AMCON DISTRIBUTING CO

Previous wording

Similar to other retail formats, the convenience retailing sector we service continues to operate in a challenging operating environment, impacted in part by weaker consumer spending. At the same time, the cost structures for wholesale distributors such as our Company have been impacted by the cumulative impact of inflation over a multi-year period. These inflationary pressures have increased operating costs in all areas of our business such as product costs, fuel, labor and employee benefits, equipment, and insurance.

Current wording

The convenience store retail sector we service continues to face a challenging operating environment, most recently impacted by higher fuel prices, which have decreased consumer discretionary spending on in-store purchases. At the same time, the cost structures for wholesale distributors such as our Company have been impacted by the cumulative impact of inflation over a multi-year period. These inflationary pressures have increased operating costs in all areas of our business such as product costs, fuel, labor and employee benefits, equipment, and insurance.

Previous wording

Certain accounting estimates used in the preparation of the Company’s condensed consolidated unaudited financial statements (“financial statements”) require us to make judgments and estimates and the financial results we report may vary depending on how we make these judgments and estimates. Our critical accounting estimates are set forth in our annual report on Form 10-K for the fiscal year ended September 30, 2025, as filed with the Securities and Exchange Commission. There have been no significant changes with respect to these estimates and related policies during the six months ended March 2026.

Current wording

Certain accounting estimates used in the preparation of the Company’s condensed consolidated unaudited financial statements (“financial statements”) require us to make judgments and estimates and the financial results we report may vary depending on how we make these judgments and estimates. Our critical accounting estimates are set forth in our annual report on Form 10-K for the fiscal year ended September 30, 2025, as filed with the Securities and Exchange Commission. There have been no significant changes with respect to these estimates and related policies during the nine months ended June 2026.

Previous wording

The following discussion and analysis includes the Company’s results of operations for the three and six months ended March 2026 and March 2025:

Current wording

The following discussion and analysis includes the Company’s results of operations for the three and nine months ended June 2026 and June 2025:

Previous wording

During Q2 2026, we purchased a distribution facility in Ohio for $8.0 million using borrowings from the Company’s revolving credit facilities. Our Wholesale Segment now operates 15 distribution centers located in Colorado, Idaho, Illinois, Indiana, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee and West Virginia. These distribution centers, combined with cross-dock facilities, include approximately 1.8 million square feet of permanent floor space. Our principal suppliers include Altria, RJ Reynolds, ITG Brands, Hershey, Kellanova, Kraft Heinz, Mars Wrigley, General Mills, Procter and Gamble, Ferrero and other major Consumer Packaged Goods and Foodservice suppliers. We also work closely with our customer base to source private label products on their behalf in a wide variety of categories. In addition, we market our own private label lines of water, candy products, batteries, and other products. We do not maintain any long-term purchase contracts with our suppliers. However, we do participate in a number of programs with our major vendors to support in-stock positions of our key products.

Current wording

During Q3 2026, we sold two smaller distribution facilities located in North Dakota and Illinois for total proceeds of approximately $5.6 million, resulting in a total gain of approximately $1.8 million. During Q2 2026, we purchased a distribution facility in Ohio for $8.0 million using borrowings from the Company’s revolving credit facilities. Our Wholesale Segment now operates 13 distribution centers located in Colorado, Idaho, Illinois, Indiana, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee and West Virginia. These distribution centers, combined with cross-dock facilities, include approximately 1.7 million square feet of permanent floor space. Our principal suppliers include Altria, RJ Reynolds, ITG Brands, Hershey, Kellanova, Kraft Heinz, Mars Wrigley, General Mills, Procter and Gamble, Ferrero and other major Consumer Packaged Goods and Foodservice suppliers. We also work closely with our customer base to source private label products on their behalf in a wide variety of categories. In addition, we market our own private label lines of water, candy products, batteries, and other products. We do not maintain any long-term purchase contracts with our suppliers. However, we do participate in a number of programs with our major vendors to support in-stock positions of our key products.

Previous wording

Sales in our Wholesale Segment increased $96.3 million during Q2 2026 as compared to Q2 2025. Significant items impacting sales during Q2 2026 included a $53.9 million increase in sales related to the volume and mix of cigarette cartons sold, a $31.6 million increase in sales related to price increases implemented by cigarette manufacturers, and a $10.8 million increase in sales related to the volume and mix of products in our tobacco, confectionery, foodservice, and other categories (“Other Products”). Sales in our Retail Segment decreased approximately $0.1 million during Q2 2026 as compared to Q2 2025, primarily due to lower sales volumes in our existing stores.

