ||
Risk-free interest rate (as a percent) | 2.55% | |
Dividend yield (as a percent) | 0.80% | |
Expected volatility (as a percent) | 45.10% | |
Expected life | 6 years | |
Stock options issued and outstanding | ||
Expiration period | 10 years | 10 years |
Number Outstanding (in shares) | shares | 34,350 | 36,450 |
Weighted-Average Exercise Price (in dollars per share) | $ / shares | $ 80.33 | $ 78.67 |
Number Exercisable (in shares) | shares | 22,890 | |
Exercisable, Weighted-Average Exercise Price (in dollars per share) | $ / shares | $ 72.67 | |
Number of Shares | ||
Granted (in shares) | shares | 0 | 5,450 |
Exercised (in shares) | shares | (2,100) | |
Weighted Average Exercise Price | ||
Exercised (in dollars per share) | $ / shares | $ 51.50 | |
Aggregate intrinsic value and fair value of options outstanding | ||
Compensation expense | $ | $ 0.1 | $ 0.1 |
Total unamortized compensation expense | $ | $ 0.2 | |
Amortization period of unamortized compensation expense | 29 months | |
Aggregate intrinsic value of options outstanding | $ | 0.2 | |
Aggregate intrinsic value of options exercisable | $ | 0.2 | |
Total fair value of options vested | $ | $ 0.4 | 0.4 |
Stock Options | Maximum | ||
Aggregate intrinsic value and fair value of options outstanding | ||
Aggregate intrinsic value of options outstanding | $ | 0.1 | |
Aggregate intrinsic value of options exercisable | $ | 0.1 | |
Total intrinsic value of options exercised | $ | $ 0.1 | $ 0.1 |
EQUITY-BASED INCENTIVE AWARDS_2
EQUITY-BASED INCENTIVE AWARDS - Authorized and Approved Restricted Stock Unit Awards (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | Oct. 31, 2015 | Sep. 30, 2020 | Sep. 30, 2019 | |
Restricted Stock Units | ||||||
EQUITY-BASED INCENTIVE AWARD | ||||||
Original number of awards issued | 14,550 | |||||
Non-vested awards outstanding at the end of the period (in shares) | 28,971 | 28,151 | ||||
Direct cost to the recipients of the restricted stock units | $ 0 | |||||
Compensation expense | 1,000,000 | $ 1,200,000 | ||||
Tax benefit related to compensation expense | 200,000 | 300,000 | ||||
Total intrinsic value of equity-based compensation awards vested | 900,000 | $ 1,100,000 | ||||
Total unamortized compensation expense | $ 1,100,000 | |||||
Period over which unamortized compensation expense is expected to be amortized | 16 months | |||||
Restricted Stock Units Awarded October 2015 | ||||||
EQUITY-BASED INCENTIVE AWARD | ||||||
Original number of awards issued | 13,250 | |||||
Estimated fair value of award at grant date | $ 1,112,000 | |||||
Non-vested awards outstanding at the end of the period (in shares) | 50 | |||||
Fair value of non-vested awards at the end of the period | $ 3,000 | |||||
Vested as of the end of the period (in shares) | 13,200 | |||||
Units scheduled to vest | 50 | |||||
Restricted Stock Units Awarded October 2015 | Minimum | ||||||
EQUITY-BASED INCENTIVE AWARD | ||||||
Service period | 36 months | |||||
Restricted Stock Units Awarded October 2015 | Maximum | ||||||
EQUITY-BASED INCENTIVE AWARD | ||||||
Service period | 60 months | |||||
Restricted Stock Units Awarded October 2017 | ||||||
EQUITY-BASED INCENTIVE AWARD | ||||||
Original number of awards issued | 13,000 | |||||
Service period | 36 months | |||||
Estimated fair value of award at grant date | $ 1,177,000 | |||||
Non-vested awards outstanding at the end of the period (in shares) | 4,334 | |||||
Fair value of non-vested awards at the end of the period | $ 280,000 | |||||
Vested as of the end of the period (in shares) | 8,666 | |||||
Units scheduled to vest | 4,334 | |||||
Restricted Stock Units Awarded October 2018 | ||||||
EQUITY-BASED INCENTIVE AWARD | ||||||
Original number of awards issued | 15,050 | |||||
Service period | 36 months | |||||
Estimated fair value of award at grant date | $ 1,264,000 | |||||
Non-vested awards outstanding at the end of the period (in shares) | 10,037 | |||||
Fair value of non-vested awards at the end of the period | $ 648,000 | |||||
Vested as of the end of the period (in shares) | 5,013 | |||||
Restricted Stock Units Awarded October 2018 | Vest in October 2020 | ||||||
EQUITY-BASED INCENTIVE AWARD | ||||||
Units scheduled to vest | 5,018 | |||||
Restricted Stock Units Awarded October 2018 | Vest in October 2021 | ||||||
EQUITY-BASED INCENTIVE AWARD | ||||||
Units scheduled to vest | 5,019 | |||||
Restricted Stock Units Awarded October 2019 | ||||||
EQUITY-BASED INCENTIVE AWARD | ||||||
Original number of awards issued | 14,550 | |||||
Service period | 36 months | |||||
Estimated fair value of award at grant date | $ 1,007,000 | |||||
Non-vested awards outstanding at the end of the period (in shares) | 14,550 | |||||