Current wording

Sales in our Wholesale Segment increased $96.4 million during Q3 2026 as compared to Q3 2025. Significant items impacting sales during Q3 2026 included a $54.2 million increase in sales related to the volume and mix of cigarette cartons sold, a $35.6 million increase in sales related to price increases implemented by cigarette manufacturers, and a $6.6 million increase in sales related to the volume and mix of products in our tobacco, confectionery, foodservice, and other categories (“Other Products”). Sales in our Retail Segment decreased approximately $0.6 million during Q3 2026 as compared to Q3 2025, primarily due to lower sales volumes in our existing stores.

Previous wording

Gross profit in our Wholesale Segment increased $0.8 million during Q2 2026 as compared to Q2 2025. Significant items impacting gross profit during Q2 2026 included an increase of $1.1 million related to the volume and mix of cigarette cartons sold between the comparative periods and a $0.1 million increase related to the mix of volumes and promotions in our Other Products category, partially offset by a $0.4 million decrease in gross profit due to the timing and related benefits of cigarette manufacturer price increases. Gross profit in our Retail Segment decreased approximately $0.3 million during Q2 2026 as compared to Q2 2025, primarily due to a decrease in gross profit related to same store sales.

Current wording

Gross profit in our Wholesale Segment increased $0.5 million during Q3 2026 as compared to Q3 2025. Significant items impacting gross profit during Q3 2026 included an increase of $0.6 million related to the mix of volumes and promotions in our Other Products category and a $0.4 million increase related to the volume and mix of cigarette cartons sold between the comparative periods, partially offset by a $0.5 million decrease in gross profit due to the timing and related benefits of cigarette manufacturer price increases. Gross profit in our Retail Segment decreased approximately $0.3 million during Q3 2026 as compared to Q3 2025, primarily due to a decrease in gross profit related to same store sales.

Previous wording

Operating expense includes selling, general and administrative expenses and depreciation and amortization. Selling, general, and administrative expenses primarily consist of costs related to our sales, warehouse, delivery and administrative departments, including purchasing and receiving costs, warehousing costs and costs of picking and loading customer orders. Our most significant expenses relate to costs associated with employees, facility and equipment leases, transportation, fuel, and insurance. Our Q2 2026 operating expenses increased $1.3 million as compared to Q2 2025. Significant items impacting operating expenses during Q2 2026 included a $1.3 million increase in other Wholesale Segment operating costs, a $0.4 million increase in allowance for credit losses, and a $0.1 million increase in health and other insurance costs. These increases in operating expenses were partially offset by a $0.5 million decrease related to employee compensation and benefit costs.

Current wording

Operating expense includes selling, general and administrative expenses and depreciation and amortization. Selling, general, and administrative expenses primarily consist of costs related to our sales, warehouse, delivery and administrative departments, including purchasing and receiving costs, warehousing costs and costs of picking and loading customer orders. Our most significant expenses relate to costs associated with employees, facility and equipment leases, transportation, fuel, and insurance. Our Q3 2026 operating expenses increased $0.6 million as compared to Q3 2025. Significant items impacting operating expenses during Q3 2026 included a $0.9 million increase in fuel costs and a $0.8 million increase in other Wholesale Segment operating costs, partially offset by a $0.6 million decrease in health and other insurance costs and a $0.5 million decrease related to employee compensation and benefit costs.

Previous wording

Interest expense decreased in Q2 2026 as compared to Q2 2025, primarily due to lower interest rates and lower average debt balances in the current period.

Current wording

Interest expense decreased $0.1 million in Q3 2026 as compared to Q3 2025, primarily due to lower interest rates in the current period.

Previous wording

Sales in our Wholesale Segment increased $114.8 million during the six months ended March 2026 as compared to the same prior year period. Significant items impacting sales during the current period included a $60.7 million increase in sales related to price increases implemented by cigarette manufacturers, a $37.5 million increase in sales related to the volume and mix of cigarette cartons sold, and a $16.6 million increase in sales related to the volume and mix of products in our Other Products category. Sales in our Retail Segment increased approximately $0.1 million during the six months ended March 2026 as compared to the same prior year period, primarily due to higher sales volumes in our existing stores.