Fair value of non-vested awards at the end of the period | $ 940,000 | |||||
Units scheduled to vest | 14,550 |
EQUITY-BASED INCENTIVE AWARDS_3
EQUITY-BASED INCENTIVE AWARDS - Restricted Stock Unit Activity (Details) - Restricted Stock Units | 12 Months Ended |
Sep. 30, 2020$ / sharesshares | |
Number of Shares | |
Nonvested restricted stock units at the beginning of the period (in shares) | shares | 28,151 |
Granted (in shares) | shares | 14,550 |
Vested (in shares) | shares | (13,730) |
Nonvested restricted stock units at the end of the period (in shares) | shares | 28,971 |
Weighted Average Fair Value | |
Nonvested restricted stock units at the beginning of the period (in dollars per share) | $ / shares | $ 76.25 |
Granted (in dollars per share) | $ / shares | 69.20 |
Vested (in dollars per share) | $ / shares | 74.02 |
Nonvested restricted stock units at the end of the period (in dollars per share) | $ / shares | $ 64.59 |
BUSINESS SEGMENTS (Details)
BUSINESS SEGMENTS (Details) | 12 Months Ended | |
Sep. 30, 2020USD ($)item | Sep. 30, 2019USD ($) | |
Information by business segments | ||
Number of reportable business segments | item | 2 | |
Total external revenue | $ 1,521,278,763 | $ 1,392,388,157 |
Depreciation | 3,116,449 | 2,575,924 |
Amortization | 41,667 | |
Operating income (loss) | 9,080,986 | 6,349,688 |
Interest expense | 1,693,251 | 1,598,864 |
Income (loss) from operations before taxes | 7,502,011 | 4,811,943 |
Equity method investment earnings, net of tax | 183,579 | |
Total assets | 188,001,273 | 157,711,622 |
Capital expenditures | 3,287,320 | 4,506,280 |
Cigarettes | ||
Information by business segments | ||
Total external revenue | 1,045,661,081 | 955,667,916 |
Tobacco | ||
Information by business segments | ||
Total external revenue | 227,807,266 | 197,678,519 |
Confectionery | ||
Information by business segments | ||
Total external revenue | 82,910,260 | 83,130,063 |
Health food | ||
Information by business segments | ||
Total external revenue | 46,010,692 | 44,210,688 |
Foodservice & other | ||
Information by business segments | ||
Total external revenue | 118,889,464 | 111,700,971 |
Other | ||
Information by business segments | ||
Operating income (loss) | (6,385,904) | (6,199,095) |
Interest expense | 1,564,579 | 1,452,884 |
Income (loss) from operations before taxes | (7,891,074) | (7,651,977) |
Equity method investment earnings, net of tax | 183,579 | |
Total assets | 10,584,563 | 141,667 |
Wholesale Segment | ||
Information by business segments | ||
Total external revenue | 1,475,268,071 | 1,348,177,469 |
Depreciation | 1,791,414 | 1,569,178 |
Amortization | 41,667 | |
Operating income (loss) | 17,291,306 | 17,280,500 |
Interest expense | 128,672 | 145,980 |
Income (loss) from operations before taxes | 17,207,935 | 17,186,295 |
Total assets | 158,292,477 | 143,541,723 |
Capital expenditures | 2,071,956 | 2,982,273 |
Wholesale Segment | Cigarettes | ||
Information by business segments | ||
Total external revenue | 1,045,661,081 | 955,667,916 |
Wholesale Segment | Tobacco | ||
Information by business segments | ||
Total external revenue | 227,807,266 | 197,678,519 |
Wholesale Segment | Confectionery | ||
Information by business segments | ||
Total external revenue | 82,910,260 | 83,130,063 |
Wholesale Segment | Foodservice & other | ||
Information by business segments | ||
Total external revenue | 118,889,464 | 111,700,971 |
Retail Segment | ||
Information by business segments | ||
Total external revenue | 46,010,692 | 44,210,688 |
Depreciation | 1,325,035 | 1,006,746 |
Operating income (loss) | (1,824,416) | (4,731,717) |
Income (loss) from operations before taxes | (1,814,850) | (4,722,375) |
Total assets | 19,124,233 | 14,028,232 |
Capital expenditures | 1,215,364 | 1,524,007 |
Retail Segment | Health food | ||
Information by business segments | ||
Total external revenue | $ 46,010,692 | $ 44,210,688 |
TREASURY STOCK (Details)
TREASURY STOCK (Details) - USD ($) $ in Millions | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
TREASURY STOCK | ||
Number of shares of common stock repurchased | 28,727 | 75,113 |
Value of shares of common stock repurchased | $ 2 | $ 7.5 |
SUBSEQUENT EVENT (Details)
SUBSEQUENT EVENT (Details) - shares | Oct. 27, 2020 | Sep. 30, 2020 |
Restricted Stock Units | ||
SUBSEQUENT EVENT | ||
Awards granted (in shares) | 14,550 | |
Subsequent events | Common Stock repurchase program | ||
SUBSEQUENT EVENT | ||
Number of shares of the company's common stock permitted for issuance under the plan | 75,000 | |
Subsequent events | Restricted Stock Units | ||
SUBSEQUENT EVENT | ||
Awards granted (in shares) | 20,500 | |
Vesting period | 3 years |