Current wording

Sales in our Wholesale Segment increased $211.2 million during the nine months ended June 2026 as compared to the same prior year period. Significant items impacting sales during the current period included a $96.4 million increase in sales related to price increases implemented by cigarette manufacturers, a $91.7 million increase in sales related to the volume and mix of cigarette cartons sold, and a $23.1 million increase in sales related to the volume and mix of products in our Other Products category. Sales in our Retail Segment decreased approximately $0.5 million during the nine months ended June 2026 as compared to the same prior year period, primarily due to lower sales volumes in our existing stores.

Previous wording

Gross profit in our Wholesale Segment increased $1.8 million during the six months ended March 2026 as compared to the same prior year period. Significant items impacting gross profit during the current period included an increase of $1.4 million related to the mix of volumes and promotions in our Other Products category, and a $1.0 million increase in gross profit related to the volume and mix of cigarette cartons sold between the comparative periods, partially offset by a $0.6 million decrease in gross profit due to the timing and related benefits of cigarette manufacturer price increases. Gross profit in our Retail Segment decreased approximately $0.2 million during the six months ended March 2026 as compared to the same prior year period, primarily due to a decrease in gross profit related to same store sales.

Current wording

Gross profit in our Wholesale Segment increased $2.3 million during the nine months ended June 2026 as compared to the same prior year period. Significant items impacting gross profit during the current period included an increase of $1.9 million related to the mix of volumes and promotions in our Other Products category, and a $1.1 million increase in gross profit related to the volume and mix of cigarette cartons sold between the comparative periods, partially offset by a $0.7 million decrease in gross profit due to the timing and related benefits of cigarette manufacturer price increases. Gross profit in our Retail Segment decreased approximately $0.5 million during the nine months ended June 2026 as compared to the same prior year period, primarily due to a decrease in gross profit related to same store sales.

Previous wording

Operating expenses increased $2.2 million during the six months ended March 2026 as compared to the same prior year period. Significant items impacting operating expenses during the current period included the impact of a prior year (Q1 2025) reduction in operating expenses related to a $1.5 million contingent liability fair value adjustment, a $1.6 million increase in other Wholesale Segment operating costs, a $0.2 million increase in allowance for credit losses, and a $0.1 million increase in operating expense costs in our Retail Segment. These increases in operating expenses were partially offset by a $0.8 million decrease in health and other insurance costs and a $0.4 million decrease related to employee compensation and benefit costs. The increase in our Retail Segment was primarily due to an increase in costs associated with our existing stores.

Current wording

Operating expenses increased $2.8 million during the nine months ended June 2026 as compared to the same prior year period. Significant items impacting operating expenses during the current period included the impact of a prior year (Q1 2025) reduction in operating expenses related to a $1.5 million contingent liability fair value adjustment, a $2.7 million increase in other Wholesale Segment operating costs and a $0.9 million increase in fuel costs. These increases in operating expenses were partially offset by a $1.4 million decrease in health and other insurance costs and a $0.9 million decrease related to employee compensation and benefit costs.

Previous wording

Interest expense decreased $0.2 million during the six months ended March 2026 as compared to the same prior year period, primarily due to lower interest rates and lower average debt balances in the current period.

Current wording

Interest expense decreased $0.3 million during the nine months ended June 2026 as compared to the same prior year period, primarily due to lower interest rates in the current period.

Previous wording

The change in the Company’s effective income tax rate during the six-month period ended March 2026 as compared to the respective prior year period was primarily related to non-deductible expenses in relation to the amount of income (loss) from operations before income tax expense (benefit) and variances in the average effective state income tax rates between the comparative periods.

Current wording

The change in the Company’s effective income tax rate during the nine-month period ended June 2026 as compared to the respective prior year period was primarily related to non-deductible expenses in relation to the amount of income (loss) from operations before income tax expense (benefit) and variances in the average effective state income tax rates between the comparative periods.

Previous wording

The Company primarily finances its operations through three credit facility agreements (a) a facility that is an obligation of AMCON Distributing Company (the “AMCON Facility”), (b) a facility that is an obligation of Team Sledd, LLC (“Team Sledd” and, the “Team Sledd Facility”) and (c) a facility that is the obligation of Henry’s (the “Henry’s Facility”) (collectively, the “Facilities”) and long-term debt agreements with banks. The Team Sledd Facility and the Henry’s Facility are non-recourse to AMCON Distributing Company, are not guaranteed by AMCON Distributing Company and have no cross default provisions applicable to AMCON Distributing Company.

Current wording

The Company primarily finances its operations through three credit facility agreements (a) a facility that is an obligation of AMCON Distributing Company (the “AMCON Facility”), (b) a facility that is an obligation of Team Sledd, LLC (“Team Sledd” and, the “Team Sledd Facility”) and (c) a facility that is an obligation of Henry’s (the “Henry’s Facility”) (collectively, the “Facilities”) and long-term debt agreements with banks. The Team Sledd Facility and the Henry’s Facility are non-recourse to AMCON Distributing Company, are not guaranteed by AMCON Distributing Company and have no cross default provisions applicable to AMCON Distributing Company.

Previous wording

At March 2026, the Facilities had a total combined borrowing capacity of $305.0 million, including provisions for up to $30.0 million in credit advances for certain inventory purchases, which are limited by accounts receivable and inventory qualifications, and the value of certain real estate collateral. The AMCON Facility matures in June 2027, the Henry’s Facility matures in February 2028, and the Team Sledd Facility matures in March 2028, each without a penalty for prepayment. Obligations under the Facilities are collateralized by substantially all of the Company’s respective equipment, intangibles, inventories, accounts receivable, and certain real estate. The Facilities each feature an unused commitment fee and springing financial covenants. Borrowings under the Facilities bear interest at the Secured Overnight Financing Rate (“SOFR”), plus any applicable spreads.

Current wording

At June 2026, the Facilities had a total combined borrowing capacity of $305.0 million, including provisions for up to $30.0 million in credit advances for certain inventory purchases, which are limited by accounts receivable and inventory qualifications, and the value of certain real estate collateral. The Henry’s Facility matures in February 2028 and the Team Sledd Facility matures in March 2028. Subsequent to June 30, 2026, the Company extended the maturity date of the AMCON Facility to July 2028. None of the Facilities carry a penalty for prepayment. Obligations under the Facilities are collateralized by substantially all of the Company’s respective equipment, intangibles, inventories, accounts receivable, and certain real estate. The Facilities each feature an unused commitment fee and springing financial covenants. Borrowings under the Facilities bear interest at the Secured Overnight Financing Rate (“SOFR”), plus any applicable spreads.

Previous wording

The amount available for use from the Facilities at any given time is subject to a number of factors, including eligible accounts receivable and inventory balances that fluctuate day-to-day, as well as the value of certain real estate collateral. Based on the collateral and loan limits as defined in the Facility agreements, the credit limit of the combined Facilities at March 2026 was $234.9 million, of which $137.1 million was outstanding, leaving $97.8 million available.

Current wording

The amount available for use from the Facilities at any given time is subject to a number of factors, including eligible accounts receivable and inventory balances that fluctuate day-to-day, as well as the value of certain real estate collateral.

Previous wording

The average interest rate of the Facilities was 5.07% at March 2026. For the six months ended March 2026, the peak borrowings under the Facilities was $193.2 million, and the average borrowings and average availability under the Facilities was $154.6 million and $80.7 million, respectively.

Current wording

The average interest rate of the Facilities was 5.04% at June 2026. For the nine months ended June 2026, the peak borrowings under the Facilities was $208.6 million, and the average borrowings and average availability under the Facilities was $163.0 million and $77.9 million, respectively.

Previous wording

The Company paid cash dividends on its common stock totaling $0.3 million and $0.4 million for the three- and six-month periods ended March 2026, respectively, and $0.3 million and $0.4 million for the three- and six-month periods ended March 2025, respectively.

Current wording

The Company paid cash dividends on its common stock totaling $0.1 million and $0.5 million for the three- and nine-month periods ended June 2026, respectively, and $0.1 million and $0.5 million for the three- and nine-month periods ended June 2025, respectively.

Previous wording

The Company has issued letters of credit totaling $2.9 million to its workers’ compensation insurance carriers as part of its self-insured loss control program.

Current wording

The Company has issued letters of credit totaling $3.9 million to its workers’ compensation insurance carriers as part of its self-insured loss control program